TriMas - Q2 2023

Transcript

Operator (participant)

Greetings, welcome to the TriMas second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sherry Lauderback, Investor Relations and Communications. Thank you, Sherry. You may begin.

Sherry Lauderback (VP of Investor Relations and Communications)

Thank you, and welcome to TriMas Corporation's second quarter 2023 earnings call. Participating on the call today are Thomas Amato, TriMas's President and CEO, and Scott Mell, our Chief Financial Officer. We will provide our prepared remarks on our second quarter results and outlook. Then we will open up the call for your questions. In order to assist with the review of our results, we have included today's press release and PowerPoint presentation on our company's website at trimascorp.com under the Investors section. In addition, a replay of this call will be available later today by calling (877) 660-6853, with a meeting ID of 13739841.

Before we get started, I would like to remind everyone that our comments today may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-Q that will be filed later today for a list of factors that could cause our results to differ from those anticipated in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. We would also direct your attention to our website, where considerably more information may be found. We would like to refer you to the appendix in our press release or our presentation for the reconciliations between GAAP and non-GAAP financial measures used during the call.

Today, this discussion on the call regarding our financial results will be on an adjusted basis, which is excluding the impact of special items. With that, I will turn the call over to Tom Amato, TriMas's President and CEO. Tom?

Thomas Amato (President and CEO)

Thank you, Sherry. Good morning, welcome to our second quarter earnings call. As we reflect on the quarter, I want to first thank our TriMas team for their increased efforts this year as we continue to navigate a very dynamic and changing global market environment. In certain product lines, we are adding capacity, ramping up production volumes, enhancing skilled labor, and alleviating supply bottlenecks, all to support robust customer demand. At the same time, in other product lines, we are rebalancing our manufacturing footprint and securing procurement savings to prepare certain businesses for improved conversion as end markets recover. Overall, irrespective of markets being strong or soft, each TriMas local team is working diligently to satisfy market demand or offset market disruptions, while remaining focused on gaining momentum against our longer-term strategies.

In relation to this quarter, I would like to personally thank our Specialty Products team for delivering strong results. Our Specialty Products performance is a result of making investment decisions in our businesses when market demand was challenged on the premise that demand would rebound. Market improvement did occur, as we are witnessing today, and we were prepared to satisfy higher customer demand, all while also converting well. In summary, we decided to invest in and take advantage of prior disruption in our Specialty Products end markets, which has benefited investors today. We are also leveraging our current momentum to position our Specialty Products group to capture future growth through new innovations, such as ultra-high purity cylinders for packaged gas applications and EPA-certified remote power generation units. Again, I would like to thank our Specialty Products team for their strong performance this year.

I would also like to highlight that while our performance within TriMas Aerospace is well below our internal standards and potential, we are starting to make some significant progress in bringing the supply of superalloy raw materials, skilled labor, and production capacity into better balance. As we make strides to achieve improved synchronization with our production planning and customer requirements, we anticipate achieving financial results much improved from current levels. In fact, our second quarter results were sequentially better than our first quarter results. I would like to note that in Q2, we had a settlement charge unique to the quarter that otherwise would have had our operating margin percent ahead of the prior year quarter as well. While we are still below our overall potential, we are starting to achieve momentum in this group.

Finally, our TriMas Packaging and TriMas Life Sciences teams are working diligently to prepare for improved market conditions as we move forward. Within TriMas Packaging, while we have seen some sequential monthly increases in our order backlog, they are at a more moderated rate than we had hoped to achieve at this point in the year. As we move into the second half, we now believe a market recovery in certain consumer products and packaging industrial submarkets will be more gradual than we assumed to start the year. As such, we made the decision to take advantage of this lower demand period to reposition productive assets and streamline our manufacturing footprint, and we are taking other procurement savings actions, which we anticipate will generate more than $10 million or 200 basis points of annual run rate savings once implemented.

Additionally, our TriMas Packaging commercial team is gaining momentum, leveraging our global supply model by expanding our business into new geographic markets with new customers, particularly in South America. Of course, we continue to make progress marketing the characteristics and benefits to our CPG customers of our patented and commercial-ready single-polymer dispenser for personal care, beauty, and other applications. We anticipate highlighting these advancements as we move into 2024. Within TriMas Life Sciences, we are ramping up and launching new programs for polymerase chain reaction, for oral test kits, and electrosurgery component applications. While some of our life science applications are currently lower in volume, we remain excited about the new channels and newer customers for growth in areas that, once qualified, have a strong moat.

Again, I thank our TriMas Packaging and TriMas Life Sciences teams for taking actions today to position us for improved performance in the future. With that background, we delivered adjusted earnings per share for the quarter of $0.50, which, compared to the first quarter of 2023 of $0.20, sorry, of $0.30, represents a sequential improvement and was in line with our internal planning models. With that said, while we continue to assume recovery in certain of our packaging end markets in the back half of 2023, we anticipate that these will be at a more gradual rate than originally modeled, and I'll discuss this further in a few slides. At this point, I would like to turn the call over to Scott, who will take us through our consolidated and segment results. Scott?

Scott Mell (CFO)

Thanks, Tom. Let's now turn to Slide 4, where I'll summarize our financial results for the quarter. Sales for the quarter were $233.2 million, as compared to $237.7 million for the prior year quarter. As organic growth in the TriMas Specialty Products and TriMas Aerospace groups and acquisition-related sales were more than offset by lower market demand for TriMas Packaging dispenser and closure products used in personal care, food, and industrial applications. We continue to believe the packaging market softness primarily relates to continuing overstock positions at certain large CPG customers, more conservative purchasing patterns, and lingering inflationary concerns. Operating profit for the quarter was $27.3 million, as compared to $15.5 million for the first quarter of this year, and $32.1 million for the prior year quarter.

EBITDA for the quarter was $45.5 million, or 19.5% of sales, as compared to $31.7 million, or 14.7% of sales for the first quarter of this year, and 20.3% of sales for the prior year quarter. As Tom mentioned in his opening remarks, the performance for the quarter was in line with our planning models, and we continue to expect our performance to sequentially improve over the second half of the year, albeit at a more gradual rate than originally expected. Finally, adjusted earnings per share for the quarter were $0.50, which was a 67% increase when compared to the first quarter of this year. Let's turn to Slide 5, and I will briefly review our balance sheet and credit statistics.

Net debt, after funding the acquisition of Weldmac, paying a dividend, and completing share repurchases, was $375 million, with a net leverage ratio of 2.3x. As previously discussed, we drew approximately $40 million on our revolving line of credit to fund the April acquisition of Weldmac, of which $22 million remains outstanding at the end of the quarter. We expect to repay the remaining outstanding balance by the end of the year with cash flows generated from operating activities. Free cash flow of $11 million for the quarter was in line with expectations, we continue to have ample liquidity to continue to invest in our businesses, take streamlining actions where appropriate, buy back shares, pay dividends, and complete future strategic bolt-on acquisitions as opportunities present themselves.

Now, let's turn to Slide 6, and I will begin my review of our segment results, starting with TriMas Packaging. First quarter net sales were $117 million, as compared to $148 million for the prior year quarter, and up slightly when compared to the first quarter of this year. Acquisitions contributed $7.5 million of sales during the quarter, while the impact of foreign currency was immaterial. As expected, organic sales were lower during the quarter, down 26% when compared to the previous year period. This decline is primarily attributable to lower demand, most notably for consumer goods, with applications in the personal care, food, and certain industrial submarkets. We continue to closely monitor the commercial environment and will take, as necessary, additional streamlining action as a hedge against any potential further market demand softness.

Operating profit in the quarter increased by $6.7 million to $21.9 million when compared to the first quarter of this year. Was lower on a year-over-year basis, primarily on account of the impact of lower sales. Operating margin was 18.7% of net sales, while adjusted EBITDA was $30.3 million, or 25.8% of net sales, a 90 basis point improvement year-over-year, and a more than 600 basis point improvement when compared to the first quarter of this year. Turning to Slide 7, I will now provide an update on our TriMas Aerospace segment.

Net sales for the quarter increased by $12.4 million, or 26% when compared to the same period a year ago, as we continue to see strong order intake for many of our aerospace products, as general aerospace volumes continue to recover ahead of market expectations. Acquisitions contributed $7.3 million of sales during the quarter, while organic sales increased by more than $5 million or 11% when compared to the previous year period. Operating profit for the quarter was $3.7 million, or 6.2% of net sales, as compared to $3.3 million, or 6.9% in the prior year. As Tom mentioned earlier, absent a one-time settlement charge unique to the quarter, operating margin for the quarter would have been higher on a year-over-year basis.

More importantly, sequential quarterly operating margin improved by more than 300 basis points, as we are starting to see improved conversion rates on higher sales. Adjusted EBITDA for the quarter was $8.6 million, or 14.4% of net sales. On Slide 8, let's review our Specialty Products segment. Net sales in the second quarter increased by more than $14 million to $56 million, a 34% increase when compared to the same period a year ago. This is now nine consecutive quarters of double-digit percentage growth for our Specialty Products segment. Demand for steel cylinders, for packaged gas applications, and remote power generation units and related spare parts, each for the North America region, remains robust, with moderately high levels of backlog for both businesses, excuse me.

Operating profit in the quarter was $12.1 million, or 21.6% of net sales, as compared to $6.8 million in the previous year period. This record-setting margin level for Specialty Products is a result of continuing robust demand and the impact of previous factory floor improvement actions. Adjusted EBITDA for the quarter was $13.2 million, or 23.5% of net sales. While our Specialty Products businesses order books remain strong, which we believe is indicative of continuing resilience in certain end markets for which they sell into, we will continue to closely monitor order changes and input costs and take appropriate actions if necessary. At this point, I would like to turn the call back over to Tom to review our 2023 outlook and for some closing remarks. Tom?

Thomas Amato (President and CEO)

Thank you, Scott. Let's now turn to Slide 9. We continue to model potential scenarios for 2023, especially given some of the uncertainty in a few of our end markets. As noted in our earnings release, we are modifying our full year outlook. There are a few important considerations I'd like to note. The most significant driver is our view of the recovery in certain packaging end markets. Specifically, while we have estimated continued sequential demand recovery as customers work through inventories, we now believe that recovery rate will be more moderated than originally forecasted. We are modifying our consolidated sales growth range to a new rate of 5%-10% compared to 2022, and an adjusted EPS range of $1.80-$1.95.

It is worth noting that on a comparison basis, when normalizing 2022 for two discrete special projects that we completed last year, our base adjusted EPS for 2022 would have been $1.73. Even at the revised adjusted EPS midpoint, we are forecasting sequential momentum in our performance. Our revised outlook also assumes continued strong demand within our Specialty Products group, continued progress against bringing supply and production into better balance within our TriMas Aerospace group, and continued moderated sequential demand increases within TriMas Packaging. We also continue to forecast our full year free cash flow to be greater than 100% of net income. Let's turn to Slide 10.

I would like to again thank our investors for their continued support as we navigate through what we believe is a prolonged but temporary softer demand period. With that said, I will conclude our prepared remarks by providing just a few examples of why we remain excited about the long-term prospects for TriMas. First, we continue to believe there are attractive long-term characteristics within our TriMas Packaging and TriMas Life Sciences group through our multiple end markets, diverse geographic presence, and improving demand. We also have many sustainable product solutions, such as mono-polymer, tethered caps, and child-resistant closures in the pipeline and coming to market in the future, and we are gaining traction with some new to TriMas medical applications.

We also have growing confidence in the sustained recovery within the commercial aerospace and defense end markets, and anticipate future increases, increased spending in defense will benefit TriMas Aerospace. We are working through supply and remaining skilled labor constraints, and expect to take advantage of long-term operating leverage gains as we bring our supply and production planning into better synchronization with customer demand. Within our TriMas Specialty Products group, we expect demand to remain robust, given our strong order backlog. We will also continue to assess new market and product adjacencies to drive future growth within our Specialty Products businesses. Given our relentless commitment to cash flow generation, we will continue to reinvest in our businesses for long-term growth, while also returning capital to our shareholders, both through dividends and share buybacks.

In addition, our leadership team remains committed to operating TriMas in a responsible way to positively contribute to society, particularly in the communities where we live and work. Again, we continue to believe TriMas is an exciting company to invest in. With that, I'll turn the call back to Sherry. Sherry?

Sherry Lauderback (VP of Investor Relations and Communications)

Thanks, Tom. At this point, we would like to open the call up to your questions.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Ken Newman with KeyBanc Capital Markets. Please proceed with your question.

Ken Newman (VP and Equity Research Analyst)

Hey, good morning, guys.

Thomas Amato (President and CEO)

Morning, Ken.

Ken Newman (VP and Equity Research Analyst)

Morning. Tom, maybe first to start off, can you just talk a little bit about the confidence that you have in the packaging guide and just where your visibility with customers in the end market is today?

Thomas Amato (President and CEO)

Yeah, I mean, look, that's a great question. The best way for me to explain what's happening in the market today, where we've had overstocked positions that we've been, you know, our customers have been working through. The best way for me to describe it is, we've seen a number of our customers that have had overstocked positions, not all, but many, make progress as we've gone through the year, burning down those inventory positions. What's happened, Ken, as a result, is given that we started the year with this position, given the capacity that's available in the market, we're seeing lead times significantly reduced in several of our product lines.

What that means is, previously, suppliers like our packaging group, as well as other suppliers we would compete with, would normally quote eight weeks to deliver certain products, six to eight weeks. That's down substantially. Customers are benefiting from available capacity, shorter lead times, which means the market has shifted to a shorter cycle supply scenario. That's a long way to say that our visibility is pretty short. There still is uncertainty. We feel a little bit comfortable because we saw our order book pick up in the second quarter on a month-over-month basis. But we're also in what I would call a shorter cycle period. I think that's the best way for us to answer the question at this point.

We are making outstanding progress on booking, what I would call larger orders for our packaging group, several of those don't hit until next year, given that they were newer innovations or specific programs. We really can't count on them for 2023. We're really looking at our current order cadence, trying to make some predictions around that, and that's where we're coming up with our revised outlook for the top line for packaging.

Ken Newman (VP and Equity Research Analyst)

Right.

Thomas Amato (President and CEO)

That being said, on a consolidated basis, we have the order book in TriMas Aerospace, and we have strong orders in TriMas Specialty Products. For us, it's a matter of getting the product out the door. We have a little mini hedge versus a pure packaging company.

Ken Newman (VP and Equity Research Analyst)

Right. I guess the things that we're trying to get comfortable with is, if the lower end of that packaging revenue guide, how much conservatism is kind of built in there? Should we expect that sales are up year-over-year in the third quarter, or is this truly a fourth quarter type of heavy revenue growth to kind of get you to that midpoint?

Thomas Amato (President and CEO)

Yeah, good question. We're, you know, we're expecting Q3 sales to be moderately up versus last quarter. The last quarter sales were very low and fourth quarter was very low. We would expect a bit of a pickup in fourth quarter. We do expect to have a seasonal selling period occur this year, which didn't occur last year. If you remember some of our conversations, orders were dropped that were in our system, and they did not, you know, the orders just never took place in the year. We do expect there will be some reversion to somewhat of a seasonal selling period, not yet at normalized rates, but certainly not what we saw last year.

Ken Newman (VP and Equity Research Analyst)

Right.

Scott Mell (CFO)

Hey, Ken, I'd also point you to Slide 13 of our earnings presentation, where we highlight the revised sales growth for packaging, for the year, which is on the low end, -8% year-over-year, and on the high end, -2%.

Ken Newman (VP and Equity Research Analyst)

Right. No, I get that. I think it still implies, you know, up double digits in the back half year-over-year, right? For just that segment. I guess that kind of leads into the next question because the margin profile also implies a pretty sizable ramp in operating leverage for the back half. That probably makes sense, just given the comments here you made, Tom, on you know, the easier comps from last year and the selling period. Any way that we can kind of think about the cadence of incremental margin, 3Q to 4Q?

Thomas Amato (President and CEO)

I mean, that I think that's, you know, I don't wanna write the story, but in terms of the value proposition for TriMas right now, as aerospace, as we bring into synchronization, and we're making progress every day, it'll come through the numbers based on the non-financials that we're seeing. As we're making progress in aerospace and as revenue comes back in packaging, the conversion rates should come up nicely. You know, I, I, I think that our, at our current run rate for, you know, packaging, it's abnormally low. We're keeping infrastructure in place to some extent, right? We're doing some footprint rationalization. We're taking some costs out, but we're not positioning the business as if this is the new run rate for sales.

We are positioning the business for a recovery. I'm confident as I sit here today, that as we get incremental sales within packaging, we'll convert very well.

Ken Newman (VP and Equity Research Analyst)

Right. Maybe just one more on packaging. Sorry if I missed it, but did you say how much these consolidations are expected to cost within packaging? Just a sense of the timing of realizing those benefits. I think you mentioned $10 million in benefits are expected. Any color there?

Thomas Amato (President and CEO)

I don't know, Scott. We do have some restructuring charges in the quarter that largely relate to anticipated costs to make those moves. You know, the payback on that I think is pretty swift, but also will help us with our, you know, with our conversion rates.

Ken Newman (VP and Equity Research Analyst)

Okay. Then these existing facilities, do they need to be retooled in any way to kind of move that capacity over? Just what's involved from an operational or logistics perspective in consolidating that capacity? You know, is there a risk that, just given since the visibility is so low right now?

Thomas Amato (President and CEO)

Yeah.

Ken Newman (VP and Equity Research Analyst)

Is there a risk that you can kind of get, you know, caught flat-footed as you try to consolidate, the manufacturing space?

Thomas Amato (President and CEO)

I, you know, I don't, I don't think so. Look, I, I think I understand what you're saying, but the one point I'd like to make here, having in my career repositioned more manufacturing operations than I can even, you know, recount at this moment. The move that we're making within the U.S., which is exiting a California operation, we're moving existing production assets into existing plants where we, you know, we actually we don't even have to build a bank in many ways. We're able to just move tools over, put them into presses that are existing, and then the presses will follow. If there's a further prolonged softness in the market, we'll still get some savings because we're taking the infrastructure costs out of one plant in California.

Ken Newman (VP and Equity Research Analyst)

Right.

Thomas Amato (President and CEO)

It's a little more complex in what we're doing in China, in terms of bringing two plants into one, because that involves a new facility. We're our estimates are based on their current demand levels, so we're not really even forecasting a pickup in demand there, and we're moving some assets to other parts of the world. I look at both of those restructuring steps as, you know, safer launches as compared to, like, launching a brand-new plant.

Ken Newman (VP and Equity Research Analyst)

Right. maybe just switching over to the Specialty segment. obviously, very strong margins here. Just longer term, I mean, how sustainable are margins at this level? I mean, is this the new baseline for that business through the cycle, you think?

Thomas Amato (President and CEO)

Well, I think it sort of depends on overall market demand and what cylinders we sell. There is a big mix characteristic here. I've been talking for the past few quarters on ultra-high purity cylinders. For us, that's a good product line. It goes into a specialized application, specifically, with the movement of localizing microchips into U.S. Those types of cylinders would go into those types of applications, and we can typically command a higher, you know, better pricing, and therefore, better margin.

You know, look, we do recognize we're getting into some historical, you know, high ranges for margin here, and that's, you know, both a good thing, and it also has us, you know, looking behind us and making sure we're doing what we can to protect that. A lot of the driver, though, has been our improving our cost structure. We've taken a lot of actions like I said, I mean. Sometimes it's difficult when times are tough to invest in a business. You know, you're taking a risk, and we did that here, and we did it on the bet that the market would come back, and it did, and it's paid off. It's a fair, it's a fair point.

I just certainly don't wanna conclude that, you know, there's risk here, but we're cognizant of what you're saying.

Ken Newman (VP and Equity Research Analyst)

Okay. Maybe just switching over to Aero really quick. You know, Boeing's announced they are ramping monthly production of the 737. Just curious how you think about that impact and the visibility for faster production?

Thomas Amato (President and CEO)

Yeah, look, the, if you ask a question on 777?

Ken Newman (VP and Equity Research Analyst)

I think the 737, but any platform, really.

Thomas Amato (President and CEO)

Oh, 737. Okay. Look, I mean, we're, it's all of that helps. The order book for us is there. The aerospace industry has something very unique to it in terms of an annual gathering that is everyone you could possibly wanna meet with and talk to, and that air show just took place a few weeks ago. Very upbeat. The types of production issues that we're having, we're not alone, and not only in the fastener space, but in some of the hard parts supply space.

The key theme for us with our customers, with our suppliers, is getting as the big aerospace wheel starts to turn again, getting alignment in the supply base and the sub-supply production base, skilled labor, labor, et cetera. That's why I'm, you know, pretty excited that as we go forward, and certainly into 2024, you know, we'll convert well. I also think longer term, I thought you asked the question about the 777, longer term, as the 777 comes back online, also maybe that's 2025 plus, you know, there's very little to no activity in our numbers related to that. That's a, you know, we've got a nice presence on that as well.

Ken Newman (VP and Equity Research Analyst)

Yep. Maybe last one for me. Just on the free cash flow guide, greater than 100%. I know that's excluding some restructuring costs, so maybe not completely apples to apples. You know, even I think through the first half, even on an adjusted basis, we're around 60% conversion. Any big one-time things, how much of that is seasonality, or is there anything that we need to kind of be paying attention to in terms of how that free cash starts to flow through here in the back half, just given all the issues with packaging?

Scott Mell (CFO)

Yeah, I mean, that, that's our traditional cycle of cash generation as we, you know, invest typically in the first half of the year, to working capital, and then we unwind it as we get into the third quarter and really into the fourth quarter. There's nothing really unique there, Ken, other than just our traditional expectations on unwinding of working capital. Plus, obviously, the incremental earnings in the second half of the year versus the first half.

Ken Newman (VP and Equity Research Analyst)

Right. Got it. Okay. That's, thanks for the time. I appreciate it.

Scott Mell (CFO)

All right. Thank you, Ken.

Operator (participant)

Thank you. Our next question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question.

Hamed Khorsand (Director and Research Analyst)

Good morning. The first question I have was on the packaging side. Do you think you might be, you know, in, in a situation where you don't have capacity if orders come back, you know, quicker than you're thinking on the consolidation side?

Thomas Amato (President and CEO)

No. We actually have been studying that. It's a great question. It's something that we've explored intently, especially given what we have seen take place within aerospace, right? It certainly was a wake-up call for us. We can add shifts to several of our plants where we would have pinch points. You know, I mean, we're not running all of our plants within packaging on a three-shift basis, or in many cases, not even a two-shift basis. We can scale up on our productive assets and get some incredible operating margin lever or operating leverage.

Hamed Khorsand (Director and Research Analyst)

Okay. As far as the customers are concerned, you know, are they adjusting as far as, you know, making new products to attract the customer again? Or is this purely, you know, they're just stuck with inventory and they're just waiting it for it to, you know, clear out through the channel?

Thomas Amato (President and CEO)

Well, I understand the question. Look, I think what's exciting about the packaging segment for us generally, is there's always innovation that is at the core of what our customers are doing, what we're doing with them, especially when you, you know, when you think about the consumer product space and what attracts, what attracts at point of purchase, point of sale, the consumer to select one item versus another. There's a lot of science that goes into that with our customers, and we support that effort intently. You're right, though. To the extent that inventory was high, or overstocked coming into this year on simple, like, a simple pump, for example, like a simple, 2cc dispenser, yeah, that would have to get burned through.

It probably wouldn't get disposed of because there's a significant amount of consumption of 2cc simple dispensers that are here today, have been here for a while, and going forward, will always be there. They're lower cost, less fancy, pumps that, that frankly, do a fine job of getting liquid out of a container to a consumer's hands.

Hamed Khorsand (Director and Research Analyst)

All right, great. Thank you.

Thomas Amato (President and CEO)

Thank you. Look forward to seeing you soon.

Operator (participant)

There are no further questions at this time. I'd like to turn the floor back over to Tom for closing comments.

Thomas Amato (President and CEO)

Okay. thank you again for joining us on our earnings call, and we look forward to updating you again next quarter.

Operator (participant)

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.