Iron Mountain Management Discusses Q3 2012 Results - Earnings Call Transcript

|
 |  About: Iron Mountain Inc. (IRM)
by: SA Transcripts

Operator

Good morning. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to Iron Mountain's Third Quarter 2012 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Vice President of Investor Relations, Stephen Golden. Please go ahead, Sir.

Stephen P. Golden

Thank you, and welcome, everyone, to our 2012 third quarter earnings conference call. We're all hoping that those of you impacted by the recent impact of Sandy came through it safely, and we're glad you could join us today. Joining me this morning are Richard Reese, our Chairman and CEO, and Brian McKeon, our CFO, and after their prepared remarks, we'll open up the phones for Q&A. I'd like to take this opportunity to thank everybody for joining us in New York a few weeks back for our Annual Investor Day event. We had a great turnout, and I think the day was a great success. Again, we truly appreciate your interest and your support. Per our custom, we have a user-controlled slide presentation at the Investor Relations page of our website at www.ironmountain.com.

Referring now to Slide 2 of our presentation. Today's earnings call and slide presentation will contain a number of forward-looking statements, most notably our outlook for our 2012 financial performance. All forward-looking statements are subject to risks and uncertainties. Please refer to today's press release, the Safe Harbor language on this slide and our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q for a discussion of the major risk factors that could cause our actual results to be materially different from those contemplated in our forward-looking statements.

As you know, we use several non-GAAP measures when presenting our financial results. Adjusted OIBDA, adjusted EPS and free cash flow before acquisitions and investments, among others, are metrics we speak to frequently and ones we believe to be important in evaluating our overall financial performance. We provide additional information and the reconciliations of these non-GAAP measures to the appropriate GAAP measures, as required by Reg G, at the Investor Relations page of our website, as well as in today's press release.

Please note that we have updated the definitions of adjusted OIBDA, adjusted EPS and free cash flow to exclude certain costs and expenditures related to our 2011 proxy contest, the work of the strategic review Special Committee of our board and our proposed conversion to a REIT.

With that, I'd like to introduce our Chairman and CEO, Richard Reese.

C. Richard Reese

Good morning, Stephen and thank you, everybody, and welcome to our call. I'd like to repeat Stephen's comments to those of you who may have suffered through Hurricane Sandy. It was a massive storm up on the East Coast. We have large operations, and quite a large facility footprint in that area. So we know what you all went through. I am happy to report that Iron Mountain did not suffer any significant facility damage and so forth from the hurricane, and we've weathered that storm quite well, given its impact around us and so forth. We are, however, having some operating challenges primarily related to local access. There are places where we still can't get into our facilities on a regular basis. We've been able to inspect and make sure things are fine, but it has mostly to do with control of local access, and I'm sure that will clear itself up in due course. We also, because of the impact on our customers, particularly in Manhattan, would expect to see some noise in our Q4 service revenues. There'll be some impact. It's a little early to quantify, but we don't expect it will impact storage or any of the real fundamentals of our business for the quarter.

So I hope you all are well. We are busy making sure our customers are taken care of and, quite frankly, through our foundation, making sure any of our employees that are impacted are taken care of, and that's a key part of our agenda at the moment.

Let's look back at the quarter. You'll see that we had good operating results, but we've had some noise or we call macro factors in our numbers. We are telling you and we do expect that for the full year, we'll be -- hit our full year targets. We think the business is running quite well, and we'll go through it. I would expect the call, frankly, to be relatively brief today, as we've just had our recent Investor Day. We appreciate the many of you that attended. We had a great turnout, and I think a good conversation, and we appreciate your feedback and your input and, hopefully, we did a good job of communicating to you where we are and where we're headed as a company.

As I said, operating results for the quarter were on target and in line with our expectation. Reported revenues at $748 million were down 2.6% on a reported basis compared to last year, primarily driven by the impacts of lower paper prices and unfavorable FX. Lower recycled paper prices in our shredding business, as well as destroying records from our storage business reduced our overall revenue growth by 1.5 percentage points versus the same quarter. And this is the same trend we saw last quarter. Last quarter and this quarter, we're in our toughest comps. As you remember, we started to see recycled paper prices really come off hard coming into this year, but last year, they were at all-time highs. So you have sort of the 2 worst comparisons. This trend will get better with time on a comparison basis and in fact, will be some -- we think somewhat better in Q4, as we lap it, but going into next year, these issues should go away.

FX reduced reported revenue growth rates by about 2%. The storage rental, which you all know, hopefully you did hear the message at ID and you've heard for years, is the key driver of our business, remained on track at 4% in constant dollar terms. North America's on track with their historical trends and International continued to generate solid strong double-digit growth. The annuity rental revenue stream that we value so highly remains durable, and still operates in the sort of 3% to 5% constant dollar range that we've been doing for some time.

Service revenues continued its pattern, this quarter, was down 6%. Lower recycled paper prices drove more than half of that, which I just spoke about. The other weakness in routine services, the patterns remained consistent and there were no really changes in those trends. And in addition, we saw a little softness in Europe, primarily in the U.K., and primarily driven around the 2 back-to-back Olympics that they had there, and the congestion and traffic. And frankly, customer impact of them going solid for quite an extended period, and we have a large business there and we saw some impact from that. And again, all that should rebound fine.

We sustained OIBDA -- adjusted OIBDA margins, despite the service headwinds and despite the lower paper prices -- and I should remind you that recycled paper is a 100% margin. So when it comes off as it did, it came off reasonably hard, holding margins for the whole company is a bit of a struggle, and it takes a lot of good execution. The team did a great job. We had programs in place, and we've been working quite a while consistently on corporate and divisional overhead, and we continue to execute those programs. And the team did well, and that's how we were able to make that happen. Plus, we were realizing and recording benefits from the International margin expansion program that we've been talking to you about.

In fact, International is performing well and on track with their 3-year margin expansion goals. In Q4, we're going to actually allow them to -- since they've got -- their plans are working as they expect, and they've got extra execution capacity, we're going to accelerate some investments into Q4. Brian will give you a little more details related to facility consolidations to improve our facility network utilization and frankly, will derive future benefits, and we'll take an expense that we might have waited a while to take into the future and accelerate it into this quarter, take advantage of the execution opportunities and accelerate the realization of those benefits.

The acquisitions, which were a key part of our International growth strategy, particularly in the emerging markets, are on track in terms of integration and so far, they're proceeding well and we're finding no surprises. International remains on track towards their roughly 25% margin target in 2013.

So as I said, the business is running as we expected it would. We're still dealing with some extraneous noise factors in paper and FX, but the fundamentals of the business are running fine, and we're about executing the business and continue to drive it forward. At Investor Day, we discussed several themes, and I don't want to repeat 4, 5 hours of our discussion, but I'll give you just a brief discussion for those who weren't there, and make sure that you understand the things we really were talking about. And first is, is our focus on storage rental revenue, which is the driver of the business. And we store boxes of paper and tapes and a variety of other things and it's out of that, that drives the majority of the revenue, the majority of the gross margin and profits and free cash flow of the business.

We derive that from a global real estate network that's substantial in size of over 64 million square feet of real estate, of which we own nearly 40%. We lease the balance. And it's nearly 1,000 -- 994 is we should say, properties spread across 32 countries. And as we've talked about at I-Day, one of the things we see as an advantage of and an offshoot of, assuming a successful REIT conversion, that we have an opportunity to leverage our cost of capital and financing to really reorient, slowly, our balance sheet over time to tune our weighted average cost of capital by the acquisition of a significant number -- additional number of these leased facilities, where we would change from a lease financing type of debt to a third-party type of debt in order to reduce our cost of debt. And that's one of the things we've talked about there as a benefit of moving forward towards a REIT.

As you know, we decided to pursue a REIT structure after divesting our additional services business a couple of years ago, and we did that. But given our heavy real estate ownership and focus on storage, we felt, after a lot of analysis and a lot of deep work, that a REIT approach is something that, of course, we looked at before, but at this point in our strategy, we felt that it aligned with our business strategy. And part of that opportunity was getting out of the digital services business that sort of changed our perspective on the ability to make that work. And part of it was, that as we got out of the digital services business, we really refocused our business back on our core storage. And that focus had been lost for a while as we were chasing the digital business, and we're starting to see the advantages. It's a slow turn of a battleship. The business didn't go negative. It just didn't grow as well as it could have, and we're starting to see that battleship's turning, and we think the business has got a good solid future, and we'll continue to grow it and continue to evolve a very strong, high cash-generating storage business.

And therefore, the REIT approach aligns with this real estate driven business and aligns with the capital allocation strategy that we set forth, which is invest and enhance the long durability, the long-term durability of the storage business, but also to return excess free cash flow or excess capital back to our shareholders. And we've shifted our strategy in that vein. You've seen us increase our normal dividend flow, and our dividend flow over time. And of course, the REIT structure is a more disciplined approach that requires more discipline. Nothing comes for free and nothing comes easy. But requires more discipline in distribution of cash to the shareholders, result in a much higher dividend rate, result in certain other requirements to pay those dividends in that nothing comes free. But as we looked at our business plan and we looked at the capital allocation strategy and we looked at our models for the future, we think we found a balanced approach and a way to make it work and be good for everybody. So we continue to pursue that strategy.

As you know, and at our Investor Day or the morning of our Investor Day on October 11, we announced an E&P distribution. That is a pre-requisite requirement for becoming a REIT, but I want to stress that -- the fact that we announced that E&P distribution early -- first, it's something we told you some time ago we plan to do, and second, is not any indication that we have any information about the probability of success of being -- getting a private letter ruling from the IRS. We're not giving any signals whatsoever, except that we're following through on our commitment that we have made some time ago, and that commitment was founded in the basic capital allocation strategy we put forth. And we had told you that we were going to dividend out or buy in stock, and distribute a significant amount of our excess capital. And we feel like that doing the E&P distribution, although it is in the path of becoming a REIT and a requirement of becoming a REIT, it also fits in with our capital allocation strategy. So even if we're not successful, as we told you before, we would go forward with that distribution, and we are in the process of doing that.

There have been some questions of people about the mechanics. So I want to go through it with you a little bit because you have a choice or a decision to make, and absent a decision, the default position, and I just want to make sure everybody understands what your options are. The distribution we announced was $700 million to be distributed on November 21. The record date was October 22. This was designed and intended to be an ordinary and qualified dividend, and not intended to be a return of capital from a tax or accounting perspective. We intend to pay 80% of it in stock and 20% in cash. And you, as our investors, have an election, and you should be looking out for mailings or notifications or whoever is controlling your securities, but you have to make an election to determine the ultimate split. So shareholders of record should have received that election materials by now. There's also an 8-K filed with the relevant information, and it's available on our website for the details.

But a little bit about the election. You can choose to receive all cash or all stock. You can't choose a mix in between. So it's option a, all cash; option b, all stock. And the value of the shares to be distributed will be determined based on the closing prices of the 3 days following November 14. Investors who don't vote or don't get their votes in by 5 p.m. on November 14, by default, will receive all stock. Investors who choose stock will receive all stock. Investors who choose cash will receive a pro rata share of the available pool of cash, that is $140 million, based on the overall election results. So it's important if you want all stock, you don't have to do anything. If you want a pro rata amount of cash, you have to make an election that says all cash. We will complete the balance of the E&P -- well before I get to that, I hope everybody understands that you have to make a decision unless you want all stock. I think it boils down to that. So look out for the technicalities. Reach out to your brokers for the individuals involved in the call and so forth, and make sure that you make a conscious decision. Look at the 8-K. Look at our website. Make yourself an educated consumer here so -- as you make a conscious decision.

After this, assuming we get a successful opinion and letter ruling from the IRS, and that is an assumption, we will complete the E&P -- an E&P distribution, but we have to distribute all of our E&P up through the end of 2013, sometime during 2014, assuming we're successful. There will not be an E&P distribution or there's not expected to be one in 2013. After 2014, there would likely be some additional small E&P distributions as we integrate more of our International operations into the QRS TRS structure of being a REIT, but they will be relatively small, and would come in over the next couple of years.

So I hope that this clarifies any questions that would come around about what your choices are and your options are, and I hope that you understand the actions that you need to take. When we get to the Q&A in a little while, we'll obviously try to answer other questions if you have some.

Another question we've been receiving is, since the E&P distribution, the stock portion effectively operates like a stock split, except that you do get high basis stock. And that is a position that I find many shareholders still have trouble wrapping their brain around. That high basis stock has an extreme value to you, and you can convert that anytime you want it to cash. But assuming that -- you know, on a share count basis, it operates like a split and that's the way the stock traded. The question we've come into is, will we hold our dividend rate -- our quarterly dividend that we've been distributing, will we hold the dividend rate the same or will we adjust it downward by -- because of the increased number of shares. And although we have not made -- the board has not voted, and it is their choice and their decision, on what the next quarterly dividend will be, and they will not do that until our regularly scheduled meeting in December, management expects to recommended that the board maintain the current dividend on a per share basis. Assuming that the board adopts management's position, this would amount to an increase of nearly 10% in the dividend payout, the amount of cash being paid out, over our current levels, and given the issuance of that much more new shares.

This is all in keeping with our capital allocation policy. We've been very clear and that policy's in place, REIT or no REIT. And we're continuing to move down that path and frankly, we're in a dual path here of pursuing a REIT and trying to be successful there. But if we're not successful there, we're on a path of distributing a significant amount of free cash flow to our shareholders. And either way, we will make that work.

So that's where we are. A good operated quarter, not a lot to talk about. Be happy to take your questions in a minute. Let me turn it over to Brian, and then we'll come back.

Brian P. McKeon

Thanks, Richard, and good morning, everyone. Slide 3 highlights the key messages from today's review. We delivered solid operating performance in Q3 supported by durable storage rental growth. Our profit results are on track, and continue to be supported by International margin gains and benefits from overhead cost controls. Storage rental grew 3 -- grew 4% on a constant dollar basis in Q3, reflecting consistent gains in North America and 12% growth in International, including benefits from our recently completed acquisitions in Brazil and Europe. Overall business trends were consistent with continued impacts from pressure on activity-based services. Reported results were constrained, as expected, by significantly lower recycled paper prices and weakened foreign currencies. Recycled paper prices were down 37% year-on-year, reducing revenues and profits by $11 million in the quarter. The year-on-year impact of lower paper prices will lessen in Q4, as we begin to lap the sharp price decline that began in Q4 of 2011. Unfavorable FX changes reduced growth rates by about 2%. Excluding these macro factors, revenue and adjusted OIBDA grew 1% and 2%, respectively, on a constant dollar basis.

Good performance in the quarter is keeping us on track to achieve our full year financial goals. As we head into the fourth quarter, we're narrowing our full year guidance ranges. We're reiterating our adjusted OIBDA midpoint. We're also pulling in the top end of our revenue range to reflect year-to-date performance and current FX and paper pricing levels. I'll speak more to these and other refinements to our year end outlook later in my remarks.

Let's now turn to Slide 4, and review our financial results in more detail. Slide 4 compares our results for this quarter to the third quarter of 2011. As noted, Q3 results were constrained by recycled paper and FX impacts. Lower year-on-year paper pricing reduced revenue growth by 1.5% and adjusted OIBDA growth by 4.4%. Weakening of foreign currencies relative to the U.S. dollar reduced reported growth rates by an additional 2%. Excluding these impacts, our underlying operating performance was solid, reflecting consistent business trends. Enterprise revenue growth was flat on a constant dollar basis. C$ storage revenue growth of 4% was offset by a 6% C$ decline in service revenues, with about half of the service decline related to lower paper pricing.

From a segment perspective, North America posted constant currency revenue growth of minus 3%. Storage rental grew 1.5% constant dollar but, as expected, these gains were offset by pressures on service revenues. Overall North American service revenues declined 9.5%, constant dollar, in the quarter. Excluding paper price changes, North American service growth was down 6%, constant dollar.

Gains in DMS revenues were offset by decreased core service activity levels and lower revenues from fuel surcharges, shredding and fulfillment services.

Our International segment posted 8% constant dollar revenue growth, supported by 12% storage rental growth. These results reflect sustained growth in Europe, continued double-digit gains in Latin America and Asia Pacific and benefits from our recently completed acquisitions in Brazil and Switzerland. These gains were augmented by strong DMS service and project revenues, which offset impacts from lower paper prices and lower revenues from shredding services and other activity-based services in some of our mature markets.

Gross profit was $438 million in Q3, yielding a gross margin of 58.5%, down 160 basis points compared to the same prior-year period. Storage gross margins increased 110 basis points, reflecting lower occupancy costs and personal property taxes. Service gross margins were down year-over-year due to decreased recycled paper revenues and a mix shift away from higher margin core services towards relatively lower margin businesses, including DMS. The previously disclosed reclassification of certain overhead expenses to cost of sales was also a contributing factor.

We continue to offset pressure from factors such as lower paper pricing to maintain strong adjusted OIBDA margins. Adjusted OIBDA was $244 million or 32.6% of revenues in Q3. Higher storage rental gross profits, strong performance in our International business and benefits from overhead cost initiatives offset negative impacts from lower paper prices and lower service activity. Adjusted EPS for the quarter was $0.34 per share compared to $0.40 in Q3 of 2011. The decrease was primarily due to lower adjusted OIBDA, higher DNA due to -- primarily to acquisitions and increased interest expense related to our recent debt financing transactions in support of shareholder payouts and the REIT conversion. These impacts more than offset the benefits of fewer shares outstanding following our substantial share repurchases in 2011. Adjusted OIBDA and adjusted EPS exclude the impact of costs associated with the REIT conversion, Special Committee and prior-year proxy costs of $11 million in 2012 and $1 million in 2011. These costs reduced 2012 reported EPS by $0.04 per share. By definition, these items have been excluded from our calculations of adjusted OIBDA, adjusted EPS and free cash flow. Reported earnings per share of $0.31 includes $11 million of REIT costs, $8 million of other expense and the impact of a higher effective tax rate due to foreign currency losses and discrete tax items. Our structural tax rate for the quarter was 41%.

Let's now take a closer look at our revenue growth on Slide 5. Slide 5 shows the components building to our overall revenue growth. Q3 and year-to-date growth rates are trending in line with our full year expectations by major revenue type. In terms of C$ growth, storage rental remains on track towards our 4% full year C$ growth outlook. Overall C$ growth was down slightly in Q3, impacted by lower recycled paper pricing and continued pressures on activity-based services. As noted, we worked through our toughest comparisons on the recycled paper front, and we remain on track for full year C$ growth in the range of 0% to 2%.

In terms of components building to overall growth, storage rental internal growth at 2.4% was in line with our expectations. The storage rental business remains durable and on track towards our full-year goals. Net global records management volume was up nearly 2% on a year-on-year basis in Q3. International storage rental growth was 5% -- storage internal revenue growth was 5% for the quarter, reflecting sustained double-digit growth in Latin America and Asia Pac. International storage rental growth moderated somewhat from very strong Q2 levels, reflecting recent softness in Europe. North America reported 1.5% internal storage rental growth, with consistent pricing trends in the 1.5% to 2% range. Overall, North America volume has remained relatively flat over the last several quarters. We saw a modest year-on-year decline in North American volume in Q3, as we were up against our toughest quarterly comparison, but we remain on track towards 2% storage rental growth and sustained volume this year.

Storage service internal growth was minus 8% or down 5% excluding impacts from commodity changes. Core service internal growth was minus 4% in the quarter, as growth in DMS services was more than offset by lower fuel surcharges and shredding service revenues and expected decline in activity-based core services. Complementary service revenues, representing about 11% of total revenues, decreased 17% internally. Results were driven primarily by an $11 million decline in recycled paper revenues, similar to Q2. Paper prices have recently come off their summer highs, and are now at about $150 per ton. Assuming they remain stable for the balance of the year, the gap should narrow as we begin to lap the steep decline that started in Q4 of 2011. As noted, FX rate changes had a 2% negative impact, which pressured reported results.

Let's now take a look at our year-to-date results on Slide 6. Slide 6 looks at our year-to-date 2012 performance compared to 2011. Our year-to-date performance reflects consistent business trends. Reported revenue of $2.2 billion is up 1% on a constant dollar basis, as continued solid storage gains offset impacts from lower recycled paper prices and soft core service activity. Lower paper prices and the SG&A re-class discussed previously have lead to a modest decline in gross margins. Despite these impacts, adjusted OIBDA is flat year-over-year on a constant dollar basis. Strong International profit performance and overhead cost initiatives are key factors in this improvement. We expect these factors to continue to support profit performance as we move forward. Adjusted EPS is $0.99 per share, down 2% year-to-date. Lower adjusted OIBDA, higher DNA and interest expense offset the benefits from fewer shares outstanding.

2012 capital spending is $114 million, excluding $23 million of acquired real estate and $3 million of REIT conversion CapEx. As a percent of revenues, CapEx, excluding real estate, is 5.1%, in line with prior year levels. Capital expenditures historically increase in the second half of the year. We remain on track to achieve our capital spending efficiency targets in 2012.

Free cash flow through Q3 was $209 million compared to $315 million for the first 3 quarters of 2011. The decrease is due primarily to higher cash taxes compared to low 2011 levels, higher interest expense in support of our shareholder payout program, and the lapping of lower cash incentive compensation payments in 2011. We remain on track towards our full year free cash flow targets as well. The adjusted OIBDA and adjusted EPS here exclude year-to-date costs associated with the REIT conversion Special Committee and prior year proxy costs, which were $16 million in 2012 and $15 million in 2011. These year-to-date costs reduced 2012 reported EPS by $0.06. In addition to the $3 million of REIT-related CapEx I just discussed, we paid $36 million in taxes towards our DNA recapture liability. All told, these items would reduce free cash flow by about $49 million year-to-date. We've included a slide outlining the actual and expected REIT costs and related expenditures in the appendix to this presentation.

Let's now turn to Slide 7 to review our results by segment. Slide 7 shows key year-to-date metrics for each of our 3 segments compared to the same period in 2011. Consistent with our business strategy, we're sustaining higher returns in our North American segment, while continuing to build momentum in our International segment as a significant driver of profit and cash flow gains. North America continues to deliver high profits and strong cash flows. Year-to-date, our North American business segment reported revenues of $1.7 billion, supported by consistent 2% C$ storage rental gains. Despite the impacts of lower recycled paper prices, we sustained adjusted OIBDA margins of 42%. We're also sustaining capital efficiencies while spending at 4% of revenues, excluding real estate.

Our International segment continues to post solid constant dollar revenue growth and strong adjusted OIBDA and cash flow gains. Adjusted OIBDA increased 14% on a C$ basis. We're benefiting from cost improvement initiatives in Western European markets and strong profit performance in Asia Pac. International adjusted OIBDA margins expanded 150 basis points. Benefits from productivity initiatives and from continued solid growth across our International portfolio has us on track towards our business plan goals of approximately 25% margins in 2013.

As Richard mentioned, we're tracking to our International margin improvement plan, and we've decided to accelerate certain building moves in London. This would result in about $6 million of additional expense in Q4 that will drive future benefits and won't interfere with our 3-year margin expansion goals. Finally, corporate expenses declined 7% compared with prior year levels, reflecting benefits from overhead cost control initiatives. Overall, we continue to drive strong operating performance across our portfolio.

Let's now take a look at our debt statistics on Slide 8. Strong consistent cash flow generation has enabled us to maintain a sound balance sheet. We're currently operating with a consolidated leverage ratio of 3.6x, comfortably within our target at 3 to 4x leverage range. As we discussed at Investor Day, our leverage ratio will increase as we make shareholder payouts and expenditures in connection with the REIT conversion process.

In anticipation of these cash outlays, we completed a very successful bond offering in August. We sold $1 billion of 5 3/4% bonds due in 2024. This was the lowest interest rate for a debt offering of our credit rating in the history of the high-yield market. We used the net proceeds to retire $320 million of 6 5/8% bonds and $200 million of 8 3/4% bonds and to pay down our line of credit. As a result, we're well-positioned in terms of cash and financing capacity. At quarter end, liquidity was $1.1 billion with $335 million in cash and $722 million in additional borrowing capacity. Our debt portfolio also remains long and fixed. Our weighted average interest rate is down at 6.5%, and we're nearly 87% fixed at quarter end. Maturity is about 7.6 years with no meaningful repayment obligations until 2014.

Our strong cash flows support continued advancement of our shareholder payout strategy. During the third quarter, we paid $46 million in regular quarterly dividends at a rate of $0.27 per share. As part of our planned conversion to a REIT, earlier this month, we announced that the first portion of our E&P purge will be paid out in November. We'll be distributing $700 million to our shareholders, using up to $140 million in cash and the balance in stock. This will result in our issuing about 17 million new shares based on current share prices.

As Richard mentioned, management expects to recommend that the board, at its regularly scheduled meeting in December, maintain the $0.27 per share rate rather than reduce it based on the new higher numbers of share outstanding -- shares outstanding. This will result in an increase to our dividend payout levels of nearly 10% over current levels. We're managing our balance sheet consistent with our strategy, while advancing substantial payouts to shareholders, and we remain well-positioned to fund our business plan.

That concludes our review of Q3 2012 results. Overall, we continue to drive solid financial performance, and we're on track to achieve our goals in 2012.

Let's now turn to Slide 9 to review our 2012 full year outlook. Slide 9 summarizes our current 2012 operating outlook. Today, we're reiterating our midpoint projection for adjusted OIBDA, while tightening the range by $20 million. We're also lowering the top end of our revenue projections by $20 million to reflect year-to-date results and current FX and recycled paper levels. We're projecting 2012 reported revenues to be in the range of $2,990,000,000 to $3,020,000,000 or 1% to 3% C$ growth, excluding the impact of lower paper prices. We're maintaining our outlook for adjusted OIBDA, while narrowing the range to be between $900 million to $920 million on an operating basis. This outlook includes about $10 million of costs related to real estate transactions that will support increased network utilization. We also expect to incur severance costs related to select organizational changes in Q4. Adjusted EPS for 2012 is now expected to be in the range of $1.20 to $1.28. In addition to the narrowing of the adjusted OIBDA range, we've updated the adjusted EPS range to reflect increased interest due to our recent financing. The calculation of adjusted EPS assumes a 40% structural rate and 172 million shares outstanding. Assuming we issue about 17 million shares to pay for -- to pay a portion of the E&P purge, our weighted average shares outstanding for the full year will increase about 2 million shares and adjusted EPS will be reduced by about $0.01 per share.

We now expect capital expenditures for the year to be approximately $245 million, including an estimated $50 million for real estate. As noted on Investor Day, the increase reflects a real estate lease buyout opportunity we're taking advantage of in North America. Our outlook for our operating free cash flow continues to be in the range of $320 million to $360 million. As highlighted in our announcement to pursue conversion to a REIT, we intend to pay significant one-time operating and capital costs associated with the conversion. Total operating expense and capital costs are estimated to be between $100 million to $150 million, with the majority deployed over the next 2 years. These costs relate to substantial system investments, legal and tax work, advisory fees and other miscellaneous costs to implement the proposed structure. The effort's underway, and we'll be breaking out and reporting on estimated impacts as we advance the process.

For 2012, in addition to the operating expectations discussed above, we expect to incur between $25 million and $30 million of incremental expense, $10 million in CapEx, and to pay about $80 million in additional taxes related to the depreciation recapture in connection with the REIT conversion. The impact of these items will be a reduction in reported EPS of about $0.09 to $0.10 per share and a use of cash between $105 million and $108 million. As noted, the slides laying out our outlook for line items below adjusted OIBDA, as well as the related items, are included in the appendix.

That concludes our review. In summary, Q3 was another quarter of good financial performance and we're on track to achieve our financial goals for 2012. We continue to execute against our 3-year plan, sustaining high profits and cash flow in North America, while driving stronger growth and higher returns in our International business, and we continue to advance work in connection with the REIT conversion as part of our long-term approach to enhance value for shareholders. Thanks, and we'd now be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of James Samford with Citigroup.

James Samford - Citigroup Inc, Research Division

The impact of Sandy, I believe you've said that some potential impact to services. Can you provide just a little bit of history on your geographic concentration in the tri-state area and the sort of prior natural disaster impacts that might have impacted your business.

C. Richard Reese

Oh, we have significant facilities in that area. I couldn't tell you how many off the top of my head on how many square feet, but it's significant. You can assume that Metro New York, New Jersey is one of our largest, if not, largest market geographically. Historically, we've had other natural disasters. We've been through a bunch. This one's a pretty big one, it looks like. It's a little early to tell the impact on customers. But you'll see a wiggle, what we'd call a wiggle in the revenue. Storage doesn't get impacted. It might get delayed by a week or 2 coming in, but that's not a significant impact. What happens is, is service will decline. Your transportation and retrieval/refile activity will decline. That type of service, I'm just trying to parse in my head real quick, is not a major part of our service line of revenue. So I would -- net-net, it's a few million dollars, I'm guessing right now, but it's not $100 million. It's not even $50 million. I bet it's not $10 million. It's a few million dollars that we'll see. But we kind of keep track of everything, so we just wanted to let you know that's happening. Just like the London Olympics. You can see the difference on a year-over-year comparison the thing's so steady.

James Samford - Citigroup Inc, Research Division

And I guess, just a quick -- I assume your 2013 outlook is still sort of on track at this point, that you provided at Analyst Day?

C. Richard Reese

Yes, we just -- all this will be -- I don't like -- or I guess I do like to call it noise, I call it noise a lot. It's noise, but it just explains why things move a little bit here and there. But yes, we don't see any change in the trajectory of the business.

Brian P. McKeon

Yes, I'd just say on the service front, to Richard's point, it's early to tell. It will be more at the margin. I think, right now, we don't have a good sense of how long the delays might be in place, so that's...

C. Richard Reese

As we spoke, I just got an e-mail telling me that one of our high-activity facilities, New York, New Jersey area, we just got into it, as in to be able to be up and running, delivering services. We've been into it, but not been able to deliver services. So it looks like it's back online at these facilities. Now we'll have to wait and see whether our customers are online and so forth.

Operator

Your next question comes from the line of George Tong with Piper Jaffray.

George K. Tong - Piper Jaffray Companies, Research Division

Could you tell us what your outlook is in services demand, x paper prices, and when you might see a re-acceleration in the activity-based services and what might drive that?

C. Richard Reese

Well, I don't know that we -- well, there's 2 components to the activity-based services. One, the big driver down still is our healthcare business, which we have said constantly is a business that, frankly, slowly is going away. Not the business itself. It's changing its nature. It's becoming a much less active storage business. And so the activity, which that is our most activity vertical segment, is coming way off. The storage side of the business is growing nicely, but the activity side is coming off. That trend will continue slowly for quite a while, okay? And then you have activity clients related to just all data getting less active. That's also a slower -- that's also a slow trend. And then third, you have economic activity declines, and we talked a lot about this in Investor Day. It's hard to parse which percentage. I mean, we know what's going on in the healthcare, which is a big part of it. But add it all up, you're talking $15 million to $20 million headwind in terms of total services on an annual basis. And I think if we had good robust economies, and as we weed through some of this, that might come down by 1/3 or somewhere like that. That's a guess though. That's not a precise answer.

George K. Tong - Piper Jaffray Companies, Research Division

Right, got it. And you mentioned extra execution capability driving the accelerated investments in the fourth quarter. Could you provide additional details on where the investments are going and what benefits or returns you're expecting to realize from the investments?

Brian P. McKeon

Yes, so we'll have -- as I have noted, George, we've got about $10 million of real estate transactions in the fourth quarter. The biggest one is we're consolidating volume in London. We have excess capacity and we're going to close a facility. That's about a $6 million impact. We've got some investments in the U.S. as well. We're consolidating volume at an existing -- we have an existing lease facility that we're going to move out of and take a charge there. And we've got some investments going around just in terms of upgrading facilities as well. And net-net -- that's factored into our outlook. We're counting on that next year, but those will have benefits in terms of reduced rental costs going into next year. So I think Richard's point on the international front was the team's been executing extremely well. We feel very good about the -- getting to our 2013 goals and I think we've got some ability here to move things forward. Good return activity forward and faster, and we're going to take advantage of that.

C. Richard Reese

I mean, the team's basically, and we've done this before, they've come to us and they said, "Look, we -- our plans for this year are pretty cooked, and they're operating and the margins are flowing and so forth." And if we will relieve them on a reported basis from -- let them have some more expense in Q4 on a reported basis, they'll accelerate and get at more, and so those are good decisions, and so we said, "Sure, let's do it."

Operator

Your next question comes from the line of Nate Brochmann with William Blair & Company.

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Okay. I want to just have just a follow-up on that question a little bit, and something that we talked about at Investor Day. But obviously is, you guys kind of cull through your portfolio of real estate and converting some leases to maybe purchase facilities, et cetera, and maybe some consolidation. How far are you through that process of really looking at that portfolio and how much value might there to be unlocked as kind of we go forward through that process?

Brian P. McKeon

Well, I think, we're -- to a degree, we've had a level of activity going on for a long time, right? Building consolidations are a normal part of what we do, and so that work continues. I think the opportunity we highlighted at Investor Day was we have basically a $2.5 billion universe in potential investment opportunity between buying out leases and investing. And the real estate and expansion markets, kind of a probability-based view on that. We put out an estimate of $1 billion deployment, perhaps, over a long period of time and...

C. Richard Reese

And buying in an existing lease facility is not to be confused with moving out and consolidating an inventory. They're really kind of separate transactions, okay? If we're consolidating inventory, we're typically either moving out of an owned building and selling the building or moving out of a lease and taking a charge because the present value of where we're going justifies that investment. Those are separate decisions. We would tend to buy-in buildings, buy-in leases, where we have high-quality buildings, good real estate, and where the cost of financing it in an acquired mode is cheaper than the cost of the lease that we have. And oftentimes, that occurs at a lease renewal cycle or when landlords want to get some liquidity out of their portfolio, and so on a negotiated basis.

Brian P. McKeon

So one way to look at is if we got $1 billion, you'd say the majority of that is lease buyouts. If we've got a cap rate of 8%, on average, on leases, if we can finance at a lower rate directly, that will be a net benefit to us. So that might give you a sense of kind of the net annualized benefit we could realize over time from the financing side of that. And we'll continue to increase our network utilization through other activities like building those, as Richard talking about.

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Okay, that's helpful. And then second question. We talked a little bit on the services in terms of some of the headwinds and also kind of the shredding services being down a little bit. Is competition getting a little bit hotter in that in terms of, at least, here in Chicago, we see some more competitors and some more trucks around? Is that a big concern or is that just on the periphery?

C. Richard Reese

Well, the competition is always a concern because of -- and sure, the shredding business has some large players and a lot, a lot, a lot of small players, and it's a reasonably easy-entry business for the small players. But our shredding services, the bend [ph] tips and the number stops and all the activities are up and continue to grow quite nicely, but what we're suffering is -- we're suffering 2 things: some price decline, which is competitive-market driven, but a lot driven off of a rollover of some very large enterprise accounts quite some years ago in a different market environment, and which we then are repricing themselves or getting repriced to current markets. But the big driver is the paper itself. I mean, the paper is a key driver of revenue and profitability in that business, and it's gone from an all-time high to not quite an all-time low, but a much lower number.

Operator

Your next question comes from the line of Andrew Steinerman with JPMorgan.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

[Audio Gap]

growth, I know you said it was in line with expectations, but it was different than the second quarter rate. Could you just go over those differences again? You went through them quickly. And do you think that the fourth quarter storage growth will be similar to the third?

Brian P. McKeon

Andrew, we missed the very beginning of your question. Was your question about storage growth?

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Yes, so my question is about the internal growth of 2.4% in storage, which you noted was in line with your expectations, but it was different than the 4% in the second quarter. Could you just go over those differences? And do you feel like the fourth quarter storage growth internally will be similar to the third?

Brian P. McKeon

So the differences -- we had a very good Q2. The International number came down from 7% to 5%, and that was primarily just reduction from mid-double-digit growth in Latin America to 12%-ish type growth. It was -- we had very good rates. It was just a bit lower. And we did see some -- we had a very good Q2 in Europe, and that's came back down to more normalized levels, I'd argue.

C. Richard Reese

And there's seasonality in the storage side of the business, which lends itself to the first half of the year versus the second half of the year.

Brian P. McKeon

North America, as I mentioned, was down a bit. It was 1.5 versus 2. And that it really is just kind of the quarter-to-quarter, year-over-year comparisons. We were up against the kind of volume built through Q3 of last year, and came down a bit early this year. But net-net, it's been really quite flat. We would expect to see some of those compares be a bit better in Q4. So we're comfortable we're on track to the 4% full year number and the 3% internal number we've been talking about.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Right. But there's not a lot of difference when you talk about the fourth quarter storage internal growth rate than the third quarter, no other things to call out?

Brian P. McKeon

No, more similar than different, which is typical in our business.

Operator

Your next question comes from the line of Gary Bisbee with Barclays.

Gary E. Bisbee - Barclays Capital, Research Division

[Audio Gap]

on that and dig in a bit into the North American storage. It sounds like the business is flat x pricing and I guess that's been the recent trend, not just this quarter. But what's baked into that mid-term view or the -- was it through 2016 view that you gave at the Investor Day? Is that a continuation of flat North American volumes? And how confident are you that there's not a -- that we're not going to actually see the volume start to decline a bit?

Brian P. McKeon

Well, we -- just going back to Investor Day, we talked about the longer-term outlook being 1% to 3%, including a 1.5% to 2% pricing. So that it is basically flat volume, with revenue growth primarily coming from pricing. And our churn has been stable in North America, what's flowing out. The incoming volume has come down moderately in terms of new sales and organic growth from customers, but we can augment that through additional activities, as well as through things like tuck-in acquisitions or customer acquisitions. And we feel quite confident that we can -- it's a very slow change, and that we can offset that through good return investments that keep the volume flowing in. So we're...

C. Richard Reese

And I think -- look, there's no guarantee about the future in anything, but if you look forward -- look where we are today, look forward versus look back, that you'll see significantly more focus of resources, asset, organization towards driving storage. And that's in marketing programs, sales programs, compensation programs. Everybody is aligned around this agenda, and that was not true looking backwards, and so -- and it will have benefits.

Gary E. Bisbee - Barclays Capital, Research Division

And then just following on that, and I'm not trying to give you a hard time, but the thought process around buying in a lot of real estate, if it sounds like we're at a situation were flat is the expectation, how do you think about the decision to buy properties in North America if it's really not growing? I mean, would you buy them in markets where you'd have the ability to consolidate another facility into it if it shrinks? It seems to me, the math isn't quite so obvious if there's the potential for weaker volumes.

C. Richard Reese

Sure. No, look, it's a local market -- it's not a local market decision, it's a local market analysis. If you were to -- and you do run the models of what if the business shrank over the next 50 years and so forth, what's your last building standing, what's your next-to-last building standing and so forth and so on, and those are the obvious ones you want to buy. Okay? And you run your portfolio that way. You also recognize that if you were in a declining situation, you're probably better off to own the real estate so you can have more flexibility of reselling it into the open market than you would be committed to a long lease. So you increase the flexibility of your portfolio, but we're not talking about -- relative to the size of our portfolio, we're not talking about buying in that many of the buildings over time, okay, to make that issue a serious issue. And the last, and certainly not least, is that we would likely deploy -- I don't know if I'd say a disproportion amount, disproportion amount relative to the size of the business, for sure, in emerging markets, where the real estate arbitrage is much, much higher. The cost of debt capital, the cost of lease capital, so to speak, and financing in emerging markets is in line with venture capital returns, and we would likely deploy a significant amount in places like that. And I use kind of over and over the example that we've now gone outside of São Paulo, Brazil, and bought 10 acres of land, and we're going to build a campus there because we can drive very, very much better economics, and we've got a very good, growing business there. And a lot of facilities we can -- on leases we can get out of that we can consolidate out of into.

Gary E. Bisbee - Barclays Capital, Research Division

Okay, great. And then just one clean-up one. What exactly are the organizational changes in the severance? Is that any -- is that a material number or you're just cleaning a few things up?

Brian P. McKeon

It's in the range of $5 million to $7 million in Q4, and we've got a few different things going on, but basically, we're -- it's part of ongoing productivity-based initiatives we're looking at, where we can be more efficient in the company, and that's what it's related to. So it's more than one activity. They're smaller in terms of their individual scope, but net-net, we do expect a fair bit of severance cost to pull through Q4.

Operator

Your next question comes from the line of Scott Schneeberger with Oppenheimer.

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

You guys were discussing the weather impact from Sandy and addressing some of the short-term issues it could have on service. Is there a potential for a positive impact, longer-term, perhaps? And with, I would imagine, very elevated insurance claims, is that something that could show up in 2013?

Brian P. McKeon

Well, I think if we -- I think it's too early to call that. It's -- net-net, I don't think that will be a net benefit to us. It's just too early to call.

C. Richard Reese

Look, I think the only -- generally speaking, the only positive that comes out of these kind of messes are is -- is in certain customers will have heightened awareness around the quality of their own operations and where they're storing things and what they're doing, and be more open to making a change, and then there will likely be a few customers who have a bloody mess after this, and we may get called in to help fix it, which we do from time to time.

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Okay. And just -- it was covered fairly well at the Investor Day, but could you address, Richard, the main verticals, financial services, healthcare, legal, for instance, just what you see for the intermediate-term outlook, the next 12 to 18 months?

C. Richard Reese

In what respect?

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Just anything that would deviate from how they've been trending, particularly, healthcare, over the next year or so.

C. Richard Reese

Well, let's take healthcare. What we see in healthcare is a consistent trend. We see actually good, great opportunity inside the healthcare space, as they computerize their health records and so forth. They don't get rid of the paper records for lots of real reasons, good reasons. So we see lots of storage opportunity in the space. We see lots of -- some hybrid or digital scanning opportunities and things like that. I don't know if we see a trend, but they're kind of in the middle of that, and they've got some years of work. The trend is the bigger hospitals started a long time ago, and the bigger healthcare systems, and the smaller ones are still working through it, trying to figure out how to do it. Financial services, what you see there is -- I mean you know it's an industry that's under pressure, and they push that pressure back at their vendors, and we see a lot of that. We see their activity rates have been down since 2007 and '08, come back slightly. Which is the same thing you guys see in the capital markets, okay? If we get robust markets and robust trading and robust everything else, I'm sure their activities -- everybody will be smiling better and their activities will be up and so forth. So I'd say you would see us -- whatever your outlook is for a given vertical in terms of their economic activity, you will see that'll flow through to us, and you'll see that the service sides respond faster and the storage respond slower. There's a lag there.

Operator

Your next question comes from the line of Shlomo Rosenbaum with Stifel.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Can you just comment a little bit on Slide 12 where it looks like there's an increase in both organic additions and destructions? Can you provide any color as to what's going on kind of on a sequential basis?

Brian P. McKeon

Just finding the slide, Shlomo, sorry. And you're looking at the outgoing volume on Slide 12?

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Yes, it looks like there was a step up both in outgoing volume and in organic additions, and I just wanted to know if there's any color you could provide behind that.

Brian P. McKeon

You do see there's some seasonality in numbers. I think, sometimes, it's important to look at Q3 to Q3 levels. I think what you see in the organic additions is they're relatively stable. And on the outgoing volume, Q3 to Q3 is actually down a bit and are now calling -- you typically have some fluctuation quarter-to-quarter. It's driven -- and many times, larger events can cause quarter-to-quarterly fluctuation. I think, overall, if you look at where Q2 and Q3 are, they're actually down from where they were the prior 3 quarters, and so -- it's one of the reasons we talk about the compares year-on-year is we knew we had some increase in the outgoing volume a little earlier in the year, and that stabilized down so we have a tougher compare in Q3, but that should be sequentially a bit better as we get into Q4.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

What seasonality is there in this business? Can you just give us from a practical standpoint why there's a seasonality in 3Q? What is behind it, if that's indeed what this chart is saying, in your view?

C. Richard Reese

Seasonality in the business is more related -- you'll see a higher growth of storage in the first couple of quarters because people are cleaning out last year's records. That's the biggest trend you see in terms of gross adds, gross additions coming in.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then in terms of the corporate, it seems like you guys are taking costs down in the OIB and that's positively impacting OIBDA. Can you talk about some of the items that happened that affected the quarter on a sequential basis?

Brian P. McKeon

On corporate costs, Shlomo?

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Yes.

Brian P. McKeon

It's flow-through benefits of -- we had a number of initiatives we started advancing really late last year around looking at our support cost areas and trying to make sure they're well-aligned with good customer service, but also being as efficient as we can be, and we're seeing the flow-through benefits of that. So it's across a number of functional areas. It's something that we expect to continue to do on an ongoing basis, and I think what you're seeing more than anything is, given when we advance those initiatives, we're starting to see the flow-through benefits of those year-on-year.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then the lower revenue from fuel surcharges, is this just index-based stuff that you just had lower charges so you had lower -- lower fuel so lower surcharges?

Brian P. McKeon

Yes, surcharges were down. Fuel prices have been down a bit and they were down about $1 million year-on-year in the quarter.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then the last question I have, is this the first time you've had back-to-back quarters of sequential down volumes in North America? So we had last quarter, you noted it on the Analyst Day as well, but is this kind of a historical period? Or is this something that has really been happening over the last few years just it's so close to 0 that you haven't really called it out?

Brian P. McKeon

It's been basically flat. We're -- if you look at the volumes and how they've trended over the last several quarters, it's been up a bit, down slightly, but basically flat and we're expecting flat this year, so it's -- I would say the headline in storage is flat in North America.

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

I'm not talking about revenue. I'm talking about volumes.

Brian P. McKeon

I am too. Storage volume is flat. Down a bit because of the compare of Q3 to Q3, and that reflects just some of the ebbing and flowing of volume coming in now. But as we go forward, we expect it to be flat. That's where we'll be this year. So that's really the broader theme, is it's relatively flat.

Operator

Your final question comes from the line of Kevin McVeigh with Macquarie.

Kevin D. McVeigh - Macquarie Research

Apologize if you answered this already, but the components of the core services, I know part of that's fuel, part of it is just healthcare activity overall. Can you just bracket in kind of round numbers what drove the decline there and how you're thinking about healthcare, in particular? Richard, I know that continues to be an area that -- on the service side, that's been a little slower, just how we're thinking about that going forward?

C. Richard Reese

Well, I think -- we're thinking that healthcare is going to continue to decline and roughly come down to -- over quite a period of time, to about half of what it used to be. And it's got few more years before it will get itself to that level, I think. And I think the rest of it is more -- the bigger part of the rest of it is more economic activity. So it depends on the economies, what comes to on there, I think.

So thank you, everybody, for coming this morning. We do try to keep to at least an hour, and I started off extending it short. I've always misjudged that so I apologize to you. I know you have other calls to get to. Thanks for coming to Investor Day, and we look forward to continue to communicate with you, and we'll talk to you next quarter.

Operator

That does conclude today's conference. You may now disconnect.

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

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

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