Crosstex Energy Q4 2007 Earnings Call Transcript

Executives

Chris Bell - IR Specialist

Barry Davis - President and CEO

Bill Davis - EVP and CFO

Bob Purgason - COO

Analysts

Sharon Lui - Wachovia

Darren Horowitz - Raymond James

Noah Lerner - Hartford Capital

Sean Wells - RBC Capital Markets

Yves Siegel - Wachovia

Crosstex Energy, Inc. (XTXI) Q4 2007 Earnings Call February 29, 2008 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Crosstex Energy Fourth Quarter and Full-Year Earnings Call. (Operator Instructions). I would now like to turn the presentation over to your host for today’s call Miss. Chris Bell, Investor Relations Specialist. Please proceed.

Crystal Bell

Thank you, Carissa, and good morning everyone. Thank you for joining us today to discuss Crosstex’s fourth quarter and full-year 2007 results. On the call today are Barry Davis, President and Chief Executive Officer; Bill Davis, Executive Vice President and Chief Financial Officer; Bob Purgason, Chief Operating Officer; and Jack Lafield, Executive Vice President, Corporate Development.

Barry will begin our call with some brief introductory remarks and a high level overview of our fourth quarter and full-year performance. Then Bill will discuss detailed financial results. Bob will follow with an operational update and review of our 2007 accomplishments. And finally, Barry will briefly discuss the outlook for Crosstex for 2008. At the end of the call Barry, Bill, Bob and Jack will answer your questions.

Our fourth quarter and full-year 2007 earnings news release was issued early this morning. For those of you who didn’t receive a copy, it’s available on our website at crosstexenergy.com. If you want to listen to our recording of today’s call, you have 30 days to access the replay by phone or webcast on our website.

For legal purposes, I must remind you that some of the statements made in this call are forward-looking and as such are subject to many factors that could cause actual results to differ materially from our expectations as reflected in the forward-looking statements. These factors are described in our SEC documents and we undertake no obligation to publicly update or revise the statements.

I will now turn the call over to Barry Davis.

Barry Davis

Thank you, Chris. Good morning and thank you for joining the call. In the beginning of 2007, we said that the year would be a building year, and it was. I’m happy to report that we have successfully completed the 2007 portion of our building. We invested $390 million in organic projects last year and there are many more organic opportunities ahead. In fact, for 2008, we estimate we will spend at least $250 million on organic growth projects.

Our existing assets continue to perform well in 2007 and I’m pleased to report that the Partnership’s distributable cash flow reached a record high in the fourth quarter. DCF was $41.1 million for coverage of 1.6 times the amount required to cover the increased quarterly distribution of $0.61 per unit, and cash flow from operations before maintenance capital and amortization of put premiums increased 97% for the same period.

Before I turn the call over to Bill, I want to briefly review highlights of the year. In 2007, we continued to strengthen our position as a leading midstream player in the North Texas Barnett Shale Play and in Louisiana. Our North Texas gathering system volumes rose 240% over 2006 and we increased the capacity of our North Texas Pipeline by 50%.

We also made some important additions to our asset base in Parker and Johnson Counties. We completed our 24-inch Red River pipeline system expansion to Crosstex LIG during the second quarter of 2007. We now have sustained throughput on our system of about 1 Bcf a day, and we have seen improvements in Southern Louisiana as we continue to integrate our processing plants in Crosstex LIG.

Increased drilling around our assets in Mississippi and East Texas produced record volumes and profitability, and we made significant progress in South Texas, where renewed focus and enhanced system have brought in new business. Looking to the future, there are opportunities across all of our core areas, where we are capitalizing on favorable market conditions. We have worked hard to strategic place Crosstex in the right places, and it is paying off.

We’re working on a number of projects that could create additional investment opportunities and value around our existing assets and provide growth for 2008 and beyond. We talked about some of these projects on our third quarter conference call and plan to update you on their status at the Analyst Conference in early April.

Now, I will turn the call over to Bill Davis, who will update you on our fourth quarter and full-year 2007 financial results.

Bill Davis

Thanks Barry. And thanks all of you for joining us on the call. As a reminder, our discussion today contains non-GAAP financial measures we refer to as distributable cash flow, maintenance capital expenditures and EBITDA. These terms are explained in greater detail in our earnings news release under non-GAAP financial information. There is a reconciliation of these non-GAAP measures to net income in the tables in our news release.

The fourth quarter was a very good quarter from the standpoint of our financial results. Distributable cash flow was $41 million, 86% higher than in the fourth quarter of 2006. Our distributable cash flow also was 29% higher than the third quarter this year and broke the record set in that quarter.

As many of you have discussed with me, the midstream business is in great shape right now and ours is no exception. With the distributable cash flow of $41 million in the fourth quarter, we increased the distribution from the Partnership by $0.02 per unit to $0.61 per unit, and we also increased the dividend from the Corporation by $0.02 per share to $0.26.

Our coverage ratio or the ratio of distributable cash flow to distributions was very strong at 1.6 times for the quarter. For the full-year 2007, we have covered the $2.33 per unit paid by the Partnership by almost 1.3 times. These records of distributable cash flow and distribution coverage were achieved despite the amortization of the cost of the natural gas liquids puts that we purchased in August 2005. This burdened amounted to $3 million in the fourth quarter and $9 million for the year.

The fourth quarter 2007 was the last quarter that will see that charge against distributable cash flow. This is also the last time we will publish the amount of our minimum quarterly distribution or MQD. Since Crosstex Energy, L.P.’s IPO we have been in what is known as the subordination period. The subordination period has now expired. Initially 10 million of the units held by Crosstex Energy, Inc. were subordinated units, not to be confused with the Senior Subordinated C Units, which I will discuss in a moment.

In order for the subordinated units to convert to common units, we needed to pay at least the MQD each quarter until the end of the subordination period, the fourth quarter of 2007. This was a fairly typical feature for MLPs to provide assurance to the IPO investors that they would receive priority in setting distributions. For the record, the distribution exceeded the MQD by over 5.6 times in this most recent quarter, so this has not been a real concern for some time.

The Senior Subordinated C Units which we issued in conjunction with financing the Chief acquisition have now been converted to common units. And therefore, the holders of those converted common units will receive the distribution beginning in May. This increases the number of units that are entitled to receive the distribution to 41.4 million units from 28.5 million units.

As you see from our estimates for distributable cash flow growth this year in our guidance discussion, we still expect that the distributable cash flow will support increases in the distribution by 10% to $2.56 in 2008, even with this large increase on the number of units receiving the payment.

In addition, we expect to increase the dividend at Crosstex Energy Inc. from $0.95 in 2007 to $1.50 in 2008 due to the conversion of the Senior Sub C Units. Crosstex Energy Inc. owned half of the Sub C units until that have now converted. So, it will begin to receive the distribution on those units, and will also receive the incentive distribution payment on all of the Senior Sub C units.

Many of you have asked about overhang from these units. We have been in touch with many of the holders of the Subordinated C Units and they have told us that they have no present intention to sell their newly converted common units in the current market.

Our March 2007 in our March 2007 guidance announcement, we said that we expected the high end of 2007 distributable cash flow to be approximately $95 million. We exceeded the upper end of our guidance by $21 million. The high-end of our EBITDA guidance was around $191 million and we exceeded that by $23 million. We are very pleased with these accomplishments.

Our 2008 guidance suggests we will see EBITDA increase to a range of between $268 million and $289 million this year or by at least 42%. We expect distributable cash flow will increase to a range of between $159 million and $180 million or by over 55%. We feel good about these numbers considering the growth we were seeing in North Texas and East Texas, the continued integration of our Louisiana assets, and the great performance we are getting from our other operations.

Obviously, processing margins and percent of liquids fee margins at the present time are very good. While at sometimes it’s difficult for us exactly where gathering feedstock and processing margins start, processing had a major positive impact on the fourth quarter, adding approximately $10 million to $15 million to results in excess of the upper end of our guidance. These margins continue to be positive in the first quarter.

The Partnership reported net income for the fourth quarter of $14.1 million, after the accounting allocation of $5.8 million of income that the general partner that reflects the incentive distribution rights of 7.3 million payable for the quarter, less a portion of stock-based compensation attributable to the Corporation’s held share of about $1.5 million. The remaining income allocated to the limited partners was $8.3 million or a reported $0.31 per basic limited partner units and $0.19 on a fully-diluted basis.

From a tax standpoint, partnership distributions for 2007 have exceeded our goal of an 80% income tax shield or taxable income shield and investors will receive 100% tax shield again this year. Form K-1s are being mailed as we speak and have been available on line since February 26. You can access information on how to download K-1 information on the investor page of our website.

In addition, we have recently posted a note on our website that the Crosstex Energy dividend for 2007 was approximately 58% return of capital, so that portion was not taxable. Be sure to check Form 1099 that you receive to be sure it reflect us. And to reiterate, we still don’t expect the Crosstex Energy will pay any significant income taxes in 2008.

With these results and the successful equity offering we accomplished in December when we raised about $60 million overnight, pro forma debt to EBITDA has declined to 4.21 at the end of the quarter. As we see foresee increasing EBITDA in future quarters, we expect to see continued improvement in this leverage metric going forward.

Maintenance capital expenditures were approximately $4.6 million for the quarter and $10.8 million for the year. Our 2007 guidance for maintenance capital was a range of $11 million to $14 million, so actual results were consistent with the low-end of this range.

Turning to Crosstex Energy Inc., as I remind every quarter, the Corporation’s GAAP statements complicate the fact that it is simply the owner of Partnership interest of various kinds and simply receives the cash from the Partnership and pays out the cash to its stockholders as a dividend, net of its separate G&A and income taxes.

We will continue to hold back some cash as we set the dividend, so that when Crosstex Energy becomes a taxpayer there will not be an impact on the dividend. This cash will hold -- withholding results in some cash and building on the balance sheet. Now that the Senior Subordinated C Units have been converted, we expect to go back to withholding about 23% of the cash distribution that Crosstex Energy Inc. receives. This is approximately the rate of which we expected to pay income taxes in 2009.

Crosstex Energy Inc. has a current cash balance of approximately $8 million. This is the cash that the Corporation can use from making its 2% match when the MLP raises equity among other things. This balance will build during 2008.

And now I will turn the call over to Bob, who will review our operations.

Bob Purgason

Thank you, Bill. Now I’m going to run through our operations by region and update you on fourth quarter activities and our accomplishments in 2007. I will begin by talking about Texas, specifically a high-level overview of our working the Barnett Shale in North Texas where Crosstex holds one of the best midstream positions in the industry.

The Barnett Shale in the Fort Worth basin is exceeding most everyone’s expectations validating why it continues to be the hottest natural gas play in the US. At the end of 2007, the basin was producing about 3 Bcf a day, up from 1.8 Bcf a day at year-end 2006. Some analysts believe that the Barnett Shale has the potential to produce up to 6 Bcf a day or more than 10% of the daily US natural gas production.

The fourth quarter throughput for the North Texas pipeline was 318,000 MMBtus per day. In mid-February, the North Texas pipeline was flowing over 360,000 MMBtu per day, nearing it’s capacity of 375,000 MMBtu per day. Volumes on our North Texas gathering systems had more than tripled since mid-2006. Throughput for the fourth quarter of 2007 was about 421,000 MMBtus per day, compared to an average of about 115,000 when we acquired the assets.

As of today, we have connected more than 216 new wells to our gathering system, adding about 200 of them in 2007. A majority of this gas is either flowing or will flow into our North Texas Pipeline.

During the fourth quarter, we expanded our compression and treating facilities to stay in front of this growth. One example is Phase 2 of Blue Mountain compression and treating facility that added an additional 50,000 million Btu’s per day to our Jarvis system.

We are taking advantage of this positive market environment in the Barnett Shale and Johnson County where drilling activity in the northern part of this county is especially good. Well results in Johnson County show initial production and sustained production rates comparable to those of the play’s development in Wise, Denton and Tarrant counties, the original Barnett Shale core area.

During the third quarter, we announced that we are constructing a new gas gathering system and pipeline in North Johnson County to capture the initial opportunities. The North Johnson County system provides greater take-away capacity in this increasingly important area of the Barnett Shale. We estimate that the total capital cost for this project would be about $80 million. The North Johnson County project includes 20-inch and 24-inch pipelines and there compressor stations totaling 36,000 horse power and serves as the foundation for additional growth in this key area.

The initial phase of our North Johnson County expansion was completed in early September and was transporting about 95,000 MMBtu per day at the end of the year, higher than anticipated. We expect to the remaining pipeline construction to be completed and operational in the second quarter of 2008.

Our third processing facility in Parker County at 200 million cubic foot a day facility, we call Silver Creek, also began operating in September. The addition of this plant brings the total processing capacity of our Parker County systems to 285 million cubic foot per day. We continue to build our business in North Texas, and we’re excited about the growing prospects for development in the Barnett Shale, which confirms our strategic expansion into this area.

Now, I’m going to take a minute to highlight the status of our East Texas systems. I know we don’t normally address this specific area, but volumes have grown dramatically and its contribution is increasingly significant. We expect this trend will continue. There’s been a resurgence of drilling in the area and our system throughput has grown steadily from about 30,000 MMBtu per day last year to about 50,000 MMBtu per day.

This is approaching our maximum pipeline capacity. We’re in the process of looping portions of this system to create additional capacity. In the fourth quarter alone, 25 new conventional wells were added to the system with an average flow for the first month about 700,000 MMBtus per day.

Crosstex has benefited from increased drilling in the vicinity from producers like Comstock, GMX and Valence. Technological and operational improvements, especially related to horizontal drilling, and of course favorable pricing account for increased drilling and production success in formation such as the Cotton Valley, Travis Peak and others. And we anticipate that activity will continue to increase in this region.

Turning to Louisiana, we see continued strength in exploration and production activity around our pipeline and processing assets. Crosstex LIG, the largest intrastate pipeline in the state saw fourth quarter volumes consistently strong at about one Bcf per day. Drilling is active throughout the system, and we have numerous opportunities to add supply.

In Northern Louisiana, drilling activity and production continue at high levels. Our North Louisiana 24-inch pipeline expansion project provides much needed take-away capacity for this gas production. Right now, the pipeline is operating close to its capacity of 240 million cubic foot per day.

The Red River Lateral also gives Crosstex access to new production that can supply and expand our existing intrastate markets. In Southern Louisiana, onshore drilling permit activity also was robust for the fourth quarter. Much of the permitting and drilling activity is also in proximity to our Crosstex LIG facilities. Our processing assets also provide Crosstex with a large-scale gas processing presence on the Gulf Coast.

We continue to reap the economic benefits of integrating our pipeline systems and processing plants, and we’re focusing on extracting maximum value from them. During the fourth quarter, we saw efficiency and reliability improved in our Southern Louisiana facilities. And we met our improvement targets for the year.

In our processing business, margins remained strong in the fourth quarter. We continue to execute a key element of our strategy in this area, which is to look for opportunities to consolidate and reconfigure all our assets so they are more fully utilized, efficient and reliable. In fact, volumes into our Eunice facility have improved sufficiently so that we are evaluating to restart some of the equipment that was idled in 2007.

We are also maximizing the flow of rich gas on the Crosstex LIG system to the Plaquemine processing plant, which ultimately reaches river markets. We made progress securing new gas supplies, another important element of our strategy to improve results in Southern Louisiana. Our processing plans started segments of interstate pipelines so we’re well positioned to benefit from processing Gulf of Mexico production headed for the markets in the upper Midwest and Northeastern US.

In 2007, lease sales for blocks in the Western and Central Gulf were strong and there are pockets of activities near the systems feeding Crosstex’s plants. We’ve seen volume growth in and around Western Gulf shelf production, which is good news for our Sabine Pass plant. During 2007, volumes at Sabine rose from 170,000 MMBtu/d in the first quarter to about 290,000 MMBtu/d in the fourth quarter, an increase of more than 70% nearing the capacity at this plant.

In a nutshell, the Louisiana story is all about being nimble. As the gas flow shift with the seasons, today its west to east, our footprints give us the ability to extract value because we’re flexible. We are taking advantage of the fact that our assets are strategically located throughout the state.

Quickly turning to our treating business. Crosstex continues to maintain its position as the largest contract amine treating company in the US. Originally our treating plants were concentrated in South Texas, which is where Crosstex started and where we continue to have a strong market share. Now, we have facilities throughout Texas and in nine other states. Treating has agreed to deals with several Barnett Shale players for treating units in the region. And we installed two new amine plants at our Blue Mountain site in North Texas.

Treating team continues to pursue new and emerging business in the Fayetteville and New Albany Shales as well. The Treating division also manages Crosstex’s 12.5% interest in the Seminole plant, a CO2 separation and NGL processing facility serving the Seminole Andres Gas Unit in Gaines County in West Texas. The plant is undergoing an expansion to accommodate an expected increase in volumes.

Crosstex share of the capital for this project is $19 million, and the expansion should be in service in 2009. Crosstex’s Treating division is a solid cash flow generator, so it’s an important operation for us. We are successfully capitalizing on opportunities around our strong core positions in both North Texas and Louisiana and delivering on what we promised.

Before I close I would like to mention that Gas Processors Association recently awarded Crosstex the 2007 Perfect Record Award for completing the year with no lost-time injuries. I would like to congratulate all our employees for their dedicated commitment to always putting safety first. As a group, they remarkably worked more than 900,000 hours with no lost-time accidents, quite a milestone and achievement that everyone at Crosstex should be proud.

Now, I’ll turn the call to Barry.

Barry Davis

Thank you, Bob. After listening to our update I’m sure you’ll agree that we are successfully pushing ahead with our growth strategy during an unprecedented time in our industry. Before we take your questions, I want to make a few comments about the Crosstex’s organization.

As Crosstex grows, it’s vital that we maintain a hands-on entrepreneurial environment because this affects our processes and ultimately drives our success rate and growth strategy. Our asset teams were an integral part of our operating structure during 2007 as we concentrated on project execution. We have found that the asset team structure works because members are accountable and responsible. There are owners who run each asset like an independent business.

Frequent communication, collaboration and teamwork are inherent to each team and we believe these qualities support achievements. Our asset team structure allows balanced growth across all of our assets, and I truly believe that the asset teams were the primary reason that our 2007 accomplishments exceeded expectations.

By now most of you know that culture plays an important role at Crosstex. We are strong believers in creating a workplace, where everyone is respected for his or her abilities. Our E4 values of excellence, ethics, employee focus and enthusiasm define who we are as a company.

Our direct offshoot of our culture is customer service. We have always prided ourselves in providing best-in-class customer service, which maximizes our customer success and allows them to focus on what they do best. We have a great track record. Our customer service has been ranked among the top midstream companies by industry surveys.

As Crosstex grows, we’re taking customer service to a higher level. We are at the point where we need a slightly more formal approach to customer service much likely we had early on with our culture. This year we are focusing on five key customer service initiatives, because we want to continue to be the best when it comes to our service. The program consisted of five key initiatives: a formalized customer service training for all employees; a relationship or communications plan for every customer; developing and promoting a heightened awareness of our service accomplishments and challenges throughout the company; a software system dedicated to managing customer relationships; and hiring a director of customer service, who will coordinate all initiatives and lead our customer service committee. The attention we are giving to customer service will help us add even more value, which ultimately should enhance our stakeholders’ investment in Crosstex.

In closing, I want to reiterate what others have said today. We worked hard to position Crosstex as a major player in the midstream sector today. Our team and the relationships we have throughout the industry are second to none. And we believe that we are in the right place at the right time. The road we travel through 2008 and beyond should be a great journey and we look forward to it.

We will continue to excel at execution and develop many exciting organic projects. Activity in the Barnett Shale continues to exceed our expectations. We expect our investment in North Texas to result in an extraordinary value added growth this year and in the future, which should allow us to continue to provide solid distributable cash flow and returns. We also believe our pipeline expansion in Northern Louisiana will continue to make a significant contribution to cash flow.

We are committed to capitalizing on further improvements in Louisiana and growth in renewed areas like South Texas and East Texas. In short, we are confident and our solid performance will continue.

Now, I would like to turn the call back to our operator Carissa, who will facilitate our Q&A session and Bill, Bob, Jack and I will be happy to answer any questions that you may have. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Sharon Lui of Wachovia. Please proceed.

Sharon Lui - Wachovia

Hi, good morning.

Barry Davis

Good morning, Sharon.

Sharon Lui - Wachovia

I was just wondering for your ‘08 guidance, in terms of the improvement what portion is attributable to the South Louisiana assets?

Bill Davis

Well. Sharon, last year at the Analyst Day, we said that we would achieve an eight to $10 million year-over-year improvement at those assets, and that’s basically what we have done.

Sharon Lui - Wachovia

Okay. So that 8 to 10 is baked into your ‘08 guidance?

Bill Davis

Yes.

Sharon Lui - Wachovia

Okay. And in terms of, I guess improved processing margins, what are you assuming for ‘08?

Bill Davis

We’ve got a -- our price deck that’s basically about an $87 oil price and the gas price at the Henry Hub, that’s a little under $8 that we’ve baked into our numbers right now.

Sharon Lui - Wachovia

Okay. Terrific. Thank you.

Bill Davis

You bet.

Operator

And your next question comes from the line of Darren Horowitz of Raymond James. Please proceed.

Darren Horowitz - Raymond James

Good morning. Thank you.

Barry Davis

Hi, Darren.

Darren Horowitz - Raymond James

Bill, I’ve got a question on your capital that you’re going to spend next year, the 250 million. Last time we had spoke, when you look at the identifiable projects across the board for you guys, the amount of money that could be spent is double or even maybe even triple that I know in North Texas is obviously there is a lot more opportunity for you to expand your gathering, processing. And in East Texas you could do a couple more loops or build more processing capacity than, of course, Louisiana. How do you look at deploying that capital this year in terms of getting the best bang for your buck?

Bill Davis

Well, as Barry and Bob alluded to, we expect the 250 to be sort of a minimum number, and we expect to be adding projects as we go through the year and we will give guidance around those big ones as we add them. The capital markets, as everyone knows right now, aren’t the most receptive. So, we will be careful as we add projects about where the financing is going to come from. These are all great return projects and we are committed to the $250 million of projects that we’ve identified in the guidance, and as I say, we may be adding others but that’s going to be subject to financial conditions and the ability to raise the capital at the time.

Darren Horowitz - Raymond James

Okay. Switching gears over to the Johnson County project, congratulations on that. It looks like the volume ramp is running ahead of expectations. Can you give us a sense for the timeline of when you think you will reach that full capacity of about 400 MMcf a day based on what you see today? I would imagine at this type of run rate you should be in the high-300s by the end of the year?

Bill Davis

I think that’s really a fair estimation of where we are. The producers in that area are all getting better results than what they have initially thought, and I think we can be very near our capacity by year-end.

Darren Horowitz - Raymond James

Okay. And then, my final question is on what you mentioned in terms of Louisiana assets, you’re seeing higher volumes through Eunice. Can you quantify for us what it would cost you to get some of that incremental capacity up and running and maybe extract some more synergies?

Bill Davis

It’s -- the interesting thing is when we shut the facilities down this last year, we pickled them and really planned on that. So, it’s really kind of in the half million dollar range that we are talking about to make the facilities ready to run again, something that we are really looking hard at.

Darren Horowitz - Raymond James

Yeah, it would be well. It would make sense, I would imagine at that price if that’s very, very economic. I appreciate it.

Bill Davis

Yes.

Darren Horowitz - Raymond James

Thank you very much.

Barry Davis

Thanks, Darren.

Operator

Your next question comes from the line of Noah Lerner of Hartford Capital . Please proceed.

Noah Lerner - Hartford Capital

Good morning, everybody. First, I want to -- I guess congratulate you -- but I guess that’s an over used word. Everything you guys seem to have laid out in last year’s analysts meeting, you guys really worked hard and accomplished -- if not all, very much of it. And looks like you guys did a really good job, as a unit holder I’m very grateful.

Thank you. I guess, the one quick question I do have after that advertisement is David, I just want to make sure the excess processing margins, you said you had about 10 to 15 million last year and the strength is continuing into the first-quarter so far. Is that ignored when you’re given your guidance for the distribution growth, so that would either be gravy or just going to the pot to pay for some of the growth projects?

Bill Davis

Well, the price deck that I mentioned when I was talking to Sharon earlier to answer her question is what we’ve used in developing the guidance, so that creates around our various facilities, what their processing economics will come out to be. Well, of course, we don’t know what prices will be this year, but that price deck is what’s driving the guidance to the extent that today we’ve got $100 oil, that’s a positive for a processing obviously -- because the NGL prices tend to be tied to oil. To the extent we’ve got $9 natural gas that can negatively impact some of the key hold stuff in relation to the liquid. So, it’s a pretty dynamic process as we go through the year around this, but that price deck creates what we put in the guidance.

Noah Lerner - Hartford Capital

Okay, great. Thank you for the clarification.

Bill Davis

You bet.

Operator

Your next question comes from the line of Lewis Sammie of Zimmer Lucas . Please proceed.

Bill Davis

Hi, Lewis.

Barry Davis

Carissa, are you there?

Operator

Yes, his line is open. You may proceed Mr. Sammie?

Barry Davis

Go to the next question Carissa.

Operator

Your next question comes from the line of Sean Wells of RBC Capital Markets. Please proceed.