Q4 2020 3M Co Earnings Call
Let me begin today by expressing our sincere hope that you and your families continue to be safe and are doing well.
With me today are Mike Roman <unk>, Chairman and Chief Executive Officer.
And more niche Vitol and wall, our Chief Financial Officer.
Mike and more niche and well make some formal comments and then we'll open it up for your questions.
Please note that today's earnings release and slide presentation accompanying this call are posted on our Investor Relations website.
At three a M dot com under the heading quarterly earnings.
Please turn to slide two.
Before we begin I would like to introduce the dates for our 2021 quarterly earnings conference calls.
Which will be held on April 27th July 27th and October 26.
Please take a moment to read the forward looking statement on slide three.
During today's conference call, we'll make certain predictive statements that reflect our current views about <unk> future performance and financial results.
These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties.
Item one a of our most recent form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions.
And finally throughout today's presentation, we'll be making references to certain non-GAAP financial measures.
Reconciliations of the non-GAAP measures can be found and the attachment to today's press release.
Please note we have provided segment and total company adjusted EBITDA reconciliations.
For reference in today's press release attachments as part of our non-GAAP measures.
Please turn to slide four and I'll hand, it off to Mike Mike.
Thank you Bruce good morning, everyone and thank you for joining us.
<unk> M team finished the year strong as we continued to execute well and innovate for our customers and fight the pandemic from every angle.
And an uncertain economic environment, we delivered organic growth and all business groups and geographic areas along with margin expansion.
Digit increase and earnings and strong cash flow during the fourth quarter.
Throughout 2020, I am proud of how three M stepped up to help meet the extraordinary challenges facing the world, which includes our comprehensive response to COVID-19.
Last year, we also took actions to transform for the future advance our core values and strengthen our balance sheet through robust cash generation.
At the same time, we know that more work remains to deliver for our customers shareholders and all stakeholders.
Moving forward, we will build on our progress and continue to prioritize investments and growth productivity and sustainability.
<unk> is well positioned as we head into 2021 and today, we are providing guidance for the year, where we expect a return to healthy growth.
Overall, I'm confident and our ability to deliver a successful 2021 lead through the economic recovery and capitalize on opportunities from emerging trends that are favorable to three M and our market leading businesses. Please turn to slide five.
Company wide total sales and the fourth quarter increased to $8 6 billion.
With organic growth of 6% and earnings of $2 38 per share up 22% year on year on an adjusted basis.
Demand remains strong and end markets, such as personal safety home cleaning and semiconductors, and we saw sequential improvement and general industrial and automotive OEM.
We also saw ongoing weakness and other end markets, including health care and oral care elective procedures, which declined sequentially as they continued to be impacted by COVID-19.
Geographically organic growth was led by the Americas up 8% with the United States up 9%.
EMEA grew 6% and Asia Pacific grew 2% with China up 14%.
Our team delivered another quarter of good operational performance, we expanded our adjusted EBITDA margins to over 27% with all business groups above 26%.
And increased our adjusted cash flow to $2 1 billion.
That wraps up my opening comments I'll come back to discuss our full year performance along with my perspective on 2021 after more niche takes you through the details of the quarter Monish.
Thank you, Mike and I wish you all a very good morning.
Please turn to slide six.
Company wide fourth quarter sales were $8 $6 billion up five 8% year on year.
This result was better than we had anticipated.
Our personal safety team continued to execute well and expanding rest Pedro production to support pandemic related demand.
And so saw continued end market strength through year end and automotive OEM and.
Electronics and home improvement.
Strong operating rigor and disciplined cost management drove robust adjusted operating income of $1 $8 billion up 20% with adjusted operating margins of 21, 5% up 250 basis points year on year.
On the right hand side of this slide you can see the components that impacted margins.
Organic volume growth, along with our ongoing cost management and productivity efforts, while the biggest contributor to our margin improvement.
Adding 160 basis points.
Included in the 160 basis point benefit were two items that I had called out during our conference in early December.
First we exited a product line, but theyre, not closure and masking and packaging business and sold the related property and Q4.
This resulted in a pretax gain of $54 million or 60 basis points margin benefit.
Please note that this gain is included and safety and industrial and Q4 operating income.
And second we had increased our respirator mask reserve by $107 million and Q4.
Which resulted in a 90 basis point headwind to margins year on year.
For the full year, we increased our respirator mask reserve by roughly $130 million, which is a little higher than the $100 million average over the last few years.
This increase and our reserve is reflected in corporate and unallocated.
As you may have noticed adjusting for last year's significant litigation charge.
Our fourth quarter, corporate and unallocated expense was up approximately $100 million year on year.
This increase was primarily driven by an update to our respirator mask reserve along with impact from ongoing legal costs as we continue to manage <unk> and other legal proceedings.
Turning to selling prices and raw materials.
Which was an 80 basis point year on year benefit to margins.
This benefit was driven by the combination of higher selling prices and lower raw material cost versus last year's fourth quarter.
Note approximately half of our fourth quarter selling price performance was benefited by lower year on year volume related customer rebates and markets that were most impacted by the pandemic.
Acquisitions, and divestitures contributed 10 basis points year on year.
Foreign currency net of hedging impacts decreased margins by 10 basis points.
And lastly, while the fourth quarter pre tax restructuring charge of $137 million was similar to last year's charge restructuring provided a 10 basis point benefit to margins year on year due to this year's higher sales.
Let's now turn to slide seven for a closer look at earnings per share.
Fourth quarter earnings were $2.38 per share up 22% from last year on an adjusted basis.
First as discussed on the prior slide organic growth and ongoing cost management and productivity efforts delivered <unk> 43 per share to earnings growth.
This included a 9% benefit from the gain on sale of property and a 10% headwind from the increased respirator mask reserve.
Acquisitions, and divestitures reduced earnings by <unk>, <unk> and foreign exchange impacts added two cents to per share earnings year on year.
The strength of the three M business model strong cash flow and liquidity position gave us the opportunity and Q4 to retire $1 billion of debt early that was due to mature in 2021.
As a result, we incurred a higher net interest and the quarter, which combined with higher shares outstanding reduced earnings by <unk> <unk>.
Finally, our lower tax rate versus last year provided a <unk> <unk> benefit to earnings per share.
The lower tax rate was primarily a function of the mix of pretax income around the world.
Please turn to slide eight for a discussion of our cash flow and balance sheet.
We delivered another quarter of robust free cash flow.
With fourth quarter, adjusted free cash flow of $2 $1 billion up 16% year over year.
Conversion of 151%.
Cash flows and the quarter, but primarily driven by robust income and daily management of working capital.
For the full year, we generated adjusted free cash flow of $6 $7 billion up 18%.
Fourth quarter capital expenditures were $422 million and were one $5 billion for the year.
During the quarter, we returned $848 million to our shareholders via dividends.
And $3 $4 billion for the year.
Share repurchases remain suspended throughout the quarter.
Given the continued global economic uncertainty.
Our strong fourth quarter cash flow generation and disciplined capital allocation and enabled us to continue to strengthen our capital structure.
We ended the quarter with $5 $1 billion and cash and marketable securities on hand and.
And reduced net debt by $1 3 billion up 9% sequentially.
For the year, we improved our net debt position by $4 $1 billion or 23%.
As a result.
<unk> the year with net debt to EBITDA of 1.5.
Down from two three at the end of 2019.
This significant improvement and a net debt position of <unk>.
Along with our strong cash flow generation capability provides us increased financial flexibility to invest and our business pursue strategic opportunities and return cash to shareholders, while maintaining a strong capital structure.
Please turn to slide nine, but I will summarize the business group performance for Q4.
I will start with that safety and industrial business.
Which posted organic growth of 11, 4% year on year and the fourth quarter.
This result includes an approximate 10 percentage point benefit from pandemic related respirator mask demand.
Overall general and industrial manufacturing activity continued to improve during Q4.
However.
Customers and channel partners continue to remain cautious given ongoing macroeconomic uncertainty.
Personal safety posted double digit organic growth year on year, driven by continued demand for respirators.
Industrial adhesives and tapes grew mid single digits, while the electrical markets business was up low single digits.
This strong growth in the residential housing market continued to drive good performance and our roofing granules business, which was up double digits organically versus Q4 of last year.
The rest of the safety and industrial portfolio, namely.
Namely automotive aftermarket abrasives and closure and masking declined year on year.
Safety and industrial fourth quarter segment operating margins were 27, 7%.
690 basis points, driven by strong leverage on sales growth and continued productivity and spending discipline and.
Along with the previously mentioned gain on sale of real estate.
Moving to transportation and electronics.
After a challenging last two years fourth quarter organic sales growth turned positive up one 4% as compared to last year.
Our electronics related business was up 2% with continued strong growth and semiconductor factory automation and data centers.
Which was partially offset by year on year softness and consumer electronics.
Our auto OEM business was up 18% year on year.
Compared to the 3% increase and global car and light truck builds.
For the full year, our automotive business outperformed global build by approximately 700 basis points.
Advanced materials, and transportation safety and returned to growth year on year, driven by improving and market trends and automotive and highway infrastructure.
Commercial solutions continued to be down year on year due to negative pandemic related impacts on advertising spend and demand for workplace cleaning and safety products and solutions.
Transportation and electronics fourth quarter operating margins were 21, 8%.
Up 100 basis points on positive sales growth and continued cost discipline.
Turning to health care.
Some parts of the World were challenged with rising COVID-19 cases throughout Q4.
As a result, those health care providers experienced sequential declines and the elective procedure volumes, which negatively impacted parts of our business.
At the same time, we continue to experience strong pandemic related demand for respirators to protect frontline health care workers.
Which more than offset the headwinds from the decline and elective procedure volumes.
As a result, our health care business delivered fourth quarter organic sales growth of six 6% versus last year.
The medical solutions business grew low double digits.
Driven by continued strong respiratory and demand.
Excluding respirators organic growth and this business was flat.
Our oral care business organic sales were flat year over year as a delta is rising COVID-19 cases.
The separation and purification business increased low double digits year on year.
This business continues to experience solid demand for Biopharma filtration solutions and supported the pharmaceutical industry and research and manufacturing efforts to develop vaccines and therapeutic treatments for COVID-19.
Turning to health information systems, which declined mid single digits organically as hospitals continue to remain cautious relative to the information technology investments.
And finally food safety was up low single digits organically versus last year.
Health care fourth quarter operating margins were 24, 7% up 340 basis points year on year with adjusted EBITDA margins of 31, 7%.
Fourth quarter margins were driven by continued strong execution and cost management, which was partially offset by the higher year on year restructuring costs.
Lastly, fourth quarter organic growth for our consumer business was up 10% as retailers saw continued strong customer demand throughout the holiday season.
Growth in this business continues to be driven by strong consumer demand for our category leading brands, namely.
Phil treat.
<unk> Scotch Blue Scotch Brite command and Mcguire.
We also continue to see very strong growth and E commerce channels as the pandemic has accelerated years' worth of changes in consumer shopping behavior.
Organic sales growth within consumer continued to be led by our home improvement and home care businesses, each up double digits organically.
Stationery and office declined low single digits as many business offices and schools remain partially or fully closed due to the ongoing impact of the pandemic.
Consumer's operating margins were 23, 5%.
Similar to last year.
As we have previously mentioned we.
<unk> been stepping up investments in advertising and merchandising and new product innovation to address changing consumer demand trends.
Lastly, similar to health care operating margins were impacted by higher year on year restructuring costs.
That wraps up the review of fourth quarter results.
Please turn to slide 10, and I will hand, it back over to Mike Mike.
Thank you Monish looking.
And looking at our 2020 performance, we posted an organic sales decline of 2% and adjusted earnings of $8 74 per share.
We increased adjusted free cash flow by 18% to $6 7 billion.
The conversion rate of 132%.
Which demonstrates the strength of our business model and our continued ability to perform across economic cycles.
Additionally, we posted a good return on invested capital of 18% and expanded our adjusted EBITDA margins to over 27% up 100 basis points year on year.
Our strong cash flow along with disciplined capital allocation helped us reduce net debt by over $4 billion and the year.
During the year, we strengthened our health care portfolio with the successful integration of facility and the completion of the divestiture of drug delivery.
We returned $3 8 billion to our shareholders through cash dividends and share repurchases.
And last year marked our 16th consecutive year of dividend increases.
Beyond financial results 2020 was a year, where three of them stepped up when we were needed. The most please turn to slide 11.
Throughout the pandemic three <unk> have been relentless and applying science to improve lives and make the world a better place.
Our COVID-19 response has been guided by three priorities protecting our employees fighting the pandemic from every angle and delivering for our customers and shareholders.
Beginning last January we immediately activated our surge capacity and doubled our production of respirators to help protect nurses doctors and first responders.
We have since worked tirelessly to bring on more capacity, which includes additional investments from three M and partnerships with governments at all levels.
And total last year, we produced and delivered 2 billion respirators globally with approximately half and the United States.
Today, we are at an annual run rate of $2 5 billion respirators, a four fold increase versus 2019.
At the same time, we have worked closely with governments law enforcement and retailers to fight fraud to day.
We have helped identify more than 8 million counterfeit respirators.
<unk> health care workers from bad actors.
Beyond providing respirators and other important personal protective equipment, we have helped the world recover and other ways.
For example, our Biopharma filtration solutions have enabled the development and manufacture of critical vaccines and therapeutics.
We also took significant actions throughout the year to position ourselves for long term growth and value creation.
We continue to strengthen our innovation, which remains at the center of our three M model and.
And last year, we invested $3 4 billion and the combination of research and development and Capex.
Our team also found ways to innovate differently and faster and response to the pandemic and.
And to serve growing market trends.
We formed partnerships with other companies to expand respirator production.
And we introduced new daily face coverings, and we quickly adapted our cleaning product lines to serve new customers.
We created new products to improve indoor air quality, Biopharma filtration and automotive electrification just a few of our priority growth platforms.
We rolled out cutting edge solutions to improve the performance of electric car batteries.
One element of our work to enable more sustainable vehicle designs.
For the full year, our priority growth platforms grew 7%.
Outperforming the markets they serve.
We also continue to see benefits from our global operating model, we implemented last January.
Our model enabled us to respond to the pandemic with agility and resilience from our significant expansion of PPE production to our ability to maintain business continuity and serve our customers and ensure the integrity of our supply chain.
Our enterprise operations team is applying learnings from our expansion of respirator production into other areas of three M.
For example, we are deploying new technology, and using our analytics platforms to double our fill treat capacity.
We also took steps to optimize our model and further streamline our organization initiating a restructuring and December that will reduce annual operating costs by $250 million to $300 million.
In summary, as I look across 2020, I am proud of our accomplishments and our people from the 50003 <unk> and our factories.
To our colleagues, who volunteer to relocate and help scale up new respirator lines.
To the retirees, who came back to staff, our hotline answering calls from home.
People across three M have stepped up to make a difference and.
And I, thank our entire team for their incredible contributions and 2020. Please.
Please turn to slide 12.
We expect to deliver a strong performance in 2021 with organic growth of 3% to 6% improved earnings margin expansion and strong cash flow and my initial take you through the details shortly.
We have aggressively prioritized investments throughout the pandemic and we will accelerate our efforts in 2021.
With ongoing focus on growth productivity and sustainability.
We will increase investments in areas with strong growth opportunities, such as personal safety and home improvement and health care.
With continued emphasis on our priority growth platforms.
The rapid movement to and even more digital first world also opens additional opportunities for three M.
We are pioneering innovations that improve performance of data centers and semiconductor manufacturing, which will be more relevant moving forward.
We will also do more to leverage E commerce, along with digital technologies to better serve our customers.
Ultimately, we have big opportunities to unleash three M science and drive sustainable long term growth.
And we will ensure that our teams have the resources to capitalize.
We continue to advance the digitization of three of them, while also accelerating our use of data and analytics and everything we do.
Further strengthening our supply chain as a priority in 2021.
With a focus on highly sustainable disruptive and safe manufacturing technology, which will help us deliver on our promises to customers and shareholders.
To that and I want to close by talking about the commitments, we will keep and 2021 and beyond.
Leading our industry and science Society and sustainability.
Three of them science drives our business forward, we leverage and combine our technologies and unique ways across the company, creating new products and new lines of business.
And we are positioned to do even more to deliver differentiated value for our customers into the future.
And a similar way three M is partnering with our communities to improve society.
And 2020, we took steps to advance our core values, including diversity equity and inclusion.
And in the coming year, we will hold ourselves accountable to new goals to support under represented groups at three am Bill.
Building on our recent progress.
We will also be releasing a new global diversity equity and inclusion report with details on our metrics.
We remain committed to sustainability, which includes using science to proactively manage PFS and to enable success and our ongoing work with communities and governments to advance our environmental stewardship.
We will continue to increase investments to make our factories more sustainable.
Including $100 million and investments this year, which is included in our 2000 and 'twenty one capex guidance to further reduce water usage and improved water quality around our manufacturing sites.
To help address questions you have been asking I would also like to touch on our strong history of working with governments and leveraging science to solve big challenges around the world.
We have had productive conversations with president Biden transition team and now the administration about their COVID-19 response, and we have open lines of communication.
And we'll continue to do all we can to get respirators and other personal protective equipment to frontline workers and help America and the world beat the pandemic.
On environmental stewardship, we share a common goal with governments of improving water quality and doing so and a way that is based on sound science established regulatory processes and collaboration with a broad range of stakeholders.
We look forward to working with President <unk> administration and congressional leaders to pursue these shared goals and.
<unk> through the remediation of <unk> where appropriate.
And we aim to build on the successful public private partnerships that <unk> has led globally throughout our history as a company.
To wrap up we are confident about whats ahead in 2021 and in our ability to create more value from the three M model and build and even more competitive and sustainable enterprise.
I will now turn the call over to munis to cover the details of our guidance Monish.
Thanks, Mike Please turn to slide 13.
As Mike mentioned, we are initiating full year 2021 guidance as end market visibility has continued to improve despite ongoing macroeconomic uncertainty.
As a result, we will no longer be reporting monthly sales updates as we had in 2020.
Looking at sales, we are forecasting total sales growth of 5% to 8% with.
With organic growth and the range of 3% to 6%.
Earnings per share is projected to be between $9 20.
And $9 70.
And up 5% to 11% on an adjusted basis.
The primary contributors to earnings and growth in 'twenty and 'twenty one include organic sales growth.
Productivity as we continue to increase our focus on operating rigor through daily management, and leveraging the use of data and data analytics and our ongoing efforts to advance and streamline our global operating model.
And lastly, we anticipate benefits from foreign currency due to the weaker U S dollar.
Partially offsetting these benefits are anticipated year on year headwinds from the Q4 2020 gain on sale of real estate.
And expected increase in areas, such as travel variable incentive compensation and advertising and merchandising investments.
Turning to cash we expect another year of robust cash flow with free cash flow conversion and the range of 95% to 105%.
From a capital allocation perspective, our first priority remains investing organically in our business, including R&D and Capex.
As we have noted we are increasing investments and growth productivity and sustainability and 2021.
As a result capex for the year is expected to be in the range of $1 8 billion to $2 billion.
Returning cash to shareholders remains a high priority for three M.
Including both dividends and.
Along with a disciplined approach to share repurchases, which we plan to restart in 2021.
Please see the appendix and today's slide presentation for additional details regarding our 2021 full year guidance.
Please turn to slide 14.
Youll see a breakdown of our expectations for organic growth by business group, along with some of the key macroeconomic and market indicators, we incorporated into our planning.
Overall, the pace and success of the COVID-19 vaccine deployment and adoption would be critical for the global economy.
The two broadest macroeconomic indicators global GDP and IP are both expected to grow mid single digits.
The overall electronics market is expected to be up mid single digits.
In addition, global car and light truck builds are expected to grow 14% versus 2020.
Also while health care and oral care elective procedure volumes have improved off the queue to lows of 2020 day are currently not expected to return to pre COVID-19 levels until the later part of 2021.
We are also monitoring the ability and pace for people to return to the workplace and students to return to school.
And finally, consumer spending, particularly retail sales and home improvement demand and E. Commerce also are factors and our planning.
Taking these factors into account, we expect the following organic growth expectations for our business groups in 2021.
Starting with safety and industrial and <unk>.
And where we anticipate organic local currency growth to be up mid single digits.
Transportation and electronics is expected to be up low to high single digits. This wider range contemplates the potential for and market variability, particularly in automotive and electronics.
And finally, both our health care and consumer businesses are projected to grow in the low to mid single digits. This year.
In 2021, we will prioritize capital to our greatest market opportunities.
Deliver for our customers.
Drive commercial intensity improve operating rigor.
And hence daily management.
Leverage data and data analytics and continue to streamline our organization.
As a result, we expect solid revenue growth improved margins and earnings.
Robust free cash flow and a continued strong capital structure and financial flexibility.
To wrap up.
And the spirit of continuous improvement, there's always more we can do and will do.
I would like to thank all three and <unk> for the hard work and the progress that we have made in an unprecedented year.
With that I. Thank you for your attention and we will now take your questions.
Ladies and gentlemen.
And would like to register a question using a landline phone. Please press the one followed by the floor and your telephone keypad.
You will hear with retail and from towards knowledge of a class.
And so your question has been answered and you would like to withdraw your registration. Please press. The one followed by this to me.
If you are using a speaker phone please lift your handset before entering your request.
Please limit your participation to one question and one follow up.
One moment, please while we compile the Q&A roster.
Our first question comes from the line of Deane Dray from RBC capital markets. Please proceed with your question.
Thank you and good morning, everyone.
Good morning, Hey, it's nice to see you guys back in the guidance business, but I have to admit I'm gonna mess those monthly sales.
Yeah.
First question for Monish.
Can you comment on how the company has been benefiting from lower temporary costs and no travel or less travel.
<unk> shows and so forth and.
And for 2021, what assumptions are you, making about how did these temporary costs start to get feathered back in.
Yes, So I would just say dean thanks for the question and as you know we've done a great job as a team trying to keep our costs under control you can see that and Q threes routes you can see that and Q4, how it'll it'll bounce back with actually all depend on where we see the.
<unk> of the pandemic and how the vaccine plays itself out.
Currently as you can see from the guidance that we've given you. There is headwind that we are planning on the bounce back of 35 to 45 cents that was that was put in there and there are two or three things and they're deemed one is as you think about the property sales that our year over year that are non repeat <unk>.
<unk> all these indirect costs travel is a big piece of that that comes back and the third one is the variable compensation that gets reset for 2021 and from a few for Q2 of <unk>. So that would be a reset and then increase and cost. So those are the factors. We're looking at and I would just say from a quarter perspective, it's all going to depend on our.
And how revenue comes across our growth happens how the economy recovers. The other piece just to keep in mind as Mike mentioned, our plan is to invest more in opportunities and growth productivity and sustainability and that also will have an impact on each quarter, depending on how the economy recovers.
That's helpful and then as a follow up and just broadly.
Really appreciate all the work that three of them has done.
With regard to ramping up the respirator mask capacity and how you've responded that's been terrific just wanted to express my.
Appreciation.
Can you comment on and any updates on the M. I T collaboration and the rapid test.
A system that you have and development.
Yes, sure day and thanks for that question.
Our team has been working with M. I T. Researchers as we've talked about really focused on developing a low cost rapid.
Detection capability for for COVID-19, and over the past nine months, we've made some very significant technical advances in the design and where we're bringing our expertise and manufacturing and scaling up working with M. I T with their capabilities and technology around the assay the measurement development and <unk>.
We've been focused on some of the challenges that are inherent in this kind of development, which is the stability of the tests and the robustness of the device and improving sensibility sensitivity and.
And the detection and we're in the middle of the development phase and we're working to address those challenges.
We've made very good progress, we'll continue to update as we go along and we're continue to be very very encouraged by the partnership with M. I T.
What would be the optimistic view on our rollout.
While we were in development, we've got to resolve some of the requirements that are there here around sensitivity and and stability of the device. So we're we're in the middle of that we will as soon as we get further along I would say and the development phase we will give you a better view of timelines appreciate it best of luck to everyone.
Thanks Dean.
Thank you. Our next question comes from the line of Scott Davis from Melius Research. Please proceed with your question.
Good morning, guys, Hey, Scott and Scott.
I wanted to just dig in on the G&A guide and a little bit.
And kind of drive a truck through that low to high range and.
When I look at it at least and based on what we see in this quarter. It seems like the bias could be and little bit more to the higher side of that.
And is there something that concerns you.
And perhaps maybe.
Our emerging market.
Cover or something like that that that concerns you that makes you a little bit more conservative on that specific segment.
Scott I'll start with something munis that it's great to see this business turn positive in Q4, it's a it's a very good business that faces into markets that have very innovative customers and segments and it's it's a good opportunity for us.
To continue to grow and and leverage our innovation as we look into 2021, we see some positive outlooks, we saw and highlighted some of the strength and semiconductor and automotive build rates turning positive in Q4 that is expected to continue to get better in 2021, I would say there is we start with.
There is some uncertainty on how that's going to play out as we start the year Covid is still the driving factor here, what what is the visibility through that I think we get we get better clarity on the plans of our customers and how they're thinking about it there's still that uncertainty around the pandemic and how that plays out even in those areas you see some of that and our outlook.
And maybe some softness in consumer electronics as we start the year. We also as a reminder, and this business we have exposure to oil and gas and highway infrastructure and commercial solutions, which really depends on people in the office working and the office and commercial settings. So there's a there's a balance.
Across those businesses with the view of the uncertainty and the.
How the pandemic is going to play out and we'll get better clarity as we go through the year I would just add Scott to walk through everything.
Mike said I would just add and other supply chain stability in the electronics and the auto OEM market also something that would be a watching so as that plays out and that gets more stable I think can you give us more.
Stability and certainty on how we're going to deliver against it.
Okay, and then just just a quick follow up I mean are there any.
Tangible pay fast milestones in 2021 net.
You guys can remind us of that.
Well thanks, guys.
And anything at all where we can get some more color yeah, I would say for US we continue to focus on proactively managing DFAST and that we've got three principles and one of those is providing transparency to you and our investors and right now the.
And there had been scheduled.
Some initial bellwether case, a case and Michigan that's been postponed it's still to be determined when that'll be scheduled so we'll update as we go we do continue to keep our three M. Dot com site updated with all recent PFS information and we will continue to update on whether it's.
Litigation or work or our work and support of regulatory standards and any of those categories. We will update there and will and will update and these calls as well.
Okay. Thank you good luck guys. Thanks Scott.
Thank you. Our next question comes from the line of Joe Ritchie from Goldman Sachs. Please proceed with your question.
Hi, Thanks, good morning, everybody.
Hey, Joe.
And maybe my first question just trying to understand obviously, great great ending.
And into the year from an organic growth standpoint.
I'm trying to understand and I guess, what's embedded from from a cadence perspective, as we progress through 2021, and then and then secondly, there was some pandemic related benefits that you received in 2020 I'm just wondering what your base case expectation is for 2021 is there is it a headwind and visit or is it neutral.
And just trying to understand that better.
So I'll try again, Joe I think you are asking what's the cadence on how we are going to look at 2021. So what we're going to we're going to be as helpful. As we can as you know Joe we have initiated annual guidance and based on where we see some of the and markets that I mentioned about in in my prepared remarks.
Based on that we'll see where and how those end markets play out that will determine how our quarterly things play out.
Our guidance is right now organic 3% to 6% with 5% to 8% growth in total, including FX one of the things that we have seen over the pandemic Joyce.
Our normal trends that historically, you would see don't seem to play itself out. So for example in December the company, usually see deceleration we didn't see the deceleration similarly on a month to month trend, sometimes what you see and variability in the months was higher due to COVID-19.
And therefore, my personal belief is I think youre going to see more variability throughout the year, depending how different parts of the world play.
Play itself out we are also aggressively prioritizing our investments throughout on all the three items, Mike mentioned growth productivity and sustainability again that'll have an impact based on how revenue plays itself out and we would love to go heavy and invest early so that we can capture the growth that's coming but we'll have to see how.
The World recovers. So we'll have to just work through that and then just on other piece for you to keep in mind as you're thinking about the quarters is from a restructuring charge perspective, we had announced a charge and the fourth quarter.
Youre going to see the balance of that charge somewhere between $110 million to $160 million in the second half of this year and we will tighten that as we go through the quarter. So our goal is to be as helpful. As we can throughout and through the various interactions. We have with all of you is to tell you what's going on and the word but that's the way we see it right now so hopefully I answered your quest.
And Joe.
And when you said Thats helpful and maybe just my follow on question. Since you mentioned the restructuring you did announce the call it 75 day $100 million and benefits.
And past 2021, I guess, how do we think about that and the context of some of the temporary cost actions that are reversing fully recognizing that.
And the investments that you've just laid out are likely going to be dependent on how and how the volume shake out.
Yeah, It's a great one Joe and the same thing we keep thinking about all the time of how do we do it. So we have tried on our on one of the presentation pages. There is a guide out there where we show you headwinds is 35 to 45.
And the benefit from restructuring is anywhere between 20% to 30.
If you think about the headwinds as I mentioned before that's property sales that don't repeat some of the indirect costs that was snapped back.
Example, travel and variable compensation is in that range of 35 to 45, and then on the restructuring side.
The 20% to 30 I would ask you to think about two pieces. One is for all the other actions that the company had taken other than the fourth quarter.
There is a carryover benefit of give or take $100 million and then the benefits of the restructuring that we announced and the fourth quarter.
Is another $75 million of benefits 75 to 100.
And then of course, that's offset by the charge that we are going to take a 110 to 160. So that's why we have called out the restructuring benefits and the guide of 20% to 30.
Perfect. Thanks, so much.
Thank you. Our next question comes from the line of Julian Mitchell from Barclays. Please proceed with your questions.
Good morning, Hey.
Hey, Julien.
Hey, maybe just.
Our first question on just the firm wide.
Adjusted operating margin expansion for 'twenty, one that's dialed in and so I see all those moving parts on slide 21, which is very helpful.
Maybe thinking about it differently from a sort of P&L standpoint, I think your adjusted EBIT margin in 2020 was around.
And that sort of between 21 and 21.5% maybe if you could just confirm that and then off that base.
What level of margin expansion you dialing in for <unk> M in 2021.
At the midpoint of the guidance, let's say.
Sure Julien I would say couple of things. So first answer your question to give you the 'twenty to 'twenty, one and a half thats correct. So it's 21 three years is the perfect number if you think about 2021 and how we look at margin and I'll just elevate first to say our general view over the long term is growth at or above <unk>.
Macro.
Sustainable margin improvement and strong cash that ultimately helps us have a very strong capital structure. So keeping that in mind, we would say that's basically how we are thinking about long term things to factor and from a margin guide perspective, as Mike mentioned, we are going to invest.
Properly in growth productivity and sustainability. So that's going to have one factor. The second factor is going to be the amount of productivity that we are generating we have got a lot of proprietary technologies that we're rolling out and supply chain, Mike mentioned that the stability of our supply chain is one of our priorities for 2021, you're going to continue that path. So you.
Should see benefit from the productivity actions that the supply chain team is driving the third piece is is making sure that.
We have factored and correctly the snapback of 2020 costs. We are showing you that is 35 to 45 cents of headwind again on the three items that I've mentioned before and I would say the last one to think about this is thinking about what revenue is going to be and what growth looks like quarter to quarter and that's going to also have a pretty big impact on <unk>.
Where we end up from a margin perspective. So those are all the factors that we are putting in here as we think about but long term growth at or above macro sustainable margin improvements and then strong cash.
I see so manish is around the sort of plus.
30, 40 basis point margin expansion is that the rough ballpark and putting in all of those different pieces.
So I go back again, Julian I would say it all depends on where revenue ends up being and where and how much we invest so it all depends on how fast the world recovers.
Fair enough and then just the second topic quickly.
You had alluded in the prepared remarks to the buyback perhaps resuming clearly.
Balance sheet, starting to look under Levered and very good free cash flow last year.
You don't dialing in.
And the way of share count reduction on that slide 21.
Help us understand what scale of buybacks you might be contemplating for the year.
Sure.
And the way we look at it Julian as a first step in all of this is to make sure that we are investing organically R&D and capex.
You're seeing us increase our capital expenditure at one $8 billion to $2 billion, because we see some growth opportunities and productivity opportunities as well as sustainability, our second priority is dividends and making sure that.
Our share all this thing Thats important we acknowledge that our third priority is M&A and then our last priority is share buyback. So we as I said in my prepared remarks at three and we understand returning cash to shareholders is important and so we have both we are going to the dividend as well as we have always supported a reasonable amount of share by.
Back and Thats, our current plan.
How much and how that plays out from a timing perspective is again goes back to where we see where the economic recovery is going to look like.
And then based on that would work and with the board and we will keep you all posted as we as we announced.
Great. Thank you.
<unk>.
Sure.
Thank you.
Next question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your question.
Yes.
Thanks, Good morning, Hey, Nigel to them.
Hi, just wanted to just go back to the increased investment comments. So just go and go into your 2021 and EPS bridge. The 40, some cents of organic growth I think that.
Kind of recap it sounds like a sub 30% incremental margin. So it feels like there is some investment spending against that just look at them that and always thinking about R&D kind of getting back to that five 5% of sales kind of range and <unk> and.
And 21.
Is the question Nigel I'll be getting back to five 5% to 6% of sales R&D is that the question.
That's part of it and then and then would that investment spending against the organic growth.
Bucket.
Yes, so I would say listen R&D right now is I would say is in that range, but it always goes back to the point, Mike made which is our plan is to keep investing in growth productivity and sustainability on the growth side. We have so many good opportunities whether it's home care personal safety digital health.
The care.
Data analytics as well as auto OEM from an electrification perspective, we have tremendous opportunities of growth and depending on how we see 2021 and 2022 and beyond play out we won't be shy to invest in those areas, we won't be shy to invest and advertising and merchandising to as required in our.
This is to make sure that we capture for the long term growth. So I would say that yes, but I would also ask us and start thinking through we are full of great businesses and depending on how the end markets play out and those four businesses, they're going to flex up or down. So I don't know if I answered your question Nigel but that's the way I look at it from a R&D perspective.
Yes, I think so I think that was a good answer and then.
And then on the pricing side, obviously, you saw a pick up and pricing, especially in EMEA I think give me it was 1% and the quarter.
Talked about reduced discounting activity because of Covid, which makes no sense I'm. Just wondering if we can just talk about rural pricing. So all you.
Increasing pricing in response to the rheumatoid and inflation and maybe just as a color on that would be helpful.
Sure. So we are seeing inflation.
One of the things about three M. As we buy so many diverse products, but theres not one product that's greater than 200 to 300 million that has a big impact but.
We are seeing I would say inflation and three areas area number one is just raw material and feed.
A couple of them. We look at is polypropylene wood pulp ethylene are areas that we look at and say all of them are showing inflation. The second is as you are seeing also from different industrial does logistics cost is higher whether it's air or truck.
Logistics costs are higher.
Seeing inflation, there and the third piece, even though the economy is still or not that very strong from a labor shortage perspective, that's and at other area, where we're seeing inflation and manpower costs. So those are the three areas that we are seeing we have a great sourcing team that's working to minimize that as much as they can.
And then also your specific question on pricing. Our aim is to have prices that would go up on a year over year to take into account the inflation that we've seen.
Okay.
Yes.
Thank you. Our next line comes from the line of Andrew Open from Bank of America. Please proceed with your question.
Good morning.
And Andrew.
And just sort of a softer question.
I think three M is going through a period, where there are a lot of changes happening below the surface, which are sort of left and apparent to us looking from the outside.
But you have new systems, you have sort of this new structure, where organization is much more globally focused can you just talk to us.
'twenty and 'twenty evolved how did it change your planning process and how did it impact your planning process going into 'twenty and 'twenty one.
Yes, Andrew Thanks for the question and we have even in the middle of the pandemic. We've continued to make very good progress on some of what you outlined there and and part of it is.
The digitization of three and transforming our company deploying new ERP and ecosystem around to that continues to move forward. We are also now operating for one year of our new operating model that we launched in January of 'twenty, and 'twenty and that we moved ahead and and the middle of the pandemic, we benefited from it and we saw other benefits.
And our ability to respond to.
Just the you know the dynamics, we hit it saw and our markets as we went through the year. So I would say we benefited from it and it validated where we're going with the three M model and validated the strength of the three and model and how we apply our innovation and our.
Our markets and I would say encourage us to continue to really press ahead, and I talked about that and my prepared remarks about the digitization and improving our operations I see it in terms of.
More agility shorter cycle times improved response and ultimately it's it's really at the foundation of how we drive productivity operational improvements as we go so thats is becoming the way we we take advantage of and that's how we focus on it and so planning broadly as part of that we're getting I would say better.
In terms of cycle times and.
And better at using the greater visibility on data and the analytics that go with it so it's and I'm encouraged with the progress we made and I believe theres more to come and as we go through 2021, Andrew I would just add I been here only six months. So just to tell you the changes that I've seen and the six months I've been here, there's a lot more focus on daily.
Management of evading daily Abbvie, not winning daily and much more tie into what external market trends that we're seeing so we can quickly react as needed you can see the work the supply chain teams have done to keep our supply chain dry and lines running despite.
Supply chain in general being broken.
Look at also the ability to see visibility of data. So there is data that demonstrate ization by we can see stuff that is happening much faster on a daily basis. So.
And so it's all about driving the operating rigor getting the daily management and quickly going into root cause and then finding sustainable improvements year over year using so I think there's much more transparency on issues that we are facing and the team is going and wide eyes wide open and trying to find solutions as quickly as we can.
Can.
And just a follow up question you sort of highlighted electro procedure slowdown, but if I look at medical solutions that was probably driven by the <unk>.
And I guess on.
Oral care I, just had a down organic but I think and reported number is still up and then.
Just talk about where is the organic growth for product lines like consolidated.
Tiger dorm and how do you expect them to sort of evolve into the second half of the year.
Sure. So <unk> I would say is one of the divisions that does get impacted the highest due to hospitalization rate and elective surgeries, but overall when you just step back and say what is it <unk> done I would say as the volumes came up and Q2 post Q2 lows. The business has continued to grow tremendously.
<unk>.
Two of those Q2 lows. The reason why <unk> is so good for three of them I think that couple of things. One is it's in a market that is ever growing right now based on demographics are secondly, it gives III M. A lot more relevance when it comes from talking to caregivers third is it gets us into a post acute space and a home care space.
Which I think post COVID-19 is going to be a trend from a home care perspective, and then what three and brings to <unk> is the synergies that you can bring one is its brand its global reach and its ability to do global and and high speed manufacturing. It brings it to that and three M did already have and advanced wound care.
Care business. So when you put this together it basically makes it a very good acquisition for three M.
We are seeing growth in both we have made a positive income in third and fourth quarter and.
And we are very encouraged with all the work that the health care team is doing that this business will keep growing but of.
Of course, it will be partially dependent on how the world recovers from electives.
And then if pachyderm other comps positive are still negative.
Andrew I think we will have to be able to get back to you Andrew on that I don't have that handy.
Now I appreciate it thank you so much.
Thanks, Andrew.
Thank you. Our next question comes from the line of Steve Tusa from Jpmorgan Securities. Please proceed with your question.
Hey, guys good morning.
I'm going to disagree with Dean for once and say I'm glad we're not getting the monthly sales just it.
And I'm in favor of a lesser work.
These days.
Given the industry trends.
And that's negative productivity for us.
And on that side that productivity bucket for you guys. The 20 to 35 cents for this year, where did that end up for.
And I know this is kind of a messy bridge for 'twenty, but where does that number and up for 2020.
You're saying the full year 'twenty, yes, the full year 'twenty kind of productivity bucket.
So the leverage I think if my Memory's right was landed up somewhere again, it's so messy with all of the indirect snap backs and in and out of 2020, and what we did by quarter to quarter timing et cetera, but I would just say, Steve and general you should just think about the leverage range for three M and the range of 30% to 40%.
From a incremental volume perspective, Okay. That's helpful and then within within the organic growth.
Assumption what are you assuming for price.
So.
As I said before on the earlier question that was that we expect prices to be positive based on all of the inflation that we are seeing and historically when you think about what three M has been able to do it they have been able to get price just because of the value that they add to customers and I don't expect that to change so like in the near term 50 to 100 bps something in that range.
Well historically three M. If my Memory's right and Bruce can correct me it has been and the range of 30 to 50 basis points, excluding electronics, which electronics as you know is an industry that definitely sees price decrease but we'll have to see what inflation ends up here and we'll do the best we can.
And then one last one just for maybe Mike.
Dupont had some news around P fast recently.
Can you just kind of help put that in context is that is that kind of meaning.
Meaningless for you guys because you're on like a very different glide path with your exposures there.
I don't know what kind of color you can provide as far as helping frame that kind of read across to you guys.
Yes, Steve and and we did see their press release, and we wont comment on on the agreement that they have announced.
Just reinforce what I've been saying is we are committed to proactively manage PFS and the three principles are the way we think about this.
<unk> science, and how can we apply that and our three M expertise to move ahead, our corporate responsibility and we're stepping into that with with where we manufactured historically manufactured and disposed of PFS and then transparency and keeping you and our investors updated on what we're seeing and how we progress and Thats.
It's something that we'll continue to focus on as we go through the year, So that's probably where I'll leave it for now.
Okay, alright, thanks, a lot appreciate it Steve.
Steve.
Thank you. Our next question comes from the line of John Walsh from Credit Suisse. Please proceed with your question.
Hi, Good morning, everyone, Hey, John.
Hey.
Maybe just a different way to ask this P. Fast question and also a follow on to capital allocation.
<unk>, but I think and your response you said the economic recovery is whats going to govern your expectations around the pace of share repurchase.
I guess a follow on question to that is are any expectations around key fast timing factoring into that or is it really about the economic recovery.
So I would say John we always take multiple factors into account as needed right now one of the big factors is the pace of the economy, but.
Things evolve and things change, we'll definitely update you on our guidance.
Okay, and then maybe just a question for from Mike.
We've seen it from several others obviously.
<unk> and <unk>.
Integrated material science company, but could.
Could you talk about any potential pruning as you as you look forward and if that's a lever that <unk> still has available to Paul yes.
Yeah, and John Youre talking about portfolio. When you when you when you asked the question correct, Yes, yes, and not yet obviously your models integrated but.
And this thing is still around the edges or maybe even a little bit chunkier in terms of pruning.
I would consider.
And I would say, we continue and even through 2020 and in the middle of Covid, We continue to actively manage our portfolio and and we focus on three priorities. When we think about that one is prioritizing where we invest organically. So the five 5% to 6% on R&D is not M.
Everywhere. The same we are prioritizing where we're making investments.
You see that and capital investments as well so we use portfolio to drive that first and foremost that's our priority and our capital allocation then we look at complementary acquisitions and.
And <unk> is more niche talked earlier and Thats a great example of that strategy and we're focused on facility, we continue to be active and looking at M&A.
Focused on and sell it as we come into 2021, and then we do have a I would say a rigorous approach to optimizing value in each of our businesses and this includes what we might do to change the model or if there's a better owner or more value to be created we would this would include divestitures as we've done as we.
We did with our drug delivery business in 2020, so it's a it's an ongoing process we continue to assess it.
When we see an opportunity to increase value will take action as we have.
Alright, Thank you very much.
Thanks, Sean.
Thank you. Our next question comes from the line of Andy Kaplowitz from Citigroup. Please proceed with your question.
Hey, good morning, guys, Hey, Andy and.
Mike you see relatively confident and ongoing recovering in the past you've said that you don't really see the recovery is a restocking. So maybe you can give us some more color and to where you think inventory is both from the channel and at three am at this point.
Yeah, Andy I would say, we're seeing what you're hearing and probably seeing more broadly and that starts with the second half of 2020 were more I would say the channels across our various markets began to stabilize as we went through the second half into the end of the year and so if you look at our core go to market models. They each have a little.
Dynamic safety and industrial business.
Our channel partners remained cautious there youre seeing continued demand for us and safety and personal protective equipment, we saw some improvement and our industrial adhesives and tapes business. As we went through Q4 other businesses are still seeing and market declines and so were not seeing material restocking and those safety are industrial.
Channels globally.
<unk> electronics.
And theyre pretty much and balanced with demand, there's some tight supply and monish mentioned and supply chain.
Things that we're watching everybody's watching around semiconductor and <unk> and that does relate to the strong demand and their end markets health.
Care generally steady as the end markets have now adjusted to the changes and areas like electric procedures.
And the middle of Covid, There's Q4, we kind of saw it.
A resurgence of Covid cases impact that but pretty pretty steady as we come into the year and consumer is I would say mixed we see high demand and home improvement that continues.
That's a lower than normal levels and that channel.
And we see really elevated levels still and office and retail as as you've seen a slowdown because of the work remotely kind of economy that we're and so it's a little mixed and in general and we're not seeing a strong restocking as we as we come into the year.
That's helpful and and solidly be.
And sort of respirators that I might have missed this but I think you mentioned 250 basis points of tailwind in Q4, a little higher than you had guided are you still increasing capacity and respirators and and these other areas that you've experienced pandemic tailwind and then what kind of line of sight do you have you know as you. If you do if you learned and.
And capacity I mean, it seems like that's abated demand could last well into 'twenty two at this point.
And we did bring online and the U S and we talked a lot about this as we went through the year.
Capital that we invested in and capital that we invested in and are in a public private partnership with the Dod.
And that is all online and we did we did realize some improved productivity on those lines. We have been working even as we bring on new capital to drive greater throughput and yields and rates and we had some improvement from that.
We did as we got through Q4 get to full capacity and full run rates and so that's that $2 5 billion run rate that I talked about we're going to we will continue to strive to improve on that as we go through the year.
Are we still see strong demand around the world, where we will we will continue to do everything we can to meet that demand and and we're at at like I said at full capacity of the new lines and we can and will incrementally add to that as we go through the year.
Thanks, Mike.
Okay.
Thank you. Our last question comes from the line of Nicole <unk> from Deutsche Bank. Please proceed with your question.
Yeah. Thanks for squeezing me and good morning, guys and good morning.
<unk>.
And I just wanted to talk a little bit about the first quarter and if there is.
Any color you guys can go out and I know, we've gone back to kind of the normal annual cadence, but given that.
Things are still kind of crazy with respect to COVID-19 not a ton of visibility.
Kind of a mix between what youre seeing on the industrial side versus PPE and is there any way you can kind of frame for us and what youre seeing in January.
Thoughts around the organic outlook for the first quarter.
Sure Nicole it's a question that we keep asking ourselves and try to get as much visa.
Visibility as we can.
And you correctly stated, there's a lot of uncertainty right now and the world at visa and market starting to stabilize.
Stabilize our visibility got better and we started and annual guidance of 3% to 6% and I think as the world recovers, we should be able to get there. We are confident that the innovation that we're doing should.
It should help us get to solid growth and growth at or about macro and the long run. When you think about one Q1 of the things that we have seen over the last six months that I have at least be near and longer for this team is some of the historical trends of just not played themselves out so December didn't slow down as historically has been.
But that said I don't think January has started off very weak, but the things that we are watching our way to weighted hospitalization go what happens to elective procedures. Both in the hospital and the oral care space. So we are pretty cautious and that and seeing what we're seeing right now on the industrial side, making.
Sure that industrial activity continues our customers continue to buy inventory will be the second piece that we got to watch third day as I've mentioned on the auto side and on the electronics side, where both of them are starting to combine together how does the supply chain and play itself out and what the volume of auto production is going to be and then the last one.
Think about it from a consumer perspective, we had an extremely strong consumer growth you saw we grew nearly 10% with a very strong holiday season. The question is does that strength continue in retail when do schools reopen and also just a reminder from a tactical basis, we are hitting that point, where we start lapping.
Year over year pandemic demand sold three M had nearly $100 million off.
Disposable respirator sales last year <unk> 'twenty.
And driven by the pandemic. So we're lapping that and then on the income side to think through Nicole is what is the volume going to look like and I had mentioned we are quite cautious on what we are seeing.
And then just on the tactical side, what else, we're going to invest how fast we're going to invest and each of the quarters and the areas. Mike mentioned, and then from a quarter over quarter sequential basis, as we reset variable compensation for the first quarter as well as as we start stepping into advertising merchandising investments will have an impact.
Philly I gave you the things we are looking at nickel as we are thinking about the quarter.
Yeah, that's perfect and.
And just one follow up.
The outlook for free cash flow can you guys just talk about what you see with respect to net working capital and the opportunity to reduce factory inventory is at three am and 2021.
Yes, so I would say Nicole improving velocity working capital turnover whichever terminology, we want to use is one of our priorities there.
And there is a good opportunity there you've seen the team has done a really nice job from Q2 highs of where the inventory was as a percentage of sales or even if you look at days on hand to bring it down and Q3 and Q4. The work that the team is doing with data and data analytics, but also putting enterprise operations and supply chain together is and <unk>.
Area that I would say is an opportunity for us and 2021 and beyond and to keep improving inventory velocity and we are committed to doing that and we'll keep driving that.
And I think finished thank.
Thank you.
That concludes the question and answer portion of our conference call and we'll now turn the call back over to Mike Roman for some closing comments.
To wrap up in Q4 and throughout 2020, our team executed well and continuing to fight the pandemic from every angle while building for the future and advancing our values. As we look ahead, we will apply three M science to capitalize on global market trends and prioritize investments and growth productivity and sustainability.
We entered 2021 and well positioned to generate greater value for our customers and shareholders and deliver a strong performance. Thank you for joining us.
Ladies and gentlemen that does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
Okay.
Right.
Okay.
And.
And.
Okay.
And so.
And.
Okay.
And.
Yes.
Okay.
True.
And then.
Uh huh.
Yes.
And.
Okay.
Okay.
Yes.
Okay.
And then.
And.
Uh huh.
Okay.
Yes.
Sure.
And then.
Okay.
Yes.
Okay.
And then.
And as for.
Okay.
Yes.
Okay.
And.
And.
True.
Okay.
Uh huh.
Okay.
Yes.
Yes.
Okay.
And <unk>.
And so.
Yeah.
And.
And.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.