Mike Monahan - SVP, External Relations Doug Baker - Chairman and CEO Dan Schmechel - CFO.

Gary Bisbee - RBC Capital Markets Chip Moore - Canaccord David Ridley-Lane - Bank of America/Merrill Lynch Manav Patnaik - Barclays John Roberts - UBS Laurence Alexander - Jefferies David Begleiter - Deutsche Bank Chris Parkinson - Credit Suisse Hamzah Mazari - Macquarie Group Scott Goldstein - Citigroup Mike Harrison - Seaport Global Securities Tim Mulrooney - William Blair Dmitry Silversteyn - Longbow Research Andrew Wittmann - Robert W.

Baird Shlomo Rosenbaum - Stifel Rosemarie Morbelli - Gabelli & Company Dan Dolev - Nomura.

Greetings and welcome to the Ecolab Fourth Quarter 2017 Earnings Release Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mike Monahan, Senior Vice President, External Relations. Please go ahead, Mr. Monahan..

Thank you. Hello, everyone, and welcome to Ecolab’s fourth quarter conference call. With me today is Doug Baker, Ecolab’s Chairman and CEO; and Dan Schmechel, our CFO. A discussion of our results along with our earnings release and slides referencing the quarter’s results and our outlook are available on Ecolab’s website at ecolab.com/investor.

Please take a moment to read the cautionary statements on these materials, stating that this teleconference, the discussion and the slides include estimates of future performance. These are forward-looking statements and actual results could differ materially from those projected.

Factors that could cause actual results to differ are described under Item 1A, risk factors, of our most recent form 10-K and in our posted materials. We also refer you to the supplemental diluted earnings per share information in the release.

Starting with a brief overview of the quarter, Ecolab’s sales and earnings continued to show sequential acceleration thorough the fourth quarter. Continued new business gains, product innovation and pricing drove fourth quarter acquisition adjusted fixed currency sales growth in all our business segments.

The sales gains, along with our ongoing cost efficiency work, more than offset higher delivered product costs and investments in the business to drive the operating income gain. These, along with lower adjusted interest expense and our work to lower our tax rate, yielded the fourth quarter’s 11% adjusted earnings per share increase.

Moving to some highlights from the quarter, and as discussed in our press release. On an adjusted basis, excluding special gains and charges and discrete tax items from both years, fourth quarter 2017 adjusted diluted earnings per share increased 11% to $1.39.

Consolidated acquisition adjusted fixed currency sales rose for all of our business segments. Acquisition adjusted fixed currency sales growth was led by North America and Europe. Reported operating margins increased 60 basis points.

Adjusted fixed currency operating margins decreased 70 basis points as price and volume increases were more than offset by rising delivered product costs in the quarter. Adjusted fixed currency operating income increased 3%.

The operating income gain, along with lower adjusted interest expense and tax rate, yielded an 11% increase in fourth quarter 2017 adjusted diluted earnings per share.

We continue to aggressively work to drive growth, winning new business through our innovative new products and sales and service expertise, as well as driving pricing and cost efficiencies to grow our top and bottom lines at improved rates.

We also see continued good underlying sales volume and pricing across our business segments, and look for that to more than offset continued and significant delivered product cost headwinds and yield stronger operating income growth. We expect 2018 to be a strong year with earnings growth accelerating through the second half.

We look for accelerated pricing to again exceed continuing and significant delivered product cost headwinds and along with our product innovation and cost efficiency work yield better operating margins and income growth.

We expect 2018 adjusted dilutive earnings per share to rise 12% to 16% to the $5.25 to $5.45 range, with second half earnings growth outpacing the first half, reflecting the expected impact of the higher delivered product costs and systems investments which are expected to have a larger impact in the first half.

We expect good first quarter fixed currency acquisition adjusted sales growth with lower operating margins as improved sales momentum and stronger pricing are more than offset by higher delivery product costs and systems investments. Adjusted diluted earnings per share are expected to be in the $0.85 to $0.93 range, up 6% to 16%.

In summary, we saw improved momentum in our business as we moved through 2017 and expect to realize strong growth in 2018 that should deliver 12% to 16% adjusted diluted earnings per share growth. And now, here’s Doug Baker with some comments..

Thank you, Mike. I’ll just touch on some headlines or top level view, as I see it. So, clearly, the business is better and getting better. Organic sales improved. And the improvement, when you look at it, was widespread. Industrial is quite strong, energy was strong, pest was quite strong, and institutional got better as well.

Also, pricing is catching up to rise. So, the strong results here, if you look across the board, you can see better improved pricing everywhere including energy, which finally moved into the plus column as we had forecast. So, we see more of the same as you look into the 2018.

We expect a very good macroeconomic environment globally, but we also expect inflation to continue with raws peaking on a year-on-year basis in Q1 and really not easing until late 2018, if at all. So, while we see this, we also see good things happening on our side. We expect solid sales momentum to continue across the board.

And we’re also continuing to push pricing, given the inflationary environment. We’ve had great new business productivity in the second half of 2017. So, there is good reason to believe momentum will continue. We have got major launches underway including our new Smartpower warewash platform, which is starting to help drive institutional improvements.

We also continue to invest significantly in customer-facing technology and in infrastructure technology. So, if you add all this up, we are quite excited about what this means for 2018 results. We see double-digit EPS for the year and for each quarter. Now, if you look underneath, this is really driven by strong underlying business performance.

We certainly have a number of good guys this year working in our favor, things like FX, for a change, tax. Hurricanes are really the planned absence thereof, we don’t forecast any hurricanes impacting a major area for us, like Houston or the Gulf again. But also have things on the other side of the ledger which are often overworked.

We’ve got the Equipment Care divestiture. We have one-time SAP in a -- or North America install expense. This isn’t the expense of the system or the amortization of the system, this is really the extra cost it takes to put this in, in terms of inventory and moving things around, et cetera.

It’s real but it’s a smart stuff to do because it’s one-time expense; it goes away once the system is up and running. And then, we have raws. Raws are going to be another headwind this year. We will offset them. We believe we’ll even realize margin accretion on gross margin basis before year-end.

But, we know we’ve got to grow price to recover the incremental raws that are coming our way. If you net all these out, we’ve got very strong underlying double-digit performance as well. So, last point, we’ve been doing a lot a work on digital technology to help our customers, and what we’re learning is quite, quite exciting.

So, we have huge advantages in the digital world and we’re making real progresses with our customers by leveraging these. So, I remain very optimistic about the year, but I am also really optimistic about our development program, and as a result, very optimistic about the years to come. So, that’s my opening. And from that, I’ll turn it back to Mike..

Thanks, Doug. That concludes our formal remarks.

Operator, would you please begin the question-and-answer period?.

Sure. Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Gary Bisbee with RBC Capital Markets. Please proceed with your question..

Hey, guys. Good afternoon. I guess, Doug, I’d love to drill down on your take on the investments.

And number one, sort of help us quantify how much incremental investment is going into business this year? And how do we think about what the payback is from those digital strategies, what are the -- what really is it, and what’s the timing of achieving meaningful payback from these investments? Thanks..

Well, look, I think, there’s couple levels of investment. I mean, one, we mentioned we’re putting in new ERP system in North America. We’ve done this in a number of regions, in a number of countries. So, we have a lot of experience. But, it takes time and spending to get this thing done, unless you want to take unnecessary risk.

The good news is, we’ve already launched, we’ve rolled out, we have a 100% of our financial backbone in North America on this platform. We closed the month. We also have about 40% in North American production and warehousing on this system, and it’s been running. And I would say the early returns are quite favorable.

So, what we know is it’s going to be on the continuum of normal installations, which I always call really painful to just impossible. I think, it’s going to be on the better side of that continuum but these things are always difficult. What’s the payback? Well, look, we’re replacing a 40-year old system.

So, some of this is ultimately you’ve got to go do this. This will enable significant upgrades in our visibility in the business, our ability to, what I would say, further leverage digital and all the rest of the stuff. It’s going to be hard to parse through exactly how that works.

But, I would say, this one-time expense that we talk about, dissipates as we go out throughout the year, and will certainly not be repeated next year. That’s around an additional, probably about a nickel this year is what we anticipate in total. That type of expense that we don’t expect to see next year. Hopefully, we do better than that.

But that’s yet to be seen. On the digital side, we’re investing another $0.04 to $0.05 this year versus last year. If you go back in total, we probably have about $0.20 investment in this year on a run rate basis. And it’s really been built over the last six years. I think, this has been very smart money for us.

And it does not show up in our R&D line where I think it probably belongs because of the accounting rules. But, this is a significant increase in what I would call R&D-related expenditures. And what it’s really designed to do is enable us to take advantage of what I think are our super size advantages in a digital world.

We’ve got access to unique data that nobody else can get at. So, we have over 2 million accounts; we’ve always talked over a 1 million; we never bothered to count them up. Globally, it’s 2.2 million. We’re collecting data today in over 90% of them but too few of them are connected to the cloud.

We’ve customized the cloud; we’ve created a central group, we’re doing a number of things right now. So, we have unique data. And I would say, the ability to leverage it better than anybody else, because we’ve got knowhow and a field team to actually take action upon what we learn.

So, this is already translating into success in the industrial area where we are further ahead because you have fewer accounts, quite candidly. And it’s easier to start assimilating and getting after this stuff. So, that’s what we are learning first.

But, it’s already led to a number of big, big enterprise deals that I don’t think two years ago we could have fantasized we would be able to go compete for because of the way they wanted to look at this industry. But now, for real, they are taking a look at what we can do on energy and water.

They’re counting it, not just counting price that we want to charge, and it’s leading to significant new wins. So, that’s stuff is translating into success right away. But, this is in spite of difficult years because of FX, principally in energy, we have continued to invest in this business.

And as we come out of this, we’re damn happy we did because it’s going to be adding additional fuel to a fire that’s already started to take off..

And a quick follow-up just on energy margins, I think your prepared remarks that you posted, called out, Q1, you lap some of the costs, step down from a year-ago or bringing the cost back on.

But, how do we think beyond Q1 about just incremental margins? If that revenue does ramp at a nice pace, should we see incremental margins start to rise and be, I don’t know, above corporate average or just any color? Thank you..

Yes. No, it’s going to ramp up according to our forecast significantly over the next four quarters. I think, you’ve seen a sequential improvement in 2017. That will continue and actually we think accelerate and it needs to.

We talked that we gave up pricing during the down turn and we need to go and recapture it, one, because it was lost pricing; and two, because we’ve now got rekindled inflation of raw materials. So, I guess, the best way to think about it is, it will be improved in Q1 but pricing will still be below the raw increase year-on-year.

Q2, we think, it’s going to be about net equal. So, it will be no longer, if you will, EPS dilutive, but it will be neutral. And we’ll start -- energy will be accretive. But, I’m just talking about the raw pricing ratio.

And then, you are going to start seeing expansion in Q3 and Q4 where if we are fortunate, we’re going to start seeing margin accretion in the second half of this year. I think, that’s more likely than that but obviously it somewhat depends on what happens in the raw market..

Our next question is from the line of Chip Moore with Canaccord..

Good to see some of the big headwinds over the past few years going the other way on FX and tax.

Maybe on tax specifically, any impacts there on tax reform in terms of end customer demand beyond obviously the benefit to you guys?.

I would say, too early to say we have any specifics about investments that are being made or other things from customers. Typically, they’re responding demand driven signals, not cash in the bank signals, and I would expect that to go. But, we are seeing fairly strong economy globally and in the U.S.

So, I would expect that we will see some expansion in certain areas that we will work to go capitalize on as we move forward. So, it’s hard to say that it’s bad news. We like our customers to have cash because when they have concepts to grow, they will do it. So, there is no bad news here..

Maybe just one follow-on for energy, following up on that first question. I think you called out maybe a small pull forward this quarter. Just talk about that size and impact in Q1..

Yes. I would say, Q4, 12% organic, we don’t believe that’s the run rate of that business. So, often, I pull them up; I would pull this one down. I think it’s high single digits is more realistic run rate that we experienced in Q4 for energy, which isn’t bad. And it’s about what we expect this year, mid to upper single digits.

And so, it was not really a pull forward as much as it was a bunch of one-time things that come along routinely in the fourth quarter, but they came along and we fully capitalized on them this year. So, it’s not a bunch of stolen business from first quarter..

Our next question is from the line of David Ridley-Lane with Bank of America/Merrill Lynch..

It sounds that you are already getting some traction in the institutional business from the refocusing in on the core product lines. Wondering if you’ve started to see any tailwind from the U.S. economy with wage growth picking up and also higher after-tax income.

I think, the National Restaurant Association’s customer traffic survey had a tick up in December, for example..

Yes. It would be tough for us to go ferret that out this quickly and this early. So, I will say, it’s a trend that we like and certainly can’t really hurt. We are seeing, I would say, an uptick in that business broadly. Some of it we know is driven by execution.

It’s a little early for us to have any public data on what’s happening in the industry in terms of units, traffic and the like. But, we’ve read the same thing. I would say customers feel better. Retail certainly had a very good holiday season, we all know that. That typically correlates with restaurant traffic and restaurant spend as well.

So, I would expect, as we sit here, our expectation for institutional, and we really focus on U.S. first because it’s the biggest business, makes the most money, and we can’t afford to have that thing stayed dormant very long. It’s moving, it improved 4 versus 3.

We expect the same or maybe even a better move in Q1 versus Q4 and sort of sequential improvement throughout the year. And our goal, and I think it’s quite achievable, to leave the year at a 5% run rate on the U.S. business, which is going to have a significant improvement overall in that public segment..

And then, just want to ask, it’s been a couple of months since the Diversey and GE Water transactions closed.

Have you been able to capitalize on some of that competitive disruption?.

Well, you never know exactly what the root is. We certainly are doing our normal welcome party to the industry. And so, we’re working to be quite aggressive. It’s what you would expect. So, we are actively pursuing new business, have programs in place in our water and our energy and in our institutional and F&B businesses.

They’re working together quite constructively, particularly in the F&B space where there are huge synergies between our water and F&B businesses. That is having success. We would expect to continue to have success..

Our next question is from the line of Manav Patnaik with Barclays. Please proceed with your questions..

I just wanted to follow up on the digital investments.

I was just curious, all this data that you talked about and the only place to get it, like can you monetize that in the future, or is this more just it increases your value proposition to the customer?.

I guess, the ultimate answer is, we don’t know. At minimum, it’s going to make us or position us to be even more helpful and valuable to customers. Whether it gets monetized in a unique income stream or it’s monetized as an overall part of the programs that we sell, I don’t exactly know.

I think, what will happen here, it’s happened in our other learning episodes is, we start out and we are starting out and we go out, doing what we know we can do and making a difference where we know we can make a difference.

As a consequence to that, you learn many other things in other areas in maybe other ways to make a difference for customers, if they’re willing to pay for. It’s certainly happened for us in the past. And I would expect this journey will have some of those off ramps as well. We’ll capitalize on them.

But at minimum, it’s going to enable us to do pretty significant things for customers, just the visibility that we can provide and the understanding about their spending patterns and their efficiency patterns within either a restaurant or food and beverage plant, a hotel, a hospital.

We now know best-in-class let’s say water usage and given in the steel mill industry globally or in the beverage and brew industries.

And these aren’t small things because if we can really say, hey, you can get down to a 1 liter in here at [indiscernible] day per liter produced, that’s a dramatic improvement in our efficiency and start mapping ways to do it helps them be better stewards and frankly make more money.

So, I mean there’s a lot of ways to make this create value for customers. Our history, when we create value, we get paid for it. And we know this is going to enhance our ability to do that..

And then, maybe just on Europe, could you just update us on sort of the margin trajectory there and maybe what the trajectory for Europe generally in your view should be in the next couple of years?.

Yes. If we go back to sort of the Europe that we had identified when we launched the Renaissance program back in ‘11, this year margin was really flat and we target a 100 basis points a year. We started off in a big hole Q1 and climbed out of the hole to reach basically flat for the year.

We’re still up dramatically over the period of time since we announced this first quarter of 2011. And I believe we will be back on track in this year as we move forward. So, there is still firm belief. We identified 1,000 points; we started out it at 3 margin, so getting to 13, I still believe that’s quite achievable. We’re upper single digits now.

We’ve covered most of that ground but we have ground left to carry, and then will start arguing from there..

Our next question comes from the line of John Roberts with UBS..

Doug, just to follow on there.

I think, you said European institutional sales were down in the quarter in fixed currencies, what was going on there?.

There was some business that we ended up losing because we didn’t want to compete for it at the price it was going to be done at. We’ve been through this in Europe several times.

I would say, of the chains that I would have put in that category, say four years ago, two out of three that we lost and are already back in our fold simply because I don’t think you can execute at those pricing levels. So, this is something we’ve dealt with for decades.

We have competitors who I don’t understand their P&L or their view of it but they are quite aggressive at times on price. And we do the math, it looks like a cash loss position to us. We are unwilling to do business at a cash loss business. We won’t drop price to protect; we’ve done that.

We will do other things, but there is a point where we just blink and say, forget it. And now that is coming out of the base fairly quickly because it’s been in it for a while. We expect to be neutral to maybe slightly positive in Q1 and for the year next year..

Do you think that’s a result of the competitive dynamics from your competitor being sold?.

Well, I mean to be honest, it’s been a pattern under five ownerships and it’s been consistent. So, we always say, well, new owner perhaps will be a new pricing philosophy. So far, that’s been a unfulfilled wish. So, I don’t know what’s going to translate here. I’ve always said, we’ve dealt with 30 and 40 off for, I’ve been at the Company 28 years.

It was happening before I got here, it’s still happening. So, my expectation is it will likely continue to happen. During that period of time, we’ve grown share, and at the expense of every competitor including those who are quite price aggressive. So, I would just say just put in the camp of everybody has got to deal with their own stuff.

That’s some of the stuff we’ve got to go deal with, we’ve done it, we will handle it in the future..

J&J put its sterilization business up for sale.

Setting valuation aside, I assume that would fit really well with your hospital product strategy?.

This is -- why don’t I say that I’m not going to make any comment on a specific property that may or may not be for sale. But certainly, the central sterile area has been one of our focus areas and an area that we’ve talked about strategically in the past, and it’s important going forward..

Our next question is coming from the line of Laurence Alexander with Jefferies..

So, two quick questions.

First, is the digitalization strategy changing or could it change your targets for R&D, and your rule of thumb for how fast your sales force would grow each year to tie into the volume growth you target? And secondly, can you give a bit of an update in terms of demand trends that you’re seeing in Asia and your thoughts around investing to grow the sales force there?.

Yes. So, Laurence, I guess, on the digital side, our priorities go in this order. Number one, we’re going develop technology that improves and enhances our ability to drive value at our customer level. That’s focus one.

Focus two is developing technology makes it easier to deal with, i.e., you want to go track a shipment, you want to find out a price, you want to get a critical information that you might need on specific products. We can do a lot better job making it easier for customers access and by the way for our field team too.

And then, third, and third is, we’ll use it to go drive efficiency. And it’s simply just trying to get the focus first. You can get projects under any of these buckets, we have loads of them. But, what do we want to do first, we want to go use this to drive value with customers. That’s our number one priority.

As a consequence of that, yes, it changes some things. But, what we’ll end up doing first is really augmenting our field with technology, and enabling them to get a lot -- get more done with less effort. And that’s the goal, because then they can spend more time upselling, helping, training and doing the things that really only humans can do.

And so, we want to supplant and use technology where we can. How is that going to translate? I said, ultimately, yes, it’s almost hard to imagine that that doesn’t enable you to increase sales team capacity, if you do it right. And we would certainly leverage that if that proved to be true.

But that’s not the objective of our initial thrust as we go out there. It really is enhance value, create value, drive the top-line and from there, learn how to do the rest of the stuff.

And, the next thing I’ll do is the Asia demand, yes, I would say, there’s a number of hot points in Asia that we continue to feed and we’ll continue to feed as we grow. Our China business in institutional, in F&B, and in whitewater has been very steadily growing at either double digits or high single digits.

It will continue to do that we believe as we go forward .It’s now starting to eclipse, some of the struggles we had in the heavier industries as a consequence of new regulations and other things.

China grew in the fourth quarter, we expect it to grow next year both top and bottom line as we go through, and these faster growth parts become a bigger part of the portfolio there. So, we’re feeding that we’re feeding Southeast Asia, we’re feeding Indonesia and other markets that are growing disproportionately.

And we’ll continue to do that as we move forward. Demand there, I would say in a number of areas is quite good and we want to make sure we’re up to supplying and meeting it..

Our next question is from the line of David Begleiter at Deutsche Bank. Please proceed with your question..

Thank you. Doug, on healthcare, it’s now been about a year since you acquired Anios.

Can you give us an update on how that is progressing? And overall in healthcare in 2018, how are you looking at growth for that business?.

Yes. I mean, Anios is -- look, you have to like it a lot to buy it and pay what we paid. I mean, it was clearly within market metrics, but market’s frothy. It turned out to be a great acquisition as we thought it was.

So, sitting here a year later, I think the team, the Anios team, our integration team, the healthcare team at large has just done a fantastic job bringing that business into the fold. They’ve done it in a way that has not disrupted the business. We’ve fed the business; we’re working to enable the business.

They had a very clear way of expanding globally. We’ve made it a lot easier because they don’t have to build infrastructure, it already exists. And so, what we were going to do frankly with a Ecolab line and Anios can do, we’re now doing via an Anios line and expanding and it’s going quite well.

What do we expect? I mean, if you look at Anios organic growth and our other organic growth, you’ve got to kind of blend them together. It’s growing at a mid single digit combined growth rate right now. My hope is that we’re able to tick that up through the year, as we go forward. I think, there’s good plans and reason to believe that.

But the business has been performing well. Anios is ahead of plan, top and bottom versus our first year expectations, and we always have high expectations. So, we’re quite pleased with the business. The more you learn about it and the more you interact, frankly better you feel cause it’s really a terrific business..

And Doug, just on institutional, the acceleration to that 5% run rate at year-end, what one or two things are going to drive that acceleration from today for the rest of the year?.

Well, some is the base stops being a problem. I mean, I want to be straight. But the other is just better execution. I think, the team went back and did a good job of looking at their plans in the last really two years. And we had a lot going on in that business that I think started pulling people’s eye off the ball.

We talked about it in prior calls, in terms of field technology rollout, kind of a major one. And every time we do these, we learn. And also the integration of Swisher was very intensive in terms of how deep it went in the organization. So, those things are behind us.

I think, they tried to do too many things last year on one level and not enough big things, it’s their summation of learning. I think their plans this year are much crisper, much more focused, the stuff that can make a difference. We -- you only get several yeses a year in a customer, you want to make those yeses count a lot, both for them and for us.

And I think we’re just back to some of those basics and the team’s plan reflects that. And you can already start seeing some of the benefits as we start tracking those metrics. So, I’m calling what’s -- I know it’s going to improve. Does it hit 5? I bet, yes, but it’s certainly not going to be hanging around the 3 level..

Our next question is from the line of Chris Parkinson with Credit Suisse..

Great. Thank you. F&B performance appears to have taken a turn for the better on the back of new business wins and enterprise selling, after as a little problematic I guess 12 to 18 months ago.

Can you just quickly comment on your expectations for the balance of ‘18 and even into ‘19? Does the current growth rate have the runway? And if so, what subdivisions and geographies are the key drivers? Thank you..

Yes. I would say, the F&B business, I think that team’s done a terrific job. ?And this marriage between F&B and water technologies which both the water white team and F&B have done a amazing job partnering, collaborating and developing outsized advantage, it’s driving both businesses forward, has been huge.

And it’s very difficult for competition to even come close to matching it, because nobody else has these two businesses. And our expectation, I think you are going to see more of the same from F&B. Every quarter is not going to be identical to the fourth quarter. But, I think, call it plus-minus 6, as we go through the year, quarter-after-quarter.

The light business is also doing well. Where do you see the growth? I mean, the good news is it’s in some of the bigger markets, right? North America, we would expect to have at least average growth versus the 6 I talked about; China a little above average; AP above average; Latin America above average. So that’s sort of where we see the growth.

But, we would expect to grow in every region..

And just a quick follow-up, quickly on pest elimination, you’ve seen some solid organic growth and also made a few smaller acquisitions.

Can you quickly reiterate or give additional commentary around your long-term strategy with enterprise selling, any geographic opportunities as well as the larger M&A landscape?.

Yes. The pest business, I mean, I would say that team continues to do a great job executing and delivering value for customers. We are getting paid for it. Their growth is upper single-digit, 8% in Q4, which is good. If you recall maybe four or five years ago we were at the very low single-digits.

And we’re getting called out regularly what the heck is going in pest, and I think the team has done a terrific job driving organic sales growth. We did make a recent acquisition. It improves our ability to serve the F&B segment.

So, that will enable us to drive even more value into that segment when you start coupling it with the water and F&B technology that I discussed before. It’s a very attractive segment for the pest business as well, because it drives real value there and they’re big units. So, they are efficient, if you will, for delivering pest services.

So, all that’s positive. Our strategy going forward, we’ve always said we really like this business, run well. It’s a very high return business. The only way to ruin a high return business is to go make a lot of overpriced acquisitions. And so, that’s the one mistake we won’t make. We love to make acquisitions in this area.

You just got to be disciplined that you don’t end up overpaying because it’s sort of a sin you can’t recover from. There are huge expansion opportunities. We are doing some of the Greenfield in the absence of acquisition targets. There are some things that we think might come onto the market in future and we will take a deep look at those.

And if we can buy them at a price that makes sense, we would love to do it..

Our next question is from the line of Hamzah Mazari with Macquarie Group..

The first question is just if you could just give us an update, how big is your corporate client base? And specifically you had talked about circling the customer a few investor days ago.

Just curious, how many of these customers are subscribing to the entire product suite? Is there still room or opportunity there?.

Look, we have all these different businesses and it’s all a different number for every business. We don’t typically have like a single enterprise number for what corporate accounts represent. Many of our businesses, it’s the majority because it’s the nature of the industry.

F&B has obviously been historically dominated by large players, think soft drinks, think beer increasingly in other areas, think QSR, fast food, et cetera. And so, it comprises a significant portion of our sales. If you look at it in total, you could easily triple the sales to that segment.

If you sold them everything, we have to offer where we have to offer it. So, whenever, I say that, people say, well, that must mean you’ve done a terrible job in the past circling the customer. And I’d say, I don’t think that’s a fair read of that stat. What it really implies is two things.

I think, we have continued to drive successfully circle the customer strategies. If you go back to the commentary I had earlier in terms of how we’re approaching the F&B business with the water technologies, F&B and even pest, and that’s been quite successful.

But, we also simultaneously have been adding to the total price by expanding our market opportunity. I think, it’s one of the smart things that we do as a company, we’ve done historically is we expand before we need to, so we don’t run into walls, like growth walls, run out of growth. So, we have significant opportunity in front of us.

If you told me all we could do is sell the existing customers, I would tell you we continue to grow like we are. I would also tell you, it’s a strategic mistake, because it takes pressure off our competition. So, I think you need to do both, if you’re going to be a successful company and that’s how we view it..

Just a follow-up question on capital allocation. One, you didn’t buy any stock back in Q4. How are you thinking about repurchases going forward? And then, along the same lines on capital allocation, how important is a chemical sale process for you guys around M&A? Swisher didn’t really have one, but deals in the did.

So, just any thoughts on capital allocation, specifically buybacks and M&A?.

Well, yes, I would say, look, we look at acquisitions to do a variety of things for us and they have in the past and will in the future. We’ll bring in technology that we think will be useful, leverage across the platform, we buy sometimes competitors and markets that we don’t have a large footprint to give us a head start.

And so, yes, I mean, we like companies that have chemical platforms; I would say, Swisher actually did. Swisher -- the business really we bought was a similar warewash business. We sold the restroom business and got out of that, because that wasn’t what was attractive to us as we went forward.

In terms of share buyback, we didn’t make any purchases in Q4, because we made the purchases early in the year. It wasn’t anything more. We tend to have a budget or expected spend level in share repurchase, we had reached it, and we reached it earlier in the year. We count on our share price appreciating throughout the year.

So, it’s typically cheaper early as we go. We also did a lot of M&A in the fourth quarter, which was a -- in our minds, our preferred use of cash as we go. So, I mean, it’s a variety of things..

Our next question is from the line of P.J. Juvekar with Citigroup..

Hi. This is Scott on for P.J. Thanks for taking my question. So, maybe just looking at your outlook for raw material inflation in first half.

What are your expectations for caustic soda specifically and are there any other raw materials that you’re keeping your eye on?.

I’d say, based on today’s price it’ll go up, caustic. Look, we go raw-by-raw-by-raw, and ours is a big basket of products that we buy. I mean, it’s over 10,000 specific products. So, it’s tough to keep track of everyone individually, although there are few that we pull out and watch. So, here is our expectation. I would say, the peak we believe is in Q1.

It’s a significant headwind in Q1, stepped up from Q4. And so, while originally in the third quarter we thought that there would be a spike in Q4 and it would abate; it did not. So, in fact, it’s gotten stronger. You guys all see this, it’s plenty of public and data around these facts.

We believe that it starts to moderate but not go down, moderate in terms of increase moving into Q2 and Q3. And then potentially, you might see a decrease in Q4. Let me say, we aren’t betting our year on it, because right now, every time we forecast moderation in price, it seems like we get the opposite effect.

So, we’re starting to hope for higher prices, maybe it will have the unintended consequence, but that’s how we see it. So, it’s real, we’re pricing for it, we’re out there. The environment is inflationary on a number of fronts. Inflation, historically, we complain about it but it’s been more a frame than a foe.

And we’ve got to do what we’ve got to go do. And I would say, the businesses are getting the price that we need to continue to keep pace and ultimately completely offset the inflation we foresee..

If I could just get a follow-up then.

So, going back to institutional, when you are looking at improvement by year-end in that business, can you point to any market segment, like full service restaurants, lodging or long-term care where you think you can execute better or any of those market segments that you’re more excited about than the others?.

Yes. I would say, our lodging business has been strong, remains strong, and we are forecasting continues to be so. I think where we see because of the warewash launch and the focus, we would expect that our full service restaurant business improve. And that’s what we’ll see because it’s a larger segment where we will see probably the best pick up.

Long-term care represents a great opportunity. They are obviously everywhere you turn, new long-term facilities going up. That’s another area that will get increased focus, but I don’t think it’s going to be a prime driver in 2018. That’s more in out years..

Next question comes from the line of Mike Harrison with Seaport Global Securities..

Going back to response about the change in the raw material inflation rate, you guys updated your Q1 guidance, you increased it by a penny.

Just trying to kind of parse out if you are seeing higher raws, what changed in the underlying view on Q1 in the past few weeks that was a positive offset to the raw material inflation?.

Well, I mean, the simple answer on Q1 is where halfway through. So, you start having more confidence that your forecast for any number of things are accurate, simply because you’ve just taken the risk of time and it’s been reduced. Catalysts are our SAP implementation; we’re now whatever 10 days into it.

So, you know a lot in the first week and you learn a lot, honestly a lot in the first day i.e. does it work. And so, those questions have been answered. We’re quite confident, it would, but now, we don’t have to be confident in the future. We can be confident in what’s already transpired.

On raw materials, you get to a point where it just says less time to have a huge impact on the quarter as you go through, both internationally because a different convention and in the United States, even though it impacts faster, you’re just running out of time, and you start seeing your pricing take hold.

So we had a clear forecast, we had clear trends, but you still have to get people to accept the price and put it in and ship them at that price. And so, all those things led to, I would say, greater degree of confidence that we would be moving up the range, and led us to move the forecast and signal that risk is kind of moving away.

And the good things that we thought would transpire are transpiring as we go through here. But just to give you a flavor, I mean, raws, in this quarter like a 14% headwind. So, we’re going to do we believe double digit, at the mid-point, but it’s not like in this benign environment. People want to talk about tax, all right.

Well, I’ll give up a whole year of tax in one quarter on raws. So, it sort of misses the broader picture. Now, we’re more than covering that with pricing also year-on-year. So, we’re not crying in our soup over this, but we are -- there’s real work, the teams have done it, we’ve done in the past.

So, there’s real I think reason to believe, but it’s just to give you the type of level that we’re talking about..

And then, on the energy business, I think, you’ve been reluctant in the past to talk about the operating leverage that you’re expecting in 2018 or OI growth relative to sales growth in the segment.

So, with a view toward mid to upper single digit top line growth in 2018 and now that you’ve left some of the headwinds around compensation and the other factors that you talked about, what sort of margin improvements or OI growth is factored into the energy business in your guidance for 2018?.

Yes. We would expect to see OI margin leverage improved for the year, probably starting mid-year, Q2 maybe earliest, but certainly in the second half. I would think in like, probably this year we cover maybe 100 basis points of margin type expectation..

Our next question is from the line of Tim Mulrooney with William Blair..

Good afternoon. The water segment has inflected into stronger growth territory lately, I mean the year I think at 5%, which is really above what we’ve seen over the last several years.

So, I guess, my question is how sustainable is that as we look into 2018 and beyond? I’m curious how you think about this business in terms of a long-term growth trajectory?.

Yes. Our expectation for the water business, particularly the core light and heavy water would be to continue to accelerate that business more in line with the 6% to 8% expectation and so, move up this year from 5% to 6% as we go forward.

Paper, we do not see and nor have we in the 5% to 6% range, but we see paper is a consistent, steady, low single digit grower that could continue through technology and a number of great initiatives, continue to enhance its margin as it enhances its ability to help customers make more money. And so, that’s where the paper business fits.

The big sea change that will occur for water is really the China business. And as we come out from under some of the challenges that the paper -- or the water business, particularly the heavy business had in China, I’ll think you’ll see that flow through and start driving faster growth globally..

And my follow-up is back on the institutional division. You kind of broke down by each segment what you expect, long-term care, there’s a long-term opportunity there, lodging continues to be strong you said. So, you expect to see the improvement on the full service restaurant side, which was good to hear.

I’m just curious what gives you confidence to be able to say that for 2018. Is it more of a -- well, you’ve been making these investments since the back half of 2017, so it’s more of an internal improvement or the external environment is improving, any additional color there would be helpful. Thanks, Doug..

I would say two things. I mean, as we look at this market, there’s a lot of conversation about unit loss et cetera. But, the unit loss really isn’t in the sweet spot of our market. If you look at full service restaurant chains and/or QSR chains, both had unit growth last year, albeit quite modest, but not down.

The decline in units has really been in the independent segments of both QSR and full service restaurants. And I would say, this is bolstered by our own internal data when we look at loss figures, i.e. how much sales did we lose year-on-year? And this is one of the metrics that we track closely for decades.

We’re at really record low levels of lost business. And our losses include bankruptcies and closures. And so, I don’t know if an Outback closes a unit that would show up in our lost column, even though we had nothing to do with it, quote unquote.

And so, to look at the levels we are in losses, I would say, also say the ground we’re on is much firmer I think than people think. We look at it as ground upon which we can get more purchase, I mean, in terms of forward momentum. And that’s why we have confidence too.

We’ve already started instituting these plans so we’re starting to see them bear fruit. So, it’s not -- I mean that’s why we think Q4 was better than Q3. It’s the specific sales events and sales efforts and why we’re confident we’ve already got right some data you might imagine in Q1, sitting here in the middle of the quarter.

So it’s all those factors that lead us to believe we’ll be able to do better there. It’s a big business. It doesn’t go down fast and it doesn’t go up fast. We are running in the U.S.

at 6%, not very long ago, you sort of saw a steady degradation of sales but went down to really probably realistically 2 to 3% at its low point which I would have called Q3 and started moving out. But it doesn’t, it’s not going to snap back, it’s going to take some time to rebuild its momentum but the team’s on it..

Our next question comes from the line of Dmitry Silversteyn with Longbow Research..

Good afternoon. Thanks for taking my question.

I’d like to follow up on your comments about China and specifically how the impact of the government’s tightening environmental regulation is playing in your industry? In other words, are you seeing more benefits from some of your competitors perhaps being pushed out of the market as a result of this? Or is this a little bit of headwind as some of the manufacturing facilities where you may be supplying that heavy industry water treatment products that are slowing you down? So, can you talk about sort of what’s going on in China with their manufacturing footprint reduction across the industries and how it’s impacting Ecolab?.

I call this one of these classic things. Overall, this is a great thing. I think, it’s a great thing for the world. I think, it’s ultimately a great thing and a smart thing for China. And it will be a good thing for Ecolab. But, there’s like adjustment period to get through, which is a period we are in.

So, I think, you cited a lot of, Dmitry, it’s what we are seeing. So, we have some customers that are being shut down who can’t make the transition to the new regulations, loss business. We have other customers who can make it, who are buying better technology and paying more money, so that’s a plus.

And then we also see what I would say is some supply disruption globally in the chemical industry, which has led to some, at least justification, whether it’s real or not for price increases and we’re seeing that in raw materials. Because a lot of what I would call substandard chemical producing plants have been shut down as well.

Now, that stuff ends and the good news flows for the long-term, i.e., standards are going to be raised, people are going to need to do more and meet to new regulatory environment. China, when they decide to do something, gets quite serious about it, and has been quite successful in driving new standards.

So, first, we see a lot in the power industry there. There is real pressure. They need to go meet these regulatory requirements in very short order. And so, we are having very important conversations there and we want to find ways that we can go and set the players to move up the scale. That will likely translate into higher spend with us.

So that’s the good part. So, I don’t mind the short-term pain, because I think long-term, this is exactly the type of move we hope for in China ultimately..

And then, just a follow-up on your comments around cleaning and sanitizing, you came out of 2017 at very low single digit growth outside of foreign exchange.

And it sounds like -- and I just want to clarify that it sounds like you are not going to look for much to change maybe in the first half of the year but with all the efforts that you made and with a little firmer foot that you are referring to, we should see some pickup in the back half of the year and then look for that maybe low to mid single digit growth in 2019 and beyond.

Is that the right way to think about cleaning and sanitizing over the near to mid-term?.

Dmitry, what segment were you talking about?.

The institutional, the cleaning and sanitizing portion of institutional, sort of your largest part of....

Yes. No, I am not that bearish. I would say, -- here is that what I would say. We would not define last year as not a good year for institutional. It grew, it didn’t shrink. We don’t think we lost share or anything else but we didn’t grow the way we except to. We started to see improvement.

And we believe we bottomed in Q3, if you want us to try to call it, and started seeing improvement in Q4 versus Q3. And what we forecast is we would expect to see the similar, maybe even a little better improvement Q1 versus Q4. So, no, we don’t believe this is like hanging out at his low-level.

But, what I’m trying to also suggest is it’s a big business, it doesn’t snap back quickly. What you’ll see is sort of continued modest improvement sequentially quarter-by-quarter to the point where we believe we’ll leave the year in that area at about a 5% run rate.

Hopefully, we can get there sooner, but that’s the most realistic forecast that we’ve got right now..

Our next question is from the line of Andrew Wittmann with Robert W. Baird..

I have couple of questions here, probably for Dan actually. Dan, I was looking at the guidance that you gave for the first quarter and for the year. It all makes sense, but the one line item here is interest expense, it’s up sequentially in first quarter. You guys did some refinancing that lowered the overall interest expense.

So, just trying to understand why the interest expense guidance appears a little bit high, and if there’s anything in there that we should be aware of, maybe CapEx or something that’s running higher than historical levels, things like that?.

Yes. I really think that it is just primarily rate driven, okay. So, we saw this pretty significant step down in interest expense between 2016 and 2017, despite the fact that our debt balances were up, that’s largely the impact, okay, of increasing our exposure to euro borrowing.

Part of that was related to the Anios financing and part of that was just increasing our exposure through the swap market. But year-on-year, although our debt balance remains about the same, what you’re seeing incrementally is really is rate driven. So, we’re not in an entirely fixed position in terms of our debt portfolio..

And then, maybe just as a follow-up, Dan, you’ve got an accounting change on revenue recognition here in 2018; in some of your prepared comments you referred to it a little bit.

I was just wondering if you want to give us a little bit more detail as what we should expect from that -- how it’s going to appear between gross margins and SG&A margins for us as analysts.

And maybe, is there any benefit to the actual revenue dollars that will be reported? We’ve seen other companies that have actually had benefit to the revenue from the new recognition standard?.

So, maybe just for sort of general benefit, explaining kind of what’s driving this revenue recognition thing, so we’re now required to split from both a sales and a cost of sales reporting, those portions of our revenues that are tied directly to products and then the portion that we think -- or what we estimate to be backed primarily by service.

And so, just I’ll kind of take your questions in sequence, if I could. So, from a P&L and geography perspective, the first thing that you’ll note is a reduction in our gross margin of about 5 percentage points, which will be offset by reduction in our SG&A ratio of about 5 percentage points.

And so, no real -- no impact at the operating income margin line. What’s driving that reduction in gross margin is really a restatement of expense from SG&A, so think about where the cost of the service currently resides, a lot of it is currently in SG&A and that will be pumped up to the cost of sales.

And so that’s going to really drive this 5 percentage point gross margin reduction, but sort of net to operating income from revenue recognition at operating income it will be equal. We will actually be -- so this is a little bit ahead of the game.

We’ll be showing the full reconciliation and restatement in April ahead of our Q1 earnings, but we actually expect to see a very small reduction to reported sales as a result of revenue recognition.

Because if you think about -- we invoice at the product level, if you think about typical ship and bill arrangements where shipments laid in the period, we haven’t actually performed the service yet, and so there is going to be a drag that we estimate and it will be restated for both years of about a penny to 2017 into 2018.

The other big accounting change that’s out there, just maybe to round up the conversation is on pension. And here -- so there is -- we are required now to split the results of our pension into two pieces.

So, the expense, which is, I would think about that as the annual expense or people accruing pension benefit, will continue to be a component of operating expense.

But, the result of the earnings on the pension portfolio, we’re now going to go below operating income, the net of that will be a reduction of about 50 basis points to our reported operating income ratio, again, all restated..

Our next question is from the line of Shlomo Rosenbaum with Stifel..

Just a question also for Dan. Dan, it looks like the guidance is assuming at the midpoint somewhere around close to 100 basis points of margin expansion.

Could you talk about some of the components that are going to drive that especially since there are so many tough comparisons in the first half of the year with raw materials?.

Well, I think, as Dough pretty clearly indicated, we feel good about our pricing program and our efforts to continue to drive pricing to cover the higher impact of raw materials.

There is as always growth in the business, will continue to drive some degree of SG&A leverage as well as other leverage across our supply chain cost structure, at least part of which is fixed. There is always cost savings in there too. We’ve been quite aggressive in 2017 on cost savings programs, which will drive an annualization next year.

But the biggest driver expect to be the continued benefits of pricing versus raw materials through the year, plus volume leverage I would say..

And then, just as a follow-up on that, based on the acquisitions to-date, how much acquisition revenue do you expect to have in 2018, and if you can kind of net that on the Equipment Care divestiture just so we get a way to understand it net-net debt?.

Relative to the Equipment Care piece, it’s almost immaterial. If you think about Anios being the big deal; that was done so early in 2017 that the annualization is going to be minimal and the rest of them are not going to be big revenue drivers..

Our next question is from the line of Rosemarie Morbelli with Gabelli & Company..

Going back to the raw materials, can you give us a feel for what the hit was in 2017 on a per share basis and what are your expectations for 2018 of the timing, magnitude?.

Two seconds, we’re adding numbers..

Sure.

So, while you are adding numbers, I was wondering, in terms of pest, you mentioned your interest in getting additional acquisitions as long as they are in line with what you are willing to pay and makes sense, would, after the -- I’m not so sure how to phrase it, after the fiasco with ChemLaw; I just really didn’t find the right word; after the fiasco with ChemLaw, would you consider that going into the consumer household type of pest elimination? And I am thinking Terminix, to make it clear?.

Yes. So, I will answer. I think, what we’ve said is our focus has been and continues to be on the away from home markets. It’s I think, the decision that was made honestly before I got to the Company to focus in these areas, has proved to be a very wise one.

And so, while we’re quite successful here, we don’t believe that necessarily translates to success in residential or consumer in terms of -- so even in the pest area, given part our circle, the customer strategy, building on our knowhow, we prefer staying where we are. So that would be how I would think about our focus going forward.

Back to your earlier question, last year in 2017, raws were, call it plus-minus $0.37, in this year, it’s probably another $0.30. But, the vast majority are like almost half of that $0.30 year-on-year hits in Q1..

Okay.

And so, if I look at 2017, by the fourth quarter, you had recovered at least on a run rate basis, the full $0.37, and then, [indiscernible] in addition to?.

No, I mean, we really started seeing white, I mean, it was like $100,000, I’m being a little facetious, between pricing and raw material increase in Q3 for the first time.

It was underwater and dilutive on an EPS basis in the first half of last year, neutral, really I’m just talking not margin, I’m talking EPS, neutral in Q3, and then slightly accretive in Q4.

Q1, we’re going to be back to just barely accretive on an EPS basis, is our expectation because we think pricing will be just a nose above raw material on an absolute dollar basis, but we start seeing increasing daylight as we go throughout the year.

And that’s not because we see raws falling but it’s because pricing continues to build and raws are running against the base last year where it increased really in late first quarter and more in the second and third quarters..

So, if I understand properly, while you will have that impact of $0.30 from raws, it’s not going to affect your EPS by $0.30 because you will be offsetting it with price increases, am I thinking about it….

Yes, most definitely, it’s yes. So, Rosemarie, I mean, our -- this is all incorporated in our forecasts which is for double-digit EPS. So, yes, we’re more than offsetting it with pricing as we go throughout the year. It’s just -- we’ve gone through these periods.

It goes benign for a few years in and then you have typically a two-year, fairly steep run up in raw material prices, started in late 2004 and 2005, and then we had another one in 2007, 2008 period and then 2011 and 2012 et cetera. So, we’re in just another one of these periods. We’ve handled them. But, they do have near-term impact on the business.

And we’re just trying to get all the transparency. I think, the team is doing a good job, we’ll cover it. And I think we’ll come out of 2018 in a strong position..

Okay, great. And if I may ask one last question, you gave us Q1 as a range of $0.85 to $0.93 but let’s say it’s up 6% to 16%. But in your remarks Doug, you mentioned double digit growth for every quarter on the EPS basis.

So, what would need to happen and what would you be unhappy to see in order to not reach that 10% growth in the first quarter?.

Well, I mean at this point, I mean, the midpoint implies double digit. And so, midpoint is not loss on either. And so, what could happen that could knock you off? We could have a problem with our SAP system. I don’t think it would be a problem that would be an ongoing problem but could be a problem that costs you money in the quarter.

You could have some huge roll up that we don’t -- run up that we don’t forecast on raw materials, it’d have to happen pretty quick. It could happen. And we could end up not hitting our sales forecast. So, I mean, there of course is risk here and then there’s upside as a consequence, which is why we have a range as we go through here.

But, it’s any number of those things. That’s life in the business world. So, we’re giving our best forecast. And my expectation is, we’re going to do everything we can to go deliver at least at the midpoint in the range. We always like to be at the upper side but we give you a range and that’s what I’d focus on..

Thank you. Our final question today is coming from the line of Dan Dolev with Nomura..

Hey. Thank you for taking my question.

Just so I understand, given the discussion about the accounting, the 47 to 48% gross margin guidance for the year that is apples to apples with fiscal ‘17, correct?.

Yes. That’s correct. As I indicated earlier. We’ll do the full restatement in April ahead of the release of the quarter..

Got it. And then, sort of related to that, if I go back to kind of your legacy business in 2005, when raws were very high, you had about a 100 basis points gross margin drag and the snap back was about 30. If I go to Nalco it was even worse and the snap back took longer.

I mean, you’re kind of implying 70 basis points of gross margin improvement for the year. Why is it different this time, especially given the more muted inflation versus kind of the last decade? Thank you..

I don’t know, I mean, this is a two-year raw material cycle. So, I would just say, I’m not sure if it’s really materially different.

I think, the water business and energy business, I mean, are in a different cycle than they were at that time, but they’re both much better equipped now to go deal with this pricing environment than they were in ‘04, ‘05.

‘04, ‘05 was the first time really raws had meaningfully moved for almost any of us on this piece of chemical business in like 20 years. And all of us had to go figure out how we’re going to develop the new pricing capabilities and all the rest. And I would say, it was one of the things that we did quite successfully.

I think, if you looked at Nalco’s history, they were much better in the ‘08 period and captured a lot of that run up and then even better in the ‘11 and ‘12 period, and that was a period at which we were looking right to buy. And so, we did a lot of studying of their capability. So, I don’t know that it’s materially different.

You just got a two-year pretty powerful cycle. We are on it. We are going to catch up. I don’t think there is -- I am quite confident we will end up recouping margin, not just dollar with our pricing..

On the Equipment Care, would you be able to quantify the margin uptick from the divesture?.

Yes. I don’t -- it’s not, I mean, Equipment Care was like 3% of that total business, and it’s the one that at zero margin. So, immaterial. It’s not going to be -- it won’t hit the rounding..

Thank you. I would like to turn the floor back to Mr. Monahan for closing remarks..

Thank you. That wraps up our fourth quarter conference call. Before we end, I want to mention that we will hold our tour of the booth at the NRA Show on May 21, Chicago. This conference call and the associated discussion and slides will be available for replay on our website.

So, thank you very much for your time and participation, and best wishes for the rest of the day..

Ladies and gentlemen, thank you for your participation. This concludes today’s teleconference. You may now disconnect your lines, and have a wonderful day..