As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Lara Mahoney, Vice President of Corporate Communications and Investor Relations. You may begin.
Thank you, Norma. I'm here with Mike Hilton, our President and CEO, and Greg Saxton, Executive Vice President and CFO. We welcome you to our conference call today, Tuesday, 21st August 2018, to report Nordson's fiscal year 2018 third quarter results and our fiscal year 2018 fourth quarter outlook. Our conference call is being broadcast live on our webpage at nordson.com/investors and will be available there for 14 days. There will be a telephone replay of our conference call available until 4th September 2018, which can be accessed by dialing 404-537-3406. You will need to reference ID number 9285137. During this conference call, forward-looking statements may be made regarding our future performance based on Nordson's current expectations.
These statements may involve a number of risks, uncertainties, and other factors, as discussed in the company's filings with the Securities and Exchange Commission that could cause actual results to differ. After our remarks on the quarter, we will be happy to take your questions. With that, I'll turn the call over to Mike.
Thank you, Lara, and good morning, everyone. Thank you for joining Nordson's 2018 third quarter conference call. Nordson delivered solid results despite challenging comparisons to our prior year's third quarter, where total company sales increased 20%, inclusive of 11% organic sales growth. Strong organic growth during the quarter within two of our segments was offset by challenging comparison of the advanced technology segment. Our prior year organic growth was 18%. Our commitment to delivering the best technology solutions while employing continuous improvement initiatives drove bottom-line performance, generating operating margin of 23%. Free cash flow before dividends was $118 million, which reflects strong cash conversion of 124% of net income. Our base business is strong, and we remain focused on bringing value to our customers and the diverse end markets that we serve.
Looking ahead to the fourth quarter, our guidance reflects strength in adhesives and medical product lines, offset primarily by lower demand for advanced technology dispense product lines that serve the electronics end markets and automotive cold material product lines. For the full year, we are on pace to deliver another consecutive year of organic sales growth, which is a reflection of the stability of the end markets we serve and our ability to drive initiatives that lead to organic volume growth. I'll speak more about our outlook in a few moments, but first, I'll turn the call over to Greg to provide a more detailed perspective on the third quarter, as well as our guidance for the fourth quarter and the full year.
Thank you, Mike, and good morning to everyone. I'll first provide some comments on our third quarter results before moving on to our outlook for the fourth quarter of fiscal 2018. Third quarter sales decreased 1% from the prior year's third quarter, inclusive of a decrease of approximately 3% in organic volume, 1% growth related to the first year effect of acquisitions, and a 1% growth related to the favorable effects of currency translation as compared to the prior year's third quarter. Organic sales volume was in line with our guidance as we expected moderation against last year's results, where all segments demonstrated strong organic sales growth. Within the Adhesive Dispensing segment, organic volume increased 3% on top of 6% organic growth in last year's third quarter. We are pleased with the pace of the end market demand across all product lines.
Within the Advanced Technology Solutions segment, organic volume was down 11% as compared to the prior year's third quarter organic growth of 18%. With the exception of those product lines facing the most challenging comparisons to the prior year, namely dispense and surface treatment product lines serving electronics end markets, demand was robust during the quarter for Test & Inspection and fluid management product lines, including medical components. Within the Industrial Coating Systems segment, powder coating and container coating product line drove this quarter's organic sales growth of 6% compared to the prior year. Moving down the income statement, gross margin for the total company was 55% in the quarter. Operating profit was $136 million, with reported operating margin of 23% in the current quarter.
As discussed in previous earnings releases, we have been incurring incremental costs associated with the consolidation of certain adhesive facilities. The impact of this effort is approximately $7 million year to date. Specific to the third quarter, incremental costs were approximately $2 million. In the fourth quarter, we're estimating the incremental costs will be about $1 million. On a segment basis, Adhesive Dispensing delivered strong operating margin of 28% in the quarter, or 29% to exclude one-time restructuring charges of approximately $1 million related to the facility consolidation effort. Within the Advanced Technology Solutions segment, reported operating margin was 25% in the third quarter. The Industrial Coating Systems segment reported operating margin was 22%, which is up 160 basis points compared to the prior year, primarily related to improved sales mix and our deployment of tools from the Nordson Business System.
On a total company basis, net income for the quarter was $95 million, and GAAP diluted earnings were $1.61 per share. EPS was reduced by $0.02 per diluted share from the $1 million nonrecurring restructuring charge mentioned previously. EPS benefited by approximately $2 million, or $0.03 per diluted share from discrete tax benefits. A reconciliation of GAAP earnings per share to non-GAAP adjusted earnings per share is included in the financial exhibits of our press release. We delivered strong third quarter EBITDA of $163 million, or 28% of sales. From a balance sheet perspective, net debt to trailing 12 months EBITDA was 2x at the end of the third quarter as we have successfully delevered from the Vention acquisition.
Our press release includes financial exhibits reconciling net income to free cash flow before dividends and adjusted free cash flow before dividends, as well as EBITDA and adjusted EBITDA. I'll now turn to the outlook for the fourth quarter of fiscal 2018. We're forecasting sales to be in the range of flat to down 4% as compared to the fourth quarter a year ago. This outlook includes organic volume to be in the range of up 1% to down 3%, 1% growth from the first year effect of acquisitions, and an unfavorable currency translation effect of 2% based on the current exchange rate environment as compared to the prior year.
Our guidance reflects strength in adhesive and medical product lines, offset primarily by lower demand against very challenging comparisons for advanced technology dispense product lines, serving electronics end markets, as well as automotive cold material product lines within the industrial coating segment. At the midpoint of this outlook, we expect fourth quarter gross margin to be about 54% and operating margin to be approximately 22%.
We're estimating fourth quarter interest expense of about $8 million and depreciation and amortization expense of about $27 million, resulting in fourth quarter forecasted GAAP diluted earnings in the range of $1.38-$1.54 per diluted share. We expect EBITDA to be in the range of $143 million-$155 million.
Consistent with our comments in the February earnings call, our estimated effective tax rate for the fourth quarter and full year, based on current tax laws and our jurisdictional mix of income, is approximately 25%. With that, I'll turn the call back over to you, Mike.
Thank you, Greg. Again, I'd like to express my appreciation to our outstanding global team. We knew we were facing challenging comparisons this year, and the team continues to deliver growth. I'm particularly pleased with the growth we've generated in our medical product lines, which has been a primary area of focus for our corporate development team, helping to drive top line growth and offset the cyclicality of the electronic systems product line within our advanced technology segment. For the full fiscal year of 2018, at the midpoint of our guidance, we expect to generate total company organic sales growth of about 2%. This is growth on top of 8% organic growth in fiscal 2017 and 7% organic growth in fiscal 2016.
Our ability to deliver organic growth again this year highlights the attractiveness of the end markets we serve, our ability to capture growth initiatives, and our ability to continue to meet our customers' expectations. We also remain focused on delivering value to our shareholders. Earlier this month, we announced a dividend increase of 17%.
This marks the 55th consecutive year of annual dividend increases, ranking us 14th among publicly traded companies for the longest running record of annual dividend increases. We take pride in returning a portion of our cash flow to our shareholders, and we appreciate your continued support. Complementing our dividend increase, our other capital deployment objectives remain consistent. We'll continue to prioritize acquisition opportunities in our targeted markets that will help drive our strategic vision for long-term growth.
We're focused on finishing strong with another good year of organic sales growth, enhancing bottom line results through continuous improvements using the Nordson Business System, and providing superior service and technology to our customers. With that, we'll pause now and take your questions.
Thank you. Ladies and gentlemen, at this time, if you have a question, please press star, then one on your touch-tone phone. If your question has been answered or you would like to remove yourself from the queue, you may press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. Our first question comes from Christopher Glynn of Oppenheimer. Your line is open.
Hey, good morning.
Good morning.
Just wondering, at ATS, as you have the period of the lower mobile demand, as that plays out, how would you describe the pipeline of your field testing activity across various applications within those markets as informing, you know, your expectations for waves of future innovation to drive demand for you guys?
At a high level, I think as we talked about in the beginning of the year, we said this is likely to be a more challenging year, particularly in the mobile segment, and that's sort of the way it played out with modest volume growth and not a lot of innovation.
That's kind of the way it played out. If I look at the various segments that we're involved with, I think the things that will drive mobile in the future will be the move to 5G that has some impacts on what goes into mobile devices, particularly phones. There's some other areas around RFI shielding and so forth, that we see as opportunities going forward in addition to any other innovation that our customers would put into the phones.
Yeah, we continue to see strong growth in the auto electronic side of things as our customers are putting more cameras, more sensors into the cars. Ultimately, we think long term, as you move closer to autonomous driving, there's gonna be more input into the cars, and that'll play well for us. Then, as we mentioned, a couple of times here over the last year, we're doing more on the tail end of the semiconductor side with both dispense and inspection, and we think that'll continue to grow over time. We knew this coming into the year was gonna be a challenging year. If you look at our guidance through the fourth quarter, you know, we're likely to be flat to modestly down in that electronics portion of the segment.
Our diversification efforts have helped us mitigate a pretty significant decline in the dispense business. We're not probably going to be quite there, but it's helping to do that. Obviously, the other parts of that segment, the medical business in particular, is growing very nicely and meeting our expectations there.
Okay. On the geographies, could you help us understand the magnitude of the Japan decline in the quarter versus, you know, overall Asia PAC or Asia PAC ex-Japan, you know, much more moderate softness. What differentiates Japan in terms of the higher volatility there?
Yeah, I think that's really related again to the electronics side of the business. If you think about a lot of final assembly going together in China, but a lot of component manufacturing being outside China, Japan is one of the key areas where you know you see a lot of component manufacturing, and that's really related to the component manufacturing going into the phone line.
Great. Thanks for that.
Thank you. Our next question comes from Charley Brady of SunTrust Robinson Humphrey. Your line is open.
Yeah. Hi, good morning, guys. Charley Brady. Hey, Mike-
Morning.
Hey, Mike. More thoughts on the Nordson MEDICAL business. You just touched on a little bit about the growth rate you're seeing there. It sounds like that business positioning today relative to where it's been over the past couple of years, and some of it is due to acquisitions, but it sounds like the growth path of that business has picked up a pretty decent amount. The amount of innovation coming out of that has picked up. Can you just talk about kind of the efforts you guys have made to really kind of more focus on that business in terms of organic development, not just the acquisition stuff you guys have done?
Yeah. I think that's a good point, Charlie. There's a lot of new products that are coming out of our medical business, and I think one of the things that's helped with the acquisition we made last year with the Vention business and the restructuring we've done along the Vention model. There's a sort of design and development pipeline on the front end that really gets us in early with key customers, not only the large customers, but some of the emerging innovators. What that allows us to do is innovate our systems and our components around, you know, their desires of where things are heading. A big focus is around minimally invasive procedures.
When you think about what the fastest-growing part of the medical device segment is, it is around minimally invasive procedures, and that's heart and lung and brain and some spinal fluid and other vascular areas. Our design and development capabilities and our components fit nicely into those end markets. What we have now is a more complete set of offerings that allows us to participate in more opportunities. We have a strong pipeline there, and we're introducing a lot of products to support the growth there, and we're excited about what we see.
Yeah, a couple of things. Just switching gears here on the, you know, the typical question here on industrial calls, price cost that you guys are seeing, raw material inflation and pricing you guys are put through. Can you just talk a little bit about what you're experiencing in terms of that?
Yeah. There are some raw material increases that, you know, things like steel and aluminum that we see. Our sourcing team has done a nice job of mitigating the impact there, and we've also been able to move some pricing to, I'd say, largely to this point, offset the impacts that we've seen. But you know, there is some cost push there that's atypical that I think we've been able to offset.
Thanks.
Thank you. Our next question comes from Matt Summerville of D.A. Davidson & Co. Your line is open.
Thanks. Morning.
Morning, Matt.
Can you sort of do a walkthrough in terms of what you saw in the quarter across, you know, the four pieces of the adhesive business, talking about Rigid Packaging, polymer, Non-woven, and Product Assembly, and I guess looking out, you know, at least into the fourth quarter, even into early next year, what your overall outlook is for those businesses?
If you look in the third quarter, I'd say in our core adhesives business, it was pretty solid. Stronger packaging and Product Assembly, a little soft in Nonwovens. But that you can see quarter-to-quarter movement there based on big projects, so I don't read anything into that. We had pretty strong comp the prior year, about 6%. I'd say in our plastic product lines, pretty solid performance in the quarter across most product lines within our plastics business. A bulging and strong backlog in that particular area, to the point that we're seeing some lead times extend a little bit, not only for us, but some others in the industry.
That's encouraging to see the backlog there build across the plastic components piece of things.
Just as a follow-up, while I recognize you guys, again, sort of the short cycle nature of the business, you don't really guide beyond the next quarter. Having said that, you know, to your point earlier, Mike, you know, given some of these comparisons you're facing, specifically the 50%+ comps you're facing in advanced tech in the fiscal first quarter of 2019, is there any comment you might make as to whether or not you feel the Street at this point is effectively handicapping or capturing that comp?
Yeah. I mean, obviously, the comp is out there, and so, I think most folks recognize that. I can't really comment on whether everybody is looking at that, but I'd say if we step back and this is where quarter-to-quarter kind of movements can maybe give an improper indication of how the business is doing fundamentally. If we step back and look year-over-year, this is, as I said earlier, for the electronics business, this is a challenging year, but we're gonna be close to flat, offsetting a pretty significant drop in mobile dispense with the efforts that we've had to diversify both from a customer and an application standpoint, and the strength in the other parts of our electronics business.
I think the continued growth in medical and general industries activities are gonna more than offset what we've seen there. I think it's pretty good performance here, but you can see these swings quarter to quarter, because we can't control when our customers are gonna place orders. What we can control is how we respond to those and take advantage of it. I think if you look at sort of annually and over a cycle, you're gonna see this business continuing to grow. In the short term, there's more volatility, and we're trying to mitigate that with our diversification efforts.
Thanks, Mike. I'll get back to you.
Thank you. Our next question comes from Chris Dankert of Longbow Research. Your line is open.
Good morning. This is [Carl Shem] for Chris.
Morning.
Hello.
Good morning.
Just kind of on the facility consolidation, do you have any updates on kind of the timing and the expected benefits there?
Yeah. We're looking at by the end of the calendar year to be through the consolidation effort. You know, the primary effort is in the U.S., although we have some effort in Germany as well. We should be through both of those by the end of the calendar year. I think as Greg mentioned earlier, he's highlighted what the additional cost that we've seen this year as a result of that consolidation. We'd expect that to go away next year. In the long run, we'd expect to see some more efficiencies come out of the new facilities as well. Right now, we're still in the middle of the final transfers and ramping up the new facilities. We're not ready to project efficiency improvements beyond that at this point.
Okay. Great. Thanks. Any update on, like, the tiered product offering, and growth in ATS there?
Yeah. In adhesives, yeah, we've seen, despite my former comment here, some nice growth in the lowest tier of the Nonwovens business. As we've talked about that before, we're into a group of customers we haven't captured before. I think both from an end customer standpoint and an OEM standpoint, we're seeing nice growth there beyond what we had expected for the year. That's very encouraging 'cause in the end, they'll move up the line. I think that's good. I'd also say in adhesives, we've added to our systems additional measuring capabilities in our packaging business, which our customers find very helpful.
The material suppliers also find very helpful in demonstrating the benefits not only of our equipment but of their materials. We're working closely with them. I think that's encouraging as well.
Great. Thank you.
Thank you. Again, ladies and gentlemen, to ask a question, please press star then one on your touch-tone phone. Our next question comes from Matthew Trusz of Gabelli & Company. Your line is open.
Good morning. Thank you for taking my question.
Yeah, good morning.
Are you seeing tariffs or trade rhetoric more broadly impacting your customers in a way that's impactful to your business? I guess overall, I'd wonder what is your overall business confidence in macro outlook now, and has that evolved at all over the last three months since we last talked?
Yeah. I would say it's hard to say that we've seen any significant impact on the tariff discussions to date. I would say in general projects are proceeding as the way they would normally proceed. I think the sort of broader discussions about more aggressive tariffs particularly with China and with the U.S. is a little bit more concerning in that it could have some broader impacts. We're encouraged to see there's some discussion going on right now, but it's hard to predict where that's going to head. I'd say our view of the overall macro economy hasn't really changed.
I think in the last quarter, we talked a little bit about the U.S., you know, being stronger than it has been for the last two or three years. However, Japan and Europe are still growing, but at a softer rate than we certainly saw last year. China is hanging in at about the same rate as we saw last year, certainly not improving. The one thing that has changed significantly, and whether that's a function of the tariff discussions or a function of, you know, Federal Reserve policy, is currency has flipped around as we look going into the next quarter from being a tailwind to a headwind. That's probably the one thing at this point looks a little bit different, and it's hard to predict how that's gonna go forward as well.
I'd say sort of the outlook we saw three months ago is pretty similar. I'd say there is some added concern if the tariff piece escalates more.
Okay, thanks. With automotive, how much visibility in that end market do you have, and how do you feel about cold dispensing opportunities as we look forward to next year on lightweighting new platforms or otherwise?
I would say we have a pretty good idea of projects that are planned. I'd say not all those go ahead. If you look at it, we talked about this last time. I think we saw sort of global platform peaks in 2016 and a modest decline last year and more of a decline this year. It's hard to tell exactly what the cycle is gonna be on that. I think obviously the drive to more efficient processes is important. I would say you know one of the areas that we're pursuing in our cold material side of the business is a focus around the electric battery side, both for the automobile side of things, but also for base storage capability.
We've seen, you know, some nice growth, although relatively modest in terms of total revenue this year, but that's an encouraging longer-term opportunity for not only our cold materials, but a number of our businesses. Then in the cold material space, we're also doing some work in the aerospace side. I'd say the whole qualification process there has taken longer than we would have expected, but we see some good opportunities there as the industry looks to do to drive automation to help them out with their backlog of orders and to effectively increase their capacity. Those are two areas that we see as growth opportunities for that part of the business as well.
Great. Thank you for the time.
Thank you. Again, ladies and gentlemen, to ask a question, please press star then one on your touchtone phone. I have a follow-up from Matt Summerville of D.A. Davidson. Your line is open.
Thanks. I'll fire off a couple more. Just with respect to ICS, I mean, all year really, very good incremental margins in that business. Can you talk about, sort of what's driving that? Is that mix related with some of that auto stuff, maybe not as strong as it was in the prior year period? I guess, ultimately, you know, where do you think ICS can go? I mean, can that be a 20% plus margin business for you guys?
Matt, you are correct. Certainly the mix has helped when you look at the mix of different product lines there and, you know, auto tends to have a bigger buy-in component than some of the other systems. With that being off a little bit, the mix has helped. We also have done a lot of good things utilizing the Nordson Business System to drive productivity there. As we said, you know, going back four or five years, we wanted to get that business up to something like 20% margins, and we're getting close, and we still have things to work on there.
I think just given the nature of the business, I don't think it's reasonable to expect that it would be in excess of 20% just because of the scope of what we typically supply and how much is more standard buy-in equipment. I think 20% is still a good goal, and we're getting close to it.
Then similarly to my question on ADS earlier, with respect to Advanced Tech, can you maybe provide a little bit more granularity? I think last quarter you indicated, you know, outside of the mobile space specifically, most of your businesses, if not all, in Advanced Tech were growing in that kind of high single- to low double-digit rate. Can you kind of talk about, you know, was the mobile piece off 50% this quarter and everything's up 10%? Can you just give us a better feel for how those, the various pieces of the segment there are really performing?
Yeah, what I would say, if you look at the total segment, now remember, half of it or more now is not electronics, and that's performing well, both the general industry piece and the medical. The medical piece, as part of the diversification effort, you know, we expect that to be high single digit, double-digit growth going forward, and it's playing out the way we expected. I'd say within the electronics segment, the Test & Inspection business has been very solid this year with nice growth, in part because that serves a more diverse end market. We see in the expense side of the business in particular. The two biggest components of that business are Test & Inspection and dispense. The Test & Inspection will for the year be up nicely.
The dispense is gonna be off significantly, and that really is the mobile-related piece. As I said, overall, we expect that part of the business, the electronics part of the business, it'll be down modestly, but, you know, we feel like we've covered a lot of ground, between the diversification efforts within electronics and then the diversification efforts in that segment outside of electronics.
Then just maybe one quick one for Greg. It looks like corporate expense stepped up quite a bit, or a couple million bucks on a sequential basis. Can you talk about that and I guess what the expectations would be built in for Q4?
Yeah. Matt, there were a couple of one-time items, one-time expense items in the quarter that hit in that corporate G&A number. I wouldn't suggest that that's a new run rate. You know, I'd probably back it down to that $13 million range going forward.
Okay. That's all for me. Thank you.
Thank you. Our next question comes from Walter Liptak of Seaport Global. Your line is open.
Hi. Good morning, guys.
Hey, Wal.
Morning, Wal.
Well, I just wanted to do a couple of follow-ons related to China. In the past, last year, especially, you had talked about some of the Chinese mobile phone makers and some of the new products that had gained traction and grown. There was no discussion of that. You know, I wonder if you could help us understand, you know, how much of the tough comp is related to the Chinese mobile phone makers. You know, is there a pause? You know, it's like the demand, the capacity went in, and now we've got a pause out of China, or is it broader than that?
No, what I would say is two things. If you look at sort of total smartphone growth, it was pretty, it's been pretty modest, like 1%-2% growth for the year, so there's not a big volume driver. That affects all of the customers that supply mobile phones. Two, this is a year with less innovation, so it's gonna be incremental. That's a sort of a typical pattern that we've seen, you know, a strong year of innovation, then a weaker year of innovation. That's kind of what we're seeing here. I'd say on the Chinese mobile side, no different in terms of of how they've approached the things.
Now they've probably gained a little bit of market share here in the short term, but it's not anything that would dramatically drive the needle one way or another.
Okay. You know, so what you're saying that the Chinese mobile manufacturers, that they're still growing because they're coming off of a small base or?
Well, they're not a small base anymore, but they are still growing. I'd say the opportunity is still there for increased levels of automation. Both in terms of the degree of overall automation and in terms of their process approach that they take, it's less sophisticated than the global guys. But I'd say in general, this has been a pretty quiet year for innovation. As we've talked about in the past, as the smartphone penetration got closer to saturation, it's really around change and innovation, and this year has been a weaker year across the board on that.
Okay. Got it. Just to follow on, you know, I appreciate your answer on the tariff question. I wonder, you know, specifically, I'm sure you've run through the $50 billion tariff and the $200 billion tariff. Are your product categories included in either of those tariff discussions?
I would say in the first set of tariffs, you know, very few, very modest. In the second set, we don't really know yet all of the details on the codes, and we don't know what the Chinese response is gonna be. Those are the two unknowns to date. We'll have to wait and see. Obviously, we're trying to understand that as best we can, and we've got a team focused on that. But there's not enough clarity yet to make a comment there. But I'd say when you talk about $200 billion, it gets more concerning.
Okay. Let's say that if, you know, in the second $200 billion that your product going into China for electronics assembly was included, is that, you know, 25% increase, is that big enough to be, you know, a deterrent to demand, or is there any other choices? I don't think there's local supply for the kind of dispensing equipment that you make for electronics.
Yeah. Walter, I'd really not wanna speculate here until we see how that plays out. Obviously, we would, you know, we do have manufacturing capability in Suzhou, and we are doing both Test & Inspection and some of our mid-tier dispense products out of there. But we would pull all the levers we could if there was an impact to us. Like I said, we really are waiting to get a better feel for both the U.S. side and the Chinese side and trying to anticipate, you know, what might happen and how we might mitigate any particular impacts there.
I would just say in general, when you look at that magnitude of a number, it's more concerning than $15 billion or $16 billion.
Okay. Thank you.
Thank you. I have a follow-up from Christopher Glynn of Oppenheimer. Your line is open.
Yeah. Hey, I just wondering if you could remind us what the algorithm is for FX translation as impacts EPS ultimately with when you add in the transactional influences.
Yeah. Chris, this is Greg. You know, if you look historically, the way it kind of models out is, if you look at the percentage change in sales, it's a, you know, a 2-3x that number percentage change in EPS. If currency adds 1% to sales, it might be a +2.5% tailwind to earnings per share change from the prior year.
Thanks. Non-interest, I'm not sure if my numbers are right, but I think you had $13 million in the quarter and said $8 million for the fourth quarter. Can you explain the dynamic there, if I got those numbers correct?
You know, a little bit of a timing issue where we had some cash on the balance sheet that will, you know, post the third quarter year-end, we'll be paying down some debt.
Okay. Thank you.
Thank you. At this time, I'd like to turn the call over to Mr. Michael F. Hilton for closing remarks.
Well, thank you for your interest in our call today, and thank you again to our global team for continuing to serve our customers well.
Ladies and gentlemen, thank you for your participation in today's conference. You may disconnect. Have a wonderful day.