Covenant Logistics Group Inc (CVLG) 2007 Q4 法說會逐字稿

Please be aware that each of your lines is in a listen-only mode. At the conclusion of the presentation, we will open the floor for questions. At that time instructions will be given if you would like to ask a question. I would now like to turn the conference over to Mr. Joey Hogan. Mr. Hogan, you may begin.

Thank you and good morning and on behalf of Covenant Transportation Group, we would like to welcome everyone to our fourth-quarter conference call. Joining me here on the call are David Parker, our CEO and Chairman of the Board as well as various other members of our senior management.

This conference call will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended in Section 21E of the Securities Act of 1934 as amended. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. We ask everyone to please review our disclosures in our filings with the SEC.

As a reminder to everyone, a copy of our prepared comments and additional financial information is available on our Website. Due to the length of discussion in our prerelease in December and our final release, our prepared comments will be brief and then we'll open up the call for questions.

In summary, I will restate that we were pleased to be able to report a slight profit in the quarter exceeding our expectation and as in our first quarter and quite some time of improving over the previous year period. Although the profit was small, the improvement reflected primarily company specific initiatives despite a very difficult freight market.

From a cost standpoint, our pretax costs increased $0.028 a mile over the fourth quarter of 2006. The main item driving the increase is the continued growth of our non-asset based solutions subsidiary. The expenses from that operation added $0.064 per mile to our cost structure while our asset based subsidiaries decreased its pretax cost by $0.036 per mile.

The efforts that we began earlier in the year to reduce costs while improving efficiencies of the truck is really beginning to materialize. We were able to reduce our asset based cost even with our net fuel costs up $0.048 a mile. The increases in the price of diesel fuel combined with an increase in our deadhead or nonrevenue miles as well as slightly less fuel surcharge recovery resulted in a negative $0.23 per share fuel impact. We were able to achieve cost reductions in several areas that more than offset the fuel increase, namely reductions in salaries and wages, insurance and capital costs. And again, we define capital cost as revenue, equipment, leases, plus depreciation and interest.

The reduction in salaries and wages resulted in part from a more effective per diem program for our drivers. A portion of the per diem payments is non deductible, which will raise our effective tax rate and offset a portion of the improvement in salaries and wages. We will continue to pursue a cost-efficient operation.

From a balance sheet perspective, we have approximately $65 million to $70 million of borrowing capacity to execute our operating plans. We were able to reduce our total indebtedness including off-balance sheet obligations by $13 million for the quarter and $49 million for the year. We have achieved our financial covenants which include maintaining tangible net worth of at least $8.20 a share. For 2008 based on our current equipment plan, we're anticipating capital expenditures net of proceeds of trades and dispositions to be approximately $50 million.

David will now give you an update on the business and our outlook for 2008.

Thanks, Joey. The fourth quarter was the beginning of an important process of returning the group back to profitability. Although one-quarter of course does not make a trend, we do believe that the efforts over the past year are truly beginning to provide some positive results.

Key highlights of the quarter that bring us optimism are one, improving our revenue per truck by 5.6% sequentially over the third quarter of '07 and 3.2% over the fourth quarter of '06. Our SRT subsidiary was able to achieve closer to its historical operating performance of approximately a 90 OR during the quarter.

Our solutions subsidiary continued to bring reduce both additional revenue and profits for the group. Our cost control efforts for all companies particularly our Covenant Transport subsidiary, resulted in the group lowering our asset-based pretax cost by $0.034 per mile. Of course there's continued challenges ahead for us. As I look at fuel expenses that we had, net of fuel surcharge collection, it continues to run approximately $0.05 per mile higher than the same quarter a year ago. Although it did not worsen from the third quarter.

And our Star Transportation subsidiary experienced declining freight rates and miles as the Southeast remained our weakest area for freight. Last quarter we highlighted four goals that we remain extremely focused on for 2008. We want to reverse the declining trend in revenue per truck. We were able to accomplish that for the fourth quarter and will remain our primary objective throughout 2008. The freight market is and will continue to be difficult and we feel that the majority of this improvement will come through increased utilization and lower deadhead miles.

We also went to continue to grow our solutions subsidiary profitably. We established internal $100 million annual revenue run rate goal by the fourth quarter of 2008 while producing our goals to reduce the mid to low 90s operating ratio. And we are confident that we are still on our way toward that goal.

We also went to reduce our variable costs. We sat a target of our variable costs being under $0.95 per mile and were able to hit that target. Variable costs are comprised of driver compensation and benefits, fuel net of surcharges, operations and maintenance expense, and insurance claims expense.

We also want to lower our fixed costs. Anything left in the income statement other than the variable costs make up our fix cost bucket. We have reduced that number from about $51 million during the first quarter of this year to $49 million in the third quarter and again, to $48 million in the fourth quarter. We feel this area will continue to slowly decrease sequentially going forward.

The plan is beginning to work. We need to continue the momentum. We need to continue to work hard but we do the forward to the challenges that are going to be before us in 2008.

We will now open it up for any questions that you may have.

Thank you. (OPERATOR INSTRUCTIONS). Justin Yagerman, Wachovia.

Good morning, guys. Nice to seek you back in the black.

You are exactly correct.

Just curious, you've been paying down debt on balance sheet, off balance sheet, but interest expense is up a little bit here. What has it been like as you've kind of negotiated higher covenants in terms of your all-in cost of debt? Where is that now and I mean do you expect that to stay stable, come down? How do we think about that?

Justin, I mean we did have some additional costs on the amendment that we did. Our average borrowing costs -- I mean part of what the additional interest expense is we did take quite a bit of debt off balance sheet to on balance sheet as far as just the mix is concerned. I was trying to find our average interest rates for a second. I think that that of course with the Fed rate move this week, that is going to help our interest costs throughout somewhat throughout 2008. And I think that our debt will slowly come down throughout 2008 so that will help a little bit. It is about 6.1%, here it is.

And how much of that is floating, Joey?

Well that is all-in including fixed and floating. I mean at the end of the year we finished about 6.3. I'm looking back -- September was 6.5; June 6.2; March 6.3, so we've been able between moving debt amongst our securitization which is obviously a less costly piece of debt between all the fixed and floating pieces. We've been, I think we've done a pretty good job as far as the overall effect of borrowing rate. And I think that our covenants should not -- if we maintain where our covenants are which we anticipate -- our borrowing spread should begin to come down around the second quarter, possibly certainly by the third quarter which helps us a little bit more there too. So I think we've hit our peak on the effective rate assuming obviously rates don't reverse back the other way.

Got it. You mentioned in the release something about getting $20 million back on your credit facility from letters of credit. Is that something that is going to happen? Or I know you guys have talked about that for a while, so you are actually getting $20 million of leeway returned to you?

Yes, we finished that up last week and we had hoped to kind of get it done by the end of the year but we weren't able to do that. Really didn't need it at all. We were comfortably within our covenants at year end. And so that was obviously a big help for us for the first quarter so we did get that done last week and it was $20 million.

That is great. I guess given that you guys have been shedding some tractors here which obviously has helped your return to profitability, but just curious what you guys or seeing from the used tractor market? You are selling them assuming pretty new equipment has got to be somewhat desirable. What are you seeing out there and who are the buyers and generally are prices holding?

Prices are holding. I'm pleased with how our sales group has done. We were able to hit our target as far as our asset held for sale by the end of the year. We wanted to get it down to at least $10 million. I mean we were right at $10.4 million but that is a little misleading because we did add quite a few more trailers to that right at the end of the year. But all we've got in inventory right now I think that hasn't been sold, we've got less than 50 trucks as of right now that haven't been sold. Prices have held nicely for us throughout the quarter. We are not -- I'm not going to have any additional inventory to add to that until probably April. So we are already beginning to presell our second-quarter inventory. So I'm real excited about our sales plan for 2008.

Sounds like it is going well. On brokerage, you guys definitely ramped up the revenue run rate. You mentioned that being one of the cost headwinds that you're running up against. It's just interesting to hear I mean how you expect to get from $9 million or so in revenue this year -- this quarter to $25 million a year from now. What does that take from an infrastructure buildout? Is there a lot of cost involved or are you adding people to that division? And I guess if that is the case, does that mean that you are going to continue to decrease your asset fleet or hold it at the same rate?

The current plan on the asset side is to hold the fleets where they are, 3500, 3550 range. And so we are not planning to add nor shrink right now. David is very focused on putting our resources behind the assets that are producing profits and we will continue that but as far as the group, we are not planning on shrinking or growing.

Solutions, let me clear, even though Solutions added costs, its operating ratio in the fourth quarter was better than the consolidated total. So the asset base, I mean its still very, very small but it did very well and has produced what you see in a non-asset-based performance externally, our solution subsidiary is at least that or better in most quarters as far as margins are concerned. So we expect that to -- we expect that to continue.

Now, we do feel that to achieve the growth rates that we would like and our customers would like us to achieve, that we're going to have to continue to invest in two things, systems and people to allow us to hit these targets. And so I don't think that it is going to be as the asset-based side hopefully continues to improve, I don't think it's going to be that big of a drag on margin for another period of time.

I mean generally speaking, those businesses are lower or higher ORs than asset-based side. But right now, we've added a couple of company stores that we're pretty excited about. We've been growing this year by adding quite a few agents and obviously to get to that target by the fourth quarter, we just expect to continue what we started late '06 throughout 2007.

Got it.

So it'll be a combination probably of agents -- probably more agents than company stores but right now it is people having the right people to lead it which we're spending a lot of time on to support our existing management group as well as the system side.

Okay, that makes sense. One more and I will turn it over. Just curious as you've gone through the last year or two and have obviously had a hard time financially but seem to be coming out. I was just curious if you guys at any point in time were getting interested buyout offers from either financial or strategic buyers?

Justin, I mean when your stock gets down to $6.00, you perk a lot of interest.

Yes, that is what I was figuring.

So, whatever that tells you.

Okay, I appreciate the time, gentlemen. Thank you so much.

Edward Wolfe, Bear Stearns.

Good morning, guys. There are so many puts and takes with the changes in your network, but David, could you talk a little bit about the operating environment both through the fourth quarter and here in January in terms of is pricing down? Is utilization on a normalized basis down at this point still? How do we think about the market forces? Are we at a bottom, are they improving, are they getting worse?

Ed, that is a great question. I mean, is it getting worse or is it getting better? It is still a challenge out there and I see among all of our divisions, I see some things going well. I see refrigerated that we are very pleased with. Tony and his group are doing an excellent job down there and starting about September, I started seeing some things happening in that marketplace that have continued into January that the customers are calling us. They are calling us for capacity, they are calling us wanting to give us freight and we haven't sensed that as you know in a long time. So the refrigerated side I'm very, very encouraged with.

I'm very encouraged on the expedited side that it did well in the fourth quarter and it's continuing to do better than typical Januarys for that division. So I'm happy with that. Just in the last couple of weeks, really in the month of January, have I started seeing a more interest on the dedicated side on customers wanting to talk again and we just and started to win a couple of small contracts, 30 to 40 truck type deals of contracts that have happened in the last couple of months.

But just in the last two or three weeks, we are starting to get a few customers starting to ask about that and just in one -- in the month of January. That was not going on in the fourth quarter. So I see some stuff happening in that segment of the business.

But at the same time, Ed, I don't know where the pricing side is going. Meeting with a customer this week, was able to get a very, a very nice, a good partnership customer, a very nice rate increase. They assisted us. But at the same time you're having that meeting, you are having another meeting with another partner that is asking you to reduce your rates by 5% or 6%. So you are having both those kind of situations going on at the same time.

The dedicated business that you are seeing stress in, what are the pricing -- what is the pricing like as those contracts come up?

It's better than what we have had. As you know, the dedicated was not even -- it was just on the cusp of getting turned around for us and actually met internal revenue per truck goals that we had set that I really felt like would achieve the results that we wanted to achieve. And we hit the target but still came up a little short on what we were wanting to achieve profitability-wise on that division. And most of it was because at the end of the day, it takes about 110% trucks to handle 100% of revenue truck. Because of time off and those kind of things. Even though we've done a great job of getting the minimum charges up, they need to go up another 3% or 4% and we're in the process of having those discussions.

Okay. And in January, you know it's always tough in January, but is there any sense of it's beyond a seasonal slowdown? It's worse than that or is it just a typical January right now?

I would characterize it as in some of the areas better than a typical January. But if the South was doing better I would be happy, Ed. The South is just not good. We are struggling in the South. We've been struggling for a year in the South and the Southeast area of the country is just not doing it. Other than that, I'm pretty pleased with what I'll see -- I'll see in January.

The East Coast has been pretty well. The Midwest has been pretty well. Texas, one day is good, the next day it's bad. The West Coast now is going through its typical January, February, Chinese New Year timeframe which we've learned to accept that every January and February. But other than the Southeast, if it was getting better, 50% -- if it was doing 50% better, I would be very, very pleased. But the South is bad but the rest of the parts are not that bad.

And the Midwest has improved?

The Midwest has improved.

Okay, that is good to hear for the economy. Just company specific stuff. Your insurance in claims came way down in the quarter. If I look at it -- $0.066 a mile or however I want to look at it on absolute terms, $7.3 million versus $9.3 million and $12.5 million the previous two years. Is this ongoing kinds of stuff or are there some onetime things in here as well or just exceptional quarter in terms of claims?

It's the latter. We had a real good quarter, Ed. I mean the days of smoothing expense that the public companies did back in the '80s and '90s, you really shouldn't and can't do that anymore. So you are going to have -- you are basically reporting your actual experience. But I do think that our overall trend rate is coming down. Where we were for the year, I think for the year we were about $0.085 a mile which included the second quarter adjustments. And I think our trend rate is continuing to move down.

I think we've got a good shot in 2008 of being less than $0.08 a mile so our trend rates, our actuarial reviews are showing that number continuing to slowly come down.

Okay, that makes sense. Hey, Joey, on the depreciation side, you ended the year at $52 million. In '08, should that number be down a bit because you didn't spend much this year?

It's going to continue to come down a little bit. I mean our capital cost number, leased revenue equipment, depreciation, interest, if I put all of those together I mean we made a big move in those kind of late in the year as we finally got rid of a lot of the stuff and were able to renegotiate some things. I think the big changes that you saw sequentially throughout this year will continue to go down but it's going to be a lot slower. We're basically getting down to a base number. We have a few more trailers we need to pull and get rid of that will help it a little bit. But the big steps we won't see that in '08. We're kind of getting down to a normalized number. But there is a little bit more room there.

All right, but if I take the 11.6 for depreciation and the amortization in the fourth quarter, if I multiply that by 4, I'm at 45 down from 52. I'm guessing it's somewhere in between maybe 47 or 48 next year is a good number?

Well I'd rather not kind of comment on a year or anything particular. But seemed reasonable but --

Yes, okay, I'm just trying to think of this in terms of -- you said $50 million of net CapEx next year.

Right.

If things somehow took another step backwards, it doesn't feel that way right now but let's think of the worst-case scenario kind of thing. If things take a step backwards, could you reduce that $50 million of CapEx? Could you buy used trucks for instance or is that kind of the number you need to do one way or another? And it seems like depreciation will offset that give or take.

We have pretty much held our trade cycle on our equipment. We extended I think two or three months, our trade cycle coming into this year or '07. And that -- we've been watching that very closely to watch the maintenance side and the resale side to see and it hasn't made much difference. And so we are probably going to hold that throughout -- I know we're going to hold that throughout 2008. I'm a little nervous to go much more than that --

So where the tractor fleet average age right now and where do you think it is at year end?

Right now it is 1.8. We were 1.5 last year. The trailers are 3.4. We were 2.8 last year. And I don't think that tractor number is going to change that much. It will go up a little bit between now and the second quarter and then its going to come down. I'm not taking any trucks between now and April really meaningfully, not really until May. So it will go up a little bit between now and June and then it's going to come back down from June to December. And I think directionally we're going to stay around that 1.5 -- 1.8, 1.6 times on the tractor side.

The trailer side, we'll continue to slowly grow. We're getting real close to where it needs to be and that is just because of the sheer volume of trailers we bought in 2003 and 2004. And so as those age, it's going to work its way up into that 3.5 to 4-year average age. So we are getting a lot closer to that but there is still a little bit more room there on that. And that is why our maintenance costs went up in 2007 is really because a lot of these trailers aging. But I think we are getting close to the top there and late this year, late '08, and then we will begin in '09 begin trading out more our normalized trailer fleet. So our maintenance cost should be helped in '09 we feel.

All right, guys. Thanks for the time. Keep fighting and it's good to see you in the black, like Justin said.

Donald Broughton, Avondale Partners.

Good morning, gentlemen. Congratulations on being a back in the black.

Well, congratulations to you to.

Well thank you, thank you. Operating taxes and licenses that when down, it's a minor item, but what is at work there?

Nothing unusual. Last year in the fourth quarter we had -- I think there was about a $400,000 settlement on an old state tax issue on some state that we had last year. It was about $400,000 in the fourth quarter. But other than that, it is just a reduction of -- primarily it's a reduction of fleet but nothing unusual at all there.

So just going back to the historical run rate. Okay. Is the plane finally sold?

Yes, it was sold right before year end.

Oh perfect, perfect. Congrats on getting that done. As I'm modeling out here on cash flow, I'm looking at the taxes and nice to be paying taxes again. But I'm assuming what you are reporting here obviously a rather high tax rate. I'm assuming that from a cash perspective, you've still got plenty of NOL to work off. Is that right?

[Mr]. Richard Cribbs, our Chief Accounting Officer, is in here. Yes, we don't anticipate losing NOL -- you know, states you can't carry it back, you've got to carry it forward but we still feel there's plenty of benefit in any of the operating losses that we had.

So from a cash perspective, taxes just aren't there, right?

That is correct, yes.

And then one minor other thing and then I will let somebody else have the floor. I was noticing the on the depreciation line, it seems -- yours seemed to have restated last year's fourth quarter. Did that happen in the K and I just missed it? Or what, it was $46 million up. What happened there?

How much difference was it?

It's $46 million. It's a minor deal but -- or 46,000 I should say.

We did -- we restated the amortization of deferred loan costs. It should have been in interest expense.

Fair enough. Fair enough. Thanks, guys. I will let someone else have the floor.

Neal Deaton, Stephens.

Good morning, guys. Congratulations on a solid quarter. Just a couple quick questions. Give us a little more color on Star Regional. I know you said the miles were down and rates but what you have in mind to try to turn that division around?

Neal, it's just, Jim Brower up there is -- they're working their bottoms off. But at the end of the day, they just need more freight. Now what we do to get more freight, they are working extremely hard and actually have won a couple of pieces of new business in the last week that will assist them dramatically. It's a multi-million dollar business that they've won just in the last week. They need to win two to three more of those kind of pieces to really get them where they need to go.

The great thing about Star is that they've got just an unbelievable cost structure within that company. And if they can get just a little bit more, they need about a half a load a week more on those trucks and they would be producing some pretty decent results. And they just need to win some more business. And that is the avenue that we are taking currently is to continue to reduce costs. They've taken out a lot of costs, even more so out of the business and they could take some more out of it in '08.

So we are going down the avenue that we believe hopefully that the Southeastern part of the country which has been in this difficult environment now for about a year and a half, we believe that we are further through it even though I have no evidence of that, but that we are further through it than we are beginning it. And I guess the most encouragement that I've got on Star late in the last few months is in the last week winning some millions of dollars of business that will assist them.

So we are going to stay that course at the present time and let their marketing just continue to work extremely hard and get some more businesses in that network. And if they get them another half a load a week per truck, not that they will be back, but they will be pretty close to being back.

Good. At least you are making some progress there with that recent win. Just a follow-up. I know in the release it said that you had more brokered freight this quarter, 11-point-something compared to 8 a year ago. Was a lot of that related to Star trying to put freight on those trucks?

It's really all divisions. I mean it is really -- it is all of them. I mean it's increasing utilization and when we get to an area like the South that is tough, we are grabbing a broker at a less rate and we are getting out of there. So it just in today's environment that we are needing more freight and we are finding it wherever we've got to find it.

Okay.

I don't know where that number (multiple speakers) I don't know if that number is going to go -- one week it is down the next week it is up and I think that is kind of imbalance that we are operating in today especially in January in February. I'm going to let it be whatever it needs to be to move these trucks. And I think that again, one week it's good and the next week it's bad. So I think that it will start stabilizing come the end of the quarter.

Okay, good. And you may have already touched on this. We had a fire alarm in the background here and I only was able to hear part of what you said regarding [refer]. It sounded like that you are getting more calls for capacity there -- how would you describe the refer dynamics and the demand in that segment of your business?

Tony Smith, down at SRT, and I both are feeling pretty good about the refrigerated side of the business. Again, we are getting evidence -- we're getting phone calls from customers so it's not like were having to knock the door down on every account to try to find a piece of new business. We've actually got customers again calling us wanting equipment. And so out of all the divisions, I'm more encouraged about the refrigerated side and I think it is probably the reason behind that, Neal, it's probably as carriers exit and I know that we haven't seen anything yet that's saying that carriers are going broke and those kind of things faster than what me and you both would think they should be in today's environment.

But whatever is happening, we know that capacity is less than what it was. And I would say it's a good bet that how fragmented the refrigerated side of the business is, that the small mom and pops are being taken out of refrigerated more than they are on the dry side. So I think that they should sense that encouragement from a capacity standpoint earlier than what dry van will experience it.

Okay, that is very useful color. And going back to what Donald was asking a few minutes ago kind of to follow up. Is there any kind of way for us to new know what to use for a tax rate in '08? I know it has kind of been all over the board with the NOLs and just profitability and all of that? But any advice there?

I mean it really depends on income. It depends on per diem, participation from our drivers. I think probably prior to this year -- I'm going to try to simplify this -- prior to this year, running in that 96 to 98 OR range effective tax rate was in the 50s, mid 50s. And our per diem amount has gone up. And so I would expect all things equal that that effective rate would rise in that type of range. So it really -- and then that number goes down as your profitability improves.

We used to have a rule of thumb for every 100 basis points of OR movement, effective rate moved down about 300 basis points. And that is kind of a directional impact. So if it was 54 in OR, and went from 97 to 96, the effective rate was 54 to 51. So that's kind of directionally what we had. But I think there's a lot of things moving around in '07 particularly with per diem that -- that would be a place to start.

Okay --

The closer you are to break even is the more skewed that number is going to be.

I'm sorry?

The closer you are to break even, the more skewed that number is going to be.

Right. And then one final question and then I will hand over the floor. Can we get any kind of update on what like the ORs for SRT or Expedited?

All we've disclosed is SRT in the release and we said that SRT was approximately 90 OR in the fourth quarter. That's all we've disclosed so far.

Can't say anything about Expedited?

No, we did not.

Okay, I think that's all I have. Thank you for your time.

Chaz Jones, Morgan Keegan.

Good morning, David, good morning, Joe. In just kind of looking through the customer information, it looked like there is a significant increase in manufacturing as a percentage of freight. It looks like it was running 34% in the quarter. I think if you go back and look, it probably was maybe closer to 20%, 25% in quarters past. Am I looking at that wrong?

Chaz, that manufacturing has predominately been in that 25% to 27% kind of number.

So are you bringing on a lot of new manufacturing customers or is that just kind of a seasonal type mix in the business?

Chaz, right now honestly we're bringing on anything we can bring on.

Okay.

So based upon that, it's just wherever we are hitting at. We have not -- we brought on some very, very good strong customers but none -- we haven't brought on no 20 or $30 million type of year account. But we've brought on a lot of 2, 3, $4 million, $5 million a year accounts and some of the ones that Star has hit at the end of the fourth and in January, were definitely manufacturers.

But it's not necessarily intentional, David. Is that what you are saying?

Right now you've just got every salesperson in all three companies knocking the door down for theirself and we could care less where it comes from. Another one is on the SRT side, they're doing a lot more on the meat side, they're doing a lot of -- because keep in mind last February when they took over those 175 trucks and then went into a slowing of the economy, that had the bam bam effect on utilization. So they've had to really work hard especially in the fourth quarter because that is really when we started feeling better about their operating plan was around September. But they brought on a lot of new accounts and a lot of those would have been on the manufacturing side.

Okay. Could you maybe give us an update -- I didn't notice it and I'm sorry if it was in there -- what the percentage of owned verses leased as far as the tractor fleet is?

We've got that --

Has that changed dramatically at all, Joey?

It's trending. If you'll call Richard back after the call, he's got that. He can give that to you.

Okay. And then last thing, do you have any remaining assets held for sale on the balance sheet?

Yes, we have $10.4 million at the end of the year.

Okay, great. Best of luck in 2008.

Hey Chaz, also I misquoted stated there. A lot of the business that SRT brought on would have gone under the food and beverage side more than the manufacturing side. So that was not a correct answer on SRT. But it's just a matter of who they are winning business from.

Okay, great. Thanks, guys.

(OPERATOR INSTRUCTIONS) Mr. Hogan, at this time we have no questions in the queue.

Thanks, Amanda, and we look forward to updating you on the future. Thank you.

Thanks.

This concludes today's presentation. You may now disconnect.