德維特 (DVA) 2007 Q1 法說會逐字稿

Good morning. My name is Sheila and I'll be your conference operator today. At this time, I would like to welcome everyone to the DaVita first quarter earnings conference call. All lines have placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question-and-answer session. (OPERATOR INSTRUCTIONS) Thank you.

I would now like to turn the call over to Ms. Zumwalt. Please go ahead.

Thank you, Sheila, and welcome, everyone to our first quarter call. We appreciate your continued interest in our company. I'm LeAnne Zumwalt, Vice President of Investor Relations, and with me today are Kent Thiry, our CEO; and Mark Harrison, our CFO. I'll start with the forward-looking statement disclosure. During this call, we may make forward-looking statements, which can generally be identified by the content of such statements or the use of forward-looking terminology and include statements that do not concern historical facts. All such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to the SEC filings included in our most recent annual report on Form 10-K. Our forward-looking statements are based on information currently available to us and we undertake no obligation to update these statements, whether as a result of changes in underlying factors, new information, future events, or other development. Additionally, our press release and related disclosures include certain non-GAAP financial measures. These measures should be considered in addition to the results prepared in accordance with GAAP and should not be considered a substitute for GAAP results. Also included in the press release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures. I'll now turn the call over to Kent Thiry.

Thank you, LeAnne. Our Q1 operating performance was rock solid. I'll quickly cover three items. Number one, our clinical outcomes; number two, anemia management; and number three, our '07 forecast and longer-term outlook. With respect to our clinical outcomes, we continue to present them first because that is what comes first. We are first and foremost a caregiver company serving over 100,000 patients every week. We are proud to report that our clinical outcomes continue to be among the best in the industry. I'll quickly reference three different measures.

First, adequacy, which is essentially how well we're doing at removing toxins from our patients' blood. This past quarter, 93% of our patients had a KTRB greater than 1.2. Second, anemia management. DaVita had another strong quarter also with 85% of our patients having hematocrits greater than or equal to 33. And the third indicator is our gross mortality rate. Our gross mortality rate for 2006 was 17.9%, which compares very favorably to the available national data. In fact, for all of these measures, our outcomes compare very favorably to available national data. As always, this clinical data relates to patients who have been with DaVita for 90 days or more.

Under the second subject, anemia management -- and I'll cover a bunch of aspects of this because it's gotten so much attention lately, but let me preface all of these comments by just reminding everyone that physicians make all prescription decisions, period. No qualifier. Does DaVita have an anemic outline? Yes. If so, how is it developed and are your physicians required to follow it? We have a physician council -- typically has about 12 members on it from around the country. They took the lead, took the first cut. These drafts are then circulated to hundreds of our affiliated physicians for comment and debate, and it's an iterative process. There are approximately five general mailings going out to hundreds of DaVita affiliated physicians -- a process that went on for roughly a year, when our first guidelines were developed and a year again when they were modified and ultimately voted on by that same council after all that debate, all that very transparent debate, and all references to all available scientific evidence. Do our affiliated nephrologists have to use the guideline? Absolutely not, absolutely not. It is available, it is totally voluntary and a majority of physicians that take care of patients in our centers either use their own protocol or a modification of ours using it as a baseline reference. I repeat, they make all the individual patient-specific prescription decisions. No guideline ever covers all patients or even close.

What are DaVita's guidelines and what changes have been made based on recent events? I'm not going to go into any detail here, because I think things can get quite messy, but let me provide three or four data points that will hopefully eliminate any high level concerns. Our guidelines are consistent with both CMS payment policy and the KDOQI guidelines. We've always targeted hemoglobins in the recommended range of 11 to 12 and also reflect a goal of having more patients above 11. Our guideline recommends dose reductions when hemoglobin reaches 12 and incorporates changes in starting dose and rate of rise in hemoglobin. There was a very big study that's not gotten a lot of press, but it's very relevant, a big study in JASN, which is the Journal of the American Society of nephrologists, a very well-regarded journal. It's literally the largest study on this topic in recent years, 58,000 patients. And it has a pretty relevant piece of information that's not getting a lot of coverage, but should in context of all the other data being discussed. And that is it shows the lowest mortality rates are associated with hemoglobins between 12 and 13, in fact. And in the judgment of our physicians, there is more and better data pointing to the risk of being below 11 of any risk of being temporarily above 13, as being below 11 again is associated with higher mortality risk.

How specifically should you think about the recent JAM article? The authors pointed out in that 2004 some for-profit facilities used on average more EPO than not-for-profit facilities. The authors do not place a lot of emphasis on the fact that the for-profit facilities had better outcomes, had more patients above 11. It is in fact well documented that the major chains have better outcomes overall compared to the national averages of the small independents. That's for a whole bunch of reasons. And since everyone's paying a lot of attention to the media's clinical expertise this days, I'll take a moment and quote a New York Times article last year. Quote: "People who receive their dialysis from a national chain generally fare better than those treated by an independent provider." This is supported by all different sources of data for the last several years. A whole lot of reasons for that. If you compare DaVita specifically to the CMS clinical performance measures, you'll see that we outperform the nation in every measure. In many areas, when we provide better care, we save the government money and we receive no additional reimbursement. Sometimes, you can get an area, like in anemia management, where in providing better quality and in many instances saving the government money, you actually do incur -- you actually do get paid more. But I repeat, in many other areas where our outcomes are better than others, those are areas that cost us money and do not cost the government anything in terms of additional reimbursement.

On to the FDA label and how does that change the way physicians treat ESRD patients. The fact, is the label has introduced a lot of confusion related to ESRD treatment. The majority of its recommendations appear to be based on studies of cancer, pediatric, and CKD -- which is to say predialysis patients -- and ESRD got inappropriately lumped together as they hurried to be responsive to some of the recent controversies. Basically, the FDA does not want hemoglobins to be targeted greater than 12, nor do we and nor do most of our physicians who make the actual decisions. We met with the FDA last week along with other representatives of the kidney care community. We explained that the current label, which we understand was generated after a whole lot of good work and thoughtfulness, was nevertheless not appropriate for ESRD patients in a few areas.

A couple examples are, most of our physicians believe strongly that EPO should not be held at 12. Abrupt termination of EPO often leads to unpredictable and large swings in hemoglobin. This is bad for the patient clinically -- and ironically, often ends up meaning you use more EPO over time to get the patient back into a stable range and hopefully within the targeted range. Second, a rigid 25% titration should not be recommended for ESRD patients. Sometimes a smaller titration is better for achieving stability in hemoglobin levels. Third, the FDA warning to increase hemoglobins to a level that avoids transfusion is confusing and literally impossible to execute in practice, because dialysis patients are at risk for transfusions, even if their hemoglobin target is greater than 12 and even still if their hemoglobin is greater than 13. So it's simply not a relevant way to guide anemia management practice. It was a very high quality exchange with the FDA. They asked excellent questions about the data and its potential implications, and now we will see what happens after they review the data at their leisure.

The final question on anemia is -- well, gee, having said all that, what do you expect in terms of utilization changes going forward? Pretty impossible to predict what physicians will do with all the noise in the airwaves these days. It is ultimately absolutely their decision. In particular, it's hard to predict because some of the recent comments in the media and elsewhere go well beyond what the science and data support. So our guess -- and it's literally nothing more than that -- is that utilization could go down in the 2 to 5% range, but we are simply not sure and we'll keep you posted as we learn more.

My third and final topic, our guidance. What about 2007 and beyond? As you already know, we're raising our operating income guidance. Our previous guidance was for operating income to be in the range of $700 million to $760 million. Our new guidance is for operating income to be in the range of $740 million to $780 million. Regarding 2008 operating income, it is of course way early to estimate that. Nevertheless, we think it's important for you to know that it looks like 2008 will be in the same range as our current guidance for 2007. These two different estimates reflect the fact that we expect some private rate compression, but cannot with any confidence predict when it will happen as we proceed through the next 24 months. We do view this period as a one of adjustment to our baseline, beyond which we hope for future growth. This guidance does not take into account any currently unpredicted changes in pharmaceutical trends, nor does it include any assumption on an MSP extension. The most important swing factors in '07 and beyond are as they have been in the past. Private rates, pharmaceutical trends, Medicare reimbursement, the potential for an MSP extension, and the billing and collection integration risks and opportunities. Despite all the risk factors that we've identified, we are very happy with our strategic position and the fundamental stability of cash flows and demand in this business and in our own company. I'll now turn the call over to Mark, our CFO.

Thank you, Kent. I will address a few questions about our quarter results. First, what were the major drivers in the quarter? Operating income from continuing operations was $193 million for the quarter. OI results were primarily driven by improved revenue-per-treatment and reduced G&A costs offset by fewer treatment days in the first quarter. The revenue increase relates primarily to favorable fluctuations in patient mix, improvement in Medicare recoveries, and the 2007 increase in the Medicare drug add-on, which covers some of the increasing cost of care. Nonacquired growth in the quarter was 4%. This quarter's nonacquired growth was adversely impacted by a lower proportion of Monday, Wednesday, Friday treatment days, from which we get a majority of our treatments. We continue to expect solid nonacquired growth in the 4% range in 2007. What about cash flow in Q1 and for 2007? Trailing 12-month operating cash flow of $631 million was unusually high due to several one-time favorable factors in Q2 2006. We currently expect operating cash flow to be $460 million to $510 million in 2007, reflecting our assumption that certain working capital items may be a use of cash in 2007. As we continue to integrate our billing and collection system, there is a risk that we could see some temporary reversal of the strong cash collection trends reflected in our decreased AR days in Q1. Our CapEx forecast for 2007 continues to be $110 million to $120 million in maintenance capital and $200 million to $220 million in growth capital for acquisitions and de novos. We continue to expect stock option exercises to generate approximately $60 million, leaving approximately $180 million to $260 million available for debt repayment or additional growth activities.

Regarding our 2007 guidance, as you update your models, you should take into consideration the following items which will impact quarterly OI. First, on April 1, 2007, the Medicare 1.6% increase took effect. Q2, as in prior years, will include our national leadership meeting. It is also our current expectation that private rate compression will likely be weighted towards the latter part of the year, potentially leading to a decline in Q3 and Q4 performance, relative to the previous quarters. Lastly, we expect 2007 G&A to be in the 9 to 9.5% range, slightly lower than our guidance of 9.5 to 10% given last quarter. Our guidances ranges for 2007 incorporate key swing factors on a probabilistic basis, and collectively, they could cause us to be above or below our stated range. What about our capital structure? At the quarter end, total debt was $3.7 billion and our leverage ratio was 3.48 times. Following quarter end on April 25 of 2007, we prepaid an additional $50 million of our term debt, bringing total debt principal repayments since the Gambro acquisition to $465 million. Additionally, on February 23, we completed a refinancing, including a repricing of our Term Loan B from LIBOR plus 200 basis points to LIBOR plus 150 basis points. And we also issued an additional $400 million of 6 5/8 senior notes due in 2013. The proceeds of the note offering were used to repay a portion of the outstanding credit facility. Through these two transactions, we reduced interest expense by approximately $10 million per year. We also provided additional covenant flexibility and extended maturity slightly. Following the transactions, 81% of our debt is now at fixed rates. At current LIBOR rates, our blended interest rate on all our borrowings is 6.4% before the $2.5 million quarterly amortization of non-cash debt expense. As a result of the transactions, we also took a write-off of $4.4 million of existing deferred financing costs and other costs, which is included in our debt expense for the quarter. I will now turn the call back to Kent.

I think let's just go right into Q&A. Operator, please?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Justin Lake with UBS Research.

Thanks. First, on the private rate compression, you talked in the last call about the expectation that you would see some of that in the second half of the year. It sound like you're confirming that. Is there anything that's been signed as far as contractually? And maybe you can give us a little bit of color on that, as far as what you've already got set up for the back half of the year?

We're signing some contracts every month. Sometimes big, sometimes small. So the answer is yes, there have been contracts signed in the last six months. Do you want to keep going with the question, Justin, so I'm more responsive?

Sure. The contracts where you're seeing lower rates, the rate compression, maybe you can give us a little bit of granularity on where that compression is coming from. Is it out of network, in-network? Is it unbundled, bundled? Can you give us an idea there?

No, because it really differs. It's not a function of bundling versus unbundling or network versus out-of-network. Every contract situation is quite different. In some cases we're getting increases, in some cases holding even, in some cases decreases. In some cases the nonfinancial terms move a lot more than the financial terms. As you recall, a majority of our contracts have 90 day outs, although I would anticipate over the next few years more of our business will become tied to contracts that are a full year or more. But it's too customized, too situation-specific to make any general comment other than incorporating the net effect into our guidance as we have.

Okay. Maybe I'll try one more way. Can you give us an idea of how far -- if you think about your entire book as far as the recontracting, can you tell us how far you think you're through that? And can you give us an idea of how long this might continue as far as possibly having no growth in the business as far as operating income?

It's so difficult to predict. It could be that we go through what we think was sort of an adjustment period over the next 18 months, but it's not something that we can predict. It takes two to dance, takes two to fight and so we're trying to provide all the information we can. But at some point you're asking for certainty and specificity in an area where by definition doesn't exist.

Okay. Maybe I'll just change the tack here and just move on to the guidance of $740 million to $780 million. You mentioned that your best guesstimate on the potential for EPO change might be -- was it 2 to 5% or 3 to 5%?

2 to 5.

Does that include the 2 to 5?

The 2 to 5% is included in our guidance. Anything that would be more dramatic than that would be outside of it in either direction.

Got it. Last question on cash uses. Two things. One, you had about $350 million in cash at the end of the quarter. Looked like on the balance sheet somewhere around there. Can you tell us what you think you need to be carrying and would you be thinking about debt repayment there? And then just on acquisitions, did you do any in the quarter? If not, was there any particular reason? Was there nobody wanted to get something done, (inaudible) on EPO, or just kind of timing?

This is Mark. Let me comment on the cash position again. First of all, I think the cash is still within normal ranges and we did comment on the fact that we prepaid $50 million of our term loan debt on, I believe, the 25th. So obviously that's reduced our cash balance. Our cash balances, first and foremost, are there to use to pursue attractive growth opportunities. And then the cash balances that we have also provide us with some flexibility in the future.

On the acquisitions, Justin, we didn't do any in the quarter. It's a function of two things. One, there were fewer available than was the case in most quarters last year. And second, in the ones were available, other people were willing to pay more than we were.

Got it. That's helpful. Thank you.

Thank you.

Your next question comes from the line of Matthew Ripperger of Citigroup.

Thanks very much. A couple questions. First, in terms of the revision to guidance this year, can you comment on what specific variables contributed more or less to that revision?

Could you repeat the question, please?

Sure. You raised your operating income guidance for fiscal '07 and I just wanted to see if there's anything that changed related to EPO, patient volume, pricing, et cetera, that specifically contributed to the raised guidance for this year?

It's really all the above. It's quite a mix. Some of it was a chronological deferring of some private rate compression. That's the only piece you didn't refer to. Everything else you said is also relevant.

Great. Second question. United Health came out with some updated guidance around disclosure of hemoglobin level and potentially not paying for EPO above a certain threshold of 13. Can you give some comments on what you view -- how you interpret those guidelines? Secondly, can you comment on how they changed relative to their previous expectation?

Well, let me take a stab at it and you tell me if I didn't answer your question. We think if United puts in a mandatory hold at 13, that is bad for patients, just unambiguously bad for patients, a black and white rule. Ironically, if that's implemented, it could lead to more EPO being used because when you hold on -- about half of the patients that go over 13 will go back down within a month, so that they're in a very transient basis. But if you're not going to pay a provider for providing any EPO there and therefore they hold, then you're at risk of the patient moving down in a very dramatic fashion. Which I repeat is bad clinically, and also puts the patient on a roller coaster, which typically means that the patient consumes more EPO to get back to his place of stability. We think it's a bad policy clinically, we think it's a bad policy in fact economically, and we're hoping that they look at all the additional data that the community is sending them and amend what they've put out.

Did their previous policy require disclosure of hemoglobin levels per bill?

I don't know. I would doubt it, but I do not know.

Okay. Last question I had is, you gave the percentage of patients with a hematocrit above 33. Would you mind giving the percent of patients with a hematocrit above, say, 36 and 39?

I actually don't have that here. Maybe that's something we'll start doing every quarter if people would like it, but I don't have it here.

Okay. Thank you very much.

It is quite relevant that we submit the hematocrit level of every patient with every Medicare claim we submit. So Medicare never pays us a dime for EPO where they don't have the patient's hematocrit or hemoglobin level. I couldn't opine on the private claims, but with respect to Medicare, which is of course 82% of our patients, they've been getting that data on every claim for years.

Great. Thank you.

Your next question comes from the line of Darren Lehrich of Deutsche Bank.

Thanks. Good morning, everyone. A couple of things here. First, I want to ask about the provision for bad debts. Since you acquired Gambro, it's been running at about the 2.6% range. I just wanted to get an understanding of what your longer term expectation for the provision for bad debts is. Do you expect that range to start to come down from 2.6% level or is this kind of the permanent run rate for that line item?

Hey, Darren, it's LeAnne. We would expect this to be our run rate. Let me back you up. At the time of the acquisition of Gambro, we really took a look at the definitions of the two companies and what the two companies quantified as a contractual allowance or write-off against revenue, versus what was considered a bad debt and we revised our policy. So net net, the bottom line is unchanged, but the classification between what's being offset against revenue and what's a bad debt has changed. And this is the definition we're using and we would expect these levels going forward.

Okay, that's helpful. I know in terms of the OI guidance that you gave, Mark, you indicated that G&A was coming down from the previous level that you had embedded in your guidance. I guess I just wanted to get a little bit more clarity on that. Is there something that you don't plan to spend on the G&A side? Is that a function of better leverage from higher revenue? Can you help me understand that change?

Sure. Actually, the change is primarily due to improved classification of the expenses that go into G&A and it did not move our OI range.

Okay.

Secondly, I just want to add that we are still in our integration. We will be in our integration throughout this year and so G&A may be volatile from quarter to quarter during the year.

Sure. As far as options expense, can you just tell us what the accrual on the income statement was in this quarter and is that now just embedded in G&A going forward?

The accrual for the first quarter was $7.7 million, and $6.9 million of that was in the G&A category. The estimate of stock option expense for the year is approximately $35 million.

Okay, great. Kent, if I could -- I realize that your other non-facility-based businesses are rather small and I know you've mentioned on prior calls that you think most of them are immaterial. I was hoping to step back a little bit -- maybe you could give us an update generally on how you see these businesses evolving and if any of them in particular become more important strategically or financially, say, over the next two to three years?

It's a fair question. We really don't have anything significant to say. At this point, the right way to think about that stuff is it's service R&D, and it's incredibly important in the sense that if we figure out some new stuff that works, over the long term, that could add a lot of shareholder value and clinical value and taxpayer value. But until such time that we're highly confident that it's going to become material to you within your investment time frame, there just isn't much point in yapping about it. I think we're still in that situation. We're not pessimistic, but we're also not confident enough that we're going to start generating economics that matter to you within the next couple years to make it worth going over them in detail. We're doing a lot of things, basically, to add more value to the system -- to manage down the total cost of patient care, to manage up quality, particularly in a holistic way, and to make us an ever more important and valuable partner to payers and physicians. They all fall into those categories.

Fair enough. I think we'll just have to hear more about it as it evolves. Okay, thanks for that. Thanks for your discussion on anemia management. That was very helpful.

Thanks, Darren. We will talk more about some of this strategic stuff at the Capital Markets Day.

Great.

Your next question comes from the line of John Ransom of Raymond James and Associates.

Hi. Good morning. My question is, how much more flexibility is in your new bank line versus your old bank line relative to share repurchases?

We did get our capacity moved to $300 million and that is provided that our leverage is greater than 3.5 times. There is no limit on our shareholder -- on our share repurchase if our pro forma leverage ratio is below 3.5 times.

And where do you stand now with that calculation?

As I said earlier, the calculation is 3.48.

Okay, okay.

It's okay.

My second question, just a clarification -- you guys think 2008 operating income will flat with 2007?

Correct. What we said is that '08 looks like it will be within the same range that we're currently providing for '07, and we are emphasizing the fact that it's very difficult to look out that far, but we're doing it to try to be useful to you.

Sure. Has your enthusiasm -- or the contribution from the Gambro deal, you used to provide numbers way back then, but has your enthusiasm from the contribution from that deal waned at all over the past -- it doesn't sound like it, but I just want to make sure we're not missing something there?

No, we -- if the question is, are we glad we did the deal, we are absolutely elated that we did the deal and think our shareholders are in a far, far better place for our having done it. And the microeconomics of the deal are ahead of plan and the microeconomics of the deal are ahead of what we told the street that they could hope for back when we announced the deal.

Gotcha. Finally, other than United, have any other large payers turned the screws up on scrutinizing EPO?

None that I know of. And we are in conversations with United. Our Chief Medical Officer and one of our most experienced physicians and experts in anemia management -- one of the world leaders in anemia management -- were on the phone with United's Chief Medical Officer for some time a couple of days ago, providing data that United did not have and also discussing some of the flaws and deficiencies in some of the data they were using. We don't want to be critical of them. They've got to manage every single aspect of healthcare within their plan, whereas we get to focus on one. So the fact we had a more nuanced view of the data they were using and had data that they were not using which is highly relevant is not a reflection of anything careless on their part. But hopefully, now that they've got all that information, they'll make the right decision. Otherwise, they'll create quite the controversy in our community because it is bad patient care.

Okay. Thanks very much.

Your next question comes from the line of Gary Lieberman of Stanford Group.

Thanks, good morning. First, I would certainly second the motion to disclose the percent of patients above 12 and 13 on the hemoglobin side. Could you maybe talk a little bit about the challenges that you would have of implementing if you had different anemia guidelines imposed on you from different payer classes? I would assume today that docs are pretty used to following what's been out there from CMS -- but if you have multiple managed care payers that each have a slightly different guideline, can you talk about how that would get implemented?

We don't anticipate that. The question is, if a bunch of different managed care plans have different hemo guidelines, what would we do?

Yes, just talk about the potential challenges that should be associated with having to address different patients that have different mandated guidelines from their payer class.

That would be a holy nightmare is about six different ways. Hopefully, we will not face that situation. We never have. The fact is there's an incredible body of science out there, there's a very significant consensus among the nephrology community supported by the data about what the right way to think about anemia management is. It's not an area in which too many payers should dare to tread. But if they do, the answer to your question is it will be a holy nightmare.

Okay. Just in light of United having changing guidelines for the first time, have you started proactively contacting managed care companies and tried to educate them on your view as what is the right guidelines as opposed to having them come to you?

We are not talking proactively to anyone that I know of.

Okay, great. Thanks a lot.

Thank you.

Your next question comes from the line of Balaji Gandhi of Oppenheimer.

My first question was on CapEx. I think you talked about $220 million for the year for growth CapEx spending?

Yes.

And it looks like you were a little bit lower than the run rate for that for the first quarter. Is there any reason for that? Because you did open 11 de novos.

Yes, because we didn't complete any acquisitions.

Okay. So we should -- is there any kind of progression that we should assume for growth CapEx for the rest of the year, or about $60 million a quarter, is that --?

It won't necessarily be smooth. It can be very lumpy, depending on the acquisition opportunity.

Okay. My next question, I guess with the '08 guidance, can you give us a better sense of the variables? Are the biggest variables on the revenue side or the cost side that would lead that number to be flat?

The biggest variables are on the revenue side.

And within revenue, if you could talk -- is it obviously on the pricing side then versus volume?

Correct.

Okay. I guess that's as close as I can get. And the last piece is on getting back to G&A, you did have those -- I think as John Ransom mentioned -- you did have those numbers early on with Gambro. And I can't recall it exactly, but I thought the final year synergies were going to be $30 million to $40 million, if I remember correctly?

Yes.

So what's your question? Excuse me?

Your next question comes from the line of Bill Bonello with Wachovia.

Bill, before you go, if --

Balaji.

Balaji, if we didn't get your last question, please come on back further in the queue. Go ahead, Bill.

Okay, he doesn't need to because I'm going to reask his question anyway, which was -- I think what he was getting at is at one time you had said $30 million to $40 million of synergies. Are you still confident in that number?

Let me go ahead and answer that, because it was two different things. We talked about cost synergies back in the day, meaning separate we talked about net economic impact. We are having the net economic -- in fact, exceeding the net economic benefit that we talked about when we did the deal. In other words, if you looked at Gambro centers, their economics have improved by more than we talked to the street about at the time and the net economic impact for the overall organization is on track or ahead of track versus what we said. As to what mix of that is coming from cost synergies versus other benefits, incremental volume growth, some stuff on the revenue side, et cetera, et cetera -- we no longer analytically parse through that every quarter, because it got to be just a bit of an accounting game, and what counts is something that would have happened anyway versus something that happened because of a deal we closed 18 months ago. At some point, it's really an accountant making that decision and might not have any basis on economic reality. Is that responsive, Bill?

Yes, that's very responsive. I guess just to follow-up on it, you initially had said that you expected it to be neutral in the second year, which I think we're in. Given what you just said, are we actually already seeing accretion from Gambro? Or embedded in your guidance for '07, is there an assumption of accretion from Gambro?

Two-part answer. When I say we're doing better than plan, it's for the plan as of 18 months in. I didn't say we're already experiencing year three results in year two. On the other hand, Bill -- at this point, we just don't separate things out. The guidance is the guidance. And to tell you what part of it is reflecting incremental benefit from the Gambro deal and what part is happening independent of the Gambro deal, it's not possible to sort it out. We could make up any number we wanted and tell you which way it was, but it would be made up.

Maybe I could come at it from another way. I think initially there has been an expectation that relative to growth in '07, growth in '08 would get a boost from Gambro that you weren't getting in '07. Is that not a logical assumption any longer?

I hear the question. It's a very fair analytical question. And I'm telling you we can't answer because eight months ago we stopped trying to sort out what incremental economics were tied to the deal versus what incremental economics would have happened anyway, because it was getting to the point where it didn't make sense. When we cut a new deal with a payer, to what extent did we say what happened is a result of the integration versus what would have happened anyway. When we picked up some savings in G&A, to what extent do we say was the integration versus not? So we know by all the metrics we can separate out, we are on or ahead of plan. But for a huge chunk of the economics, we literally can't answer the question anymore, because you can't tell.

Okay, I'll give up on that one. On the managed care contracting part -- I know we've had this discussion in the past and I'm just wondering if anything's changed. At this point, have you actually signed contracts or do you know you're going to sign contracts at lower rates than you're currently receiving?

We have signed some contracts that had rates lower than what we were receiving before.

Okay.

And we've also signed some contracts with rates higher than what we had before.

Okay. Just the final question around the contracting is -- is there some benefit that you're gaining in exchange for lower rates? As has been discussed on a lot of these conference calls, I think there's a perception, obviously, that you've got a tremendous amount of bargaining power. I'm just curious, as opposed to playing hardball, walking away from contracts, saying you won't take lower rates -- why are you deciding to be willing to take those and what might that trade-off be?

I would say that in some instances when we take a rate cut, we don't get anything of significant value back. It just is what it is and we've decided that taking the rate cut is better than getting into a big fight. So we blink, so to speak. In other cases, we don't blink and we go fight. In general, our track record on fights is quite reasonable. In some cases, we take a rate cut, it actually is part of developing a new and sort of more substantial relationship with a payer where we're going to talk coherently about quality on a regular basis, things like that. Something that didn't exist before and something that we think will create major competitive advantage for us over time because of our clinical outcomes and the big beneficial impact that has on the total cost that the health insurer experiences.

What I was trying to get at, as we think about -- and this is really asking for your long-term crystal ball -- but as we think about '08 as a year where you're resetting the base a little bit from a rate standpoint, could we also be seeing it as also teeing up the ball, potentially for longer term growth, whether that's through better relationships or disease management opportunities or that sort of thing? Is it not necessarily all negative?

The short answer is yes, absolutely yes. I think both FMC and DaVita, because of the national market share we've achieved, have opportunities to add very distinctive value to payers in a way that they would have never wanted to bother with if they would have had to try to contract with 13 different people. But with the kind of scale that FMC and DaVita have developed, we have the ability to put ourself in a spot that's worth their time to meet with us every three months for X hours and start to reengineer how some of this stuff works and drive down hospitalizations, drive down the cost of surgical procedures, delay the onset of dialysis, et cetera, et cetera. So if we put on the crystal ball hat for a moment, which sounds like a very heavy hat, but if we put that on for a moment, what you said is exactly what we intend to make come true. And I'm sure FMC is thinking about it the same way.

Okay, great. Thank you very much.

Your next question comes from the line of Andreas Dirnagl of J.P. Morgan.

Okay. Good morning, Kent. I'm going to try and beat some of these dead horses, because I think quite honestly there's some sort of disconnect. Because during this conference call, you've taken what you yourself characterize as a rock solid quarter and somehow talk the stock down from being up 5% to actually being negative slightly at one point. Let's start with guidance. In June of '06, if I'm correct, your guidance for 2007 at that point was $650 million to $700 million of operating income. We stand today at $740 million to $780 million. Can you just confirm that the delta in all of the changes you've made to that guidance, that most of the delta came from the fact that previously you assigned too high a probability to the negative event, which is commercial pricing pressure?

I would think that's probably the case, and why don't we take it as an assignment for Capital Markets to deliver a more analytical response to that question, Andreas. But it is certainly the case that we erred in predicting the timing of some of that. And that's why, as you heard in the guidance we're providing today, both the reason we're going out through '08 and the reason we're talking about it the way we are is to say, gee, we expect some of this to happen. Our track record in predicting when it will happen is pretty pathetic. It would be, however, really bad to surprise all of you by not predicting it and have it happen. So what we're trying to do is relax on any precision in predicting timing, because our track record's pretty lousy -- and at the same time, remind you that risk is there, and it's more probable than not that a bunch of it will happen. Having said that, we are working our little tails off trying to make sure not too much of it happens or perhaps none of it happens and so far we've been successful. Ironically, that success could make some people unhappy, as if it would have been better for us to be more accurate and have lower earnings.

Let's put it this way, most people would be happier with the higher earnings. Looking at what you talked about earlier in terms that you have been sort of actively recontracting, as you always are on an ongoing basis. You refer to the past six months. And some of come out higher, some have come out lower. In the past six months, in aggregate for the average of the recontracting that you have done, do you already have signs that there is weakening commercial pricing pressure? Or is it again an issue that has not yes occurred or that you really do think may occur going forward starting in the second half?

Given those two choices, having to choose between the two, I would say, yes, we have signs.

Okay. Is it at this point something that is still less significant than you would have thought this time last year?

I won't -- I can't answer that one, Andreas. You want to ask the question again, because it's going to be hard for me to put myself precisely back into nine months ago.

Well, I guess the question is -- maybe there's no other way than to put it bluntly. Kent, what's to keep us from worrying, ironically enough, about the boy who cried wolf syndrome?

That's what I tried to cover a moment ago. Clearly, we have failed in accurately predicting when private rate compression would happen. And therefore our earnings have been better than we would have thought. We may now exceed by a bit the number we gave a year ago. So guilty as charged, we are -- our number -- the next six months may exceed the number that we gave 12 months ago. That is just a fact. I don't know where you want to go with that. We could take a more optimistic point of view and think that we'll be able to do the next two years that we did the last two years and then deal with the probability that that is wrong and we come up short.

Let's maybe -- let's just say the probabilistic aspects of it, each one can decide for themselves. But can I get you at least to say -- if your track record continues in terms of the recontracting that you've done, that there would be upside to the current 2008 guidance, in terms of commercial pricing pressure?

Say the question again, please.

If the increase in commercial pricing pressure does not occur over the next 12 to 18 months, as it has not occurred in the past 12 months, there would clearly be upside to your 2008 guidance; correct?

Correct.

Okay. Maybe quickly moving on, there's been a lot of confusion as to exactly what United has and has not said. Can you give us an idea, what have they said? In other words, is this a proposal that they have put out or is this already actively being acted upon and where exactly is it? Is the proposal to stop treatment at 13? Just give us some detail, if you could, as to what your understanding of what they're saying is.

We'll try to give you some color. They posted the policy on their Web site, which provoked us, obviously, to enter into discussions with the medical director and the business side. It's right now in discussion, and I'm not certain as to whether they intend to apply it to April claims. It was to be effective April 2. The interesting part of the dialogue is that there was some lack of specificity on the Web site. So we are needing to discuss it with them and we don't have further details at this point.

But again, the actual proposal or whatever we want to call it is a discontinuation of therapy above 13?

No. Actually, the language on the Web site, as I recall, was specifically that they were going to pend claims with hemoglobins greater than 13.

Okay. So it would be a similar version, potentially, to the old automatic audit threshold, so to speak?

Correct.

The fear is, when they say pend, it means reimbursement is uncertain.

Sure. Maybe just two more quick things. One is -- you talked about the industry's lobbying efforts with the FDA and I would assume that you had this meeting last week and you upped your guidance that incorporating what you think are the most potentially negative aspects of any change to EPO. Is there any update you can give us on what you think or what CMS has told you about anything they intend on doing, if anything?

No.

No, you won't tell us, or no you haven't had discussions with them?

Well, I've had discussions and we've had discussions. There's nothing much to say. The good news is that they appear not to be swayed by some of the media noise and some of the overreaching on flawed science. So that's the good news. Having said that, who knows exactly what conversations are having and where they might come out? I just don't -- I can't go any further than telling you what I've experienced.

Great. Maybe just one final question. In terms of the whole integration cost and net benefit, I realize it's difficult to allocate a benefit to it, but I would think the cost portion is something that is more easily identifiable and I think we were talking that last year it ran roughly $50 million. Can you give us an idea what you expect spending on remaining IT projects and other integration projects this year and potentially even into next year?

We stopped tracking integration expense broadly because it permeates throughout the organization and would cost us too much money just to track it, quite frankly.

Okay, thank you.

Your next question comes from the line of Jerry Taylor of Bank of America.

I'll be Jerry today, I guess. A few questions. First, your guidance about the 2 to 5% potential reduction in EPO utilization. Is it fair to say that's in the realm of what you've seen in the last month and a half since the FDA label change?

No.

So I would assume then you've seen less than that thus far?

Correct.

Okay. Also, can you help us -- is any of the hematocrit testing on a Medicare claim outside the composite rate? Reading the rags, it wasn't clear to me if it always included in the composite rate or not.

It is included in the composite rate.

Okay. Is there any opportunity that you see with the tighter ranges that KDOQI's calling for, the increased scrutiny just in terms of hematocrit ranges. Is there any opportunity or reason to be testing more frequently on a forward basis?

We don't think so.

Okay. In your conversations with the FDA, is there -- I don't remember exactly the wording you used, but it sounded like you were optimistic, perhaps that they were -- or constructive, I think, was the word you used. Do you see the FDA giving you credit for some of these retrospective studies, or do you think it's just constructive in terms of -- or maybe you're optimistic that the vagueness in the label, particularly on the low end, might be rectified somehow?

Why don't you say the question again, so I make sure I don't wander in answering it?

What I'm asking is -- I think the FDA has been historically somewhat less inclined to be to give credit for retrospective studies, as was the large 58,000 patient study that you had mentioned. Do you have any reason to believe that they may be perhaps more interested in using that, given that it really is the most relevant science for ESRD that we've seen in a while?

I get it now. It is true that historically the FDA, for very good reasons, has strongly preferred to rely on RCTs, randomly controlled trials. There aren't a lot of those in ESRD over the last 10 to 15 years. And some of those that do exist are very tiny and have some real issues, which is not to say they don't add value to the conversation, but they have some real issues. In the meantime, we've got these observational studies like the one I referred to, with 58,000 patients, very accurate timely data and some very powerful associations. So my experience in the FDA room was that they reacted in sort of a good, intelligent, good citizen kind of way. They listened, they're not going to ignore any piece of data that their brain and their ethical sense of responsibility deems relevant. At the same time, you want to be very careful around observational studies. You really do, just like we would. In addition, some of the things that we think should change in the label aren't necessarily directly tied to either the small RCTs that have been referred to a bunch or the big observational study. They have to do with basic physiological facts about ESRD patients that are widely accepted and not controversial. So some of this has nothing to do with any sort of RCT versus -- small, flawed RCT versus large observational study debates. Rather, just putting the community consensus view on how the physiology of an ESRD patient interacts with an anemia agent to work. Who knows what they're going to do? It's a complicated situation, but they were very open minded, very inquisitive and clearly spending a bunch of time on the issue. That's all we could ask for right now. And now we hope that the gears of the government can grind forward and change some of this stuff, which just doesn't look like a good idea.

Any update on -- or just your view heading into the fall on MSP of market basket for '08? We kind of feel like the midterm politics with health and Senate changing control derailed the efforts last year. Are you as equally optimistic heading into this fall as you might have been last summer before the change of control?

I don't know if equally optimistic is quite the phrase to use. If you ask me what are the odds that we get an annual -- get our bill passed, which is the annual update. I'd say we have a chance. The anemia furor is quite a distraction that gets in the way right now of our momentum. In general, the climate for spending money is not good in D.C., and with the change of control, it's often more difficult to get stuff done. On the other hand, the MSP extension gives our bill an incredible virtue that very few have, which is that we have a pay-for that covers the Medicare reimbursement increase in the bill. So we have a chance and we're fighting for that and right now the anemia discussions are a big distraction.

Thanks for the time. Finally, did you decide on a day for the Capital Markets Day yet, or is that still pending?

It looks like July 9.

Thank you.

Your next question comes from the line of [Kerry Nelson of Skyzone].

Hi, good morning. Could you just help some of the confusion in terms of pricing? As you talk about the pricing for the second half of the year, I'm confused by the fact that your largest competitor isn't seeing the same thing. Do you think that something's happening differently in terms of the competitive environment as it relates to your competitive positioning?

Could be any number of explanations. Could be our current rates are higher, and that's why there's a difference. It could be that they're looking at the same picture and are more optimistic than we are if our rates are the same. Could be their better negotiators. So I guess those are the three potential explanations, unless you have a fourth. Logically, those are the three different ways that discrepancy could be covered --

When you look at the overall industry, would it make sense to use price to gain additional share?

The answer to that is, I think, in both general and American health care service and particularly in a segment that's architecturally set up like ours, it's a very bad idea. We are a low fixed cost business, high variable cost business. There isn't huge marginal impact of getting incremental volume. In addition, referral patterns are so sticky -- patient loyalty is so high, physician loyalty is so high -- that it's very difficult to actually have a contract lead to significant share gain. And then even if you get past everything I already said, what you inevitably do is elicit a competitive response, where someone wants to do the same thing or more aggressively on the next contract to make up for any lost volume. So for those three reasons, we respond to your question by saying we don't think that it is a good idea for DaVita to try to go out and try to lower price as a way to gain market share.

Got it, thank you.

Your next question comes from the line of Justin Lake of UBS Research.

My question has been answered. Thank you.

Your next question comes from the line of Chuck Ruff of Insight Investments.

Hello. Can you tell us what experience you have seen with any change in EPO utilization so far in the first four months of the year?

We've never discussed EPO use up and down by quarter. We just don't think it's a good idea. It's incorporated into our guidance. We actually provided a guess on what might change because of all the noise and some of the modest modifications to guidelines. So we're giving you all the go forward information we can and we're taking accountability for our guidance up to the point of all the information we have as of today, but to start disclosing utilization trends quarter by quarter, it just doesn't seem like a good idea.

Okay, but I did understand at least so far the utilization is not seeing the reduction of 2 to 5%, at least so far? Is that what I heard?

Correct. We have not experienced a 2 to 5% decrease recently.

Okay. Right off the bat at the beginning of the conference call, you reminded us all that doctors make all the decisions on prescribing drugs and -- happy you did that. Those doctors, do they have any inducement or reason to prescribe more or less EPO? For example, do they share in the profits of a center?

For 90% of our physicians, the answer is totally no. In other words, they don't own any part of a center. And if they have a medical director contract, none of that is tied in any way to center economics. And it's a long-term contract which allows them to refer all their patients elsewhere, use lots of EPO, use no EPO, and it doesn't change our contractual obligation to them -- multiyear obligation to them -- to pay them for medical director services and their obligation to deliver those services. So for 90% in about five different ways, the answer is a pure and simple and comprehensive no. For the other 10% of our physicians who own an equity stake in the center, with us as their partners -- one could argue that, gee, that gives them an economic incentive to prescribe more EPO since at ASP plus 6 there's a contribution margin there. So the next question you would ask is -- well, let's compare the hematocrit level and the amount of EPO used in those 10% where the doctors clearly have naked economic interest to use more EPO with the 90% where the docs clearly have zero economic interest in prescribing more EPO. And the facts are the use of EPO is exactly the same and the hematocrit level on average is exactly the same. So the doctors do the right thing whether they've got stunning economic interest or zero. They do the same thing and the right thing and they make those decisions by themselves, just like they should.

Great, thanks.

Your next question comes from the line of Jill [Schroedinger] of Mason Street Advisors.

Hi, Kent. I have a commentary and then also a question afterwards. As a long-term large and extremely frustrated shareholder at this point, I'd just like to point out for everybody on the call that since your Capital Markets Day in 2000, you've been calling for flat operating income the following year every year since then, so the credibility in Andreas' point about crying wolf, I think you've exceeded that at this point. But my question is for managed care pricing -- which you've also been talking about for the last five years as going down when it hasn't. Are you saying for next year the contracts that you're signing are negative from price decreases that offset any margin improvement you would get from the Gambro acquisition? Because they would have to be fairly negative to offset that expansion.

Could you say the question again?

Are you looking for such large price decreases that will offset the margin expansion that you're getting from the Gambro acquisition in your managed care contract? Because otherwise flat operating income isn't possible from a mathematical standpoint.

Correct. What would lead to flat OI would be the price increases being larger than any pickup -- price decreases, excuse me.

But you've never had a price decrease in this industry on a managed care basis. Is that correct? On an overall basis

I think that is probably be true.

So why would you be getting it now when you have greater market share than you've had in the past, when you've just said you don't want to get into a price war, that it's a low fixed cost environment -- why would you contract at lower prices?

Well, not happily. But in the cases that we've done it, it's because we thought the option of fighting was worse.

The option of fighting is that you would trade off volume for price -- don't want to give up the volume, so you gave up the price, but you just said that didn't make sense in this business to do that.

It doesn't make sense to go out and reduce price to try to gain volume. If you have a payer who is able and willing to invest in a sustained battle to move patients, in some cases you may decide that they will succeed or succeed enough that it makes more sense instead to compromise on the rate and try to move forward in a longer term more constructive win-win relationship. This is not exactly a foreign concept in business. And you can point to a lot of healthcare segments over the last 20 years who went through very significant periods where they had year-over-year rate increases and then they did run into a period of time where average net revenue decreased from the private sector. So that is not again something that's ridiculous to contemplate.

But you've been contemplating this for five years and it hasn't happened. What's going to happen this year that's going to make that happen? Given the fact that you have higher market shares now that would make it more difficult to move those patients. You just talked about how the doctors control the patients and the patients don't want to switch and it's very sticky. Why this year will prices go down for the first time ever on an overall basis?

First of all, what we've tried to point out is that we can't be clear on the timing, and I literally referred to the next two years. Second, to answer your question, is why now -- we can look back and see why it happened at any other segment in any other particular year when it hadn't happened in previous years. In this particular case, what we've seen over the last five years is very substantial consolidation on the part of insurance companies, much more integration of insurance company information systems than has ever happened before in the history of American healthcare. We're also going into the part of the cycle where year-over-year premium increases are flattening or decreasing, and we are also looking at some people who'd not spent time on dialysis before starting to spend time on it.

But you also leave out the fact that the dialysis industry as a whole has consolidated dramatically over that time too, and you should have -- market share --

I left it out because you already cited it. The question you asked me is why it might happen now when it hasn't happened before and that fact was not relevant to answering the question you asked.

I'm trying to put a probability on the fact that your prices might decrease for the first time. Like you said, you have not been good at predicting this operating income for the year. I'm wondering as a shareholder, when it's not helping your stock price -- you've been totally inaccurate at predicting the out year and why people incorporate that in their outlook is beyond me at this point. So why even put out that guidance when your track record in providing it has been so dismal?

Well, our track record speaks for itself. In this case, the bad part of our track record is that we've been wrong in predicting private rate compression. Of that sin, we are unambiguously guilty.

But at what point do you --

There are other aspects --

We could go on and on about this forever, Kent, but it's totally frustrating. I'll reiterate this and we'll move on, but it's totally frustrating as a long-term shareholder to look back and look where your share price is trading at this point and the reason it's down today or not up as much is because of your comments that next year's operating income is going to be flat with this year -- when realistically and probability, that's very difficult to model, and that's my only comment, is that as a shareholder, I'm extremely frustrated.

I sense your frustration and empathize and I'm sorry we've been inaccurate. We wish we could have done better.

Well, I think the way to do better is just not make the prediction when the probability of it coming out is very low.

If we thought that was the case --

All right.

-- we wouldn't make the prediction.

All right.

Would you like to ask another question or provide any other counsel? Operator, I think maybe we can go to the next one and then she can come back if she would like.

Your next question -- you have a follow-up from the line of Balaji Ghandi of Oppenheimer.

Can you hear me this time?

Yes.

Bill Bonello did a good job of picking up where I left off. Ultimately, you are implying that with that operating guidance being flat, that revenues will be down, I guess is the takeaway then? Could you provide net revenue guidance then for next year?

When we say aggregate revenue would not be down --

I should say commercial payer revenue would be down.

What would be down is the margin, meaning that cost would increase more than revenues would increase. And therefore margins would be down and therefore operating income would be flat and so -- help me out on exactly what question you're asking.

As I play around with the numbers, it would has to imply that commercial rates would be down an absolute dollar basis and actually almost have to be down -- commercial revenues would almost have to be down on an absolute dollar basis. Maybe this is something I could talk offline, but that's just where I'm coming out.

Yeah, I just don't know enough about your particular model to comment, but certainly you can have a follow-up conversation with LeAnne to step through it. Okay, great. Thanks.

We have a follow-up question from the line of Andreas Dirnagl with J.P. Morgan.

Kent, you mentioned it in passing, but can you give us an update about what you're hearing coming out of Capitol Hill concerning the kidney care updates -- sorry, the MSP extension and the updates for '08 and the following three years?

I don't think I'll be able to add anything to what I said a moment ago. Let me try to be real concise and then come back at me if I'm missing something. As to getting our three-year update, the anemia controversy is a big distraction and is hurting our current momentum. Hopefully we'll put this controversy to bed and get back to work on the bill and we have a chance, but it's going to be a tough fight. One of the things that gives us a big chance is the fact that we've got the pay-for in the form of the MSP. And there's always the risk that someone else will take the MSP extension provision as a pay-for for something else they need and we won't have it available in our bill anymore.

Finally, and this is probably just me being a masochist -- but given some of the frustration you've heard on the call, is there anything you can give us in terms of any thoughts or any contacts you've had about the potential for taking the company private?

No. We have no intention to take the company private, although it's not our company. So I guess we'd really have to address that question to the board. I've never asked them and they've never expressed any interest. So I guess what I could do if the shareholders want is go ask the board what they think. But as for us, we're executing on a strategy in a way that's very frustrating for some of you and the board has never brought up that subject with me.

Okay, great. Thanks.

Your next question comes from the line of Justin Boisseau of Gates Capital Management.

It's actually Jeff Gates. I can just tell you I wish all my investments were this frustrating over the past five years. My question is, given where your leverage ratio is now and given the set of growth opportunities in the marketplace, when would you expect to begin the share -- buying back stock again?

Boy, we really wrestle with that, so we have no plan right now. And suffice it to say as we go through the next year and 18 months, if we are not finding a lot of acquisition opportunities and have not launched an adjacent business, and we continue to feel very solid about the future in terms of recurring cash flows independent of any particular year's operating income trajectory versus the adjacent year, that the trade-off between debt reduction and share buyback gets pretty intense. Right now, it quite frankly is not very intense for us with all the current dynamics, but maybe not too many quarters from now it will be a pretty intense conversation.

And that's because you say it's not intense, because you are seeing adjacent opportunities or growth prospects for allocation of capital? Or because cost of debt is certainly a lot cheaper than cost of equity?

Yes, right now. Of course, what we have to look out is a lot more years than right now and what might happen. The reason it's not intense now is we think that $3.7 billion of debt and 3.48, we wouldn't mind paying that down a little bit further and using cash to do acquisitions. We're hoping that some more of those opportunities pop up. So that's really what it says now, but as 3.48 continues to decline, the conversation gets a lot more intense. If we go back over the five, six years in history, we went all the way up to 5.2 or so on a pro forma basis to do the Gambro deal. So we're not worried about that and we took down a fair amount of leverage back many years ago, when we weren't as stable as a company to do a significant tender offer, share buyback, as you recall. At the same time at the other end of the spectrum, we got down as low as about 2, 2.0, because our sense was that the Gambro asset might come on the market. We wanted to have enough powder dry to do that. We've been everywhere from 2 to 5.2 and we've been leveraged as a stable company and leveraged as a not-so-stable company. So we're certainly not intellectually resigned to reside at any one part of the debt equity spectrum. Right now, no share buyback is imminent, meaning in the next quarter or two unless something dramatically changes.

Okay, thank you.

Thank you.

There are no further questions.

Okay. Well, thank you all for your interest and please do come to Capital Markets and so on some of these issues we can spend some very good time face-to-face. Thank you.

This does conclude today's teleconference. You may disconnect.