FairPoint Communications Q3 2007 Earnings Call Transcript

FairPoint Communications, Inc. (NASDAQ:FRP)

Q3 2007 Earnings Call

November 2, 20078:30 am ET

Executives

Brett Ellis - Communications

Gene Johnson - Chairman and CEO

John Crowley - Executive Vice President and CFO

Peter Nixon - President

Walt Leach - EVP, Corporate Development.

Analysts

Jonathan Chaplin - JP Morgan

David Barden - Banc of AmericaSecurities

Tom Seitz - Lehman Brothers

Simon Flannery - Morgan Stanley

Barry Sine - Oppenheimer

Operator

At this time, I would like to welcome everyone to theFairPoint Communications third quarter 2007 earnings conference call. (Operation Instructions) Mr. Brett Ellis, youmay begin your conference.

Brett Ellis

Good morning, everyone, and thank you for joining theFairPoint third quarter earnings conference call. Participating on today's callare Gene Johnson, our Chief Executive Officer; John Crowley, our ChiefFinancial Officer; Peter Nixon, our President; and Walt Leach, our ExecutiveVice President of Corporate Development.

Before we begin, I would like to remind you that certainstatements made during this conference call, which are not based on historicalfact may be deemed to constitute forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995.

Because these forward-looking statements involve known andunknown risks and uncertainties there are important factors that could cause actualresults, events or developments to differ materially from those expressed orimplied by these forward-looking statements.

Such factors include those risks described from time to timein FairPoint's filings with the Securities and Exchange Commission includingwithout limitation the risks described in FairPoint's most recent annual reporton Form 10-K on file with the Securities and Exchange Commission.

All information is current as of the date of this earningscall and FairPoint undertakes no duty to update this information. In addition,FairPoint's results for the quarter ended September 30th, 2007, are subject tothe completion and filing with the Securities and Exchange Commission of itsquarterly report on Form 10-Q for such period.

Having said this, allow me to introduce Gene Johnson, ourChairman and CEO.

Gene Johnson

Thanks very much Brett. Good morning, everyone. We have alot to talk about today and a number of positive developments we want to talkabout, so let's get right into it.

As we did last quarter I'm going to focus my comments onreviewing the status of the transaction and providing a brief regulatory updatethen Peter will provide or John will – Peter, I guess will come in second andprovide more detail about the merger and the transition, and then John willconclude by discussing our financial results for the quarter.

Walt is going to be available to answer any questions thatyou might have as well. The operation results and the financial results that wereported today we think once again demonstrate our ability to achieve bothoperational and financial success.

I continue to be very, very pleased that we are running ourbusiness well even while working our way through the regulatory process andplanning for the close of the transaction with Verizon. And I think the strongfinancial results we had this quarter enable us again to add to our cumulativecash available for dividends and we're pleased about that as well.

We're knee deep literally in making steady and significantprogress in all areas needed to make the acquisition a success. And thatincludes among others, the planning, design and building of the system,preparing for the systems integration, testing the systems and the variousprocesses we'll be using, engineering our rollout of expanded broadband serviceand hiring many, many people for our team.

We had outlined in detail our broadband expansion plans,responded to literally thousands of data requests by the Public UtilityCommissions in the three states and have settled with many interveners whooriginally had concerns about transaction.

Just this week we completed the last of the public hearingsin the region and the public officials in all three states are diligentlymoving forward in the public interest. And while we're still experiencingsignificant resistance to the merger proposal from certain interveners, we haveearn the support of many more and have received the endorsement of many groupsacross the region.

We think we've made a very strong case for the transactionbased on the merits we outlined from day one including job growth and we'veannounced the creation of 675 new FairPoint jobs throughout the entire region.Of course, suppliers and vendors who will be supporting us will create manyadditional jobs in the region, so we think that's one of the real strongbenefits for this transaction.

Broadband expansion, we previously discussed this at length.We're expanding the service in areas where broadband is currently offered, aswell as, offering service for the first time in more rural areas that currentlyare underserved.

And I would also note that we have announced our plans foran advanced broadband network using IP and MPLS infrastructure in Maine, NewHampshire and Vermont and that platform will create the foundation really for alarge number of highly reliable efficient business-class services and will alsobe expandable and will provide the foundation for the growth of our broadbandservices.

We're also supporting economic development in the regionthrough a number of initiatives including strengthening collaborations betweenthe public and private sectors, building demand driven and broadband-enabledstrategies, empowering local leadership to identify their region's uniqueassets and resources, and leverage them for economic benefit and global economyand expanding local community economic development capacities through knowledgetransfer.

And we've announced or in the process of announcing we'venamed anyway our senior economic development officer in the region a longtimeFairPoint employee and we'll be announcing that publicly in the next few days.

So as I previously said, we think we have presented acompelling case to regulators in northern New England, while becoming noassurance concerning the regulatory approvals or their timing, we continue toanticipate the transaction will close on schedule on January 31st, 2008.

So now, I'm going to ask Peter to discuss the progress ingreater detail.

Peter Nixon

Thanks, Gene and good morning, everyone. I'm going to updateyou on several topics related to a transition and the topics, I’d like toaddress today include system readiness, business readiness, conversion andtraining partner readiness.

Let me start with system readiness. I'd like to begin byproviding a status of our operational support systems or otherwise known as OSS.Today, we have completed our third build we have one more build remaining.

All OSSapplications associate with this build have been delivered to test groups orextensive product and integration tests will be performed. Build III includescore functionality for over 65% of planned functional components and 79% ofplanned interfaces.

Let me describe examples of core business functions that ourOSS must be capable of supportingduring a process are being tested. We must have the ability to scheduletechnician appointments. This capability exists in our Build III environmentand is supported through integration between our customer relationshipmanagement and workforce management systems.

We must have the ability to monitor system network elementsand trigger false alarms, which will automatically generate trouble ticket.This too exists within our Build III environment. This capability is deployedthrough the integration of individual network elements through our networkmanagement and trouble ticketing systems.

Build III introduces our ability to test automatedprovisioning for local service orders, which supports both our retail and ourwholesale customers. The team is currently testing orders that flow betweenorder management, activation, provisioning and inventory management.

In addition to our OSS,we have business support systems or BSS. We have also completed our third buildwith one build remaining for this. Our BSS is comprised of billing and CRMsystems.

Build III represents the completion of roughly 65% of corefunctionality and planned interfaces. We are presently testing the ability fordata to move unaided between our ordering, billing and trouble ticket systems.

Let me move on to business readiness. We continue to be ontrack for building our organization. We have hired over 85 new employees,comprising mostly a Vice President and director-level personnel to assist inthe identification of the desired system functionality’s, development of themethods, procedures and practices, and organizational planning and development.

We have developed draft business cutover readiness plans,which will prepare us for operating the business while utilizing Verizonsystems, as well as, operating under our new systems. And we have developeddraft-training plans for close and cutover readiness.

Regarding conversion, we have received 158 of the plannedfirst data extracts from Verizon per our agreed upon schedule there are 10 remainingextracts under-valuation as Verizon, Capgemini and FairPoint determine if thedata is necessary within our operating environment.

Of the data we have received, we have successfully executedour conversion scripts total 61% of the data extracts into our staging orlanding databases. More importantly, we have taken representative data fromVerizon's core systems now residing in FairPoint's landing databases and haveloaded it into our target systems.

Verizon core systems consisted of three ordering and billingsystems, two finance and supply chain systems and two OSSsystems. From eight and -- data from eight systems successfully converted intoFairPoint's target systems consisting of Siebel, Kenan, E-Business Suite andOracle Suites respectively. This is not an easy task and requires strongteamwork and dedication between FairPoint, Capgemini and Verizon.

The teams are well organized and disciplined and workingtogether. They have established processes to identify and resolve issuesquickly.

Recently, the teams met to review the processes used withinthe first data extract. This is the first of many planning sessions to continueto improve the process and determine the most efficient means to transitionfrom Verizon systems to FairPoint's.

And finally training partner readiness, FairPoint conducteda demonstration of our wiser wholesale gateway to the CLEC community. Thisdemonstration enabled the CLECs to see GUI interface which supports the orderand trouble ticketing processes. And we have also completed our firstdiscussions with the CLECs who will utilize electronic bonding, or e-bonding tocommunicate with us.

That will conclude my portion of the call today. I'd nowlike to turn the call over to John to discuss the financial and operationalperformance during the third quarter. John.

John Crowley

Thanks, Peter. Good morning everybody. I'm pleased to reportto you another good quarter ahead of guidance for Classic FairPoint withcontinued progress on the merger with Verizon, New England.

I'll walk you through the financial results for the first --for the third quarter first. Revenues were up 7.1% this quarter from theprevious year to 75.7 million. Excluding the contribution from acquisitions,revenues were up 4.4%, compared to the third quarter of 2006.

The components of the revenue increased in the quarter,excluding acquisitions where [intrastate access revenues] increased $2.8million, data and internet revenue increased $1.4 million and long-distancerevenue increased 1.1 million. These increases were partially offset bydecrease in interstate access revenue of $1.5 million and decrease in othermiscellaneous revenue of 900,000.

Operating expenses excluding depreciation increased $13million compared to the third quarter of 2006 excluding the impact ofacquisitions. Of that $12.5 million of the increase is due to the Verizonmerger-related expenses and therefore not core operations.

The remaining increase is principally due to an increase ofcost of goods sold as the changing mix of our revenue occurs of $600,000, baddebt expense of $600,000, materials and supply expense of $300,000 and theseincreases were partially offset by decreases in employee related costs of$600,000 and decrease in billing expense of $500,000.

Adjusted EBITDA was $34.6 million for the quarter afteradding back the $12.5 million of merger-related expenses, which is above the$29.9 million for the second quarter of '07 and ahead of the $33.4 million forthe third quarter of the prior year.

There were two moving parts in the quarter relative to lastyear that I want to talk about. First, we had a large favorable settlement ofintrastate access charges in the quarter in the amount of $4.4 million.

As you probably know, disputes on access revenues are prettycommon these days and while we routinely agitate for a better access data,argue for more favorable traffic models and negotiate payments this was unusualonly for its size.

Offsetting this was the decline in distributions of $2.1million because of the sale in the second quarter of Orange Poughkeepsie. Netloss for the quarter was $0.15 on a per-share basis. The loss is principallyresult of $12.5 million of merger related expenses in the quarter.

However, there was a non-operating item in the quarter, $5.7million loss on certain interest rate swaps we entered into because of themerger. This is a non-cash item and relates to the January '08 financing.

These swaps, which we've been entering into, are contingentupon the closing of the merger and therefore will not take effect until themerger is completed. Under GAAP, we're required to recognize the change in thefair market value of these particular swaps through the income statement.

Let me just explain the business activity behind theaccounting. We have started to hedge the interest rates on the committed bankfinancing for next year. With the $200 million during the summer in contingentinterest rate swaps at about 5.375%. Those are the underwater swaps.

Since that time, we have added $400 million of additionalcontingent interest rate swaps at rates nearly 1% lower than the ones that wedid back in July. We also have about $600 million in swaps on our existing debtthat already get hedge accounting and we will leave those in place after themerger. So we're making great progress on giving us a highly predictablecapital cost upon the merger.

Before I get into a discussion of cash available fordividends, I want to remind everyone that because of the accounting treatmentof the merger The systems build out the OpEx and CapEx impact recorded in theGAAP financials are different from the cash flow impact.

The accounting expense or the accounting costs rather areslightly higher than the cash outlay. In the quarter, we generated cashavailable for dividends of $21.5 million and we declared a dividend in thequarter as $13.9 million. So we added to the cash available for dividendscushion as we had indicated earlier this year.

We invested $16.3 million in the quarter in capitalexpenditures of which only $6.8 million was deducted from cash available fordividends because as you know under our credit agreement merger related cash,capital expenditures are excluded from that calculation.

Also in the third quarter, we recognized an additional gainof $2.7 million related to the release of the escrow account for the SouthernIllinois Cellular Corporation Investment, which we sold last year.

In addition, during the third quarter we completed the saleof the Yates City Telephone for $2.5 million, which resulted in a gain of $2.2million, and as we mentioned our last quarter's call, Yates City Telephone hadless than 500 access lines. So at the end of quarter, we had $51.2 million ofcumulative cash available for dividends.

At the end of September, our access line equivalents, whichare, access lines plus HSD subscribers but exclude video subscribers wereapproximately 310,000 versus 309,000 rather last year.

In the quarter excluding acquisitions we added over 1800high-speed data subscribers. Our HSD ARPU remained consistent at $41 to $42range. Voice access lines excluding lines acquired or disposed of in the last12 months decreased 4.8%, compared to September 30 of last year.

Regarding guidance for the rest of the year, we continued toexpect revenues of $281 million to $284 million and continue to expect ouradjusted EBITDA to be in the range of $123 million to $125 million.

We estimate the capital expenditures for the full yearexcluding the expenditures related to the merger will be approximately $29million to $31 million as we've said all year.

As to the transition as Gene and Peter have said, the workis progressing as planned. The transition is on budget, and so through January31, we're still expecting nearly $110 million in cash costs before the Verizonreimbursements for the new systems and the hardware.

The total systems budget, that is the aggregate of the preand post-close investment is unchanged at approximately $200 million. Theremaybe and in fact probably will be some timing differences, particularly as towhat falls before or after the year end but the overall budget doesn't change.

As Gene said, we're very proud of the performance we put inso far at Classic FairPoint. We're diligently preparing for the merger and thetransition and are looking forward to integrating these two businesses into amore successful, efficient systems-based, 21st century telecom company.

And now we are happy to take questions.

Question-and-AnswerSession

Operator

(Operator Instruction) Your first question comes from theline of Jonathan Chaplin.

Jonathan Chaplin - JPMorgan

Good morning, guys. Thanks for taking the question. I amwondering if you can give us a quick update of what the access line DSL trendswere in the acquired properties this quarter.

And then secondly, the comment that I saw in the pressrelease around expected timing said there was still a good prospect it wasgoing to close something along the lines of there's a good prospect's going toclose before year end.

I can't remember how you've discussed it in the past, justin terms of the language. Are you a little less convinced that it will closebefore year-end? I'm just wondering if you can give us an update of what thiswas timing hurdles are between now enclose.

Gene Johnson

Jonathan, it's Gene. I'll take the second question first. Aswe often do, John is we'll take first question last. We think the regulatoryapprovals will all be in during December but in most -- there's generally awaiting period between the time you get the regulatory approval and the timeyou were about to close.

And so we still anticipate closing at the end of January,which is what we've said all along and we expect to close in first quarter ofnext year. So we see no reason -- it clearly will not close during this year.We think it will close early in the first quarter, probably in January of nextyear.

Jonathan Chaplin - JPMorgan

Okay.

John Crowley

Jonathan, I hope you'll permit me this quick joke. I assumewhen you ask about the acquired properties you're not talking about Germantown.

You're probably talking about Spinco. At this point becausewe are reporting earlier this quarter we only have access line information onVerizon or New England or Spinco.

Spinco finished with 1,417,000 access lines, and 1,623,000access line equivalence. They now have 206,000 DSL subscribers. So inpercentage terms that are 7.7% year-on-year decline in voice lines and a 16.3%increase in DSL accounts. That gives them a 14.5% DSL penetration.

So you know, as you can imagine our marketing people arepretty excited about getting in there, and expanding that pie. I don't have any first or thirdquarter financials yet. No revenue or ARPU figures. But I can, since we nowhave the second quarter numbers.

I'll just mention to you for the first half Spinco did $190million in EBITDA, which is up about 2% from the year before in line with asimilar revenue increase.

If you pro forma their EBITDA for retiree re-obligationsthat we aren't taking that is the people who have already retired thereadjusted EBITDA was $211 million. Their obligation is to get us third quartersby November 15th, so we don't have those yet.

Jonathan Chaplin - JPMorgan

Great. Thank you very much.

Operator

Your next question comes from the line of David Barden.

David Barden - Bancof America Securities

Thanks guys, and good morning. I guess, kind of alongsimilar lines, you know, just Gene in terms of the process know, there were alot more disclosures in this release about just in case if things do take alittle longer, we are going to have to draw on our credit facility etcetera,etcetera.

Kind of mentioned that you're seeing quote unquotesubstantial resistance, I guess it seems as though maybe we're not as far downthe path as we would have liked at this stage, or maybe there's greaterresistance at this stage of the game than was anticipated.

I guess other than just saying is our target was January30th, beginning of this process, so that's what it still is.

I guess, why you feel like you've got that comfort level, isit because you've gotten 60% or 70% or 80% of the interveners on side andyou've got daylight to these negotiations with the staff from the regulatorsand everything seems to be shaking out pretty well? Because I guess that'sgoing to be just a real issue for people to try to get their arms around,appreciate some comment there.

And then second, I guess on the results this quarter it didlook, I think, there was this $4.4 million one-time revenue benefit in accessthat flow down through the adjusted EBITDA and into the CAPD this quarter.

The guidance didn't get adjusted for that so the implicationis that the back half of the year is actually looking marginally softer thanyou expected. Could you talk about how the economic effects you think areplaying in your territories and how that might be having any impact on yourexpectations for the acquired properties or to be acquired properties? Thankyou.

Gene Johnson

Thanks, Dave. I guess you kind of answered the question forme in the way you asked it, but basically, there's been tremendous progresswith the interveners. I wish could I give you a percentage, but by far most ofthe intervener.

Many of those have come out publicly, not only settling thecase, but publicly saying they're in favor of the transaction and would like tosee it go forward. So that's a major change from the last time we talkedpublicly about this. Secondly, we do see a path towards getting this deal done.

The January date that I've given you is not based on that’sthe date we've always had in mind. If that date -- we thought there was areason to change that date, we would. Right now we feel very comfortable thatthe January date is still a good date.

Now, it's difficult for me to get into any more discussionthan that, because obviously we're at a -- what I would call a delicate stageof the transaction with the commissions, and there's a path direction,methodology for us to proceed, and we're doing that, and that's done in privateand not in public. So I think I'll stop at that point.

John Crowley

Hi, David. This is John. With regard to the remaining of theyear guidance, the remainder of the year guidance, we decided not to changethat because would it not be particularly a material change but clear, asyou've indicated, we will come in at the very high end of guidance.

We're really quite pleased with the operating results so farthis year, and we have every reason to think that will continue.

You asked a very interesting question about the economiceffects. As we reported, our bad debt expense was slightly higher in the thirdquarter, and so I think, clearly that's one of the results of the currenteconomic times. But as far as our access line changes, that was really -- therewere a whole bunch of moving parts in there.

One was that we had some account number cleanups in one ofthe recent acquisitions when we converted to our billing system. It had neverbeen converted to one of our billing systems.

That represented probably 3/10th of a percent of the lineloss. Then we had a very unusual seasonal pattern in the northwest thisquarter. Aim guessing that winter must have come early out there. And thenfinally, we had an increase in cable VoIP in one market in New York, which Ithink is probably -- we'll probably see, from what I'm hearing, probably oneother market where that will occur in the net probably should plateau.

Operator

Your next question comes from the line of Tom Seitz with LehmanBrothers.

Tom Seitz - LehmanBrothers

As you currently understand the schedule, I undserstandthings are influx all the time, but can you tell us when you say you expect thePUC votes in the three states? Is it just December broadly or are thereactually dates that you know, we can look to see if maybe there are some newsaround. And then do you expect the FCC to wait until the PUCs have voted asrequested by some member of congress?

And I guess, my final question is. You now, I have yourfingernails dirty and at this point are you still comfortable with the synergyguidance that you've laid out before for the -- not the Germantown transactionbut the Spinco transaction? Thank you very much.

Gene Johnson

Sure, Tom. I'll take that. At the end my comments, I'll askWalt to talk a little bit about the schedule and the states -- the threestates. I think he has a better handle on those three dates than I do.

But as far as the FCC is concerned, I do not believe the FCCwill wait until the states have issued their approvals before they act on this.I think -- I'm quite hopeful that will happen before the states act on this.

As far as the guidance we've previously given on thesavings, yes. We feel quite comfortable now that our fingernails are quitedirty and not only our fingernails are dirty, a lot more is dirty on thistransaction. We've worked really hard on it and we feel increasingly confidentthat our savings projections are clearly in line.

With that, Walt can you give us some sense of the schedulein the three states of when you expect to actually receive the approvals?

Walt Leach

Sure. As it relates to the state approvals, they are allthree states are pretty much on the same time line. And that is that we wouldexpect an order from the two commissions in New Hampshireand Maine and from the board in Vermontsometime in December.

There is not a specific target date set up for each of thosethree commissions. Based on what we're hearing; now we expect all three wouldoccur before Christmas, but sometime in December.

Again as you heard earlier in the call there's typically a30-day non-appeal period that we would wait to lapse before we'd close. Andthat's why we're shooting for the end January based on everything that's inplace today.

On the FCC side, we do expect the FCC approval to occurprior to the state approval probably sometime in the last half of November orearly December, based upon a recent meeting that we had with the FCC. So that'sour view based on everything we know today.

Operator

Your next question comes from the line of Simon Flannerywith Morgan Stanley.

Simon Flannery -Morgan Stanley

Thanks a lot. Good morning. If you could talk about Spinco alittle bit more, you signed at the low broadband penetration as a bigopportunity. Do you have updated sense of what the availability of broadband isin those markets from Verizon and secondly, where we are on cable telephonyoverlapping those markets? Thanks.

Gene Johnson

Peter can answer the -- can you answer the second question,Peter? Do you have the facts on that?

Peter Nixon

Well, I have some information.

Simon Flannery -Morgan Stanley

Okay. Between us we'll see what we have to give you a directanswer. About roughly 62% of their service area in those three states is servedby broadband to date. So we've announced plans to substantially increase thebroadband investment and over the MPLS network and to provide availability --excuse me -- availability to a lot more customers. Peter, can you add anythingon the cable overlay?

John Crowley

I’ll tell you. But let me talk about that, because I've gotsome records on that, Simon. Here's what we've done on the cable overlay. Youknow that, we and Verizon measure this separately. We actually, you knowbecause we're a small company because we're in the communities, what have you,we actually measure where is there cable and we do secret callers, will callthe cable company and say, Gee, can I get cable modem service on 25 main streetwhat have you.

So we have some statistics on that. And our experience isthat we have about, let me look that up, we have about 51% cable modemcompetition in our markets. So here's what we've assumed for Verizon. They usea different technique.

They use what you might call the FCC technique, which is ifa county has a cable operator it's assumed to have blanket cable coverage andmodem coverage what. We've assumed is that given their access lines break outabout 44% urban and about 56% rural.

And we define urban as a city of larger than Ellensburg, Washington or continuous to a city largerthan Ellensburg, Washingtonor town with more than 15% see like market share.

We’ve assumed that in the urban areas that there’s in fact a100% cable and cable modem competition and in the rural areas we’ve assumedthat the competition is compare to our 51%.

So on a weighted average basis that implies that’s abouthigh 60s cable modem competition in the markets.

Operator

(Operator Instructions) Your next question comes from theline of Barry Sine with Oppenheimer.

Barry Sine -Oppenheimer

Good morning. Just going back on the merger process. Thelanguage in the press release seems a bit more cautionary than you've been inthe past.

But your verbal comments seem as optimistic as you've been.Is there any change in the outlook in terms of the acquisition? The nextquestion I don't know if you have the data on this or not.

Do you know the total number of interveners they have beenin the three states? How many have you settled with how many are they’re to go.And have you given up anything material in terms of your settlements with them?

Gene Johnson

Yes. Broadly, we had interventions from the roughly 38independent ILECs in the three state we settled with all 38 of them. We hadinterventions from the utility companies in the states. We've settled with allof them.

Peter Nixon

Most of them.

Gene Johnson

Most of them, Peter says. We settled with certainly thebiggest ones and the ones that were the most problematic. We had a number ofCLECs that intervened. We settled with most of those announced thosesettlements.

Let's see. Broadly, those are kind of the three groups, themain groups. The other two groups of interveners would be the public advocatesand the union. And I think, I'm going to stop at that point.

I think for the most part we've settled with -- by far thelargest majority, I'd say off the top of may head, 80% to 90% of intervenersand those are few left that we haven't settled with at this point.

I would not make any further comments about the transaction.I think that unfortunately we live in a world of caution. And so we're justbeing cautious in our comments. We think appropriately so.

But I think you can tell that we believe still that thistransaction will close on schedule. And I think I'll stop at that point, Barry.Are there any other questions?

Operator

There are no further questions at this time.

Gene Johnson

Good. Well, see no one else is in the queue, and our goal toget you off the phone so you can go participate in other of these calls today.I would like to thank you very much for participating in the call.

Thank you for your support of the company. And we lookforward to talking to you on the next earnings call after the transaction isclosed and we can give you an update at that time on exactly where we are inthe integration.

Thanks very much and have a great day.

Operator

This concludes today's conference call. You may nowdisconnect.

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!