Q1 2020 Earnings Call
Greetings and welcome to the Limoneira first quarter 2020 earnings conference call. At this time all participants are in eight listen only mode. A question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero under telephone keypad. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host John Mills I see our thank you Sir you may begin.
Good afternoon, everyone.
Thank you for joining us for Lehman Eris first quarter fiscal year 2020 conference call.
On the call today are Harold Edwards, President and Chief Executive Officer, and Markel amounting Chief Financial Officer.
By now everyone should have access to the first quarter fiscal year 2020 earnings release, which went out to date approximately four PM eastern time.
If you have not had a chance to be either released its available in the investor relations portion of the company's website at Lehman era dotcom.
This call is being webcast replay will be available on the luminaires website as well.
Fourth again, we'd like to remind everyone that prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions.
Such statements involve a number of known and unknown risks and uncertainties many of which are outside the company's control and could cause future results performance or achievements to differ significantly from the results performance workiva expressed or implied by such forward looking statements.
Factors that could cause or contribute to such differences include risks detailed in the company's 10-Q's in 10-K filed with the FCC and doesn't mention in the earnings release.
Except as required by law, we undertake no obligation to update any forward looking statements herein.
The result of new information future events or otherwise.
No. The during today's call will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis in greater understanding luminaires ongoing results of operations, particularly when comparing the underlying results from period to period.
We have provided as much detail as possible on any items that are discussed on adjusted basis.
Also within the company's earnings release in today's prepared remarks, we include adjusted EBITDA, which the non-GAAP financial measure a reconciliation of adjusted EBITDA for the most directly comparable GAAP financial measures is included in the company's 10-Q and press release, which had been posted to our web site.
And with that it's my pleasure to turn the call over the company's President and CEO Mr. Harold Edwards.
Thanks, John and good afternoon, everyone on today's call I will provide a brief overview of our operational results for the first fiscal quarter, which is seasonally the softest quarter of the year. Mark will then review the financial results in more detail and I will finish with our outlook for fiscal year 2020.
After that we will open up the call and take your questions.
As expected our fiscal year, 2021st quarter generated higher lemon volume offset by lower pricing, primarily due to the strong wins, we discussed on our fourth quarter call. These wins affected our ranches in southern California, reducing the amount of higher priced fancy lemons for sale.
We also experienced an increase in avocados, oranges and specialty citrus revenue year over year I'll now discuss each of our business segments, starting with a full review of our agribusiness.
Over the past few years, we've made important investments that have how best position for longer term growth and improved efficiencies.
Paramount to this growth is expansion of our customer base, which we've expanded the over 250 customers, including leading restaurants and grocery store chains. This expansion is come by leveraging our domestic and international marketing and sales channels, focusing more on trade marketing and consumer facing strategies and utilizing our.
<unk> increased packing capacity.
Equally important is expansion of our agricultural acres, we enter fiscal 2020 with over 9700 planted agricultural acres of which approximately 1200 acres are currently nonbearing lemons, but estimated to become full bearing over the next four years in 2020, we expect three.
And your to these acres to be full bearing with an additional 300 acres to be full bearing by 2021 and the remaining 600 to become full bearing by 2023.
Beyond these 1200 acres, we have plans to plant an additional 250 acres of lemons and the next two years and believe this additional acreage will increase our domestic supply of Lehman era, and lemons by approximately 50% from our current level of 900 cartons 900000 cartons to 1.3.
3 million cartons additional fresh cartons as the nonbearing and planned acreage becomes productive.
In addition, we expect to have a steady increase in third party grower fruit.
As we expected avocados oranges and specialty citrus were all up year over year, we sold approximately a 125000 pounds of avocados during the first quarter of fiscal year 2020 compared to minimal pounds in 2019.
We also achieved $2.3 million of Orange revenue in the first quarter fiscal year 2020, compared to $900000 in the same period last year specialty citrus and other crop revenues were $1.9 million in the first quarter fiscal year 2020, compared to $1.3 million into first quarter if.
Fiscal year 2019.
Turning now to our real estate development Division.
Happy to report the partnership between Lehman era, and the Lewis group of companies for the development of harvest at Limoneira continues to perform well.
[noise] initial lot sales, representing 210 residential units close in fiscal year 2019, and we recently closed an additional 34 in the first quarter of fiscal year 2020.
Longer term, we are projecting approximately an additional $80 million in cash flow from the harvest at Limoneira project over the next six to nine years, which is expected to include 1500 homes.
During the past few weeks, we have begun to experience negative headwinds to consumer demand and supply chain logistics from covert 19.
Lemon and Orange export shipments to Japan, Korea, and the rest of southeast Asia ours are down significantly.
People aren't going out as much in those markets, which is impacting demand. We're also experiencing shipping challenge is to those export markets as ports wrestle with the impacted the virus. The combination of these factors is also causing a current oversupply of lemons in Orange is domestically, which is also affecting price I'll discuss our guide.
It's a little later later on in the call, but wanted to provide that color on the current state of affairs in our business and industry.
In summary, we can only control what we can control and while we are seeing near term pressure on pricing and demand. We're working through these constraints and continuing to make investments behind our business to drive longer term growth.
And with that I'll now turn the call over to Mark. Thank you Harold and good afternoon, everyone before I discuss our financial results for the first quarter ended January 31st 2020, I want to remind everyone that due to the seasonal nature of our business revenue was driven by varying harvest periods from year to year and therefore.
We advise people to view our business on an annual not quarterly basis.
Additionally, our first and fourth quarters have historically been seasonally softer quarters, well, our second and third quarters are stronger.
For the first quarter fiscal year 2020, total net revenue was $41.7 million compared to total net revenue of $42 million in the first quarter of the previous fiscal year.
Agribusiness revenue was $40.5 million compared to $40.8 million in the first quarter last year. Other operations revenue was relatively flat compared to the prior year at $1.2 million in the first quarter fiscal year 2020.
Agribusiness revenue for the first quarter of fiscal year 2020 includes $27 million in fresh lemon sales compared to $30.9 million a fresh lemon sales during the same period of fiscal year 2019.
That's Harold said earlier the decrease was the result of lower prices being partially offset by an increase and the volume of fresh lemons, approximately 1.280 million cartons of fresh lemons were sold during the first quarter fiscal year 2020.
A 21 dollar and 12 cents average price per carton compared to approximately 1.272 million cartons sold at a $24.30 average price per carton during the first quarter of fiscal year 2019.
It is our expectation that the pressure seen on fresh lemon pricing will continue until the north American summer demand picks up and late spring early summer.
The company recognize $200000 of avocado revenue in the first quarter of fiscal year 2020, compared to minimal avocado revenue and the first quarter of fiscal year 2019, approximately 125000 pounds of avocados were sold during the first quarter fiscal year 2020 at a one.
Dollar and 34 cents average price per pound.
The company recognized $2.3 million of Orange revenue in the first quarter of fiscal year 2020, compared to $900000 and the same period of fiscal year 2019 attributable to higher volume, partially offset by lower prices.
Approximately 196000 cartons of Orange is were sold during the first quarter of fiscal year 2020 at a six dollar and 71 cents average price per carton compared to approximately 124000 cartons sold at a seven dollar and 63 cents average price per carton during the same period of the.
Previous fiscal year. Additionally, in fiscal year 22020, $900000 of Orange is were purchased for resale.
Specialty citrus and other crop revenues were $1.9 million and the first quarter fiscal year 2020, compared to $1.3 million and the first quarter fiscal year 2019. The increase was primarily due to higher volume and a decrease in price of specialty citrus.
Total cost and expenses for the first quarter fiscal year, 2020 increased to $50.1 million compared to $45 million into first quarter of last fiscal year.
The first quarter fiscal year 2020 increase in operating expenses was primarily attributable to increases in agribusiness and selling general and administrative costs and expenses.
Cost associated with the company's agribusiness include packing costs harvest costs growing costs cost related to the fruit procured and sold for third party growers and depreciation expense.
Operating loss for the first quarter of fiscal year, 2020 was $8.5 million compared to a loss of $3 million in the first quarter of the previous fiscal year.
Net loss applicable to common stock after preferred dividends for the first quarter fiscal year 2020 was $6.6 million and compares to a net loss of $4.8 million in the first quarter fiscal year 2019.
Net loss per diluted share for the first quarter of fiscal year 2020 was 37 cents and 28 cents for fiscal year 2019.
Excluding the noncash unrealized loss on stock and Calavo growers and equity in earnings I believe Minera Louis community builders for the first quarter of fiscal year 2020, adjusted net loss applicable to common stock was $5.2 million or 30 cents per diluted share compared.
To the first quarter fiscal year, 2019, net loss of $2 million or 11 cents per diluted share, which excludes the noncash unrealized loss on stock and Calavo.
Adjusted EBITDA was a loss of $5.1 million in the first quarter of fiscal year 2020, compared to a loss of $600000 in the same period of fiscal year 2019.
A reconciliation of adjusted EBITDA to net income is provided at the end of this release.
Before I hand, the call back over to Harold I comment on our balance sheet long term debt as of January 31st 2020 was $126.6 million compared to $105.9 million at the end of fiscal year 2019.
Now I'd like to turn the call back to Harold to discuss our fiscal year 2020 outlook.
Thank you Mark as a reminder, for those of you need to our story, we're providing adjusted EBITDA guidance and lemon volume guidance by cartons and no longer providing earnings per share guidance. We believe adjusted EBITDA can facilitate a more complete analysis and greater transparency into our ongoing results of operations.
And remove certain noncash items that create fluctuations in earnings per share.
As I mentioned in my earlier remarks, due to the Corona virus effect on our Asian markets. We are updating our full year fiscal 2020, adjusted EBITDA guidance, excluding the noncash mark to market on stock in Calavo, an equity in earnings from harvest at Limoneira, We now expect our adjusted EBITDA for fiscal year 22.
20 to be in the range of $15 million to $20 million compared to the previous range of $22 million to $26 million.
In addition, we continue to expect to sell 7.5 to 9.5 million cartons of fresh lemons globally included in this revised global cartons estimate our five to 6 million cartons, we expect to sell domestically.
And with that I'd like to open the call up to your questions operator.
Thank you, ladies and gentlemen, we will now be conducting the question answer session. If he would like to ask a question. Please press star one on your telephone keypad. The confirmation time would indicate that your line is on the question Q you May press Star table, if he would like to remove your question from the Q for participants season speaker equipment. It may be necessary to pick up your heads up before part.
During the start keys, one moment, please let me pull for questions.
Thank you. Our first question comes from the line of Vincent Anderson with Stifel. Please proceed with your question.
Thanks, Good afternoon, so I just wanted to maybe hi.
I just wanted to.
Take into guidance, a little bit more help us bridge the old EBITDA, the new EBITDA, just because you at the midpoint, it's 30% reduction and and I don't think you had 30% of EBITDA coming from the Asian export markets, but maybe if you could just frame that up.
Terms of what you're losing to exports, what you're kind of baking into your expected realized pricing for the year, what's coming out of fancy just any any additional I'd tell you can provide there.
Sure I'll make some comments mark jump in after so basically we've seen export shipments dropped to what are normally 30% down to 20%.
And which is mostly due to the disruption from the virus, causing impacts on we believe reducing demand and also making logistics more challenging as charters are expanding out from one week to two weeks. So that's a part of it also just due to.
Our product mix this year at least a where we believe it will be in terms of a lower percentage of fancy fruit that fancy fruit is typically what hits the expert port markets. So.
The the combination of product mix.
And fewer shipments to southeast Asia are what are really creating the biggest impact on price and so the simple summary of the reduction in the range of EBITDA is due to lemon pricing, but the primary contributors are reduced shipments to.
The southeast Asia and actual.
A lower shipments domestically of fancy fruit, yeah, and I'll add just just speak specific detail. So we were it at our last call in January I'm looking at a $22 and 50 set price I'm for the year currently I'm, we're selling into March at $18 as you saw.
And this Q you know the the numbers was about towards the 21 12. So we're cautiously looking now at 21 dollar target for for the for the entire year now some of that depends on summer pricing getting up into the low to mid twenties, which we think is very achievable, but yet.
Yes to be seen the other component to the adjustment down is a enable orange is most recently the press has come out that you know last year. We thought was the worst pricing in history of needle Orange is and this year looks to be worse, given the difference of matching export.
Pricing to domestic and now having a crowded domestic market. So we shaved a few million dollars off of our our Orange total numbers, just simply because worst 60% picked up we do have delayed varieties that are coming that garner typically better pricing, but again its too early to tell itself.
As we said we'd update on Orange is that that's the other component there.
All right that's a that's helpful. It feels fields.
Maybe a little.
Conservative in terms of just trying sort of a flat line from where we are today. So if we look overseas than.
Turkey those imports to the U.S. are already tracking well below last year, Spain same thing I was wondering if you had any early insights into Mexico, and what you're kind of baking in for your bed your summer pricing in terms of backs.
Imports from those regions.
So Mexico haven't had a lot forget I mean, they just finished in December so but in general we are sort of looking for you know roughly $24 as the summer total average price and you know that depending on and that's just U.S. and.
Then you know South America, you know anywhere from 16 to 20 dollar Fob.
Depending on how those markets open up spend being shorter that we know Turkey. As you mentioned do we have those opportunities to go into those markets. We think so Argentina starts here and the next few weeks, maybe get pushed a little bit just from demand, which which they can sit on the trees still so that's a good thing I'm. So.
There's there's lots of upside and also some risks and so we just felt like this was the right place to be.
Great. Thanks, if I could sneak in one more just turning to Corona cold here in the U.S.
Yes, it does seem that we're hearing more and more chatter that we're losing foot traffic in the U.S. restaurants, obviously conferences getting canceled hotel bookings down it does seem to be the hot spots for food service providers are you seeing any early indications of a slower buying from the food service companies are just too early to tell on that.
Vince its a little too early at this point, we we're shipping at normal levels still so we really don't have a good feeling as to whether that's inventory building or whether it's really flowing through at normal levels.
But it feels like it's still business as usual from a demand perspective, we did here that there was some reduction in demand.
Being caused in the fresh segment across the whole produce kit category because of stockpiling people seeking shelf stability and going more towards fruit frozen foods for for storage purposes, but while we were while we were hearing about that our shipments remained at at normal levels. So so far no.
Would we Ah we believe we're still shipping into normal demand domestically.
Alright, thanks, so much.
You.
Thank you. Our next question comes from the line of Foreign Sharma with Stephens. Please proceed with your question.
Hey, guys good afternoon.
Good afternoon.
So I just wanted to get your sense I mean.
When prices have been weaker.
Uh huh.
Hi.
Do you have.
For the summer for pricing and then if you could just once again just talk about the global supply demand dynamics that we should be aware of as we head into the spring and summer.
So our biggest issue right now is as the harvest domestically have shifted down into the coastal lemon.
Just the way the year has played out theres a lot. There's there's good sized distribution, which bodes well for the future fresh utilization of the fruit, but typically looks like it's it's tree ripe and yellow, which means that as that as that first pick of the summer fruit.
Comes off then the real catalyst for increasing pricing capability is going to be on the second pick and the second pick a fruit, which probably will begin sometime around late April early may and that's when we believe we'll start to get some lift in the pricing because there isn't as.
Much of that part of the crop available, but right now, it's pretty crowded and with the reduction in the export sales that keeps more that through fruit home here in the domestic markets, which is really which is really having a negative impact on the on the price.
Okay. Thank you and I'm just wanted to shift over to avocados real quick.
Could you talk about.
Got it crop for the summer what does it looks like and are you seeing kind of any.
Oh, good 19 impacts specifically.
Ricardo.
[noise], we've seen no covidien would impact for our avocados. We believe we have a up a crop somewhere between four to 6 million pounds 5 million pounds at the midpoint. The very pleasant surprise is it was anticipated that Mexico would have a very very large crop and that that.
The importation of Mexico, Mexican avocados would create a much more oversupplied situation, which would have a negative impact on pricing that has not played out Mexico has been very slow to import we've heard the Mexican fruit has been smaller so they're leaving it on there too.
Trees longer to get size, that's created some great pricing opportunities for us and as Mark reported we've seen our first a couple of hundred thousand pounds, a hit the market at about $1.30, where as we go forward. We're seeing prices now for 48 set out a dollar.
80, which was much stronger than we thought so as we work with a mother nature to size up our fruit, we believe that will harvest. The majority of our avocados, probably by the end of June early July and we're optimistic are hopeful that these prices will will hold up and will.
Exceed our plan for avocados for the year.
Great. Thank you guys. That's all I have for today.
Thank you.
Thank you. Our next question comes from the line of Ben Klieve with National Securities Corporation. Please proceed with your question.
Alright. Thank you a couple from me first regarding the guidance I'm wondering if you can.
Give us any insight as to how you are thinking about domestic demand I'm kind of the range of domestic demand and how.
What it would take to hit the high end of the guidance versus the low end of the guidance here.
Again on the domestic side please.
So yeah, we have a range of five to 6 million cartons U.S. I think part of that will be utilization I'm. You know right now we're in the call. It mid 70 percentile, where we'd like to be if things come to fruition, where yeah, there isn't enough fancy fruit and some of the lesser grade for.
Comes up there's possibilities to increase that you know whether it's from some of that using opportunities. We've all discussed.
But in general the tree crop is still there which is why we didnt change our tree crop guidance I'm you know it just depends on you know is is there going to be any restaurant demand Paula I'm or do we have opportunities to move smoothed fruit in other places they don't have it internationally that we've had for export so yeah.
I think we're comfortable right now in the middle right now yeah, we're looking at the trees right now at the window and there's tons of fruit on them and so has to be to be seen but we're happy with the tree crop and if I might just one other comment to the a the size distribution across the remainder of the crop that we see seems to be much more normal versus.
Last year, when all the fruit got big which really crimp that size of the market. So by having a normal size distribution that gives us a great opportunity to get our sales and if we get ourselves then we can get great utilization and great performance from our outside growers in our packing house at that point, then it's down to what's the average price we can get back.
Back to our own production and by moving the amount of fruit that we're forecasting we can get the efficiency that keeps our cost in the call. It call. It the 15 to 16 dollar per carton range and then it's just what we anticipate as an average fob selling price, which as Mark indicated earlier he is now.
A use $21 for the remainder of the year, Iraq actually to average for the year, which as sort of the midpoint of our guidance.
Got it okay. Thanks.
That's helpful and wondering if fun.
You can kind of comment on the.
Given given the nature of the kind of counts in the market today to what degree Youre kind of near term capital allocation plan is is.
Being impacted are you, making or you can see any.
You know any shifts in your strategy.
Any decreases in your Capex outlook for the year I think any comments there would be helpful.
So back to that we can only control what we can control. So we we've we've met as as a management team just recently to discuss austerity measures to really clamp down on focus in on on cost reduction.
At this point, we're really just trying to become as efficient as we can to to stretch out the margins, which are really being challenged because of the average pricing and along with that to your question. We're also really being a lot more conservative on how we're looking at our Capex and prioritizing.
The things that have to be done that affect revenue in the near medium and long term first and slowing down on capital projects that can be delayed or suspended without any real near term impacts on our on our business. So we are we are really trying to a tick up a harder look at costs.
And and really kind of rain in Capex as we manage through this uncertainty.
Got it. Thank you and just want one last quick one for me if I recall at this time last year you guys were.
Just swimming out in the field a in southern California, and wondering if you could just elaborate a bit on field conditions.
How you how a especially the Oh precipitation has has cooperated this year and kind of what's your outlook is as far as you can as far as you can tell.
In coming weeks and months.
Yeah, we had we had above average rainfall through December and then it went job dry and so we were ahead of ahead of normal rainfall through December.
It went dry in January and February, which then push it back into a shortage situation and it's been raining for the last three days. So my my feeling is is that it's kind of been a we're probably going to average come out to have sort of average rainfall. It's been good rainfall from the standpoint that it hasn't necessarily in.
Pack did our abilities to harvest. So we're harvesting normal distributions of fresh fruit as mentioned earlier, we're still dealing with the impacts of less fancy grade, mostly driven by the early.
Wins that we experienced in this production year, but at this point it feels like it's gonna be sort of normal rainfall and a and it's been a warm winter so far so no negative impacts.
From freeze or from cold temperatures.
Perfect. That's a that's good to hear and Oh, well without will jump back in queue. Thanks, guys.
Thank you you.
Thank you. Our next question comes from the line of Chris Krueger with Lake Street Capital markets. Please proceed with your question.
Hi, good afternoon guys.
Hi, Chris.
Sort of couple quick ones what percentage of your sales go to those Asian countries that are affected by the.
<unk>.
So depending on the balance and the blend of first grade second grader third grade fruit. If we have a normal distribution of first grade fruit, which should average somewhere between 40% to 45% shipments to southeast Asia from the U.S. are typically for us about 30% to 35% this year.
We're seeing first grade so that fancy grade.
Averaging around 20% to 25% and so on average shipments or not average, but shipments to those export markets are trending around 20% driven by those two things one less first grade fruit to get to those markets, but also dismissed.
Demand disruption caused by.
The virus.
Got it and still on the lawyers any.
Maybe kind of weird question with any impact on your harvest at Limoneira real estate as far as people not wanting to get out.
Check all your lots or whatever.
You know you know it's interesting the the activity and the pace of visits for the new homes at harvest at Limoneira are at the highest level, we've seen since inception, and we believe it's because these historically low interest rates and mortgage rates right now, but since the beginning of the year.
We've been averaging somewhere between four to five home sales and that's not us it's our guests builders, but four to five homes being sold a week by from by our guests builders Southern demand has been robust the a the visits have been robust and the purchasing has been robust and even since a you know in the last couple of days.
With you know the the greater levels of concern about the spread of the virus, we still haven't seen an impact to the traffic so far.
Okay last question.
And update on on your your wine grapes.
So it's a little too early to say the harvest, but we have three we'll have 320 320 full bearing acres and it's it's that's not quite true because the last planting is not quite full bearing but a you know I think it's it's probably safe for us to anticipate somewhere on the order.
Have a four to six tons per the acre.
About 80% of all of what will be produced assuming we can produce them into the specifications that were provided to us by the wineries that we've got these contracts with about 80% our contracts that averaged somewhere between 1200 and $1300 a ton.
The so that's the very positive side of it that the sort of the challenge the challenges as we look into the remainder of the year is there is an oversupply of just the basic Cabernet Sauvignon variety and so without those contracts. The open market is going to be tougher but that.
Being said, we're in discussions for the final 20% to contract, which we're working diligently now to try to nail down before we actually get into the harvest at the end of the year. So at this point, we're cautiously looking forward to a up to the same same view that we had when we.
Got it at the beginning of the year for our wine grapes.
Alright, Thank you, but that's it for me.
Thanks, Chris Great. Thanks Russ.
Thank you we have an additional question from the line of Vincent Anderson with Stifel. Please proceed with your question.
Yes. Thanks.
Quick one for Mark.
How well things are progressing.
Yeah.
Oh.
Anything.
Maybe.
Cash flows.
Make opportunistic share repurchases.
Yeah.
Persistent weakness.
Yes.
A good question you kind of broken it out, but what I heard was opportunistic cash flows into from harvest or land purchases or stock purchases.
I think there that we're looking at all that it from harvest Yeah, that's schedules pretty set relative to know if we're selling two to four homes a week based on the deployment of capital for the infrastructure and once that's complete for the final phases, that's really when the accordion starts coming back out to us in early.
2022 on those larger cash flows.
You know there there's always some some opportunity to look at you know we have calavo stock we have a a pretty robust line. So right now we're.
We're just taking a deep breath and really looking at everything you know without with the decline in the general market and our stock equal or a bit more I think I'm just by reassuring everybody that the business is intact as is our first first goal and then really figured out opportunistically, how we can use.
As our resources in our assets to to further enhance the business.
Thanks, and I apologize if this changes or answer at all the first part of my question was specific to actually bringing some of those harvest cash flows forward, whether through some kind of securitization or or new borrowing line against them.
Yeah, I think I'm. So right now we have a 45 million dollar line with B of a it's a unsecured between the both partners 'em. We are working on moving that up to 50 million.
This point that is going to allow us not to have to put any further capital contributions into it. So far we're we've a $2.8 million this year, but I just don't see it you know Lewis is such a conservative group.
And we you know like the work under their two lidge in that space and so at this point you know we're going to that we're going to keep those numbers where they are.
Fair enough. Thanks, so much.
Yep.
Thank you enterprises, we have no additional questions at this time, so I'd like to pass the floor back over to Mr. Edwards for any additional concluding comments.
Thank you for your questions an interest in Lehman era, I have a great day.
Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation and you may disconnect your lines at this time.
[noise].