Carriage Services Inc (CSV) 2006 Q2 法說會逐字稿

Welcome to the Carriage Services second-quarter earnings conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Monday, August 7th of 2006.

At this time, I would like to turn the presentation over to Ken Dennard with DRG&E. Please go ahead, sir.

Thank you, Andrew, and good morning, everyone. We appreciate you joining us today for Carriage Services' conference call to review 2006 second-quarter results. Before I turned the call over to management, I have a few items to run through.

If you'd like to be on the e-mail distribution or fax list for future Carriage Services' news releases or if you had a technical problem and didn't receive a copy of the news release this morning, please call our offices at DRG&E and we will be glad to help you. That number is 713-529-6600.

Also if you'd like to listen to a replay of today's call, it will be available via webcast by going to Carriage's website at www.carriageservices.com. Additionally, in a few hours, there will be a telephonic instant replay made available for the next seven days. The replay number and access code are in the earnings release this morning. Please note that information reported on this call speaks only as of today, August 7th, 2006, and therefore you are advised that time-sensitive information may no longer be accurate at the time of any replay listening.

Also, as you know, certain statements made today in the conference call or elsewhere by or on behalf of the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E in the Securities Act of 1934, as amended.

The statements are based on assumptions that the Company believes are reasonable. However, many factors that are discussed in the forward-looking statements and cautionary statements in the Company's annual report on Form 10-K for the year ended December 31st, 2005 and in subsequent SEC filings could cause the Company's results in the future to differ materially from the forward-looking statements made today, or other documents or oral presentations made by or on behalf of the Company. A copy of the Company's Form 10-K, Form 10-Qs and other information and news releases are available on Carriage's website.

Now with me today are Mel Payne, Carriage Services Chairman and Chief Executive Officer; and Joe Saporito, Carriage's Chief Financial Officer. Now I'd like to turn the call over to Mel.

Thank you, Ken. I appreciate everybody turning in for our second-quarter performance. I mentioned in my comments in the press release to start it off that there were several positive outcomes during the quarter and there were certain areas that we needed to improve. Let me first address those areas that we need to improve.

We had two weak areas in the quarter and for the first half. The largest area of weakness is in our Central Region, where we had about 14 or 15 funeral homes that are having a real struggle here in the second quarter and the first half. We thought in the first quarter the volume declines in this group were primarily related to death rates; we still think a large degree of the volume decline in the first quarter was death rates.

However, the volume declines continued in the second quarter, so we took a fresh look and believe that these operations have suffered marketshare declines. They could bounce back; we are assuming they will not. These are smaller, weaker franchises compared to the rest of our portfolio, tend to be more rural operations. A lot of this has occurred suddenly, but it's been evolving because of weak regional leadership in this area over the last couple or three years, as well as certain operations with weak local leadership.

This group has not responded to our standards operating model which we implemented in '04. In other words, the operations have not taken the actions to achieve cost and margin standards as volumes have declined. We do have a plan, and the plan is moving rapidly. The regional partner is new. He moved to the Central from the West Coast, where he did a turnaround of our West Coast operations over the last couple of years, and is now going to put these skills to work in the Central Region.

We have two DOSs. One of those is now new; the other one recently resigned. The new one is known to us; he will be very effective. And the new regional leadership has designed and is currently executing enhanced revenue and cost reduction plans that will be finished by 9-30-06. So we will get to see how these operations are faring in the fourth quarter leading into '07.

We do not intend to have these operations hold back our performance in 2007. Part of the solution here on an intermediate and longer-term basis is recruiting stronger leadership for certain of our locations; that is underway. We will also review operations in this group for their strategic value. In other words, we will make a decision to keep certain of these operations or to sell them as we go along.

The second area of weakness was our Rolling Hills Cemetery in California. It is our largest cemetery. It hurt us in the first quarter; it hurt us again in the second quarter. The issues were broader and deeper than we first believed them to be. We have a new regional partner in the West, whose strength is cemetery and sales operations.

His view was we needed to break it down and build it back stronger, get the foundation set up so that we could take this very important operation to Carriage to a higher level than it has ever achieved before. That is underway. It will take us until year end, we believe, to get this operation set for a good 2007.

I support our regional partner's view in the West that rather than Band-Aid this operation and juice the sales for the short-term, we really need to break it down, restructure it and build it back the right way.

Those are the two areas of weakness. We also had some areas of strength which I'd like to comment on. The rest of the Company, general operations, did extremely well in the second quarter, especially our West and our East Coast operations. They were clicking on all cylinders, our call volumes as well as averages and margins.

We also had some outperformance in one of our other large cemeteries in California that almost made up for the underperformance in our Rolling Hills Cemetery.

Our cash generation from operations was very strong, one of our strongest quarters ever, supplemented by the sale cash proceeds of our two Indiana operations in July, which has allowed us to increase our cash from just over $24 million at the end of March to over $36 million at the end of July, an increase of over 50% in a short four months.

When we rolled out our standards operating model in 2004 in our funeral operations and did the same thing in our cemetery operations in '05 and more in '06, it caused us to look at the organizational structure. And over the last 12 months in particular, we've made some major changes, which continued at midyear.

We now have realigned our portfolio into three geographic regions from four regions. We collapsed what we call our combo cemetery region into the other three geographic regions, and now we only have three geographic regions. Our operations and sales functions operate out of each region and not a separate division or a separate cemetery combo region.

This is new to us, and our organizational structure is still evolving, with some of the responsibilities and duties of the various regional leaders changing to better execute the standards operating model.

We've also changed in our home office the organizational structure, and I think we will continue to tweak the organizational structure between now and year end, as we set up the standards operating model for better execution. We're very encouraged by these changes, our people seem to think they make a lot of sense, and we do think they will lead to higher performance in 2007.

One final comment, on acquisitions. We have spent considerable time over the last few months looking at the acquisitions market. We've turned down several transactions that in the '90s we would have made without blinking an eye. We've not turned them down because of price. We've turned them down because they do not fit our standards and strategic model, which is to buy quality businesses that we can grow.

The cycle is turning. There is not a question about whether or not the acquisitions will be there. Succession needs are not going away, whether the business is a small business or a large business. Our patience and discipline will pay off. We believe it will pay off starting in 2007 when we expect to make some initial acquisitions of consequence.

With that, I'd like to turn it over to Joe.

Thank you, Mel, and good morning, everyone. I'm going to discuss our consolidated operating results and then give you a little bit more color on our funeral and cemetery operations. I think Mel's already told you the big picture in terms of operations, but I'll get into some of the specifics.

We reported revenues from continuing operations of $37.8 million, and EBITDA of $7.9 million for the second quarter of 2006, a 1% increase in revenue and flat EBITDA when compared to the second quarter of 2005. Earnings per share from continuing operations of $0.04 per diluted share was also flat.

Free cash flow totaled $7.2 million for the six months ended June 30, 2006, compared to $5.3 million in adjusted free cash flow for the first six months of 2005, a 36% increase. Cash and short-term investments totaled $31.2 million at June 30 compared to $24.9 million at December 31, 2005.

We also completed the previously announced sale of two businesses in Indiana in July of 2006, realizing net cash proceeds of $7 million. As Mel said, our cash balances exceeded $35 million at July 31, 2006. And this was after we made our semi-annual interest payment on our senior notes of $5.1 million in early July.

As a result of our positive outlook for generating free cash flow from operations over the balance of 2006, we raised our estimate of cash and short-term investments to $42 million at year-end 2006.

Year-to-date, we reported revenues of $79.6 million, EBITDA of $18.7 million, which was a 1.5% increase in revenue and a 4% decrease in adjusted EBITDA. Earnings per share from continuing operations excluding special charges decreased from $0.17 last year to $0.16 this year.

Turning to our funeral operations, funeral revenues from continuing operations increased 2.5% from $28 million to $28.7 million. Same-store funeral contracts decreased 1.3% from $5439 to $5370.

Same-store average revenue per contract increased 2.9% from $5029 to $5174. The average revenue for burial contracts increased 3.7% to $7038. We are particularly pleased that the average revenue for cremation contracts increased 10.1% to $2684, partially as a result of an increase in our rate of cremations with services. The cremation rate increased 170 basis points to 34.2%.

We experienced a strong performance in our Western region, where the number of contracts increased 4.1% and the average revenue per contract increased 6.1%, and in our Eastern Region, where the number of contracts increased 4.1% and the average revenue per contract increased 4.8%.

However, our Central Region funeral homes suffered a decline of 14.4% in the number of contracts and only a slight increase of 0.3% in contract averages. Additionally, costs and expenses were not reduced in line with the declining revenues, resulting in a year-over-year decline of $1.1 million in pretax earnings, and this was equal to $0.04 per diluted share for the quarter and a decline of $1.7 million in pretax earnings, equal to $0.06 per diluted share for the first six months.

As Mel said, we expect the action we have initiated in the third quarter to increase revenue and realign the cost structure, and that will result in improved profitability in the fourth quarter of the year and lead to a higher level of financial performance for all of 2007.

Turning now to our cemetery operations. Cemetery revenues from continuing operations decreased 2.4% from $9.4 million to $9.2 million, and the number of interments was flat compared to the second quarter of 2005.

Our operating results in the second quarter were also impacted by a decline in the deliveries of preneed merchandise and services and higher bad debt expense. And most of that bad debt expense was attributable to our Rolling Hills operation. As a result, cemetery gross margins decreased 410 basis points from 15.9% to 11.8%.

We have been aggressively addressing the specific issues of our Rolling Hills business during the second quarter, and Mel talked about that in his previous comment. But that has not yet shown up on our financial results. Pretax earnings for the Cemetery are down $1 million, or $0.03 per diluted share, for the six months ended June 30, 2006 compared to the same period last year.

I just wanted to make a brief comment on our outlook. We do reaffirm our previous outlook for 2006 for annual revenues, earnings and free cash flow. And as I previously discussed, we raised our estimate of cash and short-term investments at year-end to $42 million. Mel?

Thank you, Joe. I'd like to conclude my comments by simply saying that we are viewing the underperformance in these two areas which account $0.09 a share through six months as a glass half full. If we didn't have these issues, our earnings would have been way up over last year. These are both fixable. The Central weakness will be fixed; the Rolling Hills weakness will be fixed.

I think we are setting the Company up for a good performance in '07. And I look forward to your continued interest and following our progress. With that, I would like to open it up for questions.

(OPERATOR INSTRUCTIONS) James Clement with Sidoti & Company.

Good morning, gentlemen. Just a question about the increase in revenue per cremation. I think you were sort of right around the 4% range in the fourth quarter of last year. And I believe you've had two consecutive double-digit increases there. Can you give us a sense of a little bit more color on what's happened here, is this sustainable?

I'll give you two reasons, Jamie, and I've been shaking my head, hoping it won't change. But we did something -- I mean, we've been doing what everybody else has been doing. We've been training a lot on cremation, and we have cremation packages that we've been training a lot. We've done a lot of cremation package training at our operations that have the highest number of cremations and the highest number of direct cremations. But that has been isolated to maybe five or six locations, and I haven't gone back to see how much of the increase is in those locations.

Obviously, I think the bigger reason is the fact that we changed our standard related to average revenue per contract, which used to be a blended standard. The standard calls for a 3% increase in average revenue per contract annually, going back to a date, I think, in '03, if you scheduled it out.

What we did beginning this year, we tweaked that standard to separate it into two substandards. One related to burial contracts, which will be looked at on a stand-alone basis; and the other related to cremation contracts, which will be looked at on a stand-alone basis.

So I think breaking out cremations highlighted it for everybody; they focused on it more. They focused on raising their prices, on having compliance with that particular standard, and I think that has made a difference.

Now a follow-up question. I think that some of your product suppliers have also seen the trend in cremation. Is some of the merchandise that is geared towards cremation, is it just better now than it was maybe five or ten years ago? Are there more options for consumers?

I think the merchandise is better, and the suppliers have definitely latched onto the trend and are producing products that can really be useful and helpful to the client families.

But I don't see that as the primary reason for the average increase. I think it's a mindset of our own people. If they view the cremation family as having the same service needs and also some product needs, they will present all the options in a professional way and let the family make choices.

That is the real obstacle, but it's also the real opportunity, and that is where we have been focused.

Okay, one last follow-up and then I will get back in the queue. I don't -- to my knowledge, you guys do not disclose profitability related to cremation, whether it's EBITDA or whatever the metric is. Can we assume that the profitability of cremation is generally rising commensurate with the increase in average revenue?

Yes, I think that is right.

Okay.

A lot of that goes to the bottom line because the gross margin in a cremation, even with the service and product, is materially higher than a traditional funeral.

Great. Thanks very much for your time.

Bill Burns with Johnson Rice.

Good morning, Mel and Joe. Joe, a clarification. Joe, on your guidance for earnings, it's $0.26 to $0.31 for the year.

Right.

Now is that off continuing operations, which I believe year-to-date is $0.12? Am I comparing apples to apples?

It's from continuing operations, but excluding special charges, and that number is $0.16 year-to-date.

Okay, that is what I wanted to double check. That is what I thought. Thank you, guys.

Mike Scarangella with Merrill Lynch.

Good morning, guys. Mel, I just wanted to circle back on the timing of some of the fixes here. So if I heard you right, on the Central Region funeral operations, I thought you said you were reviewing strategic plans. And you said something about September 30. Is that when you'll review what the fix is or that is when it will be fixed --?

No, that is when we will review the results. That is when the fixes will be in place.

Okay, they will be in place. When do you think we will start seeing (multiple speakers)?

We should see results in the fourth quarter.

Okay, all right. And same with Rolling Hills? I think you said a year-end --?

That is not a September 30 fix; that is going to be year-end. And I'm not giving -- I'm hoping it will be the year-end. I've told our regional partner in the West, fix it, rebuild it. If it takes time to do it right, take the time.

This is an awesome operation with awesome opportunities. We've been waiting for this thing to be taken to the next level. Even though it has been performing over the last three or four years at a high level, it never could take it to the next -- it never was going to the next level strategically in the Asian market.

And that is what we need here. This can be a wonderful operation, but it needs to be fixed the right way. So I hope the 2007 performance will be back to the old level, and we think the 2007 performance will be a lot higher than '06.

Okay. And for the remainder of '06, though, it sounds like -- so third quarter probably likely to be a little choppy, maybe like this quarter. And then you're expecting a little bit of a ramp in fourth quarter and then you still think you'll hit your guidance for the year?

Yes.

Okay. I wanted to just ask about the Central Region. You mentioned that volumes were down 14% this quarter. And there was some issue, I guess, that started to emerge in the first quarter. Can you give us a sense for where volumes were in first quarter? I'm just trying to figure out if it got a lot worse or if it has been the same the first half of the year?

I don't have the first-quarter volume numbers for this particular group. And what we did was isolate the real ones winds from the ones that didn't have a problem. So it's not the whole region that has a problem; it's a subgroup of maybe 14 smaller operations. And that subgroup was way off, and they were way off in the first quarter. But we've gone back and looked at this and they were also weak in the last half of last year.

So this is not exactly new, although we did have low death rates in the Midwest in the first quarter, like all the other companies reported as well. It was 6%? They were down 6% in the first quarter.

Okay.

So it was worse in the second quarter.

So it did accelerate quite a bit in the second quarter.

Absolutely.

And on the bad debt situation, can you give us any anecdotal evidence there that trendwise is that getting better or worse, and is it still concentrated at the Rolling Hills Cemetery?

Yes, it was concentrated at Rolling Hills. It's a reflection of the leadership at that location not having the controls. And it's under control.

Okay. And just last one is on the preneed. I noticed that the volume is down quite a bit, 16%. But you did really well on pricing, up 14.6%. Just what is going on behind the scenes there?

On the preneed, the pricing is -- I don't know the answer to why our pricing was so good. I can address -- and I'm glad it was so good. But really, this is a sales business. What we need are property sales. We're disappointed in the property sales. We're disappointed in the sales effort. We need more sales. And the reorganization at midyear was in response to the weak property sales.

There is a much greater focus now on property sales under this new alignment. And so under the standards model on our cemetery side, it's like on the funeral home side -- it's all about the volumes. In the cemetery side, it's about property sales.

So that is where we're going to be focused. We're focused on the leadership on the sales side, at the location and the support of that leadership in the regional organization. So I would say we were disappointed in the second quarter beyond the price increases and we expect that to get better.

Is that a broad-based issue, Mel, or is that a California issue?

No, it's a broader-based. We need more property sales in five to eight of our key properties. So it was not just California. California was so big, you see it; it is material. But we can do a lot better in some of our cemetery operations.

Sure. Okay, guys, thank you.

Tom Bacon with Lehman Brothers.

Good morning. I was curious -- it seems like a lot of your competitors in the industry are having a little bit of a tough time on the preneed cemetery sales as well. I'm just wondering if you think there is any kind of shift on the part of consumers in terms of their attitude towards buying preneed or whether you think it is just generally not very good sales efforts across the industry.

That is a good question, Tom. I don't know if the consumer has suddenly shifted. I do know that cremations are having an impact on our cemetery operations, with interments being down. How that might affect preneed sales, I haven't heard. We don't -- I can't say we have a really good feel for whether consumer has changed or not.

My own view is that's an excuse, that if you have strong leadership and good sales programs, good recruiting, good training, that you can sell property if it's competitive in the market. So we haven't accepted that as an excuse in our Company.

Okay. And then also, just in your Central Region, I mean is it possible to give us an idea what volumes and what average revenue per service would have been if you backed out hose 12 or 14 properties?

We don't have that -- we don't have that. I think it would look more like the rest of the Company -- I know those operations. And I wouldn't know what to have that mean anything either, because we haven't had the regional leadership year that we've needed. It's turned over a couple or three times over the last four years. We finally got somebody in there who can execute. So I think you'll see some changes.

On the other hand, I think we got a portfolio of smaller businesses compared to the rest of our Company portfolio whose strategic value we're going to continue to assess. It's kind of like Indiana -- these didn't fit strategically, so we exited that market and would look to redeploy that capital into some stronger businesses in some stronger markets.

Okay. In terms of -- I know you said you've turned a few acquisitions in the quarter and that they didn't set your strategic plans as far as the standards or the growth or what have you. I was wondering maybe if you could just -- you don't have to tell us what the property was or anything like that -- but maybe just how you assessed it and what you saw that made you walk away from that, just to give us a better idea of how you look at these things.

I would say that in general some of the businesses we've looked at are either isolated geographically compared to where we already are. We don't want to go into new markets unless it's a platform acquisition of a prominent business of some size. So these wouldn't have given us that kind of business.

Or if it was in an area where we already have operations, and we are looking at more of those, it had characteristics that would, in our view, lead to marketshare risk. In other words, weak leadership, too much dependence on the existing family member who doesn't want to run it day-to-day, without somebody in place already that could be a leader.

Most of the businesses we've looked at have family issues. And I've said this time around we are not in the business of fixing family issues that the family can't fix themselves. That would characterize a couple of them.

Okay. And maybe just as far as the philosophy on acquisitions. Obviously, I would think that there is expectations that there could be some fairly large possibilities coming out of the SCI-Alderwoods deal. I wonder are you guys trying to keep some powder dry, just because of those opportunities, I would think, would tend to be larger than some of your market-to-market stuff? I mean, is that -- are you still (multiple speakers)?

That is a good question, Tom. When that was first announced, I think clearly we had the mindset, having bought three other times from SCI when they had consent decrees to divest properties, that we would certainly want to be in the bidding for whatever they had to sell.

Since that time -- I can't remember when that was -- maybe that was April 1st, we have been really busy out in the market, and I'm very bullish. If we didn't do anything with SCI, I think we'd have plenty of opportunity to spend the dry powder that you see building rapidly. I think we'd have plenty of opportunity -- it's beginning to show itself. And I have no question that it won't continue to show itself in increasing numbers. And the quality is strong.

So we are not holding back betting on SCI; we don't need that deal to execute our strategic vision. And whatever that turns out to be will have to be right for us or we won't do it.

Okay, that does it for me. Thanks, Mel.

(OPERATOR INSTRUCTIONS) [Sanjay Ramakrishna] with ING Clarion Capital.

Hi, guys, are you doing? Looking at -- I have a few questions. Looking at California, so would you say that things haven't got worse compared to the last quarter? And I know at length we spent some time last quarter saying where your operations were and where you could bring them.

Would you say that we've already hit a trough now and that as we go into the fourth quarter that we should begin to see recovery? Or do you still think that there is a lot more to go?

I think we have hit a trough. I don't know about the third quarter; it depends on our funeral volumes. But it's been real interesting -- I think that is an interesting way to look at it. Every since we went to the standards model in '04, the Company has been evolving. And I know you must get tired of me talking about this operating model.

But when you switch to a new operating model that really puts a light on growth, volume growth, not just revenue growth by price increases, and you put a light on people and leadership. We're now 2.5 years under that and I tell our people here, it must seem frustrating that we have some places up, some places down.

But with this latest change in the organization and some leadership changes that we've made, continued to tweak some areas, I do think the Company is finally getting organized the right way to execute the standards model. And it has taken us 2.5, it will take us three years of an evolving organizational structure to get the right people in place who can grow a business, not just manage it.

The other part of that is to get the portfolio realigned -- and we're having this weakness with volumes. When we grown now, we're not going to be buying businesses that are going to be giving us volume problems like that in the future.

So we want to get in a kind of spot where we are growing the existing portfolio volumes, both cemetery and funeral. I think we are close, but we're not there yet.

So, would you say it was anticipated that it would be taking this length of time for things to get set straight there? Were you surprised with how operations went in California during the quarter or is it unfolding as you would like it to -- as planned? I mean of course you wanted to get restructured as soon as possible, but would you say you are on schedule?

I'm not surprised. Rolling Hills is a big operation. It took a few years for it to get in the position that it got in. The guy in charge of our region is a real pro, and his assessment was deep, broad, very detailed, very specific. And when he came up for air, he said, Mel, it's going to take me longer, but I going to build it back the right way. And I said, you know, what you doing makes all the sense in the world. I will not say that that was a surprise. Maybe timing wise, a quarter or two, but not the basic findings.

Talking about the acquisition environment and your bullishness. Now, is that, you think, a reflection of valuations? For so long, we were hearing you and some of the other publics talk about how prices were still unreasonable and that you had a lot families and small operators asking for more than what the properties were really worth.

Could you finally say that people have come back down to earth in terms of what they are looking for, which makes it more attractive for you? How would you describe that?

I would say that the pricing expectations are not materially different than what you heard before. The difference is that we are looking at the businesses much more different than before. For a business that you can't grow but you can manage really well, the price is going to be different than a business that is going already and you can grow it -- and when I say growth, I don't mean financial performance -- I'm talking volumes.

So we don't see the price expectations changing that much from what you previously have heard. Some of the expectations are higher than what you would think, some are not. It depends on whether they have real motivations for a sale.

So it sounds to me that you have more confidence in your operating model, that if applied to a business with what you think has potential, you could in a way work backward and justify the valuation?

Absolutely. I couldn't say it better than you. Every deal we are looking at now, we apply two different sets of criteria to it. One is the standards operating model on the funeral side, and we've mostly been looking at stand-alone funerals and a combination or two here and there.

We're applying the standards, and you can pretty much see how those standards would work if we owned that company. And we're also looking at some other strategic criteria that we never looked at before. So we are very confident, very confident that our discipline and our selection criteria will work and that we can deploy the capital.

Do you have a pipeline lined up now? I mean, do you see yourselves as we're now at halfway through the year, where you could see yourselves doing a few acquisitions, either imminently or through year-end? Or is this still going to be a multi-quarter process?

I would rather not get into the whole pipeline -- that leads to LOIs and the whole treadmill thing that we got on in the '90s that I never want to get on again. I will simply say that I'm very encouraged by what we see, we do expect to make some acquisitions in 2007 and we think they will be meaningful to the Company.

And then one final question. Looking at Central operations and talking about strategic value, whether you think you should keep them or not. Would you consider selling your Central operations and just basically being a regional operator on both coasts, since you guys have been successful and have proven your success on the East and West coasts?

When you say Central, I mean we have -- we're in 28 states and a lot of different markets. And we have some very good operations in our Central Region, so I wouldn't want to diminish their performance and contribution to the Company.

It is really local. We would consider selling in certain markets that we deem not strategic and where we have businesses where you just spend more time than it warrants compared to really working on something else where you can grow it.

So it would what be a matter of just cherry picking operations --?

Yes, that is the best way to do it.

Great. Well, thanks a lot.

Thank you. Management, at this time we have no additional questions and I will turn the presentation back to you for any further remarks.

I think that's it. We appreciate the questions. We feel we're in a good spot here. The frustrations that some of the questions seem to imply are being addressed operationally. Stay tuned for acquisitions, because we think there will be some. And we look forward to reporting our progress.

Thank you, management. Ladies and gentlemen, at this time, we will conclude today's teleconference presentation. We thank you for your participation on the program.

If you would like to listen to a replay of today's conference, please dial 303-590-3000, with access code of 11066673. Once again. if you would like to listen to a replay of today's presentation, please dial 303-590-3000, with an access code of 11066673.

We thank you for your participation on the program. At this time, we will disconnect. You may now disconnect and please have a pleasant day.