JAKKS Pacific Management Discusses Q1 2013 Results - Earnings Call Transcript

Apr.25.13 | About: JAKKS Pacific, (JAKK)

JAKKS Pacific (NASDAQ:JAKK)

Q1 2013 Earnings Call

April 25, 2013 9:00 am ET

Executives

Stephen G. Berman - Co-Founder, Chief Executive Officer, President, Secretary and Director

Joel M. Bennett - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Edward M. Woo - Ascendiant Capital Markets LLC, Research Division

Sean P. McGowan - Needham & Company, LLC, Research Division

James McNeil - Eagle River Credit & Event Fund LP

Operator

Good morning, ladies and gentlemen. Thank you for joining the JAKKS Pacific First Quarter 2013 Earnings Call with management. Today, JAKKS will review the results for the first quarter ended March 31, 2013, which the company released earlier this morning.

On the call today are Stephen Berman, President and Chief Executive Officer; and Joel Bennett, Executive Vice President and Chief Financial Officer. Mr. Berman will first provide an overview of the quarter. Then Mr. Bennett will provide detailed comments regarding JAKKS Pacific's financial and operational results. Mr. Berman will then conclude with the prepared portion of the call with highlights of products' lines and current business trends prior to opening up the call for your questions. [Operator Instructions]

Before we begin, the company would like to point out that any comments made about JAKKS Pacific's future performance, events or circumstances, including the estimates of sales and earnings per share for 2013, as well as any other forward-looking statements concerning 2013 and beyond are subject to Safe Harbor protection and under federal security laws. These statements reflect the company's best judgment based on current market's trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAKKS' most recent 10-K and 10-Q filing with the SEC, as well as the company's other reports subsequently filed with the SEC from time to time.

With that, I will now turn the call over to Mr. Berman.

Stephen G. Berman

Good morning, everyone, and thank you for joining us today. Sales are off to a solid start in 2013, exceeding our guidance and up 6.4% over last year. The early response to our broad mix of product line has been encouraging, and we are cautiously optimistic for the year ahead. We have some really terrific products in our lineup this year with contributions coming from a broad range of toys and toy-related products and electronics for all ages and for the entire family.

Our portfolio is an exciting blend of top licenses that give us leadership in a broad array of categories, high profile movie properties and our own intellectual developed brands that we believe are right on trend. Evolving along with our environment is vital to JAKKS Pacific's future prospects. And our DreamPlay initiative headlines our efforts to stay ahead of these continually developing play patterns. We are looking forward to the launch this fall of our DreamPlay Little Mermaid toys enhanced with iD recognition technology.

We continue to focus on carrying out the cost-saving initiatives and company-wide restructuring plans that were put into place late last year. Our infrastructure is aligned with our current business levels, and we believe the benefits from the restructuring will be evident in our short and long-term financial performance.

The toy industry environment is taking more challenges than ever before, and we are pursuing all avenues to grow our distribution and our existing buying community with incremental opportunities, such as at the register lanes, specialty retailers, value channels and the dot-com divisions, as well as expanding our international reach further into territories like China and Latin America.

We continue to lay the groundwork growth in 2014 and beyond, and we have already had a number of exciting meetings with our retail partners with our spring previews kicking off this month.

I would like to now turn the call over to Mr. Joel Bennett to review our financial results for the first quarter of 2013, and then I will give a further update of our business this year and beyond. Joel?

Joel M. Bennett

Thank you, Steven, and good morning, everyone. Net sales for the first quarter of 2013 increased 6.4% to $78.1 million, up from $73.4 million reported in the comparable period in 2012. The reported net loss for the first quarter was $27.6 million or $1.26 per diluted share, which includes the final $750,000 or $0.03 per diluted share in financial advisory fees related to the 2011 unsolicited indication of interest and also reflects the unanticipated delay of a tax benefit of $5.3 million or $0.24 per diluted share until the third quarter of 2013. This compares to a net loss of $16 million or $0.62 per diluted share reported in the comparable period in 2012, which includes $1.4 million or $0.04 per diluted share of legal and financial advisory fees and expenses related to the unsolicited indication of interest.

Worldwide sales of our products in our traditional toys and electronics segment, which includes dolls, action figures, vehicles, electronics, plush and pet products were $38.1 million for the first quarter of 2013 compared to $41.6 million for the first quarter of 2012. Sales this quarter in the segment were led by our Fly Wheels brand, Disney Princess dolls, and pre-school toys, though, was down overall this quarter.

Worldwide sales from our Role Play, Novelty and Seasonal Toys segment, which includes role-play products, novelty toys, Halloween costumes, indoor and outdoor kid’s furniture and pool toys were $40 million in the first quarter of 2013 compared to $31.8 million for first quarter of 2012. Disney Princess dress-up and role play, children's furniture and outdoor activity toys dominated sales in this category this quarter. Included in the category numbers are international sales of $16.7 million for the first quarter of 2013 compared to $9.5 million for the first quarter of 2012. Disney Princess dolls and Monsuno drove first quarter sales in the international markets.

Gross margin for the first quarter of 2013 and 2012 was 29.9% and 32.1% of net sales, respectively. The decrease, as a percentage of net sales in 2013, was primarily due to higher customer allowances and closeout sales in 2013 in what historically is our lowest sales volume quarter. SG&A expenses in the first quarter of 2013 were $47.2 million or 60.5% of net sales as compared to $43 million or 58.5% of net sales in 2012. The increase, as a percentage of net sales for the quarter, is primarily attributable to the addition of incremental overhead and amortization related to our Maui acquisition and DreamPlay startup and development expenses.

Operations used cash of $5.7 million for the first quarter of 2013 compared to having used $6.1 million in 2012. As of March 31, 2013, the company's working capital was $158.3 million, including cash and equivalents and marketable securities of approximately $165.6 million. Depreciation and amortization was approximately $2.6 million in the first quarter of 2013 compared to $2.3 million for the first quarter of 2012.

As for our tax rate, our effective tax rate for 2013 is expected to be approximately 18.5% before any FIN 48 or other adjustments, which may change if there's a shift in sales, and therefore, taxable income between the U.S. and Hong Kong territories. The anticipated tax benefit of $5.3 million shifted from first quarter to third quarter of 2013 impacting the tax rate for these periods. Capital expenditures were $2 million for the first quarter of 2013 compared to $3.2 million for the first quarter of 2012 and in line with our expectations. For the full year, we expect capital expenditures to amount to around $14 million.

Accounts receivable, as of March 31, 2013, was $65 million, up nominally from $58.4 million at the end of the first quarter of 2012 due to higher sales in 2013. DSOs in 2013 were comparable to 101 days in 2012. Inventory, as of March 31, 2013, was $52.1 million, up from the March 31, 2012 level of $45 million to accommodate the anticipated higher proportion of domestic sales during the fourth quarter in 2012, which are now expected in 2013, resulting in slightly higher DSIs of 75 days in 2013, up from 72 days in 2012.

Our balance sheet remains strong, and we continue to evaluate various uses of our funds and available financing capacity. Using our disciplined approach, we continue to look for accretive acquisitions to complement the growth of our business and effectively deploy our capital. The company recently terminated and fully paid down its credit facility with Wells Fargo Bank on April 2, 2013, that was originally set to expire on April 30, 2013. And we are now in the process of obtaining replacement credit facility that is expected to close during May 2013.

Turning to our guidance for 2013, the company continues to anticipate an increase in net sales of 4% to 5% to approximately $694 million to $700 million with diluted earnings per share in the range of approximately $0.63 to $0.68, excluding financial advisory fees related to the 2011 indication of interest. The JAKKS Board of Directors has also declared a regular quarterly cash dividend of $0.07 per common share payable on July 1, 2013, to shareholders of record at the close of business on June 14, 2013, reflecting its current annual yield of approximately 2.7%. We continue to have strong confidence in the future prospects for JAKKS Pacific and its shareholders.

And with that, I will return the call back to Stephen Berman.

Stephen G. Berman

Thank you, Joel. Let me begin with our top contributors for the quarter, which we -- are centered around many of our evergreen core brands.

Our JAKKS-owned Fly Wheels launched this quarter to early success at retail, and we are currently chasing the demand for reorders. Disney Princess and Disney fairy dolls and dress-up continue to be a robust segment of our portfolio. We'll have new themes and new toys to maintain the momentum of these evergreen Disney brands and the categories of dolls and accessories, dress-up and accessories and role play and thought for 2013.

In June, we're launching toys for the Disney animated show, Sofia the First. And the reaction from our retail customers has been extremely positive for this line. The Little Mermaid will be released on Blu-ray DVD in October, and our new toys will focus on Ariel's iconic music and transformation, as well as their beautiful underwater world with a number of items activated with our DreamPlay iD recognition technology.

Frozen, a new animated theatrical film, will be released in November 2013 backed by Disney Pixar's box office magic and Disney's strong promotional support. Our dolls based on Oz the Great and Powerful did nice business at retail this quarter, which is set up as well for future Disney live action movie released opportunities. We are currently chasing incremental promotional opportunities to the DVD release and fourth quarter timing.

Sales are up this quarter at all of our major retail partners for our Fisher-Price ride-ons, as well as our licensed inflatables and wagons, due to a new licensing mix and better in-stock strategies that optimize sales.

Our indoor preschool furniture had brisk sales this quarter, and Big Wheel is at retail for the first Spring and is due in nicely, thanks to retail ad support. We are looking forward to increased sales from our expanded Big Wheel line and our outdoor Pre-School furniture, once the colder than usual weather warms up.

Sky Ball, Way Hoop, and other great outdoor activity items from a recently acquired Maui division has strong retailer support. Maui's innovation, expertise and all-around great outdoor products, are year-in and year-out evergreen products. Early shipments of our superhero costumes, in particular, Iron Man 3 for the movie break and Avengers, resulted in better-than-expected first quarter sales for our Disguise Halloween division.

Classic staples continue to drive our core business, and we did a solid business this quarter with our Cabbage Patch Kids and our Black & Decker boys role-play, which have increased distribution at retail. We are also extremely pleased with the growth of our International business this quarter led by strong sales of our Disney Princess dolls and Monsuno Spring orders.

Security licenses for international territories continue to be a priority, and we are working on finalizing deals in Europe, Middle East, Southeast Asia and Mexico. Our Fall lines are proceeding on plan, and we expect a broad array of products that make up our core business to have wide placement at retail, including the Infant/Pre-school, Seasonal and Halloween segments.

We expect My First Disney Princess dolls will have another solid year boosted by our new Ariel Under the Sea! feature doll launching this fall. Aggressive retail promotion plans for the core line are expected to enhance this strong second half. New licenses, including Teenage Mutant Ninja Turtles, the Sofia the First, Doc McStuffins, Daniel Tiger’s Neighborhood and Planes are expected to boost our Pre-School business later this year. We are looking forward to launching more toys related to several highly anticipated movies and TV properties coming down the pipeline including Iron Man 3, Man of Steel, Smurfs 2, especially for our International business, Sofia the First, Planes, Frozen and Little Mermaid products.

We will continue to execute on our core business strategy of organic and external growth while investing for the future and rolling out plans for exciting growth opportunities in 2014 and beyond. We are looking forward to the launch of our DreamPlay Little Mermaid products enhanced with the iD recognition technology this Fall. Through the DreamPlay venture, we aim to achieve substantial long-range growth and profitability. We are aggressively working on expanding our DreamPlay offerings with Disney for 2014 and beyond, as well as with our own JAKKS brand and other licenses.

Recent internal restructuring allowed us to consolidate operations, gain efficiencies and enhance profitability while allowing us to continue to effectively focus on our core business. We believe these efforts, combined with our focused long-term strategies and investment discipline will greatly benefit JAKKS in both the short and long term.

While the toy industry environment is more challenging than ever before, we tend to forget that there are many good positive things happening with this company. We are pursuing all avenues to grow our distribution. And we have exciting programs at retail, such as Costco and Coles this year.

Product is king, and we believe we have great evergreen products for success for this year and beyond. In addition, enhancing the opportunities for children's mind and imaginations, the DreamPlay technology will further enhance the play patterns for kids for the years to come. This is an amazing company with an exceptionally talented amount of j people. And together, we will move JAKKS forward aggressively with increased determination and focus.

And with that, we will wrap up the preprepared portion of the call and open it up to Q&A. We appreciate your time and support. We are optimistic about our future business with our traditional toys business and with our new DreamPlay adventure and initiatives. And with this focus, we will build a more profitable and successful JAKKS Pacific for our stockholders and employees for the future. Thank you very much.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Drew Crum from Stifel.

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Just a couple of housekeeping questions. Joel, can you tell us why the tax benefit was deferred to the third quarter? And as far as top line is concerned, can you tell us what Maui contributed to top line in the quarter?

Joel M. Bennett

Sure. The deferred tax asset that we wrote off in 2012 was primarily a result of having cumulative U.S. taxable loss, and we knew we were returning to profitability this year, except there's more an accounting rule, or I should say, industry standard that you don't recognize it until you start seeing the actual U.S. taxable income. So that doesn't occur until third quarter. I would forecast it in Q1, again based on the forecast of us having adequate U.S. taxable income.

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Any comments on Maui and the contributions in the quarter? You guys have yet to anniversary that acquisition, correct?

Joel M. Bennett

Right. We started picking up sales in Q2, but those sales were not based on the purchase price allocation. We didn't get any profit, but it's low 8 figures. It's definitely meeting our expectations, and this is sort of their pre-peak season. Their products being outdoor seasonal, it's primarily second and third quarter, but it's definitely well within our expectations. And we're pleased with their first quarter.

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then shifting gears to cost. Your overhead was up double digits in the quarter, and you've taken on this restructuring. Is there any benefit from the restructuring that's, I guess, muted by the higher overhead cost you incur during the period?

Joel M. Bennett

Yes. A couple of things. We have the full quarter benefit of the headcount reduction than we did in October. But we have added incremental overhead for Maui and also DreamPlay. Some of the other items that were, call it, one -- not necessarily one-off items, but not fully expected is -- in foreign currency, in the last 6 months, the Chinese currency has actually started to depreciate. And we had a very active hedging program where we actually were making money. So now that we're making less on the Chinese currency, some of the other currency transaction costs that we've had historically are more prominent. In addition, in the quarter, we had a handful of small settlements, and as you can imagine, the company this size has a lot of nuisances, I should say. So we had about 250,000 legal settlement. In addition, in connection with our anticipated headcount reductions, we had higher severance. Interesting thing in China, the government actually reviews our restructuring plan much the way the WARN Act protects employees here. So with all the social activism there, we had additional unexpected cost on the severance. In addition, this is the first full quarter of DreamPlay development, which is more of a timing issue. We've had more in the first quarter, we'll have less later on in the year. And those things are enabling us to reiterate the guidance even though we've had some higher cost in Q1.

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then just a couple of last questions for me for Stephen. Stephen, can you comment on the performance of Monsuno on a global basis. I think coming out of the fourth quarter, the expectation was that Monsuno would be down for the year, but it sounds like it contributed to international growth during the period. And then just overall, could you comment on your retail take away or point of sales during the quarter?

Stephen G. Berman

Sure. You are correct. Internationally, it actually did very well for us for the first quarter this year. Actually, we didn't have any first quarter last year with Monsuno on an international basis. But on the reverse side, in the U.S. Monsuno decreased dramatically. So even though Monsuno did well internationally, it did not offset the U.S. weakness of Monsuno. And the U.S. weakness of Monsuno has primarily been the programming and time slots and the amount of programming that is being previewed on the Nick Junior. So what we anticipated was a much broader programming initiative at a much better time slot. What we're getting is a very weak time slot, one day a week. So that really affected the actual sell-throughs and the awareness of Monsuno in the U.S. Overall, in our categories, we're very strong leaders in categories with licenses in each of these categories, just this foot to floor, which is our Moose Mountain; the Kids Only!, which is the furniture; the tie, which is the Disney Princess; and Disguise as Halloween. So there's really not one specific segment that's doing phenomenal, they're all just doing really well. So there's been -- there's not one area or one specific license in one area that's making up a lot of our business. It's really -- we're very pleased that we're back to focusing on our singles and doubles. We have some very exciting things that are occurring, but will never bet the ranch on a grand slam. But I will tell you the sell-throughs, the placement, both the U.S. and internationally, is extremely strong. And it's not coming from one specific area, which is very nice.

Operator

Our next question comes from Ed Woo from Ascendiant Capital.

Edward M. Woo - Ascendiant Capital Markets LLC, Research Division

I had a question, how did Winx Club perform in the quarter?

Stephen G. Berman

Winx Club was very similar to what's occurring with Monsuno. We didn't have Winx last year this time in the quarter. Winx ended up being launched during the second half of last year, but with the programming -- again, the programming was to be stripped throughout the week. But it actually is on, I believe a Sunday, at not a premier time and only 1 day a week. So the actual awareness of Winx to children has dropped, and it was a nominal part of our first quarter.

Edward M. Woo - Ascendiant Capital Markets LLC, Research Division

And then on DreamPlay, can you give us a little bit more details of when you expect to ship the product, and how has retailer response has been?

Stephen G. Berman

We are planning to ship in August. I could give you just some scenarios without naming customers. We have a large page in a circular that will be using our iD DreamPlay recognition technology, so when a consumer gets a circular at home, they'll be able to DreamPlay-ize the actual products and get a very amazing response from this complete image recognition technology, not using any QR codes, not using any bar codes. So there's -- the technology's not just being used on products, it's being used as in circulars. It's being used now in-store standee activations, which will give a message telling the customer to visit the DreamPlay mermaid aisle, to see the DreamPlay Toys and get more activations. On the product, it has in-aisle sign activation. It has a package experience so the -- I would say the engagement we have from retail is they're not looking at it for -- as an item for fall, that's just here. They build long term. So we have a -- we're not just meeting now for this fall. It's a long-term rollout. In first quarter, we have a whole new line that we are working on for Disney next year. In fact, there is some DreamPlay technology being used during some of their movie launches this year in theater. So it's a much broader launch and adoption period, so the -- what we're doing, and we've met with probably 1 of the top 2, 3 largest toy companies in the world that are going to be utilizing the technology, it's going as good or better than we expected. And we're excited about it, and we're going to be showing some of our other retailers this month during our fall previews that we have this May.

Edward M. Woo - Ascendiant Capital Markets LLC, Research Division

Is this a global launch, or it's just in the U.S.?

Stephen G. Berman

Right now, for this fall, is global. We are launching, we have met with one of the largest retail groups in China. We're launching DreamPlay we hope this November, but for sure it will be for Chinese New Year next year. And then in U.K., so it will launch internationally next year. And it's, again -- and you will see it shortly as well as other analysts, not just analysts from our industry. But we are meeting with all technology analysts because it's very much a -- it's bringing the physical world to the digital world. And then what it does is it enhances the physical toy and allows kids to have their imagination. So you're just getting a much broader and better experience, and that's the way kids are playing today.

Operator

Our next question comes from Sean McGowan from Needham & Company.

Sean P. McGowan - Needham & Company, LLC, Research Division

I wanted to first circle back on a couple of Drew's questions from earlier, if I could. Number 1, on Maui, Joel, did you say it was low 8 figures? Do you mean over $10 million in the quarter? I thought...

Joel M. Bennett

It was in that range.

Sean P. McGowan - Needham & Company, LLC, Research Division

Second one, Stephen, I still don't know what the first product is for DreamPlay. Can you just describe what...

Stephen G. Berman

Yes, it is actually is based off a Little Mermaid, the Ariel line of product, which is launching with the DVD itself in October. So it's a range of products within the Little Mermaid Disney product lines that we produce.

Sean P. McGowan - Needham & Company, LLC, Research Division

So other than what happens in the store or with the circular, kids come home, they have the toy, what's the interaction?

Stephen G. Berman

Interaction is actually having the 3D recognition technology that allows the kid to enhance the toys. The toys' great on its own. With the DreamPlay up, it actually allows them to have a much broader, call it, a digital experience. So if you're iD-ing a Little Mermaid, I'm going to call it castle, but it's not that appropriate statement. You could iD it, recognize it with any smart device and a whole complete underwater world will appear around this physical item, and you can play with your other mermaid products and create this whole virtual environment. You can add products into it, you can record it, you can make your own stories. It allows the kid to add further imagination to that physical product. In addition, you can then take that DreamPlay technology and have your own virtual world without the product. So what you're doing is you're enhancing the physical product, and you also have a separate play pattern if the physical product is not there.

Sean P. McGowan - Needham & Company, LLC, Research Division

Okay, that's helpful. Following along on that, the -- what are the incremental rights that you have with existing licensees or new licensees beyond what you already have to use the DreamPlay technology on? I understand you have many Disney licenses, so does it require a separate and discrete license to use the technology?

Stephen G. Berman

It's actually -- which is wonderful. We have a lot of licenses that have been extended because of the DreamPlay technology. So because it's not just a one-off item that we're looking at, it's a long range of builds of a product of the way that kids are today. So our licenses have been extended longer throughout many of our licensors. And it's just they want the technology to continue to broaden amongst the product lines because eventually and as you see, that kids are getting more and more apt to using smart devices, which is a toy in itself. And they make believe their own world, so eventually they're using the physical world with the digital world. And we've seen it, we've seen it with our test groups. You see it with our own children, so it's a really broad build of products and adoption. And we've seen it with large Fortune 100 companies that we have met with, that are using it as well to enhance the experience with their own products.

Sean P. McGowan - Needham & Company, LLC, Research Division

Okay. And then my last question is again back to something that Drew had touched on earlier. Joel, I don't understand something about the tax benefit. So the full year guidance is unchanged, you had already expected your loss in the first quarter. So why were you expecting to recognize the tax benefit, and what changed that now you can't until the third quarter?

Joel M. Bennett

Well, again we knew for the year that we would have U.S. taxable income, and that's part of the criteria in when you would recognize the benefit. So basically, it'll turn in the third quarter when we'll actually show that. It is more of a industry practice. So we had...

Sean P. McGowan - Needham & Company, LLC, Research Division

But the time that you gave your guidance for the first quarter, you expected a loss. So I mean that didn't change, and then a full year profit doesn't seem to have change. So why was your expectation that you would be able to, and now, you cannot.

Joel M. Bennett

The strength is the forecast. If we were forecasting profitability in the U.S., and we calculated our effective tax rate based on that, each quarter would have been otherwise, we would have applied the same rate each quarter. So it's more of a conservative accounting practice to delay it until we actually see the profit in the U.S., which will -- which is expected to occur in the third quarter.

Operator

[Operator Instructions] Our next question is from Jim McNeil from Eagle River Asset Management.

James McNeil - Eagle River Credit & Event Fund LP

I was wondering if you could talk about what the sources of cash to pay down the credit facility are. And to the extent you're intent on taking another credit facility, do you think it'll be a longer duration one, and if so, will it contemplate paying off the convertible bonds?

Joel M. Bennett

Yes. The cash that we had used were internal cash from Hong Kong and the U.S. We expected it to be a temporary pay down. We're in the process of working on a replacement line. It's still with the same bank. It's just with a different part of the bank, they're more traditional asset baseline. With regard to the convert, it is not contemplated that this line will pay down the convert. The term of the new line is a longer term. However, there are triggers based on the liquidity event of the maturity of the convert. But we are starting to focus on the maturity of the $100 million convert, which is November of 2014, which I'm sure you're aware. But our immediate activities will entail replacing the current revolver for a longer period and then we'll look at options for the convert.

James McNeil - Eagle River Credit & Event Fund LP

So you did repatriate some cash to pay down the credit facility?

Stephen G. Berman

Not repatriate. I mean it didn't trigger any tax, it's all based on timing and how long the intercompany loans are outstanding. So we did borrow from Hong Kong, we didn't repatriate, since we'll pay them back with the proceeds of the new line.

Everybody, there are no further questions, so we appreciate the time today and the phone call. We're available to speak after the call individually, and thank you for your time. We're looking forward to speaking to you after the second quarter and also getting ready to show everybody all the new DreamPlay initiatives and our core product line initiatives. Thank you very much.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. And thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!