Energy Transfer Partners' (ETP) CEO Kelcy Warren on Merger & Acquisition Conference (Transcript)

|
About: Energy Transfer LP (ET)
by: SA Transcripts

Energy Transfer Partners, L.P. (ETP) ETE/ETP Investor Call August 2, 2018 10:00 AM ET

Executives

Tom Long - Chief Financial Officer

Tom Mason - General Counsel

Kelcy Warren - Chairman and Chief Executive Officer

Analysts

Shneur Gershuni - UBS

Jeremy Tonet - J.P. Morgan

Harry Mateer - Barclays

Ross Payne - Wells Fargo

Keith Stanley - Wolfe Research

Michael Blum - Wells Fargo

Elvira Scotto - RBC

Jean Ann Salisbury - AllianceBernstein

Dennis Coleman - Bank of America

Adam Breit - SunTrust

Operator

Greetings, and welcome to the Energy Transfer 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]. And as a reminder, this conference is being recorded.

I would now like to turn the conference over to Tom Long, Chief Financial Officer. Thank you, please go ahead.

Tom Long

Yes. Thank you, operator, and good morning, everyone, and welcome to our call. We really appreciate all of you joining us today. This morning, we will discuss yesterday’s announcement whereby Energy Transfer Equity and Energy Transfer Partners have entered into a merger agreement providing for the acquisition of ETP by ETE in a unit-for-unit transaction. I’m also joined today by Kelcy Warren, Matt Ramsey, John McReynolds, Tom Mason, and other members of the senior management team, who are here to help answer your questions after our prepared remarks.

I’ll begin today with an overview of the transaction, one we are obviously very excited about as we combine ETE and ETP into one partnership. As a reminder, we will be making forward-looking statements within the meaning of the Section 21E of the Securities Exchange Act of 1934. These are based on our beliefs, as well as certain assumptions and information currently available to us.

Starting with an overview of the key terms of the transaction ETE and ETP have entered into a merger agreement providing for the acquisition of ETP by ETE for $27 billion in ETE stock. Current ETP holders will receive 1.28 times ETE common units for each public ETP common unit implying a price of $23.59 per unit based upon the ETE’s closing price immediately prior to the announcement of the transaction. This represents an approximately 11% premium to the previous day’s ETP closing price and a 15% premium to the 10-day volume weighted average price. The transaction is expected to be immediately accretive to ETE’s DCF per unit and we expect to maintain ETE distribution per unit.

This transaction is expected to significantly increase DCF coverage and retain cash flow. A little bit on the strategic rationale of this transaction, this will create a more simplified ownership structure. With the simplification, we are eliminating the IDRs, which improves our overall cost of capital to facilitate continued growth. It also increases retained cash to accelerate deleveraging. We’re expecting a DCF coverage ratio of 1.6 times to 1.9 times coverage, which equates to approximately $2.5 billion to $3 billion of annual retained cash. This greatly reduces our external common or preferred equity funding needs going forward and we do expect the pro forma partnership to be rated investment grade.

Turning to a few more details on the structure of the transaction. The GP of ETE will be issued new Class A units of ETE, such that the general partner and its affiliates will retain the current voting interest in ETE. We will talk a little bit more about this shortly. ETE does expect to refinance its term loan and revolver; at which point its senior notes become unsecured. We anticipate the pro forma partnership launching an exchange offer whereby ETE noteholders could exchange their notes for ETP notes with similar economic terms.

As you can see, this simplified financial structure greatly strengthens our balance sheet and credit profile and positions the company for future growth. Going forward, we will target a leverage ratio of four to four and a half times.

Now, I’m going to turn the call over to Tom Mason for an overview of the Class A units.

Tom Mason

Thanks, Tom. Currently, I think as people know, Kelcy Warren and Ray Davis, John McReynolds and others own a significant amount of ETE outstanding common units in the matchup it’s about 31% of the outstanding unit. So obviously, a very large block of voting and a control in interest in ETE. With the merger, there will be a significant number of ETE common units issued to the ETP holders, which effectively reduces that ownership level to about 13.5% and therefore, resulting in a significant dilution to the voting interest of this group. As you all know, prior to this transaction, ETP was an entity that owns the operating assets for the Energy Transfer family, particularly, the transportation and midstream business, and therefore, financed these projects through a combination of debt and equity issuances.

So therefore, the equity was being issued primarily at ETP. And as a result, ETE did not historically issue much equity. And therefore, the voting interest of control group was not affected by the financing activities and particularly, the equity issuances of ETP. The post-merger ETE will be the issuer of equity to finance its growth projects.

As Tom Long discussed earlier, the new equity issuances of ETE are not expected in the near-term due to the levels of retained cash related to the expected cash’s recent coverage levels. But over time, ETE will be issuing equity because there will be growth projects that will need to be funded through a combination of debt and equity.

So, the Boards of both ETE and ETP recognized this issue, a potential dilution going forward at the ETE level and they are very, obviously, cognizant of the successful track record of ETE’s general partner, which is people know as LE GP, which Kelcy Warren controls and therefore, both Boards wanted to preserve the control of ETE’s general partner. So, the result of this thought process was the concept of the Class A units.

And the other factor as part of this thinking was the – under ETE’s partnership agreement, the general partner of ETE, which again is LE GP, has a contractual right to purchase common units from ETE whenever ETE issues common units so that LE GP can maintain the relative equity voting interest or interest – equity interest percentage of ETE. And it’s an [interesting concept] [ph] because LE GP, [indiscernible] can exercise that right, but then also the calculation is such that it can maintain not only LE GP’s interest, but that of its affiliates as well.

So as I mentioned earlier, the LE GP and its affiliates currently own about 31% of the outstanding ETE common units and it would be diluted down to about 13.5% after giving effect to the merger. So in lieu of exercising this right and is in effect LE GP will agree to waive its preemptive right to purchase its kind of pro-rata share of the additional ETE common units that would be issued in this merger there will be a new class of units called Class A units, that will be issued to LE GP. These Class A units represent limited partner interest in ETE, that will be not entitled to any cash distributions and will not have any other economic attributes. So they are purely voting interest. The Class A units will be entitled to one vote per unit and will vote together with the ETE common units as a single class on all matters [indiscernible] for the ETE unitholders.

As a result of this, the control group of LE GP and its affiliates will maintain their current combined voting interest. So pre-merger and post-merger, the percentage interest of voting will remain the same. And again the Boards believe that was important to preserve the long-term continuity and successful track record and strategy of existing overall management at the top of the family.

So the – and then just a twist to that is that so this will not last forever the where there’s a provision that future issuances of common units by ETE would also be subject to an anti-dilution adjustment as well. So that ETE would issue additional Class A units. So in the future, it would – the control group of LE GP and its affiliates would still retain the same relative voting interest as they have prior to closing at the merger. This anti-dilution right for future issuances will continue as long as Kelcy is a Director or Officer of LE GP.

So that’s kind of in a nutshell and back to you Tom.

Tom Long

Yes. Thank you, Tom. That really concludes our prepared remarks. Operator, let’s go ahead and open that call up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Shneur Gershuni with UBS. Please go ahead.

Shneur Gershuni

Hi, good morning, guys. Nice to finally have one entity. Just to start off, I was wondering if you can talk about your targeted leverage metrics. You’re obviously directing some of the accretion towards debt pay down. Is there a leverage target you’re trying to hit of the 4.75 times or 4.5 times or are you looking at it on trying to be a BBB mid? I’m just trying to understand kind of what you’re targeting and then once you get there with the expectation that some of the accretion from the deal would then be directed towards unitholders?

Tom Long

Yes. It’s actually a very, very good question. The target that we’re going to go forward look at here is probably four to four and a half times in that range. When you’re a company of our size, you can appreciate and you have the mix of earnings that we have meaning so much of ours are fee based on that 85% range that’s obviously a very, very solid balance sheet when you look at that. And these are the same things we talk to the rating agencies about that we show them.

So I think it’s the way you worded the last part of that question is probably a very fair statement that as we get to that four, four and half level and we’re looking at other factors like our capital – our CapEx spend, where the equity is, et cetera I think you can say that we can fund pretty much most of our equity with the excess cash, the retained cash. So we’ll navigate all those factors in determining the last part of your question on the distribution.

Shneur Gershuni

Okay, fair enough. And just a second question, you have a targeted coverage range of I think it was 1.6 to 1.9, I think you just mentioned. Can you walk us through what drivers get you to the higher end of the coverage range? Does this imply that 2Q was a fairly strong quarter? And then are there opportunities out there for you to invest to get to the top and could we see CapEx be running at a similar pace that we’ve seen for the last two years?

Tom Long

Yes. Listen, I know we’re having this call today and we’re a week away from that the earning. So we’re not going to get ahead of ourselves on that. So we’ll stay away from the second quarter, but I will tell you the range that we’ve put out there that 1.6 to 1.9 is what we’ve been looking at, as we pull these two together is, we went through all the analysis and everything else. And so that’s where that’s coming from our numbers. And the other thing that I don’t want to get in front of is the S-4. Obviously whenever that comes out, we will then have more of the projections, you’ll get to see more of the coverage, et cetera. And rest assured we’re going to move expeditiously on getting that filed as soon as possible.

Shneur Gershuni

Great. Thank you very much, guys. I appreciate that and I’ll jump back in the queue.

Operator

Our next question is come from the line of Jeremy Tonet with J.P. Morgan.

Jeremy Tonet

Good morning. Congratulations, certainly the transaction the market has been eagerly awaiting, so congratulations there. Tom, I was just wondering if you could walk us through the conversations with the rating agencies and what were the key issues they were focused on? And in particular it looks like Moody’s is looking for certain things before stabilizing the Baa3 rating.

Tom Long

Yes. No, you bet. Well, let’s – I mean going back to probably a lot of our conversations that I know we’ve had over the last quarters, investor meetings, investor conferences, et cetera I think all of you know that we’ve been in – staying in close contact with the agencies, keeping them updated on projects. I would say that the projects are probably one of the key items. We still feel good about all the guidance that we’ve given out on the projects.

But likewise as we look at the leverage metrics and you look at that coverage, I can’t emphasize enough that when you combine the two companies and you have that coverage in the range that we’re talking about right now and you see the financial stability that that brings to the enterprise here I would tell you that is the primary points of a conversation that we’ve had with them, all very compelling.

Jeremy Tonet

Great. So it sounds like some of these mega projects are really close to the final finish line here.

Tom Long

Yes, yes. They’re in line with what – everything we’ve put out, so no updates on those right now. Then we feel good about them, so.

Jeremy Tonet

That’s helpful, thanks. And then just one last question, does today’s transaction kind of influence your thoughts on whether or not establishing a C-Corp currency could make sense for the family and I guess just any updated thoughts on that point.

Kelcy Warren

Hey Jeremy, this is Kelcy. We’re still very open minded to that. This does not preclude that at all. We’re so much driven here by – we just don’t like paying tax, if we can avoid it as you know. And – but to the extent that there was a compelling economic reason for us to form, let’s say an up C or sidecar C whatever, then we are certainly looking at that and we’ll act upon that if we think that’s in the best interest of our – of all of our unitholders.

Jeremy Tonet

That’s very helpful. Thanks for your answers. That’s it for me.

Operator

Our next question comes from the line of Harry Mateer with Barclays.

Harry Mateer

Hi, good morning. Two questions, first, Tom can you just talk a little bit about the mechanics of making the ETE and ETP bonds pari passu. I know you mentioned potential exchange offer for ETE bonds with new ETP bonds that have similar terms. But are you also going to look to put cross guarantees in place between the two boxes.

Tom Long

And listen, where - we’ve obviously put a lot of thought into this already. But like we’ve always done on all the consolidations we’ve done, we will tweak them as we move along. So please kind of take this answer is kind of what I laid out in the prepared remarks is that. Right now what we are looking at is obviously paying down the revolver up to the ETE level as well as that term loan. And that will then trigger the – no security. So at that point, we’re anticipating that we would look at an exchange offer to bring everything down to the ETP level.

So I don’t know that there’s really a lot of necessity when you talk about cross guarantees, et cetera, because of what we’re doing. And the way we’re going to structure through this, but please take it that it’s a little bit dynamic, but we wanted to - thought it was important to go ahead and lay out that our – what our current plans are.

Harry Mateer

Okay, thanks. And then so in terms of refinancing the ETE term loan or revolver, would you do that with new ETP issuance?

Tom Long

That – yes, that’s the plan.

Harry Mateer

Okay. Thanks for that. And then second, the press release talks about some of the benefits of the deal one of which is putting yourselves in a better spot to potentially pursue strategic M&A. When you think about the 4 to 4.5 times target leverage ratio, is that a target ratio you would like to hit before thinking about pulling the trigger on M&A or should we not view that as like a limiting factor in terms of the time when you guys could do something?

Tom Long

I think that’s fair. The one thing I would add to that is, as you know any of these transactions when you look at and you always look at what the pro forma numbers look like with the transaction. And that 4 to 4.5 is what we’re focused on.

Kelcy Warren

And then I would add, I think it’s safe to conclude that, that if there is a very compelling M&A opportunity we would certainly that might somehow be slightly negative towards that goal of a 4 times to 4.5 we would certainly meet with the rating agencies, get their opinions as to our – the way we’re doing things and our view on things. As we have in the past, every major acquisition we’ve done at Energy Transfer, we have conferred with the rating agencies. We will continue to do that. And so we’re going to be smart about our M&A and careful. So – but the 4.5, like Tom said 4 to 4.5 is very important to us.

Harry Mateer

Okay. Thank you, both.

Operator

Our next question is from the line of Ross Payne with Wells Fargo.

Ross Payne

Congratulations guys on the combination. Just kind of following-up on Harry’s comment here, I guess the question I’d have on the pay down of the revolver at ETE and term loan. Would you do that with free cash flow or you actually thinking of issuing bonds to refinance that? And second of all, our future bonds going to be at ETE or ETP, I thought I heard ETP.

Tom Long

No. It would be – first part of your question, it would be with the issuing of bonds and they would be at ETP, which is where the – that the assets, et cetera, will be.

Ross Payne

Okay. And then my second question is on the ratings, you obviously – do you anticipate stable outlooks out of S&P and Fitch. And second of all for Moody’s, do you have any kind of timeline you think you might be able to get back to stable?

Tom Long

This is one of those that you don’t ever want to get out in front of the rating agencies. We do expect to get investment grade. Obviously that’s – we’ll show them all of our credit metrics, et cetera. But I don’t want to get out in front of the reports they’ll come out with now. As you’re saying, I think Moody’s has already come out with theirs. I think you could probably anticipate the other two coming shortly. And let’s wait to those come out. And then it’s also going to be waiting until the time that we close [indiscernible]

Ross Payne

Okay, great. All right. Thanks, guys, and again congratulations.

Tom Long

Okay. Let me just add a real quick on the Moody’s that just came out, they did say that they expected stable with that just for the record.

Ross Payne

Nice.

Tom Long

Okay.

Ross Payne

Thank you.

Operator

Okay, thank you. Our next question is come from the line of Keith Stanley with Wolfe Research.

Keith Stanley

Hi, good morning. I wanted to ask on the timing. So fairly accelerated here from what you saw it earlier in the year, when you talked about kind of second half of 2019. Can you just kind of go over what’s changed I guess in the outlook and how you’re thinking about things since earlier in the year? Are you expecting much better results sort of then you did six months ago just talks on the timing being accelerated here?

Tom Long

Yes. Kind of going back to – I think to once again to all the communications that we’ve had with during these quarterly calls, as well as investor meetings. We’ve been – I think we’ve been very, very clear on the fact that it was protecting the investment grade rating was the key factor. Likewise, we continue to just have dialogue, keep in the agencies updated on these projects. As you know, that was probably a real touch point. So I think it’s – this is something that we really wanted to do as soon as possible.

And if you looked at it, the reason why you would say in the 2019, you would take the projects and then you would have each one of those ramping up over a four quarter period. But once again, I’m not going to get into giving any guidance or early results for the quarters or anything else. In fairness, we will have the call next week, but we likewise when we get the S-4 out there, I think we’ll be able to talk even more about your question right now, because it’ll have the projections in there and then we’ll be able to talk in more depth.

Keith Stanley

Got it, okay. And could you clarify that the 1.6 to 1.9 times coverage. What timeframe should we assume for that? Is that a 2019 expectation, 2020? Or how should we think about what that reference is.

Tom Long

That really kind of references at closing and going out, once again, it’ll be in the S-4. But that’s based upon the terms that we’ve got the 1.28 exchange ratio, distributions staying at where ETE is currently are. I guess, what we’re telling you – that that’s where this is coming out. And then as these projects come on, I think you’ll start seeing, it’s stay within that range. We can talk more about that when we get the S-4 in those projections out.

Keith Stanley

Great. And one other quick one just on M&A since you talked about a little earlier. Just the press release notes an interest in having better equity currency both to make growth accretive and for strategic deals. Just any updated thoughts on level of interest and optimism on being able to execute on acquisitions over the next year just what you’re seeing in the market.

Kelcy Warren

Yes. This is Kelcy. Well, first of all, probably you know this, Keith, a monkey could make money in this business right now, it’s not hard. So there’s kind of wrong time to be buying things really, but we – there are some players that are not involved in basins that are on fire right now and yet have good assets and would be strategic fits for us. There are others that are involved in those basins, but typically those assets are just ridiculously priced and just will not make sense for us until the music stops.

So we would like to be very strategic, I don’t think there’s any bargains to be had right now and we’re going to – we think M&A is very, very important for our unitholders that we maintain an aggressive M&A view and a smart approach to that. So we will continue to do that.

Keith Stanley

Thank you.

Operator

Our next question comes from the line of Michael Blum with Wells Fargo.

Michael Blum

Hey, good morning, everybody. First question on the leverage target of 4 to 4.5. When do you expect that to hit that level, because that’s really the first question?

Tom Long

Michael, as you know, we were targeting to get below 5, in order to be able to sit down the agencies and protect our investment grade rating. I know we keep kind of touching up on the win part of it. The tough part is, as I really want that S-4 to get out there and get their projections out. And then we’ll be able to talk, like I said, in more depth on it. But I think you can start seeing that tied to these projects, as they start ramping up. Projects, obviously, we’re very excited about.

And so as you see Rover, ME2, ME2X, et cetera, start coming over, over that 2019 timeframe. You’ll start seeing that come up. I think, it’s worth just reminding everyone once again that, our deleveraging was occurring due to the projects, the EBITDA catching up with all the funding we’ve been doing over the last few years. And we’re seeing that now, we’re starting to see that occur. So once we get these projects or get these S-4 out and we get to walk through the projections a little bit more, I think you’ll be able to see little more detail as to when.

Michael Blum

Okay, great. I appreciate that and my next question is along the same line. So I’ll see how much you’ll answer. But just trying to get your thoughts on long-term on how you’re thinking about distribution growth at ETE relative to distribution coverage. And is this something where you want to get to that 4 to 4.5 leverage target before you would contemplate distribution growth or any kind of thoughts you can share there would be helpful.

Kelcy Warren

Yes, Michael, Kelcy. I think the latter part of your question is accurate. We would like to get to that level, we feel a responsibility. As you know, we’ve been saying we wanted to do this transaction as soon as we felt we would be maintained in investment grade, we certainly that that matters greatly to us and we’re going to conduct ourselves in a way that, where we deserve that investment grade. So yes, the second part of that question is we would like to get to those kind of 4.5 times. And then – but then Michael, we have a duty to our unitholders. I mean, that’s what MLPs are supposed to do, I think most people have forgotten that. But we’re supposed to reward our unitholders and increase our distributions. We will in fact resume that at the appropriate time.

Michael Blum

Great. That was really helpful. And my last question is, I guess once you get through this transaction, any new or different thoughts on what happens to SUN. Thanks.

Kelcy Warren

Well, Joe Kim sitting here and looking at me. So this – we love SUN. And SUN, we view as a great opportunity for Energy Transfer. SUN has a different set of assets, they’ve got fantastic management. They are – they know that SUN really needs to reinvent themselves a little bit. They need to be more of a wholesaler, I’d love to see them be more of a pipeliner actually and refined products business terminal company, they – I want back to them get more into the hard assets, Joe knows that. And I’m very pleased with what I’m seeing coming from SUN and we’re very patient with SUN assets and we have great expectations.

Michael Blum

All right. Thank you, Kelcy.

Kelcy Warren

Thank you.

Operator

Our next question comes from the line of Elvira Scotto with RBC.

Elvira Scotto

Hey, good morning. So just three quick questions for me. So absent M&A is the goal for Energy Transfer – pro-forma Energy Transfer to be equity self funding over the long-term.

Tom Long

That is the goal. That’s a very – it’s a dynamic situation as you look at all the great projects that the commercial team, constantly have on the drawing board. So it’s going to be a lot depended upon the CapEx spend each year, organic CapEx spend. So it could be a little bit dynamic, but I think the goal is for the excess cash, let’s call it retained cash is to be covering the equity side of the funding.

Elvira Scotto

Thanks for that. And then I think I know the answer to this, but will this transaction be a non-taxable event to ETP unitholders?

Tom Long

That is correct.

Elvira Scotto

Great. And then my final question and I think you touched on this but does this transaction have any impact on the ETP preferred?

Tom Long

No. It does not have any impact on the ETP preferred.

Elvira Scotto

Great, thanks. That’s all I had.

Operator

And our next question comes from line of Jean Ann Salisbury with AllianceBernstein.

Jean Ann Salisbury

Hi, good morning. And I just have one and you’ve touched on it a bit, but if you are to have unexpected further delays on ME2 and Rover. Should we worry that could impact the fourth quarter timing.

Tom Long

I’m sorry, can you see the very last part. Should we be worried about, what?

Jean Ann Salisbury

Should we worried about that could impact the fourth quarter timing, like you have to push it back if those two projects sort of get significantly push back.

Tom Long

Yes. If you started – let’s break each of the projects down. As you know Rover, we’re already getting probably over two-thirds of the demand charges on Rover. So it really comes down to, I think, what you’re probably question is on the ME2. And yes, I mean, clearly there could be some impact from that. I think you, once again I’m trying not to get into the rest a year in type or projections or forecast, but our overall base business is obviously doing very well. So I think that when you look out and you look at – kind of look at the numbers, we’ve got a situation that’s very manageable to be able to get these projects online and they’re going to be such great projects and the way they’re going to ramp up, et cetera, so.

Jean Ann Salisbury

That’s great. That’s the only one for me. Thank you so much.

Operator

And our next question comes from line of Dennis Coleman with Bank of America.

Dennis Coleman

Yes, good morning and congrats from me as well. Just one for me as well most have been asked. And coming back to distribution policy, if I can, just to try and see how you’re thinking about this? 1.6 to 1.9 coverage is a big move up and it’s a lot of dollars as you pointed out. Was there any consideration of maybe having a one-time boost to the Energy Transfer Equity distribution with this transaction to offset the cut at ETP at any time? Was that ever part of the thinking?

Kelcy Warren

Part of the thinking, yes, but again, we – as everyone knows on this call, we been saying for a while that we will – it was time to do the consolidation of ETE and ETP. We also let the market know that we saw that transaction occurring as ETE buying ETP. But then we also said that, that until we get comfortable and like Tom said earlier, we’re going to see all the rating agency assessments we believe by today sometime. Once we get comfortable that we’re going to maintain our investment grade, we will in fact go forward. And so distribution increases right now, really don’t support what we’re trying to do which was our goal to do this sooner than later. And in some point going back to the previous questions however, we do feel a duty to grow our distribution but we’d like to see that occur after we get to 4.5 times or less on leverage.

Dennis Coleman

Okay. Just trying to understand sort of the thinking there. So again, congrats, that’s it from me.

Kelcy Warren

Thank you.

Operator

Our next question comes from the line of Adam Breit with SunTrust.

Adam Breit

Yes. Hi, good morning. One quick question, Tom for you. The 4 to 4.5 times leverage target is that more of a rating agency adjusted number with proportionate JV debt or are you talking more about a credit facility just number, which is a lot lower than that.

Tom Long

No, that’s definitely rating agency. And as you know there’s a slight differences as to how each one of them look at that. But that’s definitely rating agencies what we’re referring to.

Adam Breit

Got it. Thank you.

Operator

Thank you. This concludes today’s question-and-answer session. I’d like to turn the floor back to Tom Long for closing comments.

Tom Long

Well obviously, I think it’s all you all can see how excited we are about this transaction and getting to this stage of being able to bring these companies together. And to be able to create approximately $90 billion enterprise under this simplified structure also with this very enhanced financial stability that we’ve talked about here today, which all should come back to obviously a much lower cost of capital. So thank all of you once again for joining us today. And we look forward to any follow-up questions or conversations we will have with you all. Thank you.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.