富蘭克林資源 (BEN) 2008 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen.

My name is Tina, and I'll be your conference operator today.

Welcome to Franklin Resources earnings call for the quarter ended June 30, 2008.

Please note that the financial results to be discussed in this conference call are preliminary.

Statements made in this call regarding Franklin Resources Incorporated, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements.

These and other risks, uncertainties, and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission including the risk factors and MD&A sections of Franklin's most recent form 10K and 10Q filings.

(OPERATOR INSTRUCTIONS)

Mr.

Johnson, you may begin your conference.

Thank you, and good afternoon, everyone.

Thanks for joining us today.

This is Greg Johnson, CEO of Franklin Resources.

Joining me is Ken Lewis our CFO.

Looking at assets under management declined from 591 to 580 billion and average assets declined from 610 to 602 billion, which represented about a quarter-over-quarter 1% decline.

Equity assets continued to decline from 55.5% of total assets to 54.5%.

Fixed income increased from 24.6 to 25.4 and hybrid was up slightly.

Looking at the assets by the various investment groups, Franklin was actually up quarter-to-quarter by 1.5%, 1.9% year-over-year.

Templeton down 4.2% for the quarter and 15.4% for the year.

Mutual Series down 4.7% or 12.8% year-on-year.

We did make a change to the flow summary and added net new flows consistent with the ICI presentation and broke out exchanges separately from sales.

Looking at the overall flows, return to positive flows in a difficult quarter.

Sales increased over 3%, redemptions decreased 11% and we've seen an improvement overall in redemption activity as the level of reallocation activity we talked about in the last call, specifically in January declined.

We also had an unusual event in the quarter with a redemption from a one-time offer of the Templeton emerging markets income trust which represented $1 billion and we expect $200 more million as the final tender is completed this quarter.

But the $1 billion did hit the flows for this current quarter.

Looking at net new flows by month, we had significant winds in April, but April had inflows of $3.4 billion, May $900 million and June out flows of $3.1 billion as the market slowed off during that month.

Looking at some of the flows by region, US net flows of $1.1 billion versus net out flows of $900 million in the prior quarter .

We saw the biggest improvement in equity and hybrid products, a large decline in redemptions and fixed income campaign continues to do well as we saw retail share hit a high of 13% in April.

Tax refunds were a best selling category this quarter with net flows of $1.7 billion, a 31% increase from the prior quarter.

On the non-US side, net new flows were slightly positive at $100 million, which is a $5.3 billion improvement from last quarter's out flows.

Sales increased 9.4%, redemptions declined over 11% and we did see success raising assets with some Sovereign Wealth Funds $2.4 billion during the quarter for Middle East and Asian clients.

Reduction in global equity out flows was the driver of the turn around in non-US throws, particularly in Europe where we saw the bulk of redemptions in the prior quarter.

Looking at the flows by client type, retail had net out flows overall of $800 million versus 2.8 or was a $2.8 billion improvement over the prior quarter.

Top selling US fund was Templeton Global fund with net new flows of $1 billion versus $1.8 billion in the prior quarter and top selling non-US fund within CCAV Templeton global total return with net flows of $550 million versus $365 million in the prior quarter.

Institutional had a very strong quarter, with net new flows of $1.9 billion versus out flows of 2.7 in the prior quarter.

36% increase of sales.

Largest contributor we mentioned in the prior quarter call was a Middle Eastern mandate of $1.4 billion that funded in April and actually ended up at $1.8 billion.

We continue to have meaningful wins in global fixed income mandates with $300 million Illinois state board, Japan of $250 million emerging markets debt among other wins in the quarter.

High net worth continues to be steady in a difficult environment with net flows of $100 million.

Looking at the flows by investment objective, again the biggest turn around around equity products, equity out flows were only $2.1 billion compared to $12 billion in the prior quarter.

We continue to see out flows in Templeton growth albeit a smaller pace of 1.2 versus 1.3 in the prior quarter and Templeton out flows of $830 million, the foreign fund versus $1.1 billion in the prior quarter.

Hybrid category went back into net inflows for the quarter.

Net flows of $200 million an increase of $800 million from the prior quarter.

Primary driver being Franklin income fund, which returned to positive flows of $255 million versus $800 million out flow in the quarter.

Fixed income had a solid quarter of flows of $3.7 billion down from 5.3 in the prior quarter with tax free gaining largest share, 1.7 versus 1.3.

Money funds of out flows $600 million versus inflows of $1.1 billion.

Turning to investment performance, not a lot of changes there as far as how the market has been responding.

56% of our overall assets were ranked in the top two quartiles for the three-year period, 71% for the five-year and 92% for the 10-year.

The majority of our equity assets having a value discipline have continued to be weighted in areas that have underperformed the market and the underweighting specifically to materials, commodities or oil services continues to weigh down on the short-term results.

We are encouraged by the strength of the growth areas, that's been an emphasis for us as the market, growth has out performed value.

But more importantly, we've seen excellent performance out of the Franklin Growth Fund and the Franklin Flex Cap Growth continues to have very strong performance for the one, three and five and ten year periods and our growth opportunities in the top quintile for all time periods.

Our global growth strategy on the institutional side was recently upgraded by a major consultant and we're seeing interest as that track record has reached over, closing in on five years there.

Fixed income continues to be strong on the back of the, of municipal bond performance.

And now I'd like to turn it to Ken for the operating

Okay, thanks, Greg.

Hello everyone.

We're pleased to report another solid quarter amid continued and I would say extraordinary market volatility.

Once again, our results show we're able to effectively manage our costs and not only did we maintain a healthy operating margin, we actually increased it to 35%.

Operating income increased 2.5% from last quarter to $532 million.

Net income increased 10.2% from last quarter to $403 million.

Earnings per share increases 11% from the second quarter to $1.71.

Year-to-date earnings per share was $5.38 versus $5.26 for the same period last year.

Looking at revenue, for the quarter, investment management fees increased 1% despite the decline in simply monthly average assets under management.

I think this bears a little bit of explanation.

Most of our funds generate fees based on average daily net asset values.

Due to market volatility of this quarter, the daily average assets under management was higher than the simple monthly average.

That's why you're seeing what looks like a higher effective fee rate this quarter.

On a normalized basis, our effective fee rate for the quarter was comparable with the prior quarter.

Underwriting and distribution fees increased slightly due to increased sales and average assets under management, as did the underwriting distribution expenses.

Underwriting distribution margin decreased to 2.36% from 2.79% last quarter, as we saw a small increase in the percentage of retail sales from outside the United States.

Shareholder servicing fees declined slightly due to an increase in lower fees declined slightly due to an increase in lower fee earning accounts, for example, closed accounts.

During the quarter we completed the purge of 237,000 Canadian closed accounts and our US purge that took place in July will be reflected in fourth quarter numbers was 1.7 million accounts.

Other net revenue increased $5.7 million this this quarter.

That was related, primarily, to a $485 million securitization of auto loan portfolio that resulted in a small gain.

On the expense side, expenses were once again held in check, as we continued with our strategic cost management initiatives during the quarter.

Compensation and benefits increased slightly during the quarter, due primarily to variable compensation that was based on increased operating income.

Expenses, such as technology and occupancy and other expenses, decreased during the quarter as a result of our cost cutting efforts around discretionary spending such as travel and entertainment and other office expenses.

Advertising and promotion decreased by $2.6 million this quarter due to a combination of cost cutting efforts, as well as reduced strategic opportunities.

Amortization of deferred sales commission decreased 3.2% reflecting lower class shares.

Moving below operating income, other income net increased $21.3 million from last quarter.

Our sponsored investment product losses decreased by approximately $7 million last quarter, just to remind everyone this represents the underlying investment in products we consolidate due to ownership that are mark to market trading in our balance sheet.

If you recall last quarter, we had substantial unrealized losses in that line item.

Investment and other income increased 4.9% quarter-over-quarter, the last two quarters included about $5 million to $10 million of expenses that are considered to be nonrecurring.

This quarter, there was about $10 million of losses accounted for using the equity method.

Interest expense declined as we paid off our medium term notes in April.

The affective tax rate for the quarter was 27.2% compared to 29.5% in the second quarter and that was primarily due to a change in projected earnings mix.

So we ended the quarter with a healthy operating margin of 35% which was a 0.5% increase over the prior quarter and generated a year-to-date operating margin of 35.8%.

Despite all the market volatility, I'm pleased to say that we've been able to maintain a strong operating margin.

I think this shows the strength of our management structure and ability to respond quickly to a challenging operating environment.

A couple of points on capital management.

As I mentioned we paid off medium term debt, we securitized auto loans.

We enhanced the parent company liquidity with some opportunistic commercial paper issuance.

Total shareholder payout, including dividends and stock repurchases, was 113% of year-to-date earnings and that excludes the debt payment.

Looking forward we would expect our buyback activity to support a payout ratio that's more consistent with payout ratio of prior years.

Now I will turn the mic over to Greg for discussion of business highlights.

In the United States we did have a, actually for the globe, we had an importantly organizational or restructuring at the senior management level and named Vijay Advani , Executive Vice President of Global Distribution with oversight of both the retail and institutional distribution to further leverage our global platform and really address the blurring lines between institutional and retail that we're seeing around the globe.

And hopefully from that we can get operational efficiencies out of that.

We named Bill Yun, to be the Executive Vice President of Alternatives Strategies.

A new role dedicated to overseeing the Company's alternative investment businesses including our local asset management businesses around the globe as well.

We're pleased to see that Morning Star ranked us as the top of the municipal bond fund family.

On the international side, in Malaysia we were granted one of five asset management licenses and awarded a mandate in that market.

In India, we began distributing private equity strategies to high net worth individuals and opened a new call center to service India investors.

And in Canada, we were pleased to see Edward Jones added Franklin Templeton investments as a partner in that market.

We'd now like to open it up for your questions.

Thank

(OPERATOR INSTRUCTIONS) Our first question will come from the line of Hojoon Lee with Morgan Stanley.

Hello, good afternoon.

Hello.

You noted in your release that you recently launched a new CCAV fund, Franklin [Meana] could you give us an update on your AUN in CCAV products, as well as longer term, how you think these products will grow versus US products?

Yes, I don't really, I don't have the actual AUM at this point for the fund.

It's relatively small.

We introduced it in the CCAV as well as to the Korean market.

And it's really just an example with our local asset managers, there's a minority ownership through Algebra Capital that we're seeing increased demand for regional funds, more specialized focused alpha and at this point it's really early as far as assets, I'm sure it's under $100 million.

And just as a follow-up, I'd be interested if you could give some color on any differences you're seeing in retail client engagement by geography.

Is demand in Europe and Asia currently weaker for you guys in US and also, once market conditions normalize, could you help us bracket where you expect to see stronger investment demand and why?

I think it really follows investment performance and asset wherever you tend to be strong if that market is or that sector is having trouble, that, will be difficult for flows.

And I think if you look at the volatility for us, of non-US flows, versus US flows, certainly on the retail side, you do not have the benefit of municipal bond funds and government funds that really kind of add balance to these kind of times.

So you have more volatility, deeper redemptions on a net basis number, for non-US than you do for U.S.

But on the institutional side, the offset of that is that we still see big opportunities with global fix in the end of merging markets debt still in, with Sovereign Wealth Funds and that could offset that.

But that, that is about as general of a statement as I could make.

I just think in this kind of environment I would expect to see the US flows more stable than the non-US flows.

Okay, thank you.

That's helpful.

And just lastly, could you provide some additional color on what's been driving the decline in performance this quarter at Franklin Templeton's equity funds?

Other than investment style, whether it's sector or geographic exposures that have been driving down the numbers?

It is.

I think specifically, I mentioned Templeton and not having any oils, metals, commodities, uh, obviously that, that will hurt relative performance and that really relates to the large global and foreign funds, emerging markets fund do have exposure there.

Mutual Series has historically had a heavier weighting in Global Securities and they're measured against the S&P 500.

So having a higher amount in the UK and having that sell off more than the US market to date, that's had a negative impact on its peer group, on its relative performance, but again, it's consistent with, with cycles in the past and we don't see any reason to try to change anything.

Okay, thank you very much.

Our next question will come from the line of Mike Carrier.

Thanks guys.

One question, first probably for Ken, given the average AUM levels, just given the selloff in June and the markets and sort of what we're seeing in July, when you look at end of period and how the average AUM levels are in Q3, you guys did a good job on managing expenses, just curious going forward in the back half of the year, are there areas on the expense side, on the expense line that you think you have a little bit more, flexibility?

Well, yes.

That's a pretty tough question to answer.

It's hard for me to give you a sense of trends and the reason I say that is because on the one hand, we are identifying other areas where we can defer costs or even cut costs, but on the other hand, we are continuing to invest strategically.

So how that shakes out in the individual line items is a little, in the short-term is a little bit tricky, but I think there are areas that we're looking at to see if they're adding value.

Do we need to make further cuts or deferred initiatives we had in our budget.

Okay, and just you guys have mentioned, you know in the past that sometimes you're looking for opportunities in the international markets, at one point in the UK.

I'm curious, you have done a lot with the cash in the buy back side on the debt, given the environment particularly in the US with financial firms and some of the banks needing to raise capital and potentially selling off asset management arms, are there any holes you think you'd be willing to take a look at.

Portfolio if it comes up at a good price or is it not really something you're looking at in the near term?

I think we're always looking at opportunities and you're exactly right, the valuations have come down both in the US and outside the U.S.

It's a tricky business.

To grow by acquisitions every firm is a snowflake and we might have a specific need and the properties might meet one need, but bring other problems.

We're continuing to look at it, so I think if your question is if they're interested in pursuing those opportunities, there is.

Okay, thanks.

The answer is we don't feel there's any strong need to fill a product gap and we think we have addressed the areas where we have less penetration in global growth, large cap growth and have various viable strong teams and records now that we think we can grow that.

Okay, thanks.

Our next question will come from the line of Michael Kim.

Hi guys, good afternoon.

Most of my questions have been answered, but maybe if you could just give us some additional color on kind of investment performance trends more generally, specifically looking at the equity platform.

Were there any kind of sizeable products that may have been kind of just below the 50th percentile that might be kind of skewing your overall rankings in either direction?

Yes, that's, I probably should have mentioned that when I talked about performance, I think it is important in the, some of the large categories.

Mutual Series is right on the bubble, at 50, 52 with the latest numbers, the Franklin Income Fund right at 50.

Those are huge asset levels that can really swing that number quickly.

So there's no real big lags, I think in those numbers and most of them are in that 50 to 60 category which you know can easily move a needle very significantly as far as looking at the percentage of funds in the top two quartiles.

Okay, so I understand that end of quarter, or end of month percentages can move around quite a bit, but from a flow perspective, do you find that there's a lag effect associated with kind of these shifts in overall lipper rankings?

That's probably correct and I think part of it, even though you may not be in the top two quartiles and strength in the 3 and 5 and longer term.

That'll be a bigger driver on fund flows whether you're in the quartile year-to-date one way or another.

Its a good indicator to talk about.

It ultimately leads performance.

Okay, that's helpful, thanks.

Our next question will come from the line of William Katz.

Good afternoon as well.

Just a couple questions, wondering if you could talk a little more about the institutional pipeline.

, maybe the quantitatively or qualitatively size it where we stand today versus coming in the quarter.

Curious if you could talk a little about where you're seeing demand, whether it be alternatives in global or other areas as well.

That's my first question,

I think the opportunity, and I don't really have any way to quantify the pipeline versus the prior quarter, like most, it's going to be with the Sovereign Wealth Funds right now and even existing accounts, that money continues to build, they're continuing to add to existing positions.

So I think that's the obvious near term opportunity for us, as well as in global equity.

But I don't have any way to quantify whether that's better or more or less than the prior quarter.

Has there been any change in terms of, more things seemingly coming out of the earnings so far has been just risk aversion in retail and institutional.

Are you seeing that with consultants and clients in general?

I think that's right.

This has been a major shock to the system and certainly what's happened in July and the new volatility, a lot of people are going to move to the sidelines and wait until things settle down a bit.

So I think that definitely has changed the selling environment, for the time being.

Okay and then that leads me to my second question, in terms of the new senior executive structure, just sort of curious, you alluded in your comments to some other efficiencies, just curious, are those product and/or expense efficiencies and can you help us with what some of those might be?

I think it's both.

It's probably, we look at those two areas and saw the groups getting closer and closer as gate keepers control more and more of the retail channels and a lot of the servicing we're doing with distribution in some cases was very redundant.

It's hard to attack that with two different entities and having it as one group, we think we're in a better position more redundancies we can more effectively manage.

There are real cost savings there.

May not see that for a quarter or two, but we're in the, we're in a better position to deal with it.

I don't think there's as much on the product side, because really, we always look at the products, I think holistically from institutional and from retail.

Okay, and just one last one if I can.

You said you would expect buy backs to return to more historical level relative, payout relative to prior income, can you sort of restate what that goal is?

Well I guess I'll just refer you back to the historical levels which is about 70 or 80% current year earnings and that feels like a comfortable target for us.

And is that dividends?

That includes dividends and share repurchases.

Okay that's helpful.

Thank you very much.

Your next question will come from the line of Ken Worthington.

Sorry if I missed this in your prepared remarks.

What were performance fees for the quarter?

There were some performance fees there were about $4 million in this quarter versus about $2 million last quarter.

Okay, thank you.

, you said in the release you have $3 billion of cash and cash

Right.

How much of that cash is unrestricted and available for buy back and dividends?

Well the first thing, there's, there are some regulatory requirements.

I wouldn't put that to very small, I wouldn't put them as a major factor.

I think the bigger factor is the the fact, the mix of cash offshore and onshore which of course is available, but June 30th, approximately 63% of cash was held offshore.

Great thank you.

I don't know if I'm stretching here, I think you said that Templeton Global Bond Fund had $1billion of sales.

I think that included institutional or is that just retail.

Could you repeat the question again, please?

I think you said the Templeton Global Bond Fund was your biggest asset gatherer.

It did $1 billion of sales versus $1.8 billion last quarter.

My question, is that retail in the institutional side or just retail that you're referring to?

That's just retail.

Just retail.

In terms of performance on that, that fund, as your biggest altogether, near term performance, did that have any impact on the decline in sales we saw from one quarter, the long-term track records very good.

Right.

Does that matter for fixed income funds?

I mean it may have, but it also, I think the bigger issue is just interest rates and inflation and the fear , right now that - - it's affecting the debt market so that's, that certainly had an impact.

It's hard to measure.

I can't think the short-term performance is going to have that much, but I'm sure it had some impact, but I think the bigger issue is around the volatility in the world

Okay, thank you very much.

Our next question will come from the line of Prashant Bhatia.

Can you give us the lipper performance I guess for the US registered product?

About $300 billion?

Can you give some color on the remaining $250 to $300 that's outside of the US in terms of how much is above benchmark?

Maybe on kind of a one, three, five year type view?

Yes, I don't have that -- I'm not sure we break that out.

Or even just roughly.

Just trying to get a feel for that other large pool of AUM and how the performance is.

Any kind of color you can give?

There's some other growth pools in there, the Asian Growth Fund that has done very well, I don't have that broken out for non-U.S.

Okay.

On the buy back side, it sounds like you're managing to a ratio, combination of dividend and, and buy back, are you basically not really price sensitive when you're buying back stock?

Is it just more a formula?

No, I think the strategy is, as we stated before, hasn't changed.

Opportunistic you know I just think that you know trying to give you a little flavor for trends that , kind of expecting historical averages.

So it's not, it's not a formulaic approach, but at the end of the day we should be close to that

Okay.

Maybe a mid point.

Okay.

And then, on the acquisition strategy, it sounds like you're more focused on getting some kind of new capability.

So is it fair to say asset purchases, just pure scaled asset purchases really aren't what you're looking for?

I think pure asset purchase at the right price would be very interested in.

I think it really comes down to, in that kind of situation, the efficiencies from combining the two and the price you pay.

So I think everything's relative to how much you're willing to pay and what you can do with it and ultimately add shareholder value and whether that's going out or buying a different capability and making it grown or buying existing assets that you can combine with the existing funds, we're certainly open to that.

There just hasn't been that opportunity at the right price to make that happen to date.

Okay, and would you, in some of those cases consider very large scale purchases or is it more bite sized typed purchases?

No, I think in the right situation, we would consider a large one.

Okay.

And then just on the, the haircut that you said for the 63%, that's offshore cash, is that about a 50% haircut?

That's just the uh, just for, it's -- we're, right now our policy is to reinvest t that cash for foreign operations, so I guess I was referring to the US tax rate.

No, I'm saying to bring that across, if you wanted to bring that across, what kind of haircut would you take on the tax side?

Corporate tax rate or 50%?

No corporate tax rate.

Statutory rate in the U.S.

Okay, great, thank you.

Our next question will come from the line of Craig Siegenthaler.

Thanks and good afternoon.

First question on the 2.4 billion of flows in the Sovereign Wealth Fund.

Trying to get a read for how normal this is, if this is strong result and looking at activity in late June, maybe early July, can we expect duplication of this in the September quarter or this unusually high?

The answer is the one on the Sovereign Wealth Funds in any large institutional account, we call them out because they are unusual and we want people to understand that, that you do have periods, like we did in the prior quarter where reallocation was unusual too and we called that out and that led to higher redemptions and this quarter, probably help flows with higher than normal funding of those institutional accounts.

So there is really no normal number, I think we talk about the pipeline still looks good.

We still expect to get new wins, but that may be, you could get nothing this quarter and twice as much next quarter.

So there really is no, that's really again why we called them out when we do make these calls.

And then -- well actually, you also had a $1.0 billion redemption from the Franklin Income Trust.

Is that part of the giant $60 billion retail fund.

That's the emerging markets income trust in the UK that is a, emerging markets fund that had a tender, it's a closed end fund.

Got it.

Then actually I had a second question on the fee rate and one of your competitors this morning, on their call, they also have a bipolar business in that half the business gets a higher fee rate from equities and the part gets a lower rate, kind of like you guys on the business mix, based on June 30th where you finished and based on where the average rate was for the quarter-ending in June, it looks like AUM is down significantly which could have an impact on the fee rate.

Are you looking for a one basis point decline in fee rates sequentially?

Any expectation there?

I guess it's anyone's guess what will happen as far as the mix in the overall markets, but if the equity markets decline and the mix is just fixed income, we'd see a little benefit a downward trend in the effective fee rate.

And I think you have to sometimes even look beyond, within equities because the, through June, emerging markets hasn't had that big of a set back compared to the rest of the world and they have as of July.

So that will have a bigger impact.

I wouldn't characterize it as bipolar, more of a graduated spectrum of fee rates across the different investment objectives.

And I think again, I'd stress with the global fix we have a higher fee rate for normal fixed income assets you'd get because of that specialty, same with emerging markets debt.

You don't have that kind of huge difference that I think a lot of firms have between the average fee on equity and fixed.

And because a lot of it is retail too.

Right but nothing really in short-term duration, institutional.

But could the performance fee, I know it's very seasonal.

It can be volatile, how does the third quarter look?

Is that going to put additional pressure on your fee rate?

On your performance fees?

Yes.

The performance fees really aren't a big part of the equation.

Last quarter they've been couple million dollars.

In years past, we had a subsidiary that we were consolidating that had bigger performance fees and that has been deconsolidated last year.

We're not seeing that run through revenue.

And then we have a couple performance fees on the emerging markets funds and they'll come in.

They are seasonal.

All right, great.

Thanks a lot for taking my questions.

Our final question will come from the line of Cynthia Mayer.

Just a quick one.

Seems like the distribution margin continues to shrink.

Wondering if you could remind us once again, that's a function of greater sales overseas.

Is that right?

Should we expect that to continue to slip a little bit?

That is exactly right and if that trend continues, that will likely, that margin will decrease further.

Okay, and then just circling back to the subjects of acquisitions, you mentioned alternatives.

I'm wondering if alternatives would be an area you'd be interested in acquiring?

I think it uh, is something that we, we've spent a lot of time looking at different situations and the right one really we feel is not, the right opportunity has not come up.

Having a dedicated person there to look at that and also the somewhat of a revaluation of how the streets valuing performance fees and things like that, that that again creates a higher probability of us doing something.

We're open to it, we're building it.

We think it's important and we think there's going to be more opportunities certainly than there has been in the last year.

So....

Okay and uh, one last one on the Sovereign Wealth Funds.

Do these tend to be done for straight fee or fee plus performance fee?

Should we think of them in general lower fee because they're so huge?

I think there is some performance fees, but the majority are straight fees.

It won't be a big impact and as you'd expect, lower fees than the traditional retail.

Great, thanks a lot.

Thanks.

And at this time I'd like to turn the call back over to Mr.

Johnson.

Okay, well thank you everyone for taking time to be with us today.

We look forward to speaking next quarter.

Thanks.

Ladies and gentlemen, this does conclude today's teleconference.

You may all disconnect.