Ladies and gentlemen, thank you for standing by, and welcome to the Universal Stainless & Alloy Products Second Quarter 2020 Conference Call and Webcast. [Operator Instructions]. I would now like to hand the conference over to your speaker today, June Filingeri. Thank you. Please go ahead, ma'am..

Thank you, Christel. Good morning. This is June Filingeri of Comm-Partners, and I also would like to welcome you to the Universal Stainless conference call and webcast. We're here to discuss the company's second quarter 2020 results reported this morning.

With us from management are Denny Oates, Chairman, President and Chief Executive Officer; Chris Zimmer, Executive Vice President and Chief Commercial Officer; John Arminas, Vice President of Administration and General Counsel; and Chris Scanlon, Vice President, Finance, Chief Financial Officer and Treasurer.

Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will take your questions. Christel will instruct you on procedures at that time. Also please note that in this morning's call, management will make forward-looking statements.

Under Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission. With the formalities complete, I would now like to turn the call over to Denny Oates.

Denny, we are ready to begin..

premium alloys remain our highest priority for targeted growth, and we continue to gain traction with new products and approvals, with recent underlying demand coming primarily from defense applications and specialty applications.

Gross margin in the second quarter of 2020 was 3.7% of sales, down from 8.4% of sales in the first quarter and 12.8% of sales in the second quarter a year ago.

Excluding charges related to reduced production levels that negatively impacted absorption of fixed costs and a loss on the sale of excess scrap, gross margin totaled $2.5 million or 4.8% of sales. The scrap sales generated cash receipts of about $800,000.

We made good headway in reducing SG&A expenses in the second quarter, which were 20% lower than the first quarter and 14% lower than the second quarter of 2019, excluding $600,000 of employee severance expense. Bottom line, the net loss for the second quarter of 2020 was $3.3 million or $0.38 per diluted share.

It was $2.4 million or $0.27 per diluted share adjusted for COVID-19 pandemic-related charges, including gross margin and SG&A items. EBITDA adjusted for share-based compensation and COVID-19 pandemic-related charges totaled $2.9 million. Chris Scanlon will discuss the reductions we achieved in managed working capital and long-term debt in his review.

Suffice it to say that we are focusing on debt reduction and improved cash flow as we manage through the balance of the year, and we expect accelerating positive cash flows over the near term. Looking at commodity prices.

At the end of June, nickel was quoted at $5.76 per pound, an increase of 7% from the end of March when it hit the lowest level since January 2019. In contrast, moly was down 10.3% from the end of March, while vanadium was down 20% to $9.75 per pound. Iron scrap rose modestly.

As a result of these changes, we expect surcharges overall to increase slightly during the third quarter. Taking a closer look at our operations.

We are working to run as efficiently as possible while dealing with the step-down in volumes company-wide, which prevents us from realizing the full benefits of our past initiatives, including the new bar cell in our Dunkirk facility.

At the same time, we are balancing the realities of an even more difficult second half of the year against our longer-term opportunities and growth plans.

Therefore, while we are reducing capital spending in 2020, we are proceeding with our strategic investments in an additional vacuum arc remelt furnace as well as an 18-ton crucible to support premium products growth, although we are moving these projects later into 2021. Let me turn to our end markets, beginning with aerospace.

Our aerospace sales totaled $37.2 million or 71% of sales in the second quarter of 2020 compared with $42.4 million or 73% of sales in the first quarter 2020, which represents a 12% decrease. In the second quarter of 2019, aerospace sales were $49.3 million or 70% of sales.

It's worth a reminder that aerospace demand in the year ago quarter remained robust even as the market was just beginning to contend with the delays in the 737 MAX. Unfortunately, the commercial aerospace market has worsened since our last call with additional delays in the recertification of the Boeing 737 MAX.

Boeing announced this morning that the 737 MAX production forecasts are being reduced to about 31 planes per month by early 2022. Additionally, the 777 programs will go from 3 planes per month to 2 planes per month in 2021, and the 787 will go to 6 planes per month in 2021.

The coronavirus pandemic is continuing to compound the problem with a sharp drop in air travel, having caused financially reeling airlines to cut capacity, retire airplanes and postpone or cancel new aircraft.

The International Air Transport Association announced June year-over-year revenue passenger miles fell 86.5% in total with international travel almost at a standstill at 96.8% decline. Domestic travel was down 67.6%, and freight was down 17.6%.

The impact on the aerospace metal supply chain, as I said earlier, has been to reduce buying and aggressively move inventory lower. Looking at some more specifics. Boeing delivered 10 airplanes in June versus 37 in June a year ago. Additionally, they booked just 1 order of 767 during the quarter.

That brought total deliveries for the first half of 2020 to 70. Boeing's backlog currently stands at 4,552 airplanes. It was approximately 5,000 as of our last call. Their earnings call follows ours this morning, so we should learn more about their backlog and production.

Meanwhile, Airbus delivered 36 aircraft in June but registered no new orders for the month. They reported 196 deliveries and 298 net orders in the first half. Airbus backlog totaled 7,584 aircraft as of June 30. The aftermarket is also under pressure.

Honeywell saw lower commercial demand, with their aftermarket sales declining an estimated 54% year-over-year. They cited the steep decline in flight hours as pressuring the aftermarket. This morning, GE Aviation announced a similar 55% reduction in bookings.

In contrast to the challenges in commercial aerospace, defense aerospace is a much stronger performer, including for us, and it contributed to the strong sequential growth in our premium alloy sales in the second quarter and a 19% increase in sales through our forger market channel.

In their report last week, Lockheed Martin reported 12% year-over-year increase in second quarter sales, including 17% growth in aeronautics segment driven by increased F-35 sales. Lockheed also reported $22 billion of new orders in the second quarter, bringing the backlog to a record $150 billion with over $7 billion of orders booked for the F-35.

We expect solid demand from the defense sector over the next few quarters. Heavy equipment market remained our second-largest market in the second quarter of 2020, reflecting a continuation of the tool steel plate sales recovery we saw in the first quarter.

In total, second quarter heavy equipment sales were $5.6 million or 11% of sales compared with $6.1 million or 11% of sales in the first quarter and $7.2 million or 5% of sales in the second quarter of '19. Our heavy equipment market sales mainly consist of tool steel plate sales, which were 6% lower than the first quarter.

We ended the second quarter with a strong backlog and met our expectations for the quarter. Tool steel plate is mainly used by the automotive industry, especially for tooling and model changeovers.

For context, our tool steel sales were solid, even though automakers idled operations beginning in March due to COVID-19 and now project a 20% to 25% year-over-year production decline. Automakers are also continuing to focus on introducing new models with the reintroduction of the Ford Bronco as a recent example.

Plus we see Tesla building a major new auto plant in Austin to manufacture the Cybertruck pickup and other vehicles. We expect our tool steel sales to be level in the second half of 2020.

The oil and gas end market was our third-largest end market in the second quarter with sales of $3.6 million or 7% of sales compared with $4.4 million or 8.8% of sales in the first quarter of 2020.

The challenging conditions in the oil and gas market in the second quarter caused Halliburton in their recent conference call to describe the global activity collapse as swift, severe and much worse than expected, with U.S. rig counts dropping 50% from the first quarter.

While the rig count is generally expected to bottom out in the third quarter, the consensus calls for a 50% to 60% reduction in spend throughout the oilfield. From our vantage point, we're seeing customers hunker down for a tough rest of the year.

In contrast, general industrial market sales grew $3.1 million or 6% of sales in the second quarter of 2020, representing increases of 28% from the 2020 first quarter and 30% from the second quarter of 2019. Our general industrial category includes sales to the semiconductor, infrastructure and general manufacturing markets.

The semiconductor market has been a major market for us within the general industrial segment, and the overall market has been relatively strong in 2020 after a challenging 2019. We are continuing to focus on the semiconductor market as well as pursuing opportunities in the additional markets within this segment to broaden our future sales potential.

Power generation market sales were $2.1 million or 4% of sales in the second quarter of 2020, down 5% from the first quarter and 34% lower than the second quarter of 2019.

While our sales to the power generation market are generally driven by normal seasonal maintenance activity, the shutdowns due to the coronavirus pandemic have sharply limited maintenance demand. GE Power announced a 41% reduction in bookings in the second quarter this morning.

We have not lost market share, and we expect maintenance to return to more normal levels as our states open. That concludes my review of the business during the second quarter. Let me turn the call over to Chris Scanlon for his financial report.

Chris?.

Thank you, Denny, and good morning, everyone. Let's get started with the income statement. As Denny discussed, second quarter 2020 sales of $52.5 million were down 10.3% or $6 million from the 2020 first quarter and down 26% compared with the 2019 second quarter.

Our general industrial sales improved 27.7% or $700,000 from the 2020 first quarter and were also $700,000 or 30% higher than second quarter 2019. Sales for the balance of our end markets declined sequentially and year-over-year.

Second quarter 2020 gross margin totaled $1.9 million or 3.7% of sales, down from 8.4% of sales in the first quarter 2020 and 12.8% of sales in the 2019 second quarter. In the second quarter, we generated $800,000 of cash receipts from the sale of excess scrap. Our Q2 gross margin was unfavorably impacted by $350,000 related to this sale.

Additionally, our gross margin was negatively impacted by fixed cost absorption direct charges of $200,000 related to reduced plant operating levels. Gross margin as adjusted for these 2 items totaled 4.8%. The $200,000 fixed cost absorption direct charge was a result of reduced second quarter operating levels.

Due to the reduced production levels, there is an amount of our fixed cost that was not absorbed into inventory and taken as a charge in the second quarter. We anticipate these absorption charges to continue in the second half of 2020 on lower activity levels.

Selling, general and administrative costs in the second quarter totaled $5.4 million or 10.3% of sales a decrease of $511,000 compared with the 2020 first quarter and $207,000 lower compared to the 2019 second quarter. As Denny noted, second quarter 2020 selling, general and administrative expenses include severance expense of $620,000.

Our SG&A costs, excluding severance expense, totaled $4.8 million, which represented a nearly 20% decline from our first quarter SG&A expense of $5.9 million. SG&A in each of the third and fourth quarters is expected to be below our adjusted $4.8 million second quarter amount.

SG&A also includes increased property and business insurance-related costs totaling $300,000 as compared to the 2019 second quarter. Specific to the second quarter, our income tax benefit was $939,000, and we expect our full year 2020 effective tax rate to approximate 25%. Net loss in the second quarter was $3.3 million or $0.38 per diluted share.

Second quarter net loss, as adjusted for the loss on the sale of excess scrap, the fixed cost absorption direct charge and severance costs, totals $2.4 million or $0.27 per share. First quarter 2020 net loss totaled $1.4 million or $0.16 per diluted share, and 2019 second quarter net income totaled $2.1 million or $0.24 per diluted share.

Q2 EBITDA, as adjusted for noncash share compensation, the loss on sales of excess scrap, fixed cost absorption direct charge and severance, totaled $2.9 million. The EBITDA and adjusted EBITDA calculations are provided in the tables to the press release.

Second quarter cash flow provided from operations was $7.4 million compared to our first quarter cash flow used in operations of $7.8 million and second quarter 2019 cash flow provided by operations of $2.2 million.

Related to the balance sheet, managed working capital totaled $151.8 million and decreased by $1.7 million compared with the first quarter of 2020. Managed working capital was a source of cash.

As activity declines, managed working capital has been a source of cash, and we expect to see greater cash benefit from working capital for the rest of the year. Within the components of managed working capital, accounts receivable decreased by $3.4 million and inventory decreased by $11.7 million, while accounts payable decreased by $13.4 million.

The decline in inventory is primarily due to Q2 sales levels and reduced production activity as we maintain an inventory level commensurate with our order backlog. The decline in accounts payable was driven by decreased AOD and VIM melt activity and a corresponding decline in production-related spending.

Also contributing to the decline in accounts payable was a reduction in capital expenditure activity. Second quarter 2020 backlog totaled $71.8 million and is down $38.9 million or 35.1% from the 2020 first quarter. Year-over-year, second quarter 2020 backlog decreased $45 million or 38.5% compared to the 2019 second quarter.

Capital expenditures for the second quarter were $3.2 million, $860,000 lower than first quarter 2020 and $660,000 lower than second quarter 2019. Capital expenditures for the first half of 2020 totaled $7.2 million, $2.2 million lower than first half 2019. Capital expenditures are expected to approximate $9 million for full year 2020.

The company's total debt at June 30, 2020, was $72.5 million, a decrease of $3.8 million from the prior quarter.

Company's debt is primarily comprised of our revolving credit facility and term loan, which collectively totaled $47.6 million as of June 30 and our notes, which were issued in connection with the acquisition of our North Jackson facility in 2011. These notes totaled $15 million at June 30.

We continue to include this $15 million in current debt as these notes are due and payable in March 2021. Our long-term debt also includes a $10 million term note pursuant to funds received under the Paycheck Protection Program. As of June 30, 2020, we maintained revolver borrowing availability of $46.6 million.

We believe that our current liquidity position, coupled with the solid creditworthiness of our customer base, provides us the ability to continue to endure future uncertainties.

As I noted earlier, anticipated declines in managed working capital levels are expected to be a source of cash, and we expect to see continued reduction in our debt levels throughout the second half of 2020. I will summarize our Paycheck Protection Program loan next. On April 17, we received $10 million of PPP funds.

These funds were used for eligible employee payroll and utility costs during the 8-week measurement period, which began on April 17 and ended on June 11. Paycheck Protection Program loans can be forgiven based on usage of the funds for eligible payroll and utility expenses.

The PPP forgiveness calculation also includes adjustments related to reductions in full-time employee equivalents and salary and hourly wage reductions. We have complied with the PPP loan requirements and had eligible payroll and utility costs during the 8-week forgiveness period in excess of our $10 million of PPP proceeds.

During the third quarter, we will submit our loan forgiveness application for full forgiveness of the total $10 million loan amount. This concludes the financial update. And Denny, I'll hand the call back to you..

Thanks, Chris. In closing, on our last call, I offered a snapshot of where we saw things at that time. And to summarize, we said our industry was highly stressed, and uncertainty was running high.

Our customers were being conservative in ordering and buying only on a need basis and not on speculation, and we were anticipating headwinds from lower activity levels and higher cost and inefficiencies from ongoing disruptions through the virus. Each of those conditions played out and continues to be the case today.

What has become clearer is that the difficult situation will last through the end of the year and impact our financial performance with a step-down in quarterly sales and operating activity expected for the next 2 quarters. As Chris explained, the disposition of our PPP loan should occur before the end of the year.

I also said last time that to mitigate the challenging conditions and remain in a strong position for the eventual recovery, we would focus on liquidity and on aggressively reducing cost. We made tangible progress on both counts in the second quarter.

Let me reiterate that we are executing a proactive operating strategy, similar in principle to past cyclical downturns, and look forward to the beginning of recovery in early 2021. Let me also say that we have some heavy lifting to do over the next few quarters.

Even so, I remain extremely confident that we have the right plan, a great team of employees, the support of our stakeholders, and we will power through the current situation and position our company for further growth and success in the next upturn. I'm sincerely grateful to everyone for their support. That concludes our formal remarks.

Operator, we'll take questions at this point..

[Operator Instructions]. Your first question comes from the line of Tyler Kenyon with Cowen..

Denny, I wonder if you could just walk us through just some of the sequential gross margin impacts in the quarter. You did call out a few items, but just excluding those pieces, so surcharges, kind of lower production and perhaps some mix impacts.

And is there a good way to think about kind of the progression from here as we move into the second half?.

Okay. Let's talk about the second quarter. You saw we reported gross margin of about 3.7%. And if you look at the detail, some -- there were some adders in expense over the course of the quarter. We had some heavy scrap activity, which was about 1.6% margin. So in other words, we would add about $900,000 negative. That's equivalent to 1.6% margin.

We did write off some inventory, some older inventory. And again, we're seeing a situation where we have inventory which is for sale, it's slow moving. In decent times, customers will take that on a regular basis. In the current environment, they will not.

And as we look at just the time phasing of cash flows, we're in a situation where it makes sense for us to basically write some of this off and scrap it out and defer buying new scrap because that all goes back into our melt shop. We had a loss on the sale of some 316L scrap that we discussed during our prepared comments. That was 0.7%.

The slow moving, by the way, was 1.2 -- was 0.8%. We had an acceleration of fixed cost of $200,000, which is 0.4%. And although I don't have a specific number for you here, there are several percentage points just as to the base level of absorption.

When you cut your operations in a capital-intensive business by the magnitude we did during the second quarter, you're going to have unabsorbed cost that's going to kick out as a volume variance. So you're seeing that embedded in our margins as well. So roughly, if you adjust for that, you get up to the 7.5%.

If you add the unabsorbed fixed cost in the base, you're starting to push 9.5%, 10% margins. As you look at the third and the fourth quarter, we're going to see a fall in sales. If you look at the margin percent itself, we will have larger acceleration of fixed cost. So that $200,000 number is going to grow.

Our focus is to maintain a positive gross profit margin as we go through the second half of the year in this environment.

And what you will see is a generation of cash as working capital will unwind at a much higher rate than it did during the second quarter, and capital spending in the third and the fourth quarter will be lower than what you saw in the first 2 quarters.

Does that give you a sense for where we're at?.

Yes..

And it's all against a backdrop of a very uncertain environment. As I look at -- as I was looking at the numbers this morning, we had about 2.5 million pounds sitting on the dock ready to go on June 30 that customers didn't take. So a lot of that depends upon timing and when customers take things.

And we're still in a mode -- although it's quieted down somewhat, customers cancellations are down, bookings continue to be relatively weak. But customers are managing very carefully when they take delivery of product, so you see some small pull-aheads, but most of what we're seeing is pushouts..

Got it. Okay. I appreciate all of that. Just on SG&A, curious if that's at the right level relative to kind of how you anticipate the second half to play out.

It sounds like you are taking additional action here in response to a more challenging environment, so curious as to where we'll see some of that cost come out and how to specifically think about the SG&A line..

In the low $4 million range. So we're basically running at a 4.8 run rate in the second quarter. And we did announce some changes to our salary payroll. As you saw, that's not all SG&A. There's a fair amount of salaried folks that are in the gross profit number.

The other thing I would comment on SG&A for us is about 40% of our SG&A is what I would call people cost. It's also where we book our business insurance. That's our next largest item there..

Got it. Okay. And then just lastly for me, and then I'll turn it over.

But with respect to the free cash flow in the second half, I mean, how should we be thinking about that in 3Q versus 4Q and maybe how exactly to think about the progression of the working capital piece?.

Sure. We will have improved working capital levels, i.e., reductions, in Q3 and Q4. As Denny noted, those will favorably impact our debt levels. We anticipate much improved reduction in inventory compared to second quarter levels and a similar situation on debt reduction.

Current forecast, we do anticipate, probably call it -- and Denny, you can chime in here. We're looking at approximate debt reductions north of $20 million in the second half of the year. On the managed working capital, we're looking at reductions north of $30 million for the second half of the year..

Our next question comes from the line of Phil Gibbs with KeyBanc Capital Markets..

Denny, you had the backlog down about 35% versus the first quarter.

Is that roughly the change we should see in revenues in the upcoming quarter relative to 2Q in terms of the magnitude of the drop-off you're expecting?.

No. No. It's not going to be that significant in the third quarter. We still have opportunity to book business into the fourth quarter. So you're looking at about another 20% reduction, somewhere in that range, as we look at the third quarter from where we stand today. So I would still expect to see a 4 in front of that number in the third quarter.

Getting out of the third quarter, it gets a little dicier. Our expectation, as we get into the fourth quarter, we'll start to see some bookings coming in for the first quarter of 2021. And by that point in time, you should see the destocking. The liquidation of inventory that's occurring as we speak should be over.

So the whiplash effect that mills have to suffer through should be behind us. And you should start to see bookings pick up and activity levels pick up a little bit as we go through the end of the year..

Okay. Got it. And then you gave some color on the gross profit side.

Are those absorption impacts, Denny, going to be basically acute in the back half and then the assumption is that, that starts to improve next year?.

Yes. We will be accelerating fixed cost write-offs in the third and the fourth quarter. It'll be much larger than what you saw in the second quarter. And that's reflective of the fact that we -- as you look at our facilities, we ran the entire second quarter.

For all intents and purposes, we took 3 of our larger plants down during the first week of July. And we have, depending upon the plant, 3 or 4 weeks scheduled down during the second half of the year. In addition, we've got rolling outages at different work centers.

So as those activity levels come down, you will start to spin out the requirement to accelerate fixed cost write-offs. So those numbers will get bigger in the third and fourth quarter. That's all noncash, by the way..

Okay.

And then, Chris, on the revolver availability, what's that number today? And then reiterate what you said in terms of second half net working capital reduction, did you say $30 million plus is your goal?.

Yes. On the managed working capital, you're correct. From a liquidity standpoint and an availability standpoint, in the second quarter, we had $86 million of borrowing base. We had outstanding drawings on our revolver of $40 million. That left us with a remaining revolver availability of $46 million.

That remaining availability, we anticipate, should be fairly consistent as we approach and go through the third and fourth quarters. And that is commensurate with reduction in borrowings, along with the reduction in our borrowing base, as we wind down manage working capital levels.

Specific to the revolving credit facility, the managed working capital impacts are the accounts receivable and inventory lines..

Okay. So essentially -- I got the liquidity number. So essentially in the back half, as you flush out cash, that also goes as an increased block against your base. So your liquidity basically is going to stay similar to where it was in the second quarter.

Is that the thought?.

Correct..

[Operator Instructions]. Your next question comes from the line of John Deysher with Pinnacle..

A couple of questions. One, you mentioned the fixed cost write-offs.

To make sure I understand that, is that fixed asset write-offs? Or what exactly you're referring to there? And how big might those be in the back half of the second half of the year?.

Sure. John, I'll touch on the accounting exercise that is the fixed cost write-off. So this is required whenever we have production levels that are decreased.

When production levels fall below normal operating levels, we're required to do a review of fixed cost absorption to see if any of the fixed overheads should be taken to the P&L versus capitalized in the inventory. This is done to make sure that we avoid any over absorption of fixed costs on the balance sheet.

We did this review in the second quarter because our production levels fell outside of our normal operating levels. And this is what resulted in that $200,000 expense hit to the P&L... We do anticipate decreased production levels in the third and fourth quarters, commensurate with the reduction in backlog.

Because of these reduced operating levels, the fixed charge for the absorption is anticipated to be much higher than the $200,000 in the third quarter -- or in the second quarter, correction..

How much larger do you think it might be?.

The amounts in the third and fourth quarters could approach $1 million based on what we currently have forecasted within the production levels for Q3 and Q4..

Okay.

And that runs through the P&L, correct?.

Yes. That will run through our gross margin. It is a noncash charge. We will make sure we highlight it as these charges only come about whenever we have significantly reduced production levels..

Got it. And on the CapEx side, $9 million for the year, $7.2 million year-to-date. That implies $900,000 or so per quarter.

Is that the right way to think about this for the back half?.

Yes. We have finished virtually all of our capital work that we plan to do this year as of June 30. The risk there is that we have a major breakdown of a piece of equipment where we need to spend some capital to keep it going. This will be non-maintenance-type stuff, but we're not aware of anything like that. So that's where we're at..

Okay. And this one's for you, Denny. Obviously, times are tough. You're struggling. And I would guess some of your competitors are struggling also.

So I'm just wondering -- your focus is on debt and expense reduction, but is M&A at all on the radar screen at this point? Because historically, you've been opportunistic in downturns like this, and we always like companies that come out the back end of a downturn stronger than when they went in.

And I'm just curious, are you seeing opportunities with -- amongst any of your competitors? Kind of what's that landscape look like at this point?.

I think M&A in our space is relatively muted right now. Normally, during a downturn, you get well into it and you start to see some opportunities start to pop before the next upturn. We're still -- I won't say we're at the beginning of this thing, but we're nowhere near the end of it. So there's nothing that's really hot.

There's a couple of opportunities. We were always talking to people and looking at different things.

But I think, to be honest with you, over the last 3, 4, 5 months, whether it's Universal or any of our competitors, the focus is all about adjusting to this current demand levels and the sharp drop we're seeing and how do you restructure your business so you can get out to the other end..

So no one's waving the white flag at this point..

No. But I think that will probably happen. But I think it's too early in the game right now. Later this year, early next year kind of time frame, in my opinion..

All right. Well, keep your eyes open..

We will..

And there are no further questions. I would like to turn the call back to Mr. Dennis Oates for closing remarks..

Thank you. Once again, I want to thank everybody for joining us this morning. We continue to deeply appreciate your ongoing support and interest in Universal Stainless, and we look forward to updating you on our next call, which will be out in October. So be well, stay safe, and have a great day..

This concludes today's conference call. You may now disconnect..