Hello, and welcome to the third quarter 2021 ACCO Brands Earnings Call. My name is Emma, and I'll be your operator today. If you would like to ask a question, you can do so at the end of the presentation by pressing star followed by one on your telephone keypad. If you wish to retract your question, please press star followed by two. It is now my pleasure to hand you over to Christine Hanneman to begin today's call. Christine, over to you.
Good morning. This is Christine Hanneman, Senior Director of Investor Relations. Welcome to ACCO Brands' third quarter 2021 conference call. Speaking on the call today are Boris Elisman, Chairman and Chief Executive Officer of ACCO Brands Corporation, and Neal Fenwick, Executive Vice President and Chief Financial Officer. Slides that accompany this call have been posted to the investor relations section of accobrands.com. When speaking about our results, we may refer to adjusted results. Adjusted results exclude transaction, integration, amortization, and restructuring costs and other non-recurring items and reflect an adjusted tax rate. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in the earnings release and slides that accompany this call. Due to the inherent difficulty in forecasting and quantifying certain amounts, we do not reconcile our forward-looking non-GAAP measures.
Forward-looking statements made during the call, including statements concerning the impacts of the COVID-19 pandemic on the company, are based on the beliefs and assumptions of management based on information available to us at the time the statements are made. Our forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially. Please refer to our earnings release and SEC filings for an explanation of certain of these risk factors and assumptions. Our forward-looking statements are made as of today, and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session. Now I will turn the call over to Boris Elisman.
Good morning, everyone. Thank you for joining us. I will spend a few minutes discussing the overall environment we're operating in and how it's impacting our business. Neal will follow me with details on the numbers and provide additional comments on our balance sheet, cash flow, and outlook. Then we'll take your questions. We had a good quarter based on the addition of PowerA, continued strength in EMEA, a solid back-to-school sellout in North America, and improvement in our international segment. All segments posted organic sales growth, including double-digit growth in comparable sales in EMEA. During the quarter, we continued to see steadily improving demand overall, despite higher incidences of COVID-19 during August and September.
However, while commercial product sales were up and back-to-school replenishment orders were solid, the increase in the Delta variant in the quarter resulted in more muted demand for commercial products and less back-to-school replenishment than we would have seen otherwise. In addition, global supply chain and semiconductor availability issues kept our back orders high, which also delayed some shipments in the quarter. Despite those challenges, we saw economic recovery and improving end user demand throughout the quarter and believe that steady recovery will continue in the fourth quarter. Let me now give you some color on our business. I'll begin with PowerA. We're pleased with the performance of this business, which had a good sales quarter, but at the low end of our expectations.
Due to chip shortages, video gaming console sales have been hampered by product availability issues throughout the year, and console sales are a major demand driver for the accessories sold by PowerA. We had expected console availability to improve in the third quarter, but it did not to any significant extent. There were few products on retail shelves, and whatever shipments were received were sold immediately, mostly through online channels. There continues to be strong demand for video gaming products, and we expect console supply to improve over time, but console producers are still likely to have back orders in the fourth quarter. As a result, we're reducing our outlook for PowerA sales growth this year to 20% from 25%. Our business has enough product to sell in a seasonally strong fourth quarter, and we are well positioned to meet demand.
We expect to continue to see a strong organic performance domestically from PowerA in 2022 and plan to begin incremental expansion internationally in the latter part of next year. Moving on, as we noted last quarter, the U.S. back-to-school sell-in was impacted by an inventory overhang from 2020. Back-to-school sell-through was solid this year, with school supply sales growing 27% according to the preliminary information from external sources. Our Five Star brand of school products took share again, with sales growing 39% according to external sources. We were the leading notebook brand for back to school in North America. The inventory overhang from last year's soft sell-out has been sold through.
Due to increased incidents of the Delta variant, however, our customers were somewhat conservative in making replenishment orders. We still had a reasonable amount of replenishment in the third quarter and are very pleased with our overall back-to-school performance. We will enter next year in a good position for back-to-school sell-in and have expectations for a strong 2022 season, as the circumstances should be more normalized and the channels finish this season without excess inventory. Moving now to our Kensington brand. You may recall that last year that business had its largest order ever, so we were up against a very difficult comparison this quarter. If we exclude that large sale, Kensington had double-digit sales growth versus last year, and our total comparable sales increased 10% instead of 4%.
Kensington continues to focus on development of new products to fuel its growth, and the pipeline for 2022 is robust. EMEA had another excellent quarter with organic growth of 10% on top of a strong third quarter last year. We continue to take share in every part of our portfolio, with especially strong growth in Kensington, Rexel, Leitz, and Derwent branded products. Our team in EMEA is doing an excellent job, and I expect our strong performance there to continue. Finally, let me talk a bit about our supply chain and the high freight and commodity costs we have been seeing. Every business is facing supply chain delays and disruptions, whether it's port congestion, factory closures, truck driver shortages, rail chassis shortages, shipping containers in the wrong places, et cetera. Logistics and commodity costs have increased rapidly over the past year and are still very high.
While it is hard to predict, we don't see the situation improving until perhaps the second half of 2022. Our employees have been managing this difficult situation very well. They're carrying more inventory where possible because of elongated supply chain lead times. It also helps that we manufacture approximately 40% of our products in our local markets. We've taken several price increases across all of our businesses globally to help offset the higher costs, and we will announce additional price increases for 2022. We expect price increases to substantially mitigate the effects of inflation in 2021, but they won't fully offset them until next year because our pricing generally lags cost increases. In summary, we believe that current recovery demand will lead to continued organic sales growth and improved profitability of our business.
For the full year, we continue to expect record sales and a strong profit performance. Overall, we continue to focus on executing our long-term strategy of improving sales growth and profitability by shifting our business towards more consumer-centric products and faster-growing channels. Our growth will come from acquisitions such as PowerA, as well as organic sales from demand recovery, innovative new products, and market share gains. We are aggressively pursuing and investing in the long-term opportunities we think will grow most rapidly, such as video gaming accessories, computer accessories, and work, learn, or play from home products. We recently made some leadership changes to enhance our execution of this strategy. We have promoted Tom Tedford, who ran our North America operations, to President and Chief Operating Officer, and hired Roxanne Bernstein, who has strong consumer and marketing experience, to run our North America segment.
We remain confident in our strategy and our solid financial position, especially our consistent strong free cash flow generation. I'm pleased to report that our board shares that confidence and has approved a 15% increase to our quarterly dividend to $0.075 per share. Now, I will turn the call over to Neal for a more detailed review of the segments, our outlook, and other financial commentary, and then I'll join him in answering your questions. Neal?
Thank you, Boris, and good morning, everyone. Our third quarter reported net sales increased 19% to $527 million, largely due to the contribution of PowerA, which added $57 million. Our comparable sales rose 4% as we saw improved demand in most markets. Third quarter net income was $20 million or $0.21 per share. Adjusted net income was $32 million, and adjusted EPS was $0.33 per share. Our adjusted EPS was adversely impacted by $0.03 from a much higher adjusted tax rate than originally forecast. Without the change in tax rate, our adjusted EPS would have been $0.36. Our gross margin rose 120 basis points to almost 30% compared with roughly 29% in 2020. The increase was largely the result of higher sales, a better product mix, and cost reductions.
SG&A expenses were $102 million compared with $84 million last year. Results in 2020 benefited from many pandemic-related temporary cost reduction efforts that impacted both SG&A and cost of goods sold. This year's expenses are at a more normal level for our company and also reflect the addition of PowerA. SG&A expense as a percent of sales was 19%, even with last year as the higher expenditure was offset by higher sales. Reported operating income was $39 million, compared with $34 million last year, and operating margin was slightly over 7% versus close to 8% in 2020 due to the dilution from the PowerA earn-out and amortization. The PowerA earn-out is payable in two equal installments in March of 2022 and 2023 if certain sales and profit targets are met.
Each quarter, we recognize any change in fair value of the earn-out as an expense in our income statement. We expect quarterly charges throughout the earn-out period. This quarter, we booked a $5 million expense related to the earn-out, which along with $4 million amortization related to the acquisition, resulted in only a slight operating profit contribution from PowerA. Without those charges, PowerA contributed $0.04 to adjusted EPS. We increased our full-year tax estimate to reflect changes in our forecasted geographic mix of income, interest expense limitations, and our GILTI tax burden. This resulted in a 31% projection for 2021, increased from the previous level of 29%. For the third quarter, the 34.8% tax expense reflects the year-to-date true up as the first two quarters had reflected the 29% projection.
Now let's turn to some details of our segment results. Net sales in North America increased 21% to $288 million, largely due to the $45 million contribution from PowerA. Comparable sales rose 1%, primarily from higher back to school and commercial sales, partially offset by the absence of a large Kensington computer accessories order that shipped mainly in the third quarter last year. North America adjusted operating income and margin increased as a result of higher organic sales, PowerA, and better product mix, primarily due to the absence of $22 million of low gross margin Kensington sales. Now let's turn to EMEA. Net sales rose 18% to $161 million, and comparable sales rose 10% to $151 million, which are both above 2019 levels.
The strong increases were the result of a general economic recovery as well as market share gains, including the benefit from the acquisition of the Franken product line. We have now seen five consecutive quarters of strong business improvement in EMEA. EMEA posted a lower operating profit and margin due to higher logistics and commodity costs, as well as more normalized SG&A expenses versus last year. EMEA raised prices effective October 1, so we should see some margin improvement in the fourth quarter, but EMEA will likely need to take additional price increases in 2022 to offset inflation. Moving to the international segment. Net sales increased 13% due to price increases, PowerA, and favorable foreign exchange. Comparable sales increased 5%, primarily because of higher prices. Mexico and Brazil continue to be impacted more by COVID-19. Although we are seeing improvement as vaccination rates have increased.
Mexico essentially did not have a back to school season. We are hopeful that Brazil will fare better with its back to school season as more children have returned this fall to in-person education. We expect the back to school season in Brazil to be larger than the prior year. However, we anticipate that more sales are likely to move into the first quarter of 2022 and less in the fourth quarter this year, which is the opposite of what historically has occurred. Our business in Australia was negatively impacted by a return to lockdowns. In New South Wales, which has the largest population and is where most of our sales occur, lockdowns impacted the entire third quarter. Despite that, sales in Australia were up mid-single digits in the quarter.
The lockdowns are now over and the vaccination rates have improved markedly, so we are expecting Australia to have a relatively good fourth quarter. The International segment posted an adjusted operating profit of $10 million, much better than last year, primarily based on long-term cost reductions and higher pricing. Let's move now to our balance sheet and cash flow. In the third quarter, we generated $99 million in net cash from operating activities and had approximately $94 million of free cash flow. We paid dividends of $6 million and CapEx was $5 million. To date, we generated $44 million in net cash from operating activities and generated $30 million of free cash flow. We have paid dividends of $19 million and CapEx was $14 million. Our year-to-date free cash flow is $20 million higher than last year.
As we have noted before, the planned use of free cash flow for this year will be to reduce our debt and fund our dividend. Our CapEx outlook for 2021 is less than $25 million. At quarter end, we have $447 million available on our $600 million revolving credit facility. We repaid $117 million in debt in the quarter. Our bank pro forma net leverage ratio improved to 3.8x , which is in line with what we expected and results in incremental interest savings of over $400,000 for the next four months. Now let's turn to our outlook. Our fourth quarter demand is expected to continue to improve compared to last year, especially with more companies expected to return to offices, at least in a hybrid mode.
Foreign exchange, which has been a benefit, is not expected to add much to our fourth quarter since the U.S. dollar recovered strongly during the third quarter. As a reminder, the fourth quarter is normally very strong seasonally for PowerA, EMEA, and back to school in both Australia and Brazil. We expect continued pressure on operating margins in the fourth quarter, mainly due to logistics and commodity cost inflation. However, the recent price increases will benefit our results in the fourth quarter, and although they will not fully offset the cumulative impact of inflation, we should see margins expand, but they will still remain below 2019 levels. We have incorporated this into our guidance.
We are reducing the top end of our sales outlook to reflect the impact of console availability for PowerA, and we are modifying our adjusted EPS to reflect the higher full-year tax rate. For the full year, our outlook is for sales to be in the range of $2 billion-$2.04 billion. Full year adjusted EPS is expected to be in the range of $1.30-$1.40 using a 31% tax rate. The impact of the higher tax rate on the full year adjusted EPS forecast is $0.04. We forecast adjusted EBITDA to still be in the range of $285 million-$300 million, which at the high end would bring us back to 2019 levels.
With our expected use of free cash flow to mainly reduce debt, we expect to achieve our leverage goal of 3.5x or lower at year-end, similar to where it was before we purchased PowerA. The full year outlook includes a favorable foreign exchange impact of 2.5% on sales and $0.05 on adjusted EPS. We expect our normal productivity programs will deliver approximately $30 million in full-year expense savings. The pre-tax amortization exclusion for the full year is estimated to be $47 million, which equates to approximately $0.33 on an adjusted EPS basis. We feel confident that we can deliver at least $135 million in free cash flow. We expect to generate at least $160 million of operating cash flow for the full year, and CapEx is expected to be less than $25 million.
Now let's move on to Q&A, where Boris and I will be happy to take your questions. Operator?
Thank you. If you would like to register a question, you can do so by pressing star followed by one on your telephone keypad. Questions are limited to one question per registration. If you would like to ask a follow-up question, please re-register by pressing star followed by one. Our first question today comes from Brad Thomas from KeyBanc Capital Markets. Please go ahead, Brad. Your line is now open.
Hi, good morning. Good morning, Boris and Neal. Thanks for all the details. I will focus my question around gross margin. Given the world that we're operating in with input costs going up and logistics and transportation costs going up, I was hoping you could talk a little bit more about the puts and takes on gross margin as we think about 2022 and maybe a first cut at how we should be thinking about that for next year. Thank you.
Yes, good morning, Brad. It's Neal. Like every other company, we're seeing worldwide escalation in costs for international and domestic freight together with commodity cost escalation. All of that is feeding into our products. As you probably heard from other companies, it's a developing story that is continuing to see increases, particularly now in commodity costs, even though ocean freight has perhaps stabilized. We are playing catch up with pricing. You see that particularly if you look, for example, in the third quarter at our EMEA segment, which wasn't able to raise prices until beginning of October, and you see a fairly significant impact on its gross margin. The other two segments, we're able to get the price increase in. We will need to raise prices again in the future to offset.
We're fundamentally committed to. We have no choice but to pass on the level of cost increase that we're seeing. We don't make enough gross profit to absorb it. We will be playing catch up on cost through next year. We do expect to see our margins continue to recover, so year-over-year perhaps improve, but they're just getting back to where they were in the long term in 2019.
Neal, just to be clear, like as a follow-up on this topic, you still have some nice tailwinds from recovery and productivity initiatives. Do you believe that each quarter going forward, there's still a good shot at continuing to expand gross margin just at a lesser rate than if the environment
Or, is there a potential you know you start to see gross margin declines again? Just trying to understand the magnitude of some of these things. Yeah, no, if you look at the third quarter in total, pricing actually didn't offset cost, so cost was actually a drag on margins. The thing that drove up margins was higher volume and product mix together with our own cost saving initiatives. So from a cost versus price perspective on commodities and freight, we're still playing catch up. What's driving the improvement in our margins is fundamentally the better mix of product sales and the higher volume of sales and our own cost reduction efforts. But we do expect improvement to your point, Brad.
We expect improvement, just not as much as maybe we had originally planned for just because of the level of inflation we're seeing. Given the productivity initiatives, given expected volume recovery and the pricing we're passing through, we do expect to continue to improve our margins next year.
Very helpful. I will turn it over to others and get back in the queue.
Thanks, Brad.
Thank you. Our next question today comes from Chris McGinnis from Sidoti & Company. Please go ahead. Your line is now open.
Thank you. Good morning. Thanks for taking my questions, and nice quarter. I guess just maybe to touch on PowerA just in Q4, it sounds like it's gonna obviously have some issues related to the console manufacturers. Do you think you'll I don't know if I may have missed a forecast for PowerA in Q4. I don't know if you gave one. Could you just provide where you think that'll end up for the year and, you know, above or below, you know, your expectation there?
Yeah. Overall, let me just kind of go through a little bit of what happened this year. We entered this year with an expectation of 16% growth for PowerA. We had an incredibly strong first quarter, and in the back of the first quarter, we raised our expectations for the year to 25% growth. We maintained that through the second quarter. We expected console product availability to be better in Q3 based on the information that was shared with the markets. That did not really happen. They're still in very, very tight supply. You know, console sales drive accessory sales. So because of that, we are reducing our forecast for PowerA to 20% for the year. It's still outstanding growth.
As I mentioned, you know, if anybody told me we're gonna grow 20% as we entered 2021, I would've taken and signed it and said, great. So, you know, even though we're reducing it from 25%- 20%, it's still outstanding growth, and we expect strong quarter, strong fourth quarter from PowerA. But there is some uncertainty in console product availability, and then, you know, that's really why we took it from 25%- 20%.
I totally understand. Thanks for that color. I guess just with the strong performance in back to school, can you just talk about maybe the competitive landscape? Did you take share in that market? Maybe just a little bit more color around the sell-through or replenishment.
Yeah, sure. Sure, Chris. Yeah. Back to school was good. It's gonna return to almost normal. You know, there's still you know, inventory kind of overhanging et cetera, but from a sellout perspective, it was almost normal. The overall school supply sales grew by 27% versus last year, which is a you know, very strong recovery. Then we took share, our Five Star branded school products grew 39%. We were one of the fastest growing school supply manufacturers during the season, took share and definitely are number one in school notebooks in North America. So we're very pleased with the season from a sellout perspective. We're also pleased that the channel is exiting this back to school clean.
There's not any level of additional incremental inventory that is left over. We're very optimistic that next year sell-in is gonna be really good because the channel is clean.
Great. Thank you very much for taking my questions and good luck in Q4.
Thank you, Chris.
Our next question today comes from Joe Gomes from Noble Capital. Please go ahead, Joe. Your line is now open.
Good morning, and congrats on the quarter, and thanks for taking my question.
Good morning, Joe.
Just wanted to talk a little bit here and get some more insight, Boris, on the commercial reopenings, you know, and how much, you know, where you kind of think we stand on that and how much more positive impact can that have? You know, if you look at EMEA, you've had five consecutive positive quarters there. You know, how much is left there? And then same here in North America, where it seems to be a little bit slower return to normalcy. You know, how much more do you think is still to come in the commercial reopening side, and what can that mean, you know, for the top line at ACCO? Thank you.
Thanks, Joe. Yeah. We think there's still a tailwind in the commercial sales. You know, if you look at North America, for example, where we have most third-party market research information on these things. You know, we still have a lot of offices, especially in the enterprise space, that are operating remotely, especially the case in Q3, when the Delta variant spiked. People are now returning back to work, at least in a hybrid mode, some in Q4, and some in Q1 of next year. That's gonna be a tailwind in North America. We had positive sales comps, commercial sales comps, in North America.
There's more to come, given the return back to office in Q4 and Q1 of next year. We're seeing good commercial sales internationally, as people are beginning to work from offices more there as well. The same thing is happening in EMEA. To your point, the comps are more difficult in EMEA because our sales have been very strong for five quarters in a row. In EMEA, too, people are beginning to return to offices this quarter, more and more. We should see some tailwind in commercial sales. I can't quantify that for you, but I do believe it's gonna be a positive at least for our sales growth.
Thanks for that, Boris. I'll get back in queue.
Thank you, Joe.
Thank you. Our next question today comes from William Reuter from Bank of America. Please go ahead, William. Your line is now open.
Good morning. You mentioned in your prepared remarks that growth is gonna continue to come from acquisitions. What does the pipeline look like at this point? Where are valuations? I guess, are you guys ready, given leverage being down, to take on a larger acquisition?
Good morning, Bill, and thanks for the question. The pipeline is still strong. There's still a lot of opportunities. Valuations are fairly high at this moment, you know, in our types of markets, consistent with what you're seeing across the board. Our net debt-to-EBITDA ratio was down to 3.8 at the end of Q3, so it's improving. We would still like it to continue to improve before we are ready to do anything big. We previously said that our target range is 2-2.5. That is still the case. We will continue to delever both this year and next.
You know, the more we delever, the more of an opportunity for us to do something big. You know, our strategy is not changing. We think acquisitions are important component of our growth strategy, but we wanna make sure that we are managing it prudently and don't overleverage our balance sheet.
Very helpful commentary. Thanks.
Thanks, Bill.
Thank you. Our next question today comes from Hamed Khorsand from BWS Financial. Please go ahead, Hamed. Your line is now open.
Good morning. I just wanna ask you know, if you're carrying more inventory planned to do so, you know, what kind of drag does this have on free cash flow abilities for next year? Or are you expecting just demand to be so strong that you need that extra inventory?
You know, obviously one of the things that's driving up inventory is both the unpredictability of the supply chain and also just the commodity cost increases that we've been seeing. You're correct in pointing out that, you know, as a statement, when inventory goes up, it's a drag on free cash flow. With that obviously comes the fact that you increase your payables for the same inflation, so you get a partial offset for that. You know, from a free cash flow perspective, part of what we've been doing this year is also working on receivables and payables. That's effectively gonna allow us to still achieve our free cash flow target for the year, together with our EBITDA, which is, you know, remaining very strong.
From a tax perspective, although our tax rate went up, our cash taxes are actually coming in lower than we originally forecast for the year, as is our CapEx. There's several puts and takes, but overall, we're still on track to deliver our $135 free cash flow for the year.
Enough inventory going into 2022?
Yeah. We've got, in my view, a lot of inventory. If we see supply chains become more reliable, that's an opportunity in 2022. We're gonna go into 2022 with a lot of inventory compared to last year.
Okay. Thank you.
Thanks, Hamed.
Our next question today comes from Kevin Steinke from Barrington Research. Please go ahead. Your line is now open.
Good morning. Was wondering if you could touch on your plans for the international rollout or further rollout of PowerA's products as you move into 2022, and are those plans impacted at all by the lack of console availability?
Good morning, Kevin. Thanks for the question. The plans for incremental expansion international are really focused on Asia. We don't have a significant presence or kind of legacy presence with PowerA in Asia, and we have feet on the ground with ACCO. If you look at countries like India, Japan, China, we think there are opportunities there with PowerA in the second half of 2022. We're in the middle of that planning. To your second part of your question, we certainly hope and expect that by the second half of 2022, there'll be much better product availability of consoles not to impact our incremental rollout. Obviously, if we get more information to the contrary, we will scale our launches.
Right now, we're planning. We think it's a terrific opportunity, given that really half of the gaming world is in Asia, and we have very little participation there. We think it's a terrific opportunity for incremental growth for us.
Okay, great. Thank you for taking the question.
Thanks, Kevin.
Thank you. Our next question today is a follow-up from Brad Thomas from KeyBanc Capital Markets. Please go ahead, Brad. Your line is now open.
Great, thanks. Boris and Neal, I was hoping you could talk a little bit more about CapEx. I think you lowered that to, Neal, you said a little under $25 million this year. I believe the plan had originally been $30 million. You know, that's still coming in pretty lean for what you guys historically had spent. I think of the business as being bigger now with PowerA. I was just wondering if you could talk a little bit more about what the needs of the business probably are on a normal annual basis for CapEx and some of the priorities there.
Yeah, Brad. You know, one of the nice things about PowerA is we were able to leverage all the core systems that we'd spent a lot of money putting in. PowerA fundamentally, apart from just the take-ons cost of doing it this year, which is part of our CapEx for this year, doesn't add to our CapEx burden going forward. What does drive CapEx for us fundamentally is two things. It's basically new product rollouts together with a certain level of productivity replacement for machinery, and IT. IT is really driven by ERP transitions that we have to make. The next couple of ERP projects that we're working on are smaller ones. We had a significantly higher CapEx associated with transitioning the U.S.-Canadian business, which we spent in preceding years.
On a go-forward basis, we're pretty comfortable that CapEx will be around $30 million.
Great. Really helpful. That's it for me. Thanks so much.
Thanks, Brad.
Thank you. Just as a reminder, if you would like to ask a question, you can do so now by pressing star followed by the number one on your telephone keypad. We currently have no further questions, so I'll hand the call back to Boris Elisman for any closing remarks.
Thank you, Emma, and thank you everyone for your interest in ACCO Brands. We continue to see a steady recovery from the impacts of COVID-19 with solid increases in many of our product lines and expect that to continue in the fourth quarter, which is our seasonally strongest quarter. We expect to generate a significant amount of free cash flow, and we'll use it to reduce our debt. We remain confident about our long-term future as we continue to position the company to be more consumer product oriented with higher growth and strong return for our shareholders. Thank you, and we'll talk to you next time.
This concludes today's call. You may now disconnect your lines.