EPR Properties (EPR) 2002 Q2 法說會逐字稿

This conference is now ready to start, Mr. Brian I have the conference lines open for you and the conference is being recorded Sir.

Okay, thanks very much. I guess we're going to go there. This is David Brain of Entertainment Properties trust. I want to thank you for joining us this morning. As usual I want to start by reading statement which says, this conference call may include forward-looking statements, as defined in the Private Litigation Securities Reform Act of 1995, identified by such words as will be, intent, continue, believe, expect, hope, anticipate, or other comparable terms. Company's actual financial condition results of operation may vary materially from those contemplated by such forward-looking statements. The discussion of the factors that could cause actual to results differ materially, from those forward looking statements is contained in the SEC filings including the company's report on form 10-K, for the year ending December 31, 2001. That said, Let me say again, this is David Brain, the CEO and President of Entertainment Properties Trust and as usual, the Chief Financial officer of the company Fred Kennon is with us.

Good morning.

And we're going to run down the quarter for you all. Appreciate you are joining us, and I will start and as usual give you little bit of brief, go through the industry and portfolio performance, and then I'd like to recap some of the announcements of this quarter to reflect what's been going on, as well as add a little bit of color to those announcements. Starting with the industry, the industry is continuing to turn in to nothing short of a stellar performance. Year-to-date box office revenues are up 16 percent compared to last year, and our portfolio is running in that track as well up 16 percent on a year-over-year basis.

This is a bit ahead of the 13 percent increase year-over-year we reported you in first quarter, so the industry has even continued to improve since that strong opening. So, industry in terms of revenue is doing a spectacular job, and I think with those numbers you will have to agree, is really a great spot in the economy and the retail spectrum right now. The revenue performance is important, as we talked about before; it contributes to the stability of our property and possibly to our earnings as locations crossed their percentage rent, which is facing threshold. In terms of rent coverage, we don't have all the data in for the second quarter yet, but we can confirm to you that our overall portfolio average rent coverage ratio is indeed, as we've marked before greater than two times, and all of our stores are greater than one time.

Regarding the potential for percentage rent, the outlook is quite positive. It is really, still only half way through really too early to tell for sure, and we do not include any new percentage rent amount in the analysis we do to provide guidance. But if the year continues to press its current course, we could end up increasing the number of properties contributing this bonus rent

from two to half a dozen, and the and the magnitude of the contribution from 1 to 2 cents a share, is something more like 6 to 7 cents a share.

Now, in terms of current quarter company news the big announcement really for the second quarter were two. One concerning our preferred stock sales we completed announced sale of 57 and a half million dollars of 9 and a half percent preferred stock.

Just about 30 days later at the end of June, we announced completion of a three location 76 screen package theaters for 53 million dollars both represents significant positive events for the company. The preferred equity sale represents access to a portion of the capital market that is valuable to the company and often thought not to be available to. The offering was completed at an attractive rate, given our investment return and the increase in equity results in a favorable reduction in leverage taking us well under 50 percent. The theaters we acquire represent another step in building a high quality portfolio. The three theaters are high performance properties each of them ranking either first or second in the metro market with solid cash flow and coverage ratios consisting with our portfolio. The only thing we had hope to improve on these two transactions is their timing. We had targeted our efforts in these events to have them occur nearly or rather simultaneously certainly not among the part.

The lag in the execution of the property purchases which was due to monitor but essential third party performance in compliance items and the resulting month period of cash balance holding costs us about 2 and a half cents on a per share basis this quarter, but this quarter only. The great news is that we continue to make progress on the capitalization investment plans we set out in our communication with you and importantly at our targeted yield. As of now, the progress is made that our run rate is over 60 cents per share on a quarterly basis. We have achieved 120 million dollars in accretive acquisitions for the first half of the year and are progressing solidly with some minor delays with the type of referenced earlier on the 44 million dollars two property package, the locations in suburban Detroit and Alexander Virginia were referenced in previous calls and disclosures and we have terminated efforts towards purchasing one developer Florida that we represent some earlier disclosures of likely acquisitions as a result to diligent negotiation issues.

Alternatively, we have fresh property acquisition news to report to you this morning. That's the quarter end we have acquired the land and expect upon the completion to acquire the building improvement for an 18-screen Megaplex theater in West Little Rock, Arkansas to be operated by rave reviews and the theater is currently under construction and our total investment at this location is expected to be about 12 million dollars.

under construction and our total investment at this location is expected to be about 12 million dollars. The terms of lease are comparable to other investments made this year. Reverie is another new operator for our portfolio, but as our investments reflexes in our opinion they high quality operate. Reverie View currently operates in all state of the art megaplex circuits in 5 locations in screens and is run by a highly qualified group of season's industry vendors. We have further agreed in principle to invest in another comparable theater development with broadening our relationship in creating backlogs for the company. With another party, a theater developer , we have signed the letter of intent to acquire few megaplex theaters, comprising 36 screens. We believe the subject properties are two of the highest quality properties and we are pleased to add to our client tenant relationships. The term of lease is being acquired as a part of these property transactions are getting comparable to our portfolio averages for a some better percentage of rent threshold in thus a bit higher potential upside. We expect our total investment in these 2 properties to be approximately 20 million dollars. Well, now with that update on the industry and our portfolio performance a recap of some of the recent company transaction I will turn it over to Fred, to review the financial.

Thank you David and again thank you all for joining us this morning. First I will review the operating results for the second quarter and then discuss a bit about our current capital structure. Our rental revenue for the second quarter was up 27 percent over last year to 17 million. This increase is largely due to the 5-megaplex theatres, we purchased during the first quarter of this year, together with 3 key interest of Brown lease of parcels we purchased in midyear 2001. As David mentioned we completed a 53 million dollar acquisition of 3 theatres during the last week of the second quarter. So we saw a very nominal impact from that investment in the current quarter. Based on the portfolio as of June 30th including the 3 new assets our current run rate for revenues would be about 18.4 million on a quarterly basis. GNA expense showed a significant favorability compared to the prior year quarter falling by over 400,000 or 44 percent. Last year as you will recall we were paying for the cost associated with the successful proxy defense that was concluded in second quarter last year. Our current quarter GNA reflects an expense ratio to revenues below 3.5 percent. We have been and will continue to be a leading organization. However I am quite pleased to announce the addition of our 7th employee Tanya Carl who joined us in the second quarter. She brings considerable accounting expertise to us and has already proved a valuable addition. Interest expense increased about 1 million compared to second quarter last year.

This is reflective of the 47 million in additional debts compared to June 30 last year. On a FFO, on a fully diluted basis increased 24 percent over the prior year to 10.3 million for the quarter. On a per diluted share basis FFO increased 2 percent to 57 cents compared to 56 cents last year. Our first year FFO result were negatively affected this quarter from the timing effect of the issuance of our 57 million dollars preferred equity in May and a subsequent investment of those funds at the end of June. This timing lag from being long on cash in June reduced our second quarter results by just under 3 cents. With the additional 98 million in equity proceeds we have raised this far in 2002. We have significantly improved our balance sheet strength and again proved the ability to access capital markets.

Our debt leverage profile has been reduced from approximately 55 percent a year in 2001 to a level of 50 percent at the end of the second quarter. This additional debt capacity provides us flexibility to continue to execute our business plan and aggressively pursue the creed of high quality acquisitions that we've done in the past. With that let me turn it back over to David for his closing comments and then we will answer your questions. David.

Thanks Fred. I guess the points we want to focus on this morning are we had a timing issue in the quarter but otherwise we feel like a very high quality quarter in terms of the accomplishments and on track otherwise for all that we have set up for this year. Now with that I'm going to turn it over to questions. I don't know if the operator is on...

I'm here.

Okay thank you.

I think it puts the total given around 33,000 or about 34,000 there. We opened the year with about 34,000 screens which was down about 2500 screens from the prior point, prior year.So I said consistently I think that a screen count in the low 30, 000 as opposed to the high 20's that other people have set for as a target. I said a you know, screen count in the low 30's is really is much more reasonable , logical. Frankly Tony I think that a lot of the screens, there are some as we've characterized before I think is the `Living Dead`. There are some screens out there operating that are reporting and that even if accounted in the screen count that effectively are non competitive any more by virtue of their going to summon or by a factor operating really on a percentage rent basis only with their landlords. We're trying to keep them alive as they dont really have an alternate use for them and that sort of thing. But effectively I think the clean up that we've seen has largely occured and we're getting just the minor cleanup portions now.

Okay. To ask a question you can get put into the queue by hitting star 1 on your touchtone phone and you'll be put into the queue I'll bring you forward one at a time and if your question already has been answered and you wish to exit queue, you can exit the queue by hitting star or the pound sign. We have several questions here already. The first question is from Tony Paolone. Go ahead Tony, you have the floor.

Thanks, good morning guys.

Morning.

Morning

Just first David, tell me what about the box office trends, can you give an update on screen counts in the country, new screens reductions, etcetera.

Tony, yes. Screen count was down about 400 or 500 screens in the first six months of the year. So it was a reduction but it was a somewhat minor reduction. It appears the way I'm looking at it right now it'll be about the same in the second half of the year so maybe 1000 screens come offline net this year, is about what the trend is.

Okay and what about output.....

I think it puts the total given around 33,000 or about 34,000 there. We opened the year with about 34,000 screens which was down about 2500 screens from the prior point, prior year. So we said, I said consistently I think that a screen count in the low 30,000 as opposed to the high 20's that other people have set for as a target. I said, you know, screen count in the low 30's is really is much more reasonable, logical. Frankly Tony I think that a lot of the screens, there are some as we've characterized before I think is the `Living Dead`. There are some screens out there operating that are reporting and that even if accounted in the screen count that effectively are noncompetitive any more by virtue of their going to summon or by the fact that they are operating really on a percentage rent basis only with their landlords. We're trying to keep them alive, because they don't really have an alternate use for them and that sort of thing. But effectively I think the clean up that we've seen has largely occurred and we're getting just the minor cleanup portions now.

Okay. In terms of what's coming down the pipe content wise and what are the expectations for box office growth for the full year? Do you think the box office hits while at some point,last year was a pretty good year as well in terms of growth, how was that?

Yes, last year was a pretty good year particularly in the latter part of the year although first quarter of 2001 was a very strong quarter and first quarter of 2002 beat it by double digits. So overall box office is up 9 to 10 percent last year and as I've just said reporting 16 percent year-to-date. It really the feeling is for the balance of the year Christmas product and so forth with a number of kind of repeat entries with the Harry Potter and the Lord of the Rings and in James Bond and a few things. People are very positive about the trend being sustained. I really don't want to go on record though of being a prognosticator of box office, it's a dangerous position. We like to report it and I think keep everybody abreast of it because its not something that everybody looks at but at the same time I got to tell you the trends what we can see from the trends are all very strong and Tony as you know, we've talked to many of you about the underlying fundamentals supporting those trends, particularly the demographics are all very, very good with the growth in the 14 to 24 year old segment and so forth it should support could reasonably thought to support this kind of growth on a sustained basis, you know, for a good period of time. So we're optimistic about it.

Okay, in terms of your portfolio just came as conversation there, you reported greater than two times coverage in your portfolio for rent for a number of quarters now and box office continues to rise, can you be more specific as to did it go from 21 to 24 as box office revenues go up. I mean are you seeing a similar type increase in your coverage as revenues go up or is there something offsetting that?

We haven't seen an entirely offset, there has been some increase in our rents as we have many of our of our stores that invest on an annual basis, so we have an increase of the coverage, you know, element, the hurl becomes higher, so, that keeps us from increasing this much. Additionally, there had been, people have made a lot of this, and I don't want to overplay it here, it's been modest, and I want to stress modest, to the tune of point or two of revenue, at the serial level increased in film rent, which actually are stabilizing or abating now. Our coverage ratio is still turning here in this, they're better than two times that we've talked about, we've really tried and really, they're moving towards a number more like two and a quarter times, that's I have been saying, as I said they've improved by about 10 percent. But, it's not been a massive movement, you know, it's been a favorable trend. It's been positive, but at the same time with these mitigating factors that I spoke about, and, some of the operators have increased operating cost. Many of our theatres quite frankly are operating at very high levels of utmost capacity. And operating cost, sometimes is the staffing requirements, in order to get that pretty high so that operating cost is increased commensurately as well. So, we have seen a 15 to 20 to 20 percent movement in our coverage ratios, but at the same time it has been all favorable.

And Tony let me add that, as far as our portfolio average goes, one of the good news elements is that on the lower end spectrum for those stores that tend to have or have had the lower coverage, those tend to be moving up.

Yeah, we've had gravitation towards the mean. And I think we've described it before. We have stores with three and three and half times coverage, very often those are such high volume stores. They do get billed against, if not, within three or five miles, sometimes within seven to 10 miles, it takes a little bit of business off those guys. So the guys at the top end of our performance spectrum have moderated a little bit, and the good news is, the guys at the lower end, they are the guys that have had may be some remnants of old-style competition that have close and they picked up their residual business, and we had this gravitation towards the mean in 2O. So, overall we've moderately increased our coverage ratio, we've pretty significantly decreased the standard deviation. So, everybody's performing much more closer at that 2O range, and we feel real good about that.

Okay. Also on another topic, I've participated in your calls for a while now, and it's tough from this side to really see Peter Brown's involvement in what it is. Can you comment on that? Not heard him on any calls, again it's tough to gauge, his day-to-day involvement in the business at this point?

Well, I don't know if Peter has ever been a speaker on the calls, conference call, in the first quarter of 98, I know that he came down to the office and sat in on, but I don't think he was a speaker. Tony, he has never been a speaker, and as we're certain since that last time, because it's just not been appropriate, because, as a non-executive chairman, he's not involved day to day. As the management's report to the community shareholders and analysts like this call represents. So, he did not have any day-to-day involvement, he is a non-executive chairman in all the respects, I think that's appropriate. But that's it, he's not on the calls and has not, and I don't think there should be any expectation that he would be.

Okay, and finally in the same vein, and it's certainly not to raise anyone's ire, but, you know, he's been under some pressure over AMC or some scrutinations they've given some long forgiveness over there. Can you comment on your side of the shop at EPR's status of Executive Loans and how that works out and intentions and plans there?

No, I can't. First of all the AMC's actions on business is just that it's there. There is no reflection involvement incorporation or otherwise about entertainment properties, in that decision or anything about that. So, I can't speak of that at all. I can tell you that with regard to the, there are some share holders, share purchase lends, they are relatively modest, and all of them are, first of all, they are full recourse note, they have no provisions in the notes for forgiveness, and there are no plans, I want to stress that period, none, whatsoever, for any forgiveness, and there is nothing of that sort is contemplated in any way.

Great. I appreciate that. Thank you.

Okay, we have four people in the queue, the next person is William James, go ahead William, you have the floor.

Fred the, preferred, what has been in the summary's balance sheet. Is that in this shareholder equity or is it under total liabilities?

Shareholder equity.

Okay, and then, this point over, over a, going forward towards debt, total debt EBITDA, if you could look at it that way, what is your intention there on that net ratio? If you have been in to the debt position?

Well, we've always characterized our debt objective from a leverage perspective and we'll just will stay with that. We expect that will be typically in a range from 50 to 55 percent.

We're now, as I suggest in my comments William, we are significantly under 50 percent give us some leverage capacity not to say, you know, given the track in this we will continue to evaluate and we likely ended up at a conservative leverage ratio but we will use it as it makes sense but we will use it to the range we talked about previously and we will use, you know, we will use equity if the operating percent itself as it has to deliver and use the capital market divisionally. So, we have kind of given what Fred said little leverage capacity in the company but at the same time we will continue to evaluate all the alternatives before.

Now that the minority interest rate, is that consolidated?

Yes it is, that is the minority interest of the family members associated with the Gulf State's acquisition that we did in March, they retained 15 million of equity in that subsidiary and that is convertible equity.

Okay but that, that balance sheet isn't consolidated and reflected in this balance sheet?

Absolutely.

Okay and then the that's it. Thanks a lot.

Okay thank you.

Josh Rails has next question. Go ahead Josh, here is the floor.

Good morning gentlemen how are you?

Good morning Josh, good.

Good, I saw that you saved 2.5 cents from the SG&A reduction and that was offset by the delay in deploying the capital that you referenced earlier into acquisitions, so on the net basis, it looks like you are up about 2 percent when you adjust for those factors, it seems kind of low considering the yields you are getting on the new acquisitions, may be you could explain why the fully diluted FFO growth is slow as it was in last year, year-over-year?

Well Josh, I think probably the simplest explanation would be the delivering impact of the equity we have raised. All of the acquisitions are 120 million dollars that we have done this year have been done entirely with equity. If you look historically we have always done it on more of a blended basis 50 percent equity and 50 percent debt. That does slow your earnings momentum a bit.

So you just have a little bit of catch up to get your balance sheet back in order and now we are going, the fun should begin beginning next quarter?

We would expect to and have not yet but we would expect to have the leverage returns to more of a 50 percent or slightly above 50 percent profile.

Yeah, when you started adding, you know, the acquisitions with lower cost of capital capital, you know, you have lot more, get a lot of more kind of but the delivering into the balance sheet qualitative improvement is really something we saw the right thing to do and then as far as we have exercised with the common offerings, we had at first quarter and the preferred offering in second quarter.

One last question. The Little Rock deal with rave review in the two caramite deals. What, can you comment on what the free and clear yield is on those deals going in to EPR?

Josh, what we talked about is that I think if you look our portfolio is yielding about 11 percent, we talked about yield consistent with our portfolio, we really feel like to discuss the individual yield on transactions, that's somewhat limited, you know, tie our hands a little bit in all these discussions we get into. But our feelings is what we try to convey to people is we set the cap rates we thought were the you know, a kind of low levels and we have been you know, satisfactorily completing these transactions and describing them as at least consistent about premium to our portfolio yields so, I think I'd leave it at that.

Thanks guys.

Thank you.

Okay we have Jim Sullivan in queue, go ahead Jim you have the floor.

Hi Good morning Jim Sullivan, Prudential Securities. How are you doing guys?

Hi Jim, how are you?

Two of the questions, first of all you talked about the sensitivity or a some range of sensitivity on the percentage rent David, can you just remind me here what is the average percentage rent that the tenants are paying and are the percentage rent causes a natural break or not?

Generally they are Jim, we have really kind of run the gambit now. We started all with original, even look at our original 16 properties, kind of a first of the programs that we got on to, pretty much all at 6 percent natural break, which puts them at a very high percentage of break point. And really none of those properties are added near their percentage rent break point. Subsequent acquisitions, we have done really though through 1999 and beyond we really had natural break points that are at 8,10,12 and that type of percent of revenues even up to 15 percent of revenues and unnatural break points that have really set break points at around over 3000 dollars, plus or minus on the proceed basis, which is you know, not too far off where our revenue run rate is, so, we have a big good number of, you know, five to ten theaters, that are, of those now 31 theaters that are added near their break points.

So for modeling purposes we should be thinking about probably it sounds like about a 10 percent average in terms of the variable on percentage rent as an average?

10 percent's pretty close, 10 percent might be pretty close, I would say Jim.

Okay. You've talked about the acquisition opportunities of course and with the balance sheet in better shape, everyone is expecting to put it to use now. Can you give us, some indication as to what's happening to the Cap returns in the industry given how solid the performance has been at the underlying assets?

Well, cap rates, you know are still, I think in the range that we've spoken about them and I think they've tightened modestly. There's been capital flowing back into the industry to a variety transactions but at the same time, you know, financing the real estate has not been the first choice for a lot of people again because of the type of understanding and the that we have in the industry, we're in a good position I think, still be the better choice and getting cap rate rather near to, you know, what we talked about in our portfolio run rate.

And in terms of competition for financing there was a private group in Chicago that had raised money a few years ago that was active, they're primarily active in the secondary market and I know one already has put up, has done a couple of deals. What kind of competition are you seeing, are you seeing more companies come into the business, do you expect more to come?

Well, I don't know we've seen a lot, I think we've seen as you mentioned there is a private group called The Reflex Entertainment at Chicago and then one Liberty and you see reality income, I think has just a couple of theatres and continues to look at it by a couple as a part of their portfolio. I think you'll see the same thing, mostly retail rates now are not aggressively but modestly more accepting of dealer ownership as a part of their centers but I don't think we have any formal large competitor. I think our major competition is still developers and the retail mould developers and occasional brief and nobody is specializing it the way we do.

And in terms of potential acquisition opportunities, of course the industry focus has been on consolidation here for the last several years. So, what can you tell us about the: number one, the rate of Megaplex supply growth and number two, the potential range of opportunities with the existing inventory out there?

Well, the Megaplex supply growth has really been at a close to a standstill. I mentioned the 500 screen reduction, that probably were about, there were about 8000 screen closures and about 400 or so screen openings, still was pretty slow relative to the 2 and 3 and even 4000 screen pace we've seen in the prior years. So it's kind of a shadow of itself. Megaplex developments, you know, I just spoke about the Little Rock transaction, but both is under construction, there is some new construction going on, there is some new development. I'd say its fairly modest, in much more rational basis rather than, you know, I don't want to say near rational but an aggressive, it is just a much more modest pace than it was we saw in the late 1990's. Right now with regard to the standing inventory there is we have talked about that, we have demonstrated that with a you know 120 million of acquisitions and more that we have you know in upwards 200 million that we expect to continue to get completed by the end of the year. So, that's just about right for us, we have been selective same way we have always been and we continue to have our opportunities. So, we are not at want for really for opportunities right now in any way. There are good opportunities but at the same time, we are taking some new bills just as I announced that we are progressing on one, when we think that makes the most sense. There is still a good opportunity out there for development, lot of communities that are still significantly, significantly under built with regard to the MEGA plan.

Okay and then a final question from me, in your comments I didn't recall hearing you comment on guidance for FFO per share for 2002. We gave got a range on the street of 247 to 253 with a 250 consensus, what is your comment on the guidance?

Well I will tell you, we have really, as I said we are at 67 run rate right now, I think as we continue as I talked about we have another 44 million of acquisitions we expect to conclude very shortly. My expectation is this will probably guidance is better left at more like a 242 number for the total of the year with something on the order of you know 62 to 64 cents for the next couple of quarters that's just really been conservative because of the some of the timing issues we have had, we have got a little frustrated and we have got to allow for those in my thinking. I think though they get us to a run rate of around you know 65, 66 cents for the following year easily which is very positive and I think with silly opportunities before it is very supportive of the estimates that are out there.

Okay very good thank you.

The next question is from Tom go ahead please.

Hi fine, is this David?

Yes it is.

David, I am stockholder of entertainment properties they are around since 99, and I just want to say that you folks have done a fine job.

Thank you Tom, thank you. I appreciate your interest and your comments.

No I have one other comment that I would like to make if I could, with all the talk about governance on cooperation's that I here on the news, it kind of concerns me and I just want to speak to you about management stock options and low interest loans and forgiveness on those loans.

Yes sir.

I am reading the annual report and I see that you folks have got almost 600,000 outstanding options and that the options you have exercised these stockholders loan management over 3.5 million dollars and on page 32 of your annual report, it states that the compensation committee and I assume that's you fellows.

No, no sir that is an independent,

Oh it is,

Separate committee, yes sir.

So you know I am headed here . It says here that you could forgive those loans without cause, now, my point here is that you gentlemen probably deserve everything you are getting here, I don't doubt that, but shouldn't stockholders get a proxy and at least have some type of input as to how many options are going to be granted to management, how many low interest loans will be granted and whether or not there will forgiveness and I will sit back and watch you talk.

Well, I appreciate your comments and look we are very tuned in this issue right now I want to say that. First of all, there is a compensage committee and the compensage committee is comprised of independent board members number one, the amount of options available was approved under our original show offering and quite frankly the 600,000 options that are issued relative to I believe was 5 million options approved to be available is really quite modest relative to most companies now, I am not saying that and what it deserved or not Iam just get going through the numbers. Whether further option award will be approved by the shareholders, I can't speak to I know all these matters are being considered by the compensation committee at this time and I will be glad and I will make a point of reporting you all and we will make a point of reporting in this disclosure and be glad to discuss on calls in the future. But at this time, I do not know what the voting positions of those awards right now. The voting provisions that stay at now is approving them available to be awarded and then the compensage committee can award them. Now with regard to the loans, the loans were approved at really, the only loans that have been executed in the companies were executed one of the IPL's and as a recruitment vehicle for the officers during the company and secondly at the time of promotions when I was promoted to Chief Executive Officer and Fred was promoted to Chief Financial Officer and our general counsel Greg Silvers joined the company as general counsel and now Chief Development Officer so those were loans at a point of promotion they were not a normal course matter and there had been no regular loans granted. The loans 3.5 million dollars as I mentioned, there is no consideration right now to giving us those loans whatsoever.

Are they being amortized David?

They are not being amortized. There is interest annually on those loans and I stated central government rate.

6.24?

And the loans are a forward maturity. They are fully recourse loans; so they are you know they are for recourse . I think that has role in terms of being the they are available to full repayment for the entire assets network, the individual who is signatory to them.

Okay and I don't have any problem David at what is sitting here on the board at the moment. I do not think there is any of this is excessive. I guess my concern is you know, some stockholders have suffered because they were excessive and I just want to make sure there is some kind of mechanism in place to protect our equity from excessive dilution.

Well I hear you, I want to tell you all to the reduce absolutely, completely and unequivocally no consideration on any additional loans this time and well I think now this there is showed the loans have been under the new builder we just pass to become illegal, so I do not think we have think about.

Yeah. It is the matter of fact I do not think it was the bill. I think it was the New York Stock Exchange rules but that only apply to companies with larger capitalization and entertainment property.

Well, I will research that but I will tell you there is the loans made were due to not normal course matters but really extraordinary events, there is no contemplation of furthering of that practice of any additional loans and there is nothing about the loans that you although, I guess, as the document says they could be forgiven by the compensation committee, there is no contemplation of that whatsoever.

Okay and so I don't end this on a negative note, again it's been a quiet a ride owning your stock but it has been quiet beneficial and I thank you very much.

Well, I appreciate it Tom and I will convey your comments and your inputs to the compensation committee.

Thank you very much, Brian

All right thanks.

Anybody else having a question can ask the question and getting into the queue by hitting star one at this time. Okay Mr. Brian, it looks like that's all the questions.

Well that's great. I want to again thank everybody for joining us this morning, we always appreciate this opportunity for communication and further if anybody has any comments or questions or otherwise please feel free to call the company. We look forward to hearing from you and thanks for joining us. We will see you next quarter.

Thank you.