Cincinnati Bell's (CBB) CEO Ted Torbeck on Q4 2015 Results - Earnings Call Transcript

| About: Cincinnati Bell (CBB)

Cincinnati Bell Inc. (NYSE:CBB)

Q4 2015 Earnings Conference Call

February 18, 2016 10:00 AM EST

Executives

Josh Duckworth - Vice President, Investor Relations and Controller

Ted Torbeck - President and Chief Executive Officer

Leigh Fox - Chief Financial Officer

Analysts

Simon Flannery - Morgan Stanley

David Barden - Bank of America Merrill Lynch

Batya Levi - UBS

Brian Hawthorne - Stephens Inc

Sergey Dluzhevskiy - Gabelli & Company

Arun Seshadri - Credit Suisse

Alex Sklar - Raymond James

Ana Goshko - Bank of America

Operator

Good day, and welcome to the Cincinnati Bell Fourth Quarter 2015 CBB Earnings Release Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Josh Duckworth. Please go ahead, sir.

Josh Duckworth

Thank you and good morning. I’d like to welcome everyone to Cincinnati Bell’s fourth quarter earnings call. With me on the call today is our Chief Executive Officer, Ted Torbeck; and our Chief Financial Officer, Leigh Fox. Ted will provide a summary of our highlights for the year and an update on our strategic initiatives. Leigh will provide an overview of our financial results and conclude with our 2016 outlook. Following Leigh’s discussion, we will conduct a brief question-and-answer session.

Before we proceed, let remind you that our earnings release and financial statements are posted on our Investor Relations website. In addition, you will also find presentation slides for today’s call, which we hope you will find helpful in your analysis.

Today’s call is being recorded, if you would like to listen to it at a future time. Now, I would like to draw your attention to our Safe Harbor statement presented on Slide 3. In our remarks this morning, we will be discussing forward-looking information. Due to various risks and uncertainties, actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statements.

More information on potential risks and uncertainties is available in the company’s recent filings with the SEC, including Cincinnati Bell’s annual Form 10-K report, quarterly Form 10-Q report, and Form 8-K report. This presentation also contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are also available on our website.

With that, I’m pleased to introduce Cincinnati Bell’s Chief Executive Officer, Ted Torbeck.

Ted Torbeck

Thanks, Josh, and good morning, everyone. Thank you for joining us today. I will provide a recap of our 2015 achievements and summarize the outlook for 2016. 2015 was an exceptional year for us. As highlighted on slide 6, we successfully executed on all phases of our strategy and continued the impressive growth of our strategic products.

Strategic revenue increased more than 20% year-over-year resulting in a consolidated top line growth. The increase in revenue was driven by IT services growth across all of our strategic products. In addition, strong demand for our fiber-based products generated entertainment and communications revenue growth for the second consecutive year. This strong performance resulted in adjusted EBITDA totaling $302 million for the year, which was at the high end of our 2015 guidance range.

As noted on the slide, we successfully closed our wireless operations in the first quarter. We also sold a significant portion of our CyrusOne investment investments in 2015 for cash proceeds totaling $644 million. These proceeds were used to manage our debt, which included repaying more than $500 million of notes. We have been able to reduce our leverage to near four times and if leverage was further adjusted for our remaining ownership interest in CyrusOne, it would approach our three times target.

Our business and carrier market results are presented on slide 7. Total business and carrier revenue for the year was $828 million. Strategic revenue increased 18% compared to the prior year more than offsetting legacy declines.

Entertainment and communications revenue from our business and carrier markets totaled $402 million for the year. Consistent with the prior year after excluding backhaul revenue provided to our discontinued wireless operations. Strategic revenues from these markets was up 9% totaling $172 million for the year.

In order for these markets to grow, revenue year-over-year, we're focused on accelerating the migration of these customers onto fiber network and into products like managed VoIP. Although there are initial pricing concessions when the migration occurs, overall revenue from these customers increases with the introduction of additional products.

IT services and hardware revenue totaled $426 million with strategic revenue increasing 29% compared to the prior year. This increase is largely due to the revenue growth within our professional services as we added billable headcount and increased utilization within the existing customer base. Revenue from cloud and managed services increased as we expanded our product share within the current customer base in addition to developing new relationships.

Consumer market results are on slide 8. Revenue for the year totaled $340 million, which was up 5% from a year ago. Our operating metrics are once again impressive. As the 34% Fioptics revenue continues to outpace access line and DSL subscriber loss. Video penetration rates have remained consistent even as we have aggressively expanded our Fioptics coverage. During the year, we achieved a record high 23,000 video net activations ending the period with 114,000 video subscribers.

Fioptics internet net additions were equally impressive. We increased our subscriber base by 40,000 during the year and our internet penetration rate now exceeds 35%. Total internet subscribers also grew by more than 17,000 from a year ago as we end the year with over 285,000 subs.

Video churn for the fourth quarter was 2.5%, which is in line with expectations and improved from a year ago. Total ARPU for the quarter was up on average 4% compared to the fourth quarter of 2014. However, the pace of ARPU growth continues to decelerate as a result of competitive pressures and the industries move to more standard price bridging strategies for customers leaving promotional-based pricing.

Our investment decisions remain success based. We have seen excellent results in this evolving market and are confident that fiber is a long-term solution to consumer bandwidth needs. Our results demonstrate that we can be a market disruptor and will continue to adapt as the landscape evolves.

Along those lines, I'm excited to announce that we are introducing new custom bundles that will revolutionize the way our customers view TV. As shown in our recent Super Bowl commercial, we are launching MyTV beginning in March. Customers who sign up for MyTV will receive the starter package that features more than 30 of our most popular channels. Customers must then choose at least one additional package such as sports, kids and family, or entertainment.

We understand customers want more choice and control over the fast-changing content and we are prepared to meet those expectations. MyTV gives consumers the ability to tailor content packages to their specific interests and simultaneously maximize the value of their monthly subscriptions.

As we move into 2016, our strategic initiatives for creating shareholder value remain constant. We're focused on efficiently deploying our fiber network as our results demonstrate the quality and lasting relevance of our fiber assets. Our build plans remain targeted on passing the neighborhoods with the highest return potential. We are also committed to growing our IT solutions business. These revenue streams reach beyond our operating territory and accounts for more than 50% of total business revenue.

As we expand on our relationships with commercial and enterprise customers, both in and out of territory, we are also exploring opportunities to increase market share with small and midsized businesses located in our region. Improving the health of our balance sheet also remains a top priority. Over the past two years, we have reduced our net debt by more than $1 billion and reduced interest payment by more than $70 million. This was due in large part to the success of our CyrusOne strategy. We're committed to maximizing the value of our CyrusOne investment by executing a well-timed and thoroughly coordinated monetization plan that balances the upside in CyrusOne with our goal of reducing leverage.

In closing, 2015 was an exceptional year for Cincinnati Bell. We achieved our 2015 financial guidance. We generated year-over-year entertainment and communications revenue growth for the second consecutive year. We successfully closed our wireless operation and we opportunistically monetized the significant portion of our CyrusOne investment. These accomplishments have provided the momentum necessary to grow adjusted EBITDA in 2016 and demonstrate our ability to successfully transform Cincinnati Bell from a legacy copper-based telecommunications company into a technology company with state-of-the-art fiber assets servicing both consumer and business customers with flexible data, video, voice and IP solutions.

I would now like to turn the call over to Leigh to provide additional detail on our fourth quarter and full-year result, as well as our 2016 financial guidance. Leigh.

Leigh Fox

Thanks, Ted. Good morning everyone. 2015 was an impressive year for us both financially and operationally. Our revenue and adjusted EBITDA results are highlighted on slide 10. Revenue for the year totaled $1.2 billion up $6 million compared to the prior year. Adjusted EBITDA totaled $302 million in 2015 in line with the high end of our financial guidance range. Year-to-date income from continuing operations totaled $291 million and includes a $449 million gain on sale of our CyrusOne investment and a $21 million loss on extinguishment of debt.

Net income for the year totaled $354 million, resulting in diluted earnings per share of $1.63. Fourth quarter consolidated revenue totaled $289 million down 2%, compared to the prior year due primarily to the anticipated decline in lower margin hardware sales. Adjusted EBITDA totaled $71 million in-line with our expectations.

Moving to our segment results starting on slide 11, entertainment communications revenue for the quarter totaled $188 million. This was up $3 million, compared to the prior year after excluding the loss of intercompany wireless backhaul revenue. Strategic consumer revenue for the quarter totaled $53 million up more than 30% compared to the prior year, due primarily to the growth in Fioptics more than offsetting legacy access line and DSL subscriber loss.

Fourth-quarter revenue for business markets totaled $72 million consistent with the prior year. As the growth in strategic products increasingly mitigates, legacy declines. Carrier revenue was down $5 million compared to the prior year, primarily due to no longer providing backhaul revenue through our former wireless business.

Adjusted EBITDA for the quarter was $69 million resulting in 37% margin, which is in line with recent quarterly results. As Ted mentioned, our video and Internet subscriber growth was impressive. During the fourth quarter, we added 6,000 video and 6,000 Internet subscribers. Total voice lines were $523,000 at year-end down 4% this year compared to 6% in 2014.

Declines in Legacy voice lines are increasingly being offset by customers transitioning to VoIP based solutions. Turning to slide 12, the IT services and hardware segment generated revenues totaling $104 million in the quarter, down 5% from the prior year. The growth in strategic professional services, cloud solutions and managed services revenue was offset by anticipated declines in hardware sales. Adjusted EBITDA for the quarter was $9 million resulting in margins approaching 10%.

As noted on slide 13, our capital structure continued to improve. We completed the sale of 1.4 million CyrusOne common shares in the fourth quarter for cash proceeds of $48 million. Subsequent to the completion of this transaction, our remaining 9.5% ownership in the CyrusOne is highly liquid and valued at approximately $250 million. CyrusOne monetization over the last year has improved our capital structure and limited our exposure to volatility within the equity market.

As of the end of the year, our NOL balance is approximately $340 million. Moving to slide 14, free cash flow for the year was a negative $127 million. Capital expenditures totaled $284 million, interest payments were $109 million and pension and post retirement payments totaled $21 million. Looking forward to 2016, we expect interest payments to decrease by approximately $30 million and pension and post retirement payments to total approximately $12 million. We also expect to receive $9 million in cash dividends from CyrusOne based on our current ownership levels.

Turning to slide 15, capital expenditures for 2015 total $180 million for Fioptics, $56 million for success based cyber build, for business and IT services projects and $48 million in maintenance. Specific to our Fioptics investment, the company invested $87 million to pass 97,000 new addresses during the year. As noted on the slide, our goal is to construct a fiber to the home product for 95% of the 70,000 new addresses targeted to pass in 2016.

Our fiber expansion plans continue to be focused on neighborhoods with the highest returns and our data indicates that penetration rates improve significantly when fiber is provided directly to the home. In total, we expect the capital expenditures to be down compared 2015 and range between $265,000 and $275 million. Our 2016 guidance is presented on slide 16. We're forecasting revenues of $1.2 billion and adjusted EBITDA increasing to $303 million plus or minus 2%.

As highlighted on today's call, our strategic investments have generated strong revenue growth and will be a driving factor in future profitability and sustainable cash flows. Our goal for 2016 will focus on efficiently expanding our fiber network and accelerating the growth in our IT solutions business. 2015 was a great year for us and I'm confident that our strategy will create shareholder value as we transform Cincinnati Bell onto a technology company with state-of-the-art fiber assets servicing both consumer and business customers.

This concludes the prepared remarks for today's call. Thanks for listening, we will now open the conference up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we will move first to Simon Flannery with Morgan Stanley.

Simon Flannery

Thank you very much. Good morning. On Fioptics, you are saying that your coverage will build past 60% at the end of this year. I think in the past you've talked about the Fioptics build starting to wind down in the middle to latter part of 2017. Is that still the plan here? If you want to get to 80%, 90% that would suggest you still got two or three more years after this year. And then perhaps you can just talk about the profitability model on MyTV presuming that the ARPU will be lower, but AT&T with you versus complained about the margins on their product and is it possible you might be able to get a better margin with the lower ARPU using MyTV? Thanks.

Ted Torbeck

Thanks, Simon. This is Ted. First of all, our build-out of fiber is 100% success based and as long as we see the returns that are appropriate, we're going to continue to build. We anticipate by the end of the year, we will be somewhere over 60%. We fully anticipate that we will be getting close to the upper range wherein 2017, our build will decline significantly. But there will still be neighborhoods that we go back to in upgrade with fiber to the home, but that is - it will in 2017 will decline. The profitability on MyTV, we said we're going to launch it in early March. We are very excited about the offering. We see that the revenue would probably stay relatively flat. There will be a decline in ARPU, but we're anticipating the margins actually go up 15 to 20 points, between 15 and 20 points. So, those are kind of the numbers we're anticipating.

Leigh Fox

On a per sub basis.

Ted Torbeck

Yeah, per sub basis.

Leigh Fox

ARPU will go down on a per sub basis, given what we are projecting on usage right now. We expect about a 15% to 20% lift in profit per sub.

Simon Flannery

Does this look a little bit like Verizon's custom TV? Is this the same sort of concept?

Leigh Fox

Same concept.

Ted Torbeck

Same concept.

Simon Flannery

Okay, great, thank you.

Operator

And we will now take our next question from David Barden with Bank of America Merrill Lynch.

David Barden

Hi guys. Thanks a lot. Just a couple follow-ups on that. First, Leigh, thanks for the new detail on the financials and on the guidance. I guess the big moving part in the cash flow for 2016 is going to be the working capital. Could you talk about what the puts and takes are going to be for that in 2016? Second, just following up on Simon's question on MyTV, within the context of the contracts that you have, is this something that could expand widely across your subscriber base or are there limitations within existing contracts to how many customers can be on these skinny bundles? And then just the last question if I could again, just looking at the math on the construction costs and the homes past it looks like the cost per homes past is going up about 30% year-over-year. Is that because you guys are really getting as you mentioned to the edge of that economic footprint or what's causing the big step up in cost per home past? Thanks.

Ted Torbeck

Okay, Leigh you want to start off with the first one? And then I will…

Leigh Fox

Well you are welcome for the transparency. We are big fans of the new reporting. So, I’m glad you like it and I am sure we'll get more and more questions on it. So, on the working capital piece, I don't see anything out of the norm in 2016 with respect to working capital. That's not manageable. That would be different than 2015. So, I am not too ultra concerned with any kind of working capital movement in 2015 or 2016.

Ted Torbeck

Well, MyTV…Did you have a further question, Dave?

David Barden

Well I was just going to follow-up on Leigh’s comments, it was $37 million use and $15 million is you are thinking it is going to be of that magnitude again in 2016?

Leigh Fox

It will be smaller, slightly smaller.

David Barden

Okay

Ted Torbeck

Okay, the MyTV the packages we’ve put together are to the contracts that we currently have. So, they were made basically based on the contracts so they are applicable to basically all customers. They follow the contracts that we currently have. The cost of the build is increasing as we expected. As we build out. And that is exactly, your comment is exactly right on. We’re getting to the edge of the build out and it is going to be more expensive and once we hit the threshold of where the margin decrease is to the level that is acceptable we will stop the build. So that is exactly what we're doing.

David Barden

Got it. Is it just density? Ted that’s the issue raising the cost or is there something else going on?

Ted Torbeck

It's density, it’s also whether it's aerial or buried wire. It's both those issues.

David Barden

Got it. Thanks, guys.

Operator

And we will now take our next question from Batya Levi with UBS.

Batya Levi

Great thank you. Couple of questions. First on the guidance, can you talk a little bit more about what it implies in terms of the entertainment and communications revenues and margins for this year and a question on CapEx. As you wind down the fiber deployment in 2017, where do you think CapEx could stabilize and can we expect you to turn free cash flow positive in 2017 and beyond?

Ted Torbeck

I'll take a shot at both of those. On the forecast and its impact on wireline, we expect continued growth in the wireline revenue or entertainment communications revenue. We expect margins to continue to be under a little bit of pressure. I think the unknown here is the impact of MyTV. We do expect the take rates on MyTV increase that margins will improve. We are just being a little tentative on what those take rates are going to be since it is a new, and it is a new concept not only for us but our customers, but we're pretty excited about the margin implications. The second question, on CapEx, as Ted talked about with both Simon and David, we expect CapEx to be in declining. We stayed in the past that on a normalized basis CapEx was going to be call it in the historic 12, call it 12% ranges of revenue, historic telco ranges. I don't see any different story right now as we sit here and look forward into 2017. We do believe we will be cash flow positive in 2017. We will make progress in 2016 compared to 2015, so you will see improvement in cash flow from 2015 to 2016. We won't be positive, but we will be positive in 2017. And I would expect ranges to be, sort of the normal tougher ranges of capital spend.

Batya Levi

Great, that's very helpful. Just one more follow-up question if I could, how do you think about the IT services business more strategically? You mentioned that you increased headcounts in that segment. Is this a segment that you would like to invest more and get bigger organically or through acquisitions?

Leigh Fox

Yeah, we're very bullish on the IT services business. It takes very little capital. It does take some expense with headcount to start in another city. You can start with professional services where you're putting headcount in. You establish a relationship with a customer then you can work up the value chain. So, we think that there is good potential here. We think we have good products to offer and we’re very bullish on it.

Batya Levi

Got it. Thank you.

Operator

And we will now take our next question from Brian Hawthorne with Stephens Inc.

Brian Hawthorne

Hi guys. Good morning.

Ted Torbeck

Hi Brian.

Brian Hawthorne

My first question, actually it is my only question now is really around the competitive environment and are you seeing any change in any impact into our business?

Ted Torbeck

Yeah, Time Warner continues to be very competitive and we expect that to continue. They are very aggressive on retention of customers and - but as you can see, we think we have - we know we have a better product and I think it shows in the numbers that we're getting and the share we are winning. But we expect that to continue.

Brian Hawthorne

Do you expect any change in the coming year? Or anything?

Ted Torbeck

I think they're working on a lot of areas like service, like we are. So, I do believe they will be more customer friendly than they've been in the past. But we're getting better there as well.

Brian Hawthorne

Okay, thank you.

Operator

We will now take our next question from Sergey Dluzhevskiy with Gabelli & Company.

Sergey Dluzhevskiy

Good morning guys.

Ted Torbeck

Good morning Sergey.

Sergey Dluzhevskiy

Good morning. Couple of questions. So, obviously you've done a good job taking cost out of the wireline business on in the entertainment and communications business, is the guidance for next year is flat and obviously there are puts and takes and you mentioned some of the pressures. From cost-cutting perspective, what are some of the opportunities that you see in 2016, maybe 2017, well, those are main buckets for you, you still see cost-cutting opportunities?

Ted Torbeck

Well, I'm a believer there's always productivity. I mean one of the things we've done in the past is we've outsourced our IT and so we have potential to do a surgeon capacity on projects for IT, which can generate productivity. So I think there is – and we are over that transition and we are in the process of starting to see some real positives from the IT organization that will generate productivity.

I also believe that there is still cost out as we get more efficient both in the field and in operations, that there is still a lot of opportunity to get better. Our repair rates are still too high. We're working very hard to get the repair rates down and that's significant savings. So I think there is really every facet of the business still has opportunity for productivity and that's what we're focused on.

Sergey Dluzhevskiy

Right. And one question on shareholder returns. Obviously, Leigh, you mentioned that in 2016 the freak-ish low profiles are going to improve, but it still going to be negative and potentially you will see positive cash flow in 2017. So given the timeframe I guess, two years, let’s say, how should shareholder think about potentially returning funds and at what point do you think buybacks would become a more viable tool for your guys?

Leigh Fox

Well, I think, first, you have to have the cash to return it. So we're focusing on seeing that inflection, the cash flow positive and ending our investments are declining the investments in fiber. I think you're going to hear more about plans this year from us. I don't know if you're going to see any solid movement. Just because we have to continue to be patient and execute on exactly the multi-year plan with we put in front of shareholders a few years ago and I think we're doing that. But obviously the time is coming. So we look forward to having richer conversations with respect to exactly when shareholders will see it, but we're getting closer and closer. We are not there yet.

Ted Torbeck

Yeah, we've made significant progress over the last two years to get to the position where we are and I agree with Leigh. I mean we're getting closer and shareholders are absolutely at the front of our mind on the returns. So we're getting closer.

Sergey Dluzhevskiy

Thank you.

Operator

We will now take our next question from Arun Seshadri from Credit Suisse.

Arun Seshadri

Hi, guys. Thank you for taking my questions. I just wanted to get a sense for embedded in your 2016 forecast, what is your expectation on voice lines with Fioptics embedded? How should we see that trend this year?

Leigh Fox

I would say consistent 4% aggregate decline as you’ve seen it from 2014 to 2015. We are seeing a heavier adoption especially on the business side of VoIP lines, which is just a migration from access to VoIP lines. We see that staying pretty constant. So I would say that the migration and the decline on access lines all remain the same and you should see a consistent decline similar to what you saw in 2015.

Arun Seshadri

Okay, thank you, Leigh. And then as far as SG&A goes, I think you had a $15 million year-over-year increase in SG&A, you are talking about the continued pace of investments here. How should we think about SG&A as a percent of sales. How should that – should that be relatively flat entering 2016?

Leigh Fox

I would say it will look relatively flat year-over-year. Obviously as you are ramping up on both the consumer business side, sales are the first thing you ramp up, but I think we've gotten to a point where we're looking to keep that pretty consistent. And as Ted mentioned, we've got constant programs – efficiency programs running across the company. So, yeah, I wouldn't expect them to move and if they do move, it's not going to be material.

Arun Seshadri

Got it, helpful. And then your interest expense – interest payments of $17 million that you project for 2016, does that imply just the current cap structure as it stands today or are there any sort of additional pay downs or even [indiscernible]?

Ted Torbeck

That’s correct. [indiscernible] exists today, yes.

Arun Seshadri

Perfect. Last couple of things. First, as far as CapEx goes, for 2017 CapEx, just wanted to get a sense sort of directionally what type of reduction do you think at this point and obviously a lot of this is success based, but any color you can give in terms of the extent of the potential reduction of [indiscernible] get you to free cash flow breakeven?

Leigh Fox

It’s not going to be – 2017 won’t look like a normalized year. We will still be building out. We said that the build will stretch into 2017. We will see a reduction. At this point, I don't want to go beyond that. We are intently focused on cash flow – being cash flow positive in 2017. So I can sit here and say that we do see that in front of us, but I don't want to get too detailed on the commitment on capital levels yet.

Arun Seshadri

Okay, helpful. And finally, maybe a question for Ted. I just wanted to get a sense for some microenvironment generally on the customers you're seeing. Are you seeing any sort of changes from sort of last time, last conference call, I mean, there's obviously some talk around slowdowns in various parts of the country, but just wanted to get a sense of what you are seeing on the ground [indiscernible]?

Ted Torbeck

We see our market pretty strong. If you look at IT – if you are looking for a job and your an IT person, you can get a job. I mean it’s, I’d say, pretty close to zero unemployment. Actually the problem we have is finding people for some of the applications that we have. That's been the biggest challenge. Now we see the economy very strong in Cincinnati and in the regions that we are in.

Arun Seshadri

Okay, thank you.

Operator

We will now take our next question from Alex Sklar with Raymond James.

Alex Sklar

Great, thank you. The Fioptics sales continue to be very strong, but the competitive environment you are describing. Can you just maybe give us an idea of what the Fioptics penetration looks like in homes you’ve been actively marketing to for over 12 month and then on the CyrusOne stake, appreciate the updated NOL balance. Can you also give us your remaining basis in that $250 million value of [indiscernible]? Thanks.

Ted Torbeck

Okay. On the penetration, year one, when we have fiber-to-the-home, we get about 36% on high-speed internet and on video we get about 25%. Second year, we get 33% and 24%. So that's kind of what we are seeing. And fiber-to-the-node is a little less than that and that's why we're accelerating to fiber-to-the-home and significantly higher. Year three, we are up in 40% in high-speed and close to 30% in video.

Leigh Fox

And Alex on the basis, it's about $235 million on the remaining.

Alex Sklar

Great, thank you.

Operator

We will now move on to our next caller, Ana Goshko with Bank of America.

Ana Goshko

Hi. Thanks very much. So, I think for Leigh, the follow-ups on the theme of your – the intent focus on free cash flow. So I was trying to reconcile the slide that showed the free cash flow with the change in cash and I think once we get the 10K it will be clear, but the bigger question is where there any payments or uses of cash either in 2015 or expected for 2016 that aren't reflected like related to exit costs from the wireless business or anything like that?

Leigh Fox

Yes, there are, I would say, roughly $10 million-ish. Yeah, we can give you a reconciliation on the cash, obviously, and it will be a lot easier when the 10-K comes out obviously.

Ana Goshko

Okay, great. Thanks. And then on the plans for funding the negative free cash flow in 2016, I mean it's great to hear that you still expect to be positive in 2017, can you just remind us what's the current capacity on the receivables facility and is that's going to be sufficient to meet the cash needs in 2016?

Leigh Fox

Yeah, it’s about $120 million, and yeah, it's sufficient.

Ana Goshko

Okay. And then especially in the current market environment, any other plans for the capital structure? Particularly on the debt side, I saw that you were able to kind of monetize the discount on some of the more liquid bonds and wondering bad days of the market, is there the potential for the company to kind of take the opportunity to capture some additional discount on some those securities?

Leigh Fox

Yeah, I mean, you just – you nailed it perfectly. It's opportunistic given where the market was. We are just carefully watching the market. It's obviously been extremely volatile. Even when you look at the trading under 2020’s, they've moved quite a bit over the last few weeks. We will just remain opportunistic on several levels. Our near-term focus is on the revolver and extending the revolver and then beyond that we will just remain opportunistic.

Ana Goshko

Okay, great. Thank you very much.

Leigh Fox

Thanks.

Operator

With that, there are no further telephone questions, so that we will conclude today's conference. We thank you all for your participation.

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