P&F Industries Inc (PFIN) 2004 Q2 法說會逐字稿

Good morning ladies and gentlemen and welcome to P&F Industries' second quarter 2004 financial results conference call. At this time all participants are in a listen-only mode. (Operator Instructions). As a reminder, this conference is being recorded today, August 12, 2004. Now I would like to turn the call over to Miss Jody Burfening. Please go ahead ma'am.

Thank you. Good morning everyone. Welcome to P&F Industries' second quarter earnings conference call. With us today from management are Richard Horowitz, Chairman, President and Chief Executive Officer; and Joseph Molino, Chief Financial Officer.

Before we get started, I would like to remind you that any forward-looking statements made during this call, including those related to the Company's performance for the 2004 fiscal year, are based upon the Company's historical performance and on current plans, estimates and expectations. They are subject to various risks and uncertainties including, but not limited to, the impact of competition, product demand and pricing.

These risks could cause the Company's actual results for the 2004 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company.

Forward-looking statements speak only as of the date on which they are made. And the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, further developments or otherwise.

With that, I would now like to turn the call over to Richard. Good morning Richard.

Good morning, everybody. Thank you all for joining us this morning on our conference call. In the second quarter of 2004, overall revenues decreased 1.8 percent from the same period last year to $21.4 million, with revenue increases at Countrywide Hardware, Green Manufacturing and Embassy Industries, offsetting Florida Pneumatic's expected revenue decrease due to the loss of a major customer last year.

Although the revenue decrease at Florida Pneumatic negatively affected gross margins, our efforts to control selling, general and administrative expenses helped us in offsetting some of this impact.

Net income for the second quarter of 2004 was $704,374 or 20 cents per share on a diluted basis. Before I take you through a more detailed look at our operations for each of our four business units, I would like to review what each one of our Companies does for those of you who are first-time listeners.

Our Florida Pneumatic Manufacturing Corporation is primarily engaged in importing or manufacturing of approximately 50 types of pneumatic hand tools.

Countrywide Hardware imports and manufactures hardware products for items such as doors, windows and fences, as well as various residential hardware such as staircase components, kitchen and bath hardware, fencing hardware and door and window hardware.

Of course Countrywide is comprised of Nationwide Industries, Franklin Manufacturing, and of course now our new -- our most recent acquisition, Woodmark International.

Green Manufacturing is engaged primarily in the manufacture, development and sale of custom-designed welded hydraulic cylinders used in heavy industrial and mobile equipment. Green also manufactures a line of access equipment for the petrochemical industry and a line of post holding post hole digging equipment for the agricultural industry.

Lastly, Embassy Industries manufactures and sells baseboard heating products as well as radiant heating products and gas-fired boilers, primarily used in the Northern Tier of the United States.

Now I will take a minute to review the quarterly performance in each of our units. Firstly, Florida Pneumatic accounted for 39 percent of our overall revenues for the second quarter. And for this quarter, Florida Pneumatic's revenues decreased 23.8 percent to 8.3 million, compared with 10.9 million for the second quarter of last year, due primarily to lower retail promotion and the loss of a major customer in the fourth quarter of last year.

Gross profit margin at Florida Pneumatic decreased to 36.2 percent due to the loss of a major customer mentioned earlier and previously which had higher than average margins, and the strengthening of the Japanese yen in relation to the U.S. dollar.

A reduced level of promotions which typically have low margins helps to offset these negatives. Although our results at Florida Pneumatic for the quarter were disappointing, this is clearly within our expectations and what we had projected in our last conference call.

We're pleased however to announce the delivery dates for major second half promotions are being finalized, along with introduction schedules for several new patented products of both the retail and the industrial channel.

Countrywide Hardware accounted for 32 percent of revenues for the quarter. Countrywide second quarter revenues rose 20.6 percent when compared to the same period last year, due primarily to continued growth in the fencing product line.

Fencing sales increased 35 percent in the second quarter of 2004. As a result, gross profit margins at our Countrywide subsidiary improved from 36.8 percent to 37.8 percent. Continued growth in our fencing products, which exhibit our best margins, have more than offset a slowdown in the OEM and patio product line areas.

Our Green Manufacturing subsidiary accounted for approximately 18 percent of revenues for the quarter. Second quarter revenues rose 23.3 percent as compared to the same period last year, due primarily to new customer acquisitions and a general improvement in demand for the entire product range.

Offsetting these gains was an increase in material costs in each product line area which we were unable to pass through to our customers in a timely fashion.

As a result, gross profit margin at Green remained constant at 10 percent, as the material cost increases offset any additional gross margin that would have resulted from increased overhead of absorption due to revenue growth.

Still, we are extremely pleased by the continued improvement in this business unit. And we are excited about its prospects for the second half of the year and into the future, as we expect material cost increases to stabilize, our price increases to take full effect, our market penetration to continue, and overall economic conditions to improve in this sector.

And lastly, Embassy Industries accounted for approximately 11 percent of sales for the quarter. Embassy's second quarter revenues increased 15.9 percent from the same period last year, due to increased baseboard sales resulting from the continued strength in housing starts.

This was partially offset by slightly weaker sales of radiant products and boilers. Gross margins for Embassy were 32.4 percent in '04 versus 28.0 percent in -- excuse me, I'm sorry -- 32.4 percent last year versus 28 percent in this year due to a strengthening of the euro and less favorable product mix.

Having said all this, we are excited by the penetration of our boilers having made -- having been sold to the multi-unit construction market. And although boiler sales have slowed from their first quarter pace, sales on a year-to-year basis have increased 84 percent.

Additionally the new commercial line of heating products continues to perform well, selling a 165 percent increase over the year-ago period.

A major development in the second quarter of this year was the acquisition of the assets comprising the business of the former Woodmark International LP by Countrywide Hardware. With this acquisition, we anticipate that Countrywide will now generate approximately $50 million in annual revenue.

The acquisition was immediately accretive to earnings. And plans are being developed to offer Woodmark, Nationwide and Franklin products collectively in regional locations throughout the United States. Products sold at these locations will be directly supplied by our overseas vendors, which should result in substantial revenue opportunities for us.

Now, I would like to turn the call over to Joe Molino, who will give you some additional insight on the quarter.

Thank you Richard. Since Richard is focusing on the second quarter by itself, I will take a little bit of time and give some perspective on the entire first half of the year.

Revenues for the first 6 months ended June 30, 2004 decreased 0.7 percent to 40.9 million, from 41.2 million for the first 6 months of 2003. Net income for the first 6 months ended June 30, 2004 was $940,000 or 26 cents per share on a diluted basis, as compared to net income of $1,687,124 or 47 cents per share on a diluted basis for the first 6 months ended June 30, 2003.

First half of the year was down significantly from last year, but overall very much in line with expectations and thus not a concern. Unfortunately, although consolidated revenues were nearly flat, the strength of the yen and an unfavorable consolidated product mix hurt the year-over-year comparison.

Revenues at Florida Pneumatic decreased 16 percent to 17.8 million for the first 6 months ended June and 21.3 million for the prior year. This was driven primarily by two factors. First was the loss of our third-largest customer at the end of 2003. Second was the unusual timing of retail promotions. Uncharacteristically, most of these promos are slated for the final 6 months of 2004. Gross margins also decreased from 37.1 percent to 34.2 percent year-to-date.

Although the lost customer had excellent margins, the bulk of the decline was attributable to the strengthening of the Japanese yen, mitigated somewhat by the minimal low margin promotion.

Revenues at Countrywide are up 14 percent for the first 6 months of 2004, improving to 11.4 million from 9.9 million for 2003. Once again, the fencing product line at Nationwide continues to flourish and has contributed the bulk of this increase.

Unfortunately the OEM, and especially the patio products, are not faring as well. The customers for the patio products tend to be larger, with significant buying power, and have the ability to source product directly from Asia and are beginning to do so.

As a result of this shift in mix, margins have improved to 36.6 percent up from 34.8 percent as the highest gross product, fencing hardware, has the best margin.

In addition to this trend, going forward we should begin to experience improved margins from redirecting sourcing to lower-cost vendors on many products in the Nationwide portfolio.

I would also like to remind everyone that as Countrywide's acquisition of Woodmark took place at the close of business on June 30, no portion of Woodmark's second quarter operations are included in the consolidated results for P&F second quarter. Their balance sheet, however, is included.

Revenues at Green increased by 16 percent in the first 6 months of 2004, 6.9 million up from 5.9 million from the year earlier period. We continue to penetrate the market for both log-splitter cylinders and other fluid power products for this market, due to our low-cost position as a result of our Asian sourcing capabilities.

The good news in general is that all of our markets are improving at Green. The challenge for the first 6 months of the year was staying ahead of price increases for metal. Although we've been passing along these increases, they came so rapidly that we could not fully offset them completely in the first half. However, as prices stabilize, this will change.

The unfortunate result of the above was that gross margins only improved from 8.8 percent to 9.0 percent for the first 6 month period, when under normal circumstances this type of revenue change would have generated a stronger result.

Revenues at Embassy increased 20 percent to 4.9 million for the first 6 months of 2004, up from 4.1 million for the first 6000 -- first 6 months of 2003. The two main reasons for the improvement were strong housing starts increasing baseboard sales, as well as tremendous growth of 84 percent in the boiler line in the first 6 months.

The reduction in the gross margins from 31.2 percent to 28.6 percent is due primarily to the strengthening of the Euro, which significantly increased the cost of radiant tubing and the larger mix of boilers in sales. Boilers have lower average margins than the rest of the product line.

Although Embassy did experience price increases in raw materials, they were successful in fully passing these on the customers such that the impact on results was minimal.

Consolidated SG&A expense increased 3.6 percent for the first 6 months, 10.4 million from 10.1 million for the year earlier period. Much of this increase relates to increases in compensation at Nationwide, as well as professional fees related up corporate compliance work. These increases were partially offset by substantial decreases resulting from cost-cutting efforts in all segments.

Interest expense for the first 6 months decreased 31 percent to $263,092 from $383,089 in the prior period. This was primarily due to lower average borrowing.

Other items affecting cash flow were depreciation and amortization, which were $879,488 and $272,967 respectively for the 6 months. For the quarter, these amounts were $444,437 and $136,484 respectively. Finally, capital expenditures were $649,000 for the 6 months and $423,903 for the quarter. I would like to now turn the call back over to Richard.

Thank you Joe. Now I would like to present to all of you what we expect for each of our subsidiaries in the third quarter of 2004.

We expect overall results for the third quarter to be stronger than the prior year's comparable period, driven by sales increases at all our subsidiaries and continued improvement in operating efficiencies.

Sales at Florida Pneumatic are expected to increase 15 to 20 percent due to an increase in promotional sales at two major customers and new product introductions.

Sales at our Countrywide subsidiary are expected increase between 150 to 170 percent in the third quarter, due primarily to the Woodmark acquisition and continued strength in sales for the remainder of Countrywide.

Sales at Green are also expected increase 25 to 30 percent, due to the general improvement in the overall cylinder market, continued penetration of the log-splitter market and a broad price increase. Additionally, in Green, access sales should be significantly improved, due to a new relationship with a manufacturer's representative group that was retained during the second quarter of this year.

Sales at Embassy are expected increase 20 to 25 percent as well, primarily due to an across-the-board price increase in the baseboard product line, as well as due to improved sales of our commercial product.

In addition, we should have a very strong quarter in the panel radiator sale. Gross profit margins are expected to range from 30 to 31 percent. Our selling, general and administrative expenses are expected to decrease to less than 20 percent from the year ago period, due to improvement in overhead costs and the increase in revenues.

Interest expense is expected to increase about 130 percent due to the debt attributed to the Woodmark acquisition. When we put it all together, overall profit is expected increase almost 100 percent in comparison with the third quarter of 2003.

I would like to stress once again that our outlook for the year is much better than the first half would indicate. We have several large promotions scheduled. And we believe that many of our marketing and development activities will come to fruition at this time.

As always, we will do whatever we can to improve our situation through prudent cost saving measures as well as the development of ongoing new products. Thank you for your participation today. And I would like to open the floor to any questions anybody may have.

(Operator Instructions). Amy Wyland (ph), Wyland Management (ph).

Close enough, Jamie (ph). I just want to ask a question or two about Woodmark. The revenue base of 26 million -- how does that overlap with your revenue base -- with your customer base? What are the opportunities to expand that business moving forward?

In terms of overlap, Jamie, very little actually in terms of identical products. More specifically, we don't really have any staircase components in the current product line, or I should say the product line prior to the Woodmark acquisition. We had perhaps some kitchen and bath hardware in the Franklin line, but frankly very little.

Having said that, even though there is not any overlap, the types of organizations -- representative organizations out there that sell these products -- there is some overlap in that, in that certain rep groups could rep all of the products. Maybe not every rep group out there that we work with can do all of them, but many of them could.

Joe, just referring to the customer base that you sell to -- whether you (indiscernible) the large mass merchandisers of these product lines if you can --?

These products are -- just a reminder on Countrywide. We really, outside of one or two accounts, do not have a lot of mass merchant customers and neither does Woodmark. Their niche is really for the stair business. It would be stair manufacturers and also what we call job -- job is not the word I'm looking for. Groups that manufacture stares on-site for home builders -- that process is generally contracted out by a homebuilder to what we call a stair specialist. All they do is build stairs in residential homes. That has no overlap of any other channel.

The product line itself can be repped, or I should say a rep can carry their parts, or possibly kitchen and bath parts, or store and window hardware or fencing hardware. There's a lot of that opportunity.

But none of the products in Countrywide, even with the acquisition, are going to go through any big boxes in any material way, nor is there any plan to really do that. I think the idea is to expand geographically with additional locations in that product line by adding together the various product lines in working a local area or region of the country.

How accretive do you expect the acquisition to be on an annual basis?

Very accretive. You see the results for the third quarter. I think the third quarter results as we projected them for the Countrywide business are reasonably representative of an annual run rate, keeping in mind that Nationwide is a little bit seasonal. But the -- Woodmark International is not particularly seasonal. It's probably the least seasonal of any business we own at this point.

So how accretive -- we pretty much gave you the numbers by saying that the third quarter is going to be almost 100 percent better than the prior year third quarter, obviously factoring any anomalies in other areas. That's a pretty good indication of how accretive it's going to be.

But within the third quarter, how much of the -- you're looking for about a 20, 23 cent improvement -- numbers in the quarter. How much of that is Woodmark?

I would say -- this is off the top of my head -- 3/4 of that is Woodmark.

And their business is relatively non-seasonal?

Relatively not -- it's the least seasonal of any of our businesses.

Okay. And subsequent to the acquisition, are you still going to go out there and look for additional opportunities?

Right now, the answer is no as we stand here in August, for a couple of reasons. One, there are going to be substantial integration work. In addition to that, I hinted at possibly some geographical expansion as a result of this that would not be through acquisition necessarily.

Finally, we are precluded for little bit of time to do an acquisition, until some of the debt gets paid down. So, I guess that answers your question.

Okay. Last thing on Woodmark. 75 percent of the improvement in the quarterly earnings are attributable to Woodmark. So in other words (multiple speakers)

That's a very rough number.

Okay. But let's just say it's only 20 cents per share. So let's say that's 15 cents. So it is 60 cents accretive on an annual basis?

Yeah, it's at least that number.

Fantastic. I am looking forward to the quarters ahead. Thanks guys.

(Operator Instructions). Andrew Shapiro, Lawndale Capital Management.

Over the numbers (inaudible) acquisition. You have on the balance sheet the new acquisition but we don't yet have the income statement (technical difficulty) -- the operating results from it. I'm trying to back out, if I could, to track the improvement in some of the core businesses in particular.

I'm following your inventory turns (technical difficulty) core business. Is there a way -- can you tell us the inventory that was added in here from Woodmark so that we could get a -- we could reverse engine --?

I'm going to check that while we are sitting here. But off the top of my head, it's at -- $5 million sounds about right. Just under 6 million I'm being told.

(multiple speakers) missed your D&A as you read it off for the quarter.

Sure. Depreciation for the quarter was $444,000 and amortization for the quarter was 136,000.

Now, with the acquisition, a bunch of goodwill and a bunch of -- separate line item of intangibles, it looked like they may amortize when on the books. Do you have a kind of handle of what the D&A level kicks in at for Q3 and going forward?

Yes. (indiscernible) I won't do the math off the top of my head. But annually, the amortization of intangibles will increase about $575,000.

Okay.

So divide that by four and get your number.

And that line amortizes. And now under the new rules, the goodwill line doesn't amortize. It's just regularly tested.

That's right.

And that goodwill number, is that entirely Woodmark? Was all of Green's goodwill written off?

All of Green's goodwill is written off. However, there is goodwill from the Nationwide acquisition in there. And I believe there is some goodwill at Florida Pneumatic as well, also some goodwill related to the access product line at Green.

So there are number of factors there. But the goodwill related to Woodmark exclusively is little over $12 million -- the goodwill by itself, not counting the intangibles.

Right. What -- your process on the acquisitions is certainly on hold for the reasons you cited. I understand that. I'm just trying to now follow some of the milestones of strategic success for you towards achieving this very nice incremental earnings stream.

What are some of the incremental steps that you're going to need to do for the integration and the geographic expansion for us as shareholders to follow and watch your progress?

With this acquisition, P&F now has five separate MIS systems. Four was bad enough, frankly. And five is probably going to -- not probably, definitely going to drive us to undergo a project to reduce that number. So, that is a project.

Second, we are very much in development of looking at an additional regional location, as I was saying earlier. This regional location would carry a great many of the SKUs sold currently by Franklin, Nationwide and Woodmark.

We're still deciding where the first location might be. We're contemplating several. But, we are looking right now at doing something toward the end of the year -- possibly very early into '05. So, I guess I would cite that as a milestone.

We are in development on a couple of projects that I think will be accelerated as a result of the acquisition. As I have mentioned, perhaps I have mentioned somewhere, Woodmark has a very strong relationship with a 20-odd person sourcing/manufacturing/consulting firm over in Asia that works exclusively for them and will now work exclusively for Countrywide.

And there are some projects that -- development projects that were on hold that will now be accelerated as a result of that. And I'm hoping before year end, we will announce a new line of product as a result of that. That will be in the Countrywide line.

So those are couple of milestones, things we're working on that you will hear about in the next couple of quarters.

So, when Jamie and you talked here about the broad range of accretiveness coming from the Woodmark acquisition and the thought of maybe even 60 cents we'll call it the quote immediate term accretive time range, that is not then limited to that area. These steps that you have just talked -- these milestones -- are activities that would make that number even higher? Or that's what built into those?

No, no. Those activities would make the number -- you know, higher. But, how much higher? (multiple speakers) they're development of those things.

There are growth aspects to it.

There are upside possibilities. And we're excited about them. But job one is to integrate and make sure we can manage what we've got.

But having said that, part of the interest in the deal was these opportunities. And we've got to execute on plans like we're executing on opportunities across the board. But, I don't want to place any more emphasis on those than other opportunities we're working on in other parts of the Company.

But, yes they would certainly help that number. The number I gave doesn't really include that. But again, how much incrementally more above that, we're not in a position to say yet.

Again, Andrew, this is Richard speaking. The only thing I would caution you with is people plan and God laughs. Just monitor everything we're saying. These are expectations and our goals. It doesn't mean -- we're hoping and expecting that everything -- we're going to accomplish our goals. But that doesn't mean that we're going to.

No, I understand that. In my long history here, I think that you folks have been fairly circumspect and conservative in terms of your approach to things. There is no change in the methodology for which you're making estimates is there?

No. absolutely not.

One last question on this round. But I do have some more questions and then I'll go back into the question queue. You also mentioned, besides the integration and these projects which will provide good focus of time and attention and resource allocation, is that you took on obviously a bunch of debt to buy the entity. And you need to bring the debt levels down.

That would be from the growth of your equity through the improved cash flow and earnings this acquisition brings, as well as paying down the debt. So it's kind of a two-pronged approach to getting ratios in line with whatever you and your bankers have worked out.

Can you give us some milestones for which you're targeting your either debt levels or debt ratios? What are the particular milestones that you and your lenders are looking to for which you're going to work to drive the balance sheet toward?

I would say in either approximation, if you look to the June 30, '05 balance sheet, we would hope to have paid down somewhere between $7 and $10 million of the debt as it currently stands.

Okay. So, with the debt paydown levels to be at that level, also your equity level has grown from earning (technical difficulty). Is the target a debt to -- what are the milestone targets or the metrics -- (multiple speakers)?

Well I mean, there are number of covenants that need to be complied with -- tangible net worth being one; debt to EBITDA of course. There are half a dozen things that I'm not going to go into on the call that (multiple speakers) we need to target (multiple speakers)

(multiple speakers) this an amended credit agreement that is part of the acquisition?

Yes. (multiple speakers)

(multiple speakers) credit agreement to one of your filings?

(multiple speakers) all that out.

It will be an exhibit to one of your filings, then?

Yes it will. Credit agreement is going to be an exhibit to the filing.

Okay. So we can track off of that. That's fine.

Actually, Andy, we believe in the original 8-K, where we announce the acquisition, the credit agreement should have been an exhibit.

Excellent. Okay then we'll go track that one down. I'll back out of the queue. I have a few more questions. Please come back to us.

(Operator Instructions). Andrew Shapiro.

Okay. Fortunately not enough people here on the call, which actually relates to the next question. It's great to have these calls. I want you to continue to do so. It helps us all to understand the business. Hopefully the attendance on the call is much greater than the Q&A participation.

Historically, you had turned up the ratchet on -- we will call it Investor Relations, shareholder communications activities. Oh, I don't know. It might have been -- last time you guys really did something like that might have been 4, 5 years ago. And, at the point in time, the effectiveness of the activities wasn't as great as we all would have liked to have seen because the Company's size was too small.

With this acquisition, the Company's combined revenues are going to be now over 100 million. And certainly the EPS numbers are scheduled to be on a very nice growth path. Do you have a timetable or a plan for which to, I guess, go out and work towards an expanded multiple on the Company's equity, which also would help address some of the debt to equity issue?

We do not have a timetable, Andrew, for that yet. Our first and foremost objective is to integrate the Company to pay attention to all the little things that we need to the make sure that we achieve our goals.

At that point, after we have gone to a better place with all that, then we will be examining the possibility of Investor Relations at that time. Not this time. Not now, of course, but in the future obviously.

Right. Yeah, because -- I mean, the numbers you should be pumping through here -- obviously the stocks multiple has been compressed if you deliver on these results.

Right.

With respect to Green and the price increase issues that -- you had cost increases you were not able to pass on -- price increases. I want to understand the inability to pass on the price increases, if it was due to competitive factors. Although I would assume your competitors have the same cost increases.

Is everyone suffering lower margins from that aspect? Or is it due to a backlog nature that as contracts work through, then price increases will start flowing through?

I thought we had mentioned this. I may have mentioned it just in passing. But I said in a timely manner, the prices increases have been implemented in all of our subsidiaries at this time.

But as Joe alluded to earlier in the conference call, he said that we were getting hit with the increases -- cost increases at such a rapid pace that the assimilation down to the marketplace, for us and for our customers, took a while.

So, all of our companies now have adjusted their pricing. And we are in an okay situation. We may have to go back again, depending on what happens. But if prices stabilize, then we won't have to.

But at this point, we've had cost the increases and we've had the price increases, as has the rest of our industry and each of our subsidiaries.

Okay, because Green -- it seemed to have specific language citing how the increased overhead absorption didn't flow through to the margin because the pass-through at Green was (multiple speakers)

Again, that was what was the story in the second quarter for the most part.

Oh, for all the divisions?

Well, you are specifically talking about Green.

Now, with respect to Green, I just wanted to understand if it was competition, timing, or if it was just in a backlog

It was really timing, mostly.

I would add to that, Andy -- at Green, part of it was related to contractual relationships. We had a couple of customers -- at least one major one that I can think of -- that by contract we were not allowed to pass through a price increase until some sort of delay. I can't remember whether it was 30 days or 60 days or what it was. But that was part of it.

But, I would say pretty firmly that the reason we didn't it get all absorbed didn't have anything at all to do with competitive pressure. You are right; all of our competitors are in the same boat. And everybody had raised prices. It was really more just sort of a timing situation.

If we get to a point -- and hopefully were getting to the point where the price increases stabilize on a sort of in/out basis. Once that happens, we will be up to fully offset them. Although, again, ramping up, we were little bit behind schedule, so to speak.

Okay. Great. Thank you.

There are no further questions at this time. Please proceed with the presentation or any closing remarks. Gentlemen, do you have any further comments?

Well, since there are no further questions, we would like to thank you all for joining us today. We look forward to speaking with you next quarter as we discuss our third quarter results and the fourth quarter expectations. Thank you all and have a nice day and enjoy the rest of your summer.

Ladies and gentlemen, that concludes your conference call for today. Again, we thank you for your participation and ask that you please disconnect your lines.