Brookfield Asset Management's (BAM) CEO Bruce Flatt on Q2 2016 Results - Earnings Call Transcript

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Brookfield Asset Management Inc. (NYSE:BAM) Q2 2016 Earnings Conference Call August 12, 2016 11:00 AM ET

Executives

Suzanne Fleming - Head of Branding and Communications

Brian Lawson - CFO

Bruce Flatt - CEO

Analysts

Cherilyn Radbourne - TD Securities

Mario Saric - Scotiabank

Ann Dai - KBW

Andrew Kuske - Credit Suisse

Alex Avery - CIBC

Operator

Thank you for standing by. This is the conference operator. Welcome to the Brookfield Asset Management Q2 2016 Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Suzanne Fleming, Senior Vice President of Communications. Please go ahead.

Suzanne Fleming

Thank you, operator and good morning. Welcome to Brookfield's second quarter conference call. On the call today are Bruce Flatt, our Chief Executive Officer and Brian Lawson, our Chief Financial Officer. Brian will start off by discussing highlights of our financial and operating results for the quarter and Bruce will then talk about our market outlook and Brookfield's approach to investing.

After our formal comments, we'll then turn the call over to the operator and take your questions. In order to accommodate all of those who want to ask questions, we ask that you refrain from asking multiple questions at one time in order to provide an opportunity for others in the queue. We'll be happy to respond to additional questions later in the call as time permits.

I'd like to remind you that in responding to questions and in talking about new initiatives and our financial and operating performance, we may make forward-looking statements including forward-looking statements within the meaning of applicable Canadian and U.S. securities law. These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks and future events may differ materially from such statements.

For further information on these risks and their potential impacts on our company, please see our filings with the security regulators in Canada and the U.S. and the information available on our Web site. Thank you. And now I'll turn the call over to Brian.

Brian Lawson

Thanks, Suzanne and good morning everybody. We're quite pleased with the results for the quarter, which highlight the growth in our asset management business and improved operating results across our other businesses. The second quarter marked the completion of several important milestones. In particular, we completed the fund raising for all of our new flagship funds, closing on $27 billion of capital in aggregate and we launched Brookfield Business Partners which is the fourth of our listed entities. While our work isn't over yet, these initiatives have set us up very well for continued growth.

Our second quarter funds from operations totaled $637 million compared to $520 million in the prior year quarter. So breaking this down, we recorded $514 million of FFO from operating activities and that's up 54% from the prior year. That benefited from 50% increase in fee related earnings and a 56% increase in the contribution from our invested capital.

Also includes realized distribution gains of $123 million. This came from the sale of core office properties in the U.K. energy distribution business and that compares to $186 million of realized distribution gains and carried interest in the prior quarter. Net income was $584 million or $0.15 per share and that reflects the lower level of valuation gains in our Property Group relative to the 2015 quarter.

Turning to our asset management results. Fee bearing capital increased to $108 billion driven by inflows of $14 billion in quarter and $23 billion over the past 12 months. Inflows were primarily the result of fund raising for the new flagship funds and these include Brookfield infrastructure partners’ fund 3, which is a $14 billion global infrastructure fund, so largest private fund raised by us to-date and the largest private infrastructure fund raised in the industry.

Brookfield's strategic real estate partners Fund 2, which is the second one, a $9 billion global opportunistic real estate fund. And Brookfield capital partners Fund 4, a $4 billion global private equity fund.

All three of these funds surpassed their initial fund raising targets and are double or more the size of the predecessor fund. In terms of this funds, typically allow us three to four years to invest the capital, so we have plenty of time to put the capital to work in a disciplined manner. Having said that, we continue to see a number of very attractive opportunities across all of our businesses, so this could happen pretty quickly. As an example, the new real estate fund is already more than 50% invested or committed, putting it on track to be fully invested by 2017 and in a position to launch fund raising for the next.

We continue to raise capital for other niche funds or investments that are complementary to our current product offerings and currently have four funds in the market including an open end and real estate fund and three niche funds targeting $3 billion of investor commitments. The growth in our fee bearing capital led to a 50% increase in fee related earnings as I mentioned. They totaled $191 million in quarter on $300 million of revenues. And of note, recurring base management and incentive fees on predominantly long dated or perpetual capital accounted for nearly 90% of fee revenue. With the difference due to some one time catch-up in transaction fee in quarter.

Our annualized run rate of total fees in carry is now more than $2 billion based on current funds under management. That's up from $1.6 billion last quarter end and $1.4 billion at the end of last year. Strong capital flows increased annual fee revenues by 24% to $1.2 billion and recent private fund commitments increased carry eligible fee bearing capital to $39 billion increasing our annualized target carried interest to $830 million. So that’s $1.2 billion of annualized fee revenues and the $800 million of target carry that make up that $2 billion of annualized run rate that I referenced at the beginning.

In addition to fee related earnings, we also generated $130 million of carried interest and over the last 12 months a total of $331 million. That increases our cumulative carried interest of $925 million. However, consistent with prior quarters, we defer recognition of this carry in our financial statements until the funds are substantially monetized, which will take several years.

Going forward, we are set up well to capitalize on opportunities and move quickly with $18 billion of undrawn fund capital on top of our $6 billion of core balance sheet liquidity. We have found that having large scale capital gives us an advantage in the market to acquire high-quality assets at attractive returns and Bruce will elaborate on this more in his remarks.

Moving now to our operating businesses. FFO from our Property Group was $195 million. That's up 36% on the prior year. Increase reflects contributions from investments made in our opportunity segment as well as good property growth in core office and retail portfolios and an increased contribution from our multifamily operations. We sold a partial interest in one New York Plaza as well as asset sales in our opportunity funds which gave rise to $80 million of the disposition gains I mentioned earlier.

Our Renewable Power Group produced FFO of $37 million, compared to $66 million a year ago. After experiencing strong generation in the first three months of the year, the second quarter saw continued improvement in hydrology in Brazil but lower inflows across several of our North American watersheds. We also experienced lower relative power prices year-over-year in Brazil. New assets helped to offset some of this, but we still fell short of expectations.

On a year-to-date basis, however, FFO is in line with the prior year. The Infrastructure Group contributed FFO of $68 million. That's up 11% from the same period last year. FFO benefited from increased ownership of our gas transmission business, acquisition of a toll-road business in India and 11% increase in FFO from existing businesses on a constant currency basis.

We completed the sale of our U.K. gas distribution business generating $43 million of realized disposition gains. In our private equity group, we had FFO of $97 million, up strongly from $22 million in the prior year. FFO grew by $29 million as a result of higher pricing and volumes and FFO also increased from the contribution of recent investments including our Western Australian energy business and gains on sales of investment securities, which offset a reduced contribution from our Canadian energy businesses.

In our North American home building and land development business benefited from higher volumes in the U.S. and Eastern Canadian operations, although this was offset in part by some lower margins in Alberta.

And finally, the Board of Directors declared a quarterly dividend of $0.13 per share payable at the end of September and that's unchanged from the prior quarter. So that sums up the results for the quarter and now I'll turn the call over to Bruce. Thank you.

Bruce Flatt

Good morning.

As Brian mentioned, I guess notable in the quarter fund raising continues to be very strong and significant amounts of money are flowing into specifically real asset strategies.

As Brian also said, we completed the final close for all the flagship funds and significant capital into a number of our other strategies. Total assets today are about $250 billion.

I'm going to deal with just three topics today, but Brian or I are prepared to speak on anything else you'd wish at the end.

Starting first with the U.K. Our view is that the U.K. will thrive in the long-term, but as all of you know, there often are bumps along the way in these types of situations. We also think that many times these situations present opportunities along the way where you can earn significant returns than otherwise in a situation, which is smooth during the time. Important point though to remember is, it requires a long-term view and an ability to withstand bumps along the way.

Some of our businesses in the U.K. will likely not be affected by Brexit and some actually may benefit. For example, we own a short stay resort business that provides vacation accommodation to those who don't own a vacation home. A big part of our competition in this business comes from locals vacationing outside the U.K. But with the currency down, we think people -- more people will be staying local.

We're also well diversified across our U.K. businesses and have -- for example, have a local retail mall business, a gas utility business and are building a multifamily residential business, each which will also likely not be affected by the situation. The business we own that will have the most uncertainty for a while is our U.K. office property business, essentially we rent space to large corporations, many of which are global and uncertainty about the future of the business model in the U.K. is not helpful to long-term planning for these type of companies. The good news is that we have significant time to be able to deal with this since the vast majority of our properties are fully leased on long-term leases with very high-quality tenants.

Even most of our developments, which are under way, are mostly let to strong tenants and our issue therefore isn't the next 10 years, it's really the long-term business framework for London in the future.

In this regard, we think that London will continue to be a very important center of global commerce. It's centrally located. It has a sound rule of law. It’s cultural respected capital. It has a free enterprise system. English is the primary language. A favorable tax regime for foreign companies, individuals and is a city that people like to live in. In fact, there are very few countries in the world that have all those things I just stated.

In addition, moving corporate operations is extremely disruptive and expensive and in addition to that, there's no natural alternative in the EU for corporations to go. It's therefore for all these reasons that London was a global center before the vote and why we believe it will continue to be over the longer term. And while we definitely wouldn't have chosen this outcome, we think there are three things that will happen or could happen.

Number one is that they'll negotiate an acceptable deal with the EU and life will go on. Number two, the U.K. will establish itself as a large “Singapore” sitting next to one of the three largest trading blocks in the world or number four -- number three, everyone will get tired of negotiations and leave will fade away with some alterations to the current status. And I guess I'd just say that we think that all of these outcomes over the longer term will be -- are acceptable and we just would hope that certainty would come sooner than later.

A final point on this is that U.K. interest rates recently decreased and will likely go lower even more as a result of both the Brexit situation and pressures from EU rates which are now generally negative across the board. And while most people predict real estate values will go down in London, we believe that once all of this settles out, that quality properties with assured income may very well be valued higher than they were prior to Brexit. This we think will be driven by investors' thirst for yield.

Turning to interest rates. Similarly, there are now $10 trillion of bonds globally yielding negative returns. Many of those who own these bonds acquired them years ago and have made excellent capital returns by riding them into negative territory and they continue to receive coupons on the bonds until maturity. So they're happy and continue to hold onto these positions. But over the coming years, as most of these bonds mature, institutions are going to be forced to look for new options for a lot of this $10 trillion of cash. And rather than invest in new bonds with negative yields on day one.

And in essence there are only four places globally for this money to go and the first is U.S. Treasury. The second is corporate and asset backed bonds. The third is equities and the fourth is real assets. And real assets, predominantly real estate and infrastructure which are specialties are among the safest long duration investments for earning decent returns in this context for the type of institutions that own these securities.

As a result, we think we will continue to see substantial capital flows into real assets which should be very beneficial for our business.

Lastly, and because we often get asked this question, I wanted to make a couple of comments on why we're still able to acquire assets for value in a world where interest rates are zero and the S&P is at 2200. We often -- and it really boils down to a couple of simple factors. And in essence, we generally acquire assets in off-market means. And this enables us to find transactions that aren't generally available to most others and often allows us to avoid auctions most of the time. When we say off market, it generally means one of three things.

First, we have significant capital to deploy in the sectors we operate in. And as a result, when a seller considers who might buy their large asset, we're usually at the top of the list because as transactions get larger, that list usually gets shorter. Second, we operate in many markets around the world with a very global footprint and that enables us to ensure that we can move capital when markets are out of favor, we can be there with a bid when others just aren’t set up to do the same. And third, we have operating capabilities and a reputation that enables us to usually bring more to a transaction than just capital. It allows us to underwrite with speed, certainty and often find additional values that others might not.

Our business is based on utilizing these competitive advantages to source transactions, followed by working the assets we acquired to enhance the returns over those that might otherwise result without our resources.

In total, these advantages should enable us to continue to earn returns in accordance with those we state and as they compound over time that can meaningfully add value to all of our clients and investors.

With that, operator, we'll turn the call back to you and we'll take -- Brian or I will take any questions that anybody has.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Cherilyn Radbourne of TD Securities. Please go ahead.

Cherilyn Radbourne

Thanks very much and good morning. Wanted to start on the asset management franchise where you've continued to refine both by introducing new products, I noticed an open ended real estate product this quarter, and also by selling off non-core businesses. So maybe you can just elaborate a little bit on those two topics, new products and pruning.

Bruce Flatt

Thanks for the question. And I'll start with pruning. I'd just say the following. Our business has always been and it is about generally buying assets in large quantums or buying them in off-market situations where we have a significant amount of work to do to get the asset turned around or turned into a pristine asset.

Once either of those things -- both of those things are accomplished, usually either they're assets which we're not interested in owning over the longer term, which we then sell. Or secondly, there are -- we own assets which we can't afford to own at the returns that we can sell them at, in particular in the low interest rate environment we're in. And therefore, we continuously will be pruning assets over time to be able to both get rid of the assets we don't want to own longer term, or secondly, to bring other people in with different return characteristics into an asset.

And it's not that the -- in the second category, it's not that the assets are not spectacular assets. In fact, often these are phenomenal assets that you would want to own forever. And what we're doing is, we're selling them to clients which -- or institutions which have a different return risk threshold. They want to own an asset for the longer term and it's a great asset for them if they want to earn a 7% yield in perpetuity. And but it came from a strategy in which we needed to earn 14 or 20. And so it's generally how we look at the assets.

With respect to new products, I guess what our belief is, is that we should be offering our institutional clients a group of products that satisfies -- that we can operate in but satisfies their needs for capital across the spectrum. So in all of the areas where we have expertise, being our four business areas, we want to be able to offer products both in core, core plus, and opportunistic strategies and we continue to build that out across the spectrum. And the advantage we have, therefore, with large global institutions and with sovereign institutional investors around the world is that we become more of a one stop shop for them to be able to offer products. And it’s just -- it compounds on itself because each fund that you're successful with an institution you get to know them better and that's helpful if we can offer them another product. So we'll continue to do that over the next number of years.

Cherilyn Radbourne

And just by a way of follow-up on the open ended real estate fund, obviously some have had some public issues with that type of fund in the wake of Brexit. What kind of protections would you build into the structure to avoid that kind of thing?

Bruce Flatt

So the open ended funds in the U.K. that had the issue were retail funds and they had daily liquidity on them. None of the funds that we would ever operate with long-term products in them will ever have daily liquidity. So we don't ever foresee having a product like that within our construct.

Cherilyn Radbourne

Okay. And then last one from me. I did want to ask sort of a bigger picture question on the power business because we haven't talked about it for a while. But clearly the shale revolution has had a significant impact on the mix of generation in the U.S. and on power prices, BAM’s long-term thesis has always been that power prices need to rise to incentivize new generation and that clean energy would attract an increasing premium over time. Can you just talk about how your thesis has adapted or how your approach has adapted to the recent changes in the energy market?

Brian Lawson

Yes, Cherilyn, it's Brian. I'll start off on that one. There is obviously no doubt that some of the technical -- technological advances on shale have lowered the price on gas and that's caused a lower power price for markets in which gas technology is a big part. What we've seen less change in, though, and in fact there continue to be a number of very favorable initiatives for us in that regard, is the continued drive towards having more renewable capacity in a number of key markets for us, particularly in the northeast.

So that's giving rise to more auctions for that kind of capacity, forward capacity payments for that kind of technology as well. And so while the -- I think as you recall, a lot of our thinking around energy prices, power prices going forward, we look at -- I'll say the -- almost a corridor, you could call it where the upper band would be the types of incentives and pricing required for new build fully renewable energy, which obviously we qualify for and can pick up a good chunk of that for in place capacity. The lower band, which hits you on the margin, when there's lower capacity utilization, is when you have the floor set on the gas price, purely on the gas price in those sorts of markets. And we're experiencing more of that today. But as the generation requirements continue to expand, as the economy grows, albeit somewhat slowly, we continue to see good long-term prospects for the power price.

Cherilyn Radbourne

Great. That's all my questions. Thank you.

Brian Lawson

Thanks.

Operator

The next question is from Mario Saric of Scotiabank. Please go ahead.

Mario Saric

Hi, good morning. I just wanted kind of a high level come back to the negative interest rate discussion given a big part of the world is currently experiencing them. While they may be good for kind of going in yields for real assets, negative interest rates are perhaps there for a reason and may kind of highlight the projected economic growth or lack thereof within those specific regions.

So as a long-term investor, how do you think about the balance between the two on real assets which over time as you mentioned before a good economy or strong economy is important to asset appreciation or real asset appreciation? How do you think about the balance between thinking about the economic conditions versus arguably low going in returns because of monetary policy?

Bruce Flatt

Firstly, I think I agree with everything you stated and I'd maybe just answer, add to it by just saying that I think in the world we're in today you're going to see muted -- you're going to see moderate growth even in the best countries in the world and/or more moderate growth than you would have expected in the past. Despite that, some of the returns versus where interest rates are can be very attractive to real asset portfolios. And I just think if you look at what we can earn on real assets across the spectrum, you're getting paid enormous amounts compared to Treasury bill or a U.S. Treasury or something like that and it's probably -- we're at historic highs as the differential between what you can earn on a real asset, even on a core asset, versus an opportunistic asset to an interest rate Treasury.

So look, I think we're going to be in a more moderate growth world for a long time and a low -- lower interest rate environment for a long time, but I still think that you'll be able to -- good investors will still be able to make a lot of money.

Mario Saric

Okay. And I also thought that the commentary on recycling of capital invested in debt into U.S. Treasuries over time was a pretty interesting one as well. I know over the past couple of years, Brookfield's been selling some U.S. real asset exposure in a flattening yield curve environment, does your perception on the U.S. change and does it become more attractive in a greater beneficiary of incremental capital flow going forward?

Bruce Flatt

I would just say we’re -- that's all -- again, that's all correct. Half of our assets or almost $125 billion of them are in the United States. We'll always be buying and we'll always be selling. In this environment, there's not as many opportunities, so we'll continue to harvest capital out because we can put it in other places with greater returns for the risk we take. And but that's not to say we won't still be in the United States doing things and if long rates continue to come down, I think cap rates in the U.S. will go down. But that's not to say we shouldn't still be doing what we're doing.

Mario Saric

Okay. Thank you.

Operator

The next question is from Ann Dai of KBW. Please go ahead.

Ann Dai

Hi. Good morning. Thanks for taking my questions. Thanks for the detail on the seeding and the new product development that ties into my question. So when we think about how much retained capital you have after the dividend, there's certainly plenty of liquidity to pursue different options for growth. I guess I'm just wondering how you're weighing the potential of doing acquisitions to very quickly expand the capabilities of your third party management platform versus doing the organic growth and rolling out new strategies as we go.

Bruce Flatt

So thanks for the question. So I guess our view has been that -- and over the past 15 years, other than two little tiny acquisitions, we've built the business organically from the start and plan on continuing to do that. We never thought that making any major acquisitions was the right way to build an asset management business. It was much more controllable and disciplined if you did it yourself. And given that we're 15 years into it, I don't think we'll change.

On the other hand, there are possibly small areas where we can add expertise and smaller acquisitions could be added over time because what we have today that we didn't have before is a brand name fund raising capabilities and capital to put behind new strategies. And therefore it's possible that there are some management teams or strategies that we could add to the portfolio over time, but they'll be small dollars in relation to the overall business.

Ann Dai

Thanks. Appreciate it. And my second question was around carry eligible AUMs. So we saw that grow nicely quarter-over-quarter due to the strong fund raising. But it also looks like performance was strong. We saw the percentage of AUM actually generating carry tick up. So, was wondering if you could speak to that and maybe provide some detail around if there's a certain fund that began generating carry cross the hurdle, anything around that.

Brian Lawson

Thanks, Ann. So what you're seeing is that -- and as evidenced by the most recent series of funds, is, there's a couple things at play in the stepping up of the amount of carry that we're generating in any particular quarter. So obviously, there's the investment performance itself. But also, what's happening is that the funds that we had raised let's say three years ago, it takes you a year or two to be raising them and they -- and so the carry doesn't start to kick in until you've actually invested the capital and you can start generating the returns. So there's a bit of a lag from when a fund launches and when it becomes “target” carry eligible. So that's one of the things that's happening. So in particular, in one of our real estate funds, in one of our private equity funds it would be around that vintage, would have gotten into that stage where the capital's been largely deployed and the returns are, therefore, starting to manifest themselves.

And then, the second part of it is that the funds are larger with each iteration. There's lots that's two times the previous set. The previous set were two times zero-zero set. So, you get a bit of a compounding effect there, exponential growth factor there as well. So it's really those two things that you're seeing at play there. Does that help?

Ann Dai

Yes, it does. Thank you. That's it from me.

Bruce Flatt

Great. Thanks.

Operator

The next question is from Andrew Kuske of Credit Suisse. Please go ahead.

Andrew Kuske

Thank you. Good morning. I guess the first question is just around some of the supplemental disclosure and it's really on page 10 as it relates to the underlying you've got across property, infrastructure, power and private equity on their pipelines of development activities and how do you think about at the BAM level the balancing act of the growth in the underlying just naturally from their own CapEx activities versus acquisition activities that really tie into your fund business.

Brian Lawson

So there's -- okay, so I think what you're -- the point being we have the opportunity to invest either in acquisition mode, to put capital -- deploy that way or we can put it to work through development and CapEx projects. And so the reality is we end up doing both and that gives us the flex -- it really happens in two ways. So, one is we have the flexibility of allocating the capital to where we think the best risk adjusted return is, whether it's acquisition or internal development.

And obviously, based on market conditions at any particular time, the risk return profile of one versus the other may move. The other point -- so it can be a little bit of a -- not quite either/or but can you shift it from one to the other. The other point though is that often in the context of acquisitions that we make, there are development and CapEx opportunities within those acquisitions. And so that capital can get put to work within those opportunities as well. And given the strength of our operating capabilities and that's one of the big areas that where we seek to add value, that is an attractive line of capital allocation for us as well.

Andrew Kuske

Okay. That's helpful. And then, could you give any color just on the reorganization that's happened with TCH. Because you've given disclosures in the past about your involvement as a first lien holder. Is there any color that you can provide given the reorganization is just underway at this stage?

Bruce Flatt

Yes, it's Bruce. Just maybe three things. One, the reorganization or the -- continues. We expect the company will come out of bankruptcy before the end of this year. It's longer than planned but it's on -- generally on track. Second, as part of the plan there's always been the sale of the encore assets or the business called encore which is, the bid that's on the table today is one from NextEra. And that's always been part of the plan and that or another transaction will happen and as part of this and that will be sold and that was always part of the plan.

And third, we've been working on putting -- we and the other bond holders have been working on putting a management team in place so that it can come out of bankruptcy with a management team and be off. And we're quite excited about the opportunity as it comes out but that should be done this year.

Andrew Kuske

Okay. Thank you.

Bruce Flatt

You're welcome.

Operator

The next question is from Alex Avery of CIBC. Please go ahead.

Alex Avery

Thank you. Bruce, you did a great job of outlining your -- I guess medium and long-term views of the U.K. and the London market in particular and did a great job of hedging the currency going into Brexit. But I'm just wondering when you look at it now, it seems like you're probably less concerned about hedging at this point. So I guess a couple of questions. Where does the hedge stand today? And are there any specific events over the next couple of years as this process plays out where you think you would be more likely to ramp up that hedge again?

Bruce Flatt

Generally we put hedges on when we have specific views or if there are specific risks around. Other than that, it often doesn't make sense to hedge. There's many risk in putting a hedge on as there is in not having one. So I think once we're comfortable that the currencies' at a point where it's stable and then we probably will scale out of the hedges that we had. Where that is, I won't predict right now because it often changes based on events but we have all the hedges on that we had on over the last while.

Alex Avery

And are there any specific further hurdles with this process that you think there's volatility or risk around?

Bruce Flatt

I would just -- there will be lots of changes that go on and I think for a while we'll just be watching the situation and what the economic situation is and once that bottoms or comes closer to bottom over the next while, then probably you'll see the currency bottom out or at least get more stable. And at that point in time it probably doesn't make sense for us to have all of our hedges on. In some places it just makes sense to hedge because it doesn't cost a lot to do it, and therefore, and most of our funds report their -- report in U.S. dollars, so it just -- sometimes for us it's better just to hedge perpetually.

Alex Avery

Okay. That's great. Thank you.

Bruce Flatt

You are welcome.

Operator

This concludes the time allocated for questions on today's call. I would now like to turn the conference back to Suzanne Fleming for closing remarks.

Suzanne Fleming

Thank you for participating in our call. And we look forward to updating you at our annual Investor Day in September. Thanks.

Operator

This concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.

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