Ladies and gentlemen, thank you for standing by, and welcome to the Curtiss-Wright Second Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] I would now like to hand the conference over to your speaker today, Jim Ryan, Senior Director, Investor Relations. Thank you, and please go ahead sir..

Thank you, DJ [ph], and good morning, everyone. Welcome to Curtiss-Wright's Second Quarter 2020 Earnings Conference Call. Joining me on the call today are Dave Adams, our Chairman and Chief Executive Officer; and Chris Farkas, our Vice-President and Chief Financial Officer.

Our call today is being webcast and the press release as well as a copy of today's financial presentation is available for download through the Investor Relations section of our company website at www.curtisswright.com. A replay of this webcast also can be found on the website.

Please note, today's discussion will include certain projections and statements that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance.

We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC.

As a reminder, the company's results include an adjusted non-GAAP view that excludes first year purchase accounting costs associated with acquisitions, onetime transition costs associated with the relocation of the DRG business, restructuring costs in 2020 and a non-cash foreign currency translation loss associated with the substancial liquidation of a foreign legal entity.

Reconciliations for current and prior year periods are available in the earnings release at the end of this presentation and on our website. Any references to organic growth exclude the effects of restructuring foreign currency translation, acquisitions and divestitures unless otherwise noted.

Now I'd like to turn the call over to Dave to get things started.

Dave?.

Thanks, Jim. Good morning, everyone. I'll begin today with an update of how the COVID-19 pandemic is impacting our business, and then provide some highlights of our second quarter results. Chris will then provide a more detailed review of our second quarter financial performance, as well as our reinstated full year guidance.

Finally, I'll return to wrap up our prepared remarks before we head into Q&A. Curtiss-Wright, like so many of the companies has been greatly affected by the pandemic. Throughout this challenging environment, we've maintained an unwavering commitment to keep our employees safe.

We continue to follow comprehensive health and safety protocols across all of our facilities, including the necessary investments in equipment and resources to minimize disruption to our business. I'm pleased to report that all of our manufacturing sites are operational today.

Further, I'm proud of our team's agility in responding to this dynamic situation. The acceleration of our initial restructuring plans and incremental austerity measures have been and will continue to be highly effective in mitigating the sharp reduction in commercial revenues.

These actions along with the strength of our defense markets, provides us the confidence to reinitiate our full year 2020 guidance. Turning to the second quarter 2020 adjusted results.

Although our overall sales were down 14% growth in our defense markets remained strong, for both customer demand and our operations were generally uninterrupted by the pandemic.

However, within our commercial markets, we experienced significantly lower customer demand, as well as government mandated factory closings, which negatively impacted our results. Overall, the commercial sales declined drove adjusted operating income and margin down 27% and 250 basis points respectively.

Adjusted diluted EPS of $1 31 was in line with our expectations, and is expected to be the lowest quarter in 2020, followed by sequential quarterly improvement for the remainder of the year. Regarding our orders, we experienced solid growth of 3% overall, and backlog is up 1% year-to-date, providing further stability to our reinitiated guidance.

Last week, we issued a press release announcing that we secured more than $220 million in new naval defense orders, $175 million of which were received in the second quarter. The growth in defense orders drove the strong book-to-bill of 1.4 times in defense, and 1.1 times for Curtiss-Wright overall.

Although our commercial markets were significantly challenged, we experienced some sequential improvements in both coding activities and orders as we progress deeper into the second quarter.

Our guidance anticipates a slow recovery from the pandemic and recent border patterns between April and July provide optimism for modest growth in our commercial businesses in the second half of 2020.

Turning to our free cash flow, adjusted free cash flow of $136 million increased 70% year-over-year due to an intense focus on working capital and reduced spending on non-essential capital expenditures. This performance drove robust adjusted free cash flow conversion of 247% that keeps us on track for a strong finish in 2020.

Now, I'd like to turn the call over to Chris to provide a more thorough review of our second quarter performance and outlook for 2020.

Chris?.

Thank you, Dave. And good morning, everyone. I'll begin with a review of our second quarter end market sales. Overall, we experienced a 5% increase in sales to our defense markets, or sales to our commercial markets declined 29% year-over-year. There are a few items that I would like to highlight on this slide.

First, in Naval Defense, we experienced solid organic revenue growth on both the Virginia and Columbia class submarine programs as well as inorganic growth from the 901D acquisition.

This growth was partially offset by the timing of production within our DRG business, where we completed the transition to our new facility in the second quarter and anticipate production ramping up during the second half of this year.

Shifting to the commercial markets, in commercial aerospace, our performance was impacted by customer driven production slowdowns leading to reduced sales on all major OEM platforms. Our sales were also impacted by government mandated shutdowns of Curtiss-Wright facilities in Mexico, which has since resumed normal operations.

Diving into the general industrial market, industrial vehicle sales were impacted by industry wide reductions in demand and the on-highway market, particularly on North American Class A vehicles.

In industrial pumps and valves, we experienced lower valve sales, due to a pullback in industry capital expenditures on large projects, as well as reduced MRO work quite similar to what we experienced during the last industrial recession. Next, I'll discuss the key drivers of our second quarter operating performance.

In the commercial industrial segment, our results reflect unfavorable absorption on lower sales, partially offset by the benefits of our cost containment initiatives and 2020 restructuring actions.

In addition, prior results included a $4 million onetime gain on the sales of building which generated a margin headwind of approximately 130 basis points. In the defense segment, adjusted operating income increased 10% on a 7% increase in sales, while adjusted operating margin improved 60 basis points.

The performance reflects both savings generated from our restructuring actions, as well as a solid contribution from the 901D acquisition. In the Power segment, our results reflect unfavorable absorption on lower power generation revenue, as well as the timing of naval defense revenues.

Partially offsetting those declines were again the benefits of our restructuring actions. Next, I'll focus on our strong balance sheet where Curtiss-Wright remains very well positioned. We have more than sufficient liquidity and our leverage ratios remain in line with a strong investment grade rating.

In mid-May, we took the opportunity to further strengthen our balance sheet by taking advantage of excellent pricing in the private placement market. On May 15, we circled the 300 million dollar note offering at very attractive rates near 3% for 10 and 12 year maturities.

We opted for a delayed draw feature for up to three months to provide us with some additional short term flexibility and intend to use these proceeds to support our balanced capital allocation strategy.

Overall, we remain very pleased with our flexible yet conservative capital structure, which provides further confidence in our ability to successfully navigate through this downturn. As Dave outlined at the start of the call, today, we are reinstating our 2020 guidance.

Starting with our 2020 end market sales guidance, we now expect overall sales to decline 4% to 6% reflecting the impact of the pandemic. In the defense markets, we expect revenue growth of 8% to 10% overall, and 4% to 6% organically. This is unchanged from our prior guidance.

This outlook reflects our solid backlog following strong second quarter orders and the contribution from the 901D acquisition. In Aerospace Defense, our guidance remains unchanged. And we expect sales growth to be driven by higher demand for actuation and flight test equipment on key programs, principally the F-35.

In Ground Defense, we've reduced our outlook in this market as we expect delays and funding on international ground platforms. In Naval Defense, we've increased our outlook and continue to expect strong organic sales growth driven by the ramp up on the CVN-80 and CVN-81 aircraft carrier programs and higher Virginia class submarine revenues.

Moving to the commercial markets, where we now expect sales to be down 14% to 16% overall. Our updated commercial aerospace guidance is based on widespread reductions in OEM production rates by Boeing and Airbus for actuation equipment, sensors and surface treatment services.

Next in Power Generation, our updated guidance principally reflects lower international after market sales largely due to project delays. Meanwhile, domestic aftermarket sales are expected to remain flat as social distancing related delays and maintenance are expected to be recovered in the second half of this year.

Regarding the CAP1000, although we continue to project increased revenues on the program in 2020, we're projecting a $10 million revenue shift into next year, principally due to delays caused by social distancing.

In general industrial, we expect sales declines in all major categories, reflecting our views of both market specific drivers and reductions in global economic activity. We anticipate that the second quarter revenue will be our lowest as order trends have improved and are expected to slowly increase throughout the second half of the year.

As you can see, based on the collective updates to our end market guidance, we now anticipate 50% of our overall revenues in the defense markets and 50% in the commercial markets. In the appendix of our presentation, you'll find our 2020 end market sales waterfall chart.

Continuing with our adjusted financial guidance for 2020, we expect solid sales growth in our defense and power segments to be more than offset by reduced sales in our commercial industrial segment.

Overall, operating income is now expected to decline 5% to 8%, while operating margin is expected to be down 30 to 50 basis points compared to 2019, despite improved profitability in the defense segment.

Further, we've increased our expectations for 2020 restructuring costs due to additional actions that were implemented and accelerated in response to COVID-19. Our adjusted 2020 guidance now excludes total restructuring costs of $35 million, mostly in the commercial industrial segment, which has experienced the greatest impact from the pandemic.

We now expect to achieve $40 million in annualized savings from these restructuring initiatives half in 2020, and the remainder in 2021 As a result, we anticipate that full year 2020 detrimental margins will likely range from 20% to 25% improving upon our prior estimate of 25% to 30%.

Continuing with our outlook and starting in the commercial industrial segment, we have reduced our guidance for sales and profitability in response to end market weakness. To mitigate those declines, we've implemented deep and aggressive cost reduction measures and they expect significant restructuring savings to benefit the second half of the year.

In the defense segment, we continue to expect solid growth in aerospace and naval defense, but have trimmed our overall sales slightly due to the after mentioned reduction in ground defense.

Despite that change, we are now projecting full year segment operating income to grow 12% to 14%, while operating margin is expected to increase 80 to 90 basis points to a range of 23.1% to 23.2%. Both represent increases to the guidance ranges provided earlier this year.

This outlook reflects the benefits of our cost containment actions and accelerated restructuring savings that are expected to more than offset higher R&D.

In the Power Segment, we expect strong revenue growth in naval defense while overall power generation revenues are now expected to be down slightly, principally due to lower international aftermarket revenues.

Despite the top line reduction, operating margin is expected to remain in line with our original February guidance at a range of 17.1% to 17.2%. This outlook reflects favorable absorption on a strong sequential ramp in second half sales and the benefit of accelerated restructuring savings offset by higher R&D.

Continuing with our 2020 adjusted financial outlook, please note that we made a few non-operational adjustments to our full year guidance. Higher interest expense reflects the additional $300 million in senior notes which will close in the third quarter.

In addition, our effective tax rate guidance increased to 23.5% this principally reflects a non-deductible and non-cash currency translation loss of 10 million taken in the second quarter related to the liquidation of a foreign legal entity.

We've also lowered our full year share account by nearly 1 million shares, based on our expectations for 150 million in full year share repurchases, including the $100 million opportunistic program executed in March. As a result, we expect full year 2020 diluted EPS guidance to range from $6.60 to $6.85.

We expect sequential quarterly improvements for the remainder of 2020 and approximately 40% of our full year adjusted diluted earnings per share to be recognized in the fourth quarter.

Factors contributing to this cadence include the timing of CAP1000 revenues in our power generation market, the sequential ramp and production of our new DRG facility and restructuring savings weighted to the second half of this year.

Of note, this EPS pattern for 2020 is quite similar to our rebound from the last industrial recession in 2016, when we also recognized 40% of our full year earnings per share in the fourth quarter. Next to our full year free cash flow outlook, where we are projecting a very strong free cash flow level similar to our solid 2019 results.

At the onset of the pandemic, we implemented aggressive plans to manage working capital and suspended all non-essential capital expenditures to preserve free cash flow and improve liquidity.

The results to date have been very positive and we now expect our 2020 adjusted free cash flow to range from 350 million to 380 million with an expected conversion rate of approximately 130%. This is well above our initial February guide of approximately 115% Now I'd like to turn the call back over to Dave to continue with our prepared remarks.

Dave?.

Thanks, Chris. As we enter 2020, we launched several company-wide restructuring initiatives leveraging our recession playbook to address anticipated reductions in demand and drive margin expansion. As Chris reviewed earlier, we've since expanded the scope and increased the pace of our restructuring actions due to the pandemic.

As a result, we expect to drive significant savings, particularly within the commercial industrial segment. I'd like to share an example of one of those initiatives. We ended the year targeting restructuring actions within our commercial aerospace business. Since the onset of the pandemic, commercial aerospace demand has significantly declined.

Recent industry projections have suggested that it could take several years before commercial aerospace OEMs returned to previous production levels.

Our commercial aerospace only represents 14% of our projected 2020 sales we are implementing additional facility consolidations, and workforce reductions were necessary to align to anticipated future demand.

This includes our business supporting the 737 MAX program, where we are currently performing at a steady production rate on our actuation contract through the end of 2020. Many of you have asked how our current contract will impact Curtiss-Wright in the coming year.

We understand and recognize the delicate balance between sustaining profitable growth and satisfying customer needs, including inventory on hand. We continually work to align these two priorities. Regardless of the status of this contract, we may be faced with a headwind of up to $70 million next year.

We are actively working to cover that gap through continued growth and defense revenues, or potentially via acquisition. We're taking the prudent actions required to align our cost structure and position Curtiss-Wright for continued profitable growth.

Curtiss-Wright remains well positioned to weather this challenging environment and we anticipate a strong second half performance. We maintain a diversified business mix with defense markets representing 50% of our total sales, which provides both solid visibility and stability to our revenue and free cash flow.

We are an agile and flexible business, and we have a strong track record of proactively driving margin improvement. In addition, we expect to generate strong free cash flow in 2020 to further support our balanced capital allocation strategy. Our balance sheet remains strong and healthy, with sufficient capacity to support our acquisition pipeline.

In summary, based on our restructuring actions, continued solid execution and pursuit of new business, including M&A, we remain committed to our goal of ensuring long-term profitable growth for our investors. At this time, I'd like to open up today's conference call for questions..

[Operator Instructions] Our first question comes from Peter Arment of Baird. Your line is open..

Yes. Good morning, David, Chris..

Hi, Peter, good morning..

Chris, just wanted to circle back with your comments on just the -- on guidance for Commercial/Industrial down 15% to 18% for the year versus what you just did in the second quarter, down 27%.

What are some of the drivers there that are giving you some lift in the second half?.

Yes. So I mean, Q2 was our weakest point in the year. I mean, we were expecting this to be our lowest point of the year. As we dug into the orders, we saw that was the case. We did experience small sequential improvements in coating activity and orders since May, which provides us with some optimism for the second half of the year.

If we look at commercial aerospace, orders reached a trough in May, do you increase customer pushouts and reduced OEM production levels, just basically across all platforms. In general, Industrial, all mark -- major product and service categories experienced disruptions.

We saw a low point in orders in April, severe reductions in Class 8 vehicle market, with production more -- down more than 50%. Valves, we saw pressure from low oil prices and the pandemic, and we reached a trough in early May, but some sequential recovery in June. So thus far, in July, slight improvement in GI.

We typically have a slow third quarter in Europe. But despite that, we're seeing improvement in our order patterns, and we're watching this cautiously.

On the Defense side, we talked a little bit in the script about the ramp-up on the CAP1000 program in the back half of the year as well as the ramp-up in naval defense as our new DRG facility comes up to full production capacity..

Okay. That's helpful. And just, Dave, just a follow-up on your comment on M&A. How are you viewing -- is the process, I assume, has slowed down somewhat tied to COVID, but just maybe talk about your interest in M&A and your ability -- in terms of what the pipeline looks like? Thanks..

Yes. Before the pandemic, the pipeline was relatively filled -- as it is with us for every 10, you might get through that really make it to the finish line and -- because our scrutiny is pretty heavy-duty on some of these. But we did have a few that were making it fairly nicely along that process.

And then of course pandemic hit, we all took a pause there to regroup and see where we're at.

And it was -- given this fact that we've come back in and reinstated our plan and had the -- basically the confidence that we could reinstate with the conservative manner that we run the company, we felt pretty good that, all right, this should open the door now for some of those that were underway in the past, right before the COVID hit.

And then, we have been looking and talking since the pandemic hit everybody. We've just been keeping everything alive. So I'd say that we certainly can tell. We've got the dry powder to execute on that. Now if we can just come to grips with valuations, I think some of that is opening up in terms of visibility for us.

And what expectations are, the executions, certainly, on some of those acquisitions that we were chasing since the pandemic have given us an idea of where they are headed and how they have fared during this process. So it's great to have that sort of visibility.

And from an M&A side, when you get to this kind of point where you get to look back a little bit to see how they performed under duress, that certainly either gives you a very warm feeling or it kind of puts you at a point where you can make a different decision.

And I'd say, so far, we're feeling pretty good about feeling pretty warm about how we started it and how we can conclude some of these. So I feel pretty good about M&A going forward. I think it's going to start opening up across the board..

Thanks for that. Thanks..

Our next question comes from Myles Walton of UBS. Your line is open..

Thanks. Good morning..

Hey, Myles..

Good morning..

Maybe first off on the Power segment. I know you've got a pretty big ramp implied in the back half of the year, and you talked about CAP1000 as being a piece of that into the fourth quarter, in particular.

Could you just talk about how much of a ramp that looks like into 4Q versus sequentially from 2Q into 3Q?.

Yes. I mean we're not going to talk about the specific numbers, Myles, but we essentially -- as you look at it, we're going to have a very steep ramp in Q3 and Q4.

We're expecting $90 million of revenue on that program for the year, which is still above 2019 levels of about $80 million, but it will be a very steep ramp sequentially in Q3 and Q4 being the highest..

Okay. And then, I guess, from a 2021 headwind on the CAP1000 or overall new nuclear at this point, it sounds like now it will be a slightly lower headwind in 2021, maybe $30 million or $40 million. And Dave, you called out up to $70 million in -- or $75 million in commercial aero.

Is there any other idiosyncratic things to just kind of consider as you look at 2021?.

No, I don't think so. I think as you pointed it out, Myles, I mean the pushout here of $10 million could actually be beneficial to 2021. It's still very early on for us in the budget process.

And I think we were very happy that with all the information that we were able to gather here in the second quarter that we're able to offer guidance here for 2020, we still have a lot of work to do. And we're hoping to be able to provide a little bit more clarity on 2021 as we get closer to February..

Okay. And then just a couple more cleanups. One is on the $40 million benefit from the restructuring savings.

So just -- so I'm clear that's $20 million benefit to the second half or did you benefit even here in the second quarter? And then similarly, as you look to next year, are you still picking up benefit from underlying amortization? So if I combine the benefit from restructuring plus benefit from lower amortization, you might even standing still on revenue be a 100 basis points margin expansion?.

Yes. For restructuring, we are projecting $40 million in annualized savings right now. I would say, we recognized roughly $3 million in the second quarter. So half of that annualized savings is going to be recognized in 2020.

So you've got a lot of uplift here in the second half of the year, another reason for some of the confidence that we have here in reinstating our guidance. For 2021, again, a little -- probably a little too soon to comment on where we can go here, but we will see half of that annualized savings slide out into 2021..

Okay. All right. I think that's -- sorry, one more. The working capital looks like you maybe had a help with $20 million versus the prior guidance.

Is there anything to think about on working capital as you move into next year?.

No. I don't think so. I think we're continuing to kind of drive down working capital as a percentage of sales. I mean, we've had a very strong first half in terms of collections and the way that we're looking at our guide for the full year of $350 million to $380 million, we are expecting some pressures in the back half of the year.

I mean you guys know better than anyone. There's a lot of talk out there about how everyone is going to improve their cash position. So we're trying to take a little bit of a conservative position here as we guide to the $350 million to the $380 million, expecting that there will be some headwinds in collections.

As we look out into 2021, I mean, we are -- we will continue our march to top quartile, and we'll sharpen the pencil as we get deeper into the year..

Alright. That's great. Thanks guys..

[Operator Instructions] We have a question from Michael Ciarmoli of Truist Securities..

Hey. Good morning. Thanks guys for taking questions here. Nice results. Maybe to just stay on Myles, these line of questioning on the margins and the restructuring. And I know you're not going to definitively speak to 2021 guidance, but you've got this 737 MAX headwind, you framed it pretty well. Dave, I think you said $70 million.

Is it fair to say that with the restructuring and if we do continue to see improvements in general industrial that you should be able to grow those margins year-over-year in the Commercial segment? Or will that MAX headwind kind of prove to be something that might be a little bit of thorn and pressure margins?.

I mean, as you look at it, Mike, I mean, certainly, it is a headwind to the business. And as you call it -- as we provided in the script here, we have started and we started off the year with restructuring actions and then we've implemented additional cost containment measures.

Both of those are focused on achieving margin objectives, right? The restructuring actions are longer term and more permanent in nature. The cost containment is short term and more temporary in nature.

We're very focused in -- on achieving and beating our incremental and decremental margins for the year as it may be, and we're going to make the tough decisions balancing the cuts in investments in responses to changes in volumes.

So it's a little too early for us to comment on 2021, but I can assure you that the management team is focused, and we're still driving to that 17% margin.

I think there may be -- we may be a little bit delayed in achieving that 17% based upon the $200 million in commercial revenue headwinds, but we're still driving towards that goal, and we'll know more later in the year..

Got it.

And just as we look at commercial aerospace, again, realizing it's a smaller piece of the business now, are those -- the margin profile on those aerospace revenues, are they in line with the commercial segment, below or above? Just trying to get a sense of how those -- the profitability on those products look versus your general industrial and even some of the other revenues that flow through commercial segment?.

Yes. I would say the business is probably a little bit too diverse, Mike, to be able to provide you with a specific answer as to what we're seeing there.

I think the rationale here, as we look ahead in 2021, is really going to be what are we going to be able to do with margins in that business and the restructuring actions that we're putting into place are to mitigate those headwinds. So I won't really provide any information at this point regarding differences in the two.

I think it's just -- I'd look at it as one big bucket..

Okay.

Even on a trailing basis, just to get a sense that if I were to look at last year, were aero margins sort of in line, above that segment average or below segment average?.

Yes. I wouldn't say that you can kind of pinpoint that. It's product by product, program by program and -- yes..

Got it.

What about -- can you give a little bit more color, you called out the order strength, I think you kind of end up commentary, it sounded like orders bottomed in the April time frame? Can you give us any more detail on maybe some of those shorter-cycle orders, whether it's valves, pumps, industrial controls, where you saw the most strength? Was it more on the defense side? Just any more detail on the order flow?.

Yes. I mean I would say that surface tech, as you know, is really kind of our economic billweather [ph], and they're pretty diverse in the markets that they participate in -- the commercial markets that they participate in. And we've seen slow and steady sequential improvement since April.

Vehicles, the low point was April as well, and we've seen some improvement there. And I think in the commercial aero side, some of the OEMs, while they were wrestling with their demand, they also had to consider some of the inventory changes that they were facing. And it took a little bit longer for us to see the trough and the drop on that.

So we saw those really hit in May, but we've seen improvement in June and then also July again. So I think valves, we saw a trough in May. But again, kind of like the commercial aero orders, we've seen sequential recovery in June and then also some slight pickup here in July. So the trajectory is right.

And it's providing us with some cautious optimism in our commercial markets as we enter the second half of the year..

Got it. And then just on that, you mentioned that economic bellwether, surface tech and surface treatment. Any sense as to current capacity there? I mean I know those -- you've got a lot of those facilities, close to customer proximities.

If you had to gauge at the low point, what was overall capacity and maybe where you've seen it improve to?.

Yes. I think what we're doing, Mike, with our restructuring is, we're being very in cost containment. I mean we're being very targeted. If there are temporary headwinds that those businesses are facing in the market, we're adjusting the resources and the cost as appropriate.

And then if we see anything that's there that's structurally more of a problem as we get long term, that's where the restructuring is really going to kick in, the longer-term actions that are based upon more changes within our footprint..

I'd add there, Mike, that we have a very high degree of flexibility within those surface tech business units. There are 70 of them across the United States and abroad.

And given the nature of that business, how they are sometimes in the shop and/or next door to their customer or down the street, their profile is one of agility and a ton of flexibility to go within the ebb and flow of what's going on now. So they'll flex all over the place.

And sometimes we'll close the place down and then, because there's not enough there and move it, let's say, 20 miles down the road to one of our other facilities and work that way or vice versa. If you need to grow, then we can put on another shift very easily. So we've got that sort of ability with that business..

Got it. That's helpful. Thanks guys. I'll turn back in the queue here..

Thanks Mike..

[Operator Instructions] I would now like to turn the call back to Dave Adams, Chairman and Chief Executive Officer..

Thanks, [Indiscernible], and thanks everybody, for joining us today. We look forward to talking with you again on our third quarter 2020 earnings call. Stay safe, and have a great day. Bye..

Thank you..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. And you may now disconnect..