Air Transport Services Group Inc (ATSG) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to be ABX Air 2006 second-quarter conference call. My name is Lauren, and I will be your coordinator for today. (OPERATOR INSTRUCTIONS). As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today's presentation, Mr. Joe Hete, President and CEO of ABX Air. Please proceed, sir.

Thank you, Lauren, and thanks to all of you for joining us today for our second-quarter 2006 conference call. Quint Turner, our CFO, is with me, and he will cover our financial results and help you field your questions. Today's call is to discuss our results for the second quarter ended June 30 and update you about some developments since our last call in May. We issued our second-quarter news release and 10-K yesterday. Both are available on our website at ABXAir.com. Quint will give you our financial results for the quarter, and then I will cover our operations during the quarter and a few other matters. Finally, we will open the call to your questions. Quint?

Thanks, Joe. I need to begin by advising everyone that we may make projections or other forward-looking statements during the course of this call. Such statements involve risks and uncertainties, and our actual results and other future events may differ materially from those we may describe here.

I would like to refer to ABX Air's periodic reports that are filed from time to time with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, '05 and the Form 10-Q for the quarter ended June 30, 2006 which we filed yesterday. These documents contain and identify important factors that could cause the actual results to differ materially from our projections.

In addition, during the course of the conference call, we may describe certain non-GAAP financial measures which should be considered in addition to and not in place of the GAAP financial measures we included in our financial statements.

Now for the financials. Revenues and earnings declined in the second quarter of 2006 when compared to the second quarter of 2005, primarily due to the transition in in May of management of the truck linehaul network back to DHL. For the quarter ABX Air revenues declined 13.6% to 306.6 million. Net earnings declined 4.4% to 6.5 million or $0.11 per share.

Our year-to-date revenues through June declined by 3.6% to 672.7 million as compared to the first half of 2005. Net earnings for the first half of 2006 have increased 5.2% to 14.6 million or $0.25 per share. Revenues generated from DHL were 294.8 million in the second quarter, down 14.3% from the second quarter of 2005. They represented 97% of our total revenues for the quarter. They included $98.1 million in reimbursed costs, primarily jet fuel which are not eligible for markup. The transition of truck linehaul management back to DHL on May 1 reduced second-quarter revenues by 54.7 million and earnings by 1.2 million or $0.02 per share. That 54.7 million difference in revenue is based on last year's second-quarter revenues from linehaul of 72.2 million, net of 17.5 million of revenues we recorded in April prior to turning those operations back to DHL on May 1st as previously agreed. We did not earn any markup on linehaul expenses in the second quarter this year.

For your information we released a clarification on the linehaul numbers this morning. By successfully working to keep our expenses within budget and flying greater than planned aircraft hours in the second quarter for DHL, we were able to attain the maximum allowable costs related incremental market for ACMI services, $683,000, up 57% from the 435,000 that we earned in the second quarter of 2005. Although we operated the hubs at budgeted expense levels during the second quarter, we did not earn any incremental markup under the Hub Services agreement because we handled fewer packages than we had projected. The productivity improvements achieved in the hub operations at Wilmington and the regional facilities over the last six months have been particularly impressive with paid hour reduction since January exceeding 20%.

We experienced our best ever quarter in our non-DHL business on strong gains by the charter portion of the business. We are entering our second year of having two Boeing 767s in non-DHL charter service. Revenues for the charter business were 5.4 million, up 69% from the second quarter a year ago with earnings of 704,000 compared to $5000 that we earned in the second quarter of 2005. Our second-quarter 2006 margin in the charter segment improved to 13% as compared to 6.3% in the first quarter 2006. This margin improvement was due to improved utilization and lower ownership costs associated with the first of the ex-Delta 767 freighters which we placed into service in May.

In the fourth quarter, we expect delivery of two more 767 freighters and eight more over the next two years. Revenues from our other non-DHL businesses, which includes contracted aircraft modification and heavy maintenance, was down 500,000 to 3.3 million and earnings were down 200,000 to 972,000. The decline in revenues and earnings reflects the volatility associated with aircraft modification and heavy maintenance orders.

Cash flow generated from net earnings and depreciation remains strong at 36.9 million for the first half of 2006 as compared to 33.7 million in the first half of 2005. Depreciation and amortization expenses increased 10.7% for the quarter to 11.4 million and 12.4% for the first half to 22.4 million, primarily from the two additional Boeing 767 aircraft that we have placed in service since June of last year.

As we reported several weeks ago, DHL gave us notice to remove 21 specific aircraft, 11 DC-9s and 10 DC-8s, from the ACMI agreement effective this month. This is in conjunction with the planned fleet reduction that DHL first announced to us back in November of 2004. Seven planes were removed last year, so this reduction brings the total to 28 aircraft. Although no longer flying in their network, DHL will continue to fund depreciation for eight of the DC-9 aircraft through their remaining depreciable lives in 2010. This will allow ABX to use the engines from these eight aircraft to support the remaining 59 DC-9s, which we continue to operate in the DHL network.

Under the ACMI agreement, the Company has the option to retain the other 13 aircraft or sell individual aircraft to DHL for the lower of net book value or appraised fair market value. We're currently assessing the fair market value of the 13 aircraft being removed and whether to exercise or put options to sell them to DHL or instead market the aircraft to other customers. The average remaining book value for these aircraft is fairly low. The remaining book value for all 13 totals approximately 4.8 million. In accordance with GAAP, we will be assessing whether or not it is appropriate to record an impairment charge in the third quarter associated with any of these aircraft.

Now Joe Hete will review our operations for the quarter and our outlook for the rest of the year. Joe?

Thanks, Quint. The good news from our second-quarter results is that we continue to deliver on the commitments we made our customers. Our on-time service in the DHL network remains high, and our performance against budgeted cost is on target. That said, we will not be complacent and are constantly working to improve the service level and cost efficiencies we offer our customers.

The decline in second-quarter revenues in earnings compared with a year ago is largely a factor of the transfer of the linehaul management business to DHL. While that was a good business for us and we did a good job supporting DHL requirements with contract truckers, it is not our core business. We're best at running large-scale air net transport networks, aircraft maintenance and sorting operations and getting it done with maximum reliability and efficiency, and we're looking for ways to apply what we do best to new markets and for new customers.

We're also working more closely with DHL than ever before. A significant portion of their operations staff are now based in Wilmington in the same facilities we occupy, and we are in touch with them daily. We're also working in concert with DHL and their other contractors to create more effective routing and sorting practices to reduce costs and enhance the value of DHL services to its customer. We want DHL to be as successful in North America as they are in the rest of the world, and we know they need our help to get there.

If you subtract the impact of linehaul, our second-quarter revenues were up by 2.5% compared to 2005, and our earnings were up about 15%. Our DHL ACMI revenues from retainment of the cost incentive increased by 57%, and our air charter revenues related to customers other than DHL increased by 69%. We did not earn any costs related markup on the Hub Services side, primarily because package volumes were lower than had been forecast. With automated sorting equipment coming online in Wilmington and adjustments to projected package volumes, we expect to resume earning incentive markup in Hub Services as well.

The DHL side of our business continues to generate strong positive cash flow, which we are reinvesting through our business and in new services as well. There have been no significant design changes to the DHL hub network since the integration of their Northern Kentucky hub into the Wilmington hub last fall. Stability of the network design has allowed us to better focus on improving the service quality and cost efficiencies provided to our largest customers.

DHL is proving it is willing to invest for growth as well. It will open a new state-of-the-art automated sort facility in Allentown, Pennsylvania early next year. We will continue to run the current center until a cutover.

Finally, while regrettable, we understand DHL's decision to remove 21 McDonnell Douglas DC-8 and DC-9s from our DHL dedicated fleet as a necessary step in their drive to growth and efficiency. With that change, a growing portion of the cargo capacity we fly for DHL is aboard our more reliable and more fuel-efficient 767. Additionally DHL has expressed an interesting growing the number of 767 aircraft which ABX operates in its network in the future.

As you know, we have several options for the furloughed planes under our contract. We will let you know as soon as we have determined what actions we will take.

On the non-DHL side, our ACMI charter operations are growing rapidly with two fully dedicated freighter 767 aircraft now in our fleet and two additional freighter 767s to be added in the fourth quarter. Charter block hours for the second quarter were up 42% from the first quarter of 2006 and 69% compared to the second quarter of 2005. We continue to have strong interest in the two additional aircraft we expect to put in service later this year, as well as in the eight 767s which we will add to our fleet during the 2007/2008 timeframe.

Earnings on our non-DHL business were down slightly from a year ago, largely because volume was down from some of our higher margin products such as parts and technical services. We have mentioned that we agreed to talk with DHL about other potential changes in our ACMI and Hub Services agreements. We described the outline for those discussions in our 10-K. I cannot predict when or if we will agree to any changes. We're perfectly prepared to keep operating under the agreements we have today. Any changes would have to meet our standards, which is the opportunity to earn what we would consider an acceptable return for our shareholders from that relationship.

I remain confident that we can replace more than half of the net income we stand to lose in DHL business this year with new profitable business from other customers. We're in discussions with several other charter companies about new and expanded business relationships based on the flexibility and cost advantages of our 767s. We're bidding on a number of potential hub management and sorting opportunities, including several with the U.S. Post Office. We landed one of them late last month in Dallas and a second which we announced last night in Memphis, Tennessee. Together these two Postal Service mail transfer centers should generate about 10 million in revenues a year. Both facilities will open during September with contracts covering an initial term of four years. Each one of these facilities should yield net earnings and cash flow greater than what we realized today from operating the Allentown sort facility for DHL.

In addition, we're seeing strong interest in our contract aircraft maintenance services and several other products and services. An example of the contract we recently signed for flat-panel retrofit for a 767. We installed the panels that were developed by Innovative Solutions and Support. We think there is strong potential to further upgrade among the thousands of 767s and 757s flying today, and we're excited to offer this efficiency improvement to the marketplace. We intend to work closely with DHL to make sure that all of its customers are served promptly and cost effectively. DHL's service qualities are a top priority. With good cooperation among all the DHL support providers, we can achieve significant opportunities for additional cost savings and significant rewards potential from them.

Now, moderator, we're ready to take some questions.

(OPERATOR INSTRUCTIONS). Helane Becker, Benchmark.

Just a couple of questions. Joe, what is the margin on the Postal Service business?

We anticipate having a margin somewhere between 10 and 15% on the facilities with the Postal Service.

Okay. And you said that starts in September of this year?

Yes, it does.

Of the current quarter, right? And then my second question is with respect to the 39% markup that you earned, I'm sorry I did not quite get the why of that, although I think you might have said it twice? Why in the third paragraph you talk about representing 39% of the maximum cost related incremental markup. And the reason for that? Being 39% and not higher --?

I think that is 39% of the total between the two contracts combined.

Got you. Sorry, I did not read it that way.

Yes, that is on a combined basis.

And I think we heard the reason why, right, you said it twice I think. Isn't that true?

Yes.

Okay, sorry. My last question is, with respect on the Postal Service contracts, first, how many more opportunities do you still have? And then what are the opportunities in terms of other -- like how big is the queue for other business?

Through the balance of this year, according to the current postal schedule, there is four additional hub facilities that will be bid out. One of those is the current facility that we operate for them in Indianapolis.

On a more macro basis, Postal Service is retooling their entire service network, and between now and 2010, they may open up a grand total of 80 plus facilities throughout the U.S. of a similar kind.

Okay. And then how big is the queue in terms of other business, non Postal Service business?

Certainly where it is related to the 767s, there is a significant queue out there. The limiting factor is the availability of the aircraft coming out of modification. We originally anticipated that we would see three aircraft in the service before -- three additional beyond the two we already placed in service this year of the ex-Delta aircraft. But due to some difficulties in the modification process, we will now only see two through the balance of this year and then the follow-on eight in 2007 and 2008. So there is a significant demand in that sector.

As far as some of the other lines of business, obviously the flat-panel is something that is relatively new out there. We do have high hopes for that being about 2000 757s and 767s aircraft out in the marketplace today that could be eligible for that upgrade. And then, of course, we will continue to pursue lines of business with customers from the heavy maintenance perspective as long as our hangar capacity will allow continued growth in that market.

Did you do an acquisition?

No, we have not --

For additional hangar capacity?

No.

No, okay. All right. Because you know CargoFacts keeps reporting that news. Just FYI.

We have seen that rumor.

Okay. Anyway, thank you very much.

Will Peters, Oppenheimer & Co.

I just wanted to ask a question on some of the U.S. Postal Service contracts. Can I assume that Atlanta is no longer on the table? Has that already been awarded?

Yes, Atlanta was awarded to one of our competitors.

Okay. And in terms of the 767s, you mentioned that the block hours were up 69% year-over-year. What was the actual number of hours?

As far as the aircraft on a -- each aircraft operated in excess of over 200 hours a month during the second quarter.

Okay. And do you see kind of upside to that number over the next couple of quarters?

Well, there's certainly limitation in terms of how much you can actually fly an aircraft at any given point in time, and of course, a lot of that depends on what routes they are on and how many stops they have to make as they takes obviously away from the flying time. And then, of course, you have to factor maintenance time into that as well. I think at a maximum level you can anticipate that maybe as you approach 300 block hours a month per aircraft is about the maximum you can reasonably expect to attain.

Okay. And then I guess the last question is on the flat-panel upgrades. Do you have any more clarity on how this is progressing on what the dollar value is that you might be able to receive and just kind of the size of the market there?

I think from a revenue perspective, depending upon the number of modifications some one is willing to commit to, can range from about 250 to 300,000 in revenue per aircraft. And again, if you look at the market plates in terms of aircraft that we would initially target, which would be specifically the 767s and followed on by the 757s, you are talking about somewhere between 1500 and 2000 aircraft that would be eligible for this upgrade.

Monica Logani, Wall Street Access.

Just a few questions. In terms of the hub markup, if I understand this correctly, you did not get any markup on the hub side. Is that correct?

That is correct.

Okay. And the reason you gave is because you overestimated the number of packages that would come through in the quarter?

That is correct.

So I guess my question is, what are you doing -- first of all, are you updating these forecasts every quarter, or is this all done at the beginning of the year?

Those are refreshed quarterly.

Okay. I am just trying to understand, it seems like it is out of your control the number of packages that are going to come through. But I'm just trying to understand how you are going to go about being more accurate about that so that you can get a better markup going forward?

Well, we in conjunction with DHL as part of the budgeting process, we review, of course, the recent actual volumes, and we agree on what reasonable projections are for the coming quarter. And so because it is reassessed each quarter and you have the benefit of recent actuals, I think that in and of itself results in a rightsizing of volumes to what the actuals are. So we would anticipate certainly as we move through the balance of the year that the volumes do reflect where we are at today and it should mean we have an opportunity, a good opportunity, to resume qualifying for incremental markups in that agreement.

The difficulty in the hub environment is it is easier to leverage the growth in the volume than it is to leverage the downside in the volume in terms of reducing your costs because obviously you want to keep as a finite amount of people in fixed positions, so to speak, to maintain your service level. So if you get dips in the volume, it's a little more difficult to pull out the costs as quickly as what you can add the cost in on an incremental basis when the growth is there.

So I just want to make sure I understand this correctly. You guys could do a bang-up job in the quarter, great on-time delivery from your hub performance, but if you overestimate the number of packages, you still look at zero markup?

Well, on the cost side, that is possible, although there's always a responsibility to control your costs and the relationship to the volume. But don't forget we also are incented on the service side, and that is always a focus for us. In fact, in the Hub Services agreement, more weight is given to the service markup, for instance, than there is in the ACMI agreement. In the ACMI agreement, I believe it is 25 basis points is the maximum. In the hub agreement, we can earn up to 75 basis points on our costs subject to markup. So obviously the hub environment attention to service is a priority.

So we won't see the benefits of your good on-time delivery until the fourth quarter, right, when we see the service?

Those markups are annual. That is correct.

And did they -- I'm sorry if I missed this, I did not know you had something come out this morning -- but did you give your -- every quarter you kind of give how your performance is for service.

Well, what we typically do is in the third quarter, and when the third-quarter Q comes out, we will be 75% through the year, those numbers will be we believe more meaningful, and we would expect to give some guidance as to where we stand year-to-date in that third-quarter filing on our service metrics.

What we can say certainly is that through the six months of the year we are tracking well ahead of where we were a year ago. And in the third quarter, we expect to see a little more specifics.

Okay. Then can you give us -- obviously linehaul has gone away for DHL, but you -- there is still some other revenue that is in that line item, correct from non-DHL?

Well, we had, of course, this quarter we had one month because the transition occurred (multiple speakers) on May 1st of linehaul expense, although it was not subject to markup, and that was roughly about $17.5 million. We probably have some small other truck linehauls that occur in support of our logistics side and also the air side. But that was certainly the significant piece of that line item.

Okay. So the vast majority obviously is the DHL side?

Correct.

Okay. Now could you give us a little bit more color on the non-DHL side, you know the non-ACMI? You talked about kind of the maintenance side of the business for non-DHL. What is going on there? Why was it so much less and you referred to less hanger space? If you could just give us a little color around all that.

I think on the maintenance side, and I think Quint in prior conference calls referred to that business as being a little lumpy and that you are subject to two factors. One, your available hangar space. Because obviously we have to maintain the 90 plus aircraft that we continue to operate for DHL within the existing hanger facilities, and so the ability to bring in that work is always subject to what hanger space isn't occupied with ABX aircraft.

On top of that, you're also subject to the maintenance schedules of the potential customers that you have. You only perform heavy checks on an average of, say, every year and a half to two years on an aircraft. And so depending upon how the individual customer's maintenance requirements fall, that can leave some gaps in your overall schedule of third-party maintenance work.

And is that a seasonal thing? Are there certainly quarters where you will see more work, in certain quarters you will see less?

No, because it is driven more by a calendar basis or a utilization basis by our customer as opposed to anything having to do with seasons. From a seasonal perspective, we have reduced the amount of work we do on the ABX fleet during the holiday season so that we make maximum availability of all the airframes that we have to move DHL's product.

Okay. So perhaps we could see a little bit more in the second half of the year in that line item since it was less in this quarter?

If that aligns with the customers' requirements.

Okay. And then finally just on the flat-panel, I know you have talked about it a couple of times through the call. But are we at the point where we are really seeing some of these airlines deciding to upgrade, or is it just a few here and there but it has not really become a push?

I think there are a large number of the airlines out there that are assessing the benefits of a flat-panel modification, and certainly one key driver, especially if you are talking about a passenger carrier, is the fact that there is a significant weight reduction in the aircraft itself by switching out the old CRT type instruments or the electromechanicals for a flat-panel MOD. With fuel prices north of $2 a gallon today, certainly the payback potential is that much greater.

In addition to that, as airlines grow their fleet with similar aircraft, for example, the 737 you have five or six different variance of that aircraft, the older generation don't have flat-panels, whereas the new 737-800 as an example would, and the same applies for a 7 5 or 7 6 and. So a lot of it has to do with standardization as well, which is a safety-related item.

So I mean how is the pipeline looking? Is it looking good; is it looking strong?

There is a lot of interest, but in terms of any backlog we can say that we have booked to date, there's just the one that we referenced in the opening remarks.

[Matt Votfel], First Capital Alliance.

Congratulations on your earnings today. I had a point of clarification. Earlier in the call there was a mention about the 39% of the maximum. Is that related to 2005 because that is what it reads on the press release or is it really 2006?

Let's see we have got -- that was related to 2005.

Okay. So maybe there is some confusion there. What is the -- it is 66% of the maximum that you earned in the second quarter between the two agreements.

Correct.

Right, okay. Good. I just wanted to clarify that. Secondly and I may have missed this in regards to the two Postal Service contracts you received, what is the rough range of the margins associated with that business? Is that around like maybe the high single digits?

No, we expect to get somewhere between 10 and 15% margin on that business.

And how many more contracts are out there like this?

Through the balance of this year, there are four facilities up for bid, although one of those is the Indianapolis facility that we currently operate. So there would be a net potential for us of three additional facilities. And then going forward between now and 2010, there could be as many as up to a maximum of 80 facilities from I think the current number is about 15 in that USPS network.

Okay. And then lastly in regards to the non-DHL charter income, what is driving the increase in spite of a seemingly slowdown in the economy, higher fuel costs? What is driving business towards ABX?

In reality the high fuel costs tend to be our friend at this point in time because of the fuel efficiencies associated with these 767s as compared to the aircraft that it would compete with of a similar size. If you look at it compared to the competitive aircraft, you're talking about DC-8s and A300 aircraft, both of which burn significantly more fuel than the 767 does.

So where a lot of the business is generated is the fact that the customer who ends up paying the fuel directly can stand to save significant amounts of dollars by using the 767 version of those DC-8s or A300. You can even bump up against a DC-10 type aircraft depending upon your payload certainly weighed against what you would give up with the additional capacity a DC-10 would offer. But if you don't fill the DC-10, your cost per pound or kilo is certainly going to be much higher.

Are we -- in terms of the competitors, what are they doing in response? Are they able to add airplanes, replace airplanes, or are they may be restricted for other reasons and maybe not compete as well?

The key restriction today is just the fact that right now there are no 767 freighters available, other than the ones that we have been bringing into the marketplace. We essentially have the modification lines pretty well occupied between now and 2008 at least for the facilities -- the modification facility we use, which is real aircraft industries. There is a competing modification in process today by Boeing; however, it is not anticipated that they will have their first 767 modification completed until the second quarter of 2007.

So it is fair to say that our competitors because we have acquired the Delta airplanes and currently under modification, our competitors really don't have ability right now to add more efficient planes, and thus, we're taking more market share away from essentially our competitors at this point. It seems like this is going to be, let's say, a trend for at least a little while until Boeing or what not has some other alternatives?

That is correct.

David Campbell.

Can I ask you about the Allentown facility? Can you estimate what those revenues are producing -- what that facility is producing in revenues for you?

David, if you look at the second quarter of '05, it represented less than $100,000 of our net earnings.

What about the revenue?

As Joe mentioned in his remarks, if you look at the Postal Services or the Postal centers, the two that we recently were awarded contracts for, each one of them individually on a conservative estimate would more than offset Allentown.

What were the revenues, though?

The revenues are probably roughly about 3, 3.9 to call it $4 million.

Per quarter?

Yes.

And obviously you look at the fourth quarter in all the hub facilities, you get a seasonal increase in those costs.

Right. Okay. The markup situation, so you expect to be able to quantify for the Hub Services' incremental markup in the third quarter or not until the fourth quarter based on the reassessment of package count?

Of course, we never give any guidance as to what our level of attainment could potentially be on the cost side, but what we can say is that the volume estimates are revisited to improve the accuracy of those. So, as that was probably the big reason this quarter missing the actual versus budgeted volumes was the biggest reason, we do not anticipate that to be a significant factor in the third quarter. So that should give us a fair opportunity to earn markup.

All right. You mentioned in your comments there was a clarification issued today. Where would we find that clarification?

Well, if you go to the earnings press release, it would be in the third paragraph, and we decided to clarify it. We had had a sentence in it that said, during the second quarter of '05, the linehaul operations contributed 54.7 million in revenues. So it is talking about Q2 of '05.

Well, that was the net contribution if you compare the 72.2 million of revenue we had in the second quarter of '05 from linehaul and subtract the 17.5 million that we have booked in April of this year. So that was a net number. We decided that in the context of where it is referred to, it is more appropriate to give the gross number. And so in order to clarify that, David, the 54.7 now reads 72.2 million. 54.7 is the net difference when you back out what we have booked in April of this year.

Right. Okay.

That was the only change.

Right, right, right, right. Your 767, your two 767s you have, are they both leased to Kitty Hawk, or are they leased to a number of operators?

They are leased to a number of operators, David.

Okay. And as far as the fourth quarter is concerned, do you think you will have the two additional 767s in there for the full quarter or just some of the quarter?

One of the aircraft should be in there for the full quarter, David. The second one would probably only be in there for about half the quarter.

Okay. Well, I think that most of my other questions have been answered. Thank you very much.

[Adam Flint], Keane Capital.

Joe, can you hazard a guess when you look at the other eight 767s, do you think that is four in '07, four in '08? Any thoughts along those lines and any further commentary on possible share repurchases?

I will take the question on the 767s first. Right now if the schedule holds from where it is today based on some revisions, again we originally had anticipated putting three more aircraft into service through the balance of this year. But as it stands today, we anticipate six aircraft going into service in '07 and two more in 2008.

As far as the share repurchases, as we have said previously, the ability to repurchase shares was a restriction. We had to do it -- we could not do it based on the terms of the note that we have with DHL. Earlier this year we had put out a release that said we had had a discussion and came to agreement what DHL. One of the assets they had as part of that agreement was the ability to talk about renegotiating the terms of the ACMI and Hub Services agreement to put more risk/reward components into it, and our ask in that regard was the ability to repurchase shares. To date we have not had any discussions in that regard on either subject with DHL.

Got you. Thank you very much.

There are no further questions in the queue. I would now like to turn the call back over to Mr. Joe Hete for final remarks.

Thank you. Most of you saw our announcement this week that we have added a new director to our Board. Fritz Reed is the former CFO of Wendy's and a very sharp strategic consultant. He will be very helpful as we sort through the wide range of strategic options before us.

I also want to add that I understand and share your concern about the direction of the stock price this year. We regard it as the market telling us to develop the non-DHL side of our business as fast as we can. That is a major part of what we had been doing this summer and what we will continue to work on this fall. We appreciate your support and confidence as we continue to make ABX Air a bigger and more successful company. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.