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American Water Works Co. (NYSE:AWK)

Q4 2011 Earnings Call

February 27, 2012 9:00 am ET

Executives

Jeffry Sterba – President, Chief Executive Officer

Ellen Wolf – Chief Financial Officer

Walter Lynch – President, Chief Executive Officer – Regulated Operations

Edward Vallejo – Vice President, Investor Relations

Analysts

Dan Eggers – Credit Suisse

Michael Roomburg – Ladenburg Thalmann

Neil Mehta – Goldman Sachs

Steve Fleishman – Bank of America Merrill Lynch

Operator

Good morning and welcome to American Water’s year-end 2011 earnings conference call. As a reminder, this call is being recorded and also being webcast with an accompanying slide presentation through the Company’s website, www.amwater.com. Following the earnings conference call, an audio archive of the call will be available through March 5, 2012 by dialing 303-590-3030 for U.S. and international callers. The access code for replay is 4510317. The online archive of the webcast will be available through March 27, 2012 by accessing the Investor Relations page of the Company’s website located at www.amwater.com.

At this time, all participants have been placed in a listen-only mode. Following management’s prepared remarks, we will then open the call for questions. If you would like to ask a question at that time, please press star, one on your touchtone phone.

I would now like to introduce your host for today’s call, Ed Vallejo, Vice President of Investor Relations. Mr. Vallejo, you may begin.

Edward Vallejo

Thank you. Good morning everyone and welcome to American Water’s 2011 Year-End conference call. At the end of our prepared remarks, we will have time for questions.

Before we begin, I’d like to remind everyone that during the course of this conference call both in our prepared remarks and answers to your questions, we may make statements related to future performance. Our statements represent our most reasonable estimates; however, since these statements deal with future events, they are subject to numerous risks, uncertainties and other factors that may cause the actual performance of American Water to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the Company’s SEC filings.

Now I’d like to turn the call over to American Water’s President and CEO, Jeff Sterba.

Jeffry Sterba

Thanks, Ed. Good morning to all and thanks for joining us today. Ellen Wolf, our CFO, is here with me and will join in the presentation. We also have Walter Lynch, our Head of Regulated Operations, and Kellye Walker, our General Counsel and Chief Administrative Officer with us.

We’re pleased to announce continued strong performance for 2011 on virtually all fronts. My comments will be brief since we’d previously covered our general performance during the earnings guidance call that we just held a few weeks ago. Additionally, we’ll be discussing results for the full year of 2011. Details around the year and the fourth quarter in specific will be able to be found in the 10-K, which should be filed tomorrow.

Turning to Slide 5, you can see that we delivered solid results for the year all around. Total revenues increased $111 million year-over-year to approximately $2.7 billion. Adjusted net income and earnings per share increased to approximately $320 million and $1.81 per share respectively. These adjusted earnings are presented in the same manner that we have throughout the year, and Ellen will go through those adjustments in more detail.

In 2011, our regulated O&M expense was flat to 2010 which, when coupled with a 3.6% increase in regulated revenues, drove 170 basis point improvement in our O&M efficiency ratio from 45.5% to 43.8% over the last 12 months. We also generated a 4.3 year-over-year increase in consolidated cash flow, and when you take into account a one-time tax refund that was received in 2010 and an additional pension contribution that we made at the end of 2011, cash flow from operations really increased about 16%. All of these items resulted in slightly more than 100 basis point increase in our earned ROE to just over 7.5%.

While we’re not yet where we want to be, significant progress has obviously been made. In recognition of this financial performance, as we previously announced, a quarterly cash dividend payment of $0.23 per share was declared in December; and additionally, on February 24 of this year, our Board declared a quarterly cash dividend payment of $0.23 per share, payable on June 1, 2012 to shareholders of record as of April 20, 2012. We also reaffirmed the 2012 earnings guidance range we provided a few weeks ago of between $1.90 to $2 per share for ongoing operations.

Before turning the call over to Ellen to go into more detail on this year’s financial results, let me just note that Slide 6 shows that we successfully accomplished all of the items we laid out for 2011 at our analyst day a little over a year ago. We’re very pleased with this progress and look forward to continuing that trend into and through this year.

With that said, Ellen, let me turn it over to you.

Ellen Wolf

Good morning and thank you, Jeff, and good morning to those of you who are listening to our 2011 year-end earnings conference call. As Jeff mentioned, our 2011 10-K will be filed within the next day as we continue to work with our auditors to make sure all the I’s are dotted and the T’s are crossed.

Jeff has just reviewed with you some of the highlights for 2011. I’ll also briefly add some additional detail around the results for the year.

Turning to Slide 8, our overall 2011 was another year of strong financial performance with increases in revenue, net income and cash flow as well as continued improvement in our regulated O&M efficiency ratio. For 2011, we reported operating revenues of approximately $2.7 billion, a $111 million or 4.4% increase over the 2.6 billion reported for 2010. GAAP earnings per share increased approximately 14%. Included in the GAAP number and related only to our discontinued operations is a per-share benefit of $0.09 related to the cessation of depreciation as well as a non-cash charge of $0.14 related to the write-down of parent company goodwill associated with these discontinued operations. This write-down should have been recorded in the first and second quarter of this year; therefore, when reviewing our 2011 financial statements, you will note in Footnote 22 we have recast the 2011 quarterly results. This recast had no impact on ongoing net income, EPS or cash flow, and our year-end financial statements are correct.

As some of you may remember, when American Water was purchased by RWE in 2003, the premium RWE paid for American Water was booked at the parent company level. Even though American Water was sold in 2008 through a public offering, that goodwill remains on our books. When we sell subsidiaries, the goodwill associated with those subsidiaries also needs to exit our books. Since I’m sure that someone will ask this question, let me say that the annual goodwill impairment test which we performed at the end of 2011 showed that there was no impairment to the $1.2 billion of goodwill that is on our books.

For the full year 2011, net income and diluted earnings per share adjusted for the cessation of depreciation and the write-down was approximately $319 million compared with the approximately $268 million for 2010, or $1.81 per diluted share compared with $1.53 per diluted share in 2010. The adjusted net income and adjusted earnings per share represent American Water’s ongoing operations, which as we have mentioned on previous calls we feel is a more appropriate way to view our business results.

Now I’d like to turn the discussion to the various components of our net income, starting of course with revenue. Overall operating revenues increased $111 million year-over-year. Operating revenues from all regulated business increased approximately $83 million or 3.6% driven by $134 million in rate increases obtained through rate authorizations for a number of our operating companies, which is related to our continued prudent investment in infrastructure to ensure reliable service. Revenue increases related to rates granted were offset by decreased revenues of approximately $57 million attributable to decreased water sales volume in all customer classes in 2011 compared to 2010; and I’ll be addressing water sales shortly.

As of today, we have eight rate cases filed and awaiting final orders totaling approximately $258 million. There is of course no assurance that the filed amount of the rate cases will be what is finally awarded. A list of rate cases resolved and outstanding can be found in the appendix to this presentation.

Finally, our market-based operations revenues increased by $33 million during 2011 compared with the prior year. The increase was primarily attributable to the increase in contract operations group revenues of about $22 million. This increase is mainly the result of incremental revenues associated with military construction and O&M projects of $43 million, partially offset by lower revenues associated with other expired or terminated contracts.

Now let me spend a few minutes talking about our water sales, the trends we are experiencing, and the actions we are taking. The bar chart in this slide shows total water sales volumes from 2007 to 2011 in millions of gallons, and the tables show you the breakdown of the different customer classes. Except for 2010, which as you remember was characterized by a hot and dry summer in the northeast, the overall trend has been one of declining water usage across all of our customer classes throughout all of the states in which we operate regulated subsidiaries. The rate of decline over the past five years in our various states has ranged between 1.3% to 3.4%.

Some of the variations are attributable to weather conditions and the overall economy, but increased water conservation, including the use of more efficient household fixtures and appliances as well as declining household sizes are affecting our water sales. This decline in usage contributes to regulatory lag and is an issue that we addressed in the rate cases that we filed in 2011 and will continue to address in all future rate cases.

Now on Slide 11, you can see total operating expenses for 2011 increased by approximately $36 million or 2% from 2010. Regulated operating expenses increased $21 million or 1.3% for 2011 compared with 2010, but really that is primarily due to higher depreciation expense of just about $21 million resulting from additional utility plants placed in service and increased general taxes of 5 million primarily attributable to higher gross receipt tax in our New Jersey regulated subsidiary. Now offsetting these increases is lower O&M expense mainly due to decreasing usage as we noted mainly in our New Jersey subsidiary due to record rainfall in August. Our market-based operating expenses increased by about $22 million mainly driven by expenses associated with our contract operations group’s increased activity and our military construction projects.

Our continued focus on operating expenses can be seen in the continued improvement in our O&M efficiency ratio. As Jeff mentioned, for the year our regulated entities’ O&M efficiency ratio decreased to 43.8% compared with 45.5% in 2010, and 47.7% in 2009. Our long-term O&M efficiency ratio goal of less than 40% is an important goal for this company as it allows us to continue to invest needed dollars in our infrastructure, including IT systems, while lessening the impact of rate increases to our customer.

Let me talk a little bit about capital expenditures both for 2011 and ’12. In ’11, American Water invested $925 million in company-funded capital improvements compared to 766 million in 2010. The Company’s continued investment in pipes and plants to ensure reliable service included the start of two large capital projects – a $100 million project in Pittsburgh to upgrade two water treatment plants and associated pumping capacity that will benefit over half a million people, and a $75 million project to replace a 1920’s-era water treatment facility in New Jersey.

In ’11, we also moved forward with our business transformation project to upgrade technology systems which will ultimately provide more cost-effective and value-based services to customers and result in enhanced value for our shareholders. We expect the ERP application to go live in August of ’12 and the new customer information system and enterprise asset management system to be implemented throughout 2013. Total expenditures spent for our business transformation project through the end of ’11 was approximately 140 million, of which about 100 million of that had been spent in 2011. As we mentioned in our guidance call for ’12, we intend to invest about $900 million to upgrade and maintain our water systems.

And lastly on Slide 14, we have provided a bridge to take you from our 2011 GAAP earnings per share of $1.75 to the ongoing adjusted earnings per share of $1.78, so you can have an apples-to-apples basis to compare against our 2012 ongoing operations guidance of $1.90 to $2 a share. Of course, these forecasts are subject to numerous risks including those described under forward-looking statements in our earnings press release and in our 10-K.

As a result of American Water’s 2011 portfolio optimization efforts, the Company does not anticipate the need for an equity offering in 2012.

And with that, I’d like to turn the call back to Jeff for closing comments before opening it up for your questions.

Jeffry Sterba

Thanks, Ellen. So in addition to growing ongoing earnings to $1.90 to $2 per share, what else should you expect from us in 2012? If you look at Slide 15, we have laid out once again the expectations that you can judge us by as we go through the year for this next year. First and foremost, we’ll remain dedicated to providing safe and reliable water services to our customers and the communities that we serve. We’ll also continue our portfolio optimization effort with closure of the Ohio-New York transactions and continued evaluation of other opportunities that may present themselves.

We’ll also continue to be active on the regulatory front, both in filing appropriate rate cases needed to earn an appropriate return on our investments to actively addressing regulatory issues like regulatory lag and usage trends that Ellen talked about, and continuing to champion the increased use of infrastructure surcharge mechanisms to help minimize rate impact as well as provide the cash flow necessary to maintain the level of investment that we do.

And lastly on our market-based operations, we will continue to expand the businesses that show promising growth, like our homeowner services and military contract operations, while seeking to optimize the contribution from our muni contract ops group. These efforts will anchor our long-term earnings per share growth rate of 7 to 10%. With approximately a 3% dividend yield, we seek to provide investors with a double-digit investment return with a thesis centered around investing in our country’s critical water infrastructure. Again, we’re very pleased with the 2011 performance and believe that we will keep the momentum moving through 2012.

With that, we’d be happy to take any questions that you may have.

Question and Answer Session

Operator

Thank you. At this time if you would like to ask a question, please press star, one on your touchtone phone. If you would like to withdraw your question, please press star, two.

Our first question comes from the line of Dan Eggers from Credit Suisse. Please go ahead.

Dan Eggers – Credit Suisse

Hey, good morning, guys. Jeff, I wondered if you could maybe talk or help walk us through the O&M efficiency target ratios you guys were using, and kind of the goal of getting it down below 40% by ’15. What levers are you seeing to pull right now and give you confidence you’re going continue to be able to grind that number down over the next few years?

Jeffry Sterba

Yeah, Dan, they’re really a series that focus on our operating excellence mantra, so trying to drive operating costs, for example. We have initiated two rounds of new efforts regarding our supply chain where we have over $2 billion that flows through it, but quite frankly we’ve found that we’re not really leveraging it across the system as much as we could. We do a good job, just not great; and so we’re finding opportunities, for example through our recent pipe acquisition, we saved somewhere in the 3 to $5 million range. We’ve got one in process on our fleet and meters, and we’re seeing really good, solid results as we move from really—move more into what I’ll call strategic sourcing initiatives.

We also, with the bringing forward of the elements of the SAP system through what we call business transformation, the first of three phases of which will go into service in August. We won’t really see savings this year, but as we go forward, particularly starting in ’14 and out, we will be able to drive savings in both our—largely labor, which we can hopefully manage mostly through attrition because these systems are going to enable a much higher degree of automation, a much higher degree of data that we can mine. And then last, I would just put it as really driving a culture of continuous improvement where we’re already starting to see the impact of projects that may save half a million here, a quarter of a million there; but frankly, that starts to add up.

So there is not one big thing. There are a series of things at which we’re tackling the processes we use to get our work done, to procure the materials for it, and how we deploy our skilled labor to meet the needs of our customers.

Ellen Wolf

And Dan, if I can add, these strategic sourcing savings that Jeff is talking about is really around our capital and capital spend, and the money that we would save there we can then reinvest in other capital projects within the system which, over the long run as we replace those pipes faster, can help us on our O&M number.

Dan Eggers – Credit Suisse

So the idea is that basically the O&M savings is the efficiency of reinvestment, not so much the money being saved by getting the supply chain cheaper?

Ellen Wolf

On the strategic sourcing side, yes.

Jeffry Sterba

Yeah, just on the strategic sourcing. All the other items—because some of the sourcing, a lot of the sourcing that we’re doing does affect our O&M costs. Obviously, the labor side and being able to hold our labor costs constant through increased efficiency, as well as—to give you an example on the supply chain where it directly hits the O&M, our chemicals and power acquisition. So for example, what we’ve done with this entity called EMBALA, to be able to sell power back into the grid not just in a regular demand management way but really selling ancillary services, which have high value in markets like PJM. That drives down operating costs right away. So Ellen was referring just really to some of the strategic sourcing, which is more geared around our capital side, but we’re exercising the same kind of approaches relative to the operating costs we procure through the supply chain.

Dan Eggers – Credit Suisse

Not to belabor this issue, but when you think about the savings you get, there’s also a regular cycle of rate cases being filed with the utilities. How much of this O&M benefit do you guys expect to retain at the bottom line rather than being a reduction in customer rates or need for increases in customer rates?

Jeffry Sterba

Over time, Dan, we won’t retain it. We don’t anticipate retaining it. What it really does is help mitigate rate increases over time that allows us to invest more capital on which we earn; so the way we look at it with our employees is, look, for every dollar of O&M expense we’re able to take out of rates, we can in turn invest $6 of capital with the same rate impact and earn $0.30 a share per year. So it’s really a matter of helping structure what rates are made of to create more value for customers by infrastructure investment, which in return creates value for our owners because of the returns on that investment.

The challenge, and what we want to make sure we avoid, is kind of what happened to the electric industry back in the early 90’s when we pushed too far on rates and all of a sudden, with O&M costs going up and capital being invested, regulators said, wait a minute – this is just too much pressure on customers, and so we ended up getting capital disallowed and all the things that I really don’t ever want to go through again. So we expect over time we’ll get back all the O&M savings. We’ll keep it for windows of time until the next rate case, et cetera; but it really is given back and it creates headroom, if you will, for capital expansion.

Dan Eggers – Credit Suisse

Thank you for explaining that. And I guess, Ellen, just to make sure I understand this – the no equity for 2012, does that include a DRIP program equity raise, or is that really zero equity coming in the door this year?

Ellen Wolf

We’ll still have slight, very small amounts of equity that will be raised through the dividend reinvestment plan as well as through any employee stock purchases; but that, as you see historically, is minimal.

Dan Eggers – Credit Suisse

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Michael Roomburg with Ladenburg Thalmann. Please go ahead.

Michael Roomburg – Ladenburg Thalmann

Hi, good morning. I’m looking at the broader trend – you guys under-spent your 800 million to a billion soft target for capital expenditures in ’09 and ’10, and it looks like you’re now back on track in ’11 and into ’12 to meet or exceed those goals. And I guess what I’m trying to get at was in ’09 and ’10, I would imagine that construction costs came down a bit, and since then they’ve now rebounded. I’m just wondering whether or not you could quantify the impact of that so as to determine whether or not the same volume of projects was completed as expected in ’09 and ’10, and therefore there wouldn’t be a backlog that exists into ’12, ’13, ’14; or, if that’s not necessarily what drove the less CAPEX in 2009, 2010.

Jeffry Sterba

You know, Michael, I understand your point. It’s very hard to filter through. I mean, there are obviously certain costs like copper and some components of steel that have increased in ’11 versus, say for example, ’08; but really, I think that’s a pretty small impact on the overall cap spend. It’s more driven by in ’11, we had a couple of significant projects, one in Pennsylvania—well, it’s really a series, but all of it associated with our Pittsburgh system, and then another major one in New Jersey. So are there some changes that have happened in individual components? Yes. Some have come up and there’s a few that have gone down, so I think that’s a relatively small impact, and part of that is also when and how we procure those materials. I think the strategic outsourcing or strategic supply sourcing that we talked about is really geared around trying to create greater efficiency in our capital spend so we can get more done with the same dollars, but I think the thing that really drove 2011 is the completion of the projects, or the movement through the projects in Pennsylvania and New Jersey.

Ellen?

Ellen Wolf

Yeah, the only thing—prices came down a little bit in ’09 and ’10, but not all that much, if you’ll remember, because there was a lot of federal dollars going towards construction, so there wasn’t that same amount of drive down to get business. And as Jeff said, a lot of this is around major projects – the Pennsylvania, New Jersey projects – continuing into ’12. We have, as we’ve talked about before, major projects starting in California related to the supply issues out in California. So the capital continues to increase based on the need.

Jeffry Sterba

And a lot of the items where you’ve seen more rapid escalation – for example, copper – frankly, we’ve reduced our use of copper and are reducing it further by going to other materials, so it has had less impact on us than it probably would have had five years ago.

Michael Roomburg – Ladenburg Thalmann

Got you, okay. That’s very helpful, thank you. And just moving on to rate cases, it looks like based on your slide deck here that you’ve settled the Missouri case. I’m just wondering if you have the terms available of that settlement.

Walter Lynch

Yeah, this is Walter. No terms available yet, but we did reach a non-unanimous settlement and it’s going to be going in front of the commission at some point.

Ellen Wolf

And we’ll disclose those to you as soon as we have them. As soon as we know that they can become public, we will make them public.

Michael Roomburg – Ladenburg Thalmann

Okay, okay. And then just a couple other quick rate questions as well—sorry?

Jeffry Sterba

Michael, just a clarification – when we say it’s an non-unanimous settlement, all parties have agreed not to contest it, even though they may not have signed onto the stipulation. So it’s not going to be a contested stipulation.

Michael Roomburg – Ladenburg Thalmann

Okay, understood. In New Jersey, you guys had settled previously a lot of your prior cases in pretty short order, and we’d noticed that the rate council had in this case filed a formal recommendation. I’m just wondering in terms of your thinking whether or not you’re surprised by that, your inability to settle it, and how you look at this case now in the larger light of what appears to be steadily improving regulatory environments in New Jersey?

Walter Lynch

Well, the New Jersey rate case is going through its normal process, and right now we’re in discussions with all parties to try to reach settlement. And so it’s going through it’s normal process with the normal timing.

Jeffry Sterba

You know, I think their coming out and releasing with their case, et cetera, is really kind of – as Walter said – part of the process. I think there’s certainly more focus on increasing rates, but I think we’re reasonably—we’re hopeful that we’ll able to get to a good place for customers and for us, and have reason to believe that will occur.

Ellen Wolf

And I’d like to remind, normally in New Jersey it’s a nine to 12-month process, and we’re still well within that time frame.

Michael Roomburg – Ladenburg Thalmann

Sure, okay. And then lastly, the New York-Ohio swap, any update on the timing of that?

Jeffry Sterba

It should close one tick after midnight on April 1.

Michael Roomburg – Ladenburg Thalmann

Okay. Congrats on a nice 2011. Thank you.

Jeffry Sterba

Thank you.

Operator

Thank you. If there are any additional questions, please press the star followed by the one on your touchtone phone. If you would like to withdraw your question, please press star, two.

And our next question comes from the line of Neil Mehta from Goldman Sachs. Please go ahead.

Neil Mehta – Goldman Sachs

Good morning. So you completed since our guidance call here the sale of your southwest operations. Just wanted to confirm that the cash inflow associated with the transaction, that’s $470 million and you expect to book it in Q1?

Ellen Wolf

The actual cash flow which came in was $461 million. The difference is debt that was assumed; and yes, we are booking it. The cash has come in. We have used it to pay down our short-term debt, and we were very happy to have it. And any other items related to the transaction will be booked in the first quarter, but as we noted, because there was the technical loss on the sale due to the goodwill of the parent company, all of that was now booked in 2011.

Neil Mehta – Goldman Sachs

Got it. And the second question, any regulatory events we should be keeping our eyes on, whether it’s a set date that’s in the public domain for staff or a final decision in any of your major rate cases?

Ellen Wolf

The only one that is truly mandated and live by it that we see it is the Illinois rate case; and as we’ve said, that’s 11 months so that won’t be until much later in the year. But again, something you might want to look at, and as Walter said earlier, there’s settlement in New York and Missouri so we would watch for timing on those as well.

Walter Lynch

The only other one I’d mention would be California, where we do have a partial settlement. It covers most of the rate case, and we did have hearings on the cost of capital which seemed to go very well. They were, quite frankly, fairly short and so we remain optimistic that the cost of capital element will get put in place and the rate case will get resolved. We do have the assurance from the commission that the rates will be retro to January 1 of 2012, so while we’d like to get them in place, we’re not losing anything.

Neil Mehta – Goldman Sachs

Okay. And then year-end estimated company-wide rate base, do you have that number?

Ellen Wolf

No. We’ll get it worked up for you and supply it. We don’t have it at the moment. And again, I just need to caution you, it’s an approximate number because each state has a very different nuance to it, so we do a very high-level rate base number.

Neil Mehta – Goldman Sachs

Okay, thank you, Ellen.

Ellen Wolf

Sure.

Operator

Thank you. Our next question comes from the line of Steve Fleishman with Bank of America Merrill Lynch. Please go ahead.

Steve Fleishman – Bank of America Merrill Lynch

Yeah hi, good morning. A couple things – first, is there any update on the New Jersey DISC process, just either timing or update there?

Jeffry Sterba

Everything seems to be going according to plan as we believe that the commission will be holding—you know, they’ve gotten comments, they’ve received comments from parties. I’d say that the comments that were received on the proposal were generally positive and supportive of what’s been in place, so we would expect that the commission would act on those comments and put forward the order within the next 30, 45 days, something like that. I don’t think it should go much longer than that, so it’s really now that it finally got through after the election. I think it’s moving according to the schedule. And again, remember that that probably won’t have an impact on our earnings until we move into the second half of ’13.

Steve Fleishman – Bank of America Merrill Lynch

Okay. And then when you talk about seeking other types of infrastructure charges and other mechanisms to reduce regulatory lag, are there other certain key cases we should watch where those are pending right now, or to be pending, so we can kind of track how that’s going?

Jeffry Sterba

I’ll let Walter address any that are pending. There’s a few states where we had a proposal and we ended up modifying its timing; so for example, extending in Missouri beyond the St. Louis district. Others that you would mention, Walter?

Walter Lynch

No, I think that’s it. Getting the New Jersey DISC in place is obviously one of our keys, but we continue to look at the declining usage mechanisms in each of the states and working through settlement to recognize that the decline, as we’ve said in this discussion here, is a little more steep than what’s been going on in the past, and we want to get recovery of those revenues. So that’s really a huge focus for us.

Steve Fleishman – Bank of America Merrill Lynch

Okay. And one other question, and pardon if I didn’t recall this, but in your guidance for 2012, did you give an assumption for sales?

Ellen Wolf

No, we did not. We did say that we do continue to look at the decline as we put together our revenue figures.

Steve Fleishman – Bank of America Merrill Lynch

Okay, great. Thank you.

Operator

This concludes the question and answer portion of the call. I will now turn the call back over to Jeff Sterba for closing remarks. Please go ahead.

Jeffry Sterba

Well again, thanks very much for joining us today, and we look forward to—if we don’t talk to you before the next quarterly call, we’ll talk to you then. Have a great week.

Operator

This does conclude this morning’s conference call. You may now disconnect.

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