Tortoise Energy Infrastructure Corporation
Q1 2016 Earnings Call Transcript

Published: 28 Apr 2016

[Operator:]

Greetings and welcome to Tortoise Capital Advisor’s Quarterly Closed-End Fund Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a remainder, this conference is being recorded. I would now like to turn the conference over to your host, Pam Kearney. Thank you, you may begin.

[Pam Kearney:]

Thank you and good afternoon all. I am Pan Kearney, Director of Investor Relations at Tortoise Capital Advisors’. As a reminder, some of the statements made during the course of this call are not purely historical and may be forward-looking statements regarding our intentions, projections and strategies for the future. These statements are subject to various risks and uncertainties and actual outcomes and results may differ materially from our forward-looking statements. We do not update our forward-looking statements and this presentation is provided for information only and shall not constitute an offer to sell or a solicitation of an offer to buy any securities. And with that, I will turn the call over to Brad Adams, Managing Director and CEO of our Closed-End Fund.

[Brad Adams:]

Thanks, Pam, and thank you all for joining the call today. Joining me on today’s call is Brent Behrens, Tortoise’s Director of Financial Operations, Rob Thummel and Mat Sallee, both Managing Directors and Tortoise Portfolio Managers. We’ll being with some prepared remarks, we will then address some reason questions we’ve been receiving and then open it up to your questions. As we look back on the first quarter of 2016, it really was a tale of two halves for the energy sector. It began with the severe decline hitting an inflection point midway and seeing improved performance during the second half of the quarter. Production freeze proposed by OPEC and certain non-OPEC producers created some optimism in the global oil markets, driving an uptick in oil prices. Although, there was no agreement reached and Doha to freeze production other factors have impacted the price of oil with WTI trading in the mid-$40 range today. Although, the broad energy sector including pipeline corporations saw some stabilization throughout the quarter. MLPs continue to face some headwinds including concerns about capital market access, credit ratings, capital expenditure reductions and counterparty risk. Even though public capital markets have become less accommodative for midstream companies during this period of market volatility, some midstream MLPs have secured alternate forms of funding, such as through preferred equity private placements. It’s important to note that not all MLPs are created equal and fundamentals in the midstream segment with the energy value chain of it peer remain intact. We focused on what we believe are high quality companies that have maintained solid balance sheets, stable cash flows and distribution payouts underscoring our conviction in this space. The positive momentum from the second half for the quarter has carried over to the Closed-End Funds with improved performance and daily trading volumes trending closer to more normal levels with less market speculation. You’ll hear much more from our Portfolio Managers Rob and Matt on these topics, but now I’ll turn the call over to Brent for an update on our Closed-End Funds performance year-to-date till last Friday, April, 22, use of leverage and views on distributions.

[Brent Behrens:]

Thanks, Bred. I’ll touch through review of our funds across the energy value chain. Along with more positive sentiment in the broad energy market, our fund returns have also improved since our last call, beginning with upstream. As a reminder, NDP invested in oil and gas producers that in our view are located in the best locations in the best oil and gas fields within North America. This fund also utilizes a covered call strategy. NDP’s market based total return was 5.5% and it’s NAV based total return was 4.7% for the first calendar quarter ending March 31. Within the midstream space, TYG, NTG, TTP focus on high quality companies with strategic assets providing visible growing cash flows and strong balance sheets and distribution coverage. TYG’s first quarter market based total return was negative 9.3% and the NAV based total return was negative 6.4%. NTG had a market based total return of negative 3.5% and a NAV based total return of negative 3.5% as well for the same period. TTP invest in diversified pipeline equities along with some independent energy companies and utilizes the covered call strategy. It had a market based total return to 4.6% and the NAV based total return to 4.7% for the first calendar quarter. Finally, TPZ is downstream strategies which invest primarily in power and energy infrastructure fixed income with the reminder in equities. It had a market based total return of 6.3% and a NAV based total return of 1.4% year-to-date through March 31. Fund returns have shown incremental improvement this month, improving between 7% and 20% on a market value basis and between 10% and 15% on a NAV basis through last Friday, April, 22. Managing leverage remain central focus and some deleveraging was necessary earlier in the year to maintain adequate cushion over asset coverage requirements. For those who want to follow this information we report updated leverage amounts and ratios on our website each week. While selling securities with reduced leverage reduces the revenue side of distributable cash flow, there are other factors included in distributable cash flow or DCF to consider. Growth in the distributions from portfolio investments reduce leverage costs as a result of lower leverage and changes in asset value based expenses including management fees and administration expenses will all factor into DCF. Now, moving onto distributions for the first fiscal quarter. We maintained NDP’s quarter-over-quarter distribution of $43.75 due in part to the covered call premiums that we’ve continue to earn that are enhanced in volatile markets. Our goal with MLP closed-end funds, MLP focus closed-end funds, TYG and NTG is to establish and maintain what we believe to be adequate distribution coverage, supporting our emphasis on long-term distribution sustainability. Our focus on high quality companies that continue to generate solid cash flows allowed us to maintain quarter-over-quarter distributions of $65.5 for TYG and $42.25 for NTG. Last year, we communicated that TTP’s quality distributions for 2015 will include a baseline distribution amount from DCF and a portion of the expected capital gains require to be distributed during the year. The first quarter of 2016 distribution of $0.4075 reflects our historical baseline distribution supported by DCF. However, we did not anticipate the same level expected capital gains following recent market decline. The elimination of the capital gain component resulted in a 9.4% reduction as compared to the fourth quarter distribution. TPZ’s second quarter 2016 monthly distributions are $0.125 reflect our historical baseline distribution supported by DCF. However similar to TTP, we did not anticipate same level of capital gains following recent market declines. So the elimination of the capital gain component resulted in a 9.1% reduction as compared to the monthly distributions paid for first quarter 2016. Looking ahead, we’re closely monitoring earnings and outcomes from our portfolio companies. Our board will assess this information when they meet early next month to discuss declarations of what they believe would be sustainable distribution. Fund distribution rates have lowered since last fiscal quarter end as prices have rebounded. As of April, 22, distribution rates whereas follow

[Rob Thummel:]

Thanks, Brent. Oil and gas producer performance had a strong start to 2016 with the Tortoise North American oil and gas producers’ index returning 7.5% for the first quarter. Outperforming the S&P 500 index by more than 6% and the tied certainly seems to be turning with regard to investor sentiment, natural gas producer stocks were the best performance for the quarter in particular Marcellus natural producers rose on average by 28% start 2016. TNAOP’s total return performance was 23.5% year-to-date through last Friday. Capital markets for oil producers were active in the first quarter with more than $9 billion of equity capital plus an additional almost $10 billion of debt capital raised during the quarter. There were 16 equity offerings with an average size of $551 million offered at an average discount of 6%. Moving to fundamentals, we feel the current commodity cycle has ended with oil prices bottoming out in February. This long painful cycle lasted 568 days from peak-to-trough. It will go down as the second longest commodity cycle in history with oil prices falling by 76% from a peak of $107.62 on July 23, 2014 to a trough of $26.21 on February 11, 2016. There is a limited amount of spare capacity available to OPEC to fill long-term global demand. There is no margin for air in OPEC production right now. This was evident after the Doha. Although, OPEC and Russia were unable to reach an agreement to freeze production, the secondary story of Kuwait oil field workers strike that lasted three days for moving up to $1.6 million barrels per day of production from the market, resulted in oil prices trading higher post the Doha meeting, contrary to Analyst expectations. We think the key to calling the bottom on oil prices is the U.S. oil production decline. Lower U.S. crude oil production is necessary to rebalance the global supply and demand markets. And the decline in U.S. oil production has been accelerating. We remain confident that U.S. oil production will continue to decline in 2016 and possibly into 2017, due to the continued decline in the U.S. rig count, which has fallen by more than 77% since the 2014 peak and is at its lowest level business entry. Of the four large Shale Plays in the U.S., the Bakken has the steepest decline experiencing an 86% drop in the rig count. Interestingly, our two of the hot shale basins in the past were the Barnett and [indiscernible] and they currently have one and zero rigs respectively drilling new wells. The EIA forecasts U.S. crude oil production to average around 8.6 million barrels per day in 2016, which is approximately 800,000 barrels per day lower than the average production in 2015. With OPEC producing near its maximum capacity, the global supply and demand balance could become out of balance in a good way in the second half of 2016, assuming a 1.2 million barrel per day increase in global oil demand coupled with an 800,000 barrel per day decline in U.S. production, results in global demand exceeding global supply. The oil market moves from being over supplied to being under supplied. This would require a decline in both U.S. and global inventories to balance the oil markets. One key assumption is that OPEC production volumes remain flat at current levels. Longer term, the decline in U.S. production needs to stop and we estimate that we will need to see at least $50 oil and more likely $60 oil before the decline stops. U.S. production is critical to supplying long term demand in the future. Now while so much of the spot light over the last 18 months has been on oil, natural gas prices have experienced a similar plight with prices declining 57% since the fall of 2014. Current natural gas prices are below $2 in mcf. You have to go all the way to the early 2000 to see a period where natural gas prices remained so low. And similar to oil, the reason for low natural gas prices is higher inventories. Current natural gas storage levels are well above average levels for this time of the year. We experienced a similar event in 2011, 2012 when prices responded positively from strong demand at the electric utility sector using cheap natural gas to replace coal, which increased demand for natural gas. The result, increased electric generation, demand for natural gas as the switch from coal to natural gas took market share from coal and the electric generation sector as many coal plants were retired. Broadly speaking, 2016 is gearing up to be a milestone year for the U.S. energy sector as the U.S. becomes a supplier of low cost oil, natural gas and natural gas liquids for the rest of the world. There have already been a series or several first that affirm the importance of the U.S. energy sector in the future. It is the first year in 2016 that U.S. produced crude oil is exported outside of North America. 2016 is also the first year that liquefied natural gas or LNG is exported internationally. And lastly, 2016 is the first year in natural gas liquid ethane to shipped to a foreign country. Effectively the U.S. has lowered the cost of energy to consumers around the world and the U.S. is expected to be a critical supplier of energy to the rest of the world for the years to come. Current evaluations in the E&P sector represent about $55 per barrel for oil and $2.50 of natural gas prices forever and longer term we believe that oil and natural gas prices will move higher landing around $70 per barrel for crude oil and $3 per mcf or natural gas respectively. The current producer valuations are trading at a 10 year Enterprise Value to EBITDA multiple of about 9 times. So to summarize, the oil and gas sector is off to a strong start in 2016 outperforming the S&P 500 index by almost 6% as of March 31, 2016. We believe that the current commodity price cycle is over with oil prices having bottoms supported by the decline in U.S. production happening now and ultimately expecting the result in an average of production decline of 800,000 barrels per day. The U.S. is assisting in keeping energy costs low to consumers around the world and traditionally low energy cost lead to increased demand for crude oil and natural gas. 2016 has already been a milestone year for the U.S. Synergy sector as the U.S. becomes a supplier of low cost oil, natural gas, and natural gas liquids to the rest of the world and we believe U.S. Shale is here to stay longer term crude oil and the Permian Bakken and Eagle Ford should be a critical supply source to countries around the world. With the energy sector poised for recovery, we believe that the U.S. energy sector is an attractive place for investors to increase their allocations. On that high note, I will turn it over to Matt Sallee for a discussion on the mid-stream and down-stream sectors.

[Matt Sallee:]

Thanks Rob for passing it over to me on a high note. We will try and keep the mood happy. Along with the rest of the energy sector the roller coaster ride I think could be the best description of first quarter performance in the pipeline market as well, yet the market did in the quarter move in higher. Our performance pipeline corporations as represented by the TNAP index outperformed the brighter market in the first quarter returning 9.4% and 16.5% year-to-date through last Friday. Conversely MLP is represented by the TMLP index lagged the broader market in the first quarter returning negative 6.1%, but turned positive with a 5.9% return year-to-date through last Friday. MLP’s were restrained by continued concerns regards counter party risk, the potential for volume declines and the potential for distribution cuts. Capital markets begin to [indiscernible] slightly from midstream companies in the first quarter with equity and debt offerings higher for [indiscernible] pipelines, but clearly down for MLPs. We expect equity in high yield markets to remain difficult for most MLPs and expect companies to continue to use alternate methods of financing throughout 2016. Consistent with what we thought would play out, high quality issuers in the first quarter were first to market, including Magellan on the debt side and Shale on the equity side. We expect to gradually step out on along the risk spectrum throughout the year. In the meantime preferred offering served as an alternative means of raising capital to fund CapEx and she continued to take the place of traditional debt and equity as we saw surge in preferreds during the quarter and expect that to continue as long term capital markets remain challenged. Acquisition activity in the first quarter was healthy, but a bit lighter than we expected. MLP currency remains depressed so drop downs from sponsors will likely be a bigger component of the total until unit prices recover. Our estimates for 2016 through 2018 remain unchanged as we anticipate approximately $20 billion to $25 billion of activity per year. Note, this does not include MLP to MLP transactions. So all told new MLP estimates anticipated approximately $125 billion of both internal and acquisition activity for the three year period from 2016 through 2018. While it is harder to predict we also expect M&A from crude pipelines that increase throughout the year especially following trans-Canada’s announced acquisition of Columbia pipeline group. One thing we are getting a lot of question on is counter party risk, is financial to stress and the possibility of bankruptcies to hire for upstream companies investor increasingly are worried about counter party risk from mid-stream companies serving those producers. There have been a few court cases including in the high profile negative outcome and the mid-stream Sabine Oil & Gas case where the judge issued a non-binding opinion allowing the producer to effectively just cancel their mid-stream contracts. Alongside that outside of court Crestwood and BlueStone we were able to renegotiate contracts prior to a court ruling in that case and as a reminder BlueStone is acquiring Quicksilver’s producing assets. Additionally, some mid-stream and upstream companies have elected to renegotiate contracts as part of a symbiotic relationship that exit. From a mid-stream perspective these renegotiations have resulted in a net present value neutral outcome. Something that is imperative towards mid-stream providers to participate. So clearly this is a complicated issue, but there is a few things that we want to point out. In the advent of a bankruptcy volumes don’t simply go away as the producer still needs the mid-stream company to get their product to market hence they will pay a market based rate. However, there are contracts that are at risk, we think those most risk are above market rates or those with the minimum volume commitments that are not currently being met. Echoing on a comment we made last quarter, we expect a recovery in crude prices will reduced counter party risk for pipelines. Especially, high quality mid-stream companies with primarily investment grey counter parties and those with strategic assets that will continue to operate and drive volumes through them lowering the risk of cash flow is declining. Now Rob already gave an update on crude oil production expectations, the logical question that follows with those production declines is what does that mean for pipelines? While we anticipate some declines in various locations, we reaffirm our view that rail will be the first mode of transportation to feel the effect. The numbers support this view as we’ve already seen a 450,000 barrel per day drop in real volumes since the end of 2014. Note, this is roughly in line with the decline in production that we’ve seen over the same time period. Moving to natural gas, we’ve discussed some of the key demand drivers of natural gas for some time. It’s nice to see these are starting to materialize specifically L&G exports. As Rob mentioned, [indiscernible] set on its first cargo from the past, it certainly won’t to be the last as we believe we’re on a path to 6 to 19 BCF per day of exports. We reiterate that demand points including L&G exports, exports to Mexico and natural gas power generation are key and are all starting to gain more traction as we enter the back half of the decade. To emphasize the imports and exports propane inventory levels went from being massively over supplied to the beginning of the year to almost within the five year range at the top end, within just a short three months despite a very mild winter here domestically. That was directly tied to a syringe in exports which reached a peak in January 2016. More capacity is expected to be come online later in the year as well providing increased ability to solve the domestic propane over supply. Shifting to growth, as anticipated we saw a drop in our traditional three year capital expenditure outlook compared to last quarter, basically that’s a function of 2015 dropping often we bring 2018 into that three or four year role. This is quite normal when we shift there years. Our traditional three year growth outlook for 2016 to 2018 is approximately $120 billion for C-core pipelines and MLPs combined. For comparison purposes, last quarter of the 2015 to 2017 period indicated growth CapEx of about $140 billion. So it’s come down, but most of the difference is a direct result of supply push projects being delayed to more aligned with producer expectations. We continue to expect the potential for rationalization or joint ventures to some existing projects to more efficiently allocate capital. So how do we expect 2017 and 2018 estimates to change throughout the next year to, we believe these amounts will grow, but clearly would be less muted, unless we really see a return to higher commodity prices and therefore, a renewed focus on supplier push projects to go along with the current slate of demand pull projects. Based on our view of crude oil supply and demand, we would expect to see 2017 and 2018 gradually build as the market comes back into a balance and eventually U.S. crude production began to increase again as Rob lined out. During the fourth quarter earnings calls, many MLPs provided their expectations for growth over the 12 months and based on that information as well as our financial models, we expect 5% to 7% distribution growth for the entire TMLP index and 6% to 8% growth for the midstream components of the TMLP index. We expect the medium growth rate to take down while the weighted average growth remains in that 5% to 7% range highlighting the fact that mid-stream companies and pipeline companies specifically will remain in the best position to grow. Before we leave distribution growth it’s important to point out that recent trading activity has left to yield exceptionally wide, which may lead some companies evaluate whether it’s better to save those pending for another day and instead coverage reduce leverage or internally fund CapEx, if they’re not being paid to grow. Shifting to valuation, the yield on the TMLP index was 9.4% as of March, 31 2016 and 8.2% as of last Friday’s close. This compares to the 3, 5 and 10 year medians of 5.9%, 6.1% and 6.5% respectively for the period ending March 31, 2016. The pipeline corporations, the TNAP was yielding 5.6% as of March 31, and 5.3% as of last Friday. 2016 cash flow multiples for midstream companies are about to standard deviation below historical averages. As we move to our outlook, we have the current yield plus distribution growth generating a low to mid-teams total return again we should point out that our ongoing assumption is that the market applies the same exit yield as we look forward, which clearly has not been the case lately. As we did last quarter, we also evaluate total return expectations across the few different scenarios. Looking at a low case, assuming a static exit yield from the 9.4% yield that we were at quarter end, I would like to assume growth at its mid point is only a quarter of our 6% estimate or 1.5%. We would be generating a total return of approximately 9% to 12% over the next 12 months. In a medium case, we assume our base case growth that 6% midpoint, but in exit yield that reverts to 8% as opposed to the quarter end is 9.4%. This yield compression generates additional return bringing the total return up to just north of 30%. In our high case scenario, we assume the same growth rate again 5% to 7% or 6% midpoint with an exit yield of 6%. That’s essentially in line with the three and five year medians. In this scenario, total returns approximate 72%. As we stated many times, it’s pretty difficult to predict the exit yield in any given point in time, but just wanted to provide what we think are reasonable scenarios to examine potential return over the next 12 to 24 months, and I think the bottom line has been probability for further compression is quite a bit higher than yields moving out over the long term. Now, a few comments on the downstream sector starting with refiners, refiners benefitted from another 3% increase in gas to gasoline demand compared to a year ago according to the EIA. In addition, refining margins have continued to be healthy due to lower oil prices and in spite a narrowing of the differential between U.S. and global crude prices, those refining margins remain pretty strong. Refiners continue to generate outsize profits relative to historical levels. Looking at the petrochemical sector, it generated strong free cash flow yields due to low cost natural gas and natural gas liquids as well as continued strong demand for their output products. Lastly, renewal energy has been negatively impacted by concerns regarding access to capital, high leverage and select corporate restructurings. On the flip side in our view, the strong long term growth outlook for wind and solar does remain intact. That concludes our thoughts on the energy value chain. So just to summarize, pipeline companies continue to trade with crude oil in short term however we saw some positive signs during the quarter. This includes select capital market access, more clarity on CapEx budgets and the resulting distribution growth for 2016, a continuation of exports in certain products such as LPGs and a new slate of exports in crude oil, LNG and ethane fuelling the next wave of the U.S. energy story. Finally, valuations remain attractive and we feel investors will be rewarded in the long term as fundamentals strengthen throughout 2016 and into 2017. We expect more volatility as crude oil will be wipeout by macro news, commentary and political events but keep in mind the cash flow growth of midstream companies and the portfolio is not reflective of the stock price decline that we’ve seen. With that, we’ll conclude our prepared remarks and I’ll turn it over to Pam.

[Pam Kearney:]

Okay. Thank you, Matt. With that, let’s go over a few recent investor questions and then open up the call for our listeners for their questions with the time that remain.

[Pam Kearney:]

Brad, I’ll start with you, do you anticipate that the deleveraging that occurred in the Tortoise closed-end funds over the past few quarters will create long term risk to future distribution and the anticipated distribution cuts for the Tortoise closed-end fund?

[Bradley Adams:]

All right. Pam, I guess the short answers to those questions are, no and no but I’ll add some color starting with TYG and NTG. Our management team intends to recommend to the Board to maintain current distributions for TYG and NTG for the second quarter. We’ve always managed our MLP funds conservatively with the goal of stable and ideally growing distribution payments. As you know, we entered the downturn with modest leverage and reasonable coverage, and unlike many MLP closed-end funds, we did not cut distributions in Q1. We’ve experienced no direct distribution cuts from our holdings and we continue to see dividend increases from our portfolio companies including the current quarter. Keep in mind this is to a rather volatile market and many things could change but this point our expectation is that distributions remain stable. Now regarding TPZ, TTP and NDP which are rig funds, rig fund distributions are inherently more volatile as required to payout income and capital gains. In 2015, we increased distributions in TPZ and TTP to cover the capital gains but with market declines those gains have gone away and in Q1 we reset the distributions to historical base line distribution from DCF with no capital gain expectations. Keep in mind the distribution determinations ultimately are board decision and the next board meeting is slated for the first part of May.

[Pam Kearney:]

Okay, thank you. On to Matt, what degree of concern do you have about future Tortoise portfolio company distribution cuts across Tortoise’s midstream holding?

[Matt Sallee:]

Sure. Obviously that’s something we are watching very closely right now. There have been quite a few cuts across the MLP space although it’s fairly limited within the midstream part of the MLP space. As I’m sure investors are very familiar with at this point, we do maintain a long term strategy of high quality portfolio that’s really anchored in investment grade long haul fee based pipelines. So with that as a backdrop, the portfolio has seen no distribution cuts speaking specifically to the midstream or MLP portfolios. Recent growth as of - we’re kind in distribution announcement in the early part of earnings season, so this current quarter growth is just looking at our public holdings and what they’ve said publicly did to the weighted average growth of north of 2% quarter-over-quarter, north of 8% annualized. So the growth in the portfolios remains really strong. Looking forward, we right sized positions where we see potential risk to the current payout if prices don’t recover but and we have fully exited a couple of positions, but I think at this point we feel pretty good with where the portfolios stand and great if commodity prices continue to recover.

[Pam Kearney:]

Great. Thank you. Rob, would you touch on counterparty risk that Tortoise is exposed to and its closed-end fund position?

[Bradley Adams:]

Sure. Matt talked a little bit about counterparty risk in his prepared remarks. But counterparty risk is obviously something that’s very topical especially in this environment of low oil prices and bankrupt to oil and gas companies that everybody is reading about every day. We are analyst team, I’ve spent a lot of time discovering SEC documents, 10-Ks, 10-Qs, looking for customer concentration, looking for additional risk disclosures and ultimately where we’ve landed is back to the high quality nature of the portfolio that Matt mentioned. Most of the companies that we invest in have lots of different customers, very diversified customer base and the thing that is really important and when you’re looking at the customer base is obviously their credit rating but what portion of the value chain they are in. Are they an upstream producer or they actually a downstream consumer of the energy. And while these pipelines, their customers are the downstream refiners or utilities and so a lot of those – there is really limited to no counterparty risk there. The focus is just on the upstream side and really when we boil it all down, we’ve isolated it to essentially one company and that’s Williams companies and its exposure with Chesapeake Energy and that’s been a popular name in the press lately just because not bankrupt by any means and in fact it paid its most recent debt payment that was due in March. And so, our exposure to Williams is very limited and in some of the funds if we have no exposure and other funds we have limited exposure. So we feel pretty good actually about the analysis that we’ve done looking at counterparty exposure and don’t feel that’s going to be a huge headwind for us.

[Pam Kearney:]

Great. Thank you. With that operator, we would be open to having you open up the lines for the other listeners to have answered their questions.

[Operator:]

Thank you, Pam. [Operator Instructions] There are no questions at this time. At this point, I would like to turn the call back over to Pam Kearney for closing comments.

[Pam Kearney:]

Alright, well we thank you for joining us today and we look forward to talking with you again. In the meantime, we invite you to check out Tortoise QuickTake podcast series where members of the portfolio team share their views on timely energy events. For access and more information, please visit our website tortoiseadvisors.com. And while you’re there, be sure to check out the latest edition of our Tortoise Talk market commentary piece. With that have a great afternoon. Thank you.

[Operator:]

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.