AllianceBernstein Holding LP (AB) 2004 Q2 法說會逐字稿

Ladies and gentlemen. Thank you very much for standing by. And good afternoon. Welcome to the Alliance Capital second quarter 2004 earnings review. Now, at this point all of your phone lines are muted or in a listen-only mode. However, later during the conference, there will be opportunities for questions. And those instructions will be given at that time. Just as a note, if you should require any assistance during the call, you may reach an AT&T operator by pressing star, then 0 on your phone keypad. As a reminder, today's conference is being recorded. And with that being said, let's get right to today's agenda. Here with our opening remarks is Director of Investor Relations for Alliance Capital, Ms. Valerie Hartell. Please go ahead, ma'am.

Thank you, Brent. And good afternoon everyone and welcome to our second quarter earnings review. As a reminder this conference call is being webcast and is supported by a slide presentation that can be found on our website at Alliance Capital.com. Presenting our quarterly results today are Alliance Capital's Chief Executive Officer, Lew Sanders, and Chief Operating Officer, Jerry Lieberman. Bob Joseph our CFO is also available to answer your questions in the Q&A session.

I would like to take this opportunity to note that some of the information we present today may be forward-looking in nature and as such is subject to certain SEC rules and regulations regarding disclosure. Our disclosure regarding forward-looking statements can be found on page 2 of our slide presentation and in the Risk Factors section of our 2004 Form 10-K. In light of SEC's regulation FD management will be limited in responding to inquiries for investors and analysts in a non-public forum, therefore we encourage you to ask all questions of a material nature on this call. At this time, I would like to turn the call over to Jerry Lieberman.

Thank you, Valerie. And good afternoon to everyone on the call. We will begin with a brief overview of the capital markets, which are so essential to how we do financially. A very brief overview of how we perform for our clients, which ultimately is the most important leading indicator for future net cash flows. And finally, an overview of our financial performance, which, of course, is of interest to our unit holders. I will then turn the call over to Lou, who will go over our key trends and our franchises, and additional important performance metrics. So let's begin with Market Performance.

Turning to the display on page 3, you will see the Global Equity Markets produced positive returns in the second quarter. Although, we had significantly lower rates than the 12-month period. But, nonetheless, still extending the equity market gains to 5 consecutive quarters. It is also notable that International Equity gains cooled down this quarter after a sizzling run which reduced the one-year performance number to 24%. This is still nearly 500 basis points better than the S&P, with a smaller gap on both the 1-year and 3-year performance comparisons that has been true for some time. As for Fixed Income Assets, they reversed course quite dramatically in the quarter. While still the best performing asset class over the past 3 years, sharply rising interest rates produced negative total returns in the second quarter bringing the 12-month performance to barely break-even levels.

As to our Relative Performance, once again, the most important criteria for future success, results for this quarter were satisfactory, with many disciplines producing returns in line or modestly ahead of their benchmarks. Relatively returned to international growth and emerging market's value portfolios were especially strong and our region branded managed product continues to outperform significantly, our performance, which is contributing to a resurgence of sales in this service. Now that we have briefly covered the overall market performance and our added value to that performance, let's move on to an overview of our financial results.

This afternoon we announced second quarter 2004 net income of $156 million for the operating partnership, which represents an increase of approximately 5% over the prior year's quarter, by $12 million or 7.5% lower than our first quarter. For Alliance holding reported net income per unit of 53 cents this quarter, compared to 51 cents for the second quarter in 2003. I am going to go over in some detail the variances between our second quarter '04 and second quarter '03 results. But before I do so, I do want to point out that we have 3 significant items of particular note this quarter.

As spelled out in the Press Release, we had a one-time software write-off of $12 million, and we had the receipt of $8 million in incremental insurance recoveries for previously-recorded legal expenses. In addition, we took new space in our headquarters building to bring all of our remaining Bernstein Alliance and Alliance activities together adding nearly $3 million in additional expenses for the quarter. These 3 items, all of which are reflected in our G&A expense line account for nearly to 3 cents of our overall shortfall from where the research analyst forecast consensus is and where we closed the quarter.

In general, our year-over-year quarterly financial results reflect the trail winds of strong 12-month equity markets, partly offset by flat fixed income markets. As you can see in our display on page 5, this led the way to an increase of 16.3% or $67 billion in average AUM. As a result, our base fees increased 16.5% or $72 million. Generally in line with our increase in average AUM. However, this increase is net of an $18 million unfavorable impact resulting from our January 1 reductions in US long-term mutual fund management fees, which in turn were offset by an improved asset mix from a private clientele with its related fee structure and by having our higher added value Institutional Investment Management Services become a larger share of that channel's assets.

Our Institutional Research Services Revenues are up 3.5% despite New York Stock Exchange average daily volumes, which dropped 20% when you exclude program trading. As we increased U.S. market share and continued our growth in our European franchise. It is worthy of mention too that revenues in this business were down 12% as compared to the first quarter of this year, entirely the result of reduced New York Stock Exchange trading volumes. Other revenues contain a number of fairly significant positive and negative quarter-to-quarter variances. The largest derived from the impact of FIN-46. While having no impact on net income, as I will cover shortly, this had the effect of increasing the other revenue line by $9 million in the quarter. Offsetting this increase was a decline of approximately $6 million of unrealized gains on investments. Most of which derived from prefunding or deferred compensation plans. Swings in this item are offset eventually by corresponding change in deferred compensation expense. But the way the economy mechanics work, that offset is recorded over the investing period of these plan, generally 4 years.

Turning to our Expenses displayed on page 6. Employee compensation and benefits increased 15.5% or 35 million. The component parts of which we will review in just a moment. But in contrast to compensation, promotion and servicing costs actually declined modestly by $2 million or about 1%. The decline primarily derives from a $6 million decrease in the amortization of the first sales commissions, which more than offset increases in some promotion and services spending. As you will recall, these DSE's resulted from strong sales of B-shares in the 1999-2000 time frame and they are now dropping off and not being replaced by product sales with a deferred commission. This trend of decreasing amortization will contribute to margin improvements which will more than offset our growth in other promotions and services expenses. That brings us to our G&A expense line.

In a variance that is quite high but explainable in both percentage and dollar terms. The $32 million or 40% year-over-year variance includes, as noted earlier, a $12 million write-off of a software project, which we abandoned, and includes $9 million in minority interest and G&A expense owing to FIN-46. Once again, this latter entry has no net earnings impact, as I will outline for you shortly. In addition to these items, G&A expenses reflect a $3 million increase in office and related expenses, stemming from the final phases of the relocation of former Bernstein staff to our headquarters facility. During the second quarter, we picked up additional floors in our Manhattan headquarters, and will take on still more space in the fourth quarter, the final [traunch] of this expansion. The total annual office and related expense impact of this new space will be approximately $28 million per year, of which roughly 3 million was actually reflected in the second quarter.

But you should note that 50% of this $28 million increase will be offset by the elimination of expenses from the former Bernstein Headquarters and other redundant space that we will vacate in December. Thus, these savings won't accrue to the firm until 2005. In addition, we will incur about $3 million in lease termination costs where we vacate our former Bernstein site end of fourth quarter. Netnet, this transition will have the effect of driving G&A costs higher than their sustainable rates over the next two quarters. In contrast, when we close our Scranton operation site next month, we will save over $2 million a year in rent and related costs, which we will start to realize in this year's fourth quarter. However, we will incur write-offs of about $3 million in the third quarter related to this closing.

Now, continuing with our G&A variance explanation. As I mentioned last quarter, our professional fees continued to increase as we incurred expenses related to compliance with SOX-404. The increase in these costs for the quarter were $2 million, all of which incremental versus last year's expense base, and will probably stay at this level through the end of the year. Next year we do expect the annual cost to drop substantially, but not to go away. We also have a $3 million increase in transaction processing costs related to an increase in brokerage volumes in our new OTC trading platform. An additional $1 million to market data services to a conversion from soft to hard dollar expensing of some investment research related spending and $2 million in mostly unrealized foreign exchange losses.

Finally, that we actually had less in net legal expense this quarter than the prior quarter, as we received incremental insurance reimbursement of $8 million with some previously paid legal fees, more than offsetting a $3 million increase in our gross legal cost. . This expense item is a bumpy one. As insurance reimbursements are irregular in size and unpredictable in timing. So, the bottom line of all of this is that G&A expense will remain high in the second half, but should be meaningfully below the level of the second quarter at this point, our best estimate cost for expenses is about 100 million or a little bit more per quarter including the related write-offs that I covered.

Now, let's spend a minute or so on page 7. You can see that we continue to manage our base compensation expense with merit increases accounting for the 4% year-over-year increase as head count was basically flat versus lasts year's second quarter and 8% below our December 2001 levels. We have, nonetheless, greatly strengthened our management team over this period, included some highly significant additions to our senior management in just the last 3 months. We are pleased to report that Larry [Cranch] has joined the firm as General Counsel. Larry brings to the firm a wealth of knowledge and experience in the Investment Management field. As both a Lawyer Practitioner and a Senior Manager, having been Managing Partner of Rogers & Wells for many years before its merger with Clifford Chance.

Joining the firm as well in the second quarter is Larry [Cone,] who joined us as our Chief Technology Officer. Larry brings years of outstanding experience and thought leadership in both the buy and sales side. And last but not least, Tom [Wright,] who has a career of sale-side sales and trading experience is joining us as the new Head of Global Sales and Trading. Closing my remarks on this page, the increase in commission expense is primarily related to increased sales and higher AUM related commissions at our Private Client Distribution Channel, while incentive compensation is up, is operating earnings and revenues are, and they are used in our IC formulas.

Now, turning to go page 8. Let's review the effects of FIN-46, which I referred to in discussing several of our quarter-to-quarter variances. FIN-46 is a new FASB interpretation of GAAP regarding consolidation. Effective this quarter, we are required to consolidate the balance sheet and the earnings of variable interest entities where we are the primary economic beneficiary as defined under FIN-46 rules. As a result, the earnings of Albion Alliance, our Alliance joint venture and the sponsored mezzanine funds were consolidated this past quarter. Grossing up both our balance sheet and our income statement, the latter with a net impact of $0 to our bottom line.

Before turning the call over to Lou, let's turn to the display on page 9. Here you can see that the Alliance Holding Company financial results are $42 million for the quarter versus $40 million and 46 million for the second quarter of '03 and the first quarter of '04 respectively. You can also see that we are back to our traditional relationship between cash flow and distribution. In closing, the second quarter's financial performance was mixed. We experience organic growth in 2 of 3 channels, growth that offset weak mutual fund net sales despite a softening of the capital markets performance. Now, I will turn the call over to Lou, who will add his insights and color to our business initiatives and results.

Thank you, Gerry. And thank you all for joining us this afternoon. Let me take a moment and share with you my perspectives on second quarter results. Once again, on the most important metric, and it is by far, investment returns for our clients, results were generally good with many services producing returns at or above benchmark in the quarter and even more so for the first half. But as Gerry outlined, Firm's Financial Performance was mixed. Profit margins declined, despite a strong rise in assets per employee, which would normally have driven margins up. While almost all of the decline can be attributed to one-time items and the distorting effects of FIN-46 consolidation, several components of the increase and operating expenses, notably occupancy costs, will, as Gerry highlighted, be with us for some time.

Organic growth of long-term funds under management improved, but here, too, the pattern was mixed with wide variation by product and by channel. As display 10 makes clear, the Firm continues to rely disproportionately on its value product suite for organic growth. In the quarter, net inflows and value equity services reached nearly 5 billion, equivalent to about a 12% organic growth rate. Net inflows exceeded some 20 billion in the last 12 months as shown in display 11 that's equivalent to a gross rate in the mid to upper teens. No easy accomplishment for a business of this scale.

Growth services, however, in contrast, experienced outflows of $3 billion in the quarter. As you can see in display 11, about 13 billion in the last 12 months, a function primarily of attrition in our U.S. growth products, especially disciplined growth. Note however, that gross inflows into the full range of our growth services has actually been pretty good. This high level of new business from 18 billion in the last 12 months and nearly 5 billion in the last three reflects our strong competitive position in global and non-U.S. growth services in region. And the success of our style brand services which by design carry a growth sleeve for half of the assets. Recent returns in U.S. growth services, moreover, have improved. So if sustained, attrition should moderate in time, permitting the strength of the full suite of our growth offerings to come through to net inflows. That's while the timing is uncertain, the potential of an important turn around in this product group is apparent.

A similar picture exists in Fixed Income. Long-term flows were about 0 in the quarter, and a negative 5.5 billion in the last 12 months. Owing principally a high attrition. Here, again, we are hopeful that improved performance achieved in recent periods will slow this trend. We are also anticipating substantial inflows during the third quarter from AXA Insurance affiliates. However, the revenue implications are uncertain as performance fees apply to certain of these mandates and pricing has been lowered in some existing mandates. Overall, we expect the effects to be positive to earnings, but not necessarily proportional to the added asset.

Looking at results by channel now, as opposed to product, you can see in display 12 that organic growth has resumed in the institutional business at a modest rate. The underlying dynamics here are as described before. Strong growth in global value, global growth in style blend products, offset by attrition in U.S. growth services. It is interesting that more than 80% of gross new business in the second quarter was in global products. Noteworthy too, we think, is that these products appear to be gaining some traction among U.S. clients who accounted for roughly half of these inflows. We see this trend as potentially important in that the number of credible competitors in the global arena is far smaller than in country specific services, and we think our competitive profile is quite strong in this space.

Trends in the Private Client channel remain steady as summarized in display 13. On track to expand our advisor force to about 200 by year-end and to add new offices in Tampa, Boston, and Philadelphia. Demographic mix of this business remains upscale, with the ultra high net worth component defined here as relationships above 10 million, continuing to account for more than half of new accounts. There is little new to report in terms of business trends in the retail channel as summarized in display 14. While redemption rates have declined, so has new business. A U.S. market share remains quite depressed, and net flows offshore have deteriorated reflecting general weakness in demand for fixed income funds to which our offshore business is weighted disproportionately. The one bright spot we've already highlighted that is accelerated growth in region. Assets for this service are in excess of 8 billion and organic growth is now in double-digits. Linked directly to our research initiatives and strategic change and early-stage growth, this service has unique characteristics and an excellent performance history. And, thus, we remain enthusiastic about its prospects.

We also made considerable progress in our plans for fund rationalization. The plan has now been fully defined for both the U.S. and non-U.S. funds. An implementation has begun. However, this process is going to take many months, perhaps 6, maybe even more, since board approvals are necessary in the U.S. and, in some cases, fund shareholder approvals are necessary too. The lower cost will eventually be realized as a result of this effort. It is important to emphasize, as we have before, that cost reduction is not its primary purpose. Instead, the goal here is to clarify, to focus our product array, such that each fund stands as a logical and necessary part of a well-crafted investment plan. And each fund's mandate calls on the firm's core competencies in the most effective way. Component parts of the cash flows by all 3 of these channels for the 3 months and the end 12 months summarized in displays 15 and 16. They tell a story of modest organic growth overall. But with the potential for improvement, possibly soon in the institutional channel, but with considerable patience with respect to retail.

Finally, let me comment on our Institutional Research Business as summarized in display 17. As Gerry outlined, the second quarter was tough. It was tough. Mission's available to pay for research declined sharply. Our U.S. market share improved, however, and our London- based operation held its own. We were pleased as well with the high marks earned by our European research unit in 2 leading surveys on research quality. I think you know that in the final analysis, our success relies on outstanding research, and we are well on our way to establishing that kind of brand equity in Europe. Innovation and research is, of course, not confined to our sell side unit. Indeed, it's a fundamental [strategim] in the investment management business and the subject of many ongoing initiatives. One such initiative reached fruition during the second quarter, and I think is worthy of mention.

As an outgrowth of our continuing education program for research analysts, that's a skilled development program for analysts of advanced standing, we came upon a new tool to assist in forecasting earnings. After much refinement and study, we are now rolling it out to our entire research staff and have moved to integrate it as an explicit measure of ex-anti-alpha estimation in our U.S. products. This tool has great potential as we see it. Because it captures information and balance sheet accruals that are systematically overlooked by analysts, even good ones. It correlates highly with subsequent period forecast data in both directions, that is either being too high or too low. And as such, correlates strongly with future stock price performance.

It promises then to add meaningfully to our ability to add alpha not only in U.S. value products, but in many others over time. And you know what? This is what this business is about. Delivering on the promise we hold out to clients, providing good investment advice, and adding returns to client portfolios above that available in the market passively. We need to do that in a manner that is understandable and most importantly reproduceable. Outstanding research is the route toward that end, and we are out to define what the term outstanding actually means. And now for your questions.

Indeed, sir, and thank you. And, ladies and gentlemen, as you just heard, if you do have any questions or comments, we invite you to queue up at this point. Simply press star, then 1 on your phone keypad. You do hear a tone indicating you have been placed in queue. And should you wish to remove yourself from the queue, simply press the # key. Now, ladies and gentlemen, if I may have your attention, the Management has requested that you please limit your initial questions to 2 in order to provide all callers an opportunity to ask their questions. We do welcome you to return to the queue to ask any follow-ups that you may have. And it is Alliance Capital's practice to take all questions in the order in which they are received and to empty the queue before ending the call today. So once again if you do have a question or comment, please press star, then 1 on your touchtone phone. And representing Lehman Brothers, our very first question comes from the line of Mark Constant. Please go ahead.

Hi. Good afternoon, you guys. A couple of things I wanted to follow-up. I guess I will do a business one first, I guess, big picture business one for Lou. You mentioned the global mandates gaining traction among U.S. clients. That seems to be, I guess, in contrast to what has happened over the years outside the United States, in particular in the U.K. and certain markets sort of moving from balance to specialist mandates as a loose parallel. Is that something you have a high degree of conviction on in terms of calling it a trend or is it sort of early stages? Is there a fundamental reason for it to be different this way?

Mark, I think it's an interesting analogy you draw. But I would have to characterize this trend at this point as early stages, and it's not clear that you can extrapolate it to either a sustained condition for us or for the market in general. Still, I highlighted the development because I thought, we thought it was note worthy and that historically global mandates have had very limited appeal to U.S. plan sponsors, who instead, as you know, have exercised careful control over their non-U.S. exposures in context of managing asset allocation. On the other hand, I just have to add that increasingly it's pretty clear to most market participants that country constraints on portfolio construction are artificial. There are entire industries that have moved the function of comparative advantage to specialized regions of the world. I mean, the list is obvious.

Uh-huh.

There are some other industries where the differential in the character of the investment opportunity with the global versus local mandate is so compelling as to be obvious. Autos come to mind. And I think if there is an argument that would support the proposition that what we saw recently is the beginning of the sustainable trend, it would be built around those observations.

Okay. Fair enough. And a numbers question for Gerry and Bob, if you would, I'm just trying to get a sense from you. You went through a lot of things on the sort of adjustments to what is sustainable, if you will. I just want to clarify that, in fact, the 6 million of gains related to deferred comp, that was this quarter, not the first quarter?

That's right. That was this quarter.

That was in this quarter.

That was in this quarter.

And what was the number that you said the G&A was going to be for the quarter?

Well, the gains, the gains were reduced gains this quarter. So we have gains of but less--

-- 6 million but less. Yeah.

That's right.

Yeah. Yeah.

Yes.

Okay. And similarly the G&A was, end of the third quarter, you said there is a 3 million charge, but I couldn't keep up with the meaning.

I'm sorry, what I mentioned about G&A in the third quarter. I'm sorry, the 3 million in the second quarter. That's actually in the increase that we have.

There is a charge.

And there's going to be a charge in the third quarter.

In the third quarter, right.

And there is going to be a charge in the fourth quarter that I mentioned. And both of which are included, Mark, in the run rate number that I gave you, the number that I gave you exactly, slightly over 100 million bucks.

Okay. Thanks.

Yeah.

And thank you, Mr. Constant. And representing Merrill Lynch, we next go to the line of Cynthia Mayer. Please go ahead.

Thanks. Just a couple of net flow questions, I guess. Just looking ahead to your AUM releases. I am wondering if you could give a sense of what style of assets actually you would be adding? Where we would see this come in and what size roughly?

Cynthia, total and fixed income.

Okay. Do you know what month that would be?

Actually, no. Sometime during the third quarter.

Okay, and just in terms of the 2Q net flows were all of the Vanguard inflows and outflows contained in that?

Yes.

Okay, great, thanks.

And thank you very much, Ms Mayer. Next in queue is Bill Katz representing Buckingham Research Group. Please go ahead.

Thanks. Good afternoon everybody. Lou, I was sort of curious if you would give me an update on what the distributors are saying on the retail side on the repositioning of the business?

Well, you know, at headquarters level and as financial advisors, have become exposed to our value proposition, the reception is uniformly favorable. But you, Bill, understand the character of that business well. You have, to borrow a phrase from one of our competitors, "Win these financial advisors over one at a time." Which is why we have re-emphasized, essentially at every call, at every opportunity, really, that the repositioning of this business. The rebuilding of its brand equity. The restoration of its market share. Its competitive position overall, will take a long time. But you can be sure, we are going to be persevering about it, consistent about it, and we remain optimistic that we will ultimately achieve success.

And I got a question, it's more of a tax question. I am just sort of curious, the tax rate at both the operating partnership level and also the holding company has really bounced around quite a bit. I expect a mix and maybe the one timers this quarter. Anyway of thinking about what might be a more sustainable rate at both levels?

Bill, it's Bob. I think the real issue on the taxes gets down to the mix of our business. To the extent that we have got business housed inside of our operating partnership. As you know our, the basic tax we pay is the New York State Incorporated Business Tax. Once you start getting out into domestic and foreign corporations and once the business starts begins to grow in those entities, particularly outside the U.S, then the mix changes, and as the mix gets more weighted to businesses outside the U.S, the tax rate of course will grow.

Just if I could follow-up. If all that's being equal then as you globalize the franchise and that there should be an upward bias to tha tax return?

There would be an upward bias, yes. Exactly.

All right, thank you very much.

And thank you very much Mr. Katz. And next we go to the line of Greg Mason with AG Edwards. Please go ahead.

Yes, regarding the -- just getting-- trying to dig deeper into the institutional pipeline. I snow you expect a large funding from AXA. Can you give us any additional color on what you might be expecting in the coming quarters, how the pipeline looks?

Greg, this isn't a business that has a particularly lengthy pipeline. What we reported to you at the first quarter conference call is that after a very slow start, the rate of competitions, the rate of RFPs increased noticeably in the second quarter, and that trend is sustained since then. And so we are hopeful that the institutional business will continue to perform well. Beyond that, it's really not possible to dimension this thing reliably.

Okay. And then I know in your $100 million run rate for G&A, are there going to be any additional expenses related to the new Private Client offices that will be opening the next 2 quarters?

Well, there will be. They are in the number and they are fairly small. You know, we open up an office. These are fairly, you know, 6 - 8,000 quarter foot offices, Greg.

Okay.

But the number, that I gave, I don't know if I get the words right, a little more than $100 million. That does include the run rate for those offices.

Great. Thank you very much.

And thank you, Mr. Mason. And ladies and gentlemen, once again, if there are any additional questions or comments, feel free to queue up at this point. Simply press star, then 1 on your touchtone phone. And next representing Keefe, Bruyette, & Woods we go to the line of Robert Lee. Please go ahead, sir.

Thank you. Good afternoon. Quick question. I was just noticing that given the strong cash flow in the decline in the B share sales and that it looks like the debts actually remain pretty flat through the first half of the year while the cash, cash has grown pretty significantly. And I guess I would have expected most of that free cash flow to be used for paying down debt. Is there just a timing issue there? Is there something else going on? Should I have expected that to start declining over the balance of the year?

I would love to pay it off, Rob, just love to. It is prepayment penalties on the funded debt. And so right now, the company is running, if you will, a negative arbitrage with liquidity sufficient to retire that debt. But with it being uneconomic to make that choice.

So, then, should we just expect that until you get through that period that the cash balances are going to build? How should we think of the use of that excess cash that you are generating beyond the net income?

I think you should think of it that way and that when the debt matures in August '06, we will retire it. I think also, this is really modest by the standards of our operating income. We are, if you will, positively GAAPed, which is to say that an increase in the short rate will benefit the company's net earnings.

Okay. That was it. Thank you.

Okay. And thank you very much, Mr. Lee. And with that, Mr. Sanders and our host panel. I will turn the call back to you. There are no further questions.

There are no further questions, then that's the conclusion of the call. Please feel free to call Investor Relations. Should you have any questions, I can be reached at 212-969-6414. Thanks very much.

Thanks, everybody.

And, ladies and gentlemen, your host is making today's conference available for digitized replay for one week. It starts at 8:00 p.m. eastern daylight time, July the 27th all the way through 11:59 pm August the 3rd. To access AT&T's Executive Replay Service please dial 800-475-6701. At the voice prompt, please enter today's conference ID of 738447. Internationally, please dial 320-365-3844. Again with the conference I.D. of 738447. And that does conclude our earnings review for this quarter. Thank you very much for your participation as well as for using AT&T's Executive Teleconference Service. You may now disconnect