Ladies and gentlemen, thank you for standing by, and welcome to the Actuant Corporation's First Quarter's Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, December 20, 2018. It is now my pleasure to turn the conference over to Barb Bolens, VP, Corporate Strategy, Investor Relations, and Communications. Please go ahead, Ms. Bolens.

Thank you, Operator, and good morning everybody. We appreciate you joining us for our first quarter conference call for 2019. On the call today to present the company's results are Randy Baker, Actuant's President and Chief Executive Officer; and Rick Dillon, Actuant's Chief Financial Officer. Our earnings release and slide presentation for today's call are available on our Web site at actuant.com in the Investors section. We are also recording this call and we will archive it on our Web site. Please go to slide two. During today's call, we will reference non-GAAP measures such as adjusted profit margins and adjusted earnings. You can find a reconciliation of non-GAAP measures to GAAP in the schedules to this morning's release. We also would like to remind you that we'll be making some statements in today's call and presentation that are not historical facts and are considered forward-looking statements. We are making those statements pursuant to Safe Harbor provisions and federal securities law. Please see our SEC filings for the risks and other factors that may cause actual results to differ materially from forecast, anticipated results, or other forward-looking statements. Consistent with how we have conducted prior calls, we ask that we follow our one question one follow-up practice in order to keep today's call to an hour and let us to address questions from as many participants as possible. We appreciate your cooperation. As this is our first quarter reporting in our new two segments structure, please note that we may refer to our Industrial Tools and Services segment as ITS or Tools, and our Engineered Components and Systems segment as ECS. Now, I will turn the call over to Randy.

Thanks, Barb, and good morning everybody, and before we get started today I just want to wish everybody a very safe and happy holiday. Flipping over to slide three, as you read in today's press release, Actuant delivered a solid first quarter. I'm very pleased with our execution on all aspects of our business and the continued progression toward a best-in-class performance. Now, let's walk through the progress we've made on the strategic objectives in the quarter. First, our core growth initiatives are driving greater commercial effectiveness and improved product vitality. As we discussed in our fourth quarter of 2018, we launched a large number of new products, which we expect to contribute to our 2019 growth. We are also continuing to drive the recent acquired Mirage and Equalizer business into our global tools and service organization. In terms of world-class operations and service, we'll be highlighting our progress on quality, cost, delivery, and safety later in the call, but I'd like to say that we are pleased with the results we're achieving. We are also integrating the Enerpac and Hydratight business to leverage the strengths of the combined tool company. We continue to be disciplined on how we're allocating and deploying capital. The investments we made in our core businesses are yielding commercial and operational results. And from an M&A perspective, we are actively pursuing bolt-on and strategic acquisitions to drive growth in our Tool business. And finally, I'll touch on portfolio management in a moment, but overall I'm pleased with the continued progress we're making on our key strategic objectives and our momentum on financial results. Turning over to slide four, our core sales growth grew by 3% in the quarter with contributions from new product introductions, commercial performance, pricing, and the continued positive market. As you can…

Thanks, Randy, and good morning everyone. If we turn to slide six, just a few comments on our non-GAAP adjustments for this quarter; as Randy discussed, we made further progress on portfolio management, and we are actively working to divest the remaining Cortland business and the Precision-Hayes International. As a result, we have categorized the associated assets and liabilities that's held for sale in our balance sheet. During the quarter, we recorded a $34 million after-tax charge to write down these assets to their net realizable value. On to our adjusted first quarter results, if you turn to slide seven. Fiscal 2019 first quarter sales increased 1%. Foreign currency provided a headwind of 2% in the quarter. The benefit from the Mirage and Equalizer acquisitions was offset entirely by the divestiture of Viking in the year-over-year comparison. This resulted in a core sales increase of 3%. Adjusted operating profit improved year-over-year for the fifth consecutive quarter, up 200 basis points and resulted from the solid flow-through on incremental sales within our targeted range as well as a lift from the impact of our pricing actions. Our effective income tax rate was approximately 14% for the quarter, in line with our expectations. Adjusted EPS for the quarter was $0.27 compared to $0.19 last year, and $0.02 over the top end of our guidance. If we turn to slide eight, core sales of 3% was in line with our guidance range of 3% to 5%. ITS segment sales continue to be solid, including double-digit demand across the Americas, Australia, and Asia. Solid core sales growth for ECS across all product lines and regions were partially offset by the expected decline in China truck sales. I'll provide more color on core sales improvement as we discuss the individual segment results. If you turn…

Thanks, Rick. Moving on with the slide 15, as many of you recall we began a focused progression towards lean operations in the late 2016. The projects included extensive training and a systematic improvement towards our quality, cost and delivery and safety goals. I am very pleased with progression at our manufacturing locations and the commitment of our employees. Our composite scores by plant have improved significantly and our customers are now seeing a higher quality product delivered on time from safe and clean operations. As you can see we've improved our quality, our delivery and our safety to almost our target level. However, we still have a gap to close in the cost reductions, but we have examples around the world of improved productivity. The progression towards lean operations is never complete but we have made great progress. Now moving over to slide 16, the macroeconomic factors affecting the business remain largely unchanged from the fourth quarter. The recent volatility in commodity prices has created a sense of caution in most businesses, but the activity remained strong. Tool sales continued to grow and distributors are reporting good retail performance. Service activities also remained positive during the quarter. And we continue to see and expanded number of projects in majority of our markets. The recent fluctuation in oil prices have created a renewed level of conservative maintenance which has been the mode of operation for many quarters. Off-highway mobile equipment remains positive with good growth dynamics in agriculture and construction equipment. Our major OEM customers have reflected a lower projected growth rate 2019, but still at a positive level. And finally, we believe on-highway truck sales in China have reached a normalized run rate. And as predicted European truck markets have slowed sequentially. So, turning over to slide 17, the projections for the 2019 core sales growth remain unchanged from the fourth quarter guidance provided in September. The consolidate core sales growth is projected to be between 3% and 5%. And Industrial Tools and Service core sales growth should be in the range of 3% and 5%, and Engineered Components and System will grow in the rate of 2% to 5%. This is very consistent with our first quarter results and further validates projections for 2019. Moving on to slide 18, our 2019 full-year guidance is as follows. We expect the sales to be in the range of $150 billion to $190 billion which reflects the strengthening of the U.S. dollar and the sale of the Cortland Fibron business. Full-year EPS remains unchanged from $1.09 to $1.20. Our second quarter sales is expected to be in $268 million to $278 million, and we expect our second quarter EPS to be in the $0.15 to $0.20 range. And finally, cash flow remains unchanged at $80 million to , $85 million. And as a note, all guidance does exclude the impact of future acquisitions and/or divestitures. Now, Operator, that concludes our prepared remarks for today, we can open it up for questions.

Thank you, sir. [Operator Instructions] Our first question comes from Mig Dobre with R.W. Baird. You may proceed with your questions.

All right. Good morning, everyone. It's Joe Grabowski on for Mig this morning.

Good morning.

Good morning. First question, in ITS, you called out the double-digit growth in tools in Americas and Southeast Asia, and you called out the $2 million less heavy lifting technology sales, were there other drags that kind of took the double-digit tools growth down to the 5% growth through the segment?

No. Just remember, you're looking at the composite number when you look at the segment, and so while service -- and HLT being down, service being up, those combined with the tools still being up, but a lesser number gets you to that overall 5%, but other than HLT, no other significant drag on core sales for the quarter.

Got it. Okay, and then my follow-up question is on the tariffs slide, just little -- needing a little clarification, how does the $10 million that you're calling out now compare to the $3 million to $4 million that you called out last quarter? How does the $10 million compare to the bar chart on the slide, and is the $10 million and then the $20 million pricing, is that in your EBITDA guidance for the year?

So, to the last question, yes, the pricing and the tariffs are in the EBITDA guidance for the year. The $10 million in tariffs that we expect to be paid during the year are inclusive of the $3 million to $4 million, that is the result of the 10% increase that was implemented in September. And so, the $10 million is intended to be an all-in impact from tariffs, including all tariffs that being 203, 301, all tariffs in the fiscal year, some of which we saw a little bit of the impact in the fourth quarter of last year.

That's helpful. And on the bar chart, it seems like the bars add up to more than $10 million?

Don't think so, if you exclude the 25%, look to the -- there's two axes, the left is the tariffs, the right is pricing, and if you exclude the 25%, I think it adds up.

Got it. Okay, thanks. Happy holidays, everyone.

Thanks.

You too.

Our next question comes from Jeff Hammond with KeyBanc Capital Markets. You may proceed with your question.

Hey, good morning, everyone.

Good morning, Jeff.

Good morning.

I just want to go through some of the portfolio changes here. Can you talk about proceeds from Fibron, if you can, and any impact you see on the margins as a result of pulling that out? And then just size for us the Cortland and Precision-Hayes business as they stand now, and what you think is likely timing for those divestitures? Thanks.

Okay. So the Cortland Fibron business, which fell on that category one, that we talked about a year ago, it's taken some time to find an adequate owner for that particular company. It's one of the better plants that we owned. It was very, very well laid out, good equipment, good people, good technology, but in a rough industry. As you can see from our full-year guide, the total amount of dollars that has been pulled out of the top line, you can easily see that that was associated with Cortland Fibron. On the downside or good side, is that there's no fundamental impact to our EPS or full-year EBITDA, it's very, very small, in fact -- it's in fact, some negative on the operating profit line, so it actually helps us in the long run to eliminate, which was part of the reason why it was on our list. So, the proceeds on that along with the proceeds for the other businesses add into our already very strong liquidity and cash balance, which gives us even increased flexibility for some of our acquisition targets. Timing on the other two, certainly we're working those hard, you know, Fab, our General Counsel is right in the middle of both those particular deals, and we should be able to give you more guidance on that at our -- on our second quarter earnings call. Don't want to be predictive on it at this point, because you never know what can unfold, but we hope it moves sooner than later.

In terms of relative -- top line for both of them, both PHI and Cortland U.S. would be in that, call it $45 million to $50 million top line number.

Okay. And then just on IT&S, I think the core was four, and you said tools was double digits in Americas, can you just unpack the core growth and what were kind of the headwinds that you saw in the quarter, thanks?

Sure. If you walk around the world on generalized industrial tools sales, it was still a very, very good quarter for us. There were areas in southern Europe that had some sporadic buying habits where dealers were being a little more conservative on their restock, and I think that that was one of the areas that we watchclosely as the quarter unfolded, but largely, whether it's U.S., Latin America, Asia-Pacific market, were all very -- still very strong quarters in terms of top line growth in sales performance. A lot of that has always been our self-help strategy, so that as we launch new products, and have a much more tight commercial team, that you're going to take any potential market slowdown in a better fashion. So we think we've got a very good headwind or a tailwind still with us on the tools side of the business. On the service side, this was a good quarter for us. It was the first quarter I've seen in a long time where every single region reported growth, and which was really important. So not only did we see growth in the Middle East market, which has always been a very good business for us, but North Sea, high-single digits on the U.S. market. So we've definitely seen the bottom on our service entities, and I think what's helped that team even more, is as we've merged it in with the Enerpac business, we're getting exposed to more breadth of potential service operations, and there's quite honestly, more feet on the ground. And so I think that's helped us. So I was very pleased with our tools and service sales for quarter one.

Okay, thanks, guys, happy holidays.

Yep.

Thanks.

Our next question comes from Ann Duignan with JP Morgan. You may proceed with your question.

Hi, good morning.

Good morning.

Good morning.

Maybe first on the China on-highway truck side you said that you feel like the market has stabilized, what exactly do you mean by that I mean, how many trucks do you think are going to get produced this year, and how many next year, just for perspective, so I get a sense of what you mean by stabilized?

Yes, so if you look back at time on the China truck sales, the peak of the market on heavy -- I'm talking heavy-duty trucks now -- it got up close to 1 million units a year. In fact, I think the total peak was just short of 900,000 vehicles. And obviously, as we came into '18, and then into '19 our fiscal '19, the first quarter where we saw a pretty heavy reduction was our first quarter of last year. So that's why the comparable is pretty ugly this quarter for the team, but as you look forward -- and we have pretty good visibility to what the demand are from those primary OEMs, that it's leveling out at an industry run rate, just out of that 600,000 units a year, which is a very healthy rate. And if you compare that to the prior peaks that's still well above prior peak, and so -- no forecast is perfect, but I do think that we'll start leveling out in a normal run rate of our China component sales.

And I'm sorry, what was the build rate or the sales rate for your fiscal '18 so that the 600k will compare with…

Fiscal '18 dropped through that 700k number, and then leveled out at where we're sitting now, which is between that 550,000 and 600,000 heavy duty trucks retailed in China a year. Now, that's never a perfect - it's not like AEM reporting in Ag equipment or in construction machinery. But we have pretty good visibility to it, and some generalized reporting we get in China. So I feel that level-out is going to be something that's sustainable going forward.

Okay. And my follow-up question would be one more around the balance sheet. And now that you've gotten your leverage ratio where you want it to be and within the range of where you would like to be, what does a large strategic acquisition do to your leverage ratio, and why would we ever go about 2.5 times again?

So, given where we sit today in terms of liquidity and our ability to digest a large strategic acquisition, we feel like the current liquidity gives us, between our cash on hand, the existing balance sheet and access to debt markets. It gives us enough flexibility to be able to digest something more significant. In terms of leverage, a large acquisition depending on how large, if large could take us out of our comfort level of 2.5, could allow us to creep above that. However, for the types of acquisitions that we're talking about in our Tools space, we'd be replacing some of the revenue we are divesting here with high-quality, more consistent, less cyclical EBITDA which would allow us to quickly bring that leverage back in line.

So you feel comfortable going above the 2.5 in this environment?

Well, going above the 2.5 for a transformational acquisition, large strategic that's squarely in line with our strategy, we would be comfortable.

And I think if you think about margin profile and the cyclicality in the tools market, and if you break those tools markets into industries served, some of the higher cyclicality lies in the more automotive range. But in the industrial side you get less cyclicality. And what we've tried to build is a very broad industry serve network so that it would take every single one of our vertical markets to take a deep dive to where that business would have significant top line downturn. So from my perspective, our strategy of building out a high quality tool company is right in line with that. To the extent that we can find those types of acquisitions, the strategic value of them certainly is worth the risk of taking them in.

So, just to reiterate, we got to define what large is. We got about $200 million of available cash and a lot of availability within our existing leverage before we tip above 2.5. So I guess our main theme here is we believe we have the flexibility to do exactly what Randy's been describing from a strategy perspective.

And I guess defining large is in the eye of the shareholders. So, thank you, I appreciate that. Okay, I'll get back in line just in the interest of time. And appreciate this.

Our next question comes from Charley Brady with SunTrust Robinson Humphrey. You may proceed with your question.

Hi, good morning guys. This is actually Patrick Wu standing in for Charley. Thanks for taking my questions. My call dropped earlier, so I apologize if this has been answered, but just -- as you guys comb through your portfolio for further optimization, and obviously you guys called our Cortland and Precision-Hayes. What are the margin implications for your ECS business for the longer-term excluding those two businesses, obviously without M&A implications as well on top of that.

Well, they actually improve. Very simple question, it's a simple answer, it's margins improve.

Can we talk about maybe -- maybe can add some more in terms of magnitude and how you guys think about that.

So your question is how do we view the margin either impact or decremental effect if there was one, is that your question?

Yes.

Okay. So if you go back to the original strategy we laid out for this business and the endgame EBITDA targets we laid in there, and is why part of my discussion in our last investor day was describing the content of our portfolio in the extent that we intended to take out underperforming businesses and replace it with performing businesses. And as I've said, that is a capital allocation decision. Because to take these businesses out and reposition them with other companies, in sums extended it takes impairment charges, and it takes some strength on our part to take it forward the steps that we've gone through to improve those companies to improve the value so that when we do monetize them we get good value for those transactions. So, it has always been part of my strategy, is pairing back certain components of our portfolio to improve margin contribution, reallocate those funds, those resources, not only funding resources but people resources to our best-performing segments, and then particularly our tool company. The tool company is an extremely high quality business. And we intend to continue to invest in that area. So the monetization of these assets improves margin content. It gives us additional funds, and it provides management and overall organizational focus on what matters and how to make us as much better quality business.

So, and the one thing I would say about portfolio, if you keep in mind the re-segmenting that we did, PHI has been operating much closer to that breakeven point since the issues last year. The equipment business however, if you split out Fiberon and Courtland U.S., the U.S. business, because of its diversification, is a little bit stronger, and over time it would have contributed to our migration to a 20% segment. But the strategy that we laid out was without Courtland. And to Randy's point, the actions that were taken will take underperforming EBITDA and help us to get to that 20%, just wanted to acknowledge that Courtland was and is a contributor.

Okay, that's fair enough. And thanks for calling out the impact on the tariffs. And just, I guess, as you guys look through and think through the freight uncertainty and potential further escalations on the tariff front. And you, as you talk to your customers, are you seeing that impact demand pull through at all or even slightly or has demand been fairly robust still?

I think as far as the OEM customers that are out there, what we've seen from our major OEMs is they have reflected a lower growth rate associated with their 2019 plan, still a positive growth rate, but just not on the same level that they were in '18. The pushback we've heard from OEMs is that they would rather see it in the form of a surcharge rather than straight up pricing. And so if it does occur I think some of our negotiations and many of the other suppliers to those OEMs may result in surcharge on invoicing that can be removed should those tariffs get retracted at some point in time. So that's been the major thing. But nobody has said to me that pricing has been decremental to actual retail demand, that that has not occurred. Clearly in the tool side, the retail demand has been robust, but as pricing creeps up it can have that affect. But we have not seen that yet.

Okay, that's good color. Thanks.

In terms of pricing, to date we've gone out with pricing for known cost increases. When we start talking about surcharge we're looking to the 25% expected in March. All of our pricing actions have been supporting margin preservation given known cost headwinds including a 10% tariff.

Great. Thanks for the color. Appreciate it.

Our next question comes from Allison Poliniak with Wells Fargo. You may proceed with your question.

Hi, guys. Good morning.

Morning, Allison.

So, a lot of heavy lifting has been done already on portfolio realignment. Can you walk us through -- are we done here or there are some things that you're still looking at, just kind of where you are in that process?

So, Allison, in my commentary I made special note of the fact that we had targeted and were pretty open about we had about $100 million worth of revenue that clearly was bucketed into category two, but what I've said is that number is going to grow. There's no doubt in my mind, as we look harder and deeper in our company and how it aligns with our tools' strategy, that number is likely to grow. So we have an objective to improve the quality of this company, and to create a world-class tool provider in multiple industries. And that's the game plan. So to that extent we undoubtedly are not done.

Great, thanks. And then just on the demand environment, you said it's very strong still. Obviously there's certainly concerns that we'd get a slowdown. You did talk about - I think it was Europe, right, the cautious restocking. Has that continued into the quarter? Are there any pockets there where you've seen changes in customer buying patters near-term?

Around the world, as I mentioned to answer Jeff's question, it's been quite good. The U.S., Latin America, Asia has been very, very good in terms of both tool and service demand. We did see some sporadic ordering characteristics in portions of Europe, particularly -- started in Southern Europe, would've been Italy, Spain, kind of filtered a bit into Germany. But then it rebounded. And I don't know if that was a question that the distributors were being a little more conservative of the restock, or were there actual end-users looking harder at what they were buying. The thing about Industrial Tools, this is more or less a discretionary buy by most of our maintenance managers that are buying this type of tool, whether it's aerospace or on-highway equipment or off-highway equipment that they're working on, they're going to do it based on the need versus a budget that constrains them. And so, I think that it's an area need to watch, because as we progress through this fiscal year, Southern Europe can be a good lead indicator as to whether or not the market is going to stay strong through the balance of the year.

That's helpful. Thank you.

Thanks, Allison.

[Operator Instructions] Our next question comes from Justin Bergner with Gabelli and Company. You may proceed with your question.

Good morning, Randy. Good morning, Rick.

Good morning.

My first question just relates to sales guidance. Is there any sort of tweak down to the sales guidance for core sales growth trends or is the entire amount related to the one divestiture, not the others in progress and to FX, because I noticed the range got a little bit wider, it's now $40 million versus $30 million.

Yes, as I tried to clarify when I was providing guide, is that the top line has been adjusted 100% because of the FX impact and the absence of a business that it closed yesterday. And so that's an important two elements, we had to reflect those in our guide, but from the extent the three to five growth rate, no change in my mind at all. And so from a core sales standpoint we're rock solid where we're going on that. And I think part of it -- maybe some people got that a little bit wrong when they looked at our releases today. But clearly we see good dynamics going forward. And as we divest or acquire then that top line will change. I think the most important thing to look at our guide is the absence of the Cortland/Fiberon business our EPS didn't change. And secondly, that there is a currency impact, but the impact to the EPS was also minimal. So from that extent, I think our guide was rock solid versus our fourth quarter projection.

Okay. So are you sort of absorbing some currency impact and keeping your guidance unchanged because parts of the sales or margin profile working better or is it, as you said, that when you actually look at it on the earnings basis there's very little impact from the incremental currency headwind?

This is Rick. Keep in mind the top line is really being impacted by translation of our results and the significance of our European operations. So that's the change in our top line guide. What's happening on the flipside of that is, on the opposite of the translation impact we conduct business in these regions and there's a positive transactional impact from the dollar movement that's a gain for us. And so what's happening when you get down to the operating profit translation it's been offset fully by gains from operations during the quarter.

Okay, got it. And then lastly, as you think about potentially doing larger acquisitions on top of bolt-ons in the current environment, how do you adjust your methodology in thinking about returns or assumptions as you potentially evaluate larger deals?

Well, I think that the first thing that I try to do is look at the strategic value of the company we're looking at. Does it fill on a bolt-on side the small ones we've been doing, does it supplement our R&D efforts, and accelerate the number of new tool products we can launch within the company. And those have worked really well and coming in at or above Enerpac line average margins, which has been the sort of thing we've been looking for. The bigger ones, there is no real change in our theory on returns on -- returns that we expect. But we also know that there are strategic additions from a tool perspective that are out there that we should be thinking about. So for me, it's got to make sense from a financial standpoint, but it also has to support our overall objective of growing our tool platforms and fundamentally growing this company into a more meaningful global tool supplier.

Thank you.

Our next question comes from Seth Weber with RBC Capital Markets. You may proceed with your question.

Hey, good morning everybody.

Good morning.

You kind of touched on this a little bit, but I just wanted to flip back to it. Rick, you mentioned - I think you mentioned that you pulled forward some working capital; you spent more than typical in the quarter just to pull forward to get ahead of some of the tariffs. So, I'm just trying to kind of tie that together with why you think that that's not what your customers are doing with your business as well. I mean, like how do you know that's not happening from your customers buying your product if you're doing it on the -- to your suppliers?

I guess two things. We did see some pull-forward on our end ahead of the tariffs, probably more so we saw more of the impact of Chinese New Year, which we normally see, but given the level of new platforms and growth we expect this year from NPD that was probably and was a little bit heavier than in historical patterns. And so we did see some pull forward ahead of tariffs, but not significant from a supply perspective. And in terms of our own customers, our current, just looking at demand, looking at backlog, is we don't have again there any evidence or see anything out there that's suggesting we're getting a meaningful pull-forward ahead of tariff activity. With the tariffs being delayed till March, we still haven't seen anything, any unusual noise in our backlog or anything like that for us to expect that we're going to have an impact. The other thing impacting our working capital is receivables. We didn't talk much about that, but that's primarily timing around some China activity that corrects itself in the back-half of the year. So, but that's the other working capital piece in the quarter.

Okay, that's helpful. Thanks. And then just another question on pricing, I think what I hear you say for the quarter; all of the net pricing was in the EC&S business not in industrial tools, but going forward of the, I think, $10 million or so -- $9 million or $10 million net that you expect to see for the year, is that more a split or is that still biased towards one segment versus the other?

And let me clarify we saw a $4 million in pricing during the quarter. When I said net pricing for ECS, the $2 million went straight through the operating profit because it was well ahead of their cost, which the majority of which is still sitting on inventory. Tool did see pricing and did realize pricing. The majority of that actually offset actual tariffs, and so for the year, two for both segments we anticipate that 1% to 2% overall price realization for both businesses.

Okay, and that's pretty evenly balanced down between the two.

Yes.

Okay.

For the quarter and for the year, it's about 50:50.

Okay. And the -- the right way to think about it is like a $9 million, I think you said $20 million pricing, $10 million or $11 million of tariff impact, is that…

$20 million pricing, $10 million tariff, 11 if we get 25.

Right, okay. Thank you very much, guys. Appreciate it.

Operator, are there any more questions? Okay, not sure if we still have our operator on, but in the absence of any other questions, again, I would like to wish everybody a very safe and happy holidays, and we really appreciate everybody's continued interest in our company, and we will talk to you again in March.

Good day, sir. This is your Operator. Mr. Weber's line was connected, but we did lose his audio.

Okay.