Addus Homecare Corp (ADUS) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2009 Addus Homecare Corporation Conference Call. My name is Melanie and I will be your coordinator today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session at the end of this conference.

(Operator Instructions)

As a reminder, today's call is being recorded. I would now like to turn the call over to Miss Carol Ruth of The Ruth Group. Please proceed.

Thank you, Operator. With us today from management are Mark Heaney, President and Chief Executive Officer, Frank Leonard, Chief Financial Officer, and Darby Anderson, Division Vice President for Home and Community of Addus Homecare. Before I turn the call over to management, I would like to remind you that certain matters discussed in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by words such as continue, expect, and similar expressions.

Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including changes in reimbursement and changes in government regulations, changes in Addus Homecare's relationship with referral sources, increased competition for Addus's services, increased competition for joint manager and acquisition candidates, changes in the interpretation of government regulation and other risks set forth in the Risks section of Addus Homecare's prospectus filed with the Securities and Exchange Commission and available on the Investor Relations section of Addus's website and also on the SEC's website.

With that, I will turn the call over to Mark Heaney, President and CEO. Mark?

Thank you, Carol. Thank you all and welcome to Addus's fourth quarter conference call. Hopefully by now, you've all had a chance to read the press release that we issued after the markets closed today. I am going to keep my comments short to allow sufficient time for questions and answers. While we did not meet our objectives for the quarter, I hope that by the end of this call, you will agree to two things. The first is that the fundamentals of the business and the investment thesis remain firmly intact and that in the second, that the Company continues to make the right decisions in executing its business plan.

This can be demonstrated by a number of important positives from the quarter, so I would like to begin the call commenting on just a few of the more important positives. During the quarter, the Home and Community Division, which represents more than 80% of our total revenues, grew even faster, with revenues up 6.5% and gross profit up 9.2%. In the quarter and in the subsequent quarter, we have invested in our Home Health Sales program, and our Medicare sales are beginning to increase.

Both our Home and Community and Home Health divisions in the prior quarter and continuing have reviewed their operating costs and have developed and initiated action plans to lower our operating costs by $1.4 million. State budgets are being announced and we are optimistic that the governors and legislatures continue to support Home and Community services as a preferred long-term care option and we will feel very good about the prospects for FMAP passage, which offers the states continuing relief.

And among positives and finally, an important one is that I want to acknowledge and recognize a hire. Michael Siegel comes to our company to head up our Information Systems program. Michael has 30 years' experience, widely known in the industry and he just brings to us an incredible asset and strength. So, we want to welcome Michael to Addus.

So, what happened on a per share basis relative to our internal forecast? First, $0.04 per share of our miss is related to one time tax charges, and Frank Leonard will address that in his comments. Second, $0.07 of our lower than expected earnings per share was related to lower than expected sales and slightly higher costs in the Home Health division. Third, $0.08 is attributable to an increase in our bad debt reserves for the Home and Community segment.

Okay. So, what caused that and what are we doing to correct? Relative to our underperformance in Home Health, there are really two factors to consider. The first is quarter revenues were off of forecast by about $1.2 million, while at the same time, we've been increasing our operating costs by adding additional sales staff. While organic sales were slightly lower, admissions from our integrated program were lower by more than 20%. Now this temporary slowdown was contained in our Illinois locations.

In the fourth quarter, we limited referrals to our Home Health division from our Home and Community program while the Illinois Department on Aging evaluated its role in integrated Home and Community services. In fact, I am very proud that Addus has played a central role in this discussion and the development of what will become the state's Integrated Services procedures. We have adopted the procedures as a draft procedures that the state is moving toward and doing so, referrals and admissions are returning to historical levels.

Let me add that we view the development of the statewide integrated procedures as a very strong positive, as it demonstrates the commitment of our largest customer to the fully integrated model and will result, we believe, in steadily increasing use of Home Health care services.

Now in response to a general reduction in organic Home Health sales, we have added sales staff in the fourth quarter and referrals and starts of care are increasing. However, as with any time that you invest in new sales professionals, you can expect that it will take time to meet full productivity after they enter the field. Therefore, we are expecting that we will see the benefits of this added sales force in the second part of 2010.

Now let me address the issue of the increased bad debt reserves by $1.5 million. Historically, the Home and Community division, our largest division with the most offices, has managed the receivables locally. Bringing on the McKesson system allows us to centralize this function and we have been doing so. As we have brought these processes to corporate, we have come to conclude that it is reasonable to classify some of these receivables more prudently.

Although we have added $1.5 million to reserves, the division is committed to vigorously pursuing these receivables. Now I want to remind, frankly, any of our staff that are listening included and anybody here, that reserves are not write-downs and we have our work to do, and we will pursue collections on these reserves.

Now Frank is going to have more color on this both in his own comments and certainly during the question-and-answer period. And so I did want to keep my comments short and so at this point, let me turn the call over to Frank and then we'll be taking calls from our investors. Thank you.

Thank you, Mark. I would also like to welcome everyone to our fourth quarter conference call. In the fourth quarter of 2009, our consolidated revenues increased by $3 million or 4.7% to $65.6 million, compared to the fourth quarter of 2008. Over the same period, our census grew by 0.002%.

Operating income in the fourth quarter of 2009 was $0.8 million, compared to $3.3 million for the fourth quarter of 2008. Included in operating income in the current quarter are separation costs of $1.2 million associated with our former Chairman, who is no longer involved in the daily operations of the business, but remains a member of our Board of Directors.

Prior to deducting preferred stock dividends, we incurred a net loss of $1.8 million for the fourth quarter of 2009, which compares unfavorably by $2.9 million to the net income of $1.1 million in the prior year quarter. The current quarter includes $3.8 million of one time expenses resulting from the IPO. These one time expenses net of taxes reduced our fourth quarter net income by $2.4 million. Excluding these one time expenses, we would have generated net income of $6.6 million before preferred stock dividends.

We also experienced a significant change in our capital structure in the fourth quarter of 2009. Outstanding shares increased from 1 million shares at September 30, 2009 to 10.5 million shares at December 31, 2009. Just prior to the closing of our initial public offering, all of our outstanding preferred stock was converted to 4.1 million shares of common stock.

We also issued an additional 5.4 million shares with our IPO funded in early November. For our basic and diluted share calculation, these two events increased our weighted average shares outstanding for the fourth quarter of 2009 by 2.9 million and 3.8 million shares respectively.

Now, I would like to review our segment performance. In the fourth quarter of 2009, our Home and Community segment revenues increased by $3.3 million or 6.5% to $53.7 million compared to the prior year quarter. The increase in segment revenues was 100% attributable to organic growth. Increases in average building rates contributed 3.8% of the total organic growth, while increases in billable hours contributed to the remaining 2.6% of growth.

The Home and Community segment's pre-corporate adjusted EBITDA was $5.5 million in the fourth quarter, compared to $6 million in prior year quarter. Gross profit margins increased 70 basis points in the fourth quarter of 2008, due in large part to favorable adjustments for fringe and other direct service personnel-related costs that were more than offset by operating expense increases of 230 basis points, which again was entirely due to the increase in our provision for bad debt.

In the current quarter, we experienced deterioration and aging of certain accounts receivable. This primary factor as well as revisions to management's estimates as to collectibility by aged receivable categories led to an incremental increase of $1.5 million in our reserves for doubtful accounts. We have already increased our collection efforts and implemented new procedures and protocols in our collection processes and systems, including greater centralization of building and collection activities.

In our Home Health segment, fourth quarter 2009 revenues decreased by 2.4% to $12 million, compared to the prior year quarter. While our Home Health operations were down slightly when compared to the prior quarter, these results were down more significantly when compared to internal forecast.

We experienced greater than expected decreases in our Medicare admissions, principally due to lower admissions from our Home and Community segment and declines in our non-Medicare business due to the loss of a VA contract and continuous care consumers. We have recently hired additional sales staff to address the Medicare admission decrease. Total Medicare revenue for the fourth quarter 2009 was $7.4 million and our average revenue per completed Medicare episode for the current quarter of $2,593 was up 1.7% from the prior year quarter.

The Home Health segment pre-corporate adjusted EBITDA for the fourth quarter of 2009 was $1.3 million, compared to $2.1 million in the fourth quarter of 2008. While lower revenues and slightly higher general and administrative expenses contributed to the decline, the most significant impact was due to lower gross profit margins. Contributing to the gross profit declines were reduced productivity levels on salaried and hourly direct service personnel and higher travel and training cost.

Let me now discuss our income tax expense. Our effective tax rate for the fourth quarter as reported and adjusted for one-time items related to the IPO, was 36.1% and 45.2% respectively. The fourth quarter 2009 tax rate includes an additional charge of $221,000 for the write-off of deferred tax assets related to unexercised stock options of our former board chairman, an additional charge of $70,000 related to our previous estimate of rate reconciling items. These later changes principally related to revisions to our job tax credit and state income tax rates.

Turning to our financial condition, in late October 2009, we completed two events that changed the landscape of our capital structure. We completed our initial public offering that raised $50.2 million after underwriters' discount and also closed on a new five-year, $50 million revolving credit facility with Fifth Third Bank. Our debt to capital ratio declined from 66% at September 30, 2009 to 38% at December 31, 2009. At December 31, 2009, our senior debt leverage ratio was 2.6 times adjusted EBITDA.

In the fourth quarter 2009, we experienced a negative shift in our cash operating needs. Cash used in operating activities for the fourth quarter of 2009 totaled $10.7 million, which was principally due to our net loss, and an $8.6 million increase in our net accounts receivable. For comparative purposes, our DSOs at December 31, 2009, September 30, 2009, and December 31, 2008 were 95 days, 83 days, and 68 days respectively. The DSO for our largest payer, the Illinois Department on Aging, or IDOA, for the same three periods were 140 days, 110 days and 82 days respectively.

In the fourth quarter, the increase in our net IDO receivable was $8.2 million. As the state of Illinois continues to deal week to week, month to month with its current revenue deficiencies, increased budget deficits and backlog of past due vendor payables, we believe that the DSO level for IDOA will stay elevated for the next couple of quarters.

Of our $70.5 million of net accounts receivable at December 31, 2009, $43.4 million is due from the state of Illinois. We are exploring a couple of options related to the situation with our IDOA receivables. However, we have nothing definitive to report on.

At December 31, 2009, and today, we have availability under our revolving credit facility of $4.3 million and $9.8 million respectively. Our current availability reflects the completion of an amendment to the revolving credit facility that increased the commitment by $5 million to $55 million and raised our allowable senior leverage ratio by 25 basis points to three times adjusted EBITDA.

We have also completed an amendment to the dividend notes due to our principal shareholder, EOS, which extends the note maturity by one year and delays their repayment terms. These changes to the dividend notes reduce our calendar 2010 principal payments by approximately $3.2 million and calendar 2011 payments by $850,000. These changes provide greater flexibility to address our working capital and general corporate needs. Finally, we are also actively exploring further additional increases to our credit facility.

With that, I would like to turn back the discussion to Mark for closing comments.

Thanks a lot, Frank. As I said in my opening comments, perhaps most importantly, I wanted to make the point that and the investment thesis is intact. We are very positive about our cost management. We are excited about our states and about our customers. We are positive about the extension of FMAP. We are very positive about our Integrated Services program. We feel very good about our investment in sales managers and sales staff and frankly, in the overall continuing growth of the business.

With that, Carol, I would like to open it up for questions and answers.

Operator?

(Operator Instructions)

And our first question comes from the line of Whit Mayo with Robert Baird. Please, go ahead.

Hey, thanks. First, I guess, Mark or Frank, can you elaborate a little bit more on the bad debt reserves? Specifically, how old were these receivables? I understand the change to a more centralized billing and collection function uncovered this issue, but can you just kind of discuss the policies, how they've changed? Was all of this prior period? I guess I will stop there and we can address one at a time.

Go ahead.

Sure. Yes. Let me explain our procedures, and our procedures, what we do is we estimate our allowance based primarily on aging receivables, utilizing eight aging categories and then what we do is after we get them, the eight aging categories, apply our historical collection rates to each category.

And those historical collection rates are updated on a periodic basis. The last update was the fourth quarter 2009. But what we also do is after we break this down, we also take into consideration factors that might impact the use of these historical collection rates, especially for certain large payers, and then we analyze both large payers separately.

So with that said, what we did in the current quarter is there was deterioration in our aging and we saw our receivables age further into the older aging buckets. And those aging buckets, we actually provide for additional reserves against those. So, it was really more of a function of just having balances that we continued to pursue, but there just is the increased level of risk on their collectibility.

Yes, I'd like to comment on that. This is Mark. It is important to point out that these and to underscore that these reserves are primarily in the Home and Community division. And the -- as I mentioned in my comments but I am going to elaborate on, is that it's important to understand, this company is 31 years old. For the vast -- in fact, for almost all of that time, the largest division, the Home and Community division, the accounts receivable were managed at the local level, managed by the 100-plus offices.

As we went over to McKesson, we elected first to centralize Medicare, this is three, four years ago, to centralize our Medicare and the Home Health receivables. And we did that and I then should say, I wouldn't talk about it today, but I think our Home Health receivables are in good shape, managed well. And now, we have been bringing on and centralizing the Home and Community offices. When you do that, you bring those receivables here and you have to evaluate them.

These are receivables that would be, for instance, a private duty case where we have - they are three, four, five months behind. At the site level, they might think they are going to collect it. But when we bring it to corporate and we look at it, we say, I don't know if we are going to collect that or not. And so, the burden is on the operations people to go collect it.

But we think that the prudent thing to do with this information is to increase the reserves, continue to centralize, continue to exert command and control over these receivables going forward, and endeavor to collect the -- against these reserves. I hope that is clearer.

Yes, sort of. I mean, was there any common denominator to the type of receivables or was this just something that had accumulated over a number of years? And I guess I am looking to understand, is that is all prior period or --? It doesn't sound like this was a write-off. But maybe if you could just answer that.

Now, what it really is, is kind of more of the current activity. It is not stuff related to '08, '07. I mean, it truly is just the aging of our current receivables, and as I said, we do it in eight buckets, and you can have an item move from 90 days at the end of the third quarter to 180 days now and if it wasn't collected, we end up putting a larger reserve on that.

Okay, so this was -- the 1.5 relates just to the fourth quarter?

It relates to the change in our aging between the third and fourth quarters. We did have aging deterioration in the fourth quarter.

So, Frank, how should we think about 2010 at this point in time? Does that mean I need to add $1.5 million each quarter to your bad debt number? I am just trying to think of a go forward, how do we interpret this?

Well, what we are going to do here is we do need to -- I mean, we don't provide guidance. But one of the things that we will look at internally is that we will need to increase our allowance percent going forward.

Okay, just any sense for what the margin impact would be in 2010? Not to hold you to a number, but I think that would be general and generic enough to help your shareholders out.

I am looking at -- we have, if I look at the last seven quarters, prior to the fourth quarter, we were incurring or taking charges between 1% and 1.2% of revenues. This would take the rate for 2009 to 1.75%, 1.8%. So we would increase our internal allowance by seven to eight-tenths for 2010.

Okay. Just back on the initiative itself though, the conversion or the centralization.

Right.

How far along are we? Have you now converted all of your local agencies to the McKesson system or do we have more room to go? And then, how do we think about the risk of potentially uncovering additional issues over the course of the next 12 months?

We're about 80% done with the centralization of payers. And one of the things that we have for our objectives in 2010 is to bring the other 20% into the support center.

And how should we think about just how isolated this event is? I mean, is it reasonable to assume that as you convert the remaining 20%, 22% of your agencies, that you are going to uncover more receivables that need to have a higher allowance?

No.

Okay -- it's not?

No.

Do you happen to know what your balance sheet allowance was at the end of December, Frank? I see there the dollar for the allowance.

Unfortunately, I don't have it right now.

Okay, okay. I guess, I mean, at what point in time were you guys made aware of this particular issue? I guess I am trying to understand the internal processes around this.

We were -- I mean, obviously we're looking at these provisions on a need for the update to the allowance every quarter. So I mean, obviously it became -- we became aware of it as part of the annual audit and.

Yes, I can answer that question. We're constantly looking at reserves. And in the process of the year-end audit, and the bringing this information, presenting the information to the audit committee, looking at the process that I described as centralization, it just seemed to us that as you know, Whit, taking reserves is not a science; it's an art.

And the more we looked at this, we felt that looking at this fairly and reasonably and prudently, this is the amount that we had to reserve. And that would have been, as the audit was being developed and frankly, completed, which is very recently.

Okay. I will probably just move on with some other topics. Just the tax rate, Frank, how do we think about a good number going forward? I presume the impact of Andy not exercising his options won't hurt --.

Correct. So you should look at -- I mean, I talked about another $70,000 that impacted the 2009 rate. So you should look forward and anticipating that, say, $70,000 to $80,000 impact on 2010.

Can you kind of frame that up into an effective tax rate percentage for us?

I think it depends on your pretax number.

Okay, all right. We can talk off line about that. But and then maybe the share count clearly was well off from the number that we had discussed during the road show. So can you help me understand that and what's maybe a decent spot number to think about for the first quarter?

I am sorry, Whit, I?

The share count, I mean, 7.7 million shares in the fourth quarter was well below, I think, where consensus models were. So I am trying to understand why the share count was so much lower? Maybe that's just our screw-up and then what a go-forward share count should be pro forma for the IPO?

Yes, I think you should look at the 10.5 million, which is the number of shares that are outstanding at 12/31/09. That's a good number to use go forward as the base, and then the only issue would be is, what impact would diluted - with some maybe small amount for diluted options.

Okay, and just one last question, just, can you elaborate, Mark or Darby, on the loss of the VA contract, just trying to understand that?

The VA contract, on the Home Health side -- just yes, a little bit. I believe this is the Arkansas contract. In Arkansas in the quarter, there was the loss of a contract specific to a branch. It was a good-sized contract. We were disappointed, but it obviously impacted Home Health is a smaller portion of our business and when you lose a contract like that, it has a proportionate impact.

Okay, well I'll just get back in--

It's not structure, I mean, it is just one of the factors that influenced the overall lower revenue.

Got you, okay. I will get back in the queue. Thanks, guys.

(Operator Instructions)

Our next question comes from the line of Andreas Dirnagl with Stephens. Go ahead.

Yes, good afternoon, guys. I don't know whether Mark or Darby is the right person to ask on this. But you could perhaps give us a little color in terms of sort of your positive comments on the state budget issues or the state budgets that are being set right now? Sort of, are there specific things that you can point to, to show where that sort of positive attitude is coming from? And then maybe you could comment on the recent austerity budget that was put out in Illinois?

Well, let me start with a broader comment, that the as the states are coming out with their budgets, we are frankly very positive that if you were looking -- if you were anticipating very, very difficult budgets coming out relative to Home and Community, we are not seeing them. We are just plainly not seeing them.

In Illinois, which is our largest customer, actually the very good news is that the governor continues to propose a substantial rate increase. I won't get into too much detail on the politics of the austerity budget, but I will tell you that these are difficult political times. I think that the governor made a calculation that would be better for him. He, by the way, favors an income tax increase.

To make the point, his view is, if these are my resources, this will be my budget. This is what we'll have to do. Specific to Home and Community, he is raising the rate, which is good. But he is also suggesting that only those consumers who are Medicaid-eligible will be in the programs, and then there is some other - the grandfathering, all of those who are already in the program, there would be a grandfathering therein.

The actual impact is that was implemented is rather minimal on us, Andreas. It is a small portion of the overall program. So we're actually very positive and, frankly, we do not think that this proposal of the governor's will, in fact, be implemented anyway. The politics aren't there and it makes no public policy or economic sense to do so.

Another state where there was an issue is Washington. Initially, the governor came out with a proposal that was very hostile, just not a good proposal. That was back in the fall. Since, the governor has modified the proposal and there is, I think, a 2.5% rate reduction on the administrative side of our rate. And that would have a modest impact if fully implemented on us -- I don't have the calculation in front of me. Also a political process and we feel good that we can make our case for that to be reversed, especially if FMAP is passed.

Broadly in California, we hold that the California program relative to in-home support services will not change much, and frankly, our share -- not our share, but the size of the California business as a percent of our whole does decrease as the business gets larger -- the overall business gets larger. But otherwise, there really aren't any very -- any state budgets that we are terribly concerned with. It is actually very positive.

Okay. And is that positive attitude sort of assuming that we get an FMAP increase, or do you think that, that even occurs in, even though it looks probably more likely than not at this point, but even if we don't get an FMAP increase?

It does assume as the state budgets are generally assuming, there will be FMAP. And we believe there will be FMAP and we probably listen to the same groups as do you. So we are very positive about the passage of FMAP.

Okay. And maybe moving on to Home Health then for a second, sort of the $1.2 million shortfall is your expectations that you highlighted in your remarks. Can you give us an idea as to sort of what percentage of that was the VA contract and what percentage of that was sort of almost, I guess, a self-inflicted delay in Illinois?

The VA would be rather small and I am sorry, Andreas, it is less than 10%. The two big changes we're concerned with was one, Integrated Services are down in Illinois. We just know that they are down 20%-plus. That is Home Health referrals through the integrated program. Now I will tell you - that's in the quarter.

I will tell you that they are coming back, and they are. Both reports from our field are increasing, that is our aides are reporting more need and our starts of care are increasing through that program. And frankly, we're investing into that program in the form of an internal campaign, a long-term campaign, for directed toward our aides, which will encourage them to make appropriate purposeful referrals relative to the health of their elderly consumers. So, we are very excited about that.

And then there is the - another side is just our starts of care under Medicare in the quarter were not what we had anticipated. We need to beef up our sales force. We need to compete. And so in the fourth quarter and continuing into the first, we've been adding sales force on the Home Health side. We've added two sales managers in those two periods. And our organically developed Home Health sales are beginning to increase.

Okay. So just to sort of review, in the state of Illinois where there was, again, sort of a self-selected perhaps hold on some of the referrals, that appears to have cleared at this point. Is that a new policy that took effect on January 1 or when did that take effect?

Actually, the Illinois Department on Aging is continuing to work on their procedure. In fact, our company is very, very involved in helping to develop. We are actually the model program and we are very involved in the writing of those procedures, as are others in the trade association. And I want to be clear that they are coming back, and they are continuing to increase. Those procedures -- we probably started to adopt the draft new procedures late in the fourth quarter.

I want to comment on one other thing, and I've said this before to our investors and in the road show. Just to be clear and plain, a downturn -- I think that we do a very good job with Integrated Services in some of our many Illinois sites. I am not satisfied with our Integrated Services program in a number of our sites outside of Illinois.

And part of what we need to do is, if Illinois takes a downturn because of some circumstance, it isn't acceptable that that affects the whole; all should be growing. And that's the purpose of the campaign, the initiative that is underway, to reinforce our Integrated Services program. We need everywhere to be integrated, not just Illinois.

Okay. And maybe, Frank, if we could just look again at the bad debt issue in the quarter, maybe rather than looking at in terms of composition by aging, is there any way we can look at in terms of composition by payer? In other words, what percentage of the increased reserve of $1.5 million is attributable to sort of state-funded payers?

Well, I would say that for those invoices that have been approved for payment and I am speaking now specifically about IDOA, if those are approved for payment, and even though we have not been paid, there is no reserve for that.

Okay, and so --

I'd like to interrupt, because I want to be very clear about this -- and, Frank, if I am not correct, then on the air, you correct me. The reserves taken include zero approved properly submitted bills submitted to the state. None. We contend -- and we don't contend it, we know, if we submit a bill in proper form and we rebill when we make a mistake and have to rebill, that bill will be paid. So, I want to be clear about that. The states are paying or agreeing to pay every hour of every service that we've provided.

Okay. So the increase in the reserve really has to do with non-state payers then?

I want to be clear here.

That could be, Andreas --

Yes, you can have a state-involved bill. But it might be because there is something wrong with the bill. We submitted the bill, it is missing dates, it is missing information. It has to be cleaned up. If it is not cleaned up properly and promptly, it can begin to age and it becomes very difficult to recover. Those are the subject of the 1.5

Okay. And again, just to be clear, I guess it's your expectation that as you centralize the process, in effect, your, let's call it your error rate should decrease and therefore over time, you should see an improvement in that metric.

Absolutely. Centralization is a good thing, and before we met, not too many years ago, when we were not centralized for Home Health, we had the same kind of problem five, ten years ago. When we centralized Home Health became -- our collections went right up to industry kind of norms, no problem. And that's what we're doing here. It's a good thing.

Okay. And so again, just to be clear, the much of the problem then appears to be rather than you submitting any sort of bill that for whatever reason, out of hand, the state is not going to approve, in many cases, some of your local agencies were submitting bills that had errors on them, were not correcting them in a timely manner and that is was makes it more difficult then to collect over time.

That's correct.

Okay, great. Thanks very much. I will go back into the queue.

(Operator Instructions)

And I am showing no further questions at this time. I would like to turn the call back over to management for any closing remarks. Please proceed.

Well, I would like to thank you all and if you have any questions and follow-up, we are here and we'd appreciate the questions and opportunity to clarify. As I said in the beginning, we're very positive about our business, about the fundamentals, about the growth of the business and I think that we've made a number of good decisions and we've discussed a number of these here today. I do thank you very much, and enjoy the rest of your evening.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.