Forterra, Inc.
Q4 2017 Earnings Call Transcript

Published: 7 Mar 2018

[Operator:]

Good morning and welcome to Forterra's fourth-quarter and full-year 2017 earnings conference call. Today's call is hosted by Jeff Bradley, the company's Chief Executive Officer, and Charlie Brown, the company's Chief Financial Officer. With that, I'll now turn the call over to Mr. Brown.

[Charlie Brown:]

Thank you. And good morning to everyone. Welcome to Forterra's fourth quarter 2017 earnings conference call. Before turning the call over to Jeff, I'll point out that Forterra intends to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as noted in the earnings release we filed this morning. Please remember that our comments today may include forward-looking statements which are subject to risks and uncertainties and actual results may differ materially from those indicated or implied by such statements. Some of these risks are described in details in the company's SEC filings, including our annual report on Form 10-K. The company does not undertake any duty to update such forward-looking statements. Additionally, we will refer to certain non-GAAP financial measures during this call, including EBITDA, EBITDA, adjusted EBITDA and adjusted EBITDA margin. You can find the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure and other related information, including a discussion of why we consider these measures useful to investors in our earnings release. We included all our key performance metrics that we will be discussing today in our earnings release that is available on our website and, therefore, we did not prepare a separate presentation slide to accompany this call. Now, Jeff Bradley, our Chief Executive Officer, will give an update on our business.

[Jeff Bradley:]

Good morning, everybody. And thank you for joining us on the call this morning. I'm going to start with some highlights of our Q4 and 2017 full year results before turning to my key thoughts on the fundamental economic drivers that serve as a backdrop for our 2018 outlook. Turning to Q4, I'm pleased to report adjusted EBITDA was above the guidance range and we had organic sales growth of 7%. Our results for the fourth quarter demonstrate progress in our initiatives that began in early 2017 focused on mitigating the impact of inflationary cost pressure on raw materials, transportation and labor, as well as greater operational efficiencies and higher prices. Our average selling price for ductile iron water pipe and drainage pipe and precast products is up on a year-over-year basis in both the third and fourth quarters. Favorable weather conditions in the fourth quarter resulted in higher shipments than we expected, including some pull forward from the first quarter and contributed to our earnings exceeding our guidance. The progress we made in the second half of last year is encouraging. And we look to additional opportunities this year and beyond to grow our business, expand margins and generate additional cash flow. Improving our businesses is critical to fully capitalizing on healthy end market demand for our products, fueled by positive economic fundamentals. The recently passed tax reform act will put more money in the pockets of consumers and lower the corporate tax rates. Companies have already announced their intent to make multibillion-dollar investments in their US operations over the next several years, which should be a catalyst for the commercial side of our business. Tax reform should also benefit the residential side of our business with tax savings helping to drive new home sales. On the residential front, we continue to see a recovery in single-family home starts, a key driver in the business. Homebuilder confidence at an 18-year high in December according to the National Association of Homebuilders. And recent comments here from several publicly traded homebuilders suggests we may see increased investment in land acquisition and development as compared to last year. On the public side, infrastructure spending was disappointing in 2017, down 4% nationally. However, we're starting to see improving trends in 2018 coupled with positive longer-term trends. Overall, the outlook for highway infrastructure spending over the next several years appears promising. In our Houston Drainage business, we experienced pricing volatility in early 2017, followed by severe flooding in Q3 as a result of Hurricane Harvey. In the fourth quarter, shipments in Houston rebounded to normal levels. Against the backdrop of continued inflationary pressure on the cost of raw materials, freight and labor, we remain focused on increasing the operating efficiency of our plants, delivery and procurement savings and driving higher prices. We are, of course, focused on the potential impact of the proposed Section 232 tariffs on our scrap and steel costs. In our Drainage business, rod is a significant input. And in our ductile iron pipe business, steel scrap is the primary input. We've already experienced inflationary cost pressures and are seeking to address those costs through higher prices. We announced the price increase to ductile iron pipe products last week. And during the first quarter, we announced regional price increases in our Drainage business. Portfolio enhancement also remains key to our margin improvement strategy. We recently announced a small transaction with a regional competitor in the southeast. This transaction – or through this transaction, we improved our market position in Texas and Mississippi and reduced our presence in less profitable parts of the region. We remain focused on prudent transactions that optimize our footprint and improve our margins. I also want to provide some color on our sales growth initiatives and our progress in 2017. We generated over $80 million in sales, representing about 10% of our drainage business from Bio Clean, structural accounts, strategic accounts as well as our cross-selling initiatives. We'll continue to drive growth in these higher-margin initiatives this year and beyond. In summary, the backdrop for Forterra supports our expectation for continued improvement in our business. While we realize that some challenges may persist, including potential cost inflation, we believe we are taking the right steps to position the company for continued margin improvement. The end market fundamentals support our expectation for our organic growth in our business. I'm encouraged by the opportunities ahead of us to drive further growth. Charlie?

[Charlie Brown:]

Thanks, Jeff. We reported organic sales growth of 7% in the quarter, including 10% growth in our Drainage segment and 4% growth in our Water segment. As Jeff noted, the sales growth in the quarter included the benefit of favorable weather. On a full-year basis, adjusting for acquisitions and divestitures, sales were essentially flat with modest growth in Drainage, offset by decline in our Water segment. Net income for the quarter of $43 million included the pretax benefit of a $45 million reduction in our tax receivable agreement liability as a result of the recent US tax reform. Our income tax benefit of $15 million also included favorable revaluation of our deferred tax liabilities as a result of tax reform. In our Drainage segment, we delivered an adjusted EBITDA margin of 15% that included the impact of higher shipments, higher average sales price and the benefit of initiatives, offset by higher labor, freight and raw materials. In our Water segment, we delivered an adjusted EBITDA margin of 11% that included the benefit of higher shipments and higher average sales price, offset by higher costs, most notably the cost of scrap. In corporate, the adjusted EBITDA loss of $21 million for the quarter was higher than the same period last year due primarily to higher run rate costs and higher consultant fees, most notably costs associated with material weakness remediation and SOX compliance. We made substantial progress during the year and expect our material weaknesses will be fully remediated in 2018. Turning to the balance sheet, we ended the quarter with $105 million in cash and no outstanding balance on the revolver. Our year-end cash position reflects the benefit we expected from seasonal working capital improvement. Our 2017 cash capital expenditures of approximately $53 million for the year included $11 million in spend accrued in 2016 and excluded $2 million of spend accrued from 2017 that will be paid in 2018. Netting these timing factors, our incurred capital expenditures in 2017 were $44 million and were primarily maintenance related. Turning next to our forecast for Q1 2018, we expect adjusted EBITDA to be in the range of $8 million to $12 million, including a $10 million impact from costs, deferred shipments and lost sales associated with a major upgrade at our Bessemer, Alabama ductile iron pipe facility. The Bessemer project involved the upgrade of critical equipment that melts and treats molten iron at our largest ductile iron pipe facility. This project will increase plant efficiency and quality and reduce input costs. The scope and scale of the project requires the facility to be idled in January and necessitated the slow ramp up in February. Unabsorbed costs, deferred shipments and lost sales from this project will result in a $10 million impact in the quarter. While significant within the quarter, this high-return project will largely offset the first-quarter costs during the remainder of 2018 through raw material savings and operational capabilities that would allow us to recover deferred sales. Most importantly, the Bessemer project positions Forterra for margin expansion over the coming years. Summarizing our guidance by segment, the Q1 forecast anticipates lower net sales in both our Drainage and Water segment due to unfavorable weather dynamics. First, as mentioned earlier, a portion of sales were pulled forward into Q4 2017. Second, we have experienced unfavorable weather in Q1 2018, including extreme cold and snow early in the quarter and heavy rainfall in February and early March. In our Drainage segment, we expect higher adjusted EBITDA and adjusted EBITDA margin with the benefit of our procurement initiatives and other actions taken in 2017 to reduce costs that we expect to help offset the impact of continued cost inflation, including steel, cement and aggregates. In our Water segment, we expect adjusted EBITDA and adjusted EBITDA margin to be down on a year-over-year basis as a result of the Bessemer project as well as higher scrap prices due to the fact that the rising scrap prices last year were only partially reflected in our Q1 2017 results. We expect that corporate costs in the first quarter of 2018 will be lower than the fourth quarter of 2017, but above the longer-term run rate expectation of $16 million to $17 million. The higher expected costs in Q1 2018 are due primarily to the wrap up of consulting fees associated with SOX compliance work. We expect additional material weakness remediation efforts, primarily address using existing internal resources. Thus our outlook for the first quarter of 2018 primarily reflects the impact of unfavorable weather and the Bessemer project within our Water segment that we expect largely recover over the balance of 2018. We maintain our expectation for higher adjusted EBITDA and adjusted EBITDA margin for 2018, reflecting the benefit of actions taken in 2017, despite the current inflationary cost environment and tight labor conditions. Further, we expect to see higher average sales price for both our ductile iron pipe product and our pipe and precast products. Finally, as we wrap up consulting work in the first quarter, we expect that our run rate corporate cost will be lower for the balance of 2018 at an estimated quarterly run rate of $16 million to $17 million. While we're not providing a full-year cash flow forecast, or expectations, we included a summary of the expected 2018 key cash outflows components in our earnings release that range from $141 million to $166 million. This includes anticipated TRA payments, net of expected tax refund pertaining to 2017 of $19 million to $24 million. Breaking that down further, our expected TRA payments for 2018 are $34 million, which includes $4 million pertaining to 2016, though it was not paid until the first quarter of 2018, and $30 million pertaining to our 2017 tax year that we expect to pay at the end of 2018, offset by an anticipated 2017 federal tax refund of $10 million to $15 million. With the benefit of the tax reform act and the reduction of our TRA liability, we expect our ordinary course TRA payments for future periods to be substantially lower. We also expect that the tax reform act will reduce our tax payments in 2018 and beyond. While we will likely see a reduction in our ability to deduct interest expenses as a result of the EBITDA-based cap calculation, we expect that this reduction will be more than offset by our ability to accelerate deductions of certain qualified capital expenditures. While we have not even finalized our valuation of the potential impact of the transaction tax associated with accumulated earnings and profits in foreign countries, our initial estimate of the impact is relatively immaterial. In summary, we're taking many steps to improve our financial performance and balance sheet and best position the company to capitalize on solid end market fundamentals. We believe our overall business is in a stronger position today compared to a year ago and we look forward to delivering improved results for the full year. That concludes our prepared remarks. Operator, will you please open the line for questions.

[Operator:]

Certainly. [Operator Instructions]. And our first question comes from the line of Ian Zaffino with Oppenheimer.

[Ian Zaffino:]

Hi, great. Good quarter. Jeff, you mentioned raw materials – steel, scrap, 232 – can you give us maybe an idea of your ability to pass it through or what's the lag in passing it through? Kind of what steps have you taken? You could maybe talk about, like in the past, what has happened as it relates to this business. Any real color you could give us would be great. Thanks.

[Jeff Bradley:]

Sure. As I said in the comments, Ian, we're increasing prices in both the businesses. We recently announced a ductile iron price increase and we also instituted price increase in our drainage business, both in the month of January and in the month of February. On your question about lag, typically, in both the businesses, we have a backlog that's going to extend about three months. But in both businesses, we have a fair amount of pickup business during the month and during the quarter. So, in terms of steps, we're going to continue to monitor scrap, monitor steel. And as we see fit, we're going to continue to raise prices.

[Ian Zaffino:]

Okay, all right. Thank you very much.

[Jeff Bradley:]

Thank you.

[Operator:]

Our next question comes from the line of Scott Schrier with Citi.

[Scott Schrier:]

Hi, good morning. Thanks for taking my question. First, can you talk about your incremental internal growth projects that you may have in your pipeline, thinking about this Alabama investment, and how you look at allocating capital between your two segments?

[Jeff Bradley:]

Sure. In terms of what we did in the south, we look at the whole region, we have some less profitable areas that we've addressed. As we said, we have a larger presence now in Mississippi. And, really, that's how we're going to continue to look at the country and look at all of our facilities. We have facilities that do very well, facilities that don't do as well, we're going to continue to monitor. And where it makes sense to make changes, we're going to make changes.

[Charlie Brown:]

So, Scott, I think the Bessemer project is a great example of investment in operational improvement. And the disposal that we did, the regional disposal Jeff references is portfolio management at its best. And I think that's where we're going to continue to focus on. We do have – and as I referenced in my comments, most of our CapEx spend last year was really maintenance related. This year, we're more focused, I think, on investing in margin enhancements and continued – we have, I think, good opportunities, as Jeff indicated. We have some businesses that have done better and some regions that do better and we will allocate our capital based on those type of margin improvement activities.

[Jeff Bradley:]

With every project that we do, Scott, we're looking at the ROI. The ROI on the Bessemer was very, very good. It's going to improve the quality of our material. It's going to improve the plant efficiency. It's going to improve our cost. So, it's a win-win all the way around.

[Scott Schrier:]

Got it, thanks. And then next, if we think about – you had a strong quarter. Understand you had some favorable weather. You had the demand pull forward. Can you give us some color on the end market strength? What you're seeing? Are we seeing a resurgence in public spending or in bidding activity? And if you could talk about what you're seeing in the private markets, both resi and non-resi as well. What's really comprising some of this bidding activity that you're seeing?

[Jeff Bradley:]

Sure. So, we're seeing good bidding activity pretty much across the country. We cover pretty much coast to coast. But, overall, bidding activity in 2018 looks like it's going to be stronger than 2017. I talked about the outlook for home starts. We are taking feedback from all of the builders. The builders are pretty optimistic. So, we are positive about that. Awful lot of commercial work happening around the country. We'll have to wait and see how it plays out. But what we see, what we feel, our backlog, talking to contractors, we're really feeling good about things.

[Scott Schrier:]

Great. And one last one. Can you talk about the Canadian business and when we could see an inflection point there?

[Jeff Bradley:]

You're talking the Canadian Water business or the Canadian Drainage business?

[Scott Schrier:]

Sorry. More on the Water business.

[Jeff Bradley:]

Right. So, right now, we're looking at disposing of the – we're considering it – disposing of the Canadian business. That's the pressure pipe. As you know, we sold our pressure pipe business in the US last year and now we're looking at that business up there.

[Scott Schrier:]

Great. Thank you for taking my questions. Good luck.

[Jeff Bradley:]

Thanks, Scott.

[Operator:]

Thank you. Our next question comes from the line of Nishu Sood with Deutsche Bank.

[Scott Schrier:]

Hi. This is actually Tim Daley on for Nishu. Thanks for the time. So, my first question is on the scrap prices. So, obviously, there is a lot of attention due to the tariff discussions going on right now, but you guys buy a specific type of scrap. Just curious as to how much is that up on a year-over-year basis currently?

[Jeff Bradley:]

Right. So, we – scrap changes monthly. We buy a couple of different grades of scrap. We are similar to a mini mill. We're going to buy shredded scrap. We're going to buy structural scrap. Really not in a position to give you how much our prices are up year-over-year. I don't think we disclose that. And it's a regional business too. We've got a plant in California, a plant in Virginia, and a plant in Alabama. So, the pricing in each one of those markets is going to be different. But as I said, scrap is up. We have instituted a price increase. Our backlog is about three months. We do pick a fair amount of orders up within the quarter. So, we are absolutely looking to cover those additional costs.

[Scott Schrier:]

Understood. And just curious, obviously, there is some sensitivity around the actual quantification of these numbers, but just curious as to how big the DIP price increase announced in January was? How much of that, do you believe, will be realized in the market? And as well, I think you mentioned February, was there another price increase? So, just curious if we're going to be able to see, I guess, some margin improvement. Are these price increases outstripping the raw material inflation?

[Jeff Bradley:]

We only put through one price increase in DIP. I will tell you that the increase was less than $100 per ton. And, yes, we expect to recover the additional cost of scrap in that increase.

[Scott Schrier:]

All right. No, that's very helpful. And then, just a second question, so you mentioned that the Drainage will see some higher EBITDA on an absolute and on a margin basis due to the procurement initiatives. Just curious as to how successful they had been on a, I guess, commodity by commodity basis – steel, cement and aggregates – across the three? Thank you for the time.

[Jeff Bradley:]

Sure. The procurement team has done a really nice job. As I've been talking about on the last call, we kicked off that major initiative in the second quarter of last year across the board. Cement, ag, sand, steel. The guys have done a nice job in lowering costs. So, really, what that did was that really set a nice platform going into 2018. So, starting at a lower point at the end of 2018, going into a cost inflationary period – I'm sorry, at the end of 2017, going into cost inflationary period in 2018. And so, we've covered most – all of our cost base at this point within Drainage. I think we're going after, at this point, trucking and various other support activities where we think there's still opportunity out there.

[Scott Schrier:]

Great. Thank you for the time.

[Jeff Bradley:]

Thank you.

[Operator:]

And our next question comes from the line of Mike Dahl with Barclays.

[Marshall Mentz:]

Good morning. This is actually Marshall Mentz on for Mike. Thanks for taking the questions. Still a few more on Bessemer. I think you said in your prepared remarks, the facility would be down for January, but should that be fully operational as we move forward into February? And does this impact your ability to sell in the southeast, granted January is probably not very material? Or does one of your other facilities – are you able to cover that sales region?

[Jeff Bradley:]

Yes. So, it was not fully operated. We had a ramp up period in February. It's fully operational today. The nice part about the company is, we've got the Virginia plant. The Virginia plant has been able to help out where we had situations where we might have been short of material the southeast. Our Lynchburg plant was able to cover that. The guidance also built inventory at the end of the year, knowing we were going to have this facility down. So, we lost a little bit. But as we said, we plan on making that up in the balance of this year.

[Marshall Mentz:]

That project, is that unique to the Bessemer facility or are there other opportunities that your other DIP facilities that would be similar?

[Jeff Bradley:]

No, it's not unique. I really don't want to get into the details. Really, what we did was – it was a major project that improved the quality of the cast material. It's going to improve the overall efficiency of the plant. And we're going to be able to substitute different raw materials going into the melt that are less expensive. So, that's where we get it on the cost side.

[Charlie Brown:]

Yes. We would have other opportunities in our other facilities, our other DIP facilities, and we will continue to invest in high return projects like what we've done in Bessemer at our DIP as well as our Drainage businesses.

[Marshall Mentz:]

I may have missed this in the prepared remarks, but you highlighted some pull forward in the Drainage business during the quarter. Was that just a single project out of schedule or what was that exactly and do you have a quantification of that?

[Jeff Bradley:]

No. It was just that weather was really on our side at the end of the year and we were able to pull the contractors that we do business with, we were able to pull some work forward from January that they had anticipated because of typically very cold weather at the end of the year. Because it was mild, they were able to pull some of that work ahead in the fourth quarter.

[Marshall Mentz:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Sam McGovern with Credit Suisse.

[Samuel McGovern:]

Thanks, guys. Can you talk a little bit about how you think about the right leverage for Forterra? And how, once you return to being free cash flow positive, you balance debt reduction versus investing further in the business?

[Charlie Brown:]

Sure, Tim. We are, obviously, interested in reducing our leverage position. The best way, from my perspective, to do that is to continue to grow our EBITDA. And I think we've got – we've demonstrated in the fourth quarter and the third quarter that we can continue to improve that. I look at 2018 as another year of progress. And the continued growth in EBITDA will help impact our leverage position. As we ended the year in very good position in cash, I think there should be a lot of confidence that the business is being able to build credibility. And we will use that funding to improve the business wherever possible.

[Samuel McGovern:]

Got it. And now that the business is doing better, are you starting to look at acquisitions again? And if so, how do you think about deleveraging through low multiple acquisitions versus potential integration risks, et cetera?

[Charlie Brown:]

Obviously, as we find good opportunities, we will pursue those. Managing our portfolio is crucial. And we do recognize that we are in a leverage-challenged situation. So, we're going to continue to work towards improving that. I think the investment side, you will see us do deals much like we did earlier this month or this quarter. And those types of transactions where we can strengthen our positions in crucial markets and grow in growing markets and where we can be very successful going forward.

[Samuel McGovern:]

Got it. And so, when you look at your current asset portfolio, it sounds like there is potential for more asset swaps. Would you look at any sort of non-core asset sales as well or asset swaps and acquisitions seemed better for the portfolio?

[Charlie Brown:]

Yes. I think, as Jeff indicated earlier, we're looking, obviously, at the Canadian pressure pipe business and using those – and if that were to go through, we'd use those funds prudently to continue to enhance our portfolio. And whether that be in the Drainage or the Water side is to be determined based on the best opportunity that's out there.

[Samuel McGovern:]

Got it. Thanks so much. That's very helpful. And I'll pass on.

[Jeff Bradley:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Jerry Revich with Goldman Sachs.

[Jerry Revich:]

Hi. Good morning, everyone. Can you folks talk about – based on the bookings that you're seeing, how their organic growth outlook stacks up in the Drainage compared to the Water business? And can you give us any color on regional differences that you're seeing in the demand cadence as we enter the construction season here?

[Jeff Bradley:]

Jerry, did you say bookings? I'm sorry, I couldn't understand.

[Jerry Revich:]

Yeah, Jeff. So, based on bookings and customers' intentions that you're seeing, how do you expect the organic growth outlook to stack up over the course of this year for Water versus Drainage? And any comments on any regional differences you're seeing?

[Jeff Bradley:]

Sure. So, on the bookings side, you mentioned Drainage. Yeah, we're definitely seeing positive results there. We're seeing higher bookings and revenue. We're seeing higher average selling prices. And that really gives us the confidence that I've discussed earlier. Drainage is a regional business. Pretty much across the country, we're really seeing a lot of positive things. Right now, as we sit here, the northern markets are off. It's very cold. We still have facilities that are down. We're seeing a lot of traction in Florida, Texas, California. As I said, pretty much across the country. So, we're confident. Bookings are also good in our ductile iron business. We're confident about what we're seeing there for the balance of the year.

[Charlie Brown:]

I think the Water side has probably a little bit of, as we mentioned, deferred sales. So, that would be something that has caused our backlog to look even better at this time.

[Jerry Revich:]

Okay. And then, Charlie, thank you for the color on the tax receivables agreement. I'm wondering, can you just say more about the company's depreciable base for cash tax purposes as we think about the 2018 cash tax payments? Can you just give us a sense for what that picture looks like now? And then, on the tax receivables agreement that you mentioned, about $30 million is related to payments for 2017. So, presumably, that goes into the payments. At this run rate, it would be in the $15 million to $20 million range with the lower tax rate going forward. Is that the right read? Can you just give us any context there?

[Charlie Brown:]

Yeah. Thanks, Jerry. I think that prior to the go forward with TRA, it would be – probably have been less than that. We, obviously, in 2017, had a bit of a step up. We did a couple of transactions that yielded a higher TRA. And, obviously, with a significant reduction in the tax rate, 2018 gets a nice benefit from that going forward. The two items that I would highlight on the TRA in 2017, one was the upsize of the loan which did generate a good piece of tax savings, which would flow through the TRA. And the other one was certain disposals that generated additional tax benefit. So, going forward, I would definitely look for a more ratable, more reasonable number on the TRA payment.

[Jerry Revich:]

And, Charlie, the tax part of the question, what's the depreciable base for US tax purposes? How should we think about the cash tax payments in 2018 if we're at this current earnings run rate?

[Charlie Brown:]

Yeah. I think we'd be looking at something, as we indicated, lower due to the significantly lower tax rate. And we will be somewhat constrained, Jerry. We expect interest payments to be about $60 million. There may be some cap on that as a result of the limitations in the new code. But I would, again, say that we've got good benefits associated with these capital investments, which are going to more than offset that. So, I'd expect a nice improvement in our go-forward tax rate, given our asset base at this time.

[Jerry Revich:]

Okay. And lastly, on price cost, just to make sure we're putting the pieces together correctly, it sounds like, based on your comments on the call, in the fourth quarter, we saw gross margin pressure on a percentage basis because pricing didn't fully cover costs. It sounds like you expect pricing to fully cover costs as early as the first quarter, correct?

[Charlie Brown:]

In the fourth quarter, I think there will be some challenges with the Bessemer project and the weather. So, I think that we've got price increases out there. As Jeff indicated, we've got some backlog that we'll be working through that will have still some imbalances there. But, certainly, as we get into the second quarter and the much more important third quarter and as we get through the year, we'd be matching these up much better.

[Jerry Revich:]

I appreciate the color. Thank you.

[Charlie Brown:]

Thank you.

[Operator:]

And that concludes our question-and-answer session for today. I'd like to turn the floor back over to Jeff Bradley for any closing comments.

[Jeff Bradley:]

Okay, thank you very much everybody. We really appreciate your interest and we look forward to talking to you on the next call. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may now disconnect. Everyone, have a great day.