Tesco Corp.'s (TESO) CEO Fernando Assing on Q3 2016 Results - Earnings Call Transcript

| About: Tesco Corporation (TESO)

Tesco Corp. (NASDAQ:TESO)

Q3 2016 Earnings Conference Call

November 04, 2016 10:00 ET

Executives

Jack Lascar - Partner and Investor Relations Counsel

Fernando Assing - President and CEO

Chris Boone - CFO

Analysts

Robin Shoemaker - KeyBanc Capital Markets

Michael Lamotte - Guggenheim Securities

Mark Brown - Seaport Global

John Watson - Simmons & Company

Operator

Greetings and welcome to the Tesco Corporation Third Quarter Earnings Conference Call. At this time, all participants will be in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Jack Lascar. Thank you, Mr. Lascar, you may begin.

Jack Lascar

Thank you Doug, and good morning everyone and welcome to Tesco's third quarter 2016 earnings conference call. Your hosts today are Fernando Assing, Tesco President and Chief Executive Officer; and Chris Boone, our Senior Vice President and Chief Financial Officer.

Before I turn the call over to Fernando, please note that we will make forward-looking statements within the meaning of Private Securities Litigation Act of 1995 and Canadian Securities Legislation. These statements are based on current expectations that involve risks and uncertainties that could cause actual results to vary materially from those expectations. These risks and uncertainties are more fully described in our 10-K and 10-Q reports filed with the SEC and with securities regulatory authorities in Canada. Also, we will be using certain non-GAAP measures during the call. The earnings release we issued this morning contains a reconciliation of these measures to the closest GAAP measures.

I'll now turn the call over to Fernando.

Fernando Assing

Thank you Jack and welcome everyone. Thank you for joining us this morning. While there are signs the market is bottoming, we're still of the opinion that the path to recovery will be slow. This highlights the importance of cost efficiency, differentiation and liquidity as a key measures of survivability and the ability to secure market share as activity increases.

I will discuss how Tesco is addressing these issues through our strategic initiatives, but first I will ask Chris to go through the financials.

Chris Boone

Thank you, Fernando. Good morning everyone. I'll begin with a discussion of our third quarter operating results and wrap up by summarizing our fourth quarter outlook. I refer you to today's news release for additional financial details on the quarter, including reconciliations of non-GAAP to GAAP measures, as well as our 10-Q which will be filed soon.

This morning we reported revenue of $30.40 million, adjusted net loss of $17.3 million or $0.37 per share, and adjusted EBITDA loss of $9.1 million. The adjustments were primarily due to factors. First, additional restructuring costs mostly from facility closures; and secondly, inventory write-downs on new hydraulic top drive finished goods and parts. While revenue decline 10% sequentially, both adjusted EBITDA and operating loss decreased at a greater rate. That's a result of lower margin, new product sales, and U.S. Tubular Services.

Let's take a look at each business line, starting with Products. Revenue decreased by 17% from the prior quarter to $17 million. The key factors were lower used top drive sales and lower sales of specialized offshore equipment. We shipped our first offshore catwalk in the third quarter, but that did not offset the second quarter sale of the offshore pipe handling system.

The third quarter ended with a backlog of nine top drives with the potential value of $7.8 million. We booked four new top drives, primarily for international markets. We also accepted a customer request to cancel the top drive order and apply the deposit to purchase used CDS equipment in the fourth quarter.

Today our backlog stands at 12 units worth $11.5 million, with recent bookings from an international client for a rig upgrade program with the potential for additional bookings in the near term.

Rental revenue increased sequentially by about 20% and rental utilization was 21% on a fleet of 118 units compared to utilization of 15% in Q2 on the same fleet size. We saw a pickup in rentals in North America and Russia. Activity increases in North America with -- were with smaller operators with limited drilling programs. These operators are not forecasted to be drilling at the same pace in the fourth quarter.

During the quarter no used top drives were sold. However, during the third quarter, we managed to convert two used top drive sale opportunities into new unit bookings, as part of the backlog reported above with one shipped during the quarter. These two particular new hydraulic top drives were sold at prices well below historical levels.

Hydraulic market pricing continues to be impacted, primarily by the availability of used hydraulic top drives in the market. The lower pricing also let us to write-down the value of existing finished hydraulic units and related manufacturing inventory by approximately $3 million. Our target remains reducing the rental fleet to about 60 or 70 units, as well as reducing the inventory of new hydraulic units. This is part of our overall strategy to improve cost efficiency, right-size the rental business to current market demand and generate cash.

Adjusted operating loss of products was $3.8 million versus adjusted operating loss of $2.4 million in Q2, with the sequential detrimental margins of 39%. The sequential margin decline primarily reflects the lower margins of the top drive sales mix and the first offshore catwalk. We expect to see improved margins on product sales next quarter.

Looking next to Tubular Services, revenue was $13.4 million, up 3% from Q2. The sequential revenue increase was driven by higher accessory and used CDS sales, partially offset by lower offshore activity. We continue to convert U.S. customers to our CDS Evolution model for the lower pricing of this offering offset some activity increases.

Pricing in North America remains at unsustainable levels, but is slowly driving competitor attrition. We're still cautious as to when we expect pricing to improve. We remain focused on rolling out the cementing accessories with CDS Evolution model, disrupting the industry cost model and improving our profitability.

The adjusted operating loss from Tubular Services was $7.2 million compared to $6.6 million last quarter. Profitability was impacted by lower offshore activity and certain ramp up costs in the U.S. as we prepared for planned activity increases in the fourth quarter. These costs included recruitment, training, crude relocation and equipment maintenance, and most are not expected to recur in the fourth quarter.

Moving next to Corporate and R&E. Corporate expenses were $5.2 million which is down about $500,000 from Q2 on an adjusted basis. Research and Engineering costs were $1.2 million on an adjusted basis versus $1.3 million in Q2, as we continue to prioritize our investments in the current market.

Turning now to our balance sheet. We had cash and cash equivalents of $90.1 million as of September 30th, down from $97.5 million on June 30th. The decline was primarily related to a delay and $3 million of international collections expected in the third quarter, but collected in October.

In addition, we had $800,000 of restructuring payments and $2 million of letters of credit that were cash collateralized. This cash collateralization was required when we elected not to approve a new credit facility offer. That decision was made because the annual costs and other restrictions were not proportional with the expected borrowing availability. Our current projections show we have sufficient liquidity to avoid any borrowing needs to support our operations for the foreseeable future.

Free cash flow was negative $5.7 million before restructuring payments. While delayed collections impacted free cash flow, we were able to reduce inventory by approximately $5 million before reserves.

Cash generation and preservation continue to be a high priority. We spent $2.6 million on CapEx, primarily for deepwater tubular services equipment and certain infrastructure projects. We expect CapEx in the fourth quarter to reflect the capitalization of catwalks to the rental fleet from inventory to support new Middle East integrated tubular services contracts that include the provision of both CDS and catwalk.

Turning to our outlook for the fourth quarter. While certain markets are showing some signs of activity recovery, Q4 will still be challenging. U.S. rig count should be higher again sequentially, but international and offshore markets will remain weak. In addition, global pricing is not expected to improve and we should not underestimate the impact this has on our profitability.

For Products, revenue is expected be flat or down slightly sequentially. That's because rental utilization of several markets is expected to decline, while the mix of new products yield the lower average selling price.

Aftermarket sales and service is expected to increase slightly as recent quoting activity has improved, primarily in North America. The Middle East and Russia. This is consistent with rig activity increases and reduced cannibalization opportunities in these markets. Adjusted operating profit is expected to be flat or slightly improved sequentially as higher margin products sales and aftermarket sales offset lower rental utilization.

For Tubular Services, revenue is expected to increase slightly sequentially from increased U.S. land activity and market share gain. Offshore, we expect activity to be sustained at level similar to the third quarter.

Adjusted operating loss is expected to be flat sequentially as improved profitability in U.S. land is offset by lower profits from accessory and new CDS sales. Corporate and R&E expenses are expected to decrease slightly sequentially with depreciation remaining flat.

Based on these ranges, we expect adjusted EBITDA losses in the fourth quarter to slightly improve sequentially. Cash usage is expected to reduce from the third quarter pace as collections improve.

With that, I will now turn the call back to Fernando.

Fernando Assing

Thank you, Chris. As I said at the beginning of the call, the market recovery will be a slow and volatile process with some markets showing signs of recovery Q4 will be a challenging one. We're also monitoring the recent increases in oil prices and how this movement may impact 2017 EMP budget.

It's important to remember that our different product lines and multiple international operations will respond to market recovery at different rate. Our strong liquidity will allow us to weather the slow recovery. At the same time we continue to invest in initiatives that should quicken our return to profitability.

We have the ability to be an early participant in recovery market by aggressively funding CapEx, working capital and accelerate technology deployment. I will be providing specific examples when I update you on our initiatives shortly.

We have completed most of our planned cost reductions and restructuring actions, but that alone will not return us to profitability. To achieve breakeven EBITDA we must scale up our revenue run rate and improve our products and services mix over the next several quarters.

In addition, we have maintained certain incremental capacities to be able to respond more quickly to a market recovery. However, we will continue to monitor the market and take additional actions as needed. We must respond quickly to key emerging market trends that favored Tesco in order to grow efficiently and effectively.

We have discussed some of the strengths in prior calls. And these are; first, greater integration of drilling services into rig operations; second a shift of capital to upgrade in rigs, particularly around automating pipe handling and mechanizing rig floors; third, increased focus on highly mobile, plug and play tools that can easily move between rigs and create much greater capital efficiency; and finally, the acceleration of real-time control and communication technologies to enhance the capabilities of top drives to increase drilling performance.

I will now walk you through some of the progress we have made on our initiatives. Within the Products segment, we continued funding the development and commercialization of our suite of rig floor mechanization technologies. We shipped our first high-end fully automated offshore catwalk and completed the in-house testing of the Pipe Drive System, or PBS. We should be performing the first real trials of the PBS in the fourth quarter and assuming these tests are successful we will be commercializing this technology next year.

Line catwalk technology adoption is growing with increased demand from -- coming mainly from the Middle East. This initial demand is coming from rentals, so we will be adding a few more catwalks to the fleet over the next few quarters, with due respect most of demand in the future to convert the product sales. And over time just like with top drives most rigs will operate with a catwalk that delivers pipe to the rig floor in a safe and automation manner.

We also continue to seek customers wanting to add differentiation and capabilities by investing in rig upgrade. For example, a number of our recent top drive bookings are for an international rig operate project. Also we're collaborating with a large Asian customer to analyze a potential multi-rig project to our top drive and other pipe handling capabilities to an existing rig fleet.

Secondly, we continue to expand the scope of our aftermarket services. The new scope includes not only repairing, but also upgrading third-party pipe handling equipment. Part of that strategy is to expand our footprint cost-effectively by adding distributors to markets in which we choose not to operate directly. Along these lines in the third quarter, we added our second distributor in Latin America and we just enter into a third one.

Not only will these distributors be an outlet for local aftermarket business, but are also that -- they are also generating opportunities for additional new and used product sales and Tubular Services.

And finally, we continue to increase the numbers of installations of our first generation ARC software. ARC adds significant drilling performance to our top drive and we have six systems under contract right now. The customer feedback remains very positive, and we're working on several additional opportunities. We will be developing further performance and drilling features that will be part of one seamless, fully integrated performance-enhancing platform.

Within the Tubular Services segment, we continued converting more land market share from conventional casing running to our automated Evolution model which requires significantly less people manpower and equipment. We're pleased with the progress of shifting customers in targeted U.S. markets to these offering in the third quarter. In fact, revenue from the Evolution offering doubled sequentially, representing nearly one-third of the drillings in this targeted market. Our objective now is to expand this offering to all our U.S. operations.

In addition, we expect conversion rates to increase as we introduce additional cementing tools in the fourth quarter. We have completed successfully in-house test of our new multi-plug launcher and are currently performing field test. In fact, the initial field tests have received very favorable customer feedback.

The combination of this launcher and our sighting entry cement swivel with the CDS will provide significant value creation for our customers, while giving us additional cost efficiencies. We have gained market share this year from a combination of our technologies, our preserved capacity and competition attrition. We respect this trend to continue.

Next, in Offshore, we are developing additional customer relationships in several markets. Our reputation as a full competitor to the two dominant players continues to grow through superior HSE and service quality, differentiated technology and win-win innovative business models.

Now on the technology side, we continue to invest despite the market conditions. We are commercializing this investment and should see improved differentiation and higher profitability in upcoming quarters. Our current R&D investments are focused on projects with shorter development cycle that provide customers clear cost savings and improved well quality. We recognize, however, that will take several quarters for all these initiatives to impact our profitability in a meaningful way.

In conclusion, we remain confident that we have the liquidity, the flexibility, the technology and strategic direction to put us back on a path to profitability. Our transition from restructuring to reconstruction is progressing. Now is the time to benefit from our financial flexibility and market position.

With that, operator, we're ready for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Robin Shoemaker from KeyBanc Capital Markets. Please proceed with your question.

Robin Shoemaker

Okay. Thank you. Fernando, this is a question really just on Tubular Services, where it seems that the increase in the North America rig count and market share gains that you spoke about is pretty much being offset one for one with declining Middle East -- sorry -- international activity.

But I do want to ask about the Middle East market, because some of the land drilling contractors have been speaking here recently about quite a bit of tendering activity, not just in Saudi and other Middle Eastern countries. And whether sometime in 2017, the rig count is expected to increase fairly significantly. So, are you seeing anything yet relating to that increased rig activity perspectively in the Middle East?

Fernando Assing

Robin, we do agree with that general assessment of the market. We see we're tracking that drilling activity very closely and is mainly for additional rigs in Saudi, Oman and Kuwait, are the hottest markets right in that region and once we have the greatest capability to attract rigs. That activity is happening, and with that we expect that subsequent to those returning to the market that some Tubular Services activity will pick up and follow similar trend.

At the same time, keep in mind, that our main operation and larger operation in the region is in Saudi. And we are reviewing at this stage the optimal business model for us to penetrate cost effectively and efficiently the Oman and Kuwait market.

Robin Shoemaker

Okay. Sure. So, just on the liquidity front, I will ask a question there. You have got good liquidity in the stock offering. I don't think there is any prospects for both financing -- bank financing or revolver as you were looking at earlier this year. So, when do you think that -- if we get into a more vigorous recovery next year that you will approach the banks again about some kind of financing vehicle or revolving credit facility?

Fernando Assing

Well, first, as we described in the press release and in the prepared statements, we chose not to enter into the new facility. We just didn't see value enough in it versus the cost and the access to credit that it would provide and under the current scenarios, the plan is now for 2017 and based on the current market conditions we think we have sufficient liquidity to deal with any of the two markets that face us. Whether it is an extended cycle because remember the oil prices back to $45 or to face the working capital needs requirement and CapEx requirement and all the reinvestments that may be needed to ramp up. We feel confident we have the capacity that we need.

Robin Shoemaker

Okay. Thank you.

Operator

Our next question comes from the line of Michael Lamotte from Guggenheim. Please proceed with your question.

Michael Lamotte

Thank you. Fernando, if I can maybe follow-up on the automation and in particular the comments that some of the U.S. land drillers have made this quarter about upgrading programs, you mentioned it in your prepared remarks. But I am curious as to how the tone of those conversations is going? And what you think may be the pace of orders could look like in the first half of 2017 as some of those programs actually come to fruition?

Fernando Assing

Well, we can talk certain about the upgrade trends. And there are two -- I think there are two sides of this, Michael. One is we the upgrade programs in U.S. over the last couple of years of kind of followed the certain fashion -- very specific fashion. Price share or rates in increase, pad -- adding pad capabilities walking capabilities to rigs and so on. You know what those upgrades are. We believe in Tesco that some of that the future ways of upgrades to more completely unlock the rig performance potential has to do with pipe handling and tubular services, integrating all of that rig into a mechanized rig will be key to get the maximum performance out of the rigs and to more clearly differentiate between rig standards and families.

So that's that -- that's one thing we believe is going to be happening very soon. That's going to be fueled by the fact that we will not have sufficient people in the industry to continue to man all the next couple of hundred rigs are show up.

And then on the other side of that demand equation you have increased pressures for the non-dominant players to compete with the dominant players. In every rig, we know that H&P, Nabors, and Patterson and a couple of niche smaller players have rigs that that have some of this capability already installed, and therefore there are more efficient. Therefore they need less people in the rig floor. And the other rig owners are going to have to upgrade the rigs to compete with this.

Now interestingly if you look at the market share of the dominant players, it has remained around 32% to 34% at the peak, at the bottom and today. So which means that 65% of the market is not in hands of these three or four dominant players, and that's the market that is prime for record rates, and it will come sooner or later. We can argue forever about the pace and the timing, but not about the fact that all those rigs will require significantly better rig floor.

Michael Lamotte

Right. Right. Okay. And then on the offshore side, some of the subsea companies have been talking about the tie-back opportunity. And even some of the bigger operators have talked about fast cycle times and great returns on tie-backs.

I am wondering if, you know, that presents any visibility, certainly from a subsea well count -- a deepwater well count standpoint, it looks like there could be upwards of 15% to 20% growth in 2017 versus 2016 that's tie-back driven. I am just wondering if you are seeing any of that opportunity or if that is cause for or perhaps some optimism on the offshore side next year.

Fernando Assing

Well, to the extent that that type of activity is in the markets that our -- within our five, six offshore markets, it will. And we have heard some of that conversation the Gulf of Mexico, some of that has been ongoing for years in the North Sea which is a very common thing to do. Yes, to the extent that translate into additional drilling activity we should benefit. And also remember our mission hasn't changed which is to increase market share offshore one beat at the time.

The best reference is the Gulf of Mexico. And I'll keep highlighting this that, you know, four, five years ago our market share in the Gulf of Mexico was zero or something near zero. And today it is very significant. It is in the teens -- in the low-teens. And that market share increase has happened as the rig count have decreased 60% or 70% within the same period of time. So we shows the -- how committed we are to grow market share offshore. So an increase in activity, I think is a reasonable assumption your side an increase in activity will benefit Tesco.

Michael Lamotte

Okay. Great. Thanks, Fernando.

Operator

Our next question comes from the line of Mark Brown with Seaport Global. Please proceed with your question.

Mark Brown

Good morning.

Fernando Assing

Morning.

Mark Brown

I -- Fernando, I just wanted to ask about Russia. The -- just given your history -- your company's history in that country, it seems like it is kind of off the radar a little bit in the commentary. Is there -- are you seeing potential opportunities there on the top drive either sales, rentals or aftermarket, or are there issues or risks that what you see getting in the way?

Fernando Assing

Well, Russia is an interesting market. In fact it was an early reactor out of the cycle. We still believe the long-term potential of the market is vast. And it's a market that is craving for technology. The technology lag is 10, 15 years and we're already there. So, we could be one of the conduits to get technology into the country. In fact, we are playing that role right now. We have sold more than 150 top drives over the last five years to that market, and we think it's going to be a bright spot next year.

All this putting aside any potential geopolitical or sanctions risks that we just can simply not control. So we are optimistic, but prudent about how we forecast Russia.

Mark Brown

Okay.

Fernando Assing

It is certainly -- just to give you an additional point of reference is, in 2012/2013 Russia was about 30% of Tesco revenue at some point in time, driven by product sales. And then I don't think it's going to grow back to be that relevant to us again, but certainly is the market that this is paying its bills. We are making actually a bit of money in that market. And the team -- the local team is doing a phenomenal job of navigating the tremendous complexities of operating that market, staying away from the sanctions and continue to position Tesco very strong in that place.

Mark Brown

Okay. Thank you. And I -- you mentioned that you were the process of negotiating with a large Asian customer. I think that is what you said. And I was wondering if you could maybe elaborate on what sorts of products, technologies, what the scope would be potentially, when -- what the timing would be, if those were to come to fruition?

Fernando Assing

Yeah, Mark, we will, of course, give the location and the name of the client, private at this stage. But we can tell you it is a relationship we have been working for years. As like with many things in China, it just takes a lot of [indiscernible] effort and going through all the protocol of developing the relationships. And I think that's actually what Tesco has done differently in China compared to other international companies.

In China and other Asian markets, these are particular large fleet holder that has an installed base of rigs that are not new and they are going through the old economical evaluation of deciding what to do on. As we have said in prior calls, the decision to buy new rig it is just very difficult to make these days, because the economics do not support that decision. $25 million, $30 million buying a rig, you will never get that investment back at the current day rates. So, this particular client that has a large fleet, has a strong drive to get every mileage they can out of that.

And guess what, one of that -- to liberate some of the potential of that fleet, one of the most cost efficient ways to do that is investing pipe handling mechanizing the rig floor and moving pipe faster even an older rig and has significant impact with very limited investment. And because our technologies are designed to be plug and play highly mobile, the capital efficiency is even increased. And also our technologies are very easy to use, very safe to use and I think this client is very impressed with all the impact that all these technologies can cause.

Now timing is, it is a little trickier to say. This is very -- it's early stages. And it takes time in that part world to go through all the proceedings and the bureaucracy that is normally associated with these companies.

Mark Brown

Okay. Thank you. And if I could just ask one more. Congratulations on the shipping the offshore catwalk. And I guess, do you expect to see additional orders? And I think you mentioned you are seeing increased demand for the land catwalk, the automated pipes and I was wondering if you are seeing the same on the offshore side.

Fernando Assing

The demand patterns are actually quite different. If you look at -- we're delighted with shipping -- we shipping the offshore catwalk we think can be a transformation offering for us. Three are very few suppliers that can do that, we think the customers are impressed with what we did for them, how fast we did for them, and how sophisticate the product is. We now need to watch how it operates and babysit for a while and we may find additional opportunities within that same client. However, you all know how tough the life offshore in these days and I don't think that -- those clients will be spending any cap -- any significant CapEx over the next few quarters. So glad with offshore, glad we're once again an offshore pipe, rig floor mechanization company. I would not bet in continuous bookings of this kind of equipment over the next few quarters.

On the land side, it is a little different. The CapEx associated with this equipment is a little lower. The initial demand is also come in the form of rentals. So as we said in the prepared remarks, the -- and that where I want to monetize. And in fact for us, deploying some of the early demand in form of rental allows us to keep a little more operational control, be sure these things run perfectly and they become the standard in the markets in which they are deployed, which then should in turn create the benchmark for product sale following those new standards that we intend to set.

Mark Brown

Okay. Thank you very much.

Operator

[Operator Instructions] Our next question comes from the line of John Watson from Simmons & Company. Please proceed with your question.

John Watson

Good morning.

Fernando Assing

Hi, John.

John Watson

Fernando, regarding your prepared remarks on pricing, could you compare and contrast pricing for tubular services and for top drives? Does the excess service capacity comment apply equally for each segment?

Fernando Assing

Well, it’s certainly applies to both, and to what extent is it difficult to compare. The market dynamics are actually very different. Certainly in both businesses the -- and we are talking tubular services in the service side and top drive on the sale side, for both offerings, there is a significant installed capacity in the market right now. So we think it's going to take a while for some of that capacity to drain, either go back to being utilized or more permanently disappear from the market.

In the case of top drive sales, we have seen couple of top drive sales companies just evaporate over the last couple of years. I wouldn't be surprised if couple of more and leave the market immediately, and that will help. In the case of tubular services, we're seen similar trends. Some competition -- very meaningful competition, attrition in some market in North America and in couple of other important market. But it will take a while John, and I think that's the main message out to be this call and our last call is that we are very cautious about price.

John Watson

Okay. That makes sense. And secondly, could you elaborate on the customer mix within your current top drive sales backlog? Is it similar to your rental business in NAM, where in Q3 there was a larger proportion maybe small to medium sized players?

Fernando Assing

It is actually very different. The top drive sales, the sales are all or mostly, we should say, international transactions really Eastern demand. Middle East and beyond and that has been the case over the last, I would say, a couple of years. Very strong trend towards the east, and our sales are more and more for rig upgrades rather than brand new rigs.

The -- in the case of rental, the demand tend to be very a market specific. Our traditional rental clients were the large national oil companies, particularly from Latin America and Russia and Indonesia, and that has actually changed dramatically over the last few years. Pemex has, I think, two rigs from the 60 or 70 they had a couple of years ago. Pertamina has very little activity, which was a traditional renter in Indonesia. And the client mix -- Russia has significantly changed as we have equipped with brand new top drive, most of our traditional rental client.

John Watson

Okay. That is helpful. I will turn it back. Thanks.

Operator

There are no further questions in queue. I would like to hand the call back over to management for closing comments.

Fernando Assing

Thank you. Thank you for your interest in Tesco, and we look forward to speaking to you again during fourth quarter conference call.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

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