Otelco Inc. Q2 2010 Earnings Call Transcript

| About: Otelco, Inc. (OTEL)

Otelco Inc. (OTT) Q2 2010 Earnings Call August 4, 2010 11:00 AM ET


Kevin Enda – IR

Michael Weaver – Chairman, President & CEO

Curtis Garner – CFO


Frank Louthan – Raymond James

Dave Coleman – RBC Capital Markets

Tim Horan – Oppenheimer


Good day, and welcome to the Otelco, Incorporated Conference Call. Today’s conference is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Mr. Kevin Enda. Please do ahead, sir.

Kevin Enda

Kevin Enda – IR

Thank you Melanie. And welcome to the Otelco Conference Call to review the company’s results for the second quarter ended June 30th 2010, which were released yesterday afternoon.

Conducting the call today will be Michael Weaver, President and Chief Executive Officer; and Curtis Garner, Chief Financial Officer.

Before we start, let me offer the cautionary note that statements made on this conference call that are not statements of historical or current fact constitute forward-looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.

In addition to statements which explicitly describe such risks and uncertainties, listeners are urged to consider statements labeled with the terms believes, beliefs, expects, intends, anticipate plans, or similar terms to be uncertain and forward looking.

Forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in companies filing with the SEC.

With that said, I will turn the call over to Mike Weaver.

Michael Weaver Chairman, President & CEO

Thanks Kevin. Good morning, everyone. Thanks for joining us on this call.

Following our usual format, I’ll provide you a few brief comments on the second quarter results and key accomplishments. And then ask Curtis to provide comments on financial results.

The second quarter was very productive for us as we completed several projects that are critical for our future growth and continue the positive trends for this year with an increase in both revenue and adjusted EBITDA.

The second quarter adjusted EBITDA of 12.9 million was positively influenced by our settlement with FairPoint as part of their bankruptcy proceedings.

As part of the settlement, the existing interconnection agreements remain in effect, which allows us to continue to FairPoint.

As a result of this favorable settlement, we were able to remove some of the bad debt allowances and cost accruals we had previously recorded.

June is also the month when we complete the annual Interspect cost study process for the previous year and adjust revenues based on the results of the study.

This year this study yielded a net positive impact for our five RLEC subsidiaries who filed cost-study data.

If you combine the positive benefits from these items and several other smaller one-time expense and revenue items, the adjusted EBITDA run rate for the quarter is in the $12.4 million range, which compares favorably to our first quarter results.

On the Metric Side, the second quarter is typically a soft quarter for us in relation to customer adds and deletes, and our access line equivalence declined by .4/10th of a percent. The decline was driven by access line loss increasing slightly over the first quarter, combined with slower growth in the CLEC Operations.

In an effort to improve our Otelco customer retention rates and increase the growth in our CLEC revenue, we realigned our management responsibilities to increase the focus on sales and marketing. These changes, along with our expansion into New Hampshire, should yield positive results as we move into the balance of the year.

I am pleased to tell you we’ve made tangible progress on our New Hampshire expansion as the first of the three co-location facilities is now operational. In addition, we have an office in New Hampshire and we’ve added sales staff that will be dedicated to this market.

As you may recall there are three total co-location sites in New Hampshire. As I said, the first one is operational, the other two sites will be added over the next few months with all three operational by the end of the year.

On the IPTV front, we continue to expand our footprint and now pass over 10,000 homes in our Alabama market.

While we are pleased with the expansion of our service capability, the market acceptance of this product is slower than we would like to see. In an effort to boost the take rate on IPTV, and to continue our effort to provide and expand our cable product offerings, in August we will add Video on Demand to our Alabama Cable Products customers. In addition we’ve hired additional sales staff to call on retail accounts throughout Alabama.

Second quarter saw an increase in cash of 1.5 million over the first quarter, and a total increase of $5 million for the first six months of the year.

We attribute this increase to improvement in our EBITDA margin and lower-than-expected CapEx in the first half of the year. As a reminder for the year, we expect total CapEx to be between $10.5 and $11 million.

In June we also completed the exchange of all of our Class B shares for IDSs, which increases the outstanding IDS units to 13.2 million

Another bright spot for the quarter for us was the completion of our first large hosted PBX sale. This installation, which was completed in early July, will add over 500 access lines in the third quarter results, and is expected to generate monthly recurring revenue of approximately $6,000 to $7,000. We are pleased that the demand for this product appears to be strong and we’re seeing a good back log of orders from this service.

Finally we paid our 22nd consecutive IDS distribution in June, and remain committed to continuing our policy of returning cash to our shareholders.

Curtis, if you would, please discuss the financial results.

Curtis Garner – CFO

Thank you, Mike. And thanks to everybody on the call for joining us today. I know it’s a busy time in the earnings call season.

Let me provide a brief overview of our financial performance for the second quarter of this year. More details will be in the 10-Q, which we expect to file tomorrow.

Total revenues grew 2.8% in the second quarter to 26.5 million from 25.8 million a year ago. Targeted growth in New Hampshire and Maine CLEC areas, the resolution of certain issues associated with FairPoint’s bankruptcy proceedings that Mike already mentioned, and selected price increases which were all positives, which were partially offset by decline in RLEC subscribers.

It generated positive gains across all of our revenue categories for the quarter. We also saw sequential quarter growth in each revenue category when you compare it to first quarter 2010.

Local services revenue grew 1.8% in the second quarter to 12.3 million from 12.1 million a year ago.

Expansion of CLEC revenue produced 8.4 million increase offset by 0.2 million decrease in lower RLEC voice revenue.

Network Access revenue increased 4.1% in the second quarter to 8.6 million from 8.3 million a year ago. Continued expansion into New Hampshire, including the growth in wholesale network connections, coupled with the resolution of certain FairPoint bankruptcy issues generated increase of half a million. RLEC access revenue declined by 0.2 million.

Cable television revenue in the second quarter increased 14.1% to 0.7 million from 0.6 million in the second quarter of 2009.

Digital Family Packages and IPTV growth accounted for the increase.

Internet revenue for the second quarter of 2010 increased slightly remaining at 3.5 million for both periods. Growth in broadband data lines was offset by the loss in dial-up subscribers.

Transport services revenue increased 2.9%, kind of holding flat at $1.4 million in both periods.

Moving to expenses. Operating expenses for the second quarter decreased 2.9% to 19.5 million from 20.1 million a year ago.

Cost of services increased 2.9% to 10.4 million in the second quarter from 10.1 million in the same period last year.

Increases consisted of 0.3 million increase in access expense related to growth from network connections, and a 0.1 million increase in rebranding costs of our new Otelco operations that we implemented, the OTT Communications brand name with the rollout in June.

These increases were partially offset by 0.1 million in poll-attachment audit expenses true ups in 2009 that did not reoccur in 2010.

SG&A expenses decreased 3.2% to 3.2 million in the second quarter from 3.3 million a year ago. The decrease reflects operational costs saving of 0.2 million including lower operational taxes, insurance costs, and lower reserves for uncollectibles, which were partially offset by an increase of 0.1 million in employee costs.

Depreciation and amortization for the second quarter 2010 decreased 11.7% to 5.8 million from 6.6 million in the second quarter 2009.

Amortization of intangible expenses associated with the Country Road acquisition, which was acquired in November of 2008, decreased 0.6 million and that includes the covenant not to compete in contract customer-base assets. The remaining decrease of 0.2 million reflects lower depreciation of plant assets in Alabama.

Interest expense decreased 4.2% to 6.2 million in the second quarter from 6.4 million a year ago. A decrease of 0.4 million reflects the interest rate capital expense that was present in the second quarter of 2009 but was fully expensed in 2009.

The balance reflects lower principle given the $5 million voluntary prepayment of our senior debt that we made last August, which was partially offset by increased interest rates as our second interest rate swap became effective in February 2010.

Interest rate swaps obviously limits the company to exposure to changes in interest rates through February 2012, which given the continuing malaise in the market also limits our benefits from the continued low LIBOR rates.

Adjusted EBITDA, as Mike mentioned, for the second quarter was 12.9 million compared to 12.4 million in the same period of 2009 and 12.3 million in first quarter of 2010.

The cash pay-out ratio, as we express it, is approximately 80% on a year-to-date basis for 2010.

Cash flow from operations -- operating activities was $14 million in the first six months of this year compared with 13.2 million in the same period in 2009. Cash used in investing activities amounted to 4.1 million compared to 3.4 million during the same six months period last year, basically reflecting higher additions to property, plant and equipment. Cash flows used for financing amounted to $4.9 million this year compared to $4.5 million last year and reflects our dividends paid including the IDS units associated with the Class B conversion that was completed in June. Costs associated with the conversion are also included in this category.

In terms of the balance sheet, we had cash and cash equivalents of $22.7 million compared to $17.7 million at the end of 2009. All of the company’s Class B shares were exchanged for IDS units during the second quarter of 2010.

Total long-term notes payable increased by $4.1 million to 273.7 million -- from 270 million to 277.8 million. And that was due to the exchange of the Class B shares. The related Class B exchange liability, which had been recognized in mezzanine section of the balance sheet decreased by that same $4.1 million to zero at the end of June. So no basic change, just a movement in the geography.

We continue to meet all of our loan covenants.

The second quarter distribution of $5.4 million in interest and dividends to our shareowners and $0.3 million in interest to our bond holders occurred on June 30th. And also reflects the new IDSs issued in exchange for Class B common stock.

As Mike mentioned this represents 22 consecutively quarterly dividends since going public in 2004.

Melanie, if you will provide directions, we can take questions at this time.

Question-and-Answer Session


Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions)

And our first question come from Frank Louthan with Raymond James.

Frank Louthan – Raymond James

Great. Thank you. Can you give us an idea of sort of the ongoing impact from the accrual reversal? Was there any material amount that we should see improved in expenses going forward on a quarterly basis since now you’ve kind of got that issue resolved?

And walk us through some of the success in the CLEC business. That was a little better than we had modeled in the quarter. What are you seeing there that’s driving that improvement? Thanks.

Michael Weaver

Frank, let me thank you for your question. Let me talk about the CLEC improvement in the quarter and then ask Curtis, if he would, to address the, you know, any potential effects of the FairPoint settlement.

We’ve done a couple of things in the CLEC arena that’s really only now beginning to pay off. You know, we talk about our expansion in New Hampshire, and I’m pleased with our progress there. That, you know, through the second quarter, we’re just getting started so that has not added any revenue or sales opportunities to us that have shown up on the P&L at this point and time.

What we have done is within Maine, and we’ve expanded North in to Washington County and we have a [inaudible] in Washington County were we have some customer base that’s scattered throughout the southern part of Maine. So it’s relatively -- there’s been some pent-up demand, if you will, for expanding our service in that area. We did raise quite a few sales in that area. I like the prospects for that. It’s really looking good long term.

You know, that’s an area that there’s very little incremental costs for us adding, and some good opportunities to sell. There’s limited competition in that part of the state for us.

In addition, the hosted PBX product, as I mentioned, is out there. While we mentioned the one large installation that we’ve had, we’ve had other smaller ones as well. There’s been quite a bit of interest generated from that.

We’ve seen some slight improvement in the FairPoint operational issues that we deal with day to day. That’s been a positive for us. Part of the evidence of that is the progress that we’ve made in getting the co-location sites, which are of course, FairPoint sites in New Hampshire, scheduled and with dates that we feel good about accomplishing.

In addition to that, just the day-to-day ordering of circuits and provisioning of service with FairPoint, there has been some improvement. We’re happy to say in this quarter we experienced some improvement with that.

So a combination of new sales territories in Northern Maine, the slight improvement in performance by FairPoint, and then the new products that we’ve introduced, that’s the reasons that we attribute to our improving CLEC sales efforts and results.

So, Curtis, if you would, if you would address the other part of Frank’s question, that would be great.

Curtis Garner

Frank, thanks. I guess I’d look at it in several parts. From the relationship with FairPoint, the agreement that we entered into probably has three what I would call immediate impacts.

The first is, it takes away the risk factor that services that were billed prior to bankruptcy will be considered outside of FairPoint’s need to pay. By having this agreement, FairPoint agrees that all of those expenses are due and payable. So that takes away the accruals that we had to take last year for risk for that revenue.

The second thing it does is, it avoids the potential for price increases from renegotiated contracts. This basically accepts all of our existing contracts, some of which are fairly beneficial to Otelco. And so all of those contracts were accepted by FairPoint, so we’ll continue to have relationships between the company on the existing contracts. So that avoids the potential for price increases.

And the third thing it does is it limits the risk factor that as FairPoint is fixing and cleaning up their billing system, that we have liability for failure to bill us for expenses back prior to October 25th because in essence, the agreement as filed with the bankruptcy courts says that everything through October 25th is considered correct, clean, fixed, whatever you want to call it.

So those are what I call the three benefits of the agreement. But the other thing that we’re doing is we’re waiting for some of the credits to come through on their billing system and we’re not actually taking the -- reflecting the positives that come from that until such time as we see credit.

So we expect some flow over in the third quarter of the improvements related to this agreement. It will depend on how quickly and whether they meet what we think is the expectations on those agreements.

So that’s what I see as the benefits. It will not lower our pricing and rates in the future. But it will keep us from having an increase, at least until the contracts are up for renewal.

Frank Louthan – Raymond James

Okay, great. Thank you. And what plans do you have on the video subscriber side to try and boost that? I know it’s seasonally a weaker quarter for everyone, but do you have any thoughts on your ability to kind of drive penetration there a little better? Have you see any incremental push from the satellite companies in your markets recently that’s maybe made the competition a little tougher? Can you give us some color there?

Michael Weaver

We have, Frank. Thank you for that question as well. The satellite guys have gotten more aggressive in pricing and just more feet on the street within particularly in our Alabama market, and that’s hindered our marketing efforts somewhat.

It’s interesting, when you look at our Cable TV subscribers, the IPTV tech rate is slower than we would like, but it’s still, it’s okay. I mean, it’s acceptable is what I’m trying to say. The loss that we’ve had are in our traditional coax customers that we’ve had for cable. And again, I attribute a lot of that to just the satellite guys.

We’re doing two things to try and -- three things actually to try and offset that. First is we’ve not had direct sales people out calling on business and residential customers. We’re trying that approach. It’s a bit different for us. I think that, you know, what we have to do is be really aggressive selling our products. So feet on the street is the first one.

The second one is we’re offering Video on Demand, as I mentioned. That’s something that the satellite guys don’t really have in the area where they’re offering their services in Alabama. That product should be out within two weeks. We feel really good about that. We think that’s something that the competition at this time can’t offer.

And then the third thing is we’re finally getting the local programming up to speed. And exactly what I mean is the things that are of interest to the communities we serve, whether it’s town council meetings or local sports events, or just local news and entertainment specific to that community. And again, we see that as something that the competition can’t offer.

So that’s the approach that we’re taking to try to ramp up those cable sales.

Frank Louthan – Raymond James

Okay, great. Thank you very much.


(Operator Instructions) And we’ll go next to Dave Coleman with RBC Capital Markets.

Dave Coleman – RBC Capital Markets

Hi. Thank you. I was just wondering if you could talk about the revenue backlog with FairPoint. I think in the past it was about 32,000 a month of revenue backlogs. I’m just wondering where that is now.

And then as far as the sequential increase in network access revenues, how much of that, you know, can you break that out between the settlement with FairPoint and the interstate cost study; how much of the increase is attributable to either of those?

And then on the PBX sale, it sounds like that was in the CLEC property up in Maine. I’m just wondering if you can quantify other similar opportunities in those markets? Thanks.

Michael Weaver

Dave, thank you for your question. The FairPoint revenue backlog is, you’re right, it’s typically averaging around 30 to $35,000. That number is, you know, I have not looked at that in a week or so. But I think it’s safe to say that number is in the 25 to $27,000 range.

And you know, we do expect -- it’s better. I mean, there’s no -- and we’re grateful for that. We expect that continued improvement as their operational issues get -- as they continue to work through those.

On the access revenue, probably the best way to answer that is just to give you a little bit of background on exactly what those interstate cost studies are.

First, that’s an annual -- that’s a recurring settlement process that happens every June, and as you may know. In the past that number – it’s hard to predict whether that will be a positive settlement or a negative. A positive settlement means that we’ve, you know, we’ve understated the revenue so we have to make an adjustment to state the revenue properly, base it on the revised cost studies.

And certainly, that was the case this year. The amount of that is around $212,000 from that positive cost study adjustment.

We actually do a really good job of estimating that. And if you look at the – it’s positive, and in prior year's negative adjustment, as a percentage of the total revenue we received from our interstate access revenue, it’s pretty small. But it’s great when it’s positive.

So I would say of the increase that you saw in access revenue, approximately 200 to 212,000 would be from the cost study adjustment.

And finally, you’re also correct about the hosted PBX sale. That actually was for a school system, a large school system in Maine, and it was generated by the CLEC sale. It was a competitive process and we were awarded the contract of a fairly large installation, and our first large installation. That’s the largest order that we had in backlog.

We currently have -- exactly how that works is we have quite a few requests for proposals out from similar-type vendors. Nothing in the 500-seat range. We’re currently installing a large sale, probably about 1/3 of that size in Presacral, in Maine. That installation is going on this week, it will be completed within a couple of weeks.

We’re very pleased with the product and very pleased with the market acceptance of it at this point.

Dave Coleman – RBC Capital Markets

Great. And then just going back to the sequential growth and the network access revenues, about 1/3 of that was from the cost study. The other $400,000 or so, was that just a one-time showup, or you know, how much of that is recurring?

Michael Weaver

Let me ask Curtis to comment on that.

Curtis Garner

It’s mostly a one-time update, true up. I think Mike had it worked out fairly, pretty closely. If you look at the 12.9 in EBITDA, there’s probably a $500,000 impact on the run rate that’s probably not recurring. And most of that is in access.

I mean, there’s some other pluses and minuses that make it up, but it’s basically all in access.

Dave Coleman – RBC Capital Markets

Great. Thank you.


Your next question is from Tim Horan from Oppenheimer.

Tim Horan – Oppenheimer

Good morning, guys. Good quarter. Mike, last quarter you were kind of optimistic that, you know, maybe you can do 2%-type revenue growth in the next two-three years and margins kind of slightly expanding. Do you still feel kind of comfortable with that outlook? Has anything kind of really changed in the quarter to change your mind about the trends?

Michael Weaver

Nope. Good morning to you, Tim. Not really. I mean, we’re expanding and going into greenfield opportunities with our CLEC. I mean, and we have recognized, we’re fighting really had to increase the customer retention on our RLEC understanding that, you know, that’s a difficult business to maintain status quo and certainly to grow in.

So we are correctly, you know, focusing our attention for growth on, primarily on our CLEC. And that’s – when I say we’re going into Washington and the rest of the counties and into New Hampshire for greefield opportunities for us, that’s what’s going to drive that growth. And I’m pleased by the initial acceptance that we’ve seem to be having, absolutely pleased in Washington and the rest of the counties in Maine.

It’s too early to tell in New Hampshire, although I have to tell you that our initial [inaudible] there, and initial sales calls indicate that there’s, you know, we think that we got that right. We think that we can generate a reasonable market in that area.

Now, it will take some time because we’re a new player in New Hampshire, but I -- the answer to your question is, yes, I still feel pretty good about our ability to grow with the 2% level.

Tim Horan – Oppenheimer

And what percentage of your revenue is now roughly CLEC versus more legacy?

Michael Weaver

It’s currently about 36 to 39%, and in our projections going forward, that will continue to grow. We kind of look at it as CLEC and – and CLEC separate and then RLEC and all other sources. And all other sources would include cable TV and Internet.

Tim Horan – Oppenheimer

Okay. How big is that?

Michael Weaver

Yeah, that’s the offset to the 30 to 40%, 38 to 39%, excuse me, of the CLEC revenue.

Tim Horan – Oppenheimer

Got you. And so it sounds like you think you can kind of roughly grow that 10% a year with entering new territories?

Michael Weaver

Well, that’s our goal. I mean, that certainly is our -- and one of the things that we’ve said from the beginning is, you know, we feel like if we’re staying on top of our business and being aggressive, and you know, we continue to add new products, it’s our goal that we can try to grow our steady goals to grow that business by 10% a year.

We have to have greenfield opportunities and new products, but we also, I mean, we have those. And so the realignment that we did in our senior management team, we have a very, very talented senior management team and they have diverse talents across the group.

And really what we were doing is we just sort of changed the realignments exactly the right way. We changed Dave’s responsibility really to bring more focus and attention on our sales effort. And you know, we don’t want to stop in New Hampshire. We like New England. We think that it’s a great market for Otelco and we want to continue to look for areas that we can expand our existing business and you know, we’re always looking for potential accretive acquisitions. And we, you know, we like New England for that as well.

So I absolutely think the 10% revenue growth in the CLEC is a reasonable expectation for us to have at this time.

Tim Horan – Oppenheimer

It seems like CapEx has been kind of flattish the last couple of years, even though trends have kind of improved here a little bit. Would you have an opportunity to spend more like 15 million a year in CapEx instead of 10 million? Would that help out the growth rates a little bit?

And how have you been able to keep the CapEx kind of flattish? Are your equipment costs coming down? Are you seeing more productivity improvements on the CapEx front?

Michael Weaver

It’s sort of all of the above, Tim. I mean, as you guys know, the equipment costs for our industry have come down; smaller boxes, less expensive, a lot shorter life times because the technology gets old faster than the old big switches. But certainly that’s part of it. You know, the replacement costs for the equipment we have, and the new technology, while it’s not inexpensive, it’s cheaper than buying the big switches.

So that’s one part of it. The second part is, yes we always work really hard and try to find new technology and ways to be more efficient with the equipment that we have. And the talent that we have throughout our company has worked well for that. And we’ve realized some synergies from that.

And yes, we recognize at some points in time that, you know, there will be years where we will spend 15 or $16 million in CapEx to take advantage of opportunities that we see. We work hard at controlling the -- you know, one of our goals is to continue to try to grow the cash. So we work hard at controlling the CapEx on an every-year basis, but we never want to stifle our growth by being stingy with CapEx money.

And frankly, the projects that we have for 2010, adding three co-locations sites in an adjoining state, on top of our normal CapEx, we feel very comfortable with our ability to manage that process. But that’s, you know, if we try to do much more in this year, I’m not comfortable with trying to do too much from a management standpoint to correctly monitor those situations as well as from a cash.

Tim Horan – Oppenheimer

Got you. Got you. Good point. And then just lastly, or two more if you don’t mind. One, on the ILEC side, do you think you could kind of continue this rate of productivity you’ve found over the last four or five years? Is there opportunities with new equipment and you know, and with new services to continue that?

And maybe just your thoughts on what you’re hearing out in Washington on the regulatory front. You know, just an update on that. Thanks.

Michael Weaver

Yeah, the ILEC side is getting harder because the markets are defined and you really can’t sell outside your territory from a regulatory standpoint. We keep changing and massaging our product mix. One of the things that we’re doing it increasing the bandwidth for high-speed Internet throughout all of our territories. That’s been a great, you know, we’re meeting the need now, but we anticipate additional bandwidth requirements in the future.

We want to be ahead of that curve. That’s been an opportunity for us to continue to grow in the regulated side.

But as our penetration increases for broadband, it naturally makes it harder to continue to add sales there.

There’s some other things that we can do that we’re looking at on the ILEC side. Certainly, additional product sets. We think the, in parts of our ILEC territory, our Alabama markets in particular, two of our larger Alabama RLECs have a relatively high concentration of business accounts. We actually think the hosted PBX product will work well in that market. In Aniani, our original territory as an example, I think the business customers comprise about 26-27% of our total access lines. And the hosted PBX for equipment in new systems provides – it a great answer for customers as well as for Otelco.

So that’s a product that, you know, we can add. We already talked about cable TV, but we think the real value in cable to our RLEC operations is it encourages the stickiness of our customers; one provider for all your telecommunications and cable needs. So we will continue to push that product.

So while it’s harder to maintain that productivity in the RLEC spaces, we still have ideas and we’re still working hard and trying to appropriately manage those cost on an every-day basis.

I haven’t heard a lot on the second part of your question, Tim. We haven’t heard a lot of new information coming out of Washington as far as the broadband plan and certainly we hear the gossip and the assumptions and have read the articles of things coming out.

But you know I haven’t seen anything – and that’s entertaining and interesting news, but I haven’t seen anything that I thought was concrete that would indicate -- that gave me any sense of certainty of exactly timing of all those changes and exactly what was going to happen.

Tim Horan – Oppenheimer


Michael Weaver

At this time. We’ll stay on top of that in each of our states, and we have members of senior management that part of their daily responsibilities is to monitor that. But nothing of substance at this point in time.

Tim Horan – Oppenheimer

Great. Okay. Thanks a lot.


We have no further questions.

Michael Weaver

Well, once again, We’d just like to thank everyone for participating in the call and we look forward to you joining us again in three months. Thanks a lot.


That concludes today’s conference. Thank you for your participation.

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