Smithfield Foods, Inc. (NYSE:SFD)
Q2 2014 Earnings Conference Call
August 11, 2014 08:00 am ET
Keira Lombardo - Investor Relations
Larry Pope - President, Chief Executive Officer, Director
Ken Sullivan - Chief Financial Officer
Bo Manly - Chief Financial Officer, Executive Vice President; President of Murphy-Brown
Bryan Hunt - Wells Fargo
Ladies and gentlemen, thank you for standing by. Welcome to the Smithfield Foods' 2014 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Keira Lombardo. Please go ahead.
Good morning. Thank you for joining us today for Smithfield Foods conference call for the second quarter of 2014. On our call today are Larry Pope, President and CEO. Ken Sullivan, CFO, and Bo Manly, EVP and Chief Synergy Officer; this is Keira Lombardo, VP of Investor Relations.
We would like to caution you that in today's call, there may be forward-looking statements within the meaning of federal securities laws. In light of the risks and uncertainties involved, we encourage you to read the forward-looking information section of the company's 10-KT for the transition period from April 29, 2013 to December 29, 2013. You can access the 10-KT on our website at smithfieldfoods.com.
Please note that the Q&A session later on, on our call will be limited to Smithfield's analyst only. I will now turn the call over to Larry Pope. Larry?
Thank you, Keira. Good morning, everyone. It's been a while since I have spoken to many of you. A lot has happened at Smithfield during this period. Ken Sullivan made reference to me being on vacation on the last quarterly conference call. He was right. I needed it. I could assure you, everyone, I am still hear alive and well and active in the business.
There has been a whirlwind of activity over the past 12 to 15 months. Most of you follow the company for many years, so I won't bore you with all the details of the last year. It has been almost a year since the completion of the merger of Smithfield, with Shuanghui International, now WH Group.
There has been a lot of integration, cooperation between Smithfield and our new owners, which has all been very good. It seems that since the day this deal was closed to use a traffic term, all the lights have turned green.
As Ken will discuss in more detail in a couple of minutes, all segments of our business are performing well to excellent, resulting in two straight quarters of record profits and our record first half of 2014.
I am most pleased with our Packaged Meats business, where margins have held up well in spite of a very sharp run up in raw material cost to record high levels. The fact that we generated $0.15 a pound in Packaged Meats for the quarter and $0.17 a pound for the first half, this dynamic environment is a strong testament to the talent of our management team, the strength of our brands and the value of our marketing programs. I could not be more pleased, hats off to our team.
Needless to say, the live production business has turned, and on a cash basis is delivering profits never before seen in this industry. Unfortunately, not all that is falling to the bottom-line, due to a deliberate hedging strategy we put in place a number of years ago to lock-in reasonable profits and reduce the volatility of this segment. This would have been the year to bypass our hedging strategy.
We left some money on the table. I take full responsibility for this, but it is the right long-term strategy and we will continue to follow that plan and protect all of our stakeholders over the long-term. I am convinced, this is the right strategy. We are working well with our new sister-company in China and our corporate office colleagues in Hong Kong. We salute their recent successful IPO on the Hong Kong Exchange under the lucky number 288 just completed last week.
Our business is performing well and the overall dynamics for the industry continue to look good through the rest of 2014 and likely into 2015.
I am being brief with my comments this morning as I am leaving immediately following this call along with Ken Sullivan, Bo Manly and several other executives to visit our Murphy-Brown operations across the country and celebrate their strong results in spite of the ongoing PEDv issue. It has been a successful merger to this point and the business is in fine shape.
With that said, I will turn over to Ken.
Thanks, Larry. Good morning, everybody. Thank you for dialing in.
Before we get to the numbers, let me cover a couple of administrative matters. First, you will notice a small change in our financial reporting this quarter. After several years of combining all Fresh Meats and Packaged Meats results into a singular reporting segment, a Pork segment. We are officially splitting the Fresh and Packaged components into two separate and distinct reporting segments beginning this quarter.
To repeat, the former Pork segment has been split into two reporting segments, the Fresh Pork segment and the Packaged Meats segment. Splitting the former Pork segment into two pieces provides enhanced visibility in our results, better aligns our segments with the WH Group and reflects years of underlying management changes that have changed the way we measure the business and allocate resources.
Second, from an administrative standpoint, now that the WH Group IPO has been completed, I want to remind everyone that Smithfield's standalone quarterly results are prepared in accordance with U.S. GAAP, which is not the same basis as WH Group's consolidated reporting requirements. WH Group's reporting requirements are IFRS-based and important differences exist in measuring the results of the businesses. These differences include biological assets accounting, pension accounting and numerous P&L classification differences that affect among other things the measurement of gross profit and even the bottom-line, so while Smithfield's standalone financial results are a good bellwether for the results included in WH Group filings, they are not identical.
Lastly from an administrative standpoint, I want to remind everybody these quarterly calls or for the benefit of Smithfield bondholders. We are a wholly-owned subsidiary of the WH Group, which is now a Hong Kong-listed company that has its own separate reporting requirements. WH Group will hold separate earnings call for investors on August 29 that will cover the results the entire worldwide group, including Smithfield.
The focus of today's call is solely on the operations of Smithfield in the ring-fenced US-based credit. Questions about the WH Group are not appropriate for this call. We will not address questions dealing with consolidated group.
Now, the report. This morning, Smithfield is reporting very strong earnings for the second quarter and first half of 2014. In fact, as Larry mentioned, these are record second quarter and first half results. We have never had a better second quarter April to June or first half any year. Here are the numbers.
Sales increased 14% versus last year to $3.8 billion, principally on higher values across the entire pork chain. Second quarter operating profits totaled $260 million versus $90 million last year. That's almost a three-fold increase of over the second quarter of last year.
Pre-tax profits totaled $220 million versus $45 million last year. It's nearly a five-fold increase over last year. After taxes are deducted, we are reporting net income of $143 million versus $32 million last year.
Recapping the results on a year-to-date basis, the numbers for the first half are; sales for the first totaled $7.2 billion versus $6.7 billion for the first half of 2013. That's an increase of over $571 million.
More importantly, first operating profits increased by over $300 million to $457 million versus $149 million last year. Pre-tax profits totaled$ 377 million versus $61 million last year. That's more than a six-fold increase over last year.
Net income for the six months ended June 29th, totaled $248 million versus $51 million last year. That's the high-level recap of the figures.
In terms of the key drivers for the quarter, it again starts with the top-line. Values across the entire pork chain continue to be elevated throughout the second quarter, continuing the rally that started in the back half of the first quarter.
Hog prices are up, pork meat values are up, competing proteins are also at elevated levels, so sales values across the chain are relatively high. These higher values together with significantly increased sales volumes in our Polish operations in the International segment are the key drivers behind Smithfield's top-line revenue increased both, for the quarter and the year-to-date period.
Now, moving to the operating segments. First, our Fresh Pork segment performed well with operating profits up significantly over last year. Q2 operating profit the Fresh Pork segment totaled $30 million compared to a $19 million loss last year. It's nearly $50 million improvement year-over-year.
Last year, the Fresh Pork complex was mired in an environment of lackluster export demand and sagging meat prices. This year the opposite is true, while Fresh Pork margins have been pressured by very high hog prices, meat values kept pace bovid by solid export demand and resilient domestic demand throughout 2014. As a result, our Fresh meat results are in our normalized range for both, the second quarter and year-to-date despite live hog cost increasing over 30% for the second quarter and 23% on a year-to-date basis.
Q2 sales volume was actually up slightly despite processing fewer head, a function of much higher weights in inventory draw downs. Demand was particularly healthy in Foodservice, with sales volumes up nicely over last year. Export volume was down 2% in the quarter although it remains of approximately 8% on a year-to-date basis. The small quarterly decline is attributable to the extremely high prices in the U.S. and the resulting dislocation in certain key markets, mainly China. We continue to ship product to China in Q2, just not at the pace we did last year.
Our expectation is that the relationship of poor prices in the U.S., the prices in China will revert to historical norms in the coming months in the pork trade will resume at greater levels. In fact, we have already seen directional improvements over the last 30 days. In the meantime, we are taking advantage of favorable domestic market conditions both, here and in China. We remain very excited about the synergy plans with our sister-company in the WH Group. While this is still only a small part of our production, we are excited about the programs we are developing and believe they are an important part of our growth moving forward.
Moving to Packaged Meats, our Q2 Packaged Meats results were solid, considering the sudden significant run-up in raw material prices. Even with the cost pressure, margin still held at the low-end of our normalized range of $0.15 a pound. Packaged Meats' operating profits in Q2 totaled $98 million compared to a very strong quarter last year of $112 million.
By pure coincidence, total operating profit dollars for the first half year are exactly even with last year at $218.8 million. Again, considering the raw material environment with experience for most of 2014, we are satisfied with the results. Q2 sales volumes were up 6%, but the late timing the Easter holiday clearly provided the tailwind for this increase. As I told you last quarter, hams weigh a lot.
Bottom-line, we remain as excited as ever about the future of our Packaged Meats business. We believe the regression line continues to move in a positive direction. In the second half of the year, we will ramp up our consumer marketing spending and invest in our brands. On a full-year basis, our consumer marketing spending will be up double digits.
Moving to the domestic hog production side of our business, in the hog production segment, the headline is big profits. The operating result is nearly $100 million above last year. Operating profits in Q2 totaled $129 million compared to $31 million, last year.
On a year-to-date basis, hog production profits totaled $139 million compared to a six-month loss last year of $30 million. Obviously PED diminished supplies in the second quarter, drove hog prices up 30% on a year-over-year basis. Indeed, our own farms were impacted by the disease, with nearly 10% fewer heads sold this second quarter than the same period last year.
For the year, our heads sold was approximately 5%. At the same time, we are raising much heavier pigs, nearly 10 more pounds per pig. Here is the bottom-line. We are losing pace to the disease by offsetting some of the decline with heavier weights. More importantly, higher prices have far, far outstripped the production losses during the PED issue into an accretive event for the company in 2014.
From a meat production standpoint, we expect to meet all customer needs. Our vertically integrated model and flexible manufacturing platform are helping us manage this issue and our customers need not worry. We are meeting their needs.
Turning back to live production, I will repeat something I told you last quarter. Our risk management activities continue in full force both, this past quarter and into the future. Our hedging activities represent an important tool in our effort to reduce the volatility on the live side of the business.
Hedging, almost by definition means we will likely give up the tops and hopefully minimize the downturns. We did that last year on the live side, where our losses were significantly less than industry-wide losses and we are doing it again in 2014.
We have taken steps to ensure very solid hog production profits in 2014 and beyond through our hedging program. We won't get to top of the market as Larry indicated, but we will nonetheless have historically excellent profits on the live side.
As I have said in the past, we are fundamentally a meat company and our growth focuses on the further value-added end of the business, particularly the Packaged Meats business, but our farms do represent a competitive advantage for us particularly as it relates to the export markets where our ractopamine free system provides us with market access we wouldn't otherwise have.
Q2 was a prime example. We shipped significant amounts of meat to Russia at a time when no other U.S.-based producer packer was authorized to ship. While the current geopolitical unrest has closed that particular market for the time being, the point remains that our farms represented a significant point of difference for Smithfield.
Going forward, we have chilled, frozen and packaged meats programs in development right now with our sister-company Shuanghui Development, all of which are predicated on a vertically integrated supply chain. These programs combined with moderating feed cost and operational improvements we are making on the farms will provide real support for live side profitability as we move through the balance of 2014 and into 2015.
The International segment, which is comprised principally of our wholly-owned operations in Poland and Romania and Mexican joint ventures, they contributed $34 million in operating profits for the quarter. That's a $30 million year-over-year improvement. On a year-to-date basis, the international segment has contributed $71 million versus $18 million in the same period last year.
As in the first quarter, strong operating results from our live swine operations outside of the U.S. drove the increase. However, our meat businesses also notched solid year-over-year improvements, with impressive double-digit sales volume increases in Poland. As we said before, our International segment has become a consistent contributor and represents a growth opportunity for us.
Now, let's turn to the balance sheet and expand on some key metrics our bondholders find of interest. First, debt and working capital, debt and working capital remain a bit of a moving target. Let me explain. Our short-term borings have fluctuated quite a bit over the last nine months, following our seasonal working capital ebbs and flows and further impacted by margin requirements associated with our hedging portfolio.
Let me provide you with the numbers, including some up-to-date figures that are as current as of last Friday. Then I'll tell you what it all means. You can find most these figures in the 10-Q document we filed today. Here is a chronological recap of our debt figure, starting with the "opening balance sheet from last September that reflects the $900 million in new bonds for acquisition financing".
Smithfield's gross debt outstanding, including capital lease obligations as of the acquisition date last September was $3.428 billion. By the end of December 2013, the gross debt balance totaled $3.046 million.
At the end of March, the gross debts were back to $3.342 billion because working capital requirement. By the end of June, at the end of our second quarter, the gross debt balance was back down to $3.119 billion. If you followed all these figures, you'll understand that through Q2, we have reduced the gross outstanding debt balance by over $300 million since the acquisition date last September. Again, net debt reduction figure is measured through the end of Q2.
To bring the figures even more current, the total debt paid back since the acquisition date through last Friday was more than $350 million. That's the takeaway. We have reduced short-term borrowings by over $350 million since the date of acquisition. I expect our total gross debt outstanding will be less than $3 billion by the end of the year. However, our working capital fluctuations in this environment are bit tricky to predict.
In terms of liquidity, we ended the quarter with over $930 million of global liquidity. This week, our global liquidity position has improved to more than $1 billion. Liquidity both, during the quarter and after is not an issue. With no meaningful debt maturities anywhere on the horizon, we continue to be in a very strong liquidity position.
Interest expense for the quarter was $40.4 million compared to $44.9 million last year. For the year-to-date, interest expense totaled $81.2 million versus $87.7 in the comparable period last year.
Looking forward, I expect interest expense to be in $160 million to $165 million range for the full year based on current and projected debt levels. Capital spending for the first six months of the year totaled approximately $100 million. We have a lot of capital projects in our pipeline and I expect spending will accelerate considerably as we move through the balance of the year.
CapEx targets continue to be in the $300 million to $350 million range. Depreciation and amortization for the second quarter totaled approximately $57 million and was approximately $114 million for the first six months of the year. I expect full year 2014 depreciation to be in the $230 million range.
In terms of ratios, our total debt to capitalization continues to improve. I just finished telling you, the short-term debt balances have fluctuated with working capital, but we would peg the debt to cap ratio at approximately 41.5% at the end of the second quarter. That's down from approximately 44% at the end of the first quarter, with the additional debt reduction since the end of Q2. I think we have moved the ratio even below 41% today.
Debt repayment is our priority, so don't be surprised if our percentage has a 3 in front of it by the end of the year. Equity at the end of June is $4.380 billion.
Our debt to EBITDA ratios continue to recover from acquisition point highs and lackluster 2013 results. Quarterly EBITDA for the second quarter was more than double last year's results. Similarly for the six months EBITDA more than doubled versus the comparative period in 2013. Our gross debt to EBITDA ratio at the end of Q2 was closer to three-turns as compared to Q1 when it was closer to four-turns, so we have reduced it by four-turn in just one quarter.
As I said before, I expect our leverage ratios will continue to improve as we move through 2014 and higher expected EBITDA quarters continue to replace lower 2013 results and we continue our focus on the balance sheet.
As I have said several times before, it will not surprise me if our net debt to EBITDA ratio improve to three times or less by the end of calendar 2014.
Interest coverage, like our leverage ratio, continues to improve rapidly. Based on trailing 12-month numbers, our coverage ratio is approximately 5.6%, an improvement over the 3.7 times at the end of December 2013 and 4.5 times at the end of Q1.
Based on our projections, I expect our interest coverage ratio will continue to improve considerably by the end of year and will be well over six times.
Covenants, again, we will be brief relative to the covenant issues. The bottom-line is, we do not have or foresee any covenant issues. I think that cover the waterfront in terms of the summation of the second quarter.
With that, we have concluded the opening remarks. Larry, Bo and I will be happy to entertain questions.
I remind you that we are filing a comprehensive 10-Q today. In fact, we have filed. Many of your questions will be answered in that document.
Operator, please go ahead and open the line for questions.
Thank you. (Operator Instructions) Your first question comes from the line of Bryan Hunt from Wells Fargo. Please go ahead.
Bryan Hunt - Wells Fargo
Good morning. I was wondering, Ken and Larry, have you all talked to the agencies recently? I mean, given the outlook for interest coverage and the leverage and the amount of free cash flows are generating, I would think that you may be due for an upgrade. Can you give us some perspective there?
Bryan, you are very astute. We agree with your assessment of the situation and yes we are in constant contact with the agencies and it will be inappropriate for me to sort of say anything beyond that, but clearly the metrics are improving and we feel like we should be in line for an upgrade.
Bryan, we certainly believe we are. Now, the agencies got to reach the same conclusion.
Bryan Hunt - Wells Fargo
All right. Then my next question, I will move on fundamentals. If you look at your most restrictive RP basket covenant, can you tell us what's the size of your RP basket under the most restrictive covenant?
I don't have that figure off the top of my head, Bryan, but I'd be happy to get back with you after the call.
Bryan, this is Larry. Why don't you e-mail Ken your e-mail address and he or Tim Dykstra, our Corporate Treasurer will get back to with that.
Bryan Hunt - Wells Fargo
Thanks so much. Then my last question and I will get back in the queue, but I don't want to hog at a time. When you look at hog raising costs, what they were for the quarter and kind of the outlook. Can you give us some perspective on those two items as well as the overall cost of PED?
In terms of our raising costs, what we are looking forward to these lower feed grains as we begin the feed lower price corn and soybeans as that flows its way through the system, we do expect a meaningful decrease in our raising costs towards the end of 2014 and certainly in 2015.
Bryan, I think it could translate into something as much as $10 a head, when all the lower price corn gets fed through the system looking into the back half of 2015.
Bryan Hunt - Wells Fargo
Can you touch on the cost of PED or is it just a meaningless given the improvements and spreads between hog raising then?
Yes. I think you sort of hit the button on the head, which the fact is PED has been accretive, so while we could measure the cost of the numbers of lost head, and I would tell you Bryan, it's not a small number. I think it's likely in excess of $60 million. The fact is, it has ultimately been a very accretive issue.
Bryan, let me also point out that PED also has an impact on our plants. Or plants have had reduced hours and shortened days. In fact, closed days as a result of supply, particularly on the East Coast, no hogs for the plant, so a number of the people us included in the industry had to run reduced hours, so it has an impact to the meat complex, not just on the hog farms.
Bryan Hunt - Wells Fargo
I appreciate. Like I promised, I get back in the queue. Thanks.
Your next question comes from the line of Hale Holden from Barclays. Please go ahead. Hale Holden, your line is open.
Okay. We will move on. (Operator Instructions) You have a question from the line of James (Inaudible) from Babson Capital. Please go ahead.
Hi, guys. Thanks for taking the question. I was wondering if you could provide us a little extra context around on both, the markets for products in Russia and China, given kind of the events of the year-to-date.
I'll take that. What was your first name?
James (Inaudible) from Babson.
James, we have had some very strong business in Russia over the last several months as we are the only packer in the United States that can actually ship to Russia. Unfortunately that market has just closed last week with prudence executive order to close the import of a number of items into the country, so that - important part of the business.
China has been a reduced level. It's simply economics. The price for the hogs in the United States is higher than the price in China, so our exports out of the United States into China have not been where they should have been. We think that's a big opportunity, but the markets got to turn for us, but overall exports are solid. Ken, you got the numbers there? Can you give the specifics?
Yes. Sure. Russia, I think, Larry's right is a good swing market for us, but I think it's important to keep in context in terms of our total export volume it's less than 10% of our total exports. While it's, as I said, a good swing market for us, it's not the end of the world in terms of closure of that market.
Could you give us some context around China as a size of total exports?
Sure. China historically and typically would be about 20% to 25% of our total exports. Though again, James, putting in a little bit context, we along with the industry export almost a quarter of our production and of that 25% or call it 20% to 25% typically would find its way to China.
James, China and Japan are the number one and number two markets. For U.S., US pork exports and Mexico is right in there with them now, so those are big markets that go back and forth depending upon the economics and whether price is up in Japan while pricing and China is down, but where Mexico sort of plays in that middle playing in those economics. All three of those were the three big markets.
As Ken said, [brushed] sort of number. Number four, Korea is in there as a big player as well, but exports continue even though we are assuming - Talking about negatives, exports are still very strong and have been very good for this industry…
Okay. Great. Thanks for the color, guys.
You are welcome.
Next will try the line of Hale Holden from Barclays, again. Please go ahead. Hale Holden, your line is open. Please check your mute button. Hale Holden, is your mute button on?
Okay. We will go back to the line of Bryan Hunt from Wells Fargo. Please go ahead.
Bryan Hunt - Wells Fargo
Thank you. Just a few more, one, I was wondering Ken, could you talk about the CapEx plans. You gave us the magnitude, but that's a pretty sizable number. Could you give us kind of where the largest pieces of CapEx are going maybe what their ROI targets are?
Sure. If you think about what our objectives are in the CapEx program, clearly we are wanting to invest in our plans particularly on the further value-added side of our business, so we are investing in Packaged Meats products or projects we are investing in the farms terms of our further commitment to pen gestation issue as well as some other operational improvements that we make at the same time we make those modifications to the farms. We are making other operational modifications, so I would tell you that it is principally around the meat plants and the farms.
Bryan, I could tell you from my standpoint, as a CEO, I am heavily committed towards the increased capital expenditures. I know, maybe as a bondholder that doesn't make - maybe you want to hear us pay down debt or reduce and increase interest coverage. Many of these projects are project that you have a capital, do what they need to be done and they are not relative small numbers, but they need to be done at nice paybacks. We generally are targeting 12-month paybacks to 24-month payback projects, so they are extremely good projects for the company.
The conversion of our farms or group housing, I think is going to take something like $70 million this year or so, but that's a commitment we made to this industry that we are going to do. Our operating people particularly on Fresh Meats side (Inaudible) have identified a number a very strong projects and the plants that have very good paybacks associated with them as well as growth with our customers and food safety improvements with our operations that I think are stellar projects, so don't think we are spending $350 million were haphazard because we got it.
These are targeted programs that are going to make is highly competitive and they are the reason that Ken talked about this first and second quarter earnings resulting being as good as they are, because we are investing in these plants and there is quite a bit more to come.
Bryan Hunt - Wells Fargo
Great. The kiosks in China has always been kind of interesting from the outside looking, can you give us some perspective on the maybe the velocity to those kiosks and how do you think you could have across the country?
This is Bo Manly. I am Chief Synergy Officer. Currently, we've got over 20 kiosks in place today. We hope to have that close 60 by the end of this year. That's just beginning to touch the Tier 1 cities in that regard, so I would think as long as there is logistics platform related to the growth of the kiosks in the short-term. We can't really see the end of it. It's a pretty long runway there.
From a velocity perspective, we've seen sales in the neighborhood of 100 kilos to 200 kilos per day per kiosk. That would equate to about the same amount of volume that you'll see in a typical U.S. retail store here in the United States on a weekly daily basis, so we are pleased with the velocity that is in addition to the Shuanghui sales that are taking place typically side-by-side with ours and we found that those programs can be synergistic.
In the fact that Shuanghui's volume increased. Well, at the same time we see the kiosk volume go up too, so we are very pleased with the interaction between our branded programs and those of Shuanghui's. We are just beginning to start construction of the first joined plant over there, which will give us back these capabilities inside the country as well, so we are very enthusiastic about both programs.
Bryan Hunt - Wells Fargo
Great. Then my last question is, we have heard this on other proteins and I was wondering what your perspective is. A lot of prices are set on foodservice early in the year or late in the fourth quarter and it appears that a couple of other protein manufactures have gone back and the renegotiated contracts pushing pricing higher.
Can you talk about what your perspective is on kind of resetting prices in the foodservice space or any other channel or given the strong demand and a lack of availability of the product.
Bryan, let me talk just a little bit. I am not going to talk about anything close to customer-specific relationship. Foodservices are generally rolling formula contracts. I know some people, - well, and we do have a very few situations, where we may call it a longer term, but almost all of our Foodservice business we set about every 90 days or 60 days, this business resets automatically, so the pork industry doesn't have that kind of heavy exposure to these strong prices that are going to drive anything of any real substance.
I think there is one exception, occasionally, we on a longer term basis, but that gets pretty set occasionally, but pork industry is now subject to that kind of long-term contract.
Bryan Hunt - Wells Fargo
When you talk…
…most of the other industries, they go into same direction. I won't talk about any of our competitors, some of our competitors over the last couple of years have actually changed their pricing, we are not going to do - we will get (Inaudible).
Bryan Hunt - Wells Fargo
Got you. All right. Thank you, Larry. Ken, I appreciate it, Bo.
Brian, going back to your earlier questions about our RP basket, I think obviously we have got a number of different calculations according to which bond issue we are talking about, but they range in size from $175 million $400 million. Obviously, you are sort of held to the lowest common denominator, so I think we probably got about $175 million and our most restricted RP basket.
Bryan Hunt - Wells Fargo
Thank you for clarifying that. Thank you.
You are welcome.
Have a good day.
At this time, there are no further questions.
Thank you, ladies and gentlemen. Have a good day.
Ladies and gentlemen, this conference will be available for replay after 11 am Eastern Time today through August 25th. You may access the AT&T Teleconference replay system at any time by dialing 1-800-475-6701 and entering the access code 332583. International participants dial 320-365-3844. Those numbers once again are 1-800-475-6701 or 320-365-3844, with the access code 332583.
That does conclude your conference for today. Thank you for your participation and for using AT&T Executive TeleConference. You may now disconnect.
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