Oct 29, 2014
Executives
Marietta Edmunds Zakas - Senior Vice President of Strategy, Corporate Development and Communications Gregory E. Hyland - Executive Chairman, Chief Executive Officer, President and Chairman of Executive Committee Evan L.
Hart - Chief Financial Officer and Senior Vice President
Analysts
Mike Wood - Macquarie Research Ryan M. Connors - Janney Montgomery Scott LLC, Research Division Jerry David Revich - Goldman Sachs Group Inc., Research Division Noah Kaye - Northland Capital Markets, Research Division Brent Thielman - D.A.
Davidson & Co., Research Division David L. Rose - Wedbush Securities Inc., Research Division Walter S.
Liptak - Global Hunter Securities, LLC, Research Division Seth Weber - RBC Capital Markets, LLC, Research Division Michael Halloran - Robert W. Baird & Co.
Incorporated, Research Division Joseph Giordano - Cowen and Company, LLC, Research Division
Operator
Welcome, and thank you for standing by. [Operator Instructions] This call is being recorded.
If anyone does have any objections, you may disconnect at this time. And I now like to turn the call over to Martie Zakas.
You may begin.
Marietta Edmunds Zakas
Good morning, and thank you, Kathie. Welcome to Mueller Water Products 2014 Fourth Quarter Conference Call.
We issued our press release reporting results of operations for the quarter ended September 30, 2014, yesterday afternoon. A copy of it is available in our website, muellerwaterproducts.com.
Mueller Water Products had 159.8 million shares of common stock outstanding at September 30, 2014. Discussing the fourth quarter's results this morning are Greg Hyland, our Chairman, President and CEO; and Evan Hart, our CFO.
This morning's call is being recorded and webcast live on the Internet. We've also posted slides on our website to help illustrate the quarter's results as well as to address forward-looking statements and our non-GAAP disclosure requirements.
At this time, please refer to Slide 2. This slide identifies certain non-GAAP financial measures referenced in our press release on our slides and on this call, and discloses the reasons why we believe that these measures provide useful information to investors.
Reconciliations between GAAP and non-GAAP financial measures are included in the supplemental information within our press release and our website. Slide 3 addresses our forward-looking statements made on this call.
This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements as well as specific examples of forward-looking statements. Please review Slides 2 and 3 in their entirety.
During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year. Our fiscal year ends on September 30.
All operating results discussed in these prepared remarks are from continuing operations, unless specified otherwise. A replay of this morning's call will be available for 30 days after the call at 1 (866) 418-8386.
The archived webcast and corresponding slides will be available for at least 90 days in the Investor Relations section of our website. In addition, we will furnish a copy of our prepared remarks on Form 8-K later this morning.
After the prepared remarks, we'll open the call to questions. I will now turn the call over to Greg.
Gregory E. Hyland
Thanks, Martie. Thank you for joining us today as we discuss our results for the 2014 fourth quarter and full year.
I'll begin with a brief overview of the quarter and full year, followed by Evan's detailed financial report. I will then provide additional comments on the quarter's results and developments in our end markets as well as our outlook for the 2015 first quarter and full year.
We had a strong fourth quarter with net sales up 9.4%, adjusted operating income up 29% and adjusted EBITDA up 18.9%. In the fourth quarter, Mueller Co.'
s 11.5% increase in net sales, 27.2% increase in adjusted operating income and 220 basis points improvement in adjusted operating margin to 18% were primarily attributable to growth in its domestic end markets and improved operating leverage. Anvil had its strongest year-over-year net sales growth in 2014 with fourth quarter net sales increasing 5.4%.
2014 was another strong year for Mueller Water Products as evidenced by net sales growth of 5.7% and adjusted operating income growth of 28.7%. Additionally, Mueller Water Products generated free cash flow of $110.7 million, an increase of $33.1 million or 43% year-over-year and reduced net debt leverage almost a full turn to 2.1x compared to 3x at the end of 2013.
Adjusted EBITDA grew 16.4%, and adjusted EBITDA margin for 2014 was 15.5%. Adjusted EBITDA margin in Mueller Co.
was 21.3%, and Anvil was 14.1% for 2014. We are also pleased with the progress we made in 2014 in expanding our portfolio of leak detection technologies, including commercially launching 24/7 fixed leak detection monitoring for both transmission and distribution maintenance.
While these solutions were only recently introduced, we are excited about their long-term growth potential. Our 2014 performance reflects the ongoing operating improvements we have made over the past several years as well as the increase in volume we have realized, as our end markets have improved.
With that, I'll turn the call over to Evan for a detailed discussion of our financial results for the quarter.
Evan L. Hart
Thanks, Greg, and good morning, everyone. I'll first review our fourth quarter consolidated financial results and then discuss the segment performance.
Net sales for the 2014 fourth quarter of $320.7 million increased $27.5 million or 9.4% from the 2013 fourth quarter net sales of $293.2 million due primarily to higher shipment volumes at both Mueller Co. and Anvil.
Gross profit increased 14.1% to $101.3 million for the 2014 fourth quarter compared to $88.8 million for the 2013 fourth quarter. This improvement was driven primarily by higher shipment volumes and higher sales prices.
Gross profit margin of 31.6% in the 2014 fourth quarter increased 130 basis points from 30.3% in the 2013 fourth quarter. Selling, general and administrative expenses were $58.2 million in the 2014 fourth quarter or 18.1% of net sales.
Adjusted operating income for the 2014 fourth quarter increased 29% to $43.1 million as compared with $33.4 million for the 2013 fourth quarter. This increase was due primarily to higher shipment volumes.
Adjusted operating margin also improved 200 basis points to 13.4%. Adjusted EBITDA for the 2014 fourth quarter increased 18.9% to $57.3 million as compared with $48.2 million for the 2013 fourth quarter.
Adjusted EBITDA for 2014 was $183.9 million, our highest year since 2008. Interest expense net for the 2014 fourth quarter declined $700,000 to $12 million as compared with $12.7 million for the 2013 fourth quarter.
During the 2014 fourth quarter, income tax expense was $3.8 million on income before income taxes of $30 million, resulting in an effective income tax rate of 12.7%. The 2014 fourth quarter tax expense was reduced by $8 million due to releasing almost all of the deferred tax valuation allowance based on our expectation of future taxable income.
Excluding this adjustment, the effective income tax rate for the 2014 fourth quarter was 39.3%. Reported net income per diluted share for the 2014 fourth quarter was $0.16 and included the tax benefit I just mentioned.
Adjusted net income per diluted share for the 2014 fourth quarter improved to $0.12 from $0.08 in the 2013 fourth quarter. The 2014 fourth quarter adjusted results exclude the deferred tax valuation allowance benefit of $8 million and after-tax loss on early extinguishment of debt of $600,000 and after-tax restructuring expenses of $100,000.
The 2013 adjusted fourth quarter results excluded deferred tax valuation allowance benefit of $4.4 million and after-tax restructuring expenses of $100,000. There was a weighted average of 162.6 million diluted shares of our common stock outstanding for the 2014 fourth quarter compared to a weighted average of 161.2 million diluted shares outstanding for the 2013 fourth quarter.
I'll now move on to segment performance and begin with Mueller Co. Net sales for the 2014 fourth quarter increased 11.5% to $213 million as compared with $191 million for the 2013 fourth quarter.
This increase was due primarily to higher shipment volumes across most business and product lines. Adjusted operating income for the 2014 fourth quarter improved 27.2% to $38.3 million as compared with $30.1 million for the 2013 fourth quarter.
Adjusted operating income improved $8.2 million, due primarily to higher shipment volumes. Adjusted operating margin for the 2014 fourth quarter improved 220 basis points to 18% as compared with 15.8% in the 2013 fourth quarter.
Adjusted EBITDA for the 2014 fourth quarter increased to $48.8 million as compared with $41.2 million for the 2013 fourth quarter. Adjusted EBITDA margin for the quarter increased 130 basis points to 22.9%.
I'll now turn to Anvil. Net sales for the 2014 fourth quarter increased 5.4% to $107.7 million as compared with $102.2 million for the 2013 fourth quarter.
The increase resulted primarily from higher shipment volumes to its key end markets: oil & gas, commercial and industrial as well as higher prices. Adjusted operating income for the 2014 fourth quarter improved 30.2% to $16.8 million as compared with $12.9 million for the 2013 fourth quarter.
Anvil's adjusted operating margin increased to 15.6% from 12.6% for the 2013 fourth quarter. The increase in adjusted operating income and adjusted operating margin resulted primarily from higher shipment volumes and a gain on the sale of assets of $2.5 million, which Greg will discuss in some detail.
Excluding this gain, Anvil's adjusted operating income grew 11% and adjusted operating margin expanded over last year. Adjusted EBITDA for the 2014 fourth quarter increased to $20.4 million as compared with $16.5 million for the 2013 fourth quarter.
Adjusted EBITDA margin for the quarter was 18.9%. Corporate expenses for the 2014 fourth quarter were $12 million compared with $9.6 million for the 2013 fourth quarter.
Most of this increase was attributable to the performance units of our stock-based compensation program based on the year-over-year improvement in return on net assets. This improvement applied to awards granted in both 2013 and 2014.
Turning now to a discussion of our liquidity. Free cash flow, which is cash flows from operating activities less capital expenditures, was $75.2 million for the 2014 fourth quarter compared to $58.7 million for the 2013 fourth quarter.
Additionally, we improved a measure of working capital efficiency by 100 basis points year-over-year as evaluated by trailing 4-quarter [ph] average accounts receivable, inventory and accounts payable as a percent of net sales. At September 30, 2014, total debt was $545.6 million and included $365 million of 7 3/8% senior subordinated notes due 2017, $178.3 million of 8 3/4% senior unsecured notes due 2020 and $2.3 million of other.
During the fourth quarter, we redeemed $55 million of our 7 3/8% senior subordinated notes due 2017. Net debt leverage was down to 2.1x at September 30, 2014.
Using September 30, 2014, data, we had $158.3 million of excess availability under asset-based credit agreement. I'll now turn the call back to Greg.
Gregory E. Hyland
Thanks, Evan. I'll now elaborate on our 2014 fourth quarter results and end markets and provide an outlook to the 2013 fourth quarter and a general overview of our expectations for 2015.
I'll begin with Mueller Co. Mueller Co.
had another quarter with strong net sales growth. Overall, net sales were up 11.5% year-over-year.
We saw a net sales growth in all of our product lines with the exception of export shipments, which declined about $3 million year-over-year. Our international business tends to be project-based and can fluctuate from quarter-to-quarter.
Domestic net sales of our valves, hydrants and brass products grew 17% in the quarter year-over-year. We believe this strong growth again came from both our residential and municipal end markets.
In addition, distributor inventories during the quarter declined both sequentially and year-over-year. For the full year 2014, domestic sales -- net sales of our valves, hydrants and brass products also grew 17% year-over-year.
We saw a 14% net sales growth in Canada, excluding the impact of unfavorable currency exchange rates. In addition, net sales grew 30% at our Mueller Systems business, although it was an easier comparison.
Mueller Co.' s overall adjusted operating income grew 27.2% in the fourth quarter year-over-year.
This strong growth was attributable to volume increases across all our product lines. Now let's look at Mueller Systems performance.
Mueller Systems' adjusted operating income improved about $3.4 million in the fourth quarter year-over-year due to a favorable mix and lower cost. For the full year as well, Mueller Systems saw a mix improvement with an increase in AMI shipments.
For the year, net sales grew 7.2%, operating performance improved about $5 million due to cost savings and the favorable mix, making it breakeven for the year. Mueller Co.
posted an adjusted EBITDA margin of 21.3% for 2014, an improvement of 250 basis points. The base business reported an EBITDA margin of 24.3%, an improvement of 240 basis points year-over-year, largely driven by strong growth of our domestic core valves, hydrants and brass products throughout the year.
For 2014, Mueller Co.' s incremental adjusted operating income as a percent of incremental sales was 59%.
Anvil's net sales during the quarter grew year-over-year with improvement across both the mechanical and fire protection markets driven by nonresidential construction spending. This is the first quarter in 2014 that we saw increased demand from both the mechanical and fire protection markets.
The energy market also continued to remain strong with net sales up 14%. Anvil's adjusted operating income improved 30% year-over-year, primarily due to a gain on the sale of assets.
During the fourth quarter, Anvil closed on the sale of its Bloomington, Minnesota facility, which resulted in the gain of $2.5 million. Anvil decided it could better serve its customers and grow its business by using independent sprinkler pipe fabricators rather than doing it in-house.
It ceased operations at this facility and sold associated production equipment and inventory. This move also enabled us to withdraw from the company's only multi-employer pension plan.
I'll now discuss our expectations for the full year 2015 beginning with Mueller Co. We expect continued growth in net sales at Mueller Co., driven primarily by both the residential construction and municipal end markets.
With regard to residential construction, while housing starts are expected to grow about 10% in calendar 2014, we believe we saw stronger growth largely due to the rate of raw land development. As you know, development of raw land for residential construction is a key driver of demand for our products.
According to recent surveys by Ivy Zelman & Associates, growth in land development activity reached record highs per their survey during the quarter, with the strongest activity in the central region of the country, which includes Texas. We expect that some of this activity will drive demand for our products in fiscal 2015.
Blue Chip consensus for growth and housing starts in calendar 2015 is about 18%. And Ivy Zelman and IHS are forecasting between 15% and 20%.
On the municipal front, state and local seasonally-adjusted tax receipts continue to increase and hit new highs, and municipalities overall are in better fiscal shape than they have been over the last several years. We saw strong growth in our municipal business in 2014.
And based on discussions with our customers and distributors, we expect to continue to see growth in demand for repair and replacement of water infrastructure at the municipal level in 2015. The CPI for water and sewage maintenance increased around 4% for the last 12 months ended August 2014.
Rising water rates are a significant source of funds for municipalities to drive capital projects. Water rate increases have far outpaced those of other utilities over the last several years.
Overall, for the Mueller Co. base business, which excludes our metering and leak detection products and services, we expect year-over-year net sales to increase in 2015 in a range comparable to the 7.3% growth we saw in the base business in 2014.
Mueller Systems is entering 2015 with a lower backlog than it had last year. We expect a number of larger AMI projects to be decided in 2015.
In fact, we have outstanding quotations on some of these projects today. We expect to be successful in winning a portion of these projects based on our historical win rate for AMI projects, but we do not think meaningful shipments from these projects will occur until 2016.
Consequently, today, our expectations are for Mueller Systems net sales in 2015 to be flat. Even with flat net sales based on our current backlog and project pipeline, we expect Mueller Systems to again improve its adjusted operating income on a year-over-year basis.
We believe this improved performance will come from our cost-saving initiatives as well as from an improved mix. For our leak detection and pipe condition assessment business, we continue to gain traction in both the domestic and international marketplace.
As with the introduction of other new technologies into the water industry, we find that we often start with pilot projects to enable water systems to test the technology and prove the value before broader scale adoption. During 2014, we introduced 24/7 fixed leak detection monitoring and in 2015, we expect to complete the full commercial rollout of this technology.
We are also concentrating on building our international sales and distribution capability. As we have mentioned, there is a significant market opportunity for leak detection outside the United States.
For example, we most recently established independent distribution in Germany. While we expect to see strong growth in net sales in total, we believe that the investments we need to make in our technologies and to expand our geographic presence and grow our distribution will result in a negative net impact of around $5 million in 2015.
We believe that these initiatives and investments are necessary to achieve meaningful sales growth in the future. Overall, for Mueller Co., based on the current outlook for housing and municipal spending, we expect year-over-year net sales growth in 2015 in a range comparable to the 7.4% growth we saw for total Mueller Co.
in 2014. On the production side, we expect to continue to see the benefits of lean manufacturing and other productivity improvements.
We do not expect any significant changes in our average raw material and purchase part costs for 2015 compared to 2014. With the increased production and shipment volumes, we should benefit from stronger operating leverage and see year-over-year margin expansion.
Overall, we expect Mueller Co.' s adjusted operating income and adjusted operating margin to again increase in 2015.
Now I'll turn to Anvil. We expect Anvil to see slightly higher shipment volumes in 2015.
The Architecture Billings Index was above 50 for most of 2014 and has had strong readings from May forward, which should drive an increase in construction spending in 2015. Most economic forecasts called for growth in 2015 for nonresidential construction spending.
We saw improvement in our fourth quarter nonresidential construction end market and believe this level of activity will carry over into 2015. Spending in the oil & gas markets is impacted by oil & gas prices, which have been falling recently.
Most forecasts have rig counts flat to slightly up in 2015, but that could change with fluctuations in oil & gas prices. Anvil sales to the oil & gas markets grew about 7% in 2014.
Based on current market conditions, we expect the growth could be flat or increase slightly in 2015. We expect the benefits of lean manufacturing and other productivity improvements at Anvil to at least offset inflationary increases in production cost.
Overall for Anvil, year-over-year net sales are expected to grow in the low- to mid-single-digit range, and adjusted operating income should grow at a greater rate. For Mueller Water Products in 2015, we expect net sales growth in the mid- to upper-single digits.
Additionally, with increased production and shipment volumes, we also expect the benefit of continued operating leverage, resulting in adjusted operating income growth and adjusted operating margin expansion. Other 2015 key variables include: corporate expenses, which are expected to be $34 million to $36 million; depreciation and amortization is expected to be $58 million to $60 million and interest expense is expected to be about $46 million.
We expect our adjusted effective income tax rate to be near 40%. Capital expenditures are expected to be $40 million to $42 million.
For 2015, we expect free cash flow to be driven primarily by improved operating results. We have substantially exhausted our federal NOL and expect to return to being a cash taxpayer in 2015.
We also expect to make only minimal cash contributions to our pension plan in 2015. As a reminder, our target is for free cash flow to exceed adjusted net income.
Turning now to our outlook for the 2015 first quarter. I'll start with Mueller Co.
Overall, for the first quarter, we expect to continue to see growth at base Mueller Co. driven primarily by demand from both residential construction and municipal spending.
Recently, momentum in the growth of housing -- of the housing market recovery has slowed. However, we still believe that with land and lot development, we are benefiting from growth in residential construction.
We also believe that we will see growth in the municipal market, which held up well throughout 2014. We believe Mueller Co.'
s net sales growth in the first quarter will be in the mid- to upper-single digits. We expect both Mueller Co.'
s adjusted operating income to improve and for adjusted operating margins to expand in the first quarter year-over-year. We believe this improvement will primarily be driven by an increase in domestic shipments we expect for our core products.
We anticipate that Anvil's first quarter net sales percentage growth will be up in the mid-single digits year-over-year, as we expect the momentum we saw in the nonresidential construction market in the fourth quarter to continue in the first quarter of 2015. We expect Anvil's adjusted operating income to be slightly up on a year-over-year basis, and we expect adjusted operating margin to expand.
For Mueller Water Products as a whole, we believe the 2015 first quarter net sales percentage growth will increase in the mid to upper single digits year-over-year, driven by performance at both Mueller Co. and Anvil.
We expect solid increases in our 2015 first quarter adjusted operating income as well as expansion in adjusted operating margin year-over-year. Reflecting on 2014, we are certainly pleased with our net sales growth, conversion margin and improvement in adjusted income per diluted share to $0.30 from $0.18.
Our free cash flow generation of $110.7 million enabled us to reduce our total debt outstanding and lower our net debt leverage to 2.1x. Additionally, in 2014, we continue to focus on our -- on enhancing value for our customers and expanding our Intelligent Water Technology offerings with the introduction of several new products including: our lead-free fire hydrant; next-generation gate valve, which is rated for pressures 40% higher than competitive valves; remote pressure monitoring; and 24/7 fixed leak monitoring for both transmission and distribution mains.
We are certainly pleased with the progress that we've made and appreciate the recognition of our innovations when we received the 2014 Best Smart Water Product Solution award at the inaugural Smart Water Summit in September. We received the award for our suite of Intelligent Water Technology solutions which enables our 24/7 continuous leak monitoring for both distribution and transmission mains; our AMI systems, including the Remote Disconnect Meter; and our remote pressure monitoring offerings.
This award was voted on by water utility executives representing some of the most progressive water utilities in North America. We appreciate that we need to continue to demonstrate traction with our newer technology products and services and generate net sales growth.
However, as we continue to assess the marketplace demand for solutions that offer improved operational efficiency, enhanced customer service and value added information, we are increasingly convinced that we are building the right suite of solutions. As we just discussed, we believe that the outlook for our key end markets, new water infrastructure driven by residential construction, repair and replacement of existing water infrastructure for municipality and nonresidential construction remains positive.
As our capacity utilization increases, we believe that we will continue to demonstrate operating leverage, which leads to expanding margins and improved returns for our stockholders. With that, operator, I'll open up this call for questions.
Operator
[Operator Instructions] And Mike Wood, your line is open.
Mike Wood - Macquarie Research
You provided a lot of detail on the prepared remarks, so far. On your Mueller base business, your incremental margin is -- just based on the quick math in the numbers that you gave, looked like they were about 26%.
It's a solid number, but it's far below where it's been running. Could you give some color in terms of what impacted the incremental margin in that base business?
Gregory E. Hyland
Sure, sure. Yes, as we said, including this quarter, our conversion margins for Mueller Co.
for the full year were 59%, so well above the 35% we typically expect. We had several factors impacting conversion margin this quarter as compared with the previous 3 quarters this year.
I think first, while we saw strong growth in our domestic valves, hydrants and brass products this quarter, as I discussed, 17%, that's less than what we saw last quarter at 28%. So we had a slight mix impact.
Secondly, given the increase in demand that we have seen for our hydrant product line, we were required to add a partial second shift at our Albertville hydrant manufacturing facility in the quarter. We just couldn't handle the work anymore by working additional overtime.
So when we're in that situation, we're just less situation -- less efficient with the partial shift than we would have been if we had enough work to staff a full shift. So while the additional volume contributed to overall greater profits, the inefficiencies of a partial second shift did impact margin conversion.
Finally, we had higher costs at our Echologics business as we began staffing for a number of projects that will now begin in the first quarter of fiscal 2015. We had expected some of these to begin in the fourth quarter, but last year, Echologics backlog entering the year was about $1 million.
This year's backlog is $5 million. So when we look at just the fourth quarter, the additional cost related to staffing to handle this additional work did impact the Mueller Co.'
s performance in the fourth quarter. So -- but still, when we look at our full year and we look at Mueller Co.
with a conversion margin of 59%, certainly higher than we expect on our conversion margin to be on average over time. If we look at our base business, our base business at Mueller Co.
had a conversion margin of 37% and that certainly was bought down by the additional costs that I just referenced in Echologics in the quarter.
Mike Wood - Macquarie Research
Understood. I also believe I noticed a $10 million acquisition of the business in the quarter.
Can you describe what that is?
Gregory E. Hyland
Yes, [indiscernible] on July 1, we completed acquisition of certain assets of Lined Valve Company. It's a privately held company.
We integrated it and are in the process that will be integrated in our Pratt product line. The acquisition [ph] was about $10 million.
And Lined Valve, if we look at calendar year 2013, had sales of slightly under $11 million. We think that this was a pretty nifty acquisition for us because it expands Pratt's product offerings going to water treatment facility.
And so we think when we bring this product line into Pratt's distribution network, that, one, we have the opportunity to grow it; but two, it just makes us, we think, more competitive when bidding on water treatment plant opportunities by having a more complete line. So it was a relatively small acquisition, but we think as we look at a year or 2 out that when we fully integrate it, bring it into Pratt distribution, and again, as we mentioned on previous calls, we are beginning to see more and more quotation activity -- more and more quotation activity on the water treatment side that it's good timing and it's going to put us in a much stronger competitive position.
Operator
Our next question comes from Ryan Connors.
Ryan M. Connors - Janney Montgomery Scott LLC, Research Division
A couple -- a few questions from me. First off, Greg, you mentioned in your prepared remarks that distributor inventories declined in the fourth quarter, both sequentially and on year-over-year basis.
What do you attribute that to? And what's your read of that in terms of an indicator of underlying market strength?
Gregory E. Hyland
Yes, we just look at that as good news. We didn't see a concentrated effort on distributors saying, "Boy, we need to bring down inventory."
We typically do see it come down this time of year because we're getting ready to get into the nonconstruction -- I mean, the weather-related maybe reduced construction activity across the U.S. But no, we interpreted it as very positive because if you recall that the inventories -- our shipments in the third quarter, inventories were up with our distribution network.
And the fact that our sales of our domestic valves and hydrants and brass products still grew 17%, and distributors' inventories came down, that's just further indication to us that we're seeing a strong end market activity.
Ryan M. Connors - Janney Montgomery Scott LLC, Research Division
That's good news. I wanted to also talk a little bit about this asset sale in Anvil, the Minnesota asset being divested.
I know you've talked in the past, Greg, about low-cost region imports being both a risk and an opportunity for Anvil, given that you do in-source some of your own product from your overseas operations. Are we to read that as -- and you mentioned in your remarks that they're going to be sourcing elsewhere for some of what was produced in Minnesota.
Are we to read that as you're shifting more of your sourcing in Anvil from low-cost regions, parts of your complex? Or is that a separate issue altogether?
Gregory E. Hyland
No, Ryan, that's separate. And thanks, and maybe our prepared remarks weren't quite as clear.
This was actually a fabrication business. So it was a regional fabrication business where we would take sprinkler pipe and bend it and get it ready for a job site.
And we just looked at it and said, "You know, that's outside our core." It was a legacy business.
We have been up in that territory for some time. We went to one of our distributors that's also a fabricator and just said, "We think you're probably better off doing this business and -- rather than us competing with our distributor," and then sold the business to our distributors.
So really, it had nothing to do on the manufacturing decide -- on the manufacturing side. It was almost an isolated operation for us, where we did fabrication of bending and all of sprinkler pipe and just moved it to a distributor which we think in the long run, it might even increase demand for our products since we are no longer competing with our distributor.
Ryan M. Connors - Janney Montgomery Scott LLC, Research Division
Okay, that helps clarify that. And then while we're on the topic of low-cost region sourcing, I mean, you said in the past that, that part of your business in Anvil is growing faster than domestic-sourced products.
Is that still the case? And what are the -- what's the update there?
Gregory E. Hyland
Yes, when we -- Ryan, when we look at it and it moves very -- it's a very slow movement, but I think when we look at the trend, that we certainly can come to the conclusion that, as you just mentioned, that we could see that growing at a faster rate than domestic-produced. We actually -- that was happening before the downturn in the 2009, 2010 time frame.
That started to level off, and I think it levels off because, a lot of times, our distributors will carry an offshore-produced product and a domestic-produced product. Because we have, and we've mentioned in the past, there'll be locations or there will be some contractors who will only install a domestic produced.
So that gives our distributors the flexibility. Generally, what we see in a market downturn, they'll manage their inventories a little more closely.
If they carry only domestic produced, that gives them a little more flexibility, obviously, because they can sell that to either when domestic produced is required or to any application. So it's not just an indication that if our distributors are now starting to carry domestic produced and offshore produced, it's an indication to us that they're seeing the market pick up.
But it's also -- we do think that -- more likely, that that's a trend that we may be seeing over the next couple of years. But we don't think it's a dramatic shift but just a slow, steady shift.
Ryan M. Connors - Janney Montgomery Scott LLC, Research Division
Got it. And then if I could sneak one in for Evan.
Evan, we're well inside of the year now when the senior note's going to be callable next year in September. And I just want to get your early read on the potential for cash deployment beyond that point.
Obviously, that's assuming that the restricted payments provisions get lifted then. Would a buyback be something that the company would consider as one of the things that it would look at a year from now?
Evan L. Hart
Well, Ryan, and certainly, as you know, we're limited a bit related to our senior indentures with respect to share buyback and additional debt reduction. That has been our primary focus.
But we do believe, however, we are in an opportunistic position to consider refinancing as we move closer to that first call date of our senior notes. And breakage costs have come down, less than what they were several months ago, which contributes to some compelling economics.
Despite some recent volatility in the markets, we're hopeful that there'll be a market window where we may have the ability to reduce interest expense, improve overall cash flow and gain some flexibility through a refinancing. Obviously, terms of any potential refinancing remain to be seen and any transaction would be subject to favorable market conditions, among other things.
We'll, of course, keep you posted of any developments in this regard.
Ryan M. Connors - Janney Montgomery Scott LLC, Research Division
Okay, great. But just to be clear, once that's refinanced, presumably, that you will have more flexibility to do something like a buyback.
Is that not correct?
Evan L. Hart
Certainly, with the refinancing effort, there will be additional flexibility compared to what we have today.
Operator
Our next question comes from Jerry Revich.
Jerry David Revich - Goldman Sachs Group Inc., Research Division
Can you just talk about the assumption of flat material costs next year? Are you assuming steel cost pick-up in the back half of the year?
I guess, I would think given steel price moves, that might be a tailwind for your business, at least, in the first half.
Gregory E. Hyland
Yes, Jerry, when we look at 2015 and trying to read the tea leaves and talk to our suppliers and so on, we could see some movement throughout the year. But I think, generally, that our conclusions are that we'll see that we are expecting flat material cost.
I would say that when we look at in our fourth quarter year-over-year, our scrap purchases were up 2%. The cost on an average price per ton, sequentially, that was down, so we keep seeing some movement.
And for instance, in our second quarter, they were down, flat year-over-year. So we are seeing it moving up and down.
I would say that when we look at it in the fourth quarter, it was a help for us. And I would expect that when we look at -- back to your point, for the first half of the year, it will be more a help than a negative.
And if we see any negative, it may be in the second half of the year. But overall, when we look at what we see the first half of the year versus the second half of the year, right now, we think it looks pretty flat.
Jerry David Revich - Goldman Sachs Group Inc., Research Division
Okay. And then from a pricing standpoint, can you just calibrate us on what you expect to realize compared to the list prices that are out there?
And I know you've had some product transitions recently as well. Can you calibrate how you're thinking about pricing for '15 for Mueller Co.?
Gregory E. Hyland
Yes, when we look at pricing for '15, if you'll -- well, I'll go back to our -- the price increase that -- for valves and hydrants that we implemented in February this year, we've been realizing about 60% of that price increase. So we'll get the carryover impact for our first -- probably, our first 5 to 6 months of this year.
Again, when we get to the -- in the January, February time frame, our Mueller team will assess our cost position and strengthen the market and so on, and we'll make an valuation then relative to the pricing for 2015. But as we sit here today, we're pretty confident that we'll continue to see that 60% conversion margin on the -- conversion, sorry, realization on the price increase we implemented in February.
And we probably don't start shipping at the new price until April, so that will give us 6 months of fiscal year 2015 to get the wrap around or carryover pricing. And then, our Mueller team will make the -- or probably in the process now of starting to make the evaluation of what needs to be -- what they should be doing on pricing for 2015.
Jerry David Revich - Goldman Sachs Group Inc., Research Division
Okay. And then, in terms of the contracts that you're evaluating in Mueller Systems or the bids that you're submitting, I should say, can you talk about just the magnitude of the opportunity if you deliver the historical run rate that you highlighted in the remarks?
What would that mean for book-to-bill this year or revenue growth next year for Mueller Systems? Can you frame that for us at all?
Gregory E. Hyland
Yes, we were talking that we are seeing this year -- or we're in a period for the last couple of months and expect for the next several months to see 4 or 5 major cities and they have started issuing requests for proposals, much bigger cities than what we've seen the last several years. These quotations can range anywhere from $30 million to $80 million, so we're talking about significantly bigger projects, the bigger cities.
And it's interesting that most of the inquiries that we've seen have included requirements beyond meter reading as part of their AMI system, and we're seeing more and more requests to include leak detection in the AMI system. Of course, I don't know if any of you had the opportunity yet, but we issued a press release this morning where we received an order from American Water West Virginia (sic) [West Virginia American Water] for our 24/7 fixed leak detection, and that will be communicated over our AMI system.
So we've -- this is our first order moving from the pilot stage into the -- into an actual order. So as you know, we've been talking in the last several years that we've been focusing our R&D on leak detection as part of an AMI system.
We think it could certainly further differentiate us in the marketplace. So we believe that we have the right strategy, the right suite of products and services.
We're seeing that coming through for the proposal request. But I think that, back to your point, as we progress in 2015 and expect to grow our AMI business with wins in some of these projects, that will be the validation of our strategy.
So as we look at them today that we think decisions will be made on most of these projects that we're currently up for proposal or that have been quoted, but we don't believe that there will be much of anything shipped in 2015, and that will move into 2016. So when we look at 2015, for Mueller Systems, we look at it as a very important year in terms of what we believe order activity to be.
From that activity, though, we think that most of those shipments will be in 2016 for those who win those orders.
Jerry David Revich - Goldman Sachs Group Inc., Research Division
Okay. And just can you clarify what's been your historical win rate on these types of bids?
Gregory E. Hyland
Well, I can tell you, on these types of bids, this is the first time that we've seen in the last couple of years the bids to be very large systems. If we look at our win rate on AMI systems that we have quoted over the last several years, it's in the 35% to 40% range.
Operator
Our next question comes from Noah Kaye.
Noah Kaye - Northland Capital Markets, Research Division
As you look at that guidance of about 7.5% growth in Mueller Co., I guess, for next year, can you talk about the contribution you're baking in for residential construction to drive demand versus the replacement market, and how it compares to what you're seeing now?
Gregory E. Hyland
Yes, we'll look at -- this year, and these are our best estimates, and we've said a number of times we get our information from our distributors, our field sales force and so on. But we think that for Mueller Co., our residential sales or sales driven by the residential market grew about 20% for us.
And from the municipal markets, about 6% for the full year. When we look next year, we actually think that we may see littler higher growth coming from municipal markets and just slightly less coming from the residential construction market.
But it would still be relatively strong growth in the double-digit range. And again, as we said in our prepared remarks that based on land development activity that has been reported in the July and -- June, July, August time frame, we think we'll get some benefits from carryover of that activity and should drive some of our expectation for growth in demand.
So when you look at it, we're saying that we think we're in -- we should see the same range in 2015 that we saw in 2014. We still think more of that growth will come from residential construction.
But we think probably a little less this year from residential construction, a little more from municipal spending.
Noah Kaye - Northland Capital Markets, Research Division
Great. I mean, just to be super clear, and I really appreciate the commentary, so you have 7.5%.
So approximately what of the 7.5% would be ballpark residential construction?
Gregory E. Hyland
When I look at it, I mean, I'd say anywhere from 2/3 residential construction, maybe 1/3 of the growth coming from municipal spending. And year-over-year growth, of course, municipal will still be a much higher percent of Mueller's overall sales.
Noah Kaye - Northland Capital Markets, Research Division
Sure, absolutely. Absolutely.
Second, the AMI discussion, which -- very interesting, and I appreciate all of the detail. Can you talk a little bit about the existing kind of metering infrastructure in the cities where you're seeing the bids?
Specifically, if there is gas and electric metering, what requirements are you seeing for interoperability? And how do you think you're kind of set-up there?
Because I would imagine that would be -- part of the consideration for some of these cities is having all of their infrastructure on the same network.
Gregory E. Hyland
Yes, Noah, that's a good question. I would tell you, the projects that I referred to are water only, and it's being run by the water utility.
They've formed their own committee. They've spent quite a bit of time in getting prepared for their proposal.
We're very impressed with the homework they did and what they're asking for. We're clearly seeing that they're not only looking for meter reading today, they're looking at this system to be able to -- to be -- still be a valuable system 6, 7 years down the road and be capable of having increased functionality.
So the ones I'm referring to that we are seeing are water only. We do, from time to time, see a combination of water and electric.
And in the past, we have partnered with an electric meter manufacturer to go after those. And depending on -- and will depend on the particular relationship or so on, which AMI system.
But typically, we've been going on some of the smaller water and electric systems that we've been quoting our AMI systems, and we have been putting our radios and sourcing the electric meter. We have not yet seen a big trend of interoperability between -- at different cities.
Certainly, in a lot of cases, the -- when you go to a city, the gas utility, the electric utility could be investor owned, while the city runs the water utility and -- the water systems. So we haven't seen a lot of that yet.
The quotations I referenced are right now strictly water. But we have, as I said, on occasion, when there's water and electric going together, we have partnered with a meter manufacturer.
Noah Kaye - Northland Capital Markets, Research Division
Right. Great.
That's incredibly helpful. And last quick question.
I think last quarter, you said for kind of your core products, capacity utilization was around 75%. Can you tell us about where it was this past quarter?
Gregory E. Hyland
Yes. When we look at this quarter, as I referenced, that our hydro plant had to put on a second shift, although it wasn't a complete second shift.
That's bumped up their capacity utilization and with our valve. So we were still, I think, in that 75%, maybe to 78% range when we look at -- especially at our valve operation.
For the full year, we still think we were down slightly, under 70% at Mueller Co., 65% at Anvil. And now we expect that capacity utilization, as we enter the nonconstruction season, to come back down.
Operator
Our next question comes from Brent Thielman.
Brent Thielman - D.A. Davidson & Co., Research Division
Greg, as you're speaking with end-users, what's your sense the priorities are for municipalities and, I guess, particularly capital investment for utilities kind of headed into calendar 2015? And then, as a second part to that, is there any discussion yet in the industry about lower fuel prices, what that could mean for budgets or any of your own thoughts there?
Gregory E. Hyland
Yes, we haven't heard -- I'll address the second part of your question first. We haven't heard any specific -- we haven't had any specific discussion about what lower energy cost might mean for the municipalities.
But certainly, it has to be a plus when you think it -- I think when we look at the whole state of California, I remember seeing, one time, a figure that said the largest use of energy in California was moving water or transporting water. So I mean, as those energy costs come down, you would think that, that certainly would free up their budgets somewhat.
Relative to our discussion, I can't say that we've seen any specific trends in our discussions other than in our field sales force report, that our municipal customers still feel very comfortable that -- with their level of spending. And as I said, this gives us a confidence that we think that we'll see greater demand in 2015 for the municipal markets.
I will say, and this is not enough for us to make any far-reaching conclusions, but on a year-over-year basis, for instance in our Mueller Co. and our public quotation activity, our number of quotes were up 30% year-over-year.
But on a dollar value, that was up less than 5%. So that tells us that, perhaps, the utilities are now looking at some of those smaller projects that they've been putting off for a while, and are now finally getting to do some of those, even some of the smaller projects.
But I would hasten to add that that's 1 quarter and that it's pretty difficult for us to come to that conclusion with any certainty. But we thought it was a pretty interesting development as we look at it in the fourth quarter on a year-over-year basis.
Operator
Our next question comes from David Rose.
David L. Rose - Wedbush Securities Inc., Research Division
I have a couple, if I can take them out quickly. First, on the incremental margins, can you provide a little bit more color on your expectations for the incrementals now that you have the second shift?
And then on Anvil, if I understand it, when you strip out the $2.5 million, your incrementals were about 28%. So are those the type of incrementals we should expect out of Anvil?
And then, on Mueller, what should we see?
Gregory E. Hyland
David, we are phasing out of that second shift at Mueller Co. We enter -- in October, as we entered our first quarter fiscal year, we were still running it, but we expect to be out of that probably any day.
And we think we can cover everything we need there with overtime. For us, we are so mix-dependent and, as we said, it can fluctuate from quarter-to-quarter.
We have historically said that on the Mueller Co., we expect a 35% -- we would expect 35% conversion margin. At Anvil, a 25% conversion margin.
Certainly, as we see a big shift in mix and the kind of growth rates, for instance, we saw in the third quarter at Mueller, where our domestic valves, hydrants and brass products and our valves -- domestic valves and hydrants are our most profitable products, we are going to see a higher conversion rate. As we go into 2015, for instance, and we think we're going to see some growth in water treatment and wastewater activity, that may mean we'll see a greater growth at our Pratt business, which has lower margins than our valves and hydrants, and certainly can impact it.
So we're very mix -- impacted by mix. We feel very comfortable in the 35% conversion margin at Mueller Co.
And again can point out, though, that with mix, as we demonstrated the last couple of quarters, it can be higher than that. And in Anvil, the 28%, to run that 25%, I think we'll see that, at times, it could be 18%.
At times, it could be 28%, 29%. But again, we feel comfortable on our expectations of about a 25% conversion margin there.
David L. Rose - Wedbush Securities Inc., Research Division
Okay. And then on a high level, what's your rationale for keeping Anvil?
Gregory E. Hyland
Anvil is -- we think that -- we've done a lot of work in that business. It is -- we think we are -- we've taken out costs.
It's -- we continue to grow the margins. We've improved generally productivity, though we had a very tough second quarter this year.
And we think we're at the very early stages of seeing a nice rebound in nonconstruction market. It provides very positive cash flow.
That being said, I think, we've always been consistent in saying that if we have opportunities to expand strategically on the water business, if we have the opportunity to get a -- I think, a nice international position, we can always look at where Anvil fits in our portfolio. But as we look at it today, that we think that we're at the beginning of a nice rebound in its primary market, and we've taken out cost out of that business, so we expect it to be a very nice performer for the next couple of years.
David L. Rose - Wedbush Securities Inc., Research Division
Okay. And then -- that's helpful.
And then one last one, and I'll get back in the queue is on Echologics, you have a lot of activity. One of your competitors just announced that Baltimore win.
I'm assuming you'll participate in that as well as, perhaps, a subcontractor. You have -- I believe WSSC has announced that you have won that as well.
So I see a lot of activity. What's your bandwidth to manage that?
And how much of that business can you manage?
Gregory E. Hyland
Great question. David, yes, we think as we're -- and I referenced -- and WSSC is a great example, that we thought that project would start to begin in the fourth quarter.
It's now beginning. We started adding the staffing for that business in the third quarter.
So I think we have the ability to flex our capability relative to the fieldwork. And we have been adding in the last year, I would say, our fixed technical people that we hope -- that we expect will move from project-to-project.
So I think for the -- when we look out for the next 12 months, we certainly have the capability to handle and grow that business, and we can flex our field employees. And we have, we think, enough of the technical people and the engineering people in-house today.
I think, though, as we start growing and expect to grow internationally, we're going to have to add more people, and some of that is in our forecast that I gave in the outlook for 2015 when I said on a net-net basis, given that we expect to see growth in our sales at Echologics, and that turning into -- giving us more profit, we're going to offset that, though, with investments in our sales infrastructure and some R&D. Primarily, a lot of that's focused on the international market.
So when I look at the projects that we have in the pipeline and those that we think that we can win when I look at 2015 and maybe even going into 2016, I think we have the right complement of technical people. We'll be able to flex our field people.
But when I look at our growth expectations on the international market, we have to add people, and that's actually reflected in the outlook that I gave for 2015.
Operator
Our next question comes from Walter Liptak.
Walter S. Liptak - Global Hunter Securities, LLC, Research Division
I wanted to ask about the guidance that you gave, and I think for the first quarter, mid- to high single digit at Mueller Co., mid-single digit at Anvil, looks fine to us. But I wondered how -- what you're thinking about for the rest of the year in terms of, like, second quarter should be an easy comp.
And so I think I'd expect high single digit, mid-single digit again. But then, at the back half, especially in the Anvil, it sounds like there's more of a deceleration that you're expecting from the first half?
And whether if it's...
Gregory E. Hyland
Well, no. When we look at it and -- as we've said, for the full year, we do think that Mueller Co.
will be in the range of what we saw this year, 7.4%. And on the Anvil, we're looking -- this is our first quarter, as I pointed out, that we had both our mechanical and fire protection product lines growing year-over-year.
And I would say that we think we're going to see a stronger nonres construction spending market, but we also tempered that a little bit with some of the uncertainty right now that's going on in the oil & gas market with the recent drop in prices. So I think right now that we're comfortable in pegging the overall Mueller Co.'
s net sales growth for the year to average 7.4%. And looking at Anvil, probably the mid-single digit range.
Walter S. Liptak - Global Hunter Securities, LLC, Research Division
Okay, that's fair. Can you refresh us just on the oil & gas?
My recollection is that's 10% to 15% of Anvil.
Gregory E. Hyland
No, it's 10% of total Mueller Water Products, 20% of Anvil. So over the last couple of years, that's grown nicely.
And as I referenced in the prepared remarks, that was up 7% -- demand was up 7% in the oil & gas market for Anvil this year. So that's about 20% of overall revenues for Anvil.
We've been sitting, at this time, giving our outlook for the last couple of years, I think when we looked at nonresidential construction, we always referenced the forecast that we're calling for a growth in nonres construction spending. And when we got into the middle of the year, we talked about how that didn't materialize.
Again, we're sitting here with the forecast of growth for nonresidential construction spending. But I would say, it feels -- today, it feels a little more solid than what it has in the past couple of years.
But I would say that we probably -- right now, we're sitting less confident on what's going to happen in the oil & gas market.
Walter S. Liptak - Global Hunter Securities, LLC, Research Division
Okay, yes, that sounds great. And then I wanted to ask about the larger city orders that you referenced and how that would impact 2016 growth.
Are you suggesting that we would see a continuation of this high single-digit growth rate in 2016? Or could we see an acceleration because of these orders?
Gregory E. Hyland
Well, Walt, yes, and we're confident but not confident enough to call them orders yet. They're still -- we're still in the quotation stage and to be decided this year.
But several of these are of the magnitude that it certainly would have a material impact on year-over-year growth rate. But I think at this point, as I said, they're in the quotation stage and I think as we go through 2015, they're going to be decided.
So once we have better insight there, I'll be better able to comment on 2016.
Operator
Our next question comes from Seth Weber.
Seth Weber - RBC Capital Markets, LLC, Research Division
Just a couple of quick tack-on questions. The $5 million negative impact that you highlighted, how -- is that going to be front-end loaded?
Or how should we think about that kind of flowing through the year? That's my first question.
Gregory E. Hyland
Seth, it is -- that's difficult to -- right now to be able to -- a lot of it will be -- depend on how quickly we can hire some of the people and fill the positions that we're looking at. So as we're sitting [ph] here today, I would say, it may be more towards -- we might start seeing more towards the middle of the year, and then working through the end.
But it depends on how quickly we are able to move.
Seth Weber - RBC Capital Markets, LLC, Research Division
Okay. And the CapEx guidance for the year, $40 million to $42 million.
I mean, that would be the highest level I think it's been since 2007, 2008, something like that. Is there anything that you would call out -- is there any -- you're not adding any brick-and-mortar, I assume, but is there anything specifically you would call out that you haven't addressed on the call yet that we should be thinking about?
Gregory E. Hyland
Yes, Seth, I'll ask Evan to address that.
Evan L. Hart
For 2014, the capital spending was around $37 million, and we did say $40 million to $42 million for '15 is our expectation. And it's higher than '14 because we've identified 2 projects which improved our productivity.
They have a payback of about 1.5 years. And so they're certainly contributing to higher capital spending, but we believe the return metrics are very attractive.
And additionally, in our leak detection, as we look to expand our international offerings, capital spending will be a bit higher as well there. As a reminder, our maintenance capital spending needs are about $26 million, $27 million.
And the spending above that is for these projects, either cost saving-related, efficiency or new product development.
Seth Weber - RBC Capital Markets, LLC, Research Division
And which business categories do the 2 projects that you've identified fall under, the cost savings?
Evan L. Hart
They fall under Mueller Co.
Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division
Mueller Co., okay. Great.
And then last quarter, you talked about a hiccup in the Pratt business sort of impacting third quarter numbers. Did that get reconciled here in the fourth quarter?
Or is that continuing to -- in the fourth -- or does that continue?
Gregory E. Hyland
No, no, no. We're seeing Pratt shipments picking up.
And certainly, when we look at their -- their backlog's up about $10 million. They tend to -- year-over-year -- they tend to -- there, the water treatment market tends to lag what we see on the distribution side.
Seth, we mentioned about quotation activity being up in Pratt even though sales were down, and the orders coming in, we were -- there was really no impact on the negative side from Pratt on this quarter. And we are encouraged because their backlog's up, as I said, about $10 million on a year-over-year basis.
Seth Weber - RBC Capital Markets, LLC, Research Division
Okay, great. And just one -- sorry, one last one.
Just a clarification on your comments about the energy outlook with the Anvil business, have you actually seen or heard of a change in customer behavior around the lower oil prices? Or are you just sort of trying to handicap what you think may happen going forward and that's why you're being conservative -- or that relates to your commentary?
Gregory E. Hyland
It's more handicapping. We saw it actually grew 14% for Anvil in our fourth quarter and haven't seen a slowdown yet, but we're sitting here saying, "Gee, you would think it would have to catch up at some point."
But we have not seen it from the market yet.
Operator
Our next question comes from Joe Giordano.
Joseph Giordano - Cowen and Company, LLC, Research Division
I apologize if this was asked already, I've kind of been bouncing around. But on Anvil, just for the growth rate in the quarter, I just wanted to parse out how much of that was attributable to oil & gas and how much was nonres.
Gregory E. Hyland
Yes, Joe, when we look at it on a year-over-year basis, the energy, still -- oil & gas was still the largest single market grew -- I mean, grew the greatest of any of our single markets. On a year-over-year basis, it was almost 14% as I mentioned.
When we look at our nonres construction, it probably was about in the 5% range, so both our mechanical and fire protection grew. And as we said, that was the first time we saw demand for both of these grow on a year-over-year basis in this quarter -- I mean, in this year.
Operator
David Rose.
David L. Rose - Wedbush Securities Inc., Research Division
I can follow up afterwards and keep the call short.
Operator
And at this time, I'm showing no further questions.
Gregory E. Hyland
So again, thank you very much for your interest, and I look forward to seeing you all soon.
Operator
This now concludes today's conference. Thank you for your participation.
You may now disconnect.