RBC Bearings Inc
NYSE:RBC
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
242.24
339.97
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Hello, and welcome to the RBC Bearings Q1 Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Josh Carroll, Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, and thank you for joining us for RBC Bearings' fiscal 2023 first quarter earnings conference call. With me on the call today is Dr. Michael J. Hartnett, Chairman, President and Chief Executive Officer; Daniel Bergeron, Director, Vice President and Chief Operating Officer; and Robert Sullivan, Vice President and Chief Financial Officer.
Before beginning today's call, let me remind you that some of the statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors.
We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's website. In addition, reconciliation of GAAP and non-GAAP financial information is included as part of the release and is available on the company's website.
With that, I'll now turn the call over to Dr. Hartnett.
Thank you, Josh, and good morning all. I'll start off by saying that net sales for the first quarter of fiscal '23 were $354.1 million versus $156.2 million for the same period last year, an increase of 126%. For the first quarter of '23, sales of industrial products represented 72% of net sales, aerospace products 28%. Gross margin for the quarter was $141.2 million, 39.9% of net sales compares to $63.8 million or 40.8% for the same period last year.
Adjusted operating income was $68.3 million, 19.3% of net sales compared to last year of $29.9 million and 19.1%, respectively. GAAP EPS was $1.09 and new adjusted EPS came in at $1.79, and Rob will explain this in more detail later in the call. The quarter performance was very much in compliance with our expectations, right in the middle of the fairway.
A little lower on revenues than our guidance as a result of losing $6 million to $10 million from the shutdown of our Shanghai China plant and some unusual missteps by a forward freight manager. Adjusted EBITDA was $100.7 million, 28.4% of net sales compared to $45.3 million, 29% of net sales for the same period last year. During the period, we paid down debt by another $125 million and free cash flow was $51.2 million.
We entered the first quarter with a strong industrial sector. All components, including industrial distribution, food, aggregate, grain, mining, semiconductor machinery, marine, wind, energy were strong and the outlook here is more of the same for the next quarter. Sales of industrial products were up by 286.8% from last year. RBC organic growth for industrial products was up 17.3%.
Turning now to aerospace and defense. The first quarter of fiscal '23 net sales were up 10%. The revival in production at Boeing is a welcome contributor, as their plans to increase rates on the MAX to over 500 and 600 ships in '23 and '24, respectively, from 330 today and Airbus sets a new pace of 700 and 800 ships for the A320 series over the same period.
Today, there are -- they ship -- they plan on producing 600 ships. This brings a new and welcome post-COVID volume to our factories, many of which were designed and capitalized over the past half dozen years to efficiently produce products for these important aircraft models.
As many of you already know, RBC Bearings was honored to receive the Supplier of the Year Award from Boeing at their June Supply Chain conference in Los Angeles. We have been a supplier to Boeing since the 1940s, probably earlier, and participate in every plane model currently produced and a great many defense products. Boeing commercial aircraft is supported today by over 11,000 suppliers.
The release to production of the Boeing 787 model aircraft is an important milestone event for us. Several of our plants produce many unique products for this plane and our content is substantial. Obviously, we are applauding the resumption of production of this aircraft and are busy now reviewing plant capacity to support the increase. We are using 10 ships per month in 24 months out as a planning boogie.
A word on our defense business, the outlook here is positive for new designs, hardware and services, new designs for advanced munitions, aircraft and submarines with expanded mission profiles. It's very active right now, and it's a pretty exciting place to work. Our business supporting the construction of Virginia and Columbia ships continues to expand, and we plan to add to our manufacturing and test facilities over the next 24 months to support these requirements for the next at least a dozen years. More on this aspect in future calls.
Finally, given the deployment of U.S.-made equipment to Europe in the past month, there's been a strong initiative underway here for replenishment of munitions. As you can imagine, we will be impacted by that. Regarding the second quarter, we are expecting sales to be between $355 million and $365 million. The art here in that range is all about supply chain.
And now I'll turn the call over to Rob for more detail on the financial performance.
Thank you, Mike. SG&A for the first quarter of fiscal 2023 was $55.8 million compared to $31.2 million for the same period last year. As a percentage of net sales, SG&A was 15.8% for the first quarter of fiscal 2023 compared to 20% for the same period last year. Other operating expenses for the first quarter of fiscal 2023 totaled $20.9 million compared to $3.2 million for the same period last year.
For the first quarter of fiscal 2023, other operating expenses included $17.3 million of amortization of intangible assets, $3.8 million of costs associated with the Dodge acquisition and $0.2 million of other income. For the first quarter of fiscal 2022, other operating expenses consisted primarily of $2.6 million of amortization of intangible assets and $0.6 million of restructuring costs and other items.
Operating income was $64.5 million for the first quarter of fiscal 2023 compared to operating income of $29.3 million for the same period in fiscal 2022. On an adjusted basis, operating income would have been $68.3 million for the first quarter of fiscal 2023 compared to adjusted operating income of $29.9 million for the first quarter of fiscal 2022.
Interest expense for the first quarter of fiscal 2023 was $15.8 million, including $2.3 million associated with the amortization of deferred financing fees. This compares to interest expense of $0.3 million for the same period last year. The year-over-year increase reflects the addition of a term loan facility and the senior notes utilized for the Dodge acquisition during fiscal 2022.
For the first quarter of fiscal 2023, the company reported net income of $37.4 million compared to net income of $24 million for the same period last year. On an adjusted basis, net income was $40.2 million for the first quarter of fiscal 2023 compared to $24.3 million for the same period last year.
Net income available to common stockholders for the first quarter of fiscal 2023 was $31.7 million compared to net income of $24 million for the same period last year. On an adjusted basis, net income available to common stockholders for the first quarter of fiscal 2023 was $34.5 million compared to $24.3 million for the same period last year.
Diluted earnings per share was $1.09 for the first quarter of fiscal 2023 compared to $0.95 for the same period last year. On an adjusted basis, diluted earnings per share for the first quarter was $1.19 compared to adjusted diluted earnings per share of $0.96 for the same period last year.
Starting this quarter in future releases, we reflect a newly defined adjusted earnings per share. In recent months, it's become clear everyone is a bit all over the place in how they're considering earnings per share, and we have listened to feedback from our shareholders, and we believe this new metric will best reflect the ongoing performance of our business. To be clear, in future periods, we will no longer report cash earnings per share or our historical adjusted earnings per share, which only considered foreign exchange, discrete and other unusual tax matters, and other nonrecurring or unusual items.
The new adjusted earnings per share will reflect adjustments for onetime or unusual items, foreign exchange, discrete and other unusual tax matters, amortization of M&A-related intangible assets, amortization of stock-based compensation and the amortization of deferred financing fees.
For the first quarter of fiscal 2023, this new adjusted earnings per share was $1.79 compared to $1.22 for the same period last year. This year-over-year improvement reflects the significant benefits provided by the Dodge acquisition. Please refer to our press release filed this morning for the full calculation.
Turning to cash flow. The company generated $59 million in cash from operating activities in the first quarter of fiscal 2023 compared to $53.3 million for the same period last year. We made a strategic investment in our inventory during the current period, which impacted the operating cash generation. Capital expenditures were $7.9 million in the first quarter of fiscal 2023 compared to $3.4 million for the same period last year. We paid down $125 million on the term loan during the period, leaving total debt of $1.565 billion as of the end of the period and cash on hand was $119.6 million.
Finally, I wanted to offer some brief details on the restatement of our 10-K previously filed in May. This restatement arose out of the company's reexamination of the timing of the recognition of stock-based compensation expense associated with certain executive awards. Under U.S. GAAP, the recognition of compensation expense associated with these awards should have been accelerated due to certain clauses in the agreements associated with voluntary termination. The results of these adjustments is an expense that would have previously been recorded in fiscal 2023 and future years has been recorded in previous periods.
The impact in fiscal 2022 was an additional $9 million of pretax compensation expense. The impact in fiscal 2021 was a reduction in expense of $3.2 million and the impact in fiscal 2020 was an additional $7.4 million of pretax compensation expense. Importantly, these adjustments relate to a noncash expense item and impact the timing of the recognition rather than the overall amount of the compensation expense.
There was no impact to our historical non-GAAP adjusted EBITDA as we traditionally exclude stock-based compensation from that metric. As a result of these adjustments, the total expense recognized in fiscal 2023 is expected to be less than previously anticipated, including a reduction of more than $5 million for the total for the rest of the fiscal year.
I would now like to turn the call back to the operator for the question-and-answer session.
[Operator Instructions] Our first question today is coming from Kristine Liwag from Morgan Stanley.
So first, congratulations on winning the Boeing Supplier of the Year Award. Presumably, Boeing would want more of a supply chain to execute like you guys. I mean, to what degree does this recognition potentially unlock expansion of scope of work?
Well, we're waiting to see how that plays out, Kristine. It -- we're clearly sort of in the winner circle in terms of new work coming from Boeing. And so we're working through bids on other products. Boeing is -- I guess, it's well known that they have a lot of supply chain issues and suppliers that didn't make it through the COVID period for financial reasons or employment reasons or shortage of labors. And so they're looking to move work. And I think we're probably in a very good position to achieve some of that work. It's too early to tell what the ultimate benefit is going to be, but I like where we are.
And if I could do a follow-on question on Dodge. When you look at RBC Bearings historically, you guys have performed and been very defensive across different cycles. I mean, looking back in the past 10 years, gross margins didn't dip below 35%. And even going back to data post IPO, I mean gross margins never dipped below 30%. So given the uncertain macro backdrop we're facing today, can you provide more color on how Dodge changes your -- the defensibility of your portfolio and how you'd expect them to perform in an industrial recession, should we see one? I mean, with the 60% recurring revenue at Dodge, is it more or less defensible on top and bottom line versus RBC bearings on a legacy basis?
Yes. Well, I think roughly 80%, I'm rounding now, of Dodge's revenues are coming from industrial distributors. And those industrial distributors, if you talk to any one of those industrial distributors, they will tell you that 50% of their revenue is what they call break fixed revenue. So there's something broken in one of the plants that they service. And so they supply the replacement part to that plant. And so a heavy -- there's a heavy concentration of Dodge's business is associated with this break-fix component of the U.S. infrastructure.
And that infrastructure is aggregate, it's grain, it's a what they call unit handling. And so it's very integrated into the U.S. GDP. So I think that Dodge -- when you look at the Dodge revenues over that same period, they're lower beta revenues than RBC's because RBC is more direct OEM business. So we might be supplying somebody like a Caterpillar and depending upon what systems you're supplying at Caterpillar, you can be up a lot, you can be down a lot. And Dodge doesn't have that variability in their makeup.
And then with less of that variability in the top line presumably, margins also would be more stable. Is that a fair assessment?
Yes, I think that's a fair assessment.
Next question is coming from Steve Barger from KeyBanc Capital Markets.
Rob, thanks for the explanation on the new adjusted EPS. Just to make sure I understand, when you report 2Q, we'll see a GAAP result and then the adjusted number that you will focus people to will be comparable to the $1.79 that you referenced for this quarter?
That's exactly right. Those will be the only 2 that will reflect starting next quarter.
So you would expect consensus to reflect more of that 179 basis.
That would be what we would expect.
I'm going to ask that industrial question maybe in a slightly different way. When you think about the combined industrial business and how that will grow relative to the cycle, just to be more quantitative, if IP or industrial production is plus 5%, what would you expect your business to be up? And then same question if IP were to be down 5%.
Yes. Well, I can tell you, if IP were up 5%, we would have difficulty supporting all the order book. Year book would be extremely demanding. Actually, when it's above 3%, it's very demanding. 5% that's probably merges with a purchase manager index of something like 55 to 58. That's -- those kind of track each other and in those neighborhoods, we're as busy as it can get.
When it goes negative 5%, Steve, I really don't want to think about that.
Well, I mean, you just went through it in the pandemic, right? And IP is running about 5% right now. So is the order book hard to keep up with as it stands today, supply chain notwithstanding?
Yes. So the order book is still outpacing our ability to deliver. And that's mainly a supply chain thing. We certainly have the internal plant capacity, but we are having hiccups, particularly in the Dodge side, not on the RBC side, but on the Dodge side with supply chain matters. And that way, when we do a revenue guidance, there's an incredible amount of work that goes into the calculus associated with getting to those revenue numbers. And so we try to make them conservative but realistic. And so if there's some supply chain breakthroughs, then there'll be a very pleasant revenue surprise at the end of the quarter.
The supply chain problem is getting better as we bring on basically additional suppliers. And in some cases, we convert some of the RBC classic plant manufacturing to relieve some of the shortages that we have. So -- and that's working better as you introduce it and work it and it matures. So I think -- but I do think it's going to be with us for the rest of this year.
Yes. For the revenue guide for 2Q, how much did you factor in as an offset for supply chain?
Well, I know what the number is, but I don't want to tell you.
Okay. Is it less than you factored in for your 1Q guidance?
No, it's the same.
Okay. And do you expect Dodge revenue contribution will be up sequentially?
Yes, I do.
Next question is coming from Seth Weber from Wells Fargo Securities.
I wanted to ask, the margins were actually better than what we were looking for, both on the gross margin and EBITDA margin. So I'm just trying to understand maybe where you're at from a price cost perspective. Would you expect price cost to be getting better through the balance of the year? Are you on the positive side of that? Or just any framework you can give us for what you saw in the first quarter relative to expectations for the rest of the year?
Yes. Well, I think price cost is going to get better, particularly as it relates to supply chain and half of Dodge's cost of sales in rough numbers, our supply chain -- supplied. And so there's transportation expense in there. In the past quarter, there is air freight from Asia there. That's going away. The cost of diesel is -- seems to be moderating. So the transportation expense should calm down. And we see the prices of some of the basic commodities backing off. So that's telling us that, that cost pressure should be relieved as time goes on. We didn't see any relief in the first quarter. So we're not planning to see any material relief in the second quarter.
Okay. Would you keep the price increases that you're pushing through even in a lower input cost environment?
Well, I mean, we'd have to evaluate it product by product and account by account, and see where it all comes out. It's -- that's a hard question to answer. We would in some cases and we'd probably back down in other cases. And so it's very tactical.
Okay. And then just my follow-up question. You've mentioned now for a couple of quarters adding capacity on the aero side. And I think I heard you kind of referenced adding some capacity on the defense side as well. Can you just put some timing around that. It sounds like defense may be a little bit further out. But when would you expect this extra capacity to start to help you?
Well, on the aero side, we don't have to add the capacity on the aero side in terms of CapEx and that sort of thing because we were at a gallop there before the pandemic hit. And we want to get sort of -- it looks like we're going to get back into those clothes. So it's really adding manpower and that's -- these days, that's not easy to do, but it's doable. And so you have to go out and be creative about where you look for people and how you attract them to your company. So that's -- on the aerospace and the industrial side, that kind of answers that question.
On the defense side, yes, it's a little further out. We have proposals into the -- some of the defense agencies with regard to what we'd like to add for -- or what we think should be added for capacity. And they've been favorably received, and it looks like we'll receive some funding.
[Operator Instructions] Our next question is coming from Sam Struhsaker from Truist Securities.
I was just hoping I think you touched on this a little bit regarding pricing, but is there any particular aspect of supply chain, whether it be specific parts or raw materials were you guys either increasing lead times or maybe some pressure there? And then kind of building off of that, again, briefly touched on prior. But regarding labor, are you guys finding any additional needs there for bringing on capacity on that front?
Yes. One, on the labor side, we definitely will, we'll have to add labor. This buildup of the 787 production volume is pretty significant for us. So there's no way that we're going to be able to do that without adding labor. And -- but it's a manageable amount of labor requirement. So it's -- the second part of your question was materials?
Yes. Just if you guys are feeling any particular supply chain pressure, whether it be lead times or just some pressure and whether it's any particular parts or raw materials when you might be feeling that?
Well, yes, on raw materials, of course, it's titanium. And titanium is always an issue. And depending upon who you're working for, it can be a challenge. It could be very costly. And so there's various strategies that we can employ there and do employee. We can buy -- if we're supplying Boeing, we can buy titanium from the suppliers at a negotiated price that Boeing had negotiated with that supplier for people like us. And Boeing tells us there's absolutely no issue at all with the availability of titanium that got that covered. So I hope they're right.
Now with regard to some steels, some of the steels are pretty exotic and pretty sophisticated, and lead times on some of the steels are out a year, 50 weeks. Some of the important steels are made by people who went bankrupt, and are barely staying alive. And so some of the big plane makers and their subcontractors, larger subcontractors are doing some extraordinary things to keep those people alive, but that's always a concern.
Your next question is coming from Joe Ritchie from Goldman Sachs.
A few quick ones for me. I think I recall the last time we chatted, we were anticipating the first half gross margin to be about a 100 basis points higher than where you exited fiscal '22. It looks like the start to the year has gotten maybe a little bit -- gone off a little bit slower than expected or below the 4Q number. Do you guys still expect the first half GM to be about 100 basis points higher?
What did we end up in?
So yes, I think the way we're looking at is over the course of the year, we should start to see that improvement, but it's always lumpy during the year. I would expect the second quarter gross margins to look quite similar to the first.
And our strongest quarter is Q4.
And then, I guess, maybe just kind of parsing out, I know that you guys have a lot of international exposure, so probably less affected by FX than a lot of other companies that we cover. But I'm just curious, the industrial organic growth number for this quarter, I don't -- I didn't hear you guys give it earlier. I mean, we're calculating something like 17%. Is that what you saw come through in the quarter?
17.3%. And that's mainly...
And then I'd actually be curious just to hear any trends that you're seeing in the business as you progress through the quarter. Obviously, 17% is a very healthy number. A lot of concerns out there around industrial activity slowing. Just any thoughts around what you're seeing in that business? And any trends that you saw intra-quarter?
Well, I think we have a few really good key markets that are doing well, construction and mining, semicon, oil and gas. And at the same time, I think we're starting to see some activity from our synergy on cost training, Dodge's sales team and RBC sales team. And so with a 17.3% growth rate on industrial mainly in the U.S., I mean we'll more than double of any of our competitors on the growth for year-over-year with a quarter that we're going up against. But for us, the big markets, like I said, are construction and mining side be the Caterpillars, Komatsus of the world, oil and gas, semiconductor, general industrial distribution. Just without Dodge, our general industrial distribution business was up 11.6% organically and our OEM business was up 21%.
Your next question is coming from Ron Epstein from Bank of America.
So just a couple of quick financial questions. So is the plan to still pay down $300 million of debt this year?
The plan is to accomplish $300 million this year, $400 million cumulatively since the acquisition. That's right.
And then I guess another thing that kind of came out in the release to me, what's being done to address the material weakness in the financial controls?
Yes. We're taking it internally. We are reevaluating the processes that are in place regarding employment contracts as they relate to compensation and we'll be adding additional controls regarding the legal and accounting review prior to the time of grant.
The next question is a follow-up from Steve Barger from KeyBanc Capital Markets.
Was there anything outside of Shanghai and supply chain that impacted 1Q revenue? Like was there any FX impact?
Very minimal FX impact during the period, all things considered. Obviously, the European rates moved the way they did, but the notes that Mike hint on were the bigger drivers.
Can you remind me, if anything changed around seasonality for 3Q with Dodge included? I think historically, it typically steps down a touch from 2Q before the ramp to the 4Q peak.
The same. So you can expect they're going to have the same holiday seasons that we have, Thanksgiving, Christmas and the shortest amount of production days for both companies.
And historically, ROLL's been really good at taking an analytical approach to things. So as you look across your end markets and your existing customers, do you see more value right now in going after more wallet share or in entering new markets? Because presumably, the former has a higher returns than the latter.
Well, we have a lot of new products coming through the system, almost too many in terms of I mean, you can't get behind all of them. And you have to pick the big winners. And so right now, as far as Dodge is concerned, we're sorting through what they have for product development, which is extensive. And which products, how mature are their developments, how far along is the product technically and how far along are we in terms of understanding the market needs, and what's scalable in terms of those products. And that's the process that we're going through right now with Dodge. And it's -- I'll tell you, it's keeping us busy. There's a lot of -- lot of wood to cut there. And so I think in terms of adding new products to the existing market channels is a very good recipe for success, as it applies as -- certainly as it applies to Dodge.
Now RBC on the other hand, has to a large extent, particularly in aerospace and defense, has completely different lineup in terms of customers and market channels. And so we've kind of gone through the RBC agenda over the years and know which ones are the ones to back. And it's pretty much product introduction to existing markets. And then I think secondarily to that is how do you map RBC across Dodge's industrial markets, so that you're actually picking up revenue by introducing new accounts to existing products. So that's -- those are the 2 big waves on the stool that we're working on right now.
And realistically, how long does it take to effectively complete that mapping process? Is that years or quarters?
We're quite -- well, I mean, it never ends, Steve. It really never ends because there's always more coming through. But we're quite far along on some of these programs in terms of Dodges' program. And so -- and others are at the initial stage at the end of their technical development, but at the beginning of their market assessment. So yes, I think we're going to have some good things to talk about.
And just one more. Just looking at the segments, will aerospace always have intrinsically higher incremental margin than industrial? Or should they be even over time?
They tend to be quite close over time. It obviously depends on the period and what's going on. But if you look at the history, they're really not that far apart.
Your next question is coming from Pete Skibitski from Alembic Global.
Sorry, I've been getting trouble getting into the queue there. Yes, Mike, maybe just to start, on the Shanghai plant is revenue-wise. Has the plant reopened again as of the start of 2Q?
Yes, it has.
Okay. So we should gain that revenue back. And then would you guys be willing to quantify the impact of the -- I think you called it an unusual freight misstep in the quarter?
Yes.
It was -- that impact was somewhere between $2 million and $4 million.
And the issue has been -- it sounds like a onetime issue?
Yes. It was -- it's an unusual issue for this particular forwarder. It hasn't happened in the past that anybody could remember. And so we're getting involved with why it happened this time and what we can do to help.
Maybe on industrial they kind of switch the metric a little bit from IP. In the past, Mike, you've talked about PMIs a lot and it's great when PMIs are about 55%, and we've seen a little bit of deceleration recently. So I'm just wondering, as we sit here in August over the last month plus, are there any signs of deceleration in demand at all for your industrial end markets? Or is it just not really something that's visible right now?
Certainly for classic RBC, we're definitely not seeing it. We're not seeing any acceleration. In Dodge, it's -- their business is lumpy. And -- but when we look at the markets that they serve, aggregate -- in the aggregate market from what our field people are telling us, there's no capacity left by aggregate producers. They're 100% full, and we have now this infrastructure program coming through that's going to throw gasoline on the fire. Grain is grain. It's going on in the world with grain. And so the farmers are running their machinery and breaking things and needing replacement.
Our food products have been really well accepted by the industry. And that's a growth leg for us that's in its early stages. And we have been -- we have a lot of demand for these new products out of Dodge that address the manufacture of food. And so we think that those markets are going to continue. And we haven't seen them lit up. We have seen some backing off of what they call unit handling as a result of Amazon canceling building, what, 40 or 50 different warehouses. So there's been some back up there, but that's -- frankly, that's probably going to expand our margins.
Last one for me. I think you guys are still expecting to generate $400 million in adjusted EBITDA this year. Is that on track?
Well, certainly, with the first quarter, we're trending in that direction. Yes.
We've reach the end of our question-and-answer session. I'd like to turn the floor back over to Dr. Hartnett for any further closing comments.
Okay. Well, I appreciate the involvement of everybody in the questions today. And thanks again for your interest in RBC Bearings and participation in the call, and we'll speak again in October. Good day.
Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.