Earnings Call: Q4 2019

Jan 28, 2020

Good morning, ladies and gentlemen, and welcome to the PolyOne Corporation 4th Quarter 2019 Conference Call. My name is Shannon and I will be your operator for today. At this time, all participants are in a listen only mode. We will have a question and answer session at the end of the conference. As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the call over to Joe DeSalvo, Vice President, Treasurer and Investor Relations. Please proceed. Thank you, Shannon. Call may be considered forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements will give current expectations or forecast of future results and are not guarantees of future performance. They're based on management's expectation and involve a number of business risks and uncertainties. Any of which could result in actual results to differ materially from those expressed in or implied by the forward looking statement. Some of these risks of uncertainties can be found in the company's filings Securities And Exchange Commission, as well as in today's press release. During the discussion today, the company used both GAAP and non GAAP financial measures, Please refer to the earnings release posted on the PolyOne website where the company describes the non GAAP measures and provides a reconciliation for the most comparable GAAP financial measures. Unless otherwise stated, operating results referenced during today's call will be comparing the fourth quarter of 2019 to fourth quarter of 2018. Or the full fiscal year of 2019 to the full fiscal year of 2018. Joining me today on the call is our Chairman, President and Chief Executive Officer, Bob Patterson, and Executive Vice President and Chief Financial Officer, Brad Richardson. Now, I will turn the call over to Bob. Well, thanks, Joe, and good morning, everyone. I am pleased to report that for the 4th quarter, we delivered adjusted EPS of $0.34. It's a 42% increase over the prior year fourth quarter, and $0.04 better than we expected when we provided our updated outlook in December. Much of the upside was driven by our composites platform. However, Europe Color And Asia Engineered Materials also did better than expected. Our investments in composite and other sustainable solutions have been a highlight for us this year. When combined with cost reduction initiatives we took early on, We have been able to offset a weak demand environment in a number of end markets or regions. Specialty Engineered Materials finished the year strong growing organic operating income 30% in the 4th quarter. This was driven by top line expansion from new business gains and composites wearing cable and healthcare applications. Back on a full year basis, our Composite Technologies grew organic revenue 11% as sales in healthcare and wire and cable applications also grew 14% 16%, respectively, over this same time. It's pretty impressive when you consider that SEM Europe's automotive related sales were down 12% for the year. These same end market dynamics negatively impacted our Color segment as sales and operating income from Color Europe were down 7% 13%, respectively, for the year. Despite these results, there were some real bright spots in color demand for sustainable solutions gains momentum. Our barrier technologies for food and beverage packaging, Not only preserve content, but they are also improving recyclability. They reduced material requirements and energy consumption consumption in the manufacturing process as well. These positive attributes deliver on our customer's sustainability goals. And in doing so, this helps to preserve our planet's natural resources. It's a win for customers, our planet, and for PolyOne. And that's why we have been investing in our sustainable solutions portfolio for several years now. And overall, that portfolio grew again this year. And in fact, over the last three years, sales from sustainable solutions has expanded at a compound annual growth rate of 8%. And lastly, let me highlight our distribution business, which increased operating income to a new record of $75,000,000 for the full year. Return on invested capital for this segment is over 35%. The improvement over the prior year is really a story of mix and margin improvement As Healthcare now makes up about 30% of this segment sales. And we also benefited from freight surcharges, which were implemented late in 2018. In some respects, 2019 was a challenging year. As automotive sales in Europe and Asia were down 6% and 27%, respectively. Further, we believe tariffs and related trade issues between U. S. And China impacted demand dynamics. The reality is overall macro conditions haven't changed much since the beginning of 2019, which is why I'm particularly proud of how we have differentiated our performance and demonstrated our ability to grow in this environment. Our investment in commercial resources over the last 4 years has been a difference maker. And as you know, we have increased sales, marketing and technology associates by 31% since 2014. As a result, we are providing our customers with exemplary service and quality and certainly doing so with a better mix of specialty products such as composites. Overall, we delivered adjusted EPS growth from continuing operations of 12% to $1.69 for the full year. We benefited from the previously described growth drivers, but also lower interest expense and a lower share count. We're very pleased with this performance, but even more excited about our future. In the second half of this year, we divested our performance products and solutions segment and announced the transaction to acquire Clariant's Masterbatches business. In doing so, we have taken 2 truly transformational steps to accelerate specialty growth like never before in our company's history. I'll have more to say about that following Brad's additional remarks on the quarter and the year. Well, thank you, Bob, and good morning, everyone. Let me first start with our GAAP results. In the 4th quarter, we reported GAAP earnings per share from continuing operations of of $19,900,000 compared to $20,600,000 in the prior year. 2019 special items are primarily related to additional provisions for earn out payments associated with the Fiber Line And Plastics acquisitions. As the business's performance has been exceptional, exceeding our original expectations. As Bob mentioned, adjusted EPS for the quarter was $0.34, 42% higher than the prior year fourth quarter. This growth in adjusted EPS was lower interest expense and a lower share count. Contributions from Fiber Line, our growing composites portfolio and barrier additives continue to perform and differentiate us. And as Bob said, we are also benefiting from our earlier effort to reduce cost and improve pricing and mix. From a regional standpoint, organic sales in Europe were down 8%, primarily due to weak demand in automotive applications and unfavorable foreign currencies. Foreign currencies negatively impacted the region's overall sales by 3%. Agent sales were down 2% with weaker foreign currencies impacting slight top line decline improved mix from wins and sustainable solutions led to a 30% growth in operating income. For the fourth quarter and a record operating income for the full year. In reviewing our segments for the fourth quarter, SEM expanded revenue and operating income 18% 60% respectively. Organically, operating income increased 32% on flat sales, driven by improved mix from wins in healthcare applications, and composite solutions. Strong performance from composites and North America wire and cable sales along with mix improvement offset unfavorable FX and demand weakness in Europe and Asia. And healthcare mix for SCM improved throughout the year, where end market sales were up 14%. Examples of wins and applications that are driving this steady growth each quarter included medical devices like next generation glucose monitors, formulations for new catheter extrusions, performance tubing required for the effective delivery of liquids and component and seals on mass used for continuous positive airway pressure therapy. Made possible by our VersaFlex thermoplastic elastomers. We are being chosen by customers because of our material science expertise in medical grade solutions and FDA compliant polymers. Our value added services aid our customers in the earliest stages of their product design and testing. Or more than just a material supplier, we are a collaborative partner in their product development process. Looking at our Color segment, revenue and operating income were down 6% 9% respectively for the 4th quarter. Weaker foreign currencies impacted both sales and operating income by a percent. From an end market perspective, growth in sustainable solutions such as bear additives was more than offset by weakness in transportation applications. Sustainable solutions continue to be a growth story, particularly within the Color business. Similar to SEM, Healthcare sales were also up in color, growing 6% for the year. And just like in food and beverage preservation, additives can play a crucial role to enable the desired performance of products in this industry. For example, when certain pharma contents are UV sensitive and can degrade, It requires packaging with additives that protect the quality and integrity of the precious content inside. Our added as portfolio offers that and more. As Bob mentioned, the distribution team delivered a record year of operating income growing expansion from improved mix and pricing. In addition to healthcare, recent mix improvement is attributable to gains in outdoor high performance, which now make up 7% of our PoD segment revenues. For the full year, unit sales were up 14% in this growing end market through a combination of new wins and expanding with existing large customers, particularly in the recreation and off road vehicle applications. I'd like to also add to what Bob said about POD's presence in healthcare. In 2013, About 20% of the segment revenues were from Healthcare. Today, it's nearly 30%. Healthcare is a growing point of differentiation for our distribution business and it's contributing to our company's ongoing movement toward higher margin less cyclical end markets, regardless of the segment. Lastly, I want to comment on our ending balance sheet position. We finished the year with $864,000,000 of cash, which includes the proceeds from the sale of PP and S. There is a $155,000,000 tax liability associated with the gain on the sale that will be paid in the second quarter of 2020. We are in a great position to use this liquidity That concludes our segment and financial review. Bob will now provide some closing comments. Well, thanks, Brad. I'm certainly proud of our team's accomplishments this year, portfolio transformation and what lies ahead. With the divestiture of PP and S pro form a for the announced Clearance transaction, Over 85% of our EBITDA will be generated from specialty applications, and that's up from just 7% when we began our specialty transformation journey a little over 10 years ago. The new polyone portfolio will have significantly reduced exposure to cyclical end markets like North America Housing And Transportation, more than half of our sales will now come from packaging, consumer and healthcare. Geographically, we will be much more global. This clearly expands our geographic presence in higher growth regions such as India, Southeast Asia and Brazil, as well as in established markets such as Europe. And the latter should not be overlooked. Entrepreneurs are often behind breakthroughs in technology. We all know this, but established markets and OEMs will also be driving forces behind sustainable solution innovation. Such solutions will of course be deployed around the world, and I believe that this is one of the largest opportunities in front of us. Our focus Therefore end, we define our 4 pillars of people, products, planet and performance. This comprehensive report not only details how we are investing in each, but highlights how important culture has been for us in transforming the company. As many of you know, in 2018 we earned our first great place to work certification. And our recent employee engagement survey results demonstrate further improvement in how our associates feel about working for PolyOne. It's a huge source of pride for us and it is a competitive differentiator. A recently announced transaction to acquire Clariant Masterbatches certainly garnered the preponderance of investor attention recently as it should. But I'd like to conclude my remarks today by reminding our investors of our growing presence in composites. 5 years ago, we began investing in this technology through a series of bolt on acquisitions. Using our investor growth philosophy, we added much needed commercial resources to help drive growth. And in 2019, we had our best year ever in the composites platform. And did you ever think that you would be talking about PolyOne and 5G? With the recent acquisition of Fiber Line, we now provide an exciting suite solutions for the fiber optic market, a market that is expected to grow over 10% annually over the next several years. With respect to the Clarion transaction, we are conservatively financing it so that we continue to add on to our composites platform. With additional bolt ons. And our goal is that 5 years from now, we will be talking about composites as a driving force behind specialty engineered materials, if it's not its own segment. Our near term focus now is on starting 2020 as strong as possible. As we look back on 2019, it was a choppy year in many regards, but we did grow the bottom line by double digits and we expect to do the same in 2020, excluding any impact from the Clarion transaction or related financing. Some of you know that PolyOne turns 20 in 2020. Internally, with our incredible team of associates, we're using that as a rally cry. To serve our customers with excellence, to deliver on We have purpose. We have momentum and we are well on our way to creating a world class sustainable organization. That concludes our prepared comments for today's call. And we will now Our first question comes from Frank Mitsch with Fermium Research. Your line is open. Thank you. And a nice end to the year, Bob, and a happy belated birthday. Thank you very much. A lot of celebrating to do, not just for yourself, but also with PolyOne. Hey, listen, you outlined a couple of the areas as to why you were able to post $0.04 better from your December 19th guidance. And I was curious if you had any thoughts was any or concerns, was any data pull forward into 2019? And how is, how are you seeing the first quarter start out since it appears that you ended the 4th quarter pretty strong? Yes. I don't perceive or believe that any of it was a pull forward is, you know, in our space, sometimes December can be a little bit of a wild card with respect to customer buying patterns and oftentimes that's directly offset by what takes place in January. So for us going into December, we had a pretty conservative view on how it would play out. And fortunately, it came in a little bit better. But don't believe that we were pulling anything in from our customers did anyway from January to December. With respect to how things have started out to the year, I'd say it's probably a pretty decent continuation of what we saw in the fourth quarter. Reality is there isn't a whole lot of macroeconomic a tailwind here. So as we look at the first quarter, we do see the opportunity to expand EPS by double digits, but acknowledged a lot of that's going to come from price and mix, and a little bit lower interest expense. Thank you. And we're now a bit more than a month after the announcement on Clarion. Is there any update that can give us in terms of your discussions with the regulatory agencies or if there's anything else from a change perspective in terms of your outlook on synergies etcetera, with this transaction? No changes with respect to our outlook on synergies or timing related to the capture, of those synergies, our expectation is that regulatory approval will take somewhere between 4 6 months. So we expect to close the transaction sometime in the middle of this year. The filings have all been made with the exception of one which will be done tomorrow. And as I said before, we don't expect any issues with that. So no other comments really to be made at this time with respect to related financing. I think that will be known as we move forward and get closer to deal being done. Thank you so much. Our next question comes from Mike Sison with Wells Fargo. Your line is open. Hey guys, congrats on a nice end of the year. I just want to make sure I understood your outlook for 2020. I think you said that you can do double digit growth on your own, meaning without Clariant or the financing? And if that's so, can you maybe talk about how that flushes out with the segments into 2020? Yes. So, first of all, thanks for asking that question because we wanted to be clear that, the guidance expectation really is an organic one with respect to what we believe we'll be able to do in 2020. Of course, we do have, the intention of raising equity and ultimately issuing debt to accomplish the Clariant transaction. And my comments about double digit EPS growth don't contemplate any of those changes. So just look at what we have today and what we see for next year, we expect to deliver the double digit. So My expectation is, is that should play out, with respect to probably getting we'll get there in the first quarter with respect to 10% or 11% EPS growth. I don't really expect Mike much in the way of, substantial sales expansion this year. I really think it could be somewhere between 1% 3% as we still see some downward effects from Europe and Asia, although they were not as down as much as we thought in the fourth quarter. But are still down. And so largely we're going to get there through a continuation of improved mix and margin improvement. So that's kind of how I see things playing out, for the year as a whole and how we expect to start the first quarter. My sense is that, again, composites and SEM will have the highest level of growth for the year and in the first quarter. I think color will continue to see some challenges coming out of Europe in Q1, which we hope to start to improve in the second quarter. Right. Okay. Great. And then I think you outlined, that you still see $0.85 terms of accretion, including or excluding the step up amortization for the Clariant deal. Can you maybe talk about a little bit what drives that in year 1 in terms of how much will come from integration and maybe sales growth, if any, and how do you think the current business needs to form to get there? Yes. So with respect to, 1st of all, the $0.85 is a pro form a figure as if the acquisition had been done on the 1st day of the year. And with all the synergies fully captured, our expectation is that of the $60,000,000 of synergies we've identified that we will achieve a run rate of 2020 by the end of 1st, a full year of acquisitions. So that means if the deal were to get done in June of this year, we would be there by June of next year. And that is contributing to the EPS expansion to the tune of probably 15 dollars, 16¢ or so. We do see incremental EPS expansion from simply the acquisition of Clariant without synergies, and that's probably $0.04 to $0.08 on a per annum basis. Mike, if you want to think of it that way. And again, we haven't given any guidance with respect to how that plays out this year because we just don't know the timing of the deal. Got it. Thank you. Yes. Thank you. Our next question comes from Mike Harrison with Seaport Global Securities. Your line is open. Hi, good morning. Hi, Mike. I'm wondering if you can maybe talk a little bit about the strengths in composites and wire and cable in EM, I think one of the questions I have is If that stuff is so strong, clearly there are some offsets what's going worse in Engineered Materials than you would have thought? And then maybe the second piece is specifically on fiber line how sustainable can that improvement be? Is that 5G infrastructure build out pretty steady or is it something that's going to have some fits and starts? Yes. So, well, 1st of all, we have benefited this year from the acquisition of Fiber Line. But we have also grown some of space. So both of those are actually doing very well this year. A lot of that in connection with fiber optic build out. Now in our markets like the U. S. And Europe where we have the largest presence, A lot of that build out is actually of legacy technology or infrastructure, 3G and 4G. 5G is really just beginning. Obviously, China is a way ahead of anyone else in that regard, but it's really getting started. So when I look at the growth of Fiber Line and other wire and cable applications, in this last year, just a little bit of that's driven by 5G, the rest of it by the legacy infrastructure build out. So I do view that as various and I view that as something that's going to continue to grow over time really over the next decade as this rolls out. It takes that long for, the infrastructure to get, to reach really critical mass. Now you did ask the second part of that question is, well, what's not going well? And a lot of that has been off set by automotive demand in Europe, French air materials, which is down considerably over the year. So if you look at SCM segment results as a whole, there's certainly a plus with the add of Fiber Line. Organically, the growth of composites and wiring cable, partially offset by automotive demand in Europe. All right. And then in the color business, I wanted to specifically take a look at the packaging piece within that business. Has that generally been solid or is it more mixed, maybe just comment on areas within packaging where you're seeing some strength in some weak right now? Yes. I mean, packaging is actually, if you just want to think across the board, for our major markets, I'd say packaging has actually been fairly stable. We have grown in that end market primarily as a result of the sustainable solutions we've introduced primarily in, light blocking beverage preservative type additives. So for us, the whole packaging is up. That's a question that's getting asked more and more frequently, of course, which is what challenges does sustainability present? As people, if they do try to use less plastic and how does that play itself out? Interestingly, if you look at 2019, rigid plastic consumption is actually up almost 2%. For the year, population growth is maybe up 1.1%. So there is a continued consumption, although I think people are doing so in smarter ways and the sustainability trend is is here to stay. So we view it as a is primarily an upside opportunity for us. All right. Thanks very much. Yep. Our next question comes from Jim Sheehan with SunTrust Robinson Humphrey. Your line is open. Good morning. Could you talk about interest expense in the fourth quarter? Was that did come in a little lower than you expected? And what should we be thinking about for interest expense in 2020? Yes, Jim, I mean, it came in pretty much in line with what we expected. And I would say as you kind of look at the full year, we had $11,900,000. And as Bob mentioned, excluding obviously the impact of the the clearance, the run rate that we were on in the fourth quarter is probably a good run rate for the year. Terrific. And for your double digit 2020 EPS growth outlook, would we be using as the adjusted EPS base in the first quarter of 2019? Yes, that should be, $0.43. Okay. And, And quickly on your color margins, when do you expect to start to see margin expansion year over year? Yes. Look, as I said, I think the first quarter is, potentially in challenging quarter for the Color segment. And so should see improvements starting in the second quarter. Really, what we have seen there is just some level of volume decline associated with really transportation and fiber related demand in Europe and Asia this year. Sustainable solutions are still a good guy from a margin standpoint, but that really what's driven the year over year decline. Our next question comes from Colin Rusch with Oppenheimer. Your line is open. Thanks so much guys. Given the success that you're having with Sustainability Solutions. Can you talk a little bit about your pricing power and how you expect to wield that on a go forward basis? Yes. I mean, look, I think that from a margin standpoint, these are some of our, best performing offerings. So I do think that there is really good pricing power with respect to those solutions. Can't really put it into a relative basis for you, VERT vis a vis, the other things that we have in the portfolio other than to point to, let's say, additives for example, are always a higher margin profile than what we have in some of our traditional or legacy master batch offerings, again, if I'm just sort of focusing on the color side. So it could be that it's, 4% or 5% higher between the two. But look, I do expect that there's competition out there for these products as well. We're not the only one with this as an initiative. Everybody has it as headline. But we really do think we got a great suite of products to help our customers. Okay, great. And then I'm going to combine 2 that you may not have your answer but one, you just, FTC anti trust clearances came through. I'm curious about how that may impact, if that came in a little bit faster than you expected and may are at some of the closing activities that you've got, for the current business acquisition? And then also just if you have any early indications on whether the coronavirus is impacting any of the supply chain in Asia for you guys at this point? Yes. So, I'll take the last one first, if I can. With respect to the coronavirus, obviously, we have are obviously concerned about the safety and welfare of our associates in China and around the world. At this point, we're not aware of any of our associates being impacted It is a Chinese New Year. Our plants are actually shut down presently. There is discussion about potentially or the government potentially extending that shutdown for a longer period of time, that remains to be seen and how that plays out for us. We don't have any facilities in Wuhan directly. But we do have some associates there. So we've taken measures to restrict travel for all of our associates into and out of China. And at this point, really just waiting to see how things develop over the course of the next couple of days and see if there's any other governance mandate, if you will, with respect to when plants can be operational. To the extent that there's an impact from that, we'll have to update our investors when we know more at this point, we haven't assumed there is because we're on Chinese New Year as we expected. So I can't I don't have any more to say about that, Colin. I think the first part of your question was about U. S. Regulatory approval, which we just got early clearance for, that just came out. So that's a good sign. It's one that we did request early termination for. We were happy to get that I think just this morning or last night, whenever that got published. So that's right off the presses. I think it's a good sign that, we're going to get regulatory approval in the other twelve locations where we have filed. One of the reasons why we've said 4 to 6 months really is simply just a matter of the time it can take in certain jurisdictions to go through the process. So We're not expecting any challenges, but do expect that it just could take, more time. So hopefully I'm answering the 3rd questions as well. Yes. That's fine. I just wanted to check and see if there's anything there. Thanks so much guys. Yes. Our next question comes from Ben Kallo with Baird. Your line is open. Hey, good morning guys. How about you, Ben? Hey, so just a little minutiae maybe, but the other income during the quarter, what was that? There's $10,700,000? Other income for the quarter I'm sorry, yes, for the quarter. Yes, it should have been closer to about $1,000,000, on an adjusted basis. Which is a combination of pension expenses below the line as well as some FX related items Okay. Yes, there's $10,000,000, Ben. We have a defined benefit plan. And we've marked that to market in the fourth quarter of every year and we had about a $10,000,000 mark to market gain That's really what's in the other income. And of course, in our adjusted results that we speak to the $0.34, we pulled that out because that's a kind of a one timer. Yes. Got it. And then just another question on the sustainability aspect. Is there a way for you to kind of break out your revenue? Or have you thought about that for sustainable products or just a rough estimate? Because sometimes we get asked by investors focused on that. Thanks. Yes. I'm going to defer that, in solar put together our next IR deck. We're doing some work on that presently to update the numbers for 2019. I'd say a reasonable estimate is probably around $380,000,000 to $400,000,000 in revenue. But admit that we've got to go back through and look at FTC code and guidelines and do the same thing. So We've done some estimates in the past. That's probably a good place to start with. It could end up being a little bit higher, but we just we need to work on finalizing those numbers for 2019, which we'll get in our next investor deck. Great. Sounds good. Thanks guys. Our next question comes from Bob Koort with Goldman Sachs. Your line is open. Good morning. This is Dylan Campbell on for Bob. A question on raw materials, polyethylene and polypropylene prices have come in during recent months and oil down recently. And imagine that's being into a couple of your other raw material baskets. How is the competitive landscape currently? And I guess kind of was the likelihood that you're going to be able to preserve this margin on lower raw material costs? And then I guess what do you have had in terms of raw material trends your 2020 guidance? Yes. So, I do think we have seen some benefit from those trends in the second half of twenty 19, hopefully that continues into the 1st part of 2020. So to this point, I'd say we have hung on to some, but I'm sure not all of that, the competitive dynamic is, candidly getting more challenging with respect to demand conditions, particularly in automotive markets like Europe and Asia. So I think when auto starts to pull back that just puts a lot of competitive pressure and engineered materials for things that are, let's say, nylon based, for example. So, but hopefully in color, we're actually able preserve that under the underlying base resonance for polypropylene and polyethylene. And I think we have seen some of that. With respect to margins being down in color though mostly, again, that's just volume driven with what comments I made about Europe, a few moments ago. Got it. That's helpful. And then I guess in terms of margins, you had pretty strong margin improvement in SEM business. On a year over year basis, I think is comping against the fourth quarter of 2018, where I'd imagine it's fairly low utilization rates. So can you give us a sense of kind of utilization rates in that business as we head into kind of 2020? Or in other words, I can I guess kind of what margin improvement could we see in that business, I guess, in the more typically stronger seasonal quarters outside of the fourth quarter? Right. Well, 1st of all, to one of your points acknowledging that the fourth quarter of 2018 was weak as it's spot on. So clearly, that was a very difficult quarter for us, one of the most challenging we've had in a long time. So potentially got just an easier comp in that regard. I'm sure that utilization blains some of the margin expansion as a result of that. But we're not quoting a specific capacity or utilization rate. Certainly they're up, but it's not anything we've ever really been obsessed about, as you know, not thinking about but thinking more about sales and value. I do expect margins in, FCM to improve in 2020. Which is going to be through a combination of increased sales and deposits, but as well as margin expansion partially, again, driven by, I think, a little bit of a benefit from lower raw material costs. So, probably more to say about that when we get to end of the first quarter. Our next question comes from Lawrence with Jefferies. Your line is open. Hi guys, it's Dan Rizzo on for Laurence. How are you? Hey, Dan. Hey, Dan. Hey, just a quick question. How does Clariant fit into your Sustainability Solutions portfolio? I mean, is there work to be done there or do we kind of meld in seamlessly? I was just wondering how do we think about that? Well, look, I think Clarion fits in very well. They have a larger presence in, packaging than we do, but look at us as being look very similar with respect to how we view that end market and how we're both going to participate in the megatrends that drive it. So I think it's a very good fit culturally. I'll just reiterate what I probably said in the past. In the sense that we're both ACC Responsible Care certified, we'd both take great care of our employees and customers and the planet as well. So, I think it's going to be a really good fit. Now, because we're competitors, right? I don't have perfect line of sight and visibility into product line profitability or detail. So more to come on that once they are part of our organization, but certainly believe their sustainability portfolio should mirror our own. And then you mentioned obviously the weakness in European auto. I might have missed it, but you haven't really talked about North American auto. Is that not as important? And what is it doing? I guess, what we're seeing? Well, it was it didn't impact us as much as Europe and Asia did this year. For our sales into it, it was down a couple of points in 2019 versus 2018. And it probably just hasn't garnered, any attention, Dan, simply because the other 2 were so much bigger. So again, someone earlier asked a question about, composites are growing so much might have been Mike Harrison. If composites are growing so much, what's going on with the rest of EM and the preponderance of that answer really has been Europe auto. So There is some going on there from a North American auto perspective that's down slightly, but it just hasn't hit the radar probably for that reason. All right. Thank you very much. All right. Good. I think we got time for one more question or just one more color on the line. Our last question comes from Rosemary Marbelli with G. Research. Your line is open. Thank you. Good morning, everyone. If I could follow-up on a couple of items in terms of China and the coronavirus. Can you give us a feel for your exposure into that market whether it is directly or via customers who are operating in the region? Well, we do have 8 facilities in China. So we are located there. We have our own employees there, nearly a 1000. So we do have a significant presence in China. We do not have any facilities located in Wuhan, the employees that are there are sales associates, for the most part, And so our exposure is very similar to what you've read about anybody else who is in Shanghai Shenzhen, Sujal, for example, are the biggest places where we have operations. That's really what I could tell you about our size and scale. When we do business in China, typically, it's for customers who are located there, although they may be exporting their products. Ultimately outside the U. S. Can you share with us the revenues you are generating in the region? Yes. I mean, China for polyone legacy is about 10% of sales. Okay. Thanks. And just quickly, any expectations of potentially having to divest small pieces of Masterbat is in one region or another with, regarding Carrying? No, we don't have any expectations, we there have been some questions about mix and, the percentage of their sales that are from Blacks and whites would acknowledge that that's higher than our own, but I also think historically Clariant done a better job with those product lines and in those end markets that they serve. So my starting premise is that it's a positive But obviously, once the deal is complete and we looked at our overall profitability and where we do business, things could change. But I'm not looking at it right now as if there is something that needs to be divested. Okay. Thank you very much. Okay. Thank you. Thanks again for everybody who is joining us on the call. We look forward to giving everyone an update following our first quarter results. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.