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LTC Properties, Inc. (NYSE:LTC)

Q4 2008 Earnings Call Transcript

February 26, 2009 1:00 pm ET

Executives

Wendy Simpson – President and CEO

Pam Kessler – SVP, CFO and Secretary

Analysts

John Roberts – Hilliard Lyons

Karin Ford – KeyBanc Capital Markets

Rich Anderson – BMO Capital Markets

Operator

Good morning, my name is Sara and I will be your conference operator today. At this time, I would like to welcome everyone to the LTC Properties year end conference call (Operator instructions).

This presentation may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties which may cause the company's actual results in the future to differ materially from expected results. These risks and uncertainties include among others general economic conditions, the availability of capital, competition within the financial services and real estate markets, the performance of tenants and borrowers within LTC Properties portfolio, and regulatory and other changes in the healthcare sector as described in the company's filings with the Securities and Exchange Commission.

I would now like to turn the call over to Ms. Simpson, Chief Executive Officer of LTC Properties.

Wendy Simpson

Thank you Sara. Good morning and good afternoon and thank you all for joining us for our 2008 year end conference call. I will make some brief comments on our fourth quarter and our year and then Pam Kessler our Senior Vice President and CFO will give you a more detailed analysis of the quarter and the year.

Basically we reported for after the close of the market yesterday a fully diluted FFO for the quarter of $0.42 per share and for the year $1.86 per year. That is not including – if you did not include non-cash compensation charges, these amounts would have been $0.43 and $1.91 respectively. Also in the quarter we had some expenses that could be viewed as one-time expenses such as legal expenses for deals we did not consummate and for some lingering crosses for our Sunwest property. When Pam gives her analysis, she will provide you with some more specific details on those amounts and some other small amounts.

During the quarter we did complete our redeployment of the Sunwest properties. We had two own properties in California, they were both assisted living properties, we transitioned those properties to be operated by Ameritus [ph] and Ameritus began operating those properties on December 1. So they are under a long-term mass release with Ameritus and we are very pleased to have Ameritus as an operator. We did foreclose on the one independent living property in Fortworth, Texas that Sunwest had a mortgage done, we have that being operated by a small local operator. Independent living is probably one of the most challenged levels of care at the moment because of the economic situation. We have provided a certain amount of capital to be available to this operator to remodel the property, to put up some security fences to get it more into a defensive or competitive situation in that area.

Right now the operator has done quite a bit of remodeling in the interior and is working on the exterior fencing and is developing a marketing plan for that property. We foreclosed on it and so it moved from a loan to an owned property during the fourth quarter. The last property we had with Sunwest was assisted living property in (inaudible) Texas. The thick investors in that property assumed the loan and have paid the loan up to date, have paid all of the charges and late fees and are current on their loan. So we have no further exposure to Sunwest other than pursuing our claims against the various entities for the bulk of those properties.

When we last had a conference call, I mentioned that we were looking at an acquisition in the fourth quarter that I estimated to be in the $25 million range or so. We were fairly well along that acquisition path and the financial markets as we knew them came to a streaking halt. So we agreed with the other party to seize our negotiations, we agreed under friendly terms. Neither party has an obligation or a commitment to restart negotiations but I believe it is a possible transaction that we look at in the future and I am hopeful that we could look into that area of investment, it was (inaudible) or assisted living but we did stop that transaction at the end of last year.

In the interim as a result of not completing that transaction, we incurred some legal costs of course and some due diligence costs and I think the result of those costs and not having the acquisition and any increase in FFO may be a cause for us missing our FFO estimate by some of the analysts that follow us. During the quarter, we did not purchase any of our common stock or any of our preferred stock even though we do have still an open authorization to do that by our board and as we happen to pass, we do take the opportunity when the deals are high for us to repurchase our covenant or our preferred assets in the marketplace.

Now I will ask Pam for her comments on the quarter and then I will come back after Pam’s comments and talk about what I see for 2009 and give you some guidance.

Pam Kessler

Thank you Wendy. I am going to talk about quarter over quarter since the year over year analysis is in the 10-K that was filed yesterday. Revenues decreased this quarter over last quarter $339,000 due to the following. Rental income increased $143,000 primarily due to the fact that in the third quarter we were up $124,000 in straight-line receivable due from Sunwest. In the third quarter we had one month of Sunwest rent at $208,000 and in the fourth quarter we had one month of Ameritus rent at $150,000 that is $58,000 lower on a monthly basis and $700,000 on an annual basis. This decrease in cash rent was offset by $75,000 normal rental rate increases due to step up. Hence our rental rates increased 50 basis points quarter over quarter and for the year they increased 3.2% excluding default of leases. Straight-line rent net of amortization of lease inducement costs was $714,000 in the fourth quarter. In our supplemental, this quarter you can see what we anticipate straight-line rent to be for 2009 and for 2010 we anticipate, based on current leases and trades assuming no new acquisition, that straight-line rent would decrease $1.7 million from 2009 (inaudible).

Mortgage interest income decreased $427,000, $251,000 of the decrease was due to the prepayment of two loans in the fourth quarter resulting from sales of those properties. The prepayments totaled $5 million and resulted in $145,000 lower cash interest income and a write-off of $106,000 of effective interest receivable that is essentially straight-line interest receivables. The remaining $176,000 decrease is due to the normal effect of amortizing loans and our loans are amortizing about $1 million a quarter. Interest and other income decreased $55,000 due to lower interest rates on our overnight investments in cash, legal expenses due to transactions that were terminated, operating and other expenses increased to $294,000 due to property tax escrow shortfalls from Sunwest and the Colorado property. Cost related to terminated transactions was $85,000 and changes in the bad-debt reserve. We established a reserve for straight-line rent receivable of $140,000 this quarter and our estimate is approximately 1% of the straight-line rent receivable which is similar to the reserve allocation we do on our mortgage loans receivables that 1% and that is based on what we have experienced historically over the past seven years.

Fully diluted FFO per share was $0.42 this quarter compared to $0.45 last quarter excluding $630,000 or $0.03 per diluted share one-time charges that were primarily related to Sunwest and Colorado property default and terminated transactions. FFO was $0.45 this quarter compared to fully diluted FFO per share last quarter of $0.46. Geographically on the income statement where these one-time charges occurred was $100,000 and interest income from mortgage loans and not related to the write-off of the effective interest receivable from prepayment of loans, $100,000 was in the legal expense line item and $400,000 was in G&A and not related to the property taxes and bad debt expense.

Moving to the balance sheet, we invested $112,000 in capital improvement at a weighted average yield of approximately 10% and $132,000 in capital improvements in yields already reflected in the lease rates. We originated $11.4 million mortgage loan on an 84-bed skilled nursing property in Utah at an initial yield of 10%. We foreclosed on a $4.7 million mortgage loan in Fortworth, Texas that when you talked about the Sunwest. We received $5 million from two mortgage loans that paid off and $1.1 million in scheduled principal payments on mortgage loans receivable. During the quarter we had 6642 shares of the preferred lease stock converts to 13,284 shares of common stock. At year end there were approximately 39,000 shares at preferred E stock outstanding that could convert and during the fourth quarter we paid $12.9 million in preferred and common dividend. At 12/31 we had 466,000 of growth unencumbered real estate assets on our balance sheet, this represents 93% of the gross book value of the properties that we owned at December 31.

Wendy Simpson

Thank you Pam. Right now looking at the year going forward, I can say that the deal flow seems to be almost nonexistent. While we do get calls mostly right now to consider loans, we are finding that the people looking for loans have not yet stepped to the new reality of the changed market. We got a call the other day somebody looking for 90% loan to value on assisted living property in New Jersey. We sort of passed on that opportunity but we are taking the calls and we are looking at a possible transaction, I don’t see anything currently on our list of things we are following up on that. I would say we would complete in the first quarter of 2009.

We have had some additional enquiries from our SNIP [ph] operators about investing in properties that we own and that they operate. These are enquiries that we have not had in the past and so Clint is spending time with those operators and in fact is going out I think next week to look at some properties that we had not had an opportunity to invest in in the last couple of years. So I am hopeful that we can spend a few million dollars in improving properties and investing money in our properties and getting some return on that. Right now we are very focused, carefully focused on our assisted living properties to make sure that the repairs and maintenance of these buildings are being done by the operators. In a few instances lately we have seen (inaudible) before inexperienced deferred maintenance. I will personally be talking to the operators about properties that need immediate attention. If the operators are having some cash flow problems, we will offer funding under various terms as it is appropriate in the circumstances. But all of our leases and all of our loans are current and we have experienced no late payments.

Looking at Sunrise which I commented on for the last several conference calls, Sunrise continues to not cover their rent based on the financial information they have provided to us and in former conference calls I have mentioned that if you will find a margin that other assisted living operators are experiencing to the Sunrise operations, it would look like Sunrise would be profitable and would cover. So what we did is we took the Sunrise properties and the analysis that they gave us, the financial information that they gave us and we compared the cost with properties that are operated by assisted living concepts in Ohio, we compared it on a per resident day basis and made some adjustments that we thought were appropriate relative to the fact that Sunrise is operating a slightly larger building than the assisted living concept buildings in the same state. I am not saying that assisted living is the best operator but they were the best operator financials that we have in a comparative basis. So on that comparative basis, if we looked at the Sunrise properties, on a cost per resident day and adjusted their costs, instead of 0.75 times coverage they would have had 1.68 times coverage and that is including a 5% management fee. I believe some other people quoting coverage use less than 5% management fee on assisted living but I am using a 5% management fee. On an adjusted basis, Sunrise is just spending much higher in the terms of all employee-related cost and in administrative costs on things like insurance, utility and (inaudible) and we did not adjust for real estate taxes because of the relative values of the two types of properties but all of the differentials seems to be an employee related cost and administrative cost. We had some unsolicited interest in those properties by other operators but Sunrise has not defaulted. I experienced – I went out and looked at all the Sunrise properties at the end of last year, they are well run, they are well maintained, they get back to us and spend money in the properties, they don’t cover base on the financial information we gave, I know they have some issues in front of them as a corporation. We are monitoring it and I will continue to monitor the situation. So that is our Sunrise.

Assisted living concept continued to not cover their rent. They continued to have very low occupancy in the Northwest states as they continue their strategy of reducing their Medicaid population. They have recently released their annual results. They seem to have plenty of liquidity, I am not concerned about their ability to pay, we have a couple of properties that we are going to be talking to them about relative to deferred maintenance. Just to remind you, we have extended the care as (inaudible) on these master leases and so I am not concerned about assisted living concept’s ability to pay their rent and we are going to be working with them very carefully to make sure that they are maintaining their properties and understand their strategy of increasing their occupancy in the Northwestern state. Alterra which has now changed its name to Brookdale still has very good coverage. Their overall coverage is 1.52 and that is using a 5% management fee. We have been not adjusting any of their information that they gave to us. We had some deferred maintenance issues on some of their properties and we will be following up with them to take care of these issues. We don’t currently have any issues with the Brookdale Property, they have always been very good operators.

For our large SNIP operator which is preferred healthcare it is a non-public entity but it is our largest SNIP operator and it does show up in our financial information. So just to let you know that they have excellent coverage of 2.01 times after using a 5% management fee. As you know, we don’t publish coverage. I comment on them with the understanding that the results are using their financial information as presented to us. This information is often not warranted or independently verified by us in any way. If we made adjustments relative to the information to quote coverage, I will let you know and the only adjustments we made were to Sunrise that I commented on.

Moving to liquidity, we have approximately $20 million of cash on hand. We will retire approximately $24 million of secured debt by the end of the year. In 2010, we have one maturity of $7.6 million. Of the $24 million we are paying off this year, we are considering doing some Fannie Mae financing on these same properties if it is still available and I don’t know what the loan to value or interest rate is and I am not sure what the climate will be when we look at this in the summer but we are considering putting some more secured debt on these particular properties since they have been secured in the past. I think it is a good way for us to gain some more liquidity and it is also a good way for us to establish a relationship with these financing sources we have not done Fannie Mae financing in the past and it seems to be a very good financing source for our assisted living properties. Additionally we have our unused and unsecured $80 million line of credit. The interest rate on that is LIBOR plus one and a half, we will also look at other liquidity opportunities as they arise which may include a continuous offering program. This type of program is attractive to us because it provides us with a way to issue small amounts of common stock at a relatively low price, 225, 250 spread rather than the spread that is doing a very large equity offering. I also understand how common shareholders may not like this type of a program because they could view it as creating dilution for them without advance notice they would get from a larger underwritten offer. I can only assure you that if we implement this program we have not done nor do we expect to do in the future dilutive deals.

We would use this program to issue common stock in small amounts, it is impossible for us to issue $10 million worth of common stock in a fully underwritten deal and doing a $10 million transaction for us could be very accretive, and certainly it is very accretive drawing down on our line to use that to do a $10 million deal, a $20 million deal or whatever but we always have to have a way of taking that line down because it does its part here in 2011. So I think that this continuous offering program would be very beneficial to LTC as a way of accessing the equity markets in small amounts to take out financing of an accretive transaction. So just to let you know we are looking into that type of liquidity availability. Our bank client does not expire until 2011 and our banks are in relatively good shape and I am not sure what the market for bank clients will be in 2011 but right now I don’t think we have any issues relative to our banks ability to fund if we make any draws on our bank line.

Turning to 2009, at this time, I give guidance between $1.87 and $1.91 on a fully diluted basis and including our non-cash compensation charges. As a reminder in the first quarter of 2008, we had a $0.04 gain from the redemption of our preferred S and so we are not including in our guidance any gains on any capital transactions relative to buying back any of our common shares or any of our preferred shares. The FFO run rate on our investments at this time is approximately $0.45 per quarter. This guidance does not take into consideration any possible losses of rent or interest which I don’t foresee at this point. It does not take into consideration any pre-payment of loans, our loans basically do not allow for pre-payment unless the property has been sold. And we have experienced a couple of those situations where the property has been sold recently so we have had some interest, some loan pre-payments and so our interest income has gone down.

My projections assume that all of our loans stay in place as they are right now. We don’t have any new acquisitions or any investments or any repurchases of any of our outstanding securities or any other unforeseen happening in the guidance of $1.87 to $1.91. It does however include a reduction of our debt, interest cost during the year it will provide additional FFO as we pay off debt that is now 8.81% primarily using our cash on hand that is turning us almost zero interest, so we will get additional FFO in the second half of the year as we pay off this debt. We are trying to pay off the debt early but we can’t find anybody who will take our money before its due date. Some of this will be paid off in June and some will be paid off in September.

We believe that we are positioned to be able to withstand the economic challenges as we understand them today. We are continuing looking and talking to others about ways we can use our balance sheet and our ability to complete opportunistic and accretive transactions. At this point I don’t expect to have any change in our dividends during the year. Our board has not declared the second quarter dividend but I don’t anticipate in any way that this company would be paying a dividend in stock as opposed to paying a dividend in cash. I think the entire industry and the entire world is just totally on a wait mode to see what is going to be happening in the government stimulus and bail out programs. So far it seems like the Medicare, Medicaid programs are going to be supported, that is very good for our operators, certainly very good for LTC and our industry and right now I can only say that we are watchful waiting, we have our liquidity under control, we are looking at raising additional liquidity and we are looking at opportunities in 2009.

Thank you for your time in listening to all these comments and I will now open it up for questions. Sara?

Question-and-Answer Session

Operator

Your first question comes from the line of John Roberts, your line is open.

John Roberts – Hilliard Lyons

Hi Wendy.

Wendy Simpson

Hi John.

John Roberts – Hilliard Lyons

First a little housekeeping, I think you mentioned $700,000 in lower rents with the Sunwest (inaudible) swaps, is that on a go forward run rate?

Wendy Simpson

On a going forward run rate, it is approximately the same because of straight-line, right, it is. In the first year it is $700,000 lower than it was under Sunwest. In the second year, it was $500,000 lower than I understand last. In the third year $100,000 lower than the last and at the end of year 3 Sunwest would have been –

Pam Kessler

But you are still doing cash?

Wendy Simpson

Yes, on a straight line basis. It is not low.

Pam Kessler

Do you know, do you have the straight line?

Wendy Simpson

No, I do not have the straight line, I am sorry.

John Roberts – Hilliard Lyons

Straight line is the –

Wendy Simpson

I believe straight line is a push –

John Roberts – Hilliard Lyons

Yes, right.

Wendy Simpson

I believe straight-line is more because Sunwest was coming in at the end of their lease so their cash rent was higher than their straight line rent where Ameritus ends up counting income from Sunwest as opposed to Ameritus.

Pam Kessler

From straight line I do not have that detail (inaudible).

Wendy Simpson

Okay, we will get that, we will get that and we will publish it somewhere.

John Roberts – Hilliard Lyons

Great. Thanks. You actually answered one of my questions as to what happens to that $25 million investment, when you say both of you have decided basically not to go along with the deal and I am kind of surprised that you would have decided that given your liquidity, did you have some reticence about using the credit line to finance it or is that situation in your perspective?

Wendy Simpson

It was at an interest rate of, yield of a little over 9 and I thought that we would have opportunity in excess of 9 and so – no it was not reticence about, it was about making a long-term investment at 9 at that point of the economy.

John Roberts – Hilliard Lyons

Got that. Any thoughts on what you should be looking at right now as far as cap rates go?

Wendy Simpson

Yes, we are looking at 11 to 12 yields.

John Roberts – Hilliard Lyons

That’s right.

Wendy Simpson

It is and as I understand our competitors are quoting approximately the same thing in terms of looking at a deal. We have always been in the double digits and –

John Roberts – Hilliard Lyons

Sure.

Wendy Simpson

And we had to maintain our double digits whereas I think it is comfortable that other people are now in our double digit category.

John Roberts – Hilliard Lyons

As far as repurchases go, you mentioned you didn’t do any repurchases in the current quarter and it sounds like you are more interested in issuing stock versus repurchasing at this point.

Wendy Simpson

For instance John, if a loan advise me that they are going to pre-pay because they sold the property and I was getting $2 million, $3 million or something like that our loans on a weighted average have about 11% yield, so I would look to use that $2 million to possibly buy back stock, our preferred (inaudible) are approximately yielding that, I have not looked at the market today but I would redeploy that money because it is long-term money probably to buy back estimates we had further softening of our common stock and the yield was in that area, I would buy back some common stock because the balance sheet assets are going down and the equity should go down. I would only issue equity to take out a draw on the line for a large amount, I mean I am probably not going to issue equity for $1 million deal but if we drew our line down by $10 million or $20 million, I would start looking at maybe we should issue equity to make that a permanent investment as opposed to an investment under the line.

John Roberts – Hilliard Lyons

And you are going to do that depending on what the share prices is I take it.

Wendy Simpson

No, it would still have to be accretive to the transaction.

John Roberts – Hilliard Lyons

Right. What I am saying is you would have to have the share price high enough in order to meet that goal.

Wendy Simpson

Absolutely.

John Roberts – Hilliard Lyons

Okay. You mentioned a little bit that you are hearing, taking calls from potential borrowers etc, can you just go a little bit further what these people are saying, what you are hearing, what they are looking for?

Wendy Simpson

They are looking to take out often bank loans that they took in the last couple of years and the banks are not wanting to renew their loans and so mostly if people who finance using local banks, they are still looking at very high loan to value ratios and very low interest rate and a lot of them they are looking for bridge loans something like – what we want is, we want a loan and we are going to try to hug it or we are going to try to Fannie Mae it or something like that and so if people are looking for temporary money at this moment, it would be a fairly unique situation where we would get involved with some temporary money.

John Roberts – Hilliard Lyons

Potentially that creates some opportunity that some of these borrowers can’t get financing due diligence and scoop up some asset at good prices?

Wendy Simpson

Yes, I mean that is why we take the call. It is always good to have a call, have a contact, and we follow up to see what they did, where did they finally find the financing and we are very – we don’t do lot leaders, we say this is what we need and we don’t change what we need and how we would view something, so all of these are marketing opportunities John, absolutely.

John Roberts – Hilliard Lyons

And finally, I will let somebody else ask some questions here, you mentioned a dividend, obviously you are going to increase it now for what four years, right?

Wendy Simpson

Right.

John Roberts – Hilliard Lyons

My assumption is there is no thought about increasing it this year in the current environment.

Wendy Simpson

Correct.

John Roberts – Hilliard Lyons

Thanks Wendy.

Wendy Simpson

Thank you John.

Operator

Your next question comes from the line of Karin Ford, your line is open.

Karin Ford – KeyBanc Capital Markets

Hi, good afternoon.

Wendy Simpson

Hi Karin.

Karin Ford – KeyBanc Capital Markets

My first question is you guys don’t have any CPI based escalators in your leases, is that correct?

Wendy Simpson

I think Brookdale is a CPI escalator with a minimum of 2%.

Karin Ford – KeyBanc Capital Markets

Okay, so you will be at the floor this year but you have got 2% in the bank there, okay. Second question is your guidance assumes that the mortgage receivables, $7.65 mortgage receivable is repaid in November, is that correct?

Wendy Simpson

Yes we do,

Karin Ford – KeyBanc Capital Markets

Okay, just trying to make sure. And then finally just can you summarize, is the lease default the only opportunity that you guys will have to potentially replace them as an operator, is there any other means by which you could do that and have you had discussions with them given their issues since these properties don’t seem to be profitable for them that they would be interested in doing some kind of deal with you guys.

Pam Kessler

Yes, I have been reluctant to approach them but it is something that I am going to seriously consider. They would have to be proactive with us in doing that, I can’t force them to do anything without a lease default and I think that it might be as you say an opportunity to take a possible problem off of their plate and they might be very accepting of an opportunity and now that we have had some unsolicited offers to take a look at those properties and I have got some other operators in mind that I would like to have look at those properties, it is something that I think I might be doing in the near future.

Karin Ford – KeyBanc Capital Markets

Thank you very much, very helpful.

Operator

(Operator instructions) Your next question comes from the line of Rich Anderson, your line is now open.

Rich Anderson – BMO Capital Markets

Hi, good morning to you folks.

Wendy Simpson

Hi Rich.

Rich Anderson – BMO Capital Markets

Wendy you mentioned double-digit returns, can you distinguish between senior housing and net returns that you would expect to get you interested in the story?

Wendy Simpson

Yes, it has been so long since we have looked at assisted living because the prices had been really still very high but it is really not – it is a function of our cost of capital and our need to get a return. So I don’t think I would be looking for a sub double digit and an investment in an assisted living as opposed to a SNIP.

Rich Anderson – BMO Capital Markets

I did not think so I just wanted to make sure that –

Wendy Simpson

Yes.

Rich Anderson – BMO Capital Markets

In the journal today there is a story talking about Obama looking at the Medicare Advantage plan and trying to rein in some of the budgets as there is perceived to be some waste in the Medicare business to private insurance companies. I know Medicare Advantage is different than Medicare reimbursements and nursing homes but it is after all the same word, Medicare, I guess my question here is you mentioned you feel good about the reimbursement outlook for your portfolio for the business but in light of balancing the budget and all that, pressure that is on the system today, I wonder why you had that type of optimism?

Wendy Simpson

Most of our operators are very tied into their states and into what is happening in Washington. We are not hearing, they are all fairly comfortable with their reimbursement level. Medicare, I would be more concerned if we had a lot of Medicare dependent SNIP. In the last several years a lot of people have invested in SNIP that are modeled that they had to have a very high Medicare component. All of our operators I am sure would like to have more Medicare coverage but I don’t think we have any that are 100% or a high percentage dependent on Medicare. Right now I have not heard anything, I have not read that article, I don’t know what Obama’s budget plan is, he is proposing, I don’t think with the margins that our operators are reporting to us in the SNIP areas and the fact that we had these properties for quite a long time and our lease rates are very reasonable that there is still a lot of margin between our rents and their profits. So, I still think we have significant cushion in our operators even if there are moderate cuts in the Medicare program.

Rich Anderson – BMO Capital Markets

Right, fair enough. I am not sure if I understood this, you talked about the use of proceeds the potential to buy back stock but then also the potential to issue small pieces of stock through (inaudible) does that not send a mixed signal, can you explain to me why you can kind of talk or burn both ends of the candle?

Wendy Simpson

Yes, I know, the underwriters wanted to know the same thing.

Rich Anderson – BMO Capital Markets

Yes.

Wendy Simpson

It is you know – I guess it is opportunistic, if we have a certain amount of capital available and we need to deploy that to the best return to our common shareholder and the other stakeholders in our company it is possible and in certain circumstances and we have not bought back common stock recently but in certain situations I think it is appropriate for us to take money that is provided to us by an asset that pays off like a loan to buy back common stock if I have no other place to put that capital that will return to the common shareholders. If the situation arises that our stock increases in value and it makes sense to issue the stock to do a transaction then for us to gear up to do a underwritten offering and to do an underwritten offering for $50 million, $75 million, we don’t generally have those transactions in front of us, so we have it in the last couple of years, it is sort of like I just think the company should have every financing option available to us and if we have the program, it is not necessarily that we have to use the program but we have to get up to speed, you have to get registered, you have to get all these documents done just in order to use it. So I guess it is opportunistic and I appreciate opinions on it. If it is going to cause a ripple in the market and investors are going to find this untenable that possibly we will be buying back stock or possibly we will be issuing stock then I would take that under consideration. I was just thinking of the optimum way of having liquidity available to us to maximize a return to the shareholders.

Rich Anderson – BMO Capital Markets

Yes, I understand now, I do think it is a tough spin to sort of do both. I understand where you are coming from in theory, I would guess you will get some pushback on that from people who think about it in more mathematical terms. Anyway I just wanted to clarify.

Wendy Simpson

Thank you Rich.

Rich Anderson – BMO Capital Markets

That’s all I have. Thank you.

Wendy Simpson

Alright, thank you.

Operator

There are no further questions at this time.

Wendy Simpson

Thank you very much and thank you everyone for joining our call. Bye.

Operator

This concludes today’s conference call. You may now disconnect.

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