Intrinsic value of Mueller Industries - MLI

Previous Close

$28.00

  Intrinsic Value

$19.04

stock screener

  Rating & Target

sell

-32%

Previous close

$28.00

 
Intrinsic value

$19.04

 
Up/down potential

-32%

 
Rating

sell

We calculate the intrinsic value of MLI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  2,445
  2,631
  2,825
  3,025
  3,234
  3,451
  3,677
  3,912
  4,156
  4,411
  4,676
  4,953
  5,241
  5,541
  5,855
  6,183
  6,525
  6,883
  7,257
  7,649
  8,058
  8,486
  8,935
  9,405
  9,897
  10,412
  10,952
  11,518
  12,112
  12,734
Variable operating expenses, $m
  2,263
  2,434
  2,611
  2,796
  2,988
  3,187
  3,394
  3,610
  3,835
  4,068
  4,295
  4,548
  4,813
  5,089
  5,377
  5,678
  5,993
  6,321
  6,665
  7,024
  7,400
  7,794
  8,206
  8,637
  9,089
  9,562
  10,058
  10,578
  11,123
  11,695
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,263
  2,434
  2,611
  2,796
  2,988
  3,187
  3,394
  3,610
  3,835
  4,068
  4,295
  4,548
  4,813
  5,089
  5,377
  5,678
  5,993
  6,321
  6,665
  7,024
  7,400
  7,794
  8,206
  8,637
  9,089
  9,562
  10,058
  10,578
  11,123
  11,695
Operating income, $m
  182
  197
  213
  230
  247
  264
  283
  302
  322
  343
  382
  404
  428
  452
  478
  505
  532
  562
  592
  624
  658
  693
  729
  767
  808
  850
  894
  940
  988
  1,039
EBITDA, $m
  230
  247
  265
  284
  304
  324
  345
  367
  390
  414
  439
  465
  492
  521
  550
  581
  613
  647
  682
  718
  757
  797
  839
  883
  930
  978
  1,029
  1,082
  1,138
  1,196
Interest expense (income), $m
  7
  26
  30
  33
  37
  41
  45
  49
  54
  59
  63
  68
  74
  79
  85
  91
  97
  103
  110
  117
  125
  132
  140
  149
  158
  167
  177
  187
  198
  209
  220
Earnings before tax, $m
  156
  168
  180
  193
  206
  219
  233
  248
  263
  279
  313
  330
  349
  367
  387
  408
  429
  452
  475
  500
  525
  552
  580
  610
  641
  673
  707
  742
  780
  819
Tax expense, $m
  42
  45
  49
  52
  56
  59
  63
  67
  71
  75
  85
  89
  94
  99
  105
  110
  116
  122
  128
  135
  142
  149
  157
  165
  173
  182
  191
  200
  210
  221
Net income, $m
  114
  123
  131
  141
  150
  160
  170
  181
  192
  204
  229
  241
  254
  268
  283
  298
  313
  330
  347
  365
  383
  403
  424
  445
  468
  491
  516
  542
  569
  598

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,425
  1,533
  1,646
  1,763
  1,885
  2,011
  2,143
  2,280
  2,422
  2,571
  2,725
  2,886
  3,054
  3,229
  3,412
  3,603
  3,803
  4,011
  4,229
  4,457
  4,696
  4,945
  5,207
  5,481
  5,767
  6,068
  6,382
  6,712
  7,058
  7,421
Adjusted assets (=assets-cash), $m
  1,425
  1,533
  1,646
  1,763
  1,885
  2,011
  2,143
  2,280
  2,422
  2,571
  2,725
  2,886
  3,054
  3,229
  3,412
  3,603
  3,803
  4,011
  4,229
  4,457
  4,696
  4,945
  5,207
  5,481
  5,767
  6,068
  6,382
  6,712
  7,058
  7,421
Revenue / Adjusted assets
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
  1.716
Average production assets, $m
  413
  445
  477
  511
  547
  583
  621
  661
  702
  745
  790
  837
  886
  936
  990
  1,045
  1,103
  1,163
  1,226
  1,293
  1,362
  1,434
  1,510
  1,589
  1,673
  1,760
  1,851
  1,947
  2,047
  2,152
Working capital, $m
  423
  455
  489
  523
  560
  597
  636
  677
  719
  763
  809
  857
  907
  959
  1,013
  1,070
  1,129
  1,191
  1,255
  1,323
  1,394
  1,468
  1,546
  1,627
  1,712
  1,801
  1,895
  1,993
  2,095
  2,203
Total debt, $m
  529
  595
  663
  734
  807
  884
  963
  1,046
  1,132
  1,222
  1,316
  1,413
  1,515
  1,621
  1,731
  1,847
  1,968
  2,094
  2,226
  2,364
  2,508
  2,659
  2,817
  2,983
  3,156
  3,338
  3,528
  3,728
  3,937
  4,156
Total liabilities, $m
  862
  928
  996
  1,067
  1,140
  1,217
  1,296
  1,379
  1,465
  1,555
  1,649
  1,746
  1,848
  1,954
  2,064
  2,180
  2,301
  2,427
  2,559
  2,697
  2,841
  2,992
  3,150
  3,316
  3,489
  3,671
  3,861
  4,061
  4,270
  4,489
Total equity, $m
  563
  606
  650
  696
  744
  794
  846
  900
  957
  1,015
  1,076
  1,140
  1,206
  1,276
  1,348
  1,423
  1,502
  1,584
  1,671
  1,761
  1,855
  1,953
  2,057
  2,165
  2,278
  2,397
  2,521
  2,651
  2,788
  2,931
Total liabilities and equity, $m
  1,425
  1,534
  1,646
  1,763
  1,884
  2,011
  2,142
  2,279
  2,422
  2,570
  2,725
  2,886
  3,054
  3,230
  3,412
  3,603
  3,803
  4,011
  4,230
  4,458
  4,696
  4,945
  5,207
  5,481
  5,767
  6,068
  6,382
  6,712
  7,058
  7,420
Debt-to-equity ratio
  0.940
  0.980
  1.020
  1.050
  1.080
  1.110
  1.140
  1.160
  1.180
  1.200
  1.220
  1.240
  1.260
  1.270
  1.280
  1.300
  1.310
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.390
  1.400
  1.410
  1.410
  1.420
Adjusted equity ratio
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  114
  123
  131
  141
  150
  160
  170
  181
  192
  204
  229
  241
  254
  268
  283
  298
  313
  330
  347
  365
  383
  403
  424
  445
  468
  491
  516
  542
  569
  598
Depreciation, amort., depletion, $m
  47
  50
  52
  55
  57
  60
  63
  65
  69
  72
  58
  61
  65
  68
  72
  76
  80
  85
  90
  94
  99
  105
  110
  116
  122
  128
  135
  142
  149
  157
Funds from operations, $m
  161
  172
  183
  195
  207
  220
  233
  247
  261
  276
  286
  302
  319
  337
  355
  374
  394
  415
  436
  459
  483
  508
  534
  561
  590
  620
  651
  684
  719
  755
Change in working capital, $m
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  103
  108
Cash from operations, $m
  130
  140
  150
  160
  171
  182
  194
  206
  218
  232
  240
  255
  269
  285
  300
  317
  334
  353
  372
  391
  412
  434
  456
  480
  505
  530
  558
  586
  616
  647
Maintenance CAPEX, $m
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -45
  -48
  -51
  -54
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -85
  -90
  -94
  -99
  -105
  -110
  -116
  -122
  -128
  -135
  -142
  -149
New CAPEX, $m
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
Cash from investing activities, $m
  -58
  -61
  -65
  -69
  -72
  -77
  -81
  -85
  -89
  -94
  -99
  -105
  -110
  -116
  -121
  -127
  -134
  -140
  -148
  -156
  -163
  -171
  -181
  -189
  -199
  -209
  -219
  -231
  -242
  -254
Free cash flow, $m
  72
  78
  85
  92
  98
  106
  113
  121
  129
  137
  141
  150
  159
  169
  179
  190
  200
  212
  223
  236
  248
  262
  276
  290
  305
  321
  338
  355
  373
  393
Issuance/(repayment) of debt, $m
  64
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  166
  173
  182
  190
  200
  209
  219
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  64
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  166
  173
  182
  190
  200
  209
  219
Total cash flow (excl. dividends), $m
  136
  144
  153
  162
  172
  182
  193
  204
  215
  227
  235
  248
  261
  275
  290
  305
  321
  338
  355
  374
  393
  413
  434
  456
  479
  503
  528
  555
  583
  612
Retained Cash Flow (-), $m
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -124
  -130
  -137
  -143
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  95
  101
  109
  116
  124
  132
  141
  150
  159
  168
  174
  184
  195
  206
  217
  230
  242
  255
  269
  284
  299
  314
  331
  348
  366
  384
  404
  425
  446
  469
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  89
  88
  87
  85
  82
  79
  75
  70
  65
  59
  52
  46
  41
  35
  30
  25
  21
  17
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Mueller Industries, Inc. is a manufacturer of copper, brass, aluminum and plastic products. The Company operates through three segments: Piping Systems, Industrial Metals and Climate. The Company's products include copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; plastic fittings and valves; refrigeration valves and fittings; fabricated tubular products, and steel nipples. The Company also resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. The Company's operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, and China. The Company markets its products to the heating, ventilation, and air-conditioning (HVAC), plumbing, refrigeration, hardware, and other industries.

FINANCIAL RATIOS  of  Mueller Industries (MLI)

Valuation Ratios
P/E Ratio 16.1
Price to Sales 0.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 10.2
Price to Free Cash Flow 13.4
Growth Rates
Sales Growth Rate -2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 31%
Cap. Spend. - 3 Yr. Gr. Rate -1.5%
Financial Strength
Quick Ratio 25
Current Ratio 0.2
LT Debt to Equity 23.7%
Total Debt to Equity 25.3%
Interest Coverage 22
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 9.2%
Ret/ On T. Cap. - 3 Yr. Avg. 9.4%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. 12.2%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 16.3%
Gross Margin - 3 Yr. Avg. 14.6%
EBITDA Margin 9.1%
EBITDA Margin - 3 Yr. Avg. 8.5%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 6.8%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 32.9%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 21%

MLI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MLI stock intrinsic value calculation we used $2266.073 million for the last fiscal year's total revenue generated by Mueller Industries. The default revenue input number comes from 0001 income statement of Mueller Industries. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MLI stock valuation model: a) initial revenue growth rate of 7.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.1%, whose default value for MLI is calculated based on our internal credit rating of Mueller Industries, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Mueller Industries.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MLI stock the variable cost ratio is equal to 92.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MLI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Mueller Industries.

Corporate tax rate of 27% is the nominal tax rate for Mueller Industries. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MLI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MLI are equal to 16.9%.

Life of production assets of 13.7 years is the average useful life of capital assets used in Mueller Industries operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MLI is equal to 17.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $522.111 million for Mueller Industries - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 57.591 million for Mueller Industries is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Mueller Industries at the current share price and the inputted number of shares is $1.6 billion.

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COMPANY NEWS

▶ Mueller Industries: 2Q Earnings Snapshot   [Jul-24-18 07:07AM  Associated Press]
▶ Mueller Industries, Inc. Acquires ATCO Rubber Products   [Jul-02-18 04:30PM  Business Wire]
▶ Why Mueller Industries Inc (NYSE:MLI) Could Be A Buy   [Jun-24-18 09:50AM  Simply Wall St.]
▶ Mueller Industries: 1Q Earnings Snapshot   [Apr-24-18 09:06AM  Associated Press]
▶ Mueller's Canadian acquisition enhances its future in plastics   [Apr-03-18 02:40PM  American City Business Journals]
▶ Company Profile for Mueller Industries, Inc.   [Feb-09-18 12:36PM  Business Wire]
▶ Mueller Industries posts 4Q profit   [Feb-06-18 07:33AM  Associated Press]
▶ Mueller Industries posts 3Q profit   [Oct-25-17 05:51AM  Associated Press]
▶ Final site plan approved for new Fortune 1000 HQ in Collierville   [Aug-23-17 11:33AM  American City Business Journals]
▶ Mueller Industries posts 2Q profit   [Jul-25-17 04:56PM  Associated Press]
▶ Memphis public company makes acquisitions in Canada   [Jun-06-17 01:25PM  American City Business Journals]
▶ Here Are Mario Gabellis Top Infrastructure Bets   [May-26-17 07:37AM  Market Realist]
▶ Fortune 1000 company set to relocate HQ from Memphis   [Apr-26-17 06:55PM  American City Business Journals]
▶ Mueller Industries posts 1Q profit   [Apr-25-17 09:04AM  Associated Press]
▶ Mueller Industries posts 4Q profit   [08:06AM  Associated Press]
▶ Mueller Industries, Inc. Announces New Capital Investment   [Dec-02-16 07:01AM  GlobeNewswire]

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