SYNNEX Management Discusses Q2 2013 Results - Earnings Call Transcript

Jun.25.13 | About: SYNNEX Corporation (SNX)

SYNNEX (NYSE:SNX)

Q2 2013 Earnings Call

June 25, 2013 5:00 pm ET

Executives

Deirdre Skolfield - Director of Investor Relations

Marshall W. Witt - Chief Financial Officer

Kevin M. Murai - Chief Executive Officer, President, Director and Chairman of Executive Committee

Analysts

Jim Suva - Citigroup Inc, Research Division

Osten Bernardez - Cross Research LLC

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

Bill C. Shope - Goldman Sachs Group Inc., Research Division

Richard Kugele - Needham & Company, LLC, Research Division

Louis R. Miscioscia - CLSA Asia-Pacific Markets, Research Division

Operator

Good afternoon. My name is Kim, and I will be your conference operator for today. At this time, I would like to welcome everyone to the SYNNEX 2013 Second Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions]

At this time, I would like to pass the call over to Deirdre Skolfield, Director of Investor Relations at SYNNEX Corporation. Ms. Deirdre Skolfield, you may begin your conference.

Deirdre Skolfield

Thank you, Kim. Good afternoon. Welcome to the SYNNEX Corporation's fiscal 2013 second quarter conference call for the period ended May 31, 2013. Joining us on today's call are Kevin Murai, President and Chief Executive Officer; Dennis Polk, Chief Operating Officer; Marshall Witt, Chief Financial Officer; and Chris Caldwell, President of Concentrix Corporation.

Before we begin, I'd like to note that today's statements on today's call, which are not historical facts, may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements include, but are not limited to, statements regarding our strategy, including business, sales and profitability growth, market share, investments in and growth of our GBS business, growth in shareholder value, expectation of our revenues, net income and diluted earnings per share for the third quarter of fiscal 2013, our expectations of our tax rate, our expectations regarding foreign exchange rates, anticipated benefits of the Supercom acquisition, our performance, benefits of our business model, demand and pricing expectations and market conditions, our expectations regarding vendor incentives and interest and operating expenses and margins.

These are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. Please refer to today's press release and documents filed with the Securities and Exchange Commission, specifically our most recent Form 10-Q, for information on risk factors that could cause actual results to differ materially from those discussed in these forward-looking statements.

Additionally, this conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcast without specific written permission from the company.

Now I'd like to turn the call over to Marshall for an update on our financial performance. Marshall?

Marshall W. Witt

Thank you, Deirdre. Good afternoon, everyone, and thank you for joining our call today. As this is my first call, let me start off by saying just how excited I am to have joined SYNNEX. In my short time here, I'm very impressed with the quality of the leadership team and excited about the company's reputation and growth opportunities.

I'll begin with a few highlights and a summary of our results of operations and key financial metrics. I'll provide some additional color on the financial impact of the Supercom acquisition, as well as some detail regarding the convertible debt settlement. And I'll conclude with guidance for the third quarter before turning the call over to Kevin.

Overall, we are pleased to report that our results came in ahead of expectation in light of some of the challenges we noted in our last call. Solid execution in our distribution business drove good sales and profit results. We also continued to achieve strong growth in the GBS Concentrix business as a result of our ongoing investment in that segment.

In our second quarter, total consolidated revenue was $2.59 billion, up 4.4% year-over-year, a bit ahead of our guidance. Supercom accounted for roughly $45 million of reported Q2 revenues, so excluding Supercom, we grew our revenue 2.6% year-over-year.

Our second quarter revenue from distribution segment was $2.54 billion, up 4.2% year-over-year, despite foreign exchange rate trends, and up 5.3% sequentially. Adjusting for Supercom acquisition and for the translation effect of foreign currencies, primarily the yen, our distribution business was up approximately 4.9% year-over-year. And our GBS segment revenue grew to $55.1 million, up 15.4% year-over-year. We are clearly seeing the impact of our ongoing success in signing new business, which resulted from investments in our business and sales and marketing efforts.

Consolidated gross margin was 5.9% compared to 6.3% in our second quarter 2012 and 6.34% in Q1 of 2013. As we outlined in our last call, the second quarter gross margin was affected by a combination of mixed demand environment and a competitive pricing environment on the broad line side of our business. Second quarter total SG&A expenses were $103 million, or 3.97% of revenues, compared to $97 million or 3.91% of revenues in the second quarter of fiscal 2012. Second quarter of 2013 SG&A includes $2.1 million in one-time integration costs related to the Supercom acquisition, as well as additional operating expenses related to the Supercom acquisition from the date of acquisition.

Consolidated operating income before nonoperating items, income taxes and noncontrolling interest was $52 million or 2.01% of revenues compared to $59.3 million or 2.39% in the prior year second quarter and $55.9 million or 2.27% in Q1 of 2013. At the segment level in fiscal Q2, distribution income before nonoperating items, income taxes and noncontrolling interest was $47.7 million or 1.88% of distribution revenues compared to $56.4 million or 2.31% in the prior year second quarter and $52.1 million or 2.15% sequentially.

In the GBS segment, operating income was $4.4 million or 7.91% of GBS revenues compared to $2.6 million or 5.4% in the prior year when we were integrating recent M&A and up from 7.43% in Q1. So in the second quarter, GBS represented 2.1% of our revenues and 8.4% of our operating profit. Net total interest expense and finance charges for the second quarter of 2013 were $4.9 million compared to $5.5 million in the prior year quarter. The tax rate for the second quarter of fiscal 2013 was 35.4%. For fiscal 2013, we anticipate the annual tax rate to be in the 35% to 36% range. Our second quarter net income for SYNNEX was $30.8 million or $0.81 per diluted share. This compares to $34.4 million or $0.90 per diluted share in Q2 of 2012.

Now turning to the balance sheet. Accounts receivable totaled $1.2 billion at May 31, 2013, for a DSO of 43 days, an increase of 2 days from the prior-year quarter. Inventory totaled $947 million or 35 days at the end of the second quarter, up 1 day from the second quarter of 2012. Days payable outstanding was 36 days, up 5 days from the end of the prior year second quarter, but in line with our historical average. Hence, our overall cash conversion cycle for the second quarter of 2013 was 42 days, down 2 days from the same quarter of last year and down 1 day from Q1 of 2013. Our debt-to-capitalization ratio was 18%, down from 19% in the prior year second quarter. At the end of Q2, between our cash and credit facilities, the company had over $0.75 billion available to fund growth and other potential financing needs.

The purchase price for acquisition of Supercom Canada was approximately $35.6 million in U.S. dollars. The Supercom revenue impact for Q2 was approximately $45 million, which is in line with recent Supercom trends, and Supercom will be modestly accretive to earnings for the first few months as we focus on integration.

Other financial data and metrics of note for the second quarter are as follows: Depreciation expense was $4 million, amortization expense was $2 million. HP, at 32.2% of sales, was the only vendor accounting for over 10% of sales. Cash, capital expenditure for the quarter was approximately $5.1 million and preliminarily year-to-date cash flow from operations was approximately $91 million. Trailing fourth quarter ROIC was 9.6% and Q2 annualized ROIC was 8.2%.

Now moving on to the converts. As you know, on May 6 of 2008, SYNNEX issued $144 million of 4% convertible Senior 10-year notes with an optional redemption date on or after May 20 of 2013. The company decided to settle the convertible notes by using all cash for principal and interest, as well as for the conversion premium, which is the difference between the market price and the conversion price of $29.42. The impact on the financial statement is as follows: As we will now pay the conversion spread in cash, the company has recorded a $35.6 million liability for the conversion spread as of May 31, 2013, based on a $36.71 average per share price calculated in a manner consistent with the indenture. Interest expense will be reduced, of course, but it will be somewhat offset by additional borrowing of our working capital requirements due to growth and normal seasonality.

Now moving to our third quarter 2013 expectations. We expect revenue to be in the range of $2.65 billion to $2.75 billion. For net income, the forecast is expected to be in the range of $34.3 million to $35.5 million and corresponding diluted earnings per share is anticipated to be in the range of $0.91 to $0.95. Diluted earnings per share for fiscal Q3 of 2013 does not include any changes in the liability for the conversion spread that may require an adjustment to the numerator and our diluted EPS calculation. Historically, dilutive impact of the conversion spread was recorded in the denominator as an adjustment to the diluted shares.

We are projecting that the demand environment will continue to improve and we are factoring in recent trends in key foreign exchange rates, such as the yen and Canadian dollar. As a reminder, these statements of Q3 expectations are forward-looking and actual results may differ materially.

I will now turn the call over to Kevin Murai, President and Chief Executive Officer, for his perspective on the business and our quarterly results. Kevin?

Kevin M. Murai

Thank you, Marshall. Good afternoon, everyone, and thank you for joining our call today. I'm pleased with our second quarter results highlighted by strong year-over-year sales growth of 4.4%. Both our distribution and GBS segments contributed to this success. In addition, we achieved a respectable operating margin of 2.01% and trailing 4-quarter ROIC of 9.6%, both of which were burdened by the one-time integration costs associated with our Supercom acquisition.

Within our distribution segment, all of our geographies performed well. Sales in the U.S. and Japan were stronger than anticipated, both growing in the mid- to high-single digits in local currency. Our Japanese business was aided by strong mobility sales in our Retail segment, as well as the second quarter being the seasonally strongest. Canada sales remain softer as expected, driven largely by the pullback in federal government spending. The Supercom acquisition, which closed on April 15, contributed approximately $45 million to our sales.

From a profitability perspective, we've made good progress in our Japanese business, delivering operating margins well above 1%. The U.S. also delivered solid margin performance, as we made good progress in restoring back-end margins while protecting our market share. Canada's operating margins were consistent with the prior quarter, although they were burdened with one-time integration costs from the Supercom acquisition.

One of the headlines this past quarter was our successful acquisition and on-boarding of Supercom Canada. The addition of Supercom makes SYNNEX one of the largest IT distributors in Canada and enhances our penetration in key markets, including retail and SMB. I'm pleased to report that in the short time since we've closed the deal, we are now operating as a single and cohesive business, as we have successfully consolidated operations and have migrated the entire business to our ERP platform.

Our steady performance in our distribution business underscores the unique competitive advantages built into our business model and the way we run our business. In light of the more aggressive pricing environment we discussed last quarter, we defended our market share and still delivered healthy profitability. Equally important, we continue to grow our business in more profitable segments, including our Technical Solutions division and the SMB market.

Within our GBS segment, we continued our trend of strong, organic sales results, delivering more than 15% growth over the prior year. The investments we've made in our sales and marketing processes continue to pay dividends. With GPS operating margin at nearly 8%, the business delivered close to a 70% increase in operating income over the prior year.

Now turning to our third quarter guidance. We expect to achieve steady sales performance and positive year-on-year growth within our distribution segment in all geographies, within a demand environment that is overall improving, although still somewhat softer in Canada and seasonally softer in Japan. It should be noted that with the weakening of the yen and the Canadian dollar, we will experience a translation impact to U.S. dollars. We foresee a more stable competitive pricing environment compared to the previous quarter, as well as vendor incentive programs more in line with the market reality. Within our GBS segment in Q3, we expect to continue our trend of sales growth well above market rates with operating margins in the high single digits.

Looking beyond the midpoint of our fiscal 2013 and towards the second half of the year, we have reason to be optimistic about our business outlook. Our business strategy, competitive advantages and operational excellence give me confidence that SYNNEX will continue to thrive. I've spoken in the past about major technology trends and changes in how technology is consumed, but it's really the change itself that creates the opportunity. Even at our current size of over $10 billion in revenue, we can and will continue to be nimble and embrace change within our business model in order to capture the significant new pools of value being created.

Our focus on creating shareholder value -- our focus is on creating shareholder value, and we believe we are well-positioned to grow sales and profitability over the long term. I would like to acknowledge the hard work and dedication of all of our over 12,000 SYNNEX associates around the world and also thank our vendors, customers and shareholders for their continued partnership and support. And with that, let's turn the call over to the operator for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Jim Suva with Citigroup.

Jim Suva - Citigroup Inc, Research Division

When we think about your commentary of a opportunistic or better looking second half of the year, can you help us better understand the key items around it? It sounds like a lot has to do with the vendor rebates being reset. If that's the case, are they in the process of being renegotiated? Are they completely locked down now, or you're hopeful they'll get locked in? Or is it integrating the acquisition in SYNNEX organic operations that will drive the majority of that gross margin improvement?

Kevin M. Murai

Jim, this is Kevin. Really starting at the highest level, I think just the overall view that we have on the markets and I'll start with distribution. The IT demand markets seem to be slowly improving and do feel a little bit better than even 3 months ago. In addition to that, some of the challenges that we talked about 3 months ago in terms of a more competitive pricing environment, as well as the back-end vendor incentive rebates that you had addressed or you had spoken of, those now are normalized to what market conditions are, and we feel a little better about the overall competitive pricing environment. But in addition to that, I think at a higher level yet again, the focus that we have on where we're taking the business continues to be very strong. We continue to make progress there. And also within the GBS Concentrix part of our business, we continue a really good trend of quarter-on-quarter -- or year-on-year quarter-after-quarter growth and growth well above market rates, with continually improving contribution at the operating income level. So just overall, I think we're hitting on all our cylinders, we're executing well and overall market conditions seem to be slowly improving.

Operator

And your next question comes from Osten Bernardez with Cross Research.

Osten Bernardez - Cross Research LLC

When I consider your comments with respect to maintaining share during the quarter, how much of that is related to your strategy of pursuing new businesses and adding new line cards versus addressing some of your more traditional markets with, I guess, perhaps even aggressive pricing on your end or other marketing plans?

Kevin M. Murai

So really breaking that down into 2 parts, Osten. The more competitive environment and also where we saw, I guess, on a relative basis a bit more softness in overall demand was really more on the broad line side of our distribution business, and that's really where we continued to protect share through the past quarter. The growth areas that we've talked through and these tend to be the more, I guess, the more technical products that we sell, all part of our Technical Solutions division, those have been growing well above our average growth rates and that trend continued, and we certainly expect to continue to gain traction in that area, too. So really 2 different areas of the market, where the broad line was more competitive, we protected share, but we continue to invest in growth on the other side.

Osten Bernardez - Cross Research LLC

Okay. And I just wanted to be clear that I understood correctly, with respect to what you're seeing from a pricing environment, are you saying that you -- that the stability that you assumed would take place coming into the second half of the year is starting to occur, meaning that your competitors are not being as aggressive as they were several months ago?

Kevin M. Murai

Osten, that's correct. And what I had said 3 months ago was we've seen this happen before where when changes occur in overall demand a little more quickly, we tend to see some of these different actions that tend to be relatively short-lived. And as it turns out, yes, we don't see as aggressive a pricing environment today as we saw 3 months ago.

Osten Bernardez - Cross Research LLC

And then one last question for me. With respect to Supercom, what is their exposure to government spending in Canada?

Kevin M. Murai

Supercom's exposure was -- consider them more of a broad line distributor. Their focus had been more in SMB and retail, so not as much exposure to government.

Operator

And your next question comes from Brian Alexander with Raymond James.

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

Kevin, I just wanted to get a sense for where you expect operating margins to land for the August quarter, just given the convert and everything. I wanted to make sure we're on the same page. It looks like maybe 2.1% to 2.2% if I take your revenue and earnings guidance. And if that's kind of the right range, it's up about 15 basis points sequentially, whereas historically you've seen more margin expansion in the August quarter on a sequential basis, and I would just think with pricing and rebates, has more of a tailwind in the third quarter, I guess I'm wondering, why wouldn't we see more margin expansion than what we've seen historically?

Kevin M. Murai

So Brian, again, understanding that the overall portfolio of our business has changed quite a bit from even a couple of years ago. We have much more exposure to Japan than, say, 2-plus years ago and there's been -- we're also still continuing through both the soft market in Canada, as well as continuing on gaining the -- all of the benefits of the acquisition that we've done up there as well. But as you know, I can't forecast specifically on what our operating margins are going to be. All that being said though, when you look at the core business itself and the key components of what we've dealt with over the past quarter, for the most part, those conditions have returned back to normal, and we continue to see opportunities in margin expansion over the long term in our Japanese business, as well as our Concentrix business too.

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

Okay. And then just a quick follow-up on the revenue guidance, if I back out Supercom from the May quarter and what I think it might contribute in the August quarter, it seems like guiding up about 2% sequentially in terms of revenue, and the last 3 years, you've guided up more like 3% to 5%. Perhaps it's kind of what you just said, the portfolio is different, the mix is different, but I'm just trying to reconcile what appears to be maybe slightly below seasonal guidance for revenue versus your comments that the demand environment was improving.

Kevin M. Murai

Yes, the main factor, Brian, is what's happened recently with currencies. So you've got a significant weakening of the yen on a year-on-year basis. And then even in Canada, where it's been soft to begin with, but then in addition to that we've also seen a recent weakening of the Canadian dollar as well, those are both factored in.

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

So if you were to normalize for currency, as we think about sequential revenue expectations, would you say it's more or less seasonal?

Kevin M. Murai

Yes, that's correct.

Operator

Our next question comes from Bill Shope with Goldman Sachs.

Bill C. Shope - Goldman Sachs Group Inc., Research Division

Could you give us a bit more color on what you saw for sequestration impact in the quarter and how you're thinking about how that flows through this current quarter and for the remainder of the year?

Kevin M. Murai

Yes, so for the -- specific to the federal government business, we saw -- we continued to see federal business slowing, in particular for contract commitments that were already awarded. We did see some softening just in terms of net new opportunities out of the federal business, but there is an anticipation, I guess, optimism that as we get into the federal government year end, that we'll start to see that business, I guess, be a little bit more normal, but again it remains to be seen. I do want to mention, though, that our overall Government Business, when you go beyond federal and include state, local and education, with improving state balance sheets, we've also seen recent strengthening in the SLED part of our business, too.

Operator

Our next question comes from Rich Kugele with Needham & Company.

Richard Kugele - Needham & Company, LLC, Research Division

Just a few questions. I guess, first, Marshall, can you just talk a little bit about your philosophy on the debt side, seeing you guys pay this off, is 18% an appropriate debt to cap for the company from a strategy perspective? Then I have one other follow-up.

Marshall W. Witt

Sure. Rich, it's at a high level again. SYNNEX is in a great position and we have a lot of options out there in regards to how to finance and where to finance and how to get that done. So certainly, I think as Kevin has indicated in previous discussions, our willingness and ability to go beyond the current debt equity position is one that where we can and will do if the opportunity is right.

Richard Kugele - Needham & Company, LLC, Research Division

Okay. And then in terms of the second quarter, the reported results, how much did Supercom move up the operating expenses? Can you give us color there?

Marshall W. Witt

As I had said in Q2 and the prepared remarks, Supercom had a 2.1 pretax impact on Q2 results.

Kevin M. Murai

Yes, that was the -- for the one-time restructuring charges. Overall, Supercom transacted at what we would call traditional more broad line type margins, so you can kind of do the backwards math in terms of what their SG&A would be based on the $45 million approximately that we included in our second quarter.

Operator

Our next question comes from Lou Miscioscia with CLSA.

Louis R. Miscioscia - CLSA Asia-Pacific Markets, Research Division

This is Lou Miscioscia, CLSA. Could you give as an idea as to where you think, on a quarterly basis, interest expenses will level out at?

Marshall W. Witt

Again, Lou, is the question for Q2 or Q3?

Louis R. Miscioscia - CLSA Asia-Pacific Markets, Research Division

Well, I know that you obviously pulled to convert. I just didn't know if you're going to get to a steady-state level of interest expense going forward for the next x number of quarters, really.

Marshall W. Witt

Yes, Lou, first of all, just from a convert standpoint and a static basis, if you look at that impact on an annual basis, it's about a $12 million cost of interest expense that gets removed. But be mindful on the second half of the year, we do have working capital lines that -- excuse me, seasonality that could tap some of the working capital lines that could adjust that interest expense.

Louis R. Miscioscia - CLSA Asia-Pacific Markets, Research Division

Any color there, because I heard that obviously in your opening remarks. I was trying to get a little bit more fine on it, if possible.

Kevin M. Murai

Well I think it's -- Lou, I think it's as simple as -- as we redeem the bonds, the interest expense that Marshall spoke to goes away. However, that being said, we do intend on replacing at least some of that debt with our working capital lines. So it really depends on the overall growth and use of capital, working capital of the business, over the quarter.

Louis R. Miscioscia - CLSA Asia-Pacific Markets, Research Division

Okay, great. You talked about, obviously, things improving in the second half. Obviously, you just gave third quarter guidance, but any chance that we could get second half gross margin guidance?

Kevin M. Murai

No chance of that, Lou. Lou, as you know, we don't guide specifically on gross margin. But all that being said, and as I talked about many times in the past, as we continue to manage our portfolio up into higher margin categories, which we've been doing in addition to that, as the GBS business becomes a bigger part of our overall portfolio, the trend-line should be up and to the right.

Louis R. Miscioscia - CLSA Asia-Pacific Markets, Research Division

Okay, great. And just to clarify something, before you said that you were doing better, I guess, in I think some of the technology solution areas? Maybe if you could just expand out on that and any other points of strength, obviously, you talked about a couple of geographies, maybe if you could just talk to any other products that were either strong or weak.

Kevin M. Murai

Sure. So Technical Solutions, our Technical Solutions division, which is really a consistent division, as well as go-to-market strategy across all our distribution businesses, really focuses on the both the technologies and the organizations in both enterprise, as well as more specialty markets. So would it be inclusive of, say, our enterprise server and storage business, of our unified and integrated communications business? So networking security is also part of that, our data capture business, our managed print and professional services solutions, and that's only to name a few. Those both have the characteristic of being higher end technology, as well as more services-rich go-to-market strategy. So as a result, they transact at higher gross margin, higher operating margin as well. Pretty much each quarter for the last, as far as I can remember back, our TSD groups have grown much, much faster than our overall distribution growth average, and that's not only helping with top line, but it also helps enrich the overall profitability of the margins that we have too. So in addition to technical solutions, and some of this will be repetitive, because some of the stronger categories are representative TSD, but that is actually one of the things that's pretty across all of our geographies, U.S., Canada and Japan, our technical products did grow faster than the overall average. As you would expect, things like tablets grew faster than all other categories or most other categories in all of our geographies as well. Going to the opposite side, printers were typically slower than our overall growth. But then in between that, really there were differences in how our products grew on a year-over-year basis based on geographies. So, for example, in the U.S., we saw PCs that were slower than average. However, in Canada, PCs were a little bit stronger than average. In Japan, in addition to our tablets, we had some consumer-electronics products that were also very, very strong, and then PCs and software, as an example in Japan, were a little bit softer, too. So, hopefully, that gives you a bit of a flavor, but it typically does match up against -- more -- beyond SYNNEX growth trends that I'm sure you're well aware, out in the market.

Operator

Our next question comes from Jim Suva with Citigroup.

Jim Suva - Citigroup Inc, Research Division

A quick follow-up. Kevin, I think I heard you mention that you said that business trends in the last 3 months or thereabouts have showed some good healthy encouraging signs of improvement. Can you just clarify, was that the last 3 months into your quarter close or kind of more recently like as June has progressed? Because we have seen some companies, like in the month of June, such as Oracle and some others, have some results that weren't quite as optimistic. Can you just help us understand your commentary about the timeframe you're looking at and how June kind of played out, since we're [indiscernible] June?

Kevin M. Murai

Yes, so the comment was not specific to June. In fact, what I think I said was, it feels a little better today than it did 3 months ago.

Jim Suva - Citigroup Inc, Research Division

Got you. Perfect. And then June, how did June turn out relative to kind of normal -- for a lot of companies it's the quarter end for their normal calendar quarters and sometimes there's like end-of-quarter sales, how did June turn out for you guys, if you have any sense or pulse on that?

Kevin M. Murai

Yes, June was pretty typical, kind of as expected.

Operator

[Operator Instructions] And at this time, I show no further questions.

Deirdre Skolfield

Okay, thank you, Kim. Thank you, everyone, for joining our call today. We look forward to speaking with you during the quarter.

Operator

Thank you. This concludes today's conference. You may disconnect at this time.

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!