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Sterling Construction (NASDAQ:STRL)

Q1 2013 Earnings Call

May 10, 2013 11:00 am ET

Executives

Elizabeth D. Brumley - Chief Financial Officer, Executive Vice President, Controller and Treasurer

Peter E. MacKenna - Chief Executive Officer, President and Director

Brian R. Manning - Chief Business Development Officer and Executive Vice President

Analysts

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

John F. Kasprzak - BB&T Capital Markets, Research Division

John B. Rogers - D.A. Davidson & Co., Research Division

Nicholas A. Coppola - Thompson Research Group, LLC

Operator

Greetings, and welcome to the Sterling Construction Company, Inc. First Quarter 2013 Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Brumley, CFO for Sterling Construction Company.

Thank you, Ms. Brumley. You may begin.

Elizabeth D. Brumley

Thank you, Kevin. Good morning, ladies and gentlemen, and welcome to our first quarter conference call.

Before we get started, I just wanted to give you a word of warning. We've got some pretty bad thunderstorms here in Houston and so if we get disconnected hold on and we will go to plan B with the cellphones. So we'll dial back in and it may take 1 minute or 2 minutes.

I'm joined by Peter MacKenna, our Chief Executive Officer and Brian Manning, our Chief Development Officer.

I would like to remind you that this call may include certain statements that fall within the definition of forward-looking statements under the Private Securities Litigation Reform Act of 1995. Any such statements are subject to risks and uncertainties, including overall economic and market conditions; competitors, customers and suppliers' actions; weather conditions; and other risks identified in our filings with the Securities and Exchange Commission, which could cause actual results to differ materially from those anticipated.

Any such statement should be considered in light of these risks. Predictions that we make at any time may not continue to reflect management's beliefs, and we do not undertake to publicly update them.

This is both a challenging and rewarding quarter. On the one hand, we are disappointed with the operating loss for the 2013 first quarter. However, we are seeing favorable trends in the margins on awards. And we are pleased with the results for contracts awarded in 2012 and later.

Revenues for the quarter were 13% higher than the 2012 first quarter, reflecting the pickup in awards during 2012. Projects in Texas, California and Nevada were the major contributors to the increase in revenues. The gross margin of 1.2% in the first quarter of 2013 was comparable to the 1.9% in the 2012 first quarter, but well below our expectations. This was primarily a result of downward revisions on 2 projects in Texas, which reduced gross profits by $3.3 million.

[Audio Gap]

General and administrative expenses were $9.6 million or 8.7% of revenues. This compares to $9.1 million in the 2012 fourth quarter. The increase is primarily related to spend on information systems as well as higher employee benefits.

Diluted earnings per share was a loss of $0.39 for the quarter as compared to a loss of $0.44 for the 2012 first quarter. Basic and diluted EPS for the first quarter includes a charge of $0.11 related to an increase in certain noncontrolling interest obligations.

In accordance with GAAP, revisions to the estimated obligation are recorded directly to retained earnings and do not impact net income. These are taken into consideration in computing earnings per share.

Earnings attributable to noncontrolling interest owners was only $200,000 for the 2013 first quarter and was impacted by breakeven results for the 50% interest held by the owners of Myers in California and RHB in Nevada and Hawaii. As you recall, we own 100% of RLW, which has our Utah and Arizona operations, as a result of the acquisition of noncontrolling interest in December 2012.

Our overall effective tax rate for the quarter is impacted by the noncontrolling interest in our earnings. After adjusting for this impact, the overall effective tax rate was 38% for the 2013 first quarter.

The diluted loss per share, excluding the $0.11 charge to retained earnings, was $0.28. Capital expenditures were $4.9 million for the 2013 first quarter. As previously discussed, we expect that capital expenditures for 2013 will be lower than in 2012, which was impacted by efforts in Texas to rightsize their fleets, certain expenditures for buildings, as well as piling and shoring equipment. In contrast to the 2012 first quarter, proceeds from disposals of property and equipment were not significant for the 2013 first quarter.

Backlog at March 31, 2013, was $693 million and that compares to $656 million at December 31, 2012. About 32% of our backlog is attributable to awards prior to 2012, and is primarily work in Texas. The average margin on these earlier awards has been impacted by the write-downs and estimated gross profits in 2011 and later periods and is estimated currently at around 3%.

In contrast, the remaining backlog, which was awarded in 2012 and 2013 is at an estimated gross margin that is comparable to the 7.5% realized in 2012.

Sterling continues to be in very sound financial condition. Networking capital at quarter end totaled $71.7 million.

I will now turn the call over to our CEO, Peter MacKenna.

Peter E. MacKenna

Thanks, Liz. In these prepared remarks, I should take a few minutes to address some of the issues and trends that we are seeing in our business. Of course, we'll be available to answer your specific questions in a few minutes. Of course, that's contingent upon surviving this Texas thunderstorm outside.

You can see that the trends highlight the positive impact of the steps that management has taken over the past few quarters to first, stabilize our troubled projects and second, prepare the organization for growth and sustainable earnings.

First and foremost, I want you to know how extremely proud I am of the 1,500 men and women of Sterling. In the first quarter, they worked more than 770,000 hours and did so without a single lost time accident. In fact, our operating unit Ralph L. Wadsworth in Utah has worked almost 8 full quarters without a lost time accident.

First, working safely is not just a catchy platitude. It is our moral ethical imperative, and frankly, it's also just good business. But in addition, improving safety performance is a leading indicator of improving project performance. A robust safety programs, such as ours, requires pretest planning and hazard analysis. When you are planning to work safely, you are also planning to work efficiently and deliberately.

We're seeing strong evidence of this operational improvement fixing some of our analytics. Of the 110 or so active projects, only 7 were adjusted downwards. In fact, 2 of these projects accounted for more than 70% of the negative impact. This is the smallest impact of write-downs in 6 quarters, both in terms of number of projects and dollar impact.

I also want to note that 6 of the 7 projects written down were already in a loss position and all have been prior to 2012.

As Liz said, 30% of our $692 million in backlog at the end of the quarter is performing at less than 3% gross margin. In spite of this impact, as well as the impact resulting from the completion of the successful I-15 core project last year, the overall quality of our backlog, when measured by embedded gross margin, has improved to 10% since December 31, 2012. In fact, the quality of the backlog in our Texas subsidiary has improved by more than 20% over the same period. We expect this trend to continue as the substandard backlog is burned off and replaced with higher quality work.

We're pleased to see that higher quality work is available in the marketplace. I'm also pleased to see that we've been successful bidders on more than $150 million worth of work bid in the first quarter and $265 million on 63 projects year-to-date. Even better, we are seeing in aggregate across the platform, better than 10% gross bid margin. This is the result of several factors, not the least of which is the deliberate pursuit of non-commoditized work.

A word of caution, however. We are still seeing localized hyper competitive markets in our historical home marketplaces.

Functionally, Sterling continues on its path to becoming a fully integrated company. Several shared service projects are underway, which will leverage our combined strength and make real the axiom that we are greater than a sum of our parts. Several of these initiatives have already yielded very positive result, such as the consolidation of IT, HR services and the consolidation of our insurance and surety programs.

Ongoing initiatives include the creation of a financial shared service structure and implementation of a robust succession planning and management program.

I continue to be impressed by this company. The projects we performed across a wide and varied geography are truly impressive. However, I'm most impressed by the men and women that proudly worked here. Of course, they're driven, hardworking and focused, but they also have a strong desire to make Sterling a better company, to share what they do well with everyone in the organization and their willingness to embrace change for the betterment of all. This is the company that I truly believe will achieve its potential.

At this point I'm going to turn it over to Brian Manning, our EVP, who will talk about the marketplace.

Brian R. Manning

Thank you, Peter. Looking at the overall trends in the first quarter, FMI reports that residential construction is on the rise with foreclosures down 21% from the period December 2011 through December 2012, and office and commercial construction is rising slightly. We are encouraged by these facts as an increase in housing activity is usually a 12-month leading indicator of recovery in the civil construction market.

On the national general legislative front, the Senate is considering Senate Bill 601, the Water Resources Development Act, or WRDA of 2013. A study conducted by the American Society of Civil Engineers shows that underinvesting in the nation's marine ports and inland waterways, threatens more than 1 million U.S. jobs and $270 billion in U.S. exports by 2020.

Sterling provides infrastructure that supports port facilities. Our recent success on our $19 million port of Houston Overseas Container Storage yard job that was mentioned on our last call, is one example of such a support facility and the reason why Sterling would benefit from WRDA passage..

The Texas House failed to pass House Bill 3664 on Thursday. House Bill 3664 represented an opportunity for Texas to address a portion of a $4 billion transportation funding shortfall. The bill was to raise $700 million annually in vehicle registration fees. Texas will need to continue to look to alternative financing sources to fund infrastructure projects.

Sterling is committed to tracking and supporting legislation that enhances infrastructure.

We continue to aggressively pursue construction projects in all the geographies we serve. We have undertaken market studies in all the states where we currently operate and in adjacent states where there is a potential for profitable construction.

As Peter mentioned, we are seeing margin increase in our backlog and the alternative delivery projects provide a potential for higher margin than traditional bid build work.

The watch list we're tracking for potential alternative delivery projects extends from Texas to California, and includes Hawaii, exceeds $4 billion in opportunity for Sterling, of which we are currently pursuing $483 million.

Our subsidiary, Texas Sterling, has been selected for approximately $35 million in new waterline work within the past few months. According to FMI, on a national level, water should grow approximately 1% in 2013 after a steep 7% decline in 2012. In addition to the $4 billion watch list, we're also tracking and will pursue over $300 million of large diameter waterline projects that we'll bid this year.

And finally, we continue to pursue acquisitions to expand our service capabilities and geographic footprint. There are many strategic opportunities for growth that Sterling will carefully consider in the remainder of the year.

And now if there are any questions, we're happy to answer them.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from Saagar Parikh from Keybanc.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

First question on the additional write-downs. What gives you comfort that what you have in the backlog now or even the backlog that you're booking at these higher margin levels right now is being bid at correct rates or rates that give you guys enough cushion. And the reason I asked that is because your larger E&C peers on the energy side a few of them have been facing issues on fixed price projects have seen issues down in their businesses. And so I just wanted to see what you guys are doing in terms of your bid process to make sure that you're bidding correctly.

Peter E. MacKenna

Part of it is a feedback loop of looking at our cost experience and working that into the estimating process. What I want to reinforce is that the work that was secured after the beginning of 2012 is performing as expected with the normal variances, but absolutely as expected. And these legacy projects that I think are the result of not feeding back the information, not having the systems to do that, that continued to drag us down a little bit. I think in terms of looking forward, that 2012 has performed -- the jobs secured in 2012, performing the way they are I think is testament to the process working. The jobs that we've picked up so far this year that have already begun are performing as expected. So it's a feedback loop. You have to constantly be checking and keeping the rigor up with looking at our forecasted cost to complete. But I think we're feeling pretty comfortable about the processes we've put in place to make sure the bids are not only accurate, but competitive.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

And then with those legacy projects, it seems like every quarter there's a little bit more of a write-down on those legacy projects. Why not just take a total kitchen sink approach? And why is there -- what's changing every quarter that makes you guys have to go back and readjust them downwards again?

Peter E. MacKenna

Well, it really -- it boils down to 2 projects. One of them is we actually mentioned it in the last call. We are the minority partner on a joint venture in Austin where we are not in operational control and we are just not comfortable with that job. And in fact, we've taken a much more conservative posture than our joint venture partner has at this point. That accounts for the lion's share of the write-down. The other project, which is in New Braunfels, not far from San Antonio, will be complete in July. And frankly, it's a matter of there was some underground work that had to be redone, that was done 2 years ago and it really just came to light. The good news is that the job will be done in July, the joint venture will be done by the end of the year. And we have, I think, it's $185 million at the end of the quarter in Texas backlog that is subject to the sort of volatility. The good news is that nearly all of it will be burned off this year. I hear what you're saying about the kitchen sink. And our job is to try to make sure that we have the right forecast. I think sandbagging you guys will be just as bad as being overly optimistic. We're trying to be accurate to the best of our ability. Hope that answers your questions.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

And then Peter so you've been on now for -- remember I think around 6 months or so. And what do you see in the business -- or I think it's actually longer than that, my apologies. Coming over from Skanska, a bigger E&C firm in terms of the amount of revenue they did, and now that you've been in the Sterling business for a while, what do you think you could bring over from your year experience versus 30 years or so at Skanska? What can you bring over from those into Sterling? And what's your strategic vision going forward?

Peter E. MacKenna

I think initially bring it over is the rigor at which you have to review the jobs and operate. I talked about it in the safety program. When you have a rigorous program, whether it's safety or whether it's job cost management or how we manage our financial function, you need strong rules. Years ago, I had a boss tell me that when you have an organization of superstars, you don't need any rules. And when companies grow, you need to put rules in place. And that's what we're doing now. And I keep using the word rigor, but it's almost like a religion. You got to live within the systems and processes that are set up. And that's what we've been working very hard at doing. And I think looking at the backlog and the quality of the backlog improving, that's starting to take hold. And there's a lot of value proposition in the groundwork that Sterling has laid over the last couple of years specifically about the acquisitions they have made. The integration of those subsidiaries is key to the future of this company. The ability to take what we do in our various units and apply that across the whole platform will ultimately make us a major regional player. It is an integrated business on the functional side, but construction is always local. So it's the ability to let the guys do what they do well, get work, execute work, make money and leave the functions in the center and build across. The vision for the company, frankly, we have a couple of holes in our footprint. I'd like to fill those and we need to diversify this platform to get into less commoditized work. And seeing that in the work that we've been picking up and acquiring, but I think we need to be a little more strongly focused in the adjacent spaces. And Brian mentioned acquisitions and it's certainly part of what we're thinking about for the future, to get into adjacent space, to complementary space, to really diversify this platform to being a broad spectrum heavy civil construction company.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

Okay, great and then one last question on my part. Brian, in the press release you guys mentioned bookings in the second quarter in excess of $100 million so far. Either you or Peter, could one of you guys just talk about what you guys are seeing in terms of what those bookings are and what how the trends are maybe what regions you're seeing the strength in?

Brian R. Manning

In general, we're seeing a little bit better markets in Texas, as far as the projects that we're pursuing. Peter mentioned some of the alternative delivery or the ones where we're being selected on a best value. That's where a lot of that reputation comes into play. And the jobs, we've got bidding activity in 2013 that represents nearly 200 jobs, and 200 jobs bid with over 60 of them won. And they are kind of spread across the different divisions, but primarily between Texas Sterling and the RLW divisions, which would be Texas, Utah and it also includes Arizona. Idaho and Montana, that's a good point, Peter. Looking at those adjacent states adjacent to Utah as well, where there's opportunities and some of it has been in parking structures as well.

Operator

[Operator Instructions] Our next question is coming from Jack Kasprzak from BB&T Capital Markets.

John F. Kasprzak - BB&T Capital Markets, Research Division

Regarding the margin comments, what's in the backlog, older projects are obviously lower margin since they're older. Will they roll off more quickly during the year, such that we'll see the newer projects have more impact on the gross margin as 2013 unfolds? Is that a realistic expectation?

Elizabeth D. Brumley

I would say you'd probably see them roll off evenly throughout the year because a lot of it is the joint venture that Peter mentioned. So there's a big chunk related to that and that's going to go on for the full year.

John F. Kasprzak - BB&T Capital Markets, Research Division

Okay. And regarding SG&A expense, I think you guys had made some comments previously that the expense might be higher in dollars, but similar as a percent of sales. Where do we stand now? If you can give some guidance on SG&A expense following the first quarter result.

Elizabeth D. Brumley

I think what you saw, what we're seeing in the first quarter is going to be indicative of kind of an annualized amount of SG&A. It is fairly comparable to what we had in the fourth quarter of 2012. So this is more reflective of a realistic run rate. As Peter mentioned, there's a lot of initiatives going on. So we've got -- we're doing a lot to bolster up our IT infrastructure and those other projects that are hitting SG&A. But these are things that we think will bring a lot of long-term benefit to the company and make us much more effective.

Peter E. MacKenna

We did exit a couple of executives. There is some severance in that as well that was unexpected.

John F. Kasprzak - BB&T Capital Markets, Research Division

So looking a little farther ahead into next year and beyond, that might roll off and reap some benefits and maybe get a more -- little more leverage related to the G&A line.

Elizabeth D. Brumley

That and I think there's a very positive indirect impact by having just better information available to organization for people to run their jobs. So you can't translate that into specific dollars. But I think the better and more timely, more accurate information that you've got available to people on the fly, the better they are at managing those projects in the field.

Operator

Our next question is coming from John Rogers from D.A. Davidson.

John B. Rogers - D.A. Davidson & Co., Research Division

A couple of things. First of all, I just want to make sure I'm clear on the bookings in the second quarter. You had mentioned $91 million where you were apparent low bidder on work not in backlog, but there was a reference in the release to the $100 million of bids won to date. Could you explain to me where we are relative to the second quarter?

Peter E. MacKenna

Well, I think what I can say is that we were the apparent low bidder on actually $265 million worth of work year-to-date. How that translates into the backlog and the timing of how that translates, it's a little hard to say. We made the decision when I got here that we weren't going to move towards the backlog until we have a signed contract. And we're a little bit at the whim of the owner when they actually signed the contract. I expect it all to move backlog that is certainly our expectation. It's just the timing that I'm not really sure of.

John B. Rogers - D.A. Davidson & Co., Research Division

No, that's fair. I just want to make sure I understood. So it's $115 million to $120 million kind of pending work, that wasn't as of right now. Is that -- was it in backlog as of the end of March?

Elizabeth D. Brumley

Yes. I mean, it's at least the $91 million plus a decent amount on top of that.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay. Secondly and I appreciate very much the color on backlog in the margin profile. I guess following up on Jack's question, too. It sound -- I mean, if you just kind of combine those, you've got an aggregate margin of something around just a little under 6%, I guess. Was that -- if nothing else changes, it's essentially the margin that we're looking at until that backlog is completed, is that -- which I guess is most of 2013?

Elizabeth D. Brumley

I mean, I think that's a reasonable way to look at it. Our backlog on average is about 18 months. If you broke out the $220 million, which most of it should complete this year and that's at the 3%, so you can look at the rest of it and say, okay, some of it is going to fall into 2014 and a decent amount will be here. You've got the indications that the revenues are going to be substantially unchanged for the year.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay. And then, I guess, as it relates to maybe, Brian, on your comments, we heard you what you were saying about the Texas legislation recently. But I'm also seeing reports a lot of the increases in bidding activity within Texas. I mean, is that what you're seeing right now as well?

Brian R. Manning

We're seeing that now as well, but as Peter mentioned in his comment, there's also new players that are playing in markets that they traditionally didn't play in, specifically our highway markets. So we've seen a couple of awards go to foreign entities or foreign contractors.

John B. Rogers - D.A. Davidson & Co., Research Division

So does that then include some of these megaprojects that have been announced recently? Is that part of the increase that we're seeing as opposed to I guess, or at least what I thought it was more of your traditional sub [indiscernible]?

Brian R. Manning

It's part of that but the competition that we're referring to is on our traditional bid build work. So where these larger entities have been competing for the larger design build and PPP work, we're seeing some involvement in the bid build market from those entities which is increasing that competition.

Peter E. MacKenna

Interestingly enough, it's on the larger projects so we're really not seeing them on the smaller say bread and butter projects in the $20 million.

Brian R. Manning

Sure. These are $100-million-plus projects that I'm referring to.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay. And then you touched on it a little bit in your comments relative to the various markets, but could you just refresh us a little bit on how, Peter -- how you see your market exposure Texas versus some of the other regions? I know it's a little hard to define, but in terms of where your capacity is allocated or how Sterling is positioned?

Peter E. MacKenna

In terms of our business, the biggest single chunk is Texas, of course. But that's not where the greatest margin opportunities are. Those reside elsewhere. And what we're seeing is as Brian said relatively strong market in -- or strong opportunities in Texas and both in our traditional marketplace and in adjacent places like work transmission and some of the other opportunities, there's a tremendous shortfall of work in Utah. Utah has slipped just a tiny amount of work so far this year. But RLW is able to pivot. They picked up quite a few jobs in Idaho and Montana and in Colorado and Denver, and down in Phoenix in Arizona, which is starting to recover. So there's great margin opportunity there. And I continue to be intrigued with the Hawaiian market. We have either completed or work under contract right now in Hawaii in excess of $100 million. And it's not an easy market. It's got a lot of challenges. But we've paid our tuition to get there. We're established and we're doing well. And as I said, I continue to be intrigued by that market. So there's some wonderful opportunities there. And margins on our 50/50 partnership in California continue to find interesting sort of nontraditional work, specialty work where the margins are good. And frankly, we're looking for margin, not volume. This commodity work has made life difficult over the last few years. And growing up in New York, there was a commercial on TV that states, it's not what you make, it's what you keep. And that's definitely part of what our focus is now.

Operator

[Operator Instructions] Our next question is coming from Nick Coppola from Thompson Research Group.

Nicholas A. Coppola - Thompson Research Group, LLC

It's good to hear that the newer wins are at higher margin relative to legacy projects, that's encouraging. What distinctions are there across geographies? Particularly, how is kind of Texas doing where there's been more of the challenges in the past? Any kind of color there will be helpful.

Peter E. MacKenna

Sure. I think I mentioned in my comments that the quality of the backlog in Texas, is measured by the gross margin embedded in the backlog, has increased 20% in just this last quarter. If you dive into some of the areas, specific districts within Texas, we've seen margin improvement of 50%. So I'm feeling a lot better about Texas, still got to get through these crap jobs. But the future is starting to look a lot brighter. And I've got to tell you, they've driven a lot of rigor into how they bid jobs and execute jobs. So they've come a long way, they've come a long way. And just in terms of RLW and some of the other areas, they're coming off a very big job that was driving a lot of their earnings. They're dealing with sort of the post I-15 world. And as I said, there's very little work in Utah right now. They've pivoted and now they're in structural work and in parking structures and some other unique projects. So their gross margin structure is changing a little bit. But the one thing I have a lot of confidence in is RLW and their ability to deliver. And we're seeing some good margins as I said before in Hawaii. It's an intriguing market.

Nicholas A. Coppola - Thompson Research Group, LLC

What are you seeing in states like California or Nevada?

Peter E. MacKenna

Nevada, Nevada's tough and we've not really been successful in acquiring a lot of new work this year in Nevada. Matter of fact, we had a bid last week, a $10 million bid where we were second bidder by $2,000, as you can imagine, it's very disappointing. Nevada's tough right now. And we're not going to chase cheap work. We'll pivot that's why I keep talking about Hawaii, it's a very interesting place for that organization to look.

Brian R. Manning

And then traditional California work is down somewhat and that is -- has caused us to look at nontraditional work and those opportunities that Peter spoke about earlier.

Nicholas A. Coppola - Thompson Research Group, LLC

Okay. That is helpful. And then a couple of follow-up questions. On the opportunities that you talked about, about that $4 billion and then subset of that of you said, $483 million that you're pursuing. Is that -- am I right in assuming that that's your share of that work? And then kind of further on that point, are there any specific projects you can talk about that are going to be bid or awarded in the near term?

Brian R. Manning

The $4 billion that I spoke off was an overall watch list, which are potential projects that should be evolving over the 2013 to 2015 time period. So as these projects come into an RFQ stage or are being ready to bid, they are added to that other list, the 400 number that I spoke off, which are active pursuits. There's a solicitation on the street and we're actually pursuing them.

Peter E. MacKenna

I want to also note that these are specialty projects that are either alternative delivery or something else unique. In addition to that, I'll say that again, in addition to that, we've identified another $4 billion worth of opportunities that we're chasing in a normal course of events.

Nicholas A. Coppola - Thompson Research Group, LLC

Okay. And then my last question, I was wondering if you could talk a little bit more about the acquisition landscape. And I know you've talked a little bit about sectors and geographies in the past. But is there any update on that? And kind of what's interesting out there?

Peter E. MacKenna

There's a lot of interesting opportunities that bankers knocking on the door almost every day. I don't want to talk too much about this. But there are some great opportunities. We're intrigued with a couple of them and I think we'll leave it there.

Operator

[Operator Instructions] If there are no further questions at this time, I'd like to turn the floor back over to management for any further or closing comments.

Peter E. MacKenna

I'd just like to thank everyone for taking the time to join us for this call and your insightful questions, we always appreciate it. We managed to survive the thunderstorm here in Houston so I'm grateful for that as well and I look forward to talking to you all in the future.

Have a great day. Thank you.

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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