Pinnacle West Capital Corporation (PNW) Q3 2015 Earnings Report, Transcript and Summary

Greetings, and welcome to the Pinnacle West Capital Corporation 2015 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Mountain, Director of Investor Relations. Thank you sir, you may begin.

Thank you, Christine. I would like to thank everyone for participating in this conference call and Webcast to review our third quarter 2015 earnings, recent developments, and operating performance. Our speakers today will be our Chairman and CEO, Don Brandt, and our CFO, Jim Hatfield. Jeff Guldner, APS's Senior Vice President of Public Policy and Mark Schiavoni, APS's Chief Operating Officer, are also here with us. First, I need to cover a few details with you. The slides that we will using are available on our Investor Relations Web site, along with our earnings release and related information. Note that the slides contain reconciliations of certain non-GAAP financial information. Today's comments and our slides contain forward-looking statements based on current expectations and the Company assumes no obligation to update these statements. Because actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. Our third quarter Form 10-Q was filed this morning. Please refer to that document for forward-looking statements, cautionary language, as well as the risk factors and MD&A sections which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures. A replay of this call will be available shortly on our Web site for the next 30 days. It will also be available by telephone through November 6th. I'll now turn the call over to Don.

Thank you, Paul and thank you all for joining us today. Pinnacle West delivered a solid quarter with several financial and operational highlights keeping us on pace with our guidance for the year and setting us up well for next year. The Board also approved the 5% dividend increase last week effective with the December dividend payment, continuing the predictable return of capital to our shareholders. Jim will discuss the financial results and guidance. Our operations team did an excellent job maintaining the fleet and the electrical grid again this summer. The Palo Verde Nuclear Generation Station performed well. Unit 2 entered its planned refilling outage on October 10th this outage marks an important milestone. It represents the completion of flex equipment installation at all three units. Flex addresses one of the main safety challenges at Fukushima the loss of cooling capability and electrical power resulting from a severe event. Flex short for diverse and flexible mitigation strategies is an industry wide initiative with site specific applicability, it relies on portable equipment to protect against even the most unlikely scenarios. The transmission distribution and customer service teams also performed well. Similar to last year we had a series of monsoon storms over the last few months 50,000 customers were without power during the worse storm. The vast majority were back on within 24 hours. Due to the storm damage our crones replaced 485 pools nearly twice a number from the 2014 storm season. August was particularly hot this year. We hit our 2015 load peak on Saturday August 15th after temperatures hit over 114 degrees for three consecutive days. This is the first time in modern era with air-conditioning that our peak has been on a Saturday. One data point worth noting is that when our customers were using the most energy at around 5 pm that day rooftop solar on our system was producing only 38% of its capacity, supplying 75 megawatts of the 7,031 megawatt load, since rooftop solar peaks around noon. However in stark contrast utility scale solar was producing 80% of its capacity supplying 140 megawatts of the load, because most utilities scaled panels are on trackers that move with the sun. Just a couple of hours later when our system load was still high rooftop solar production was at zero and the only solar production was coming from Solana our concentrated solar facility with thermal storage capabilities. This scenario was not unique to our peak lower day and highlights the importance of the electric grid at all hours of the day. Along with a robust and modern grid modernizing the rate structure is a necessary priority for which we have been advocating. Let me provide some perspective on how our recent regulatory fillings have evolved. Our priority remains clear we want to continue the dialogue on rate design with the objective of thoughtfully evaluating these policy issues ahead of the rate case application we plan to file in June of next year. The grid access towards filling we made on April 2nd was designed to take another step in this rate transition by increasing the fixed charge to $3 per KW or about $21 per month per solar customer. In August the Arizona Corporation Commission ordered to move forward with an evidentiary hearing on the issue the exact scope and timing of that process was to be determined they has another meeting. Subsequent to that decision we saw an unprecedented display of political theatre and character attacks by the rooftop solar lobby aimed at paralyzing the commission. Given the backdrop we offered an alternative to the commission in September to forgo of the request to increase the grid access charge and exchange for a more narrow hearing on the cost to serve customers with and without solar. In connection with this alternative we filed a summary of a recently concluded cost to service study on October 8th. This study used a methodology that has been tried, tested and validated in utility proceeding across the country using actual verifiable data. It concluded that each month APS incurs $67 to serve solar customers that those customers do not pay. This analysis credit solar customers for the measurable cost that APS avoids when a customer installs rooftop solar primarily reduce fuel costs. The commission discussed how to proceed at the open meeting last week. In the end they wanted to move forward with a single generic docket that will investigate a both the cost to service issue raised by APS and the value of solar. The procedural calendar would be determined soon by the commission staff. Although there has been a lot of noise around this issue we believe moving forward is critical and we will continue to work with the commission and key stakeholders in this proceeding. In addition to the regulatory proceedings we are also learning about the customer and grid impacts through our solar partner rooftop solar program. Our understanding in this area will better inform our efforts to create a modernized rate structure tailored to our customers’ energy needs. We've had a lot of interest in the process of signing up customers and installing rooftop systems. Let me know provide an update on a few other items related to our generation portfolio. Our utility scale program AZ Sun has two 10-megawatt projects in the Phoenix metro area come on line in September bringing the total program total to 170 megawatts. We will access a need for more utility scale solar through our resource planning process. We also retired Cholla unit 2 one of our core units as of October 1st in line with our announcement a year ago as part of a broader environmental plan for the Cholla site. Let me conclude by saying that we remain focused on delivering on our financial and operational commitments. We have a busy calendar over the next couple of years while the state addresses rate design modernization and we prepare for our rate case filling. We will remain steadfast to find solutions that benefit all of our customers. I'll now turn the call over to Jim.

Thank you, Don and welcome everybody. We had a solid third quarter as we benefitted from our continued cost management efforts and improvement in our customer sales. Today I'll discuss the details of our third quarter financial results provide an update on the Arizona economy and review our financial outlook including introducing 2016 guidance. Slide 3 summarizes our GAAP net income and ongoing earnings. For the third quarter of 2015, we reported consolidated ongoing earnings of $357 million, or $2.30 per share, compared with ongoing earnings of $244 million, or $2.20 per share for the third quarter of 2014. Slide 4 outlines the variances in our quarterly ongoing earnings per share. I'll highlight two primary drivers. Higher gross margin increased earnings by $0.28 per share. I'll cover the drivers of our gross margin variance on the next slide. Going the other way higher depreciation and amortization expenses decreased earnings by $0.12 per share. Similar to the first half of this year the variance includes the absence of the 2014 Four Corners cost deferrals and related 2015 amortization of the deferrals and cost associated with the acquisition. D&A expenses were also higher due to additional plant service. Turning to Slide 5, I will cover a few of the key components of the net increase of $0.28 in gross margin. Higher usage by APS customers compared to the third quarter a year ago contributed $0.08 per share. Weather normalized retail kilowatt hour sales after the effects of energy efficiency, customer conservation and distributed generation increased 2.1% in the third quarter of 2015 versus 2014. Collectively the adjustment mechanism is continuing to add incremental growth to our gross margin as designed, contributing $0.17 per share primarily the Four Corners adjuster that went into effect on January 1. Offsetting Four Corners’ expenses are included in the other drivers, primarily D&A, which I mentioned earlier. The effect of weather variations increased earnings by $0.04 per share. This year's third quarter was warmer or more favorable than normal, while the third quarter of 2014 was milder, or less favorable compared to normal conditions. As Don mentioned, August was particularly hot this year or for the first time since we added in Arkansas -- we hit our peak on a weekend. As a reminder, both the O&M and gross margin variances exclude expenses related to the renewable energy standard, energy efficiency and similar regulatory programs, all of which are offset by comparable revenue amounts under adjustment mechanism. Slide 6 presents a look at the Arizona economy, and our fundamental growth outlook. Arizona's economy continues to grow, much like it has in the past several quarters. Job growth in the third quarter in the Phoenix Metro area remained above the national average, as they have for the past 17 quarters. As seen in the upper panel of Slide 6, Metro Phoenix added jobs at a 2.8% year-over-year rate. This job growth is broad-based with the construction, healthcare, tourism, financial activity, business services and consumer service sectors, each adding jobs at a rate above 3%. Growth in consumer spending remains robust and expectations are improving for the housing market. Our expectation for the Metro Phoenix housing permits could be seen in the lower panel on Slide 6. The housing market is on track to record its best year since 2007 for both total permits and the single-family sector by itself. Total permits are up more than 12% this year and notably single family permit activity is up over 40%. Permit activity in the third quarter was the highest we’ve seen since the middle of 2007 and homeowners continue to report strong traffic in their sales offices. In summary, Metro Phoenix economy did grow fairly and is positioned for stronger growth in the next couple of years as it will act on the overbilled real estate market receipts into the past. As I have mentioned before, Arizona and Metro Phoenix remain attractive places to live and do business, especially as it is situated relative to the high-cost California market. 2015 is turning out to be better than 2014 in terms of job growth, income growth, consumer spending, and new construction. And we expect 2016 to be better than 2015. Reflecting the steady improvement in the economic conditions, APS's retail customer base grew 1.3% compared with the third quarter of last year. We expect that this growth rate will gradually accelerate in response to economic growth trends I just discussed. Importantly, the long-term fundamentals supporting future population, job growth and economic development in Arizona appear to be in place. Finally, I will review our earnings guidance and financial outlook. We continue to expect Pinnacle West's consolidated ongoing earnings for 2015 will be in the lower half of the range of $3.75 to $3.95 per share, based on the negative effects of weather through September. Year-to-date unfavorable weather through September has impacted earnings by approximately $0.08 per share versus normal conditions. We adjusted our 2015 customer growth down slightly to 1% to 2% from 1.5% to 2.5%, although our sales outlook hasn’t changed. We are introducing 2016 ongoing guidance of $3.90 to $4.10 per share which assumes the normal weather. The adjustment mechanics particularly transmission and LFCR along with modest sales growth are the key growth margin drivers. O&M is above trend in 2016 however, non-outage O&M spending remains flat in 2016 compared to 2015 with planned possible outages representing the increase year-over-year. This includes major planned outages at Four Corners and Cholla which occur roughly over six years. Separately the new lease terms related to the Palo Verde waste plant at Unit 2 that take effect January 1, 2015 offset plan and service impact and key depreciation and amortization relatively flat year-over-year. A complete list of the factors and assumptions underlying our guidance is included in our slides. Our rate based growth outlook remains 6% to 7% through 2018. We've included our updated rate based slide in the appendix. These estimates include bonus depreciation which we’re assuming will be extended for 2015 and 2016. And we continue to forecast that we will not need additional equity until 2017 at the early. Lastly as Don discussed the Board of Directors increased the indicated annual dividend last week by $0.12 per share or approximately 5% to $2.50 per share effective with the December payment. This concludes our prepared remarks. Operator we’ll now take questions.

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Dan Eggers from Credit Suisse. Please proceed with your question.

If we get to see an end of the 2016 guidance a little bit. I guess first question is you go back from the 1.5% to 2.5% customer growth number, given that reduction in inventory and revenue mix. Is there enough things now are coming online for next year that you can actually hit that numbers you guys look out and see what’s getting built?

We do Dan. We see as we talk about home permits were up 78% in the August from the same month a year-ago. We’re seeing sales up 32% in [indiscernible] so we’re seeing a lot of activity in that housing market.

And this is Don, I refer you if you do a search on azcentral.com Web site for the Arizona Republic and just a story that appeared on the 21st of October I just take a selective quote out of that but over the past two years approximately 11,000 building permits for single-family new homes have been issued annually and he said the expectation is that the number will reach 16,000 by year's end.

And then on the O&M cost side for next year. The cost should be flat excluding the maintenance I guess what you said if we thought about what ’17 looks like how much of that extra maintenance gives us a way to just try and normalize that?

Well don't think ’17 will be as big as ’16 and when we look for rate case purposes we use a average of five years or so, so that all get blended out in the rate case.

The rate case will reflect that moving that with the ’17 numbers?

Yes I mean we’ll get all of it because this is a sort of peak but we’ll get an average over several years as typically how they do it.

And then on the rate base forecast it includes another non depreciation act in the 18 rate case numbers now have a $400 million, what you guys do with the bonus depreciation cash and the activation company and the equity?

Easy to fund CapEx, we’ll still be net negative cash from our fixed income securities to fund the CapEx but it does reduce our need.

It will reduce our need for debt financing.

Yes and we take bonus depreciations will be 70% of that reduction in CapEx the rest is really moving Ocotillo out to ’19 from ’18.

Our next question comes from the line of Greg Gordon with Evercore. Please proceed with your question.

My math shows that -- I think my math shows that on the updated rate case forecast that 390 to 410 basically should more or less reflect the 9.5% to 10% ROE band on parent equity in 2016?

That’s correct, right.

So yes that’s consistent with the way you thought about in the past?

Correct.

So to the extend we lined up with the low-end or to high-end of that range thinking about the drivers on Page 10. Obviously this year we’re more towards the lower half because weather was mild. Is it fair to assume that the midpoint of your gross margin guidance range just assumes just a normal weather?

Yes it includes normal weather as well as we've those adjuster mechanisms two things you -- the other thing you'll see from the gross margin perspective we've the negative transmission adjuster in 2015 which will have a positive next year. So we get the cumulative effect of that as well.

I guess I'll step back and then ask higher level more open ended question. What are the key two or three factors that would cause you to end up at 410 versus that would cause you to end up at 390 i.e. high end of the range versus low end as you think about managing risk in ’16?

I'll take the higher end of the guidance to reflect a little higher sales growth and we’re currently planning. That would be the big driver.

Okay. And you file a rate case when and how and when is the -- what's the statutory time limit for a decision?

We will file June 1 of 2016 typically there was a 30 days efficiency and there is the last case we did in 10.5 we expect probably it will last goal longer with the rate design in there it's the statutory four month timeline but and Christmas around as you get days of the hearings and so on.

So the goal would be to have rates in place for the summer of ’17 but that could slip?

Yes. And the perfect word we will have it at July 1 what the issue in the case on rate design changes and so on that would be an optimistic scenario I think.

But isn’t that the reason why you are trying to get a lot of that discussion down now and the context of these proceedings that Don just discussed.

Exactly Greg.

Our next question comes from the line of Ali Agha with SunTrust. Please proceed with your question.

Don so do you want that the commission decided to have these hearings on the generic basis and I know you guys have pushed for them to be more specific and focused on the cost of service side and is there a concern that while they go through the generic process and then when the rate case comes you've got to go through this once again but with more specific numbers so at the end of the day how much realistically do you think this moves the ball forward given the generic measure of this discussion?

I think it's a new advanced the ball will be dealing with the not just generic number but our numbers specifically as will be other participants and Jeff Guldner sitting here next to me I think can explain on that far a little bit.

Sure. And I remember this they said their value has sold the dockets which was up there with obviously would be a new port on a generic the cost of service study that we did is specific with us and so one of the things you would get in the generic proceeding is still some discussion of how do you apply cost allocation factors how do you sort it out cost to service issue and result those and move forward in the rate case with the given the commissioners policy options that are available to cost from the value side and the more of that we can work through ahead of the rate case the more productive that's going to be when you get into the rate case process.

And then secondly as strong was good to see the growth in weather normalized sales pick up this quarter at 2.1%. With customer growth at that 1.3% level was there anything specific to this quarter would the weather normalization not have worked perfectly the sense that your sales growth is actually greater than customer growth this quarter and normally as you said does that 50 to 100 basis point differential but you see so anything to explain why sales growth was strong than customer growth this quarter?

I think the biggest thing Ali is sort of a weak comparison last year in the third quarter overall we have 1% sales growth year-to-date which would reflect the kind of customer growth we’re seeing currently. I think a lot of that two part of our we look at the we have top solar and EDE and a lot of this been confident it's new and I think you are seeing a little more cost that consumer and those in the Phoenix marketplace.

I see, okay. And then on a sort of the LTM basis based on the way you guys calculate ROE and I know that's all book value when you talk about your targets. Can you tell us what is that ROE that you want over the LTM basis?

I haven’t calculated that I'll have to look at that.

Okay. But to be clear on the ’16 outlook the range reflects at the lower end 9.5% again based on the book value calculation?

Yes.

And the high-end would be 10. Is that right?

Yes.

Thank you.

Next question? Operator, next question? Christine? We have lost connection from the host just one moment please.

Ladies and gentlemen, I am sorry for the delay. Our next question will come from the line of Michael Weinstein with UBS. Please proceed with your question.

Hi guys. Can you hear me okay? Hello? Oh! Boy.

Ladies and gentlemen, please stand by your conference will resume momentarily.

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Ladies and gentlemen, again please stand by your conference will resume momentarily. Once again please stand by your conference will resume momentarily. Gentlemen, you are reconnected. And your next question comes from the line of Michael Weinstein. Please proceed with your question.

Hi, guys. Can you hear me okay? Hello? I am not hearing anybody, operator.

Gentlemen you are connected.

Yes, can you guys hear me okay?

Yes.

Oh! There we go. All right.

Okay.

So my question has to do with the guidance for 2015. Just looking at you’ve reduced the retail customer growth a little bit by 0.5% but the sales volume is remaining the same. So that would sort of indicate that there has been an improvement in terms of energy efficiency effects, I guess less of an energy efficiency effect that you see in 2015. However, when you go forward to 2016 guidance, you have an increase in the customer growth rate but still the same sales rate, so that indicates the opposite. Just wondering what’s going on with energy efficiencies and asset management side?

I Michael would caution you to look at any quarter and try to extract anything out of quarters, a quarter. I think we are pleasantly surprised by the sales growth year-to-date. I don’t think we necessarily expect laying that into ’16 guidance.

Okay. And also just in terms of the rate cases filing. Is it true you guys are going to have to file or you are going to have to make purchases of new generating assets before you file the case. Is that right?

We have no plans to purchase generation assets other than what we are billing at occupancy or which is a self built.

Okay, so there is no potential for anything else, fairly probably you can see now?

No we have some PPAs and other things rolling off and we will go out next year for sort of all resources RFP for sometime later this -- probably later this decade, then we will see what where get at that point but we’re ways off from new generation at this point.

Our next question comes from the line of Brian Chin with Bank of America/Merrill Lynch. Please proceed with your question.

So with the revised rate base numbers including bonus depreciation, can you quantify out the impact of the bonus depreciation or give us some sense of how big that is relative to the prior forecast?

Yes, bonus depreciation we expect to be over the two years about $250 million. We just think about that as ratably over those two years.

Okay, excellent. And then with regards to the revised bonus depreciation numbers, can you give us an update on any potential needs for equity, I would assume that it reduces that since you are able to take the bonus depreciation and use that for further deployment of capital. But just revise us on what the equity financing needs are if any as we go to the next year?

Yes, well, certainly the cash and bonus depreciation would minimize the need, if we need anything, we won't do anything until after we get that outcome and next rate case.

Okay, great. And then lastly, just what risk do you think there could be under the more narrowly tailored generic proceeding. Is it possible that any delays or extension of that proceeding could bleed into the timing of when you file the rate case? Is there a risk of the two issues kind of melting together? I guess it’s a little bit of a springboard question on earlier question I think that Ali asked?

Brian it’s Jeff I don’t think it would affect the timing of the filing of the rate case. One of the issues that came up in the discussion a little while ago was we've requested that the information push to get that aside us in the April timeframe was ahead in the case. But the procedural conference is still coming out, if that leaves over that wouldn't affect the filing, once you file the case you've got a fairly lengthy litigation process.

Our next question comes from the line of Charles Fishman with Morningstar. Pleas proceed with your question.

If I could go back to the rate base growth once again 2018, the 400 million decline in generation and distribution that was bonus depreciation and the delay of Ocotillo the $200 million decline in transmission is that all bonus depreciation or there a project is been delayed or canceled that I have forgotten about?

No we’re constantly on ongoing basis moving capital from year-to-year so there is nothing substantial in terms of delay in big projects or anything like that.

Our next question comes from the line of Paul Ridzon with KeyBanc Capital Markets. Please proceed with your question.

Very quickly, you said you had 2.1% sales growth and that is after the impact of efficiency correct?

Yes, and distributors and origin.

What was the gross number?

Little over three.

Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed with your question.

Sorry to beat a little bit of a dead horse just want to make sure I understand though. Can you walk us through from your prior disclosures to today's flight deck, the change in total expected rate basis for the forecast period and just two or three biggest drivers for that? There has been a lot 1C 2Cs and I want make sure I understand what’s going on here?

Well about 70% of the change roughly is the impact of bonus depreciation, and significant amount of the other is just moving Ocotillo from our end service date of ’18 to 2019.

And the total change is $400 million or greater number?

About $4 million.

Second when we think about 2017 O&M should we assume that it kind of gets back down in that year to something closer what you've guided to for 2015 or does it kind of stay at that elevated level that you're going to see next year but that you recovering you're expecting to get more recovery of that in rates?

We've really not talked about any aspect of 2017 guidance Michael.

Is the 2016 increase in O&M viewed more as one time or viewed as recurring?

Well I think it is -- I would call it one time, and we do generation outage every year where it is based with significant overall at both quarters at 28 in the same year I could say that that number is elevated based on what we wouldn’t call it one time in any view.

And the case are going to filed in mid-’16 will that use a full year ’15 test year and what large if any known and measurables would be in there?

We’ll try to let's see what we had on the past which is the 2015 test year and any planned service 15-18 months then post patch your plan and there will be some things that are still under construction that won’t be done like the SCRs or Ocotillo allows them to recover some other mechanism.

Meaning you're expecting to potentially get Ocotillo recovered in this even though Ocotillo is now not due online until 2019?

No, we would not get Ocotillo in this rate case.

So this rate case is more about just managing lag and getting the FBRs in?

I think this rate case is also a lot about the rate design issue which is how we align our 70% of fixed cost with only 10% of fixed revenue and try to get more alignment between cost and revenue.

Our next question comes from our Paul Patterson with Glenrock Associates. Please proceed with your question.

There was a court case in the Arizona Court of Appeal which overturned from the Arizona Corporate Commissions it was the case that didn't involve you but in theory I guess there is some that are arguing that the solar access being out of the rate case could be -- would it comply with the court of appeal ruling if you follow me. I am sure you guys are familiar with the case but whether -- is this a new point that you have withdrawn your request or is there any risk if this I know the ACC is probably going to appeal it but if this decision were upheld is there any risk to you guys would respect to what would be the impact to you guys if it was upheld let me just ask it that way?

So Paul this is Jeff Guldner. If you are referring that water company case involving infrastructure adjustor the commission have appealed that and if so court of appeals case they start review with the Arizona supreme court and with the case that what's there was how the commission makes fair value findings which is somewhat unique that Arizona regulation how it makes their value findings in the context of adjustor mechanisms and things like that so we get them in rate cases we do typically fair value findings and provisions and almost everything that we do and so what I think folks are looking for right now is clarify some of the things that were in the court has appeals decision but it's I don’t think that the supreme court is not yet excited whether to grant review and if they do I'm sure they will see mostly intelligence of state participating in that litigation.

Okay, right. But I guess what I'm wondering is if they grant review and I mean this ultimately is upheld where there would be any impact on what you guys have collected in riders or what have you with this access do you mean what would be -- let me just ask you this way with reviewing impact on you guys when you look at the Arizona court of appeal’s decision what do you think the impact would be if we were up held?

The part of the review on how you that to make fair value findings and those proceedings and I think most folks would expect the release to be prospective and so would be in highly to move forward with a different proceeding in terms of making fair value findings to which support whatever the court ultimately came out lift. We've had filed adjustors and one of the things that was mention that decision is a fuel adjustor which tracks expenses up and down fuel adjustors have been common in Arizona for decades and that opinion recognize with types of adjustors fine and as you get into different styles or different models for adjustor gets little more complicated and you guys figure out how you put the fair value piece it up. [Multiple Speakers]

So you guys have been fine with fuel adjustment that wanted to be something that would be impacted but would there be any other potential riders as something that we should think about as being potentially impacted or is it would you feel basically that you guys have the one that impacts that much. Is that what I'm getting at?

Yes. We also look at all the riders and we look at how the fair value provisions and how we handle fair value in each of those cases and that litigated or implemented the rate cases and then if we have to make adjustments for the next rate case then we would.

We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Thank you, Christine. Thanks for joining us today. We apologize for the connection issues we had on the call. And we look forward to seeing most of you at EVI here in a couple of weeks. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.