Hubbell Incorporated
Q4 2013 Earnings Call Transcript

Published: 28 Jan 2014

[Operator:]

Good day, and welcome to the Hubbell Incorporated Fourth Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Jim Farrell. Please go ahead, sir.

[James Farrell:]

Good morning, everyone, and thank you for joining us. I'm here today with our President and Chief Executive Officer, Dave Nord; and our Chief Financial Officer, Bill Sperry. Hubbell announced its fourth quarter and full year results for 2013 this morning. The press release and earnings slide materials have been posted to the Investors section of our website at www.hubbell.com. Please note that our comments this morning may include statements related to the expected future results of our company and are, therefore, forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Therefore, please note the discussion of forward-looking statements in our press release and consider it incorporated by reference into this call. In addition, comments may also include some non-GAAP financial measures. Those measures have been reconciled to the comparable GAAP measures and are included in the press release and the earnings slide materials. Now let me turn the call over to Dave.

[David G. Nord:]

Okay, thanks, Jim. Good morning, everybody. I'm just going to provide a little bit of highlights for our fourth quarter and full year results, got a couple of other topics to cover, and then I'll turn it over to Bill for a little more of a detailed review. Obviously, you saw our results. Very pleased with how we finished the year, particularly a year that's had mixed markets throughout the year, with sales up 7%, acquisitions contributing 3% of that. So good core growth, probably the best core growth we've seen whole year. The end markets, as I said, were mixed. Non-res was a little better than we've seen all year, obviously still depending on the strength in the renovation. And then our energy efficiency market, residential market continued to be solid for us, double-digit growth. Now the utility market is much weaker, as we signaled earlier in the year, particularly on the transmission side, also a little tougher compare because you don't have the storm activity that we saw last year. And I think there was a little bit, certainly in December and some of that continuing into this year, the impact of this severe cold weather, obviously storms, to the extent they provide activity. But regular maintenance, a lot of that is getting deferred until the weather warms up a bit. And then on the industrial side, we saw some good performance there, particularly on the high-voltage business. Of course, that's a very lumpy business, but we predicted that, that would be recovering. We saw that earlier in the year, and that was a contributor in the fourth quarter. All that giving us some good margin expansion, up 90 basis points, with productivity driving that, as well as some lower material costs. And all that leading to earnings per share, up 15%. Anytime we deliver 15% earnings, I can't help but be very pleased with the performance of the organization. So all that helps us finish the year a very solid year, good operational performance in an environment of a lot of ups and downs in the markets, with sales up 5%, acquisitions benefiting that by about 3%, so core growth up 2%. As I said, the end markets were all mixed. And we think -- and we'll talk later about how that -- we see that playing out into '14, but from my standpoint, I'm just pleased that we were able to navigate through those mixed markets, still focusing on the execution that this organization has really become very keen on. We finished with margin expansion up 40 basis points. That's what we guided this time last year, so I'm pleased that we're able to deliver that. We obviously had some help from lower material costs but still focusing on continued improvement in productivity. I think we also spent a lot of time focusing on our capital deployment. We increased our CapEx spending last year, up 20%. We increased our dividend, up 11%. We spent nearly $100 million on acquisitions in 2013. And we had share repurchase of just over $30 million to make sure we kept up with the dilution from employee options. So the continued focus on investing in the business and returning our strong cash flow to shareholders. I think we've also made some good progress on building on that foundation of our One Hubbell strategy, good progress during the year. We've realized some early successes, but there's still a lot of opportunity in front of us. And we'll talk more about that at our Investor Day at the end of February. I think, the other 2 points that I would raise

[William R. Sperry:]

Thanks, Dave. Good morning, everybody. Thanks for joining us. I'm going to start on Page 3 of the slides that Jim had mentioned to you. So reported sales for fourth quarter up 7%, with a balance between acquisitions and organic. Operating margins up 90 basis points from the prior year to 15.6%, with productivity really being the main driver there. EPS of $1.38, 15% increase; and strong free cash flow. Just wanted to pause for a second on the acquisitions. Our format with these slides sometimes doesn't let us aggregate multiple years' worth of information. And you all always ask us lots of good questions about our capital deployment and acquisition program, so let me just share some of the facts over the last few years, give you a sense of what's going on with the acquisition program. So back in '11, we invested about $30 million that year; in '12, $92 million; as Dave said, this past year, $98 million; and already $95 million in 2014. That program comprises 12 different companies that we've acquired. And I'd make kind of the following observations. I think first is you'd see good balance offered against our organic markets by that level of activity. The average deal is a small tuck-in really averaging about $20 million in sales of those last 12 companies that we've bought. They've been across our portfolio of businesses

[David G. Nord:]

Okay, great. So on Page 18, just a few comments on our end markets and our overall outlook. I think, as we look through the end markets, we think, certainly, they're poised for continued growth next year overall. I think starting with the non-res market, I think there's some good outlook there. Certainly, we expect the continuation of the investment and the opportunity coming from the energy efficiency, particularly in our Lighting side. But hopefully, we'll see some additional investment on the new construction than on the more traditional non-residential. I think the industrial side, we expect to see that continue to grow in the 2% to 3% range. We've seen some of the improvement on the high voltage side, but really, on our core industrial, for the most part. I would say that when you get into the Harsh & Hazardous, there'll be a little bit of mixed performance there. I think the oil and gas will continue to improve next year. I think the mining side of the business, we'll still have some challenges, as they've seen this year. And then I think the utility side, we think that's going to, at least at this point, be flat. We certainly hope that turns out to be conservative. But I think from the experience we've had this year, particularly on the transmission side, but even the challenges that the utilities have seen on distribution being able to fund investment, we're a little more cautious on that. As Bill mentioned, we were surprised by the weakness. We signaled that earlier on as soon as we saw that, particularly in transmission. And we've seen that, although our orders in December were a little bit better, but I can't say that's the case in January. And some of that is -- may be attributable again to the severe weather conditions that we're dealing with. I think that's also a market that what we've seen this year and I think some of the impact on our business in the past year has been on some of the competitive pressures on pricing. And we continue to maintain discipline on that front, but I think we expect that -- we've taken some hard look at some of our cost and we're going to take some more aggressive positions on cost. Lastly, on the residential side, we're forecasting that market to be up 10%. I think a year ago, we said that 10% might have been a little bit conservative. I'm not sure I would say that this year. I think as you've seen the data on housing starts and permits and most recently new home sales, I think that is -- we're paying close attention to that. On the other hand, I would say that I'm very optimistic about our ability to perform in those markets. And our team, particularly in our Progress Lighting side, is very well positioned. They've performed very well. I was just with them a couple of weeks ago at the Dallas market for residential lighting, and the customer feedback that I received was very complimentary about the Progress team ability to perform this year, far better than many of the competitors. And so -- and we see some of that continuing. So very optimistic about that. So when you put that all together, we think there's overall growth of end markets in the 2% to 3%. Turning the page, how does that play out for our segments? On the Power side, which is a little less than 1/3 of the business, we see that business up 2% to 3% overall, with acquisitions contributing 2% of that. And on the Electrical side, up 6% to 7%, with the non-res and res growth, and acquisitions contributing 3%. So overall sales, up 5% to 6%. It's a balanced contribution between both acquisitions and organic, which is the model that we like, and that's on acquisitions that have been completed. Operating margin expansion up 20 to 30 basis points. It's a little bit lower than our normal guidance simply because from the acquisitions that we've done, we think there'll be a short-term margin dilution of about 10 basis points. So the core business, still up 30 to 40 basis points. Tax rate, up a little bit. We go through this cycle every other year on R&D tax credits, so since it hasn't been extended, we're assuming a rate that doesn't have an R&D tax credit. If that changes, we'll let you know. And free cash flow, equal to net earnings. So, Bill, I don't know if you want to add any additional comment to that.

[William R. Sperry:]

I think it's worth, Dave, maybe just reminding the call about Hubbell's seasonality. We tend to, in a typical seasonal year, get more of our sales out of the back half of the year, typically order of magnitude historically may be 52%, and from an earnings perspective, even a little bit more than that. And I think, for the first half, first quarter tends not to be -- is less of a contributor than the second. So -- and I think, as Dave -- when you talked about what we can see from January orders, it's not -- we don't -- we're not getting a clear vision. We've talked with you over the past year about month-to-month some slightly erratic order behavior. Dave mentioned the weather. December and January are interesting months because you sometimes get customers being motivated by incentives, which pulls more orders forward. And so in any case, it's a -- just remind everybody of the seasonality of which this annual outlook has embedded in it. And also, I guess, from that tax rate, just to remind everyone as well, that there really was a concentration in the first quarter of a lower rate last year, so the -- of the headwind, it will be a little bit more pronounced in the first quarter.

[David G. Nord:]

So I think, just wrapping up, our performance last year clearly demonstrates our ability to deliver improved performance even in the uneven markets. We finished the year strong. We look forward to building on that next year. And the entire team really is unifying around our One Hubbell approach as we look to exceed expectations at every level of our organization. So with that, Jim, you can open it up to questions.

[James Farrell:]

Okay. Divona, let's open up to the Q&A portion.

[Operator:]

[Operator Instructions] And we'll take our first question from Christopher Glynn with Oppenheimer.

[Christopher Glynn:]

Had a question. Just wondering if you could split out C&I Lighting performance and what you see in terms of the competitive landscape there. Any changes in the industry competitively?

[William R. Sperry:]

Yes, I'm not sure, Chris, that we see a lot of competitive change. I think that the nature maybe of some of the -- on the C&I side, maybe some of the relight projects, there may be some lumpiness and share shifting that can go on as big customers do a bunch of projects and then maybe they pause. And but I don't see a big shift or change per se in the competitive dynamics.

[Christopher Glynn:]

Okay. And then you sort of asked for further questions on the acquisition front, at least as I heard it, so let me throw my hat in that ring. Thanks for breaking out the recap. Still looks like, even adjusted for the new deals, the cash on hand is going to be about 2x what you've spent in the last 3 years and 1 month, we'll call it. So just if you could kind of re-clarify how the capital structure sits right now and the strategic importance of that.

[William R. Sperry:]

Yes, we would describe it, Chris, as being highly liquid and poised for investment. You're looking at it compared to the last few years' annual run rate, which I think is one way to look at it. I think another is to consider that we did BURNDY for $355 million, right? And so I think having the optionality of the cash on-hand to be able to do BURNDY and bigger-sized deals, I think, is a competitive and strategic and value-creating advantage for us right now.

[David G. Nord:]

Yes. Chris, I would just add to that. I think I don’t want to lose sight of and I don’t want to put undue pressure, but maybe it's good that I put some pressure on Bill Tolley. But a significant part of what I'm expecting him to add support to is not simply more of the same when it comes to acquisitions. I would say, to make sure that we can put more emphasis on much more of the same or more of the different, the larger, the more strategic transactions that we've talked about, we've put some energy around, but that's just one more step in, in putting more energy around those types of transactions. That's what he's going to be spending a lot of his time on, which he's got great experience from the breadth of his experience in the organization to really help facilitate that. So that's a big part of what we're talking about.

[Christopher Glynn:]

Okay. And on the bigger deals, have you seen price get away from you on any? Have you had to kind of walk away from anything there?

[David G. Nord:]

No. Actually, some of the things that have occurred out there that we've looked at, I think, have been consistent with our point of view of valuation. There hasn't been anything that we've been considering that is not actionable because of prices. It's more of other influences that come into play in whether it's actionable and the timing of actionability. So it really is just more of a probably a longer lead time to actionability on larger deals.

[Christopher Glynn:]

And then just a quick one on Electrical margin. Called out lower cost. Is that a separate bucket from productivity?

[William R. Sperry:]

Yes. Well, there was just more things in there than productivity, Chris. So something like pension, for example, that was lower. We sort of expanded the bucket from productivity to say lower cost.

[James Farrell:]

Chris, that would also include lower materials in it.

[Operator:]

And we'll go next to Rich Kwas with Wells Fargo Securities.

[Richard Michael Kwas:]

Just to follow up on the guide here for organic growth. If I look at the acquisition contribution and look at your end market outlook, it appears that you expect to grow in line with your end market outlook. And just what are the barriers to you outperforming the end market outlook as we move through the year? Is it lumpiness of projects, is it mix of business? How should investors think about that?

[William R. Sperry:]

I think that price is one angle to that, Rich. And whether you're kind of price leading and putting pressure on even maintaining share versus the market, I think that's one consideration, but other than that, we would try -- the barrier is making sure you're doing -- I kind of invert the question little bit in the way Dave challenges our operating team is what are the ways to outperform the end markets? How much capital do you need for new product development and the like? And how aggressive can you invest in productivity so you can be a price leader? So we sort of take your question and invert it as we do our strategic planning and challenge our teams to try to outperform. In this case, I think you're right to say the way we've -- the way we're starting the year is to assume performance, which is again given some of that caution that Dave mentioned and some of the pieces of the end-market pie, really.

[David G. Nord:]

Yes. And, Rich, I would -- let me just add that when I look at this outlook, my view of it and certainly what I'm pushing, as Bill mentioned, the organization, we're not satisfied with growing with the market. So part of it is, I think, a, we hope the market is little bit better. And we -- as you know, we tend to try to be a little conservative in our market expectations and then be prepared to deliver on better market conditions. Also, trying to, where appropriate, capture share, as I was talking about before, on the residential lighting side. I think we've seen some of that performance already this year. And so I would expect some of that to continue next year just because we have a great position there and we have a great track record there. And I think there's other parts of the market. And then lastly, we're certainly, as we talk about, continuing to focus on acquisitions, and we would add growth to the portfolio through acquisitions. So all those things, from my standpoint, suggest that the bias from our outlook will be better, but it's still early. Okay?

[Richard Michael Kwas:]

Understood, understood. And then just some tie ups some loose ends. On high voltage, what did that grow in the quarter? And as you think about the year, I assume that the growth should stay fairly robust here in the early part of the year and then slow down against tougher comps in the back half. Is that the right assumption? And then on lighting, Bill, do you have the split between C&I and residential growth and what the LED mix was in the quarter?

[William R. Sperry:]

Yes. So let's start with high volt. So as you pointed out, they had a very strong double-digit fourth quarter, very strong outperformance, which came against kind of an easy lap versus last year. And so they're kind of recreating the inverse of this year by having that tougher comparison the second half, and so a little bit easier time growing in the first half. So your assumption on that is right. Your question on growth within lighting

[Richard Michael Kwas:]

And then, do you have the C&I and resi split on the lighting piece?

[James Farrell:]

Rich, the residential was a bigger contributor to that. So resi was higher than the overall and C&I was in the low to mid-single digits.

[Operator:]

[Operator Instructions] We'll go next to Steve Tusa with JPMorgan.

[Charles Stephen Tusa:]

One of the utilities yesterday was talking a lot about continuing to put money to work in transmission projects. I just want to get a little bit of color on that. It's unclear to me whether that's a step-up actually or it's just robust and kind of at a high level. They were just talking about how the returns are allowing them to throw money at transmission. That's going to be a priority. Maybe if you could just provide a little color on that.

[William R. Sperry:]

Yes, I think, Steve, if we were to kind of abstract to the entire utility market, it feels to us like the average utility customer is feeling like -- that their CapEx dollars may be getting called towards the generation end, actually, as they're kind of dealing with gyrating fuel prices and making sure their fleet is properly aligned relative to natural gas versus coal. But we're finding, I think, net-net, people thinking that there's a little bit less attention and maybe less dollars available to be doing this kind of transmission and distribution spending that would affect Hubbell's level of volume. I think there's always pockets. And I certainly agree that a good transmission project can really -- can have good IRRs and it can really help. If you put some good, efficient high voltage in there or connect maybe to another FERC region, it can really lower your investment that you need to make on the generation side. So I think somebody saying that makes sense, but I think it's probably not reflective of the broader kind of general utility market as we're seeing it right now. But hopefully, that's maybe a trend of -- for the future and where we're going, because we've have some pretty soft T [ph] in those compares, which is kind of the other element of your question. Those compares start to get a little bit easier.

[Charles Stephen Tusa:]

Okay. How much do you think storms -- I mean, the weather impacted the 4Q utility growth there? I think you said mid-teens level of Sandy impact, but I'm not sure what that kind of referred to. Maybe put a little bit of a finer point on that.

[William R. Sperry:]

Yes. So I think the Sandy spending for us was in that order of magnitude of the $15 million type range of spending. And last year, we were talking about that potentially crowding-out other spending. And this year, it feels like it makes it more of a tough compare...

[Charles Stephen Tusa:]

Okay. And then one last quick one. I'm not sure if you...

[William R. Sperry:]

And Dave's describing in the cold weather affecting maintenance spending and that cold is a little bit different than what Hubbell loves, which is an ice storm that knocks down the lines that we can immediately get replaced for it for our good utility customers.

[Charles Stephen Tusa:]

And then just one last quick one. You guys have been giving some good color on non-res, but I guess just the kind of the vertical discussion around institutional and commercial and other areas, maybe give us a little bit of color on what you're seeing today and what you expect for '14.

[William R. Sperry:]

Yes. I think the first cut I'd give you, Steve, on that is the fact that the way outlook is constructed, and again we'll use third-party forecast to inform us on some of that regard, looks like the first split we make vertically is between public and private. And while private's been growing, it looks like that's continuing to grow in '14, as is expected. But I think some of the better news is that the public looks like it maybe has bottomed in '13 and should maybe return to growth. So I think from a broader perspective, that's pretty good news for us. But as far as then further slicing the verticals, we tend to be fairly kind of market represented in each of them, so we tend not to get terribly focused on what -- which verticals might be popping because we kind of try to get our fair share of each piece.

[Operator:]

And we'll go next to Jeff Sprague with Vertical Research.

[Jeffrey T. Sprague:]

Just a few questions. Just first on the deals that you did. It was a little unclear if the 3 deals collectively add $45 million in sales. Or was -- the power deals added $45 million, and then that resistor deal's another $30 million. Can you just clarify that point?

[William R. Sperry:]

Yes. Sorry, Jeff. In aggregate, $45 million. Sorry.

[Jeffrey T. Sprague:]

In aggregate, $45 million, okay. And just in terms of kind of the M&A targets now with Bill in the new role. Dave, I think about that kind of pyramid you used to put up, and I can't totally visualize it right, but you got -- kind of got kind of a sweet spot in low voltage and you say you want to avoid apparatus, and there's a few other things. I mean, do you come outside of that construct? What kind of license does he have, do you guys have to kind of open it up to maybe broader adjacencies?

[David G. Nord:]

We -- generally, we don't come outside that construct. That doesn't mean that it's a firm line on the top or the bottom, so there could be some drift there but with the core of whatever the target is certainly being in that middle part of the pyramid. I think that's -- as we look at larger deals, the issue with the larger deals is that they're not as pure as the bolt-on deals that we have. They always have some element that wouldn't necessarily be within our core, but it's not so far afield that we wouldn't take that along with what is the fundamental core. So that's a little bit of what I'm expecting us to spend a little more time on and a little bit more identification and evaluation to get more of those type transactions in the pipeline. So we have a number that we've always had in the pipeline, but part of the effort is to expand the possibilities. Okay?

[William R. Sperry:]

I think, Jeff, you're right to bring up the pyramid. The -- that sweet spot, middle section above commodity and below apparatus, tended to be in the high $30 billion of wholesale volume, so we always felt like, as a $3.2 billion company, that suggested lots of room within that piece for us to keep getting bigger. So that -- you're right to use that pyramid as a guide of kind of how much addressable market's there.

[Jeffrey T. Sprague:]

Okay. And then just on pricing, can you address what's going on? Has it tipped negative anywhere, perhaps in Power in particular, I'm thinking? But what is -- and you've got a little bit of relief on cost, obviously, but how about just kind of headline price, what's going on?

[William R. Sperry:]

Yes, it was, I would say, Jeff, a very competitive year. We were, net, able to pull price but quite a small amount. And I agree with you, some of that is being influenced, I think, by the very benign commodity market. And so then your question evolves into, are there some markets that are pretty competitive? I would say you're absolutely right to point out, within the Power segment, and I'd say even particularly within Power, that large transmission sort of megaproject, as that comes up, I think people are willing to bid that pretty competitively. And I think the lighting side continues to be aggressively priced as those projects come up.

[Jeffrey T. Sprague:]

Is lighting pricing just more reflective of the natural price-down from LED? Or is there -- do you feel like there's some like-for-like price-down as you try to adjust through the mix effect?

[William R. Sperry:]

Yes, I think there's, yes, just good old-fashioned price pressure there. Just call it competitiveness.

[Jeffrey T. Sprague:]

Yes, okay. And then just finally for me, on the high voltage. And I do recall, as far back as kind of this time last year, you were saying you expected it to pick up. Just wonder if you could give any insight on what's going on at your customer level around that? I mean, is there new transformer capacity going in? Or is it a increase in transformer production at your customers that's driving that? Is there any visibility behind what's actually driving the business?

[William R. Sperry:]

Yes, there's -- there's really 2 customers that we have for that segment. One, as you point out, is the OEM transformer manufacturer. The other is the utility who's doing field testing. And these products, Jeff, really, if I were to say the single biggest driver, it's probably emerging market electrification. So a lot of our product is going into international markets. A lot being said about emerging markets right now maybe not being the solid performers going forward that everybody's expecting, but the other side, on the OEM side, it's hard for us to say that there's net capacity. Our customers, in some cases, are getting out of certain facilities. Some are relocating to new locations. Others are adding capacity, but actually, a slightly mixed picture for us on the OE side. And so net-net, I'd say our opportunity comes on the kind of the international side.

[Operator:]

And we'll go next to Noelle Dilts with Stifel.

[Noelle C. Dilts:]

I just had another kind of quick question on non-res. If -- I'm curious to know your thoughts just on how you see non-res kind of progressing through the year, when you think we'll start to see kind of an acceleration in large projects given that you typically see this pickup in the spring, and then how your product cycle would follow that. Would you expect to see again more of a back-half-loaded benefit as some of those projects progress?

[William R. Sperry:]

Yes, Noelle, I'm not sure that we feel we have any crystal ball. I think some of the early optimism around hockey stick -- as the hockey stick rebounds, which is probably not the way we're planning our year. I think you're right to point out that, spring in second half, we're really hoping to see stronger growth maybe than the first. But I don't think we have any great crystal ball on that. And in terms of cycle timing, you're right to point out that some of our products, like the ROUGH-in electrical boxes, and commercial construction oriented are sort of mid-cycle spend, and things like C&I Lighting tend to be late cycle in a project [indiscernible].

[Noelle C. Dilts:]

Okay. And then when you were discussing kind of this new -- the new structure in -- of the organization, I think you mentioned a bit about new product development. I was hoping you could expand on that a little bit, maybe touch on the key areas of focus. And is this really disproportionately -- would this be disproportionately weighted to lighting?

[David G. Nord:]

Sure. First of all, no, it's not disproportionately weighted to lighting, although they certainly have had the most dynamic change in the market and so had a lot of investment there. It really is focused around making sure that we're, one, doing the best to share a lot of the best practices that are around the organization in new product development, whether it's on the lighting side, on the utility side and/or on the Electrical systems. When we brought BURNDY on 4 years ago, they had a really nice process that we've been trying to build off of, I think, in the Power Systems side. And it's interesting that Bill is going to be taking this on because our Power Systems has done some things around new product development, but I think that's a market that has a lot more opportunity to develop more advanced capabilities in those products. So it's really just to make sure that we have -- or are putting the appropriate emphasis and investment to be sure that we are maintaining a leadership position particularly in those markets that we are a leader in and then building off of that to develop a leadership potential in those markets that we aren't. So it's really around the focus, the sharing and, to some extent, the investment and making sure that we are appropriately investing and pushing ourselves as aggressively as possible. So, okay?

[Operator:]

And we'll take our last question from Mike Wood with Macquarie.

[Mike Wood:]

I guess I'll just ask on M&A. Historically, it looks like you guys have paid about 1x sales. I'm curious if you can just give some color in terms of what was different in first quarter on these acquisitions. It looks like you paid just over 2x sales.

[William R. Sperry:]

Yes, I think, if you were to broaden, Mike, to the last 12 that I highlighted in our conversations, that's been about 1.25x. It tends to be really more our average. What drives that multiple is obviously margin and growth rate. So it can bounce around, but if you are looking for averages, I'd think more in that 1.2x, 1.3x range is probably more what I would expect to be typical.

[James Farrell:]

Okay, Divona, I think that wraps up the Q&A portion.

[Operator:]

Yes, that is the end of the Q&A session. I'd like to turn it back to our hosts for any closing remarks.

[James Farrell:]

So, everyone, thanks again for joining us this morning. And certainly, if any of you have any follow-up questions, you can certainly contact me throughout the day and into tomorrow. So thanks again for joining us.

[Operator:]

Thank you. This does conclude today's conference. We appreciate your participation.