Great Lakes Dredge & Dock Corp (GLDD) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to this Great Lakes second-quarter 2006 earnings update. Today's call is being recorded. Now, at this time, I would like to turn the conference over to the Chief Financial Officer, Ms. Deborah Wensel. Please go ahead, ma'am.

Thank you. This is Deb Wensel, Chief Financial Officer of Great Lakes, and I welcome you to our quarterly update call. The purpose of this conference call is to provide you with a summary of Great Lakes second-quarter 2006 financial results, operating and bidding activities, market outlook, debt and liquidity levels and other relevant information. Following the presentation, you will be given an opportunity to ask any questions you may have.

Before I begin however, I need to remind you that certain matters discussed may be considered forward-looking statements, and participants in this call are cautioned not to place undue reliance on such forward-looking statements. Furthermore, any forward-looking statements speak only as of the date hereof, and Great Lakes assumes no obligation to provide any future updates.

Our revenues for the quarter ended June 30, 2006 were $114.1 million, which compares favorably to second-quarter 2005 revenue of $93.4 million and is consistent with more recent quarters' revenue levels. While contract margins were similar between the periods, the Company's gross profit margin for the quarter ended June 30, 2006 was improved to 15.4% compared to 12.2% for the same quarter in 2005 with the increasing utilization relative to fixed costs. In addition, the margins in the second quarter of 2006 continue to be negatively impacted by increases in our self-insured reserves related to our Texas-based personal injury claims, which I will discuss a bit later.

The Company achieved EBITDA of $16.9 million for the quarter ended June 30, 2006, compared to only $10.2 million for the same 2005 period. EBITDA was ahead of expectations for the quarter due to a mix of projects performed that included almost continuous utilization for a number of our most productive dredges throughout the quarter. Revenues and EBITDA for the six months ended June 30, 2006 were $222.5 million and $27.1 million respectively, which compared to $193.3 million and $15.4 million for the same 2005 period. The increase in revenue and EBITDA is attributable to additional foreign and beach revenues compared to the prior year as well as performing on projects that had solid contract margins with a high level of utilization throughout the period.

The following is a general overview of contracts contributing to the quarter's operations within the context of the dredging markets we serve and our demolition segment. Revenue during the quarter included $55 million of capital, which includes $17 million of foreign, $34 million of beach, $12 million of maintenance, $13 million of demolition for total quarter revenue of $114 million. The comparative numbers for the first quarter of 2006 are $40 million of capital, including $17 million of foreign, $22 million of beach -- I'm sorry -- $41 million of beach, $16 million of maintenance, $11 million of demolition for a total of $108 million for the quarter. The comparative numbers for the second quarter of 2005 were $41 million of capital, including $10 million of foreign, $22 million of beach, $18 million of maintenance and $12 million of demolition for a total quarter revenue of $93 million.

Our capital dredging revenues for the quarter totaled $55 million -- was primarily generated by the following. We began work on an option to our Miami Harbor deepening project and an extension to our Oakland Harbor deepening project, utilizing our Clamshell Dredges 54 and 53, respectively. We continue to work on our deepening projects in New York's Arthur Kill; Wilmington, North Carolina; and the LNG project in Texas. Finally, we had a significant contribution from our continuing work on the Durrat land development project in Bahrain, utilizing our hydraulic dredges Carolina and California.

Beach revenue in the second quarter totaled $34 million. Beach revenue continued to represent a large portion of our revenues, as it did in 2005. This is a result of the substantial amount of beach work put out for bid last year and the larger share of the beach market Great Lakes has obtained in 2006. Beach work contributed to 41% of the domestic bid market in 2005. Even though the bid market -- or the beach bid market has begun to moderate in 2006, it still represented 29% of the domestic bid market in the first half of 2006. Great Lakes has picked up a 78% share of the beach work put out this year. During the quarter, the Company's beach revenues were substantially generated by two large projects in Florida -- Collier County and Destin Beach -- and two in South Carolina -- Modesto Beach and Huntington Island.

Maintenance revenue in the second quarter totaled $12 million, which is consistent with our quarterly average over the last year. The majority of the quarter's maintenance revenues relate to a rental project along the Mississippi River, which was completed in the quarter, as well as two clamshell projects -- one in Wilmington Harbor, North Carolina, and the other in Cape Henry, Virginia.

NASDI had another strong quarter, generating approximately $13 million in demolition revenue. NASDI has consistently generated this revenue level over the last six quarters. The activity in the demolition sector has been solid in both the number of projects and the number of larger projects performed.

Capital expenditures for the second quarter totaled $5.7 million. Included in this quarter's spending was $1.1 million for overhaul of the Hopper Dredge Long Island. This dredge is being reconfigured as a material rehandling barge to be used on a new land reclamation project in Bahrain that I will discuss later. The total cost of this upgrade is expected to be approximately $8 million as to be funded through the Company's revolver. Once completed, the improvements to the vessel will be financed through a sale/leaseback under a long-term operating lease arrangement.

In addition, $1.6 million was spent on upgrades to three other dredges and $1 million in new demolition equipment. NASDI is also currently building a new office and garage facility, on which they spent $1 million on leasehold improvements during the quarter. Excluding the purchase of the Dredge Victoria Island that occurred last quarter, capital expenditures for the year are expected to increase by $2 million to $16 million due to a new demolition office and garage space and additional improvements to certain vessels that will be deployed overseas.

Our maintenance expense in the second quarter totaled $7.1 million. Again, these are equipment-related costs that are expensed in the year incurred. Our first-quarter spending was up from typical historical average quarters due to the timing of maintenance requirements on certain vessels. But our second-quarter spending was back down to more typical levels. Our 2006 annual maintenance spending is expected to be in line with our annual historical spending average of $28 million, as we expect utilization to be on par with historical levels.

The Company's general and administrative expenses totaled $7.3 million for the quarter ended June 30, 2006, which was reduced from $8.1 million for the same quarter of 2005 due primarily to a reduction in federal subpoena-related expenses, as little activity has occurred related to this matter in 2006.

Our 2006 second-quarter net interest expense of $6 million compares to $4.6 million of net interest expense in the second quarter of 2005. We incurred an increase in cash interest expense of $0.5 million due to the increase in underlying interest rates on our variable rate debt. In addition, we recorded a non-cash interest expense of $0.1 million related to the mark to market of our fixed-to-floating rate swap compared to a $1 million benefit recorded in the 2005 period related to the same swaps. The Company achieved net income of $2.9 million for the second quarter of 2006, which compares to a net loss of $0.5 million for the comparable 2005 quarter.

Upon delivering our compliance reporting package for the first quarter of this year, the financial covenant requirement under our senior credit facility reverted back to the pre-2004 amendment levels. At June 30, 2006, we were in compliance with all senior credit facility financial covenants as originally required as well as under our surety agreement. At quarter end, without adjustments allowed by our senior credit agreements, our total leverage was $4.8 million, senior leverage was $1.4 million, and interest coverage was $2.4 million. At June 30, 2006, the Company had total debt of $244.8 million, of which $2 million was current; total cash and equivalents of $0.6 million and outstanding performance letters of credit totaling $15.7 million.

In June, the Company made a voluntary prepayment of $3 million on its senior bank term debt. At June 30, 2006, the Company had no revolver borrowings outstanding. Subsequent to quarter end, we did receive payment of over $5 million from our Tampa project with the Corps that had remained outstanding for some time. The Company had $44.3 million of borrowing availability at June 30, 2006.

Turning to some other matters, again, there's nothing new to communicate with respect to the federal subpoena matter. However, the matter continues to remain open and we're continuing to incur legal costs. Although, these costs have been reduced significantly in recent months.

With regard to the new harbor dredge commissioned by Manson Dredging, we have heard that the vessel is operating on a project in the Gulf Coast and is now active in the bid market. This hopper dredge is over two times the size of our most recently-constructed hopper dredge, the Liberty Island, and is best suited for the maintenance rental market in the Mississippi Gulf outlet. This dredge represents additional capacity in a presently weak market sector. And therefore, the entrance of this vessel would be expected to depress pricing, absent other measures to reduce capacity in this sector. I will comment further on this as I discuss the bid market.

Due to the persistent rise in fuel prices, we continue to incur increased fuel costs. However, our new contracts take into account the increased costs, and we use fuel commodity for our contracts to reduce the impacts of changing fuel prices from the time of contract award through contract completion. Our exposure under our hedging method is the time between contract bid and award, which typically is not a long timeframe. We believe this procedure has adequately enabled us to manage our fuel pricing risk.

We have continued to experience increased costs on personal injury claims from our hourly Jones Act workforce. As I stated on the prior call -- quarter's call, there are two Texas law firms, which are aggressively pursuing personal injury claims on behalf of a certain sector of the industry's workforce to a degree never experienced before. An unprecedented number of lawsuits are being filed for incidents that would not have likely escalated to claims in the past. However, aggressive legal representation and medical advice is increasing the seriousness of claim injuries and the amount demanded in settlement.

In the first quarter of this year, we recorded a $2 million charge to increase our reserves for our self-insured portion of these liabilities. In the second quarter, we recorded another $1.3 million related primarily to new lawsuits filed during the quarter. Additionally, should these trends persist, the Company could continue to be impacted negatively in the future.

Presently, 80% of our current claims liabilities are being generated by less than 15% of our workforce. This is not a problem unique to us. All the dredging companies operated in the Gulf are being similarly targeted and impacted by these two law firms. As a result, the Company and industry are implementing changes to try to protect ourselves from exposure to future litigation. Ultimately, this is an issue for the Army Corps of Engineers, who will have to fund the increased expense to the US dredging industry as these costs are incorporated in future bids. We plan to vigorously defend against these claims to ensure fair and equitable outcomes for both the Company and the employees.

The passage of the current Water Resources Development Act, or WRDA, legislation now appears likely. However, in the last few days of Senate debate, the provision for the retirement of the Corps Hopper Dredge McFarland was removed from the bill. Industry will continue to work toward retirement of the Corps dredges as we feel the work can more efficiently be performed by industry capacity. The important positives for the industry still included in the current WRDA are authorization of various additional harbor deepening projects, the reduction in local cost-sharing required on capital deepening projects that go below 50 feet and the authorization for 12 priority projects under the Louisiana coastal restoration plan. Passage of this bill will give assurance of continuing commitment to capital dredging workout in the future.

The second-quarter 2006 domestic dredging bid market, representing work awarded during the period, totaled $178 million. This was a larger market as compared to last quarter and was more in line with previous quarters. Great Lakes obtained a 31.5% share of the second-quarter bid market. Great Lakes was also a low bidder on a Deep Port project in New Jersey for $24 million and is expected to be awarded in the third quarter.

In addition, a large capital deepening project in Oakland was bid in the second quarter and won at $115 million by a joint venture of two of our competitors. However, the award of this contract has been protested. Due to funding issues, it is expected that the award of this project will not be resolved until the fall of this year. The bid market included $44 million in beach work this quarter. As mentioned earlier, Great Lakes won a large share of this work, $30 million or 79% for the quarter. The remainder of the market consisted primarily of maintenance work of $121 million with one Deep Port project, which was won by a competitor for $13 million.

The most exciting news for the quarter was related to our foreign market prospects. On June 13, 2006, Great Lakes along with our civil construction joint venture partner, AA NASS Contracting signed a contract for over $400 million to perform the Diyaar Al Muharraq project, a large dredging reclamation off the north coast of the kingdom of Bahrain. This island reclamation will enhance the further economic development of Bahrain. Phase I of the project has been awarded with a value of approximately $150 million for Great Lakes that will require approximately three years to complete.

The second phase, which can be awarded by the customer anytime prior to June 2009, is also approximately $150 million in value to Great Lakes and will take an additional two years to complete. Normalization works are already underway, and the dredging work will commence in September of this year. This project requires the mobilization of two of our medium-sized hopper dredges and one small hopper dredge from the US as well as the reconfigured Long Island rehandling barges mentioned previously.

As we have been stating for the last few quarters, the uncertainty of the US dredging market has made us look more aggressively to strong market in the Middle East for additional opportunities to deploy potentially idle assets from the US. Diyaar is primarily a hopper dredge project that was targeted to employ hopper dredges from the US that could have been idled with the decline in the rental markets and the Mississippi Gulf outlet and the addition of the new Manson hopper dredge into this market.

Dredging backlog to date in 2006 with a 31% market share of a $257 million bid market, Great Lakes has added only $79 million to domestic dredging backlog. Given the high level of revenue generated during the first six months, domestic backlog has continued to decline. However, with the addition of $150 million of the Diyaar contract to our dredging backlog -- increased to $286.8 million at June 30, 2006 from $204 million at March 31, 2006 and compares to $294.4 million at June 30, 2005.

The demolition services backlog at June 30, 2006 was $10 million, which compares to $14 million at March 31, 2006 and 16.6 million at June 30, 2005. Although backlog was down for previous quarters, NASDI did add a large $2.5 million job to backlog for a hospital demolition in the second quarter. NASDI has consistently been able to generate stable revenues and backlog for the last 1.5 years and is expected to maintain this trend, as there continues to be good demand for demolition works in the Boston area.

Our backlog by dredging type and segment at June 30, 2006 included $52 million of domestic capital, $174 million of foreign capital, $45 million of beach, $16 million of maintenance for total dredging backlog of $287 million, adding $10 million of demolition backlog for total Company backlog of $297 million. The comparative numbers for the end of the first quarter of 2006 was $81 million of domestic capital, $74 million of foreign capital, $44 million of beach, $5 million of maintenance for a total of $204 million in dredging plus $14 million of demolition backlog for a total Company backlog of $218 million. Then the corresponding numbers for the end of the second quarter of 2005 was $142 million of domestic capital, $116 million of foreign capital, $31 million of beach, $6 million of maintenance for total dredging backlog of $295 million, adding $17 million of demolition backlog for a Company total of $312 million.

To date, the 2006 domestic bid market has generated $256 million of work awarded. However, this total to date does not include two sizable capital projects, one in Newark and Oakland -- as mentioned previously -- that total $139 million and are expected to be awarded this year. If we annualize the bid market today including these projects, the 2006 year market would be in line with the prior two years' markets, which generated over $700 million each year.

The biggest hurdle to the near-term market is the issue of continuing contracts. As I mentioned in the last call, Congress has mandated that only projects that are fully funded can go forward. In the past, a project could be bid if appropriations were identified for the current year only and the rest of the contract could be continued into the next year. The remaining funding would be taken out of the following years' appropriations.

Restriction on the Corps' ability to utilize the continuing contracts mechanism has apparently resulted in the deferment of Corps projects with the thought they can carry over this year's money and get the full appropriation for their project next year. The Corps' opinion is that this change in policy will work its way through the system over the next two years and that during this time period appropriated money will go on spent but will be carried forward to the next year. We're currently tracking projects that are probable to come out on authorized Deep Port projects over the next 6 to 12 months. These projects include another phase of the Port New Jersey 50-foot deepening project, two more phases of a New York harbor 50-foot deepening project, along with deepening and land reclamation projects in Baltimore, Maryland; a port expansion project in Jacksonville Harbor, Florida; two deepening projects in Portland, Oregon; and several port expansion projects in the Tampa area, which in the aggregate could generate over $350 million of bidding opportunities to the market over that time period.

With regard to beach renourishment work, funding is always an issue. Although beach projects were numerous in 2005 due to hurricanes in the resulting supplemental appropriations, this year's federal funding is back to being uncertain. Fortunately, over the past few years, more beach communities have developed funding sources to meet their beach nourishment needs, and more local and privately-funded beach work is being put out to bid. Great Lakes has performed over $62 million of beach work in 2006 for non-federally-funded customers. Current schedules indicate beach projects from both federally-funded and non-federally-funded customers, valued at approximately $100 million for bidding through the end of 2006.

Finally, dredging work related to the development of LNG terminals continues to expand, particularly along the Gulf Coast of Texas. We're finishing up the LNG terminal project in Freeport, Texas and have just signed a contract in the third quarter for another LNG terminal also in Texas for a job valued at approximately $60 million. We're still involved in several project solicitations with private customers for additional LNG terminal work valued at over $50 million that should provide work for 2007.

The foreign markets has again been the bright spot to offset the uncertainty in the domestic market. With the amount of work we have in Bahrain, in the fourth quarter, we will be fully employing six vessels. Upon completion of the direct contract in the first quarter of next year, we will have capacity to take on more work for our two hydraulic dredges. Given the volume of work being generated in the Middle East regions, there appear to be many potential opportunities for employing this equipment.

The second quarter of 2006 was a solid quarter from operations and one of our strongest quarters in the last few years. Our year-to-date EBITDA at June 30, 2006 has exceeded our expectations and continues to show improvement despite the added expense related to our self-insured claims reserves. In addition, the domestic bidding activity for the second quarter rebounded. And even with the corresponding issues, there is still work scheduled to come out and to provide opportunities to increase our backlog for the remainder of the year.

However, although we have adequate backlog and contracts pending award at June 30, we expect our third quarter will be impacted by significant mobilization to both domestic and foreign projects, certain required drydockings on vessels, and the deferral of one of our large beach projects due to typical environmental window restrictions. Then, in the fourth quarter, with the startup of Diyaar and environmental window work, operations will pick up again. Therefore, we continue to feel that our range for EBITDA for the full year of 2006 of $45 million to $48 million is still reasonable and with the results to date EBITDA for 2006 would likely exceed this range. At this level of EBITDA, we expect to generate sufficient cash flow to meet our current annual debt service requirements of approximately $22 million to fund our necessary capital expenditures and allow for continued paydowns on our senior debt.

As a final note, I will make a few comments regarding the pending merger. On June 28, Great Lakes' parent company and Aldabra Acquisitions (sic) Corporation signed an agreement and plan of merger. Aldabra is a blank-check company formed for the purpose of investing in a business to build long-term value. Upon completion of the merger, the combined corporation will be owned approximately 67% by affiliates of Madison Dearborn Partners LLC and approximately 5% by Great Lakes management. The available cash of Aldabra, which was approximately $50 million at March 31, 2006, will be used to pay down the Company's senior bank term debt. There will be no resulting change of control, and therefore our $175 million of 7.75% senior subordinated notes will remain outstanding.

The transaction has been approved by the Boards of both Great Lakes and Aldabra but is subject to customary closing conditions and the approval of Aldabra stockholders. The transaction is anticipated to close during the fall of this year. Any further questions regarding the transaction will need to be deferred at this time, pending the filing of the registration statement on a Form S-4, which will include a prospective, the Aldabra proxy statement and pro formas which should follow shortly.

This concludes the formal portion of the update, but I would also like to note that we will provide a summary of the operating and backlog information provided herein as well as a reconciliation of our EBITDA, which is a non-GAAP measure to net income, a GAAP measure, in the financial section of our Company's website at GLDD.com.

I would like to now open the call up for your questions regarding Great Lakes second-quarter earnings.

(OPERATOR INSTRUCTIONS). Larry Taylor, Credit Suisse.

First of all, when you think about margins on the foreign work and it does seem like there's a lot of growth there, how would you compare those margins to domestic margins as they exist today or at over the last couple quarters?

Well, as you know, the domestic margins have been lower than what we have seen prior to 2004. The work that we're taking on overseas is at this point in time a little bit higher than margins that we are currently seeing in the domestic market. So it's good utilization and a good margin level.

To understand the Bahrain contract, you've won $150 million and then there's another $150 million, which as I understood the press release that is up for award. Have you already won that award? Are you already in the driver's seat? Or how does that work?

Well, the way it works is that we along with our joint venture partner signed a contract to perform $400 million of work, of which Great Lakes' share is approximately 300 million. The customer has awarded to us what they call Phase I, which will be about $150 million to Great Lakes. It is at their option to award Phase II. They have up until June of 2009 to make that decision.

So you have won it if they do go forward with the budget?

Yes. If they go forward with it, we will perform the work; that is correct.

Is the first half of this project worth anything without the second half? Are they separable?

Absolutely.

So they could do half of it but not the other half if they chose?

Yes. It's a big land reclamation, so you could do a smaller scope and you would still have additional land. It's just the size of -- it's basically an island that's being built off the North Coast. So it can stop at a certain size.

(multiple speakers) Go ahead?

We think that they will perform the whole scope, but they do have that option.

Then you talked about in terms of contracts where you are sort of low bidder and pending award or otherwise. There's an LNG contract that you said that $60 million for another LNG plant --

Right. We just signed that contract here in the third quarter. So of course, that's not in our backlog in the June 30 numbers.

So the two bigger ones -- there's that and then there's the other one that you mentioned when you were going through the bidding?

In Newark, New Jersey, right. That's right. So there's just between those two projects another $84 million that is not in the backlog number at June 30th.

Lastly, just to understand the math, you are affirming your guidance at $45 million to $48 million, but you're saying you might exceeded it at this point? Or did I not understand that properly?

Yes, we're reaffirming that that range is appropriate. But, given the results today, we think that it's likely we will exceed that.

Obviously, things would look like they would have to go badly in the second half. You're --

Well, again, we point to where we do know in the third quarter, there is the issue that we will be mobilizing. It's a big mobilization overseas as well as a couple of jobs domestically. We do have some required drydockings that just have to be done in that timeframe. So, given that, there will be a reduction in third quarter. But then things will pick up again in the fourth quarter.

Well, forgive me for being pushy. Would you be down year over year do you think in the third quarter?

That I don't know.

John Parker, Jefferies.

Great quarter. Can spell the name of the project in Bahrain for me?

Yes. Diyaar is Diyaar, and then Al Muharraq -- I will have to look at here.

I just know the conference call transcript probably won't have it correctly.

Al and then separate word Muharraq.

One thing I noticed, your backlog doesn't quite foot (sic) for the foreign backlog because you added $150 million, you drained off about $17 million, but you had $74 million before you added that on. I'm wondering why that foreign backlog is only $174 million.

Well, anytime -- you really can't roll forward backlog because we do have adjustments to contracts. Contracts can either expand or contract, depending upon the number of yards that you end up placing. Also, too, we did have another foreign project in backlog, which we have been carrying for a while but have been waiting for the funding to come through. At this point, we felt it was better to take it out of backlog, although it was a signed contract. But until that funding comes through, we will not include that in our backlog number.

What is the ramp-up looking like for this new foreign project? Do you expect to be at full run rate in the fourth quarter or maybe the first quarter of next year?

We will start dredging in September. I think by the mid quarter, we should be fully up and running.

Mid fourth quarter?

Yes.

I don't think you disclosed overall utilization. Is there any way you can give us a sense of at what point does your fleet become completely utilized and you need to start adding to the fleet? Or are you just capped out?

That's a question that we kind of struggle with every quarter. We don't really have a good way of indicating where we are in our absolute capacity. At this point, we have dredges that could take on additional work. Of course, work always -- there's a scheduling issue. There's drydockings. There's all sorts of things that prohibit you from being full out utilizing every dredge all the time. So we talk more in generalities of high utilization, lower utilization. Clearly, we had a very high utilization quarter here in the second quarter. That's not a maximum that we probably could do, but it's a pretty full-out level.

Would you consider adding to your fleet? I guess a follow-on question to that is, assuming the merger does go through and you pay down your debt and you continue to run at this rate, you've got a lot of free cash flow. Is fleet expansion something you would consider doing that cash flow or a dividend?

Well, absolutely. We would always look to expand the fleet if the market called for that so that is market-driven. As far as that, there's no other decisions about what we will do with cash flow going forward.

(OPERATOR INSTRUCTIONS). Sarah Thompson, Lehman Brothers.

What was your actual maintenance expense for the second quarter?

$7.1 million.

Am I thinking about it correctly? When you're saying you're going to have more drydock stuff in the third quarter, does that mean your maintenance expense will increase as well as your utilization go down? Or is it just the utilization comment?

Well, again, I indicated that we thought our maintenance spending would be in line with the $28 million that we averaged, and that would include whatever work we do here in the third quarter. Obviously, some of that work is also capital work; you can do both at the same time. I think I gave our expectations for the total capital spending to be somewhere about $16 million.

I thought you said earlier when you were talking about the Manson Dredge that you expected it to have some impact on the pricing in the market and you were going to cover it later. I may have just missed it when you covered it later.

Well, what I talked about was the fact that taking on Diyaar, we specifically look to taking on that work because it was a hopper job. So we have now sent two of our medium-sized hoppers and one of our smaller hoppers over to do that Diyaar project, which will take capacity out of the US market.

You were practically just looking at that movement as balancing capacity back to where it was?

Yes.

On the money for the $5 million you finally got in after the quarter closed, was that applied to -- or will that be applied to your term loan? Or are you just holding that for liquidity right now?

Right. We typically make quarterly paydowns on the term loan at quarter end based upon our budgeted amount. So we will continue to do that. Any paydowns on our term loan will be at the end of the quarter. So obviously, that just goes into general reserves/working capital. As I said too, we do have a fair amount of mobilization going on here in the third quarter.

Ms. Wensel, there are no further questions at this time. I will turn it back to you for any closing comments.

If there's no further questions, I appreciate you joining me for our second-quarter update. And I expect to conduct the next call for our third-quarter 2006 results the week of November 6th. Thank you.

That does conclude today's conference. Thank you all for joining.