TETRA Technologies' (TTI) CEO Stuart Brightman on Q2 2016 Results - Earnings Call Transcript

| About: Tetra Technologies (TTI)

TETRA Technologies Incorporated (NYSE:TTI)

Q2 2016 Earnings Conference Call

August 08, 2016 10:30 AM ET

Executives

Stuart Brightman - President & CEO

Elijio Serrano - SVP & CFO

Joseph Elkhoury - SVP & COO

Analysts

Jacob Lundberg - Credit Suisse

Marc Bianchi - Cowen and Company

Marshall Adkins - Raymond James

Jason Wangler - Wunderlich Securities

Sean Meakim - JPMorgan

Operator

Good morning and welcome to the TETRA Technologies Second Quarter 2016 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Stuart Brightman, President & CEO. Please go ahead.

Stuart Brightman

Thank you, Bianca. Welcome to the TETRA Technologies second quarter 2016 earnings conference call. Elijio Serrano, our Chief Financial Officer is also in attendance this morning and will be available to address any of your questions, as well as Joseph Elkhoury, our Chief Operating Officer. I'll provide a brief overview of our second quarter results then turn it over to Elijio for some additional details, which in turn will be followed by your questions.

I must first remind you that this conference call may contain certain statements that are or may be deemed to be forward-looking statements. These statements are based on certain assumptions and analyses made by TETRA and are based on a number of factors. These statements are subject to a number of risks and uncertainties, many of which are beyond the control of the Company. You are cautioned that such statements are not guarantees of future performance and that actual results may differ materially for those projected in the forward-looking statements.

In addition, in the course of the call, we may refer to net debt, free cash flow, adjusted EBITDA, adjusted profit before tax or adjusted earnings per share or other non-GAAP financial measures. Please refer to this morning's press release or to our public Web site for reconciliations of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period.

In my remarks, I would like to cover an overview of the second quarter and our perspective on the second half of the year. Overall our results for the second quarter were consistent with our internal expectations. Sequentially we improved our EBITDA and remain on-track to achieve our free cash flow targets for the year. Some of the key highlights of the quarter that contributed to these results were, continued reduction in demand in North America, during the quarter the rig count declined substantially and competitive pressures continued. We continue our process of adjusting our headcount in taking the necessary cost actions to mitigate these market challenges.

Several of our Gulf of Mexico projects are on-track to be executed during the second half of the year. Receipt of several contract awards in offshore services and fluids that position us for improved results for the second half of the year. Successful completion of a public equity offering for TETRA, raising $60 million in net proceeds to repay outstanding debt. Amendment of our credit facility and debt agreement covenants providing enhanced financial flexibility. Amendment of a CCLP debt agreement that increases the maximum leverage ratio.

Results for our fluids division in the second quarter were adjusted pre-tax income of $1 million, a portion of which was due to the normal positive seasonal impact of our European chemicals operations which more than offset the continued decline in demand in North America. As noted on our last call in May, we have been awarded the largest produced water recycling project in the U.S. and we deployed our first pad at the end of the second quarter. We expect this project to continue through 2017. As we look forward towards an expected continuation of slow demand in North America, we believe the technology we’ve introduced in our Water Management business will enable us to increase activity, particularly with those customers that will be most active.

As we enter the second half of the year, we have good visibility on several Gulf of Mexico projects and believe the second half for the year will be a significant improvement in this business. Based on the combination of the backlog, signs of increased demand in North America, and the awards of several projects, we expect the second half to produce better results for our fluids division.

Our Production Testing division had an adjusted pretax loss of 4.2 million in the second quarter. This sequential decline in earnings was driven primarily by a continued reduction of activity in North America, and certain international markets. Similar to fluids, we expect this activity to increase in the second half of the year, with a slight improvement in earnings during that time period. Our continued focus will be to work with those clients in North America, that are the busiest in whatever possible bundle our Water Management products with our flow back testing.

Our Compression division reported second quarter adjusted EBITDA of 24.7 million, an improvement over adjusted EBITDA of 23.6 in the prior quarter. Primarily due to the continued benefit of aggressive cost reduction actions. Utilization of our compression assets in the second quarter decreased to 76% from 77% in the prior quarter. Consistent with prior quarters, our larger horsepower units continued much higher utilization. We’ve seen indications recently that we may have hit the bottom of the decline in lower horsepower utilization and we have several opportunities during the third quarter.

Overall, the cost actions we have taken at both the operational and SG&A levels have allowed us to maintain the division’s margins, significantly reduce SG&A and continue to generate EBITDA margins approximately 13% and maintain a coverage ratio of 1.19 in the second quarter. Our focus will be on the most active areas of Western South Texas. In addition, we continue to move forward with our ERP integration project and believe this will be implemented Phase 1 at the beginning of 2017, yielding significant savings during 2017.

With this integration, we are continuing the overall strategy of centralizing back-office functions and realizing the full benefits of the CSI acquisition. During the second quarter, we finalized amendments to the CSI Compressco bank agreements. These amendments give us more favorable covenants as we go through the current cycle. Our Offshore Services segment reported adjusted pretax income slightly above breakeven for the second quarter. This is a significant sequential improvement from the first quarter, as expected as we moved into the seasonally favorable second and third quarters which have historically been the busiest portions of the year for this segment.

Our backlog through the end of the second quarter has increased and we have a very good backlog visibility of our major assets through the third quarter and into the fourth quarter. We have also leased a third-party diving vessel to support this backlog. This starts during the third quarter. This lease will be matched to demand and is treated as a short-term lease with the ability to exit as the work is completed. The second quarter continues the evidence of our ability to reduce cost for this segment and reduce breakeven in a very competitive market. We still believe that over the intermediate term the regulatory climate as well as the deferred spending by our customers will ultimately translate to increased demand for the segment.

Also during the quarter TETRA raised approximately $60 million of net proceeds associated with the public equity offering, this was further demonstration of our conservative approach to managing our balance sheet. In addition, we finalized amendments to our credit agreement and debt agreements to enable enhanced financial flexibility. These two capital structured actions also position us very strong for the eventual recovery. In summary, the quarter was consistent with our expectations. We saw seasonal improvement in the areas we expected. We saw increased backlog to several of our segments. We believe that the combination of our strong balance sheet and the strength of these businesses positions TETRA to have an improved second half of 2016, including achieving our pre-cash flow targets.

With that I'll hand it over to Elijio.

Elijio Serrano

Thanks Stuart. TETRA revenue of $175 million increased 4% sequentially reflecting our traditional seasonal increase from Offshore Services that offset declines by production testing and compression. We expect Offshore to show another sequential increase consistent with our historical trends, where the third-party represents peak activity levels. Fluids was up 3% sequentially on a traditional ramp-up in industrial activity in Europe. We expect some meaningful increase in fluids in the third quarter as the decline in industrial Europe activities would be more than offset with the Neptune project that we're currently working on in the Gulf of Mexico,, in addition to the Water Management project that we're on in the Permian Basin.

Adjusted EBITDA excluding Maritech in the second quarter was $32.9 million, up $13.5 million from the first quarter driven by a $7.9 million improvement with Offshore Services and a $6.4 million reduction in companywide G&A expenses. The reduction in G&A expenses was a combination of continued aggressive reductions and cost controls, including lower audit, legal and consultant expenses. We have implemented several long-term sustainable cost reduction actions as we have collapsed back office support and filled G&A costs.

In addition, we have implemented some temporary cost reduction actions to reduce cash incentive compensation, reduce work weeks, eliminated the 401(k) match and temporarily reduced our salaries. First quarter companywide SG&A was $33.6 million. As a result of all the actions I have mentioned, second quarter SG&A was $27.2 million, a reduction of 19% or $6.4 million. Approximately $600,000 of unusual charges were incurred in the second quarter that were normalized when reporting adjusted EPS. We expect that in the next two quarters SG&A will be approximately $29 million.

Consolidated adjusted EBITDA was 18.8% of revenue in the second quarter compared to 11.5% in the first quarter. The reconciliation of adjusted EBITDA to net income is included in the press release we issued this morning. We expect consolidated adjusted EBITDA to be up again sequentially in the third quarter from the higher offshore activity levels in the Gulf of Mexico Neptune project. Adjusted earnings per share was a loss of $0.15, consistent with our internal expectations. Our press release includes a reconciliation of adjusted earnings per share to GAAP earnings per share.

TETRA only free cash flow was the use of cash of $8.8 million in the second quarter consistent with our internal expectations. Historically, the first half of the year is weaker from a free cash flow perspective, due to the lower Offshore Services in the first quarter and the ramp-up of business in the second quarter from Europe industrial and Offshore in the Gulf of Mexico. As we collect receivables in the third and fourth quarters from the ramp-up of those businesses, we generate stronger free cash flow in the second half of the year. This pattern has been consistent in recent years. In fact if we go back to the last couple of years in 2014 and 2015 approximately 70% of our free cash flow have come in Q3 and Q4. In 2014, $61 million of our $85 million of total year free cash flow was generated in 2014 and in 2015 $83 million of our $120 million of free cash flow was generated in the second half of the year.

We will also be aided in the second half of this year by the Neptune project in the third quarter that should monetize late in the third quarter or early in the fourth quarter. Year-to-date free cash flow for TETRA is $10 million. We continue to track towards the previously issued guidance of 30 to 50 for the year. We remain focused on keeping capital expenditures low, aggressively managing our cost structure and staying on top of our receivables. Despite the financial challenges from many of our operators in the industry, our day sales outstanding remain very low. TETRA only DSO was 61 days at the end of June, down from 79 days at the end of last year and has been on a consistent downward trend as our for staff remains very focused on timely and accurate invoicing and persistent follow-up calls with our customers. CSI Compressco’s DSO was an impressive 47 days at the end of June compared to 49 days at the end of last year, also reflecting a focused effort by our organization.

During the second quarter we completed a restructuring of our balance sheet to better prepare us for the impact of this downturn that has persisted much longer than any of us expected. The restructuring was done through a series of actions that we methodically laid-out late last year and began executing early this year. This included the tender for and retirement of $100 million of private notes and the amendment to the covenants in our credit facility without reducing the size of our $225 million revolver and the issuance of $60 million of equity. The cumulative impact of this action has left us with a solid balance sheet to weather the continued impact of lower spending by our customers.

TETRA only net debt has been reduced to $212 million. Our leverage ratio was 2.27 times compared to the bank covenant of four times. We have liquidity in excess of $120 million and as I mentioned earlier, we expect to generate free cash flow this year of between 30 and 50. The impact of actions to strengthen the balance sheet and aggressively focus on cost and manage working capital has positioned us to manage through this extended downturn and has prepared us to respond rapidly to any upturn in the market. Stu?

Stuart Brightman

And with that, I think we’re available for any questions?

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jacob Lundberg with Credit Suisse. Please go ahead.

Jacob Lundberg

So we heard a little bit earlier in the earnings season from some of your competitors on P&A activity in the Gulf of Mexico. I was wondering, could you just comment on what you've been seeing there, anything abnormal beyond sort of typical seasonality?

Stuart Brightman

I think we've seen in certain areas where we have had some pick up, in other areas it has been challenging, I would say overall our heavy lift demand has been good and we have a good backlog going into the fourth quarter, diving has been about as expected and I'd say the P&A side with the wells has been lower demand than we had thought. In the cutting side, we've introduced some new brace of cutting system that we're getting good reviews on. And we've got a couple of projects out there we're looking that possibly could help us next year and also as I said we've got demand on the diving side where we felt confident to bring a short term lease on a diving vessel. And I think overall the wild card in all this is on the regulatory side with the NTL that Bessie brought out on increased bonding and financial security. So, I think there is going to be a lot of choppiness in the short-term as our customers work through the impact on them and the timing of getting that work done given some of the challenging balance sheets that are out there.

Jacob Lundberg

And then for a follow-up, I'm just wondering so after the balance sheet restructuring actions in the second quarter, it had been to maintain ample liquidity in case there was a renewed downturn or prepare for the upturn. Just wondering if, with those restructuring actions, if we don't have another leg down in activity, has that changed at all the way you're thinking about how to handle the Maritech liability?

Stuart Brightman

I think our approach on Maritech has been fairly consistent and I would expect that would stay there. We're in good shape with what we've done, and what we need to do and our plans are to not spend a lot on that, the balance of the year if we fell we don't need to. If the market picked up faster and the world got a little bit better we may revisit but I think at the moment we're comfortable where we are.

Operator

The next question comes from Marc Bianchi with Cowen. Please go ahead.

Marc Bianchi

I guess just thinking about the outlook for the fluids business here in the back half of the year you've got the Neptune projects coming on, some water recycling business. Could you maybe talk in a little bit more detail about the timing of the Neptune projects? Is there one or two? How many are we talking about here and perhaps something on the order of scale?

Stuart Brightman

Yes, I think we've got Neptune that will go in -- certainly started in the third quarter will most likely go into of the end the third quarter possibly into the four and we've got some other business right now we have one Neptune project that we're executing on several others that we're looking at. And then on the water side as I mentioned in my comments, we've got the project in West Texas that we started, that we think goes well into and possibly through 2017 and we’re looking at how do we leverage that capability with some of the other major operators out there. We’ve always been focused on being the industry leader around the well site for produce water, recycling it and saving cost and we get very good response. Joseph you’d spent a lot of your time in that area recently, you might want to give a little bit more commentary just on the water and the fluid side?

Joseph Elkhoury

Okay, so Marc this is Joseph. With regards to TETRA CS Neptune, we continue to expand and put some effort on R&D to expand the application and the envelope of CS Neptune, so we have several ongoing discussions with customers in the North Sea and the Gulf of Mexico to review the application of the fluid. We’ve got it to work on one of the projects and we are in the middle of conversations to see whether or not should we pull the trigger on another project moving into 2017. But we feel optimistic about the application and the background effort on R&D.

With regards to fluids overall on land, we have continued to expand our Water Management capability through either the introduction of new technology with the patented automated blender and a few other additions that allowed us to win this big project on recycling to produce water we have expanded that. But as Stu mentioned, we deployed the first pad, we are in the middle of the second, deployment. We hope that our achievement so far with that particular customer expand the scope and utilization of that project and eventually impact positively the returns of that particular project, but also enable us to sell that solution to other customers in the U.S. land operation. So that gives you a little bit of an idea about the Gulf of Mexico CS Neptune and some of the Water Management projects we are currently on.

Overall in international, we have continued to basically battle the top oilfield services behavior respectively the big oilfield services companies in the international market. In Q2, we have managed to reclaim some of the market share we lost earlier in the year and we hope that will significantly impact our international margins. We believe that we can still do more on that space and we are taking many actions to expand our market share in the North Sea particularly and in the Middle East and Africa.

Marc Bianchi

Maybe just a follow-up on the water recycling project that you're doing in west Texas, when would you expect that to be sort of on its full run rate? And then in terms of expanding the scope of it, when would we know when you would have the opportunity to expand scope on that project?

Joseph Elkhoury

So when we won the tender it was 160 wells when we deployed the first pad that scope expanded to 259 wells, so we’ve already seen the commitment from our customers to expand the scope in terms of wells that we will treat. In the second deployment we’ve been asked to double the size of what we call the oil separation. So we are already seeing demonstration of the customer being happy with what we have delivered. The second pad will be deployed fully in Q3, and we hope to start the third pad in Q3 moving into Q4 and then we will be fully operational based on the original scope by the beginning of Q1 2017. So, all those give you an indication of how we expect to impact our results moving into the second half and into 2017.

Operator

The next question comes from Marshall Adkins with Raymond James. Please go ahead.

Marshall Adkins

Let's come back to the fluids, particularly the Gulf of Mexico. You mentioned the Neptune stuff that is. I want to get a broader sense of your view for recovery in the Gulf of Mexico. And not just for the next couple quarters but into 2017. What is the outlook for your Gulf of Mexico Fluids business?

Stuart Brightman

Yes, I think it's going to be like a lot of others clearly there has been lot less drilling this year and most folks expect that to continue out to next year and hopefully start to see some improvement in ’18. So I'd say our perspective is obviously the completion side we lag the drilling side we do have several projects we're chasing that have already been funded. To me, the kind of the way we bifurcate it is, areas that have already been funded that are going forward and then new investments, the new investments is obviously going to be slow to come. So, our view is we do see some visibility in the second half of the year we feel good. We see some opportunities next year that we feel good about. The overall general activity is going to be challenging just like this year. So, at a high level it is probably going to be somewhat similar to what we've seen in 2016 in the Gulf. Overall activity much less than last year, a few projects that are material and our ability to win those will drive the results. Obviously longer term out a couple of three years we remain bullish in that space above our position, but we think next year will probably look like ’16.

Marshall Adkins

Right, obviously enhanced with the recovery in oil price, which we certainly expect. What about U.S. land, are you seeing any trends there where people are using more of your type fluids on land in the U.S.?

Stuart Brightman

Well, on the water side I think Joseph gave you [Multiple Speakers] a good summary on that. On the product side, we continue to look at areas where we can put nominal footprint that helps us get to the market faster and quicker than we've done some of that in South Texas successfully, we will continue to look at that. We think with our manufacturing footprint, we've got all the basins covered and we've been able to maintain our market share on the downside, I'd say I am seeing indications that there is any unusual demand, or unique demand of specific fluids now as we move into hopefully a little bit higher activity. But the way I look at it is we've got a great position as that market comes back. We'll continue to be positioned well with our manufacturing footprint, but nothing that's demonstrably different than we've seen recently.

Marshall Adkins

Yes and I'll just slip that one last one here on the production testing side in U.S. land, any indication of response and demand for your stuff from completing some of the DUCs that are out there or I guess customer conversations, how is it looking on the production testing side?

Joseph Elkhoury

Yes, Marshall this is Joseph, we continue to aggressively manage what we can control in this market to be honest with you. We’ve introduced the salary reductions, the reduced work week, schedules, limits, the structural damage we have to our footprint in U.S. land. We expect that this will help us moving into the second half as the market stabilizes and hopefully modestly rebounds. Our customer base is really made out of the most active customers and the more economical base. So the actions we have taken have allowed us to increase that market share.

We believe that the DUC inventory has continued to decline somehow in the first half with the lack of drilling, but over the last few weeks we’ve seen signs that that DUC inventory may have stabilized and started to increase again. So that’s really why we’re building a little bit of confidence into saying that there will be a modest growth in completions activity in the second half of the year. At least in U.S. land we have also managed to work with our customers to pick up a few of their most favorite crews and we hope that that will improve our market share positions in the Permian Basin the scoop and the stack. So that gives you a little bit of why we’re saying that we will see a modest improvement in the production testing.

On the international side, we have deployed a highly customized, Optima cooling solution for an international customer. We continue to drive that value proposition with other customers. And to be honest, we mentioned in the earnings calls earlier that we have a few visibility to or we have visibility to a few early production facility projects, but with the head stack we’ve seen the commodity reverse to 40. We are becoming less optimistic that those customers and the customer budgets are going to be spent this year.

Operator

Our next question comes from Jason Wangler with Wunderlich. Please go ahead.

Jason Wangler

Maybe just to dovetail on that last question, how are you seeing, specifically in the U.S. the pricing discussions go, are we starting to see some easing on that side of the production testing or is it still pretty much a dog fight out there?

Joseph Elkhoury

I think overall the customers have really pushed us with a 23% drop in rig count in Q2 with -- this is on top of a 40%, so it can drop in Q1. So the pie has shrunk significantly. We would see the impact of these price concessions moving into Q3 and we hope that those conversations as the activity recovers a little bit will be in the past and we hope that towards the end of the second half that we may be able to start raising some prices to operate in a more positive environment. In fact, we have had a couple of discussions with some of our key customers and it has allowed us to meticulously raise some pricing and some crew charges, so that we work better in partnership. So if those conversations continue, we hope to see some impact towards the end of the year.

Jason Wangler

And then maybe, Elijio, if I could ask, looking at the free cash flow plans, should we just kind of think about as at least in the near-term something to continue to pay down some of the revolver or just kind of your thoughts about where we should see the use of that free cash flow as it comes in the second half?

Elijio Serrano

Our plans are to continue to pay down the revolver until we see a little bit of clarity of where the market is going, and just continue to be very conservative in the process.

Operator

[Operator Instructions] Our next question is from Sean Meakim with JPMorgan. Please go ahead.

Sean Meakim

Thinking about your margin profile, given all the changes to your cost structure and then some of the new initiatives, perhaps like in fluids, how do you think about incremental margins in a recovery scenario? Are you expecting to see something larger than what you've seen in prior cycles or does the slower recovery in offshore mute some of the impact?

Stuart Brightman

It is a pretty complicated question there Sean. I'd say on fluids we've said a couple of things, one is obviously the second half of the year will be better than last year. We've had record margins that will take us a while and a much better market to get to. I think as you look at the profile going forward on how this market compares to prior cycles you've got the new technology we have in both the Water and the Neptune that we didn’t have the last cycle. So I think that mix of business will be good I think it's going to take us a while as Joseph to kind of get some of that pricing back I think that's going to be the real question is with which customers, on which products and what geographies are we able to do that. Clearly you have heard some of the larger service companies feel somewhat confident that they are on a path to do that, I think we know where those actions are required. We have a game plan, the timing that is going to be really a function of the specific customers and demand and the capacity. But overall, I don't know that if you compare it to prior other than to say we have a very low cost structure. I think our exit rate after this cycle on a companywide cost structure both at the field level and the corporate level is going to be lower than the exit. So, I think there will be some structural advantages to that that kind of gets done in tandem with how fast the pricing is going to change.

Joseph Elkhoury

Only just to add to Stu on the Gulf of Mexico you are on point Sean. I think 2017 moving any pricing in the Gulf of Mexico with a lack of activity and the depressed commodity price would be very difficult. But on land the same comments we made on production testing will be applicable to land operation.

Sean Meakim

That makes sense. And then just maybe thinking about compression, you noted maybe some stabilization there as we get to the middle part of the year. Maybe could you give us some of the puts and takes for the second half? And just thinking about the type of contingency planning that you're doing around the covenant for CCLP, if second half EBITDA maybe doesn't pick up as much as you'd hope.

Joseph Elkhoury

I would take the first question on operations and then I will pass it to Stu to talk about covenants. The focus in that division has remained on cost control like we're seeing utilization, pricing management with our customers. Overall, the working capital and the CapEx reduction and we have significantly focused on market share. In the second quarter the request of price concessions remain high, we believe that we may be at the bottom of the cycle with compression. Our headcount has really dropped by 20% since the beginning of the year through the end of June. We have restructured our sales organization to focus on the authority and accountability and customer relation so that we can crop the revenue in many basins where we are active. The natural gas prices Sean have improved in the second quarter and have remained over $2.5 touching a couple of times close to 3. So we believe that this thing should improve our near-term demand for the lower horsepower segment. We’ve seen an increased interest from numerous customers, for gas lids and wafer recovery applications. Tim mentioned this during the earnings call on Friday and those enquiries are coming from places like the Permian, the Delaware, the Scoop and the Stack. We believe that the gas prices remain positive and improves as we move into the second half, we believe that several customers will increase their budget spend over the near-term and in terms of maybe capital utilization going into 2017.

Stuart Brightman

And Sean with respect to CSI Compressco, we had the earnings conference call on Friday and announced the result of CSI Compressco and we mentioned that EBITDA for bank covenant purposes in the second quarter was $26 million. It was an improvement over where we were in the first quarter. And obviously that annualizes to a very attractive number if you take current activity levels. We believe that we’ve got an excellent relationship with our lender group that includes three of largest banks that are also on the TETRA revolver. If we thought that we are going to have issues in the second half of the year, we believe that we’ll have the support of our bank to take a look at the covenants again but at the current run rate that we’re at, we think we’re in good shape.

Joseph Elkhoury

And again Sean this as we said earlier, we’ve been very transparent with our banks. We have a lot -- great relationship and I think as what he just said in this comments, we’ve kind of laid the path of last year of how to deal with that extended cycle and we’ve continued to execute with the full support of the financial community. So we feel good about that and we tend to be conservative when it comes to managing the balance sheet.

Operator

We have no further questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Stuart Brightman for any closing remarks.

Stuart Brightman

Thank you. And as always we all appreciate the good questions and the support and we’ll look forward to updating the group in early November on the actual results from the third quarter. So thanks again.

Operator

Thank you for attending today’s presentation. The conference is now concluded. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!