TE Connectivity Ltd. (TEL) Q4 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, good morning. Thank you for standing by. Welcome to the TE Connectivity Fourth Quarter Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr. Keith Kolstrom. Please go ahead.

Good morning, and thank you for joining our conference call to discuss TE Connectivity's fourth quarter and fiscal year 2013 results. With me today are Chairman and Chief Executive Officer, Tom Lynch; and Chief Financial Officer, Bob Hau.. During the course of this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. [Operator Instructions] . Now let me turn the call over to Tom for some opening comments.

Thanks, Keith and good morning, everyone. This was a very good quarter for the company and we capped the year of strong performance in an uncertain economy. Q4 is especially noteworthy for several reasons. Our organic growth was 3.3% and the company returned to growth for the first time since early last year as continued strength in our Transportation Solutions segment was augmented with growth in our Industrial Solutions segment and then our Telecom Networks and Appliances businesses. Quarters excluding our SubCom business, grew 6% in the quarter and the strength was broad-based in terms of end market and region. Our $0.93 per share is a new earnings record for TE and it's up 22% versus the same quarter last year. We delivered 15.7% adjusted operating margin at a run rate of less than $14 billion in annual revenue. We did have a very favorable mix in the quarter but adjusting to more normal mix our margins were still above 15%. Our efforts to driving lean across the company, which is our TE operating advantage program are really paying off with customer satisfaction and margin improvement and we'll have more to come on this at our Investor Day in November. For the third consecutive year, we were selected at the top 100 innovator by Thomson Reuters. 5 years ago, we stepped up and refocused our renovation efforts and we have a terrific product pipeline and a wide range of intellectual property that should fuel our growth for several years to come. And we had another strong cash flow quarter, and for the year delivered $1.5 billion in free cash flow, our sixth consecutive year of 10% or better cash flow yield on revenue. For the year just ended, we increased adjusted earnings per share by 13% on sales, which were relatively flat. The team did a great job of delivering cost savings and productivity to more than offset the impact of a slow economy. I'm also very pleased with the integration of the Deutsch acquisition. The markets for Industrial Transportation and Commercial Aircraft are strong and we expect to deliver the sales and cost synergy ahead of the acquisition plan. As expected, Deutsch has added great products and people at TE. I'm also very pleased that we generated adjusted net income in excess of 10% for the year, and as I mentioned earlier, we are converting these strong earnings into strong cash flow. During FY '13, we returned $1.2 billion in capital to our shareholders in the form of dividends and share repurchases. In fiscal year '14, we expect to return over $1 billion in capital shareholders -- in capital to shareholders, and as shown in our press release earlier this morning, our board has recently approved an increase of $1 billion to our share repurchase authorization. Now please turn to Slide 4. Total company sales were $3.43 billion and were up 3% organically versus the prior year. The sales increase was driven by continued strength in the Transportation segment and improving demand in the industrial and telecom businesses. Please turn to Slide 5, and I'll review our segment performance. Unless I indicate otherwise, all changes are on an organic basis, which excludes the effect of currencies, acquisitions and divestitures. We had another outstanding quarter in our Transportation business. Sales were $1.4 billion, up 10%, and adjusted operating margins were again over 19% and in line with our expectation. Global automotive production was up approximately 4% to 19.6 million units with strength in the U.S. and China. European demand continues to be soft but does appear to be stabilizing. We also continue to see improvements in the heavy truck markets in several geographies. The Deutsch acquisition positions us very strongly in this high end harsh connectivity market. The strong operating margin performance is due to the increased revenue, continued productivity improvements coupled with a very lean footprint and the strong performance in our commercial vehicle business. We expect another strong quarter in Q1, with revenues up about 10% versus the prior year on an expected vehicle production increase of about 3%. Please turn to Slide 6. Sales and earnings in our Industrial Solutions segment were better than expected due to stronger end market demand and favorable product and channel mix. Importantly, we had a strong ordered growth -- we had strong order growth for the second quarter in a row, a solid growth in every region. On a year-over-year basis, sales were up 2% and orders increased 10%. Book-to-bill was 0.96. Orders were especially strong in the commercial Aerospace and Industrial Equipment markets. Energy was up 7%. In the first quarter, we expect sales to be up mid-to-high single digits versus the prior year with Industrial Equipment up close to 10% and Aerospace and Defense and Energy up low to mid-single digits. Continued strength in our commercial Aerospace business is more than offsetting lower spending on Defense program. Sales and earnings in our Network Solutions business were little better than guidance. Within this segment, orders and sales continued to improve in our Telecom Networks business, which is the business where we provide the connectivity for the broadband network for telecom carriers and cable operators. Across the world, we are seeing a gradual pick up in fiber rich broadband network deployment. This improvement was offset by continued weakness in our DataComm equipment business. In our SubCom business, project activity continues to be robust and funding continues to be slow. Revenue in the quarter was in line with expectation but the return to the growth cycle looks to be in the second half. For the segment overall in Q1, we expect a slight decline in revenue as the weaknesses of SubCom and DataComm more than offset the growth in the telecom business. Please turn to Slide 8. Sales in the Consumer Solutions segment were down 5% versus the prior year. The continuation of declines in the PC market and a slowdown in the growth in smart phone and tablets more than offset our growth in our appliances business. In Q1, we expect sales to be down mid-single digits as growth in appliances is offset by continued softness in the Consumer Devices business. I'm going to turn it over to Bob who's going to cover the financials in more detail.

Thanks, Tom. Good morning, everyone. Let me discuss earnings, which start on Slide 9. Our GAAP operating income for the quarter was $465 million, which includes restructuring charges of $71 million and acquisition related charges of $3 million. Restructuring charges were $311 million for the year, which was higher than our $275 million guidance. Given the progress we made on projects already announced, we implemented additional items that we originally expected to occur in fiscal 2014. In fiscal 2014, we anticipate a substantial reduction in the level of restructuring activity with charges of approximately $50 million. Adjusted operating income was $539 million with an adjusted operating margin of 15.7%, up 220 basis points from Q4 last year. The improvement is driven by 3% organic sales, productivity from TEOA and benefit of accelerated restructuring. As Tom mentioned, we did benefit from a favorable mix in the quarter. Adjusted EPS were $0.93 and GAAP EPS were $0.92 for the quarter. GAAP EPS included $0.13 of restructuring and other charges and $0.12 of income related to tax items. Turning to Slide 10. Our adjusted gross margin in the quarter was 33.7%, which was a record level for the company. This is a 190 basis point increase versus the prior year, largely due to continued progress in our TEOA or lean programs driving increased productivity with reductions in both material and conversion costs and improved profitability related to the integration of Deutsch. Total OpEx spending was $617 million in the quarter, which is flat versus the prior year despite sales being up 3% organically. On the right side of the page, net interest expense was $30 million for the fourth quarter and I expect approximately $31 million of expense in the first quarter with a decline of about $1 million per quarter as we move through the year in 2014. Adjusted other income, which relates to our tax sharing agreement was $7 million and largely in line with guidance. The adjusted effective tax rate was 23.8%, also in line with guidance. In the first quarter, I expect other income of about $8 million per quarter dropping to about $6 million per quarter for the remainder of the fiscal year. And expect the tax rate of 24% to 25% throughout fiscal year. Now turning to Slide 11, I'll discuss our balance sheet and free cash flow. Cash from continuing operations was $595 million and our free cash flow in Q4 was $412 million. Full year free cash flow was $1.5 billion. Capital spending during the quarter was $183 million or about 5% of sales. This is consistent with our anticipated spending rate of approximately 4% to 5% of sales going forward. Receivable days outstanding were 61 days and inventory days on hand were 68 days, both metrics remain in line with our expectations. Now let me discuss the sources and uses of cash outside of free cash flow shown on the right side of the slide. You see we began the quarter with $1.3 billion of cash and ended the quarter with about $1.4 billion. During the quarter, we returned a total of $313 million to shareholders. We paid dividends of $103 million and repurchased about 4.2 million shares for $210 million. We expect additional share repurchases of $150 million to $250 million per quarter during fiscal 2014 consistent with the 2013 levels. Outstanding debt was $3 billion at the end of the quarter. On October 18, we filed the press release calling for the redemption of all the outstanding 5.95% senior notes, which were to mature on January 15, 2014. The slightly earlier redemption is part of our normal cash management. And while no decisions have been finalized regarding replacement of this debt, I do not expect our capital structure to change from the redemption and continue to expect that levels to be about $3 billion. Now I'll turn it back to Tom.

Thanks, Bob. Please turn to Slide 12 and I'll cover our outlook. As I mentioned earlier, we've seen solid improvements in our order rates over the last couple of quarters in most of the end markets we serve. And although the overall global economy feels like it has more momentum than it did this time last year, though, there's clearly still uncertainty given slow job growth, the weak economy in Europe and an unsettled U.S. government budget. When we take all these trends into consideration, this is our guidance for Q1. In Q1, which is our seasonally slowest quarter of the year, we expect organic sales growth of 4% to 7% and adjusted earnings per share growth of 14% to 20%. At the midpoint of the guidance, adjusted EPS would be $0.76, an increase of 17%. I feel like this is a really good start to our new year. In Q1, we expect continued strong performance in our Transportation and Industrial businesses with high single-digit year-over-year growth. We expect our Network Solutions segment to be down slightly as improving conditions in the telecom network marks -- -networks market are offset by the softness in our DataComm business and continued project delays in SubCom. We expect our Consumer Solutions business to be down mid-to-high single digits as Q4 trends continue into Q1. Please turn to Slide 13. Now for our full year guidance. Based on these current trends, we expect our organic revenue growth in fiscal '14 to be in the range of 3% to 7%. We do expect the continuation of solid demand in the Transportation and Industrial markets as well is in the Appliances and Telecom Infrastructure markets. We expect continued softness in our SubCom business as contracts coming into the force remains low until at least the second half of the year and we expect our Consumer Devices business to be about flat. We expect to continue our execution momentum and to deliver adjusted earnings per share in the range of $3.50 to $3.80, which is about a 13% year-over-year increase at the midpoint of our guidance range. This improvement is driven by organic sales growth, another year of strong productivity and the increased benefits of restructuring. At the midpoint of our guidance, we expect to deliver 15% adjusted operating margins for the full year at $13.9 billion of revenue. We also expect a significant reduction in restructuring charges as our footprint is much improved. Overall, this was an excellent quarter, a very solid year of earnings and sales growth -- and our cash growth and I feel good about our momentum entering fiscal '14. I'm confident that if the global economy continues to recover, we are well positioned to deliver attractive sales and earnings growth. Now let's open it up for questions.

[Operator Instructions] Our first question today comes from the line of Amit Daryanani, representing RBC Capital Markets.

Two questions for me. One, maybe you could just talk a little bit on the December quarter guide. I think sales, you're implying will be down about 4%, so call it $160 million, $165 million down sequentially. but if I'm run the math and EPS implies that operating income will be down $190 million or so. That suggests detrimental margins of 50% plus, so will you talk about why is such a severe decline or detrimental margin in the December quarter and then maybe you can give us comfort on why you see them expanding to getting out of 15% by year-end.

Thanks, Amit. First, regarding the sales guide. As I mentioned, this is always our seasonally lowest quarter, so we will typically see a 4% to 5% sequential decline in revenue. It is a little higher fall off in operating income but that's not unusual either, because we typically -- what always happens in this quarter is you hit the holiday, you have less work days so your productivity and efficiency suffers a little disproportionately. And on top of that we come off what is typically a very strong quarter when we're running all out at the end of September. So if you look at how we pattern from last year, first half second half, almost exactly the same pattern. So no real difference there, that's why I'm confident that the sales growth and margin, particularly the margin growth through the second, third and fourth quarter and 15% is the -- I feel confident about achieving that. Fair enough. that's all. But let me just ask you a question about the Transportation side. If I look at the September results and also the December guide, looks like the Transportation business is up about 10% year-over-year organically in both quarters. If I looked at the lower production numbers, that's up about 3%. So I guess, it seems you are seeing about a 7% content growth for September and December, net of ASP erosion . Could you to tackle why you're seeing such a big acceleration on the content growth and could that perhaps sustain for the next several quarters as well?

Yes. I don't think it's -- there's any sudden change in content growth. But I think it's a couple of things. One, we continue to do well around the globe and are growing in every market. And believe we continue to move up our market shares. Secondly, the Industrial Transportation business is very strong with the heavy truck market. And that's a pretty high end market for us. So that's also lifting our growth rates.

Our next question today comes from line of Mike Wood with Macquarie.

I wonder if you could comment in terms of the range of possible outcomes for SubC sales next year. In the context of $90 million next quarter, which would be at like a mid-$300 million run rate, and obviously you've talked about the robust pipeline. So what visibility do you have there in terms of the timing, potential downside, potential upside?

Thanks, Mike. Right now, I'd say SubCom feels flat year-over-year but the second half is hard to call. I think there's probably more upside than downside based on the project pipeline and when we map the extent of this project pipeline to prior years, we know all projects will not come into force but if we look at the typical come into force rate, we would expect to see things starting to pick up in the second half and as we watch projects move through their funding process. That's where we'd expect though -- first quarter is pretty much what the first quarter is going to be. Second quarter is probably going to be close to that. Hopeful that the second half picks up and these contracts that we won come into force.

Great. And then if can you comment also on the Transportation segment follow-up to that last question. Next year in terms of your vehicle production guide, you have more of a contribution from Europe than you had in your projection for this quarter and 1Q? What's the impact on TEL in terms of that greater contribution from Europe from a content standpoint, your out performance versus the global vehicle production?

Well Europe definitely has higher content. And Europe, you really have to break it down. On the surface, which is the local demand for cars in Europe, that's been weak. But particularly, the German OEMs, they've been strong as they export quite a bit and that's where we are strongest. So we don't see a dramatic change there. We see a slight improvement in Europe for us. So there's no big swing in our numbers based on Europe.

Next we'll go to the line of Matt Sheerin with Stifel Nicolaus. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Looking at your margin guidance for FY '14, a 15%. Could you talk about the drivers? You have got 2 segments -- consumer and the Networking business you're guiding sort of flattish, you're coming off of peak margins in the Transportation business. What are the drivers in terms of margin expansion within the different segments particularly in the businesses that are guiding flat?

Yes, Mike, this is Bob. Across the board in 2014, we're seeing improvement in operating margin from all 4 of our segments. As you know, we had significant restructuring activity is 2013 and we see the benefits coming through into 2014. We've indicated about a $100 million at exit. Into 2015, we'll see that $400 million. In our 2014 numbers, you have probably between $60 million and $70 million of operating income improvement from those restructuring activities. And of course, we continued down the path of lean and our TEOA activity. So all 4 of our segments, obviously, participating in that where we have the good top line growth obviously in our Transportation business and Industrial where we're seeing mid-to-high single digit growth, we'll get some nice volume leverage in our Industrial and Consumer business -- I mean, our Consumer and Networks businesses where they're a little bit more flattish, margin improvement will be harder to come by. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And Tom, on the DataComm, the commentary continues to be cautious there. Do you see any signs of life going into fiscal '14 and if you think it's going to remain flat and down year-over-year. Are you looking at additional cost savings in that business?

I would say it's going to be down, but most of the decline is because we exited some very low-end business this year. When you take that out, we're going to be slightly down. I think that's mostly just the slow market. But we're in the middle of the pack player there. That business has gone through a lot of restructuring over the last year, so I don't anticipate any significant additional restructuring there. Never say never, but we stepped up to that about 6 to 9 months ago.

Our next question today comes from the line of Shawn Harrison with Longbow Research.

Just following up on Matt's question on the margin targets. It's just, would you be willing, Bob, just kind of give a may be a range where you think each of the 4 segments could be for the year in terms of EBIT margin?

I don't want to get into guidance by segment but I think the key -- and I've mentioned this in the previous answer, if you look at the volume growth overall top revenue Transportation, Industrial being kind of mid-to-high single digits Transportation, obviously stronger than Industrial but in general, nice improvement. That's where we're going to see the higher lift from a year-over-year standpoint. Consumer Solutions and network, we're seeing real benefits from the restructuring actions that we took in 2013 and continued improvement in new products have higher margins but without the volume lift you're not going to get dramatic improvement in the operating margin. Now obviously overall, I'm doing very well grown from the 14.2% we had this year to 15% next year. But clearly, Transportation and Industrial are doing majority of the heavy lifting given the volume.

Got you. I guess on the restructuring savings, maybe another way to come with that question is on that $70 million -- or $60 million to $70 million expect of restructuring savings to fall on the '14, how much of that is Networks versus Industrial versus consumer?

Probably the easiest way to think about that is if you look at where the investment went to $300 million, roughly between networks and consumer, 70% of the spending were in those 2 businesses. So you'll see that majority of the benefit in those 2 businesses. 40% networks and about 30% consumer.

Got you. Got you, that's helpful. Then just as a follow-up. I guess, with commodities being down, how much of a tailwind from commodities you're baking in on a dollar basis to your '14 numbers?

Commodity is definitely helping on a year-over-year basis, you have to be a little cautious, number one, there's a lot of the year left and our commodities still move. Additionally, with our hedging program that benefit feathers in over time. But on a full year basis, if commodities were to hold where they're at today, there's probably $45 million to $50 million of tailwind for us on a full year basis.

And our next question is from the line of Jim Suva with Citi.

When we think about the outlook, just to be clear I assume that the stock buyback, I think you said $150 million to $250 million per quarter is built into your EPS guidance. And then also, am I correct that you are not building any potential acquisition so if you can talk about that a little bit because it seems like you past acquisitions are progressing better than historical and some of your peers do a lot of acquisitions. Are you now looking at the point where we should expect TEL to start a little bit more aggressive on acquisitions?

Yes, Jim. We have baked in the share repurchase at that $150 million to $250 million range, the range of repurchasing we had in '13 and we plan to continue that per quarter going into 2014, so that's baked in, a modest improvement in the shares outstanding minus reduction. In terms of acquisitions, we have not baked into our guidance any acquisitions we may or may not do into 2014. Obviously, if we were to conclude any acquisitions in the year, we've revised our guidance to that point.

Just adding onto that regarding M&A. We have a robust pipeline. But as you know, we're pretty thoughtful about it. We really focus on strategic fit. But I would expect and we desire to continue to round out our product line and our overall connectivity portfolio. It's a big market. We have the broadest product line but we're not satisfied yet. So we're always looking, but we don't build that into our outlook.

Great. And as a quick follow-up, there's been some indications that the Australia fiber build out has been slowing down here, as well as some changes in China. Is that incorporated into your guidance, did you put in some conservatism there for it, and how should we think about those recent trends that are happening into those area, which once were a very highly attractive area and very robust outlook?

I would say Australia for sure is still -- are very attractive. what's going on there, as you know, the changing government, they've got to sort through how they want to build the broadband network. The prior government was fiber to the home. This is more like fiber to the node. In both cases it's a lot more fiber in and a lot more broadband in the country had today. So it could affect us, $10 million, $15 million a year is our estimate right now, which we have included in our guidance. So we don't see -- I mean things could change, but we're not getting any indication and we're very close to the organization down there. On China, we are being [audio gap] in China, it's where we play in the network, it's a business you need to be selective in. I would say generally, this is reflected in our guidance, the market hasn't been as attractive as we saw a couple of years ago, a lot of competition, a lot of low-end competition, so much like we do on our energy business in the market like China. We're selective in playing were quality and reliability really matters. But from our telecom perspective, that business has been a slow business for us. The opposite side of the road on automotive so to speak, which has been, it continues to be a booming business for us.

A question today comes from the line of Mark Delaney of Goldman Sachs.

I was hoping you could help us, remind us about what your exposure is to the European market and I think there is some green shoots in the Automotive business and than maybe even in Telecom as we look into the 2014. So are you seeing any positive indications in Europe and can you help us think about how much TE might benefit from that?

About a third of our business is done in Europe. The biggest part of that is Automotive. And a pretty significant portion of that business, 20% to 30% is exported out. So it's a little murky to walk through. But in general, we're strong in all our businesses in Europe and that has depressed our growth rates over the past 2 years but we have a strong, profitable businesses there, our best businesses, Automotive which as I indicated is continue to be a good business because of the export base. Our strongest Energy market is in Europe, which has been a slow this year, very slow, but we're starting to see signs of picking up. We have a pretty sizable telecom business in Europe, which is not very fiber rich yet. So we're encouraged about the prospects for that and we are seeing some green shoots so to speak in some areas of accelerated fiber build out. And our largest industrial equipment business is in Europe, which has been slow but is also, as we mentioned in overall Industrial business, showing signs of stabilizing and picking up. So I'd categorize Europe end market demand as being feeling a little bit better, but off of a low base. So it's nothing to get gleeful over yet but the stabilizing is the way it looks.

That's helpful. For my follow-up, can you guys just clarify on the restructuring benefits that you assume for fiscal '14, I know a $60 million to $70 million -- is that the $60 million to $70 million of benefit that you got for fiscal '14 overall or as you exit fiscal '14 you will be getting to $60 million to $70 million on a run rate basis?

The $60 million to $70 million is for the full year. We'll exit a bit higher and what we've said is $100 million plus benefit into 2015 once we hit that full run rate.

And we have a question from the line of William Stein with SunTrust Robinson.

I'm wondering if you can comment on the cash flow outlook for next year with the lower restructuring charge. How does that affect cash?

Thanks, Will. I think we're going to continue to generate cash at around the net income level. So I'd say it's in that 14, plus or minus. I do expect some CapEx to increase year-over-year and restructuring charges are down but restructuring spending is about flat. So and the early stages of restructuring our cash outflow lags our charges and that eventually, it catches up. Bob, I don't know if you want to add on to that.

Yes, the charges that you see or saw in 2013, that's $300 million plus, the cash flow is out really over 3 years, simply the majority of it is in 2013 and 2014. '14 it's up slightly, but not significant one.

That's helpful. And then if I can just hit the margins, I know there has been a lot of discussion on this. It's like Transportation at a very strong level going higher and certainly for the company, you just go blew through the 15% target nicely in the quarter. How we think about aggregate to the operating line, and then is there a significant delta from 1 segment to the next with regards to the drop through?

I'd say relative to the relationships of the businesses, Transportation and Industrial, which are a long cycle highly engineered, harsh environment businesses, which honestly is that we do best at, have a higher flow through than the Consumer, which is the other end of the spectrum where you need volume particularly in devices to get flow-through and volumes has been intermittent for us there. Networks is sort of the mix. Our Telecom Networks business, again, highly engineered products and harsh environment, high flow-through. So you'll typically get higher flow-through in Industrial and then Transportation and Telecom networks.

And our next question comes from the line of Amit Daryanani with RBC Capital Markets. [Operator Instructions]

Just have a quick follow-up guys. Regarding the capital allocation, Tom, I think you mentioned at the onset of the call that you expect to return $1 billion back to shareholders. But if I do my math, at least at the midpoint of the buyback on that $150 million to $250 million range that would be $800 million alone and in your dividend policy, I think it's a little over $400 million. That would put you all up to $1.2 billion, I think. So does that imply that maybe the buybacks would be at the lower in the $150 million to $250 million range or do I just mishear the $1 billion comment initially?

I said $1 billion, but it's early in the year. Last year was the year of no M&A, to be determined what happens this year. Well I think, think of that as what we see right now, that's what is the most likely range. What happened this year as we progress through the year, there were no M&A opportunities that made sense to us, so we increased the buyback. That could happen again or if we see the right opportunities that are strategic and help us strengthen the company and increase our growth rate, we'll go in that direction. But at this point, I'd say a $1 billion is the way to think about it in total.

So that, I guess, Tom, that would imply the buyback would be $150 million a quarter then, right?

Amit, actually the comment on the script was over $1 billion, so I mean, again, it's early in the year so.

If you were to take it literally in a $1 billion, it would be at the low-end.

Got it. So the way to think about it is at minimum it is going to be $150 million, and as you ramp through the year, and if you don't find or don't do enough deals, you can ratchet it up higher much as you did in fiscal '13?

That's correct.

And speakers, nobody else is queued up at this time.

Thanks, everyone for calling in. Just one reminder. Our Investor Day, the first one in 2 years is in New York on November 19 and we look forward to hopefully seeing all of you there. And until then, have a good couple of weeks, see you late November.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and using the AT&T executive teleconference. You may now disconnect.