Cineverse Corp (CNVS) 2009 Q4 法說會逐字稿

Good day everyone and welcome to the Cinedigm Digital Cinema Corporation fourth quarter fiscal year end 2009 earnings conference call. Today's call is being recorded. Listens are cautioned that some of the material discussed today may include forward-looking statements regarding Cinedigm's business and expected financial results. Words like anticipate, believe, estimate, or expect are generally forward-looking statements.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available and certain functions and there can be no assurances that they will prove correct. You should not rely on anything in these forward-looking statements as a promise or representation as to future results. You're encouraged to do read the Company's Securities and Exchange Commission filings. Now I would like to turn the call over to today's host, Mr. Bud Mayo, Chief Executive Officer.

Good morning everyone and thank you for joining us today for Cinedigm's fourth quarter fiscal 2009 investor conference call. As most of you already know, we have rebranded the Company to Cinedigm Digital Cinema Corp, or just Cinedigm, from Access IT in November of last year, and I will be referring to the Company by its new name throughout this call.

With me today are Brian Pflug, our SVP of Accounting and Finance, Andy Patel, our VP and Treasurer, and Adam Mizel, our newest Board member. Adam began his career in private equity at Morgan Stanley Capital Partners in 1991 and has spent his career in private and public equity investing.

He is currently the managing principal, the general partner of the Aquifer Opportunity Fund LP and he has significant experience in working with small public companies to help maximize shareholder value through both strategic and financial efforts. Aquifer first invested in Cinedigm two years ago and is our second largest shareholder. I've gotten to know Adam during this time and believe he'll be a great help to our Company. We welcome him to our Board.

Now let me start with an overview of what we plan to cover on the call today. We have a full agenda with a lot of detail to cover because it is our year end call. First, I'll provide a report of our topline financial results. Second, I'll discuss trends we are seeing in the industry and how Cinedigm is capitalizing on them. Then I'll provide an update on our business and talk about a few of the exciting events we have coming this summer.

Brian will then review the financial results in further detail, after which Adam will talk about our liquidity and balance sheet. Finally, I'll conclude with our outlook for fiscal 2010, before opening the call for questions. Overall revenues for the year were up 3% to $83 million, on an increase from the total number of digital projection systems installed and associated VPFs.

Due to a contracted 16% reduction in VPF rate starting in November 2008, and seasonally fewer titles and prints in the fourth quarter, fourth quarter VPF revenue was down 18% versus last year, although overall on plan. This step down in contracted VPFs charged to the major studios will stabilize with just one additional step down scheduled in the third quarter of fiscal 2012, with a more modest 7% reduction at that time, and then the VPF rate will remain flat until systems we installed in 2005 through 2007 begin to roll off from the major studios 10 year VPF schedules.

Given our long-term Phase I studio contract, this business remains predictable and is performing according to our expectations. Overall adjusted EBITDA was up 30% for the year to $39.4 million, due to increased revenues and also due to aggressive expense reduction.

Like revenues, EBITDA was on plan for the year, although down 19% in the fourth quarter to $7.3 million, primarily resulting from the same VPF issues discussed earlier. Movie releases in April and May are up 30% over the same period versus last year, last fiscal year and have fiscal 2010 off to a great start with Q2 and Q3 traditionally our seasonally strongest quarters to come.

Gross profit margins increased for the full year from 67% to 69%, after being down for the fourth quarter over the same period in the prior year from 69% to 66%. Direct operating expenses declined 3% for the full year to $25.7 million, and 10% in the fourth quarter to $6.1 million.

It's important to note, in total we eliminated approximately $5 million of annualized expenses through headcount and operating cuts of which only about $2 million of these savings were reflected in the fiscal 2009 results. And we generated positive cash flow from operations of $8.4 million in Q4, an increase of $4 million versus last year's fourth quarter, and $2 million versus our third quarter, ending our fiscal year with over $26 million in cash on our balance sheet.

In the recent six months, we've seen the promise of digital cinema take hold in theaters around the country, and also in our discussions with major entertainment brands. A prominent example of this trend is the considerable uptick in 3D movies, driven by all those involved in the entertainment industry.

We've seen many record new 3D movie openings and widespread excitement from studios, exhibitors and consumers about the potential for 3D. There are currently more than 13 3D movies in the studio pipeline and many more are anticipated as 3D releases continue to set box office records, including most recently, Up, which has earned $141 million as of Monday, June 8, at the box office.

We've also seen numerous sporting and entertainment organizations start to think about cinema in new ways, often spurred by the possibility of a 3D and live broadcast to theaters. These are organizations that had no prior interest in using cinema to reach their base consumers. Major consumer brands like the NFL and Disney tested 3D as ways to enhance their entertainment offerings to their consumers. And, of course, we at Cinedigm are proud to handle the first ever live 3D broadcast to theaters on a nationwide basis.

The BCS championship in January and the NBA All Star Saturday Night in February. Both of which saw huge turn outs of three to ten times the attendance compared to competing 2D features and much higher than average concession sales.

Cinedigm's role in its distribution of the BCS Championship Final earned an award by the Sports Video Group, an organization which supports the professional community that relies on video, audio and broadband technologies to produce and distribute sports content. Our entertainment group and satellite DMS teams collaborated to do earn this prestigious award.

Our Hollywood standard digital cinema platform provides necessary underlying technology for 3D exhibition and our unique and robust satellite network reaches more than 3,000 screens nationwide and is the only one that can and has brought Hollywood standard live events to theaters in more than 31 states. Thanks to our great DMS team and years of hard work, the best is ahead of us.

We believe that these kinds of enhanced theater experiences, made possible only by digital cinema, will accelerate industry excitement and commitment to our technology and to the products and services we provide. When theater owners call us and say that 3D live events are a major differentiator for them, we are reminded that we are riding the wave of an important new trend.

This is why theater owners using their own capital have installed more than 1,100 digital screens in more than 900 digital 3D screens in more than 850 sites independently in the past year, as they await our Phase II deployment and the DCIP roll-out. Many of these exhibitors will be our Phase II partners, as they contribute their investment in these systems, and Cinedigm completes the conversion of the rest of their screens in their multiplex.

The live events this winter have significantly increased consumer awareness of and interest in Cinedigm as a brand, and as an industry leading company. As a consequence the more consumers recognize the value of digital cinema, the greater value it will bring to theaters, deepening their connection to Cinedigm and to the many new choices we provide.

We plan to build on this growing awareness by offering events that reflect the unique capabilities of Cinedigm, that we offer to enhance audiences experiences. Our next event is the premiere of the movie The Narrows on June 19.

Which will include the first ever (inaudible) between Hollywood (inaudible) and theater audiences nationwide. We got a little blow back there. Hopefully, you heard what I said.

June 19 will include the first ever live virtual digital cinema Q&A between a Hollywood movie cast and theater audiences nationwide. The cast members including, Kevin Zegers, Vincent D'Onofrio, and Sophia Bush, will be located in New York and will appear live on screen to answer questions submitted by text message in The Narrows Facebook page.

This first of a kind event is another great example of the power of digital cinema, also provides a new template for value-added programming and services, that we can increasingly bring to content owners and consumers as a fee for service provider. I'll now move on with an update of our business, beginning with our media services segment. We recently announced an amendment to our existing Phase I credit facility with GE.

This amendment significantly relaxed covenants under which our special purpose subsidiary, Christie AIX, was working, and there by improved Cinedigm's corporate liquidity, which I'll discuss in more depth later on the call. Phase II is moving forward despite delays as a result of the economic climate and the shut down of credit markets. We see improvement in both and intend to capitalize on these improvements.

To date we have installed 3,900 screens including 139 screens in Phase II and we have supply agreements in place with three major distributors of digital cinema projects, Christie, Barco and NEC. We also have long-term VPF agreements with nine motion picture studios, in addition to collecting virtual print fees from any distributor who plays a title on any of our systems. This makes us vendor neutral and the only experience provider of end to end technology solutions for theater owners with almost 14 million shows to date on our screens with 99% reliability.

In the fiscal year ended March 31, 2009, total media services revenues increased 10% to $59 million, versus fiscal 2008. EBITDA rose 21% to $46.8 million, versus fiscal 2008, before corporate allocations in both cases. As a reminder media services includes VPF revenues, software revenues, as well as digital movie and trailer delivery fees. We call that division DMS. Our entertainment group has an exciting summer lineup of events that begin with The Narrows, the film I mentioned earlier, and is expected to include 3D concert events to be recorded at three festivals around the country.

We also agreed to distribute and deliver the movies Pool Boy in August and Opa in October. Events like these are expected to significantly improve financial performance of this unit in fiscal 2010. The Content & Entertainment segment which also includes Unique Screen Media and our pavilion movie theater, delivered revenues which were down 12% year over year, in both the fourth quarter and the fiscal year.

The segment EBITDA loss was trimmed in the yearly period by 55% to just $500,000. And in the quarterly period, by 60% to just $186,000, before corporate allocations. The Company accomplished this through a combination of staff reductions, increased events, elimination of unprofitable screen advertising contracts, and the launching on March 1st of a national advertising partnership with Screen Vision.

These results should continue to improve on a seasonally slower Q4 fiscal 2010. At this point, I'd like to turn the call over to Brian who will walk you through our financial results in greater detail. Brian?

Thanks, Bud. I'll begin by reviewing our quarterly operating results. Our consolidated revenues for the fourth quarter ended March 31, 2009, were $17.9 million, bringing us to $83 million for the year. This represents a decrease of $4 million or 18% from the prior year's fourth quarter. And an increase of $2 million, or 3% for the year.

As Bud mentioned earlier, this decrease was primarily driven by a contracted 16% reduction of major studio VPF rates, as well as normal seasonality. The increase in our reported revenues from last fiscal year continues to be driven by (inaudible), increased by $5.1 million due to virtual print fees and movie delivers, attributable to our, to the completion of our Phase I roll-out in the prior year.

We expect that servicer and license fees from our Phase II roll-out, as well as increased delivery fees from the expanding digital screen universe, will help us offset the scheduled virtual print fee reduction and rates associated with our Phase I systems. In the quarter we also had a $500,000 drop in legacy IT services EBITDA from last year's quarter, due to a contract that ended last year. Our Content & Entertainment segments revenues decreased $3 million versus last year, due to our elimination of various underperforming advertising customer contracts, and due to continuing economic factors negatively impacting the advertising industry as a whole.

Our adjusted EBITDA decreased to $7.3 million for the quarter, from $8.9 million last year, a 19% decrease, and increased $39.4 million for the full year, versus $30.3 million from last year, a 29.7% increase. It should also be noted that consolidated adjusted EBITDA has exceeded all of our interest expense for the last eight quarters, a trend we expect to continue.

Our direct operating costs are down slightly for the year, due to continued careful expense management and remain at just above 30% of revenues. Our resulting gross margins increased to 69% for this year, from 67% last year. Our overall selling, general and administrative expenses have declined fairly significantly versus last year, and as a percentage of revenues, dropping from 29% of revenue last year to 22% of revenue this year.

A major cause of this was a consolidation of sales and other personnel within the advertising business. Personnel reductions throughout the Company and ongoing cost containment efforts. Our total Company headcount was 242 as of March 2009, versus 295 as of March 2008. The full effective of our cost containment efforts, approximating $5 million, will be realized in fiscal 2010.

This year also includes a non-recurring charge of $6.5 million for the impairment of goodwill on our previously acquired Content & Entertainment businesses, due to the decline in the market capitalization of our Company and economic conditions generally, and was recorded last quarter.

We performed full impairment tests for our goodwill containing units again as of March 31, 2009, and determined there was no further impairment. Our interest expense was $1.8 million lower this year versus last year, due to our fixed rate on the GE facility effective August, 2008, and the fact that we paid down $15.4 million of the principal balance through March, 2009. While the interest rate swap locked in a fixed rate of 7.3% on the GE debt, resulting in lower interest versus prior periods, we recorded a non-cash charge of $4.5 million to reflect the change in the fair value of the swap contract.

This charge resulted from the decline in LIBOR rates and the projected outlook for LIBOR rates remaining below the Company's 2.8% fixed LIBOR rate under the contract. We expect further volatility in this line item, either up or down, as the interest rate environment undergoes further change. However, since we intend to hold the swap until maturity in August 2010, we do not expect to realize any cash losses on the contract.

Our net loss was $37.4 million for the year, versus $35.7 million in the prior year. Excluding the impairment charge in the mark-to-market accounting on the swap contract, our net loss would have been reduced to $26.3 million.

In fact the media services segment has positive net income in both this fourth quarter and year to date, excluding the swap item. I should also mention that we do not have taxable net income in the segment. However, and we have significant net operating loss carry forwards to shelter any taxable income when it does occur. The current quarters loss includes $11 million of non-cash charges.

The March 2009 quarterly loss includes $5.6 million of cash interest, primarily associated with the GE credit facility, and our Phase I subsidiary, plus $800,000 of non-cash interest. The balance sheet reflects total cash of just over $26 million, working capital decreased to approximately $3.5 million. As expected without any material Phase II purchasing activity to date, our recorded asset amounts have declined due to normal depreciation, improved receivables management and, of course, now due to the goodwill right off mentioned earlier.

Our 10-K will be filed shortly with a clean audit opinion, and we will give further information including positive operating cash flow of over $30 million for the year. With that, I would like to turn the call back to Bud.

Thanks, Brian. We were pleased to announce the amendment to our existing GE credit facility last month.

The amendment relaxes financial covenant ratios that our Phase I subsidiary, Christie AIX is required to meet every quarter through the maturity of the loan, in 2013 and allowed about $5 million to be released to do our parent at closing and up to $3 million per year in servicer fees going forward from the Phase I cash flows, also to our parent Company, improving our overall liquidity. The fact that this agreement was amended in the midst of such a challenging credit market, we believe is a testament to our strong relationship with GE and their confidence in our ability to execute on our business plan. We appreciate their foresight and initiative in helping Cinedigm to lead this new and important industry since 2005.

At this point, I'd like to pass the call over to Adam Mizel, our newest member, who will say a few words on our financing efforts.

Thank you, Bud. As Bud mentioned I am a general partner of the Aquifer Opportunity Fund and largest shareholder of the Company. I joined the Board on March 19th as a representative of all shareholders. Almost immediately, at the request of Bud and the other directors, I partnered with Bud to examine the Company's financial needs and to work together to secure solutions. I dedicated more than half of my time to this effort, and will continued to do so.

The first thing I can tell you is that my diligence is confirmed, the operating, strategic and financial strength I saw in the Company as a public investor. The key assumption that supported the Aquifer investment in Cinedigm has been the existing ten-year contractual cash flows in Phase I are sufficient to repay all the Company's debts and still leave residual value for the common equity, even with no Phase II deployment. I continue to believe this to be the case.

This is critical to our ability to address our financing needs. The second important point to emphasize, is that Cinedigm is still standing as we come out the other side of the worst financial and credit markets we have seen since the 1930s. Even with the highly leveraged capital structure, that was not meant to endure almost 24 months of very little growth, the structure has not broken. Few companies can say that. Yes it is bent and twisted, but management is work to go buttress the balance sheet.

Fortunately, the overall credit market environment has markedly improved, and as a result we have confident that Cinedigm can take advantage of this. I believe that Cinedigm has three key areas to address on its balance sheet, and management is focused on all three simultaneously.

Number one, the existing GE capital led Phase I financing. Number two, new Phase II asset-backed financing packages and, number three, the existing $55 million of Senior Notes. I will update you on progress with each. First, the existing Phase I facility. Check and completed. Bud walked through the GE amendment earlier in the call. A reminder, this debt is a subsidiary and is non-recourse to Cinedigm.

The lenders agree to provide Cinedigm greater liquidity and access to cash servicing fees, because they understand my earlier statement, the existing ten-year contractual cash flows, after servicer fees to Cinedigm in Phase I, are sufficient to repay all the Company's debts, and still leave residual value for the common equity. We believe that our lenders' confidence will also translate into the contemplated Phase II financing. Number two, that Phase II financing. Cinedigm has several complementary financing discussions underway. None are at the point we can give you details, but all are progressing and accelerating.

None require a Cinedigm equity contribution like Phase I. Simplistically in Phase II, the junior capital necessary is being funded by movie theater exhibitor contributions and vendor financing, and not by Cinedigm, who will manage the Phase II implementation and servicing plan.

First, Cinedigm expects to have installed 139 Phase II screens by the ends of June and partnership with Barco, a large digital projector manufacturer and a large Belgian bank. We are working with both to expand this facility materially.

Second, we continue to discuss a new Phase II facility with GE Capital and other existing or new lender to say join the syndicate. At the end of 2008, GE had informed us they like most lenders were temporarily making no new loans. That time has ended. GE Capital is in the lending business again and Cinedigm is a key client at the top of the list. We believe that Phase I amendment validates the strength of our relationship.

Third, we are working with another large global bank and projector vendors on an innovative financing facility to separately complement the GE led efforts. Finally, we are working with several potential exhibitor customers representing currently several hundred screens, on structures in which they either purchase or contribute the digital cinema equipment directly, or become lenders to the Cinedigm themselves. In each of these models, Cinedigm performed its core role as a servicer, including the collection and description of VPF related revenues and earns its servicer fees.

We look forward to reporting specific details to our shareholders as we finalize them. The last thing we'll discuss is our $55 million Senior Notes. In August 2007, Cinedigm borrowed at the parent holding Company level, $55 million from a group of lenders. These notes are due after a six-month extension in February 2011.

In these credit markets 20 months is not that far a way, and we clearly hear the markets concerns. As a result, the Company is addressing this issue today. We do not have access to most of these Phase I cash flows to service the Senior Notes until 2014, after the maturity of the GE Phase I facility.

But these cash flow are consistent, secure and high credit quality, given the long-term contracts with both movie studios and exhibitors. The use of these cash flows and the residual value of the Phase I equipment as collateral, are the underlying basis of discussions surrounding our refinancing efforts. It is understood by our perspective partners, and Bud and I are together driving these discussions forward.

In summary, the board and management are focused on our balance sheet. I've been actively involved with Bud and the team for two months.

We see reasons for optimism as the credit markets improve, and the breath and depth of Cinedigm's financing conversations accelerate. We are committed to the steps necessary to enable Cinedigm to reignite its growth model and that maximize shareholder value. We look forward to coming back to the market with specific results.

Thank you, Adam. We greatly appreciate your view and your anticipated contribution to our growth plans as we move forward. Before I close, I'll provide investors with several guide posts to better understand our expected fiscal year 2010 financial results. First, all of our comments do not assume a large Phase II deployment, although we expect this to occur.

Given the capital markets, we cannot control the roll-out timing, so we will not try to predict it to you. Nevertheless, our outlook for fiscal 2010 is excellent. We expect to produce double-digit increases over 2009 revenues and EBITDA, independent of the timing of the large scale Phase II deployment, and to an even greater degree, with our expected full Phase II launch.

Second, as we mentioned earlier, we made approximately $5 million of annual expense and headcount reductions during the fiscal 2009, about $3 million of which should be first reflected in fiscal 2010. This alone should improve our fiscal 2010 operating results.

Third, even with the capital markets delaying broad industry digital conversion, the industry now has over 6,000 digital screens compared to about 5,000 at March 31, 2008, and according to the National Association of Theater Owners, is expected to add at least 100 additional digital screens per month through the end of the year to meet the growing 3D studio release calendar. We deliver digital movies regularly on behalf of our studio customers and all these digital screens. We deliver to all of these digital screens. And so our delivery unit, DMS, revenues and EBITDA should increase correspondingly.

Fourth, as we mentioned above, our entertainment group has agreed in just the first quarter of this fiscal year to distribute three independent firms this year, as well as several 3D music festivals and concerts, expanded its Kidtoons program and has numerous other initiatives in the world. Our mantra in this business unit is that we sign the backs of checks, so we expect that each of these events will be profitable for Cinedigm.

Finally, we expect to continue strong results from our Phase I deployments. The box office is experiencing a record year and the upcoming movie release schedule, which drives our both screen turnover and VPF revenues remains strong. We expect an increase in alternative content fees to supplement those VPF revenues.

Overall, the first quarter is off to a good start, as titles are up 30% over last year at this time and the Company overall is performing well. The past year has been tremendously exciting for Cinedigm, not only did we rebrand the Company, but we also brought groundbreaking events to consumers, fans of college football and the NBA during the fourth quarter.

These first ever nationwide live 3D sporting events put Cinedigm on the map as a consumer brand, bringing top quality live programming to go theaters. Despite continuing economic challenges, I'm confident that Cinedigm is in a strong position to capitalize on trends we are seeing in the resilient and thriving theater industry, and we look forward to delivering strong results across all our business units this year and beyond.

Thank you and now I will open the call for questions. Operator?

(Operator Instructions). We will take our first question from Rich Ingrassia from Roth Capital Partners.

Thanks, good morning, everybody. Bud, since we are at the end of the fiscal year, can you talk about the content business and the advertising business? There's been valleys and peaks there over the last 12 months. Can you talk about what you've learned about those businesses and what can be most effective going forward?

Well, we've learned that we want to be in a better economy first of all, from the advertising standpoint, without question. That's the one part of our business that is directly impacted by the economy. The movie industry at large has proven to be very resilient in this economy. So advertising, and I don't mean to be flip about it, advertising is clearly affected by the economy.

What we've learned is how to be sure that when we sign a contract with an exhibitor, that we share a pie that is definable and that exists and has peaks and valleys. So that's one lesson we've learned because the industry standard has been to provide minimum guarantees which put a lot of contracts under water.

We've renegotiated virtually all of those contracts and have essentially created an addition by subtraction and in doing so, we reduced the size of that business down to businesses and relationships that make sense today and will make even more sense in a better economy. From the entertainment business, we've learned that the so-called Hannah Montana model is what we are most interested in.

We are really looking at alternative content as a full run product that is going to play more than just one show. We've also learned that live events need strong sponsorship to make them make since.

Live events can be priced in a variety of ways, but mostly they are driven by branding opportunities for sponsors. They also send another message that I think is very important to movie gears, and that is that movie theaters can do something more than just play movies, particularly during nonpeak periods, so as we've said in our comments, the BCS Championship game did ten times the movie business than anything else playing on that Thursday night, and NBA All Star event on a Saturday night, out grossed just about every movie playing in the theaters that they worked.

We hope to get that message strongly across. It is certainly being received and is being a particularly strong driver for conversion.

It's Adam. Let me just add to what Bud said, two things, number one in the advertising business, that business in the last fiscal year contributed solid positive EBITDA to the Company, and we expect it to do the same in this fiscal year, even assuming a further decline in its revenues due to the economy, we think its EBITDA will be positive and strong. Number two, on the content side similarly, we figured out how to have that business be profitable to the Company.

Last year it was not. This year as you heard we made, we've added a significant number of independent movies we are distributing, as well as music concerts and other types of content, just based on what we have on hand the financial performance of that business will dramatically improve, and that's only in the first quarter.

We are working on many, many other thing. So both of those businesses we feel, we figured out how to make them contributors versus detractors financially to the Company in this fiscal year.

Now, just let me make it clear. We've signed contracts in this quarter that will play throughout the year.

I don't want to create expectations that the first quarter is going to be the big quarter for the year. We are lining up a slate of all kinds of exciting events that will move out into the year and be booked. Intelligently, so they don't bump up against studio product.

Okay On CBG, Bud, could you give us a status on your discussions for roll-out there? Obviously it's being held up by inability to finance the equipment, but do you have a pipeline of orders or signed commitments that are ready to be turned lose once that funding is in place, or have those discussions just been halted all together?

Not at all. We are actually, we just had another conference call, a regular conference call with our management team. We are moving forward on that and we've been meeting with CBG members, and Show East and Show West, as well as the management team of Nato and CBG continuously for the past year and a half.

What has to happen is we need to complete a master license agreement, which is the agreement between us and the exhibitor and we want to do that with their attorneys and with their management teams, so we don't have to do it every time we sign an exhibitor who are teeing up currently. So the answer is we will be signing many of those exhibitors almost immediately when we complete the negotiations, the final negotiations which are nearing an end on the terms of the master license agreement.

Which are very similar to the agreements we have in Phase I. We also need some adjustments with some of the studio agreements we have to accommodate the smallest theaters, the mantra for CBG and Nato is no theater left behind, so there needs to be a different model for different types of theater owners, like drive ins, seasonal, even sub run theaters, and it reflects the amount of contribution the exhibitor has to make and the financability of those theaters. We are completing those concurrently.

When those two converge and are completed, we will be signing those exhibitors very quickly. And I think as we discussed before, we have an exhibitor self financing plan that we've already promoted to all theater owners and particular CBG members, which allows them to buy the equipment and we manage them and charge fees. Very much the way that we intend to do it throughout Phase II and we are working on getting sign off from all the studios to allow us to do that because we have the VPF agreement.

Alternatively, they can be the senior lender in a challenging credit market where banks are more reluctant to lend than they were before, an option for exhibitors is to be the note holder and we've come up with a plan to do that as well. In addition to all the third party lender discussions that we are having, that Adam described, we are also meeting with individual exhibitors and we have quite a few screens already in play in that category.

So that's the reason for the optimism and CBG in particular is moving very quickly now towards getting started.

A couple more if that's alright. I saw the amended credit facility and I guess I'm having a hard time seeing that as anything better than a neutral vote of confidence from GE, I don't see it as a vote of confidence to relax covenants in exchange for a higher rate. Could you maybe explain the workings there in a little bit more detail?

Sure, the reason it's a vote of confidence is really the terms of that amendment. If you look at the rate, it is an excellent rate that any lender today would be very happy to get. And the relaxation and freeing up of capital on a going forward basis, because servicer fees are a component of EBITDA and without the relaxation of those it would be more difficult for us to always be able to have paid to our parent company those servicer fees.

That became an important issue for us going forward. It's not that we couldn't manage that process. But in a challenging marketplace, where capital is definitely limited, in particular when we began those discussions, this is an important amendment and I don't think that had we not demonstrated that even with those covenants that the loan was a very good loan.

It was going to get paid off the way it was expected to and the confidences they built in the experience they had with us over the past three years. That they would have done that.

Rich, I think it validates one of the things that I mentioned earlier, which is that GE and the other lenders released to Cinedigm a meaningful amount of cash up front and cash on an ongoing basis that otherwise would be there to repay their debt sooner. They did that because they understand and have confidence in the stability and quality of the cash flows, which we will be repaying over the, their debt with over the next few years and it validates that they see themselves getting repaid and there's a lot of meaningful excess residual cash flow thereafter.

They didn't have to do that. In this credit environment, it would be very easy for a lender to say, that's interesting, we will just pay ourselves because that's the world we are in. That's not what they said and that's because they understand the value that exists in those cash flows, they understand the value we provide as a servicer.

They know that we need to keep doing that for them in Phase II and so all of that is linked together. That's why we and they view it as a vote of confidence, the world we are in today is borrowing money costs more. If you want changes like that, you are going to pay more.

We paid below market at the time, the market still. Before that we got a lot of flexibility and I think that wouldn't have happened if it weren't for all the positives that we just discussed.

I guess I'm still not getting it entirely because it's costing you more now in interest in exchange for relaxed covenants. I'm just speculating here that the covenants were at some risk of going noncompliant, that this was something that you had to do versus a worse outcome with respect to the GE facility. Am I not?

No, I think the issue would be, Rich, that we would have continued on an accelerated pay down schedule of the GE facility, which would have further constrained the Company's cash. We were and could have been in compliance with the covenants.

We just would have had less cash leaving that subsidiary to the holding company, which without that capital we don't have the ability to continue to invest in the development of the business, whether that's a satellite dish or whether that's regular service or overhead. And so the lenders in essence said that makes no sense to us or to you.

We would rather have you have the flexibility to do what you need to do to build your business, because we are going to get paid back on a regular schedule and we are very comfortable with that. So it was really a balancing of all of those cash demands and the lender saying we don't need it today.

Go ahead. So that's, I think that's probably what you are not seeing or, does that help make it more clear?

Yes. Okay. One last question if that's all right.

On the step down in VPF that were effective, Bud, I think you said in November, I don't remember that being communicated at any point in the discussion of the VPF contracts, and not on the last quarterly call. Is this something that was renegotiated?

Absolutely not. Ever since we started back in 2005, and announced this plan, there were planned step downs, periodic step downs. We've never given, because we are under a very strict confidentiality agreement with the studios, the exact numbers. We've used approximately $1,000 on occasion.

And what we've said is there are periodic step downs. This is the first time that we've actually talked about that step down. We've given you now the entire step down plan within the Phase I. And had it not converged in such a way where we had a seasonally least performing quarter, together with the step down, and it had an impact, we would have talked about it perhaps in a different way.

We have to be extremely careful about how we describe this plan and our agreements with the studios. It's a lot easier to talk about it after the fact, and explain it, than it is to talk about it perspectively. But now we've laid it out without really hurting our confidentiality agreement.

Okay. Thanks.

I'll take our next question from Jeff Van Rhee with Craig Hallum.

A couple of questions, first concerning the 2010 guidance, the double-digit growth in revenues and EBITDA, what's assumed in there, specifically how many new screens does that assume?

It assumes very few new screens. We are building slowly, but surely. We've done 139. We will do a few hundred more. Under this assumption.

You just can't predict when Phase II is going to launch and we are really looking at small incremental revenues that come off the growth generally of digital cinema universe. As I've always said, our business plan is based upon the universe of digital screens. When there are more of them, our business grows.

DMS, our satellite delivery business, grows, as it has this year and the preceding year, based on the screens that are out there. We made money again in that unit this year and we expect growth both on revenue and EBITDA in that unit, as a result of the growth of the universe of the digital screens, from any source and what we are seeing is driven by the 3D events that are coming out regularly now. We are seeing exhibitors finding ways to install more digital screens, so they can play those 3D movies.

When they do that since we deliver to the entire universe of digital screens we grow that business. They also give us more screens to book when we release content in our entertainment unit. So we are seeing traction there, too. And that's giving us the ability to get more content as a fee for service provider, so those are the two major drivers for growth and certainly directly affected by the size of the universe.

Obviously, we expect to be able to do a lot more and when we do we will see further growth and we will report to you as we achieve some of these particular milestones. Unfortunately today we can't give you specifics.

Jeff, as you know, it's very hard for us to provide insights because we don't control the timing of financing. We remain.

But the question is, is 2010 guidance based on some assumption of screens. I'm trying to get in the ballpark and I think it was at the start of the answer, am I in the ballpark in assuming your base line is maybe 300 screens for the year, new screens?

I would say that's probably the right number to use, Jeff.

For the annual principal and interest for the debt service, principal and interest, what's the number for 2010 assuming current interest rates?

Yes, Jeff, we are going to have something in the 10(K) on, in the obligations table on the principal and interest that's expected. You will be able to see that. There's 's a table in the MD&A on that and you will see that by Monday.

You are certainly free to talk about it on this call. You can't just give me a semblance of what that is?

It's about $18 million.

Of interest expense.

Of interest expense on the GE facility and then in essence we continue to amortize about $1.9 million of month of principal, and then there's a free cash flow sweep of anything on the EBITDA level at the Phase I subsidiary, after the payment of our service fees.

So basically all of the EBITDA generated by that subsidiary, other than what is paid, the $3 million a year paid to us in service fees, will be interest or principal or cash sweep to pay down more principal on that facility.

We are definitely delevering from that standpoint on a monthly basis.

I can certainly look to the K there, but I mean you lost me in there, unless I'm missing it. But I know where you are on the map. I just don't have it in front of me here and I want to get your semblance of plain and simple, not assuming payments, just what the principal and interest would be.

We'll have $2 million a month on the GE facility of scheduled principal.

Okay.

Of course nothing on the 55 and really nothing of substance even out of that. We have a couple of small notes out there if you want to assume something less than half a million, that's probably the right number.

The cost savings I was a little unclear, $5 million was thrown out there and then there was also a mention of $3 million. How much of this $5 million in annual cost savings impacted already this quarter. I mean I'm trying to get a sense is from this quarter's Opex run rate, how much should we take out of it on a quarterly basis as we go through fiscal 2010.

During fiscal 2009, of that $5 million in cost cutting, the entire impact throughout the year was about $2 million. In the fourth quarter it would be something in the order of $700,000 of that. And so moving forward, we are really expecting a run rate because there were some termination fees and other expenses associated with them.

We've moved into fiscal 2010 with about a $5 million run rate reduction throughout the year. So we are looking at somewhere in the vicinity of $1.250 million per quarter.

We are seeing about $700,000 of savings and at?

Jeff, when you do your models you can basically think of taking $3 million of expenses from fiscal 2009, beyond that won't appear in fiscal 2010.

Fair enough.

And that's pretty rate-able.

I missed it, did you give the cash from ops this quarter?

Yes, 8.4.

I'm sorry?

8.4. $8.4 million.

All right. Then lastly I guess, then, in terms of the EBITDA, sequentially I'm in line with Rich, I guess, in terms of the VPF because the step down was certainly not something timing wise I was looking for, and understandably you have to balance the lenders needs with ours, but to some degree to communicate that would have been very helpful.

But sequentially, how much of the, besides the VPFs, let me ask two parts. You have $3.7 million drop in EBITDA. How much of that is a sequential drop in VPF versus some other portions of the business that (inaudible) a sequential basis?

The bulk of it was VPF drops in the quarter which were expected largely, but made aggravated by the fact that there were fewer titles.

So there's about 16% drop in the VPFs. So, in terms of virtual print fees about $2.4 million of the overall variance Q to Q from the VPFs. Unique Screen Media represented about another million dollars. And most of that planned by reduction on the revenue side.

Revenue, not EBITDA.

It's revenue. The EBITDA impact. Did I misunderstand, are you asking for revenue and EBITDA?

You hit it on the VPF, and that's what I was looking for. That leaves $1.3 million of incremental decline in EBITDA, but I'm assuming $1 million you gave me for USM was for revenue.

That's revenue and certainly wouldn't come all to the bottom line, wouldn't impact it. Those were contracts that we renegotiated or terminated and certainly affect Q versus Q.

Other than the virtual print fee drop, USM would be the next biggest or I would think there might be something else that would be a larger portion of the sequential.

No, USMs EBITDA for the quarter wasn't lower because we made a bunch of expense and contract cuts. I think the other thing that happened was you just had a short term month over month shift in the timing of movie releases which is why our comment that movie releases in April and May as impacting our business were 30% higher than April and May last year.

Part of that Easter and the long weekend was in April and not in March, you have thing like that, so a shift in a month of a few releases has a pretty big impact in the VPF revenues in a period. So that was the other main component. Those were the two drivers of the difference in EBITDA sequentially year over year.

Aren't those all one and the same? I guess the VPF issues.

We had a lower VPF revenue number against whatever the number of movie releases that we were playing on our systems were. So in the quarter you had a step down of 16% in the VPF revenue itself, that input times the number of movies, the number of movies in the quarter were lower than last year because they shifted into April and May from March.

Right. So that gives you was $2.4 million EBITDA decline on the sequential basis, and I guess what I'm saying is beyond that another $1.3 million, I'm trying to determine what's the incremental 1.3 EBITDA, it didn't have to do with the VPF pricing decline or the lower turnover (inaudible) intra quarter?

Well, Jeff, you're talking about Q3 to Q4 EBITDA drop, not year over year?

I think that may be where we are.

If you compare Q3, Jeff, Q3 is one of the heaviest release schedule periods of the year. So you are comparing Q3 ending December 31, 2008, you have a holiday movie releases to Q1 calendar Q4 fiscal, in which you have the fewest number of releases any way.

Jeff, Q3 to Q4 VPF reduction was greater than the number Bud just said. He was referring to the year.

Year over year.

So it's $3.5 million.

Okay. Well that answers it, then. That's almost all of it. That's all I have.

In the interest of time we will take one or two more questions. We will now move to Scott Preston with The Maven Fund.

Hi, guys, good morning. A couple of questions. First starting with liability side of the balance sheet, a couple of the analysts have talked on the debt side and the refinancing. From my calculation it looks like in the first year, it's going to cost you $5 million more, and on an ongoing basis between $4 million and $5 million, with the up front fee and increased interest, does that sounds about right?

I think it's a little high for the first year and a lot high going forward because you are not factoring in the meaningful reduction in principal every year, even with the highest interest rate. You are paying the highest interest rate and on rapidly declining balance of debt. ,

How much is left on the GE credit facility?

$185 million at the end of the quarter, but we are continuing to pay it down and we expect to fill the additional payments from time to time, based on the seasonality and what we anticipate as a ramping up of VPF turnover rates, and alternative contents fees which are also part of that revenue stream.

About $4.5 million this year and then kind of slowly declining each year. Okay. And then I'm just curious, did you guys trip any covenants, is that what caused the negotiations or was this.

We did not trip any covenants but as I explained earlier, the leverage covenant is an EBITDA covenant, based covenant. And part of the EBITDA calculation are our servicer fees. We want availability of that cash flow to run our business.

And this was one of the things that we did in order to establish and create certainty of being able to collect those VPFs. Because certainly we could reduce those and stay within that, but as the seasonality that we are experiencing and the drop down in VPFs, would make that more difficult from time to time and we just saw an opportunity to do that, and also to relax other covenants that make it very easy for us to do and it's really a cash flow availability issue.

Bud , what would happen or maybe Adam you're a better one to answer this question. Default at the sublevel, if you guys were to trip the covenant, how does that affect the parent?

It's bankruptcy remote and there's no cross guarantees. But let's be clear. That is no, there is no prospect of that any time in the future. If there was, we wouldn't have changed the structure of the covenants and the loan if anyone was worried about it. So let's be very clear, that that is not a risk at the moment.

Okay. Now just on the sub debt piece, what are your options there right now, the principal amount is about twice your market cap, so any conversion would pretty much wipe out us common shareholders, how are you guys working through that, what's the plan there?

As I mentioned in my comments I think we are very, we are very confident and in discussions with various partners and lenders, the cash flow from Phase I that are under these ten-year contracts are more than sufficient to pay off that debt. They are just not accessible in 2011.

I think everyone that we talk with understands that, and so as we look at how we restructure that debt, the basis underlying that is the cash flows and on top of that there is the residual value of the assets we own are more than sufficient. We have a timing challenge and that's what we are working on. What we are not working on is converting that debt to equity. That's not even a consideration.

Okay. On that note what, when you mention working through my calculations, I guess you left Q1, or calendar Q1, your fiscal year end with $38 million in book value left. At your current run rate in five more quarters there is zero book value left for the equity holders. What kind of residual value are you referencing? Is it something other than that or?

Something very much other than that. The Company installed 3,724 systems in Phase I. For a total capital investment of about $285 million.

The systems are producing cash flows under ten-year contracts, and longer as they have both VPF and ACF revenues beyond expiration of various studio agreements. At the end of that period of time, those systems are installed and running all of the movie display operations in a theater.

We own those systems. A theater owner has to either buy them from us, lease them from us or we take them out and sell them to someone else. We are depreciating those systems over ten years. At the end of ten years they are not worth zero. These are high quality large industrial pieces of equipment that are going to last 30 or 40 years.

I mean given that there's no VPF contract on those machines after that period how do we go about valuing those.

Think about it, you own a movie theater, you show movies on this equipment, you have to have an equipment to show movies. You don't own that equipment. We do. So that theater owner has to buy or lease that equipment from us in order to make any revenues.

But before that even happens, there are three more years after GE is paid off of VPFs that continue and that's free cash flow. And those contracts are in place. And we are adding to them as we sign other distributors which continue to pay.

So we are looking at a horizon that goes out to 2020. And, we expect GE to be paid off by the ends of 2013, early 2014. So it's the balance of those cash flows that is we are talking about, that is our equity.

You take that cash flow and you add expected residual value. You can plug in any number you want, present value that and that's equity that far exceeds by itself, forgetting about our satellite operations or any other parts of our business, our software business which is the industry standard, and that is the equity for the shareholders. And what we intend to do is to capitalize on that equity. And that is not being recognized.

That's all depreciated much more rapidly than the useful life of the value, since the book value is not necessarily a reflection of asset value in this case?

The accounting rules say we depreciate those assets tied to the ten-year contract, the ten-year life of the contracts that produce VPF revenues and as Bud said in fact they are longer than that. It has nothing to do with the market value of those assets at that time.

Got you. Okay. Now kind of reverting back to the income statement on the revenue line, it looks like the analysts out there had about $110 million for 2010, fiscal 2010. Given your current run rate now, that looks like it's going to be hard to achieve and if you only put in 300 machines, I'm kind of at a loss to how we get to double-digit revenue growth this year given the VPF step down. Unless I'm wrong on the 300 machines or I heard you wrong.

No, you are right about the 300 as a very, very base line estimate of what have we expect. We already have 139 installed by the end of this quarter. And we will certainly have every reason to expected to do 300 or 400 more. Those generate more revenue, but we are not just talking about systems that we are going to install. We expect, let me make it clear.

We expect to do much more than that and we will report as with financing and time, we will report exactly what that will be so everybody can update their models. Right now the visibility is what it is and the market conditions, we simply can't predict the timing of these installations.

But in addition to those 300 that I told Jeff we thought we could do as a safe base, very base case, there are other systems going in around us, that are not owned by us that are not funded by us in any way or even managed by us. But we still address those theaters when we deliver a movie, we deliver a movie to everyone who books it for that studio. That increases the number of deliveries we do, and there by increases not only the revenues that the EBITDA that come from those deliveries.

And that is already happening. That's inexorable. It is connected to the 3D phenomenon that we're all experiencing now in this industry. In addition to that, we have already booked many more events, significant events, including independent films to be distributed by our entertainment group, that weren't on the docket last year at all.

We are seeing them this year. So growth will come from that part of the business and how we recognize not only sponsorship, servicer fees, distributor fees, but also shares of box office. And even shares of downstream DVD releases that are associated with those movies and concerts.

We will be making very specific announcements of those as we move forward, but we've already given you a pretty good taste of what's already been agreed to for this coming year, and it's significantly more than last year was.

At least on Q1 coming up we're basically through the entire quarter and given the high visibility that you guys have, can you give us kind of a range of where Q1 revenues are likely to be.

I'm really not in a position to do that right now. I will say that Q1 is certainly, our fiscal Q1 is not our best quarter by any means.

It will be down from Q4.

No, I'm not saying that at all.

Q1 is a period in time in which there are more movie releases than Q4. Q4 is the seasonally slowest quarter of the year for the Company, driven by the movie release schedule in January, February and March.

So we should see this quarter up nicely then from Q4?

Sequentially you will see, I would look at this quarter compared to last years and look at the sequential increase between Q4 and Q1, and we've told you that we've seen meaningfully more movie releases this year versus last year, just from a timing of when they occur to give you a sense that we are pretty confident in Q1 performing well.

I want to also say that the events and movies that we are releasing in the entertainment group are in the second and third quarters, just to be clear.

Okay. And then Bud, can you talk about on Phase II on the additional machines going in, how much as far as the financing, how much are you guys putting up as far as equity in the machine? Is it 20% down? What are the requirement lenders are looking at now?

As I mentioned in my comments, this is Adam, we are putting up no equity in Phase II. The capital that is required, and there is obviously capital required from senior lenders as provided by exhibitor contributions and vendor financing, and that is the big difference between Phase I and ll, and while we continue to make the statement Phase II will require no equity contribution on these systems by the Company.

Okay. And then finally just so my numbers are correct, you finished the quarter $26 million in cash. You have $25 million in amortizing debt coming due. And then interest expense this year would be about $30 million, is that right, if I include the sub notes and the new rate on the GE facility?

It's no where near that. It's no where near that.

Where is it?

Let's break it down. The interest expense on the credit facility with GE is about $18 million.

With the new rate?

With the new rate.

And what was it in fiscal year 2009, do you have that handy?

It was about $7 million.

We will dig that up while you're talking. It was probably a little bit higher but we amortized debt in fiscal 2009, so it offsets each other.

I guess you have about $5 million on the sub note. Is that right?

$5.5 million on the sub note.

On the senior note.

On the senior note.

Sorry, senior note.

And maybe another half a million or $1 million in random.

Less than $1 million of smaller notes.

Okay. Got you. Alright. Thanks, guys, good luck.

Thank you.

Our next question comes from Paul [Sung] with Paulson Partners.

Thank you for taking the question. I know we have pretty little time so I'll be quick.

That's all right, Paul. We I understand two other people queued up and we will take both of them.

Let me just make a comment, first. I think that the fact that you got access to capital in this environment from GE, who is arguably has issues of its own, I think is a tremendous complement both to your relationship and to the strength of your business, and probably more to the strength of your business. Anyone who thinks that this was a sign of weakness or you had to do it, I think is not addressing the facts certainly as I know them.

So I just wanted to make that comment because I think there have been some of the comments that have been made seem to be off the reservation in terms of really understanding what's going on. That's the comment.

A couple of questions, the DCIP financing, I wonder if you have any comment? Do you guys know how that's going just as a proxy for what will happen for you guys?

We are standing on the side lines cheering for them, I will tell you that because we want to see them succeed. And get more screens out there, so we can do some more business generally and it's also a catalyst.

Do you know when it's been completed it or how it's being received?

We do not. We can't comment on how it's being received, but to our knowledge and I'm sure they would have announced a completion of a financing of any kinds. To our knowledge they have not completed it at this time?

A question. How much free cash do you have outside of the GE facility, cash that's available for you to do with what you want?

Enough to deal with our needs for the coming year. We have access to most of that cash or a major portion of that cash, and what we've done is to plan it so that it's there and adequate for the needs of the Company, in its present statement and with a reasonable amount of growth for the coming year.

So there is not going to be, for the next 12 months then, there is sufficient cash on hand and with cash flow to meet the requirements for the senior note, the $5.5 million, without having to do any more financing.

That is correct.

Great. That's all I have. Thank you very much and I think you are doing great.

Thank you.

We will take our last question in cue and final question for today's presentation from a private investor, Mr. Alan [Portelli].

Good morning, I have a couple of questions. One, I didn't understand the revenue drop, even though it's on plan, I heard you say contracted reduction in something, what was the contracted reduction? Are we lowering prices? And if we are lowering prices, why are we lowering prices? Is it competition or what? What's going on? I didn't understand that at all.

Okay. The Company in rolling out digital systems entered into long-term contracts with all the major studios. And for that matter, anyone who plays a movie on any of the screens that we install. Think of it as kind of a toll collection.

We collect the toll for any owner of a movie or any other content that plays on screens. That's the deal. And it's a long-term contract that goes out ten years following the installation of every screen. Okay?

Okay.

In that contract there are contracted periodic reductions of the virtual print fee, that toll that we collect. This was the first significant one. There is another one back in 2012 that is smaller.

This was a 16% reduction. The next one is 7%. And then it just flattens out. So basically, the revenue stream that comes from these systems is arithmetic. It's how many movies of any kind play on each of these screens during the course of the year, times the contracted virtual print fee.

And that generates revenue per screen and you multiply that by the number of screens, and that's the revenue that we get in a particular quarter or can forecast for the coming year. This was on plan as far as the virtual print fees in total for the year.

And the reason that there was a drop in virtual print fees was the combination of that contracted drop in price if you will, the toll went down, but also because this is a particularly weak quarter in terms of the number of titles that were out and the number of prints that were distributed on those titles, and when you combine those we had enough of a drop to want to explain it.

Okay.

Does that help?

It definitely helps, but now that brings out another question. Most of the contracts in my life that I've negotiated, you negotiate a long-term contract, you have provisions to increase the price because of inflation or what have you. What was the logic of Cinedigm in having contracts where the price goes down over time?

This is very much of a discounted cash flow model. Therefore we wanted the higher virtual print fees to be on the front ends. They are worth more to us.

Particularly when the greatest amount of work in doing the installations and managing that whole process. If you look at the analogy of building a bridge, that's where all the work goes in. You build the bridge.

Once you've completed the bridge, collecting the tolls is a relatively simple matter, and that's how we determine that in negotiations now with all of the major studios. So, obviously we are not just setting the price. We are negotiating this entire contract which is a ground breaking first every contract of its kind.

Okay. So you're trying to recover your investment faster?

That's correct, and the early money is worth more. The consistency and our ability to take all of those anticipated revenues, which we expect will actually go up in terms of the number of turns, because not all movies are released in digital. Not 100% of the movies.

About 10% or 12% are still strictly film, and when those movies and eventually when there are enough digital screens out there in the next two or three years, all movies will be released only in digital, and that will increase the number of turns, we think, on every screen that we have.

And that again going back to that basic arithmetic, the number of movies that play times the virtual print fee, so part of the negotiation of these contracts was the anticipation, and we've seen some of that, of increased number of movies that play on each screen. So they are intended to neutralize each other in any given year.

Okay. Another question, I'm sorry , what is Phase II, is that a term for a new financing or is it a, what is Phase II really mean when you guys keep talking about Phase II?

The first 3,724 screens we installed we refer to as Phase I. The second is a 10,000 screen plan that needs to be financed. We've done 139 out of 10,000 so far. The reason we haven't done a lot more is because financing markets have been shut down.

What Adam has been talking about earlier is that those markets are opening up, and we are beginning to see day light and therefore, should be able to during the course of this year, we can't be specific about timing, continue that Phase II. And that means more installation.

It's a term for additional financing you will need to continue growing the number of screens out there that have your system on it.

Essentially.

Okay. Well, a comment that resonated with me from Adam was he wanted to reignite the growth model, that's important to me because when I hear you guys cutting expenses, cutting expenses, that certainly is not a growth company that's cutting expenses, but I guess you had to do it in the environment that you are living in right now.

I can assure you we did not cut into the bone. We have a senior team in place, everything we need in place ready to grow and ready to take advantage of improved credit markets.

Okay. Best of luck.

Thank you for your questions. We will wrap it up right now. I believe there are no other questions and we hopefully have held your attention for a significant amount of time, longer than usual.

Thank you very much for your participation. Have a great day. We hope to have some great news for you in the very near future.