Host Hotels & Resorts Inc (HST) 2007 Q2 法說會逐字稿

Good day and welcome to the Host Hotels & Resorts Incorporated second quarter 2007 Earnings Conference Call. Today's call is being recorded.

At this time for opening remarks and introductions, I'd like to turn the call over to the Senior Vice President, Mr. Greg Larson. Please go ahead, sir.

Thanks. Welcome to the Host Hotels & Resorts second quarter earnings call. Before we begin, I'd like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed. As we are not obligated to publicly update or revise these forward-looking statements. Additionally, on today's call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA, and comparable hotel results. You can find this information together with reconciliations to the most directly comparable GAAP information in today's earnings press release, in our 8-K filed with the SEC, and on our website at hosthotels.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide a brief overview of our second quarter results and then will describe the current operating environment as well as the Company's outlook for the remainder of 2007. Ed Walter, our Chief Financial Officer, will then provide greater detail on our second quarter results including regional and market performance. Following their remarks we will be available to respond to your questions. And now here is Chris.

Thanks, Greg, and good morning, everyone. We're pleased to report another quarter of strong results for the Company. Very solid revenue and flow-through combined with savings in a number of areas led to earnings results that significantly exceeded our guidance. We continue to feel good about the fundamentals in the business and our outlook for the remainder of the year, which I'll discuss in more detail in a few minutes.

First let's talk more specifically about our second quarter results. Our FFO per diluted share for the quarter was $0.48 including adjustments of $0.08 per share related to costs associated with the refinancing of debt. Excluding those adjustments, our diluted FFO per share exceeded the consensus estimate by $0.04 resulting in FFO growth of over 30% compared to the second quarter of last year. Our pro forma comp hotels which include our current comp hotels plus the hotels we acquired in the Starwood transaction had a RevPAR increase for the quarter of 6.7% driven by a 6% increase in average rate and a .5 percentage point increase in occupancy.

The adjusted EBITDA of Host Hotels & Resorts LP for the quarter was 414 million, an increase of more than 19% over the second quarter 2006. On a year-to-date basis our pro forma comp RevPAR increased 6.8% as a result of a 6.1% increase in average rate and a .5 percentage point increase in occupancy. Year-to-date, adjusted EBITDA was 677 million, an increase of over 21%.

Food and beverage revenues at our comp hotels grew 3.4% with strong flow-through resulting in a significant increase in departmental profit margins. This strong margin performance is due to continued growth in highly profitable F&B areas including meeting room rental and banquets. Although group room nights softened slightly for the quarter revenue per group room night increased approximately 5.5%. We expect to continue to see strong food and beverage profit as our group booking pace is strong for the fourth quarter of this year. In addition, comp hotel other revenues increased over 6 % with strong flow-through that resulted in a substantial increase in profit margins.

Turning to demand, transient business was very strong during the quarter as room nights were up nearly 3% with a positive shift to the highest rated premium business. This increase in overall transient demand combined with an average rate increase of approximately 7.5% led to double digit increase in transient revenues for the second quarter. Group average rates increased nearly 5% as a result of a shift in group room nights from lower rated business to higher rated association groups combined with an average rate increase in association business. However, group room nights were somewhat lower than forecast for the quarter due to fewer than anticipated group bookings in the quarter for the quarter as well as some cancellations. This was primarily isolated to specific markets including Boston, South Florida and Atlanta, and in addition, related to renovation disruption at many of our hotels.

Looking forward, our group booking pace for the fourth quarter of this year is very strong and for the full year of 2008 and now even 2009, we have some of the strongest bookings we've seen in years with meaningful increases in both rooms on the books as well as average rate. We continue to focus on one of the largest CapEx programs in our company's history. This program consists of maintenance CapEx, ROI and repositioning and value enhancement projects. We expect to invest approximately 650 million in 2007. These projects are focused on lobbies, public spaces, food and beverage facilities, spas, retail outlets, energy conservation, back of the house meeting space and rooms. In fact this year, we're renovating over 10,000 rooms and approximately 800,000 square feet or over 18 acres of meeting space.

We've made great progress on a number of large projects including the construction of the 105,000 square foot exhibit hall at the Orlando World Center Marriott which is expected to be completed in the third quarter and will accommodate a large group event already booked for October. At the Atlanta Marquis, construction of the new, reconcepted food and beverage facility and renovation of all the existing breakout space was recently completed and the new 20,000 -- 26,000 square foot ballroom is scheduled to be completed by the third quarter of 2008. We have also just opened a spectacular new spa at the JW Marriott in Desert Springs.

As you might imagine our substantial capital investment program is causing significant disruption resulting in a meaningful reduction in RevPAR growth for the year; however from a capital allocation perspective we believe these investments are the highest returning investments we can make and favorably position our hotels and enhance the future value of our property. In fact, by the end of next year, we will have the youngest portfolio and the best condition in our history with rooms and meeting space averaging slightly more than two years old.

On the external growth front, we remain cautious on acquisitions in North America due to the current asset pricing environment. As such we did not make any acquisitions during the quarter. While we continue to be active in evaluating potential transactions, given that we are past the midpoint of the year for modeling purposes, we would guide you to not include any acquisitions for the remainder of the year. On the disposition front, we continue to focus on taking advantage of the current strength of the asset transaction market to recycle capital out of lower growth assets at attractive pricing. We are increasing our guidance on dispositions to 200 to 400 million for the remainder of the year. Obviously, the impact of increasing our disposition guidance combined with no projected acquisitions for the remainder of the year will have a slight negative impact on our estimated adjusted EBITDA for 2007.

In Europe, the hotels we purchased in our joint venture are performing very well and we have a strong pipeline of deals we're actively evaluating. In fact we expect to announce the completion of a transaction in our European joint venture shortly. Now let me update you on the outlook for the remainder of 2007. As I previously mentioned, pro forma comparable hotel RevPAR grew 6.8% in the first half of the year. Our forecast is that the second half of the year will be modestly stronger with third quarter results expected to be slightly below the second quarter followed by a much stronger fourth quarter due to the very solid advance group bookings. For the year, we expect our pro forma comparable RevPAR to increase 6.5% to 7.5%. Based on these operating assumptions and our year-to-date results, our guidance for diluted FFO per share for the year will be between $1.78 and $1.84 including $0.08 per share of expenses related to costs associated with refinancing. Our guidance for adjusted EBITDA for Host LP is 1.450 billion to 1.480 billion.

As we mentioned before, we've instituted our new dividend policy under which we expect to declare a fixed $0.20 per share common dividend each quarter as well as a special common dividend in the fourth quarter of each year, the amount of which will be based on our level of taxable income. Based on our continued strong operating performance, we expect the amount of our special common dividend for 2007 to be in the range of $0.10 to $0.20 per share.

In summary, we're pleased with the results of the quarter and remain confident about the outlook for the remainder of 2007 and for 2008. Based on our booking pace for 2008 and 2009, which looks very strong, as well as our expectations for fundamentals in the business including a supply growth forecast that remains below historical averages, we continue to believe that the current growth cycle in lodging will be sustained. Our portfolio will be as well positioned as it ever has been to benefit from these strong fundamentals, particularly given the significant investment we're making in our assets. Thank you, and now let me turn the call over to Ed Walter, our Chief Financial Officer who will discuss the quarter's financial performance in a little bit more detail.

Thank you, Chris. Let me start by giving you some detail on our pro forma comp hotel RevPAR results for the quarter. Looking at the portfolio based on property types, during the second quarter our downtown hotels performed the best with RevPAR growth of 8.4% as we benefited from strong performance in several downtown markets such as New York and Seattle. RevPAR at our suburban hotels increased by 6.8% for the quarter and our airport hotels increased by 6.6%. Our resort conference centers increased by just .9% and several hotels were significantly affected by major renovations, leading to a 2.0 percentage point decline in occupancy for this product type.

Turning to our regional results for the quarter, just like in the first quarter, our top performing region was the Mid Atlantic which experienced 15% RevPAR growth. Our New York City properties performed especially well with RevPAR growth averaging more than 20% driven by strong group and transient demand. The Philadelphia market rebounded from weak group demand in the first quarter as three citywide events helped drive RevPAR growth of roughly 6%. Both Philadelphia and New York should outperform the third quarter.

The South Central region also had a great quarter as RevPAR grew by 9.5%. Performance was strong in Dallas and Houston as transient demand grew meaningfully in both markets. The third quarter should also be solid in the region with good results in both Dallas and Houston, as group and transient demand should continue to be strong.

Our Mountain region also performed well with RevPAR increasing by 8.1%, as the Denver market had a strong quarter driven primarily by solid citywide events with RevPAR growth of over 11%. With group pace expected to remain strong, both Denver and the region are expected to continue to perform well in the third quarter. Our Florida Market experienced RevPAR growth of 4.6%. Performance was generally solid across the region but group weakness and construction efforts at the Harbor Beach Marriott led to a RevPAR decline and our Ritz Carlton in Naples suffered from weaker transient demand, dragging down results in the quarter. The third quarter looks quite weak in Florida as group business is down significantly to last year and two of our larger events will be -- larger hotels will be experiencing meaningful construction disruption.

Overall RevPAR growth in the Pacific region was solid at 5.9% but results varied widely by market. Our three hotels in Seattle were up approximately 11% and San Francisco had a great quarter with RevPAR improving by over 13%, as transient demand was extremely strong. On the other hand, Hawaii struggled with RevPAR declining by more than 3% due to weakness in the leisure segment and reduced group activity.

Looking at the third quarter, we expect Seattle should continue to perform well and Los Angeles will likely accelerate. We also expect Hawaii will improve in the third quarter and then perform quite well in the fourth quarter. It's worth noting that the Hawaii market continues to exhibit strong occupancies, over 80% year-to-date and very high RevPAR levels at over 330 per room and remains an attractive market in the long term.

As expected the Atlanta region had a weak quarter as RevPAR grew by just 1.7%. This weaker performance was experienced across the market in both group and transient segments and is generally attributable to a combination of difficult year-over-year comparables and fewer citywide events. Citywide room nights in the quarter were down roughly 50% over the prior year. The Atlanta market was a significant beneficiary during the first half of 2006 from business which relocated to the city because of hurricane disruption in other markets leading to a drop in citywide events in 2007. Unfortunately, these trends are likely to continue as the Atlanta market is expected to have a soft third quarter and citywide events will continue to fall short of prior year levels. Fortunately, this trend is expected to reverse in the fourth quarter as citywide events are projected to strengthen considerably.

The New England region also underperformed in Q2 as RevPAR grew by just 2.1%. Continuing a trend from the first quarter our suburban Boston properties performed well with RevPAR growth averaging approximately 8%. The real issue occurred in the downtown markets where some of our larger hotels like the Sheraton Boston and Hyatt Cambridge suffered from weak group demand. Third quarter growth will likely remain low in New England due to difficult comps since the Summer of 2006 was a record quarter for citywide events in Boston. The fourth quarter is expected to be considerably stronger in Boston and the region as a whole.

Year-to-date the Mid Atlantic has been our best region with RevPAR growth of 14.8% followed by the South Central where RevPAR growth was 9.6%. The Atlanta region where growth has been just 1% and the New England region where growth was 2.5% have been our weakest performers. Looking at our European JV, we had a strong second quarter as RevPAR based on local country currency increased by 6.3%. Performance has been particularly strong in Barcelona where RevPAR at our Arts Hotel increased by 13% and in London where the Sheraton Skyline increased by almost 9%. The outlook for 2007 remains positive as the EU economy continues to grow at a solid rate.

For the quarter, adjusted operating profit margin for our comp hotels improved by 50 basis points. Rooms, F&B and EBITDA flow-through were quite strong, although absolute comp margin growth was somewhat inhibited by the lower level of RevPAR growth. It is worth noting that pro forma comp margins were higher primarily because pro forma comp RevPAR was stronger. F&B margins improved by 110 basis points as the banquet business continued to represent an increasing share of the overall F&B business and food costs were restrained. Also on the positive side, wage and benefit increases were limited to 3% which represented a reduction from the prior -- in growth rate from the prior two quarters. Utility costs were up less than 2% for the quarter and real estate taxes increased by approximately 5%.

Year-to-date our comp margins have improved by 40 basis points. We expect that margin growth for the second half of the year should be stronger as RevPAR and food and beverage growth rates improve and flow-through remains very solid. Utility costs and real estate taxes are risk areas for the remainder of the year. Given our overall perspective on full year RevPAR growth we would guide you to full year comparable margin growth of 75 to 100 basis points.

Looking at our Balance Sheet, we employed the proceeds of our 600 million, 2-5/8% exchangeable debenture offering and some available cash to repay three mortgage loans totaling approximately 650 million that carry an average interest rate of nearly 8%. As a result of these transactions, the average interest rate on our debt is now 6.1%. We also restructured the terms and increased the size of our credit facility up to $600 million. The key benefit of the restructuring was to reduce the costs associated with the facility. To the extent we borrowed on the facility today, our interest rate would be LIBOR plus 65 basis points versus the prior rate of LIBOR plus 200.

We completed the quarter with 497 million of cash. This amount will be used to maintain working capital of roughly $100 million to $125 million as well as fund additional investments in our portfolio, acquisitions by the Company or our European JV, additional debt repayment or for other corporate purposes. We have full capacity on our $600 million credit facility. With respect to the third quarter, we expect RevPAR growth for our pro forma comp hotels will be between 5.5% and 6.5 % as tough group comps in Boston and Atlanta, weaker group pace in Florida and overall construction disruption result in slightly weaker growth than in Q2. A turnaround in Atlanta and Boston, two of our weaker markets this year combined with stronger overall group bookings are expected to result in a considerably stronger top-line growth in the fourth quarter. For the third quarter we forecast that FFO per diluted share will range between $0.32 and $0.33 which represents a solid 18% growth over 2006 levels.

As we have detailed today, we continue experiencing solid growth on the top-line and very good flow-through at the bottom-line leading to strong EBITDA and FFO growth. Our outlook for operating trends for the remainder of the year especially the fourth quarter remains very favorable. This completes our prepared remarks. We are now interested in answering any questions you may have.

Thank you, sir. (OPERATOR INSTRUCTIONS) We'll go now to William Truelove of UBS.

Hi, guys.

Hi.

Just could you talk a little bit about changes in the group business activities? I mean, were you somewhat surprised that the third quarter and fourth quarter group business activity is working out this way or the way the individual markets are or did you sort of see this coming say at the beginning of the year? How far in advance do you really have with the group booking pace given that many of the groups do book in the quarter for the quarter? Thanks.

Well, I think you do have a pretty good sight line into the group bookings, as you start the year looking at each of the quarters. I think obviously the second quarter was a little bit lighter than we had anticipated and I think it was as we described, for some unforeseen reasons in a few markets like Atlanta, Boston, South Florida, and also related to some more significant construction disruption, as a result of some of our CapEx projects than we had thought but the fundamental truth about second quarter and for that matter third quarter looking forward one quarter has been that those have been -- from the beginning of the year, those have been weaker periods, weaker quarters in terms of group bookings overall. So the fourth quarter throughout the year has been a lot stronger and continues to be a lot stronger.

And so I think the way I'd view Q2 really is that there were -- it was a little bit weaker than we thought isolated to a few markets and involving a few cancellations which were not systemic that were kind of isolated to particular circumstances at a particular hotel. In terms of activity changes, I think the thing that frankly we feel best about is that the fourth quarter really is hanging in there and in fact as we've said a couple of times between Ed and I in our prepared comments is looking quite good so our expectation of a big pickup from Q3 to Q4 is by no means a pipe dream, it's based on some very significant solid group bookings, and so we have a very good feeling about that and frankly, the other change that I'd say on the positive side, we feel very good about is as we continue to look out into '08 now and start to get some sightlines into '07 where basically in '08, 50% of our group bookings approximately are on the books and about 25% in '09 are on the books.

We're way ahead of pace in both those years and a much stronger rate, so I think those shouldn't be underestimated in terms of being very good solid indicators of strength in that particular part of our business, which is obviously a very important, you know, makes up more than 40% of our overall business and it's a very important indicator in the sense that it provides the platform to then manage our transient business off of, and obviously the transient business in the second quarter and for that matter we expect for the rest of the year is showing very good strength as well. So as we get into the third and particularly the fourth quarter, strong group bookings with what has been very strong transient business, we think is a very good sign and a very good indicator as we move into next year.

Thanks so much.

Yes.

Thank you. We'll go next to Jeff Donnelly of Wachovia Securities.

Good morning, guys. Chris, if I was to try to benchmark your performance to the metro and segment data that we get from travel, it looks like Host beat the national averages for the quarter but we suspect and it's difficult to do the analysis but I suspect you might have lost a little share in the urban and resort categories, is that correct and if so is that the result of the renovation activity?

Yes. I think maybe in resort conference we did and that probably had to do with the fact that a disproportionate share of that is in Hawaii and Hawaii while we think is a great long-term market was particularly hard hit. I don't have the stats right in front of me, Jeff, but I don't think we really lost share in the urban. And in fact if we look at our entire portfolio for the quarter, we gained market share when we look at the star data we didn't lose market share, so I think we feel fine about what's going on in the core of the portfolio, obviously the resort conference was weak for the reasons that I described.

Again, ask a follow-up then. I know you have a significant volume renovation activity. I'm trying to understand what impact that has on overall results. Are you able to quantify for us the rooms out of service in Q2 and maybe the remaining quarters of the year or to the extent that their activity is not focused on the rooms but common areas? Can you guesstimate the revenue impact?

The easiest way, it's hard to do in any particular quarter and take this as directional, not perfect science, but as we look at the full year and we look at kind of what we've given you as guidance, 6.5 to 7.5, there's probably a 1 to 2 points of RevPAR impact associated with the $650 million we're spending in the portfolio, and that -- and we've looked at pretty carefully looking at kind of the assumptions on how much displacement we've already had as a result of our renovation activity and what we expect to have in the third and fourth quarter so really largely occupancy driven, kind of room nights that we think we're losing as a result of that activity, so as I said in my prepared comments is we think that there's a significant impact as a result of the renovations that are far beyond kind of typical renovations and obviously at a 1 to 2 points, if you added that back in, if you had a much lower level of activity in that arena the numbers would be a lot better.

We are very pleased with what we're doing. We think long term we're making the right decisions, we're allocating capital well, these are very high returning investment opportunities and as well as opportunities just to make sure that our portfolio is extraordinarily well positioned for the future and frankly, we think the future is quite good over the next few years in terms of where we are in the cycle so we're very excited about the fact that our portfolio is going to be in the best shape it's ever been and the youngest in terms of rooms, public spaces, and meeting space than it's been in our history at a time where we think we've got a half a cycle left, and that we're going to really reap the reward of that.

Is it fair to say that 1 to 2 point impact is more behind you than ahead of you?

No. No, I think it's throughout the year. When I talk about the impact, it's probably not so much first quarter somewhat second, and then third and fourth obviously we've tried in our third and fourth quarter and full year guidance to bake that in as best we can. We were frankly a little bit off in the second quarter. We maybe had a little bit more disruption in the second quarter than we thought. Obviously we've tried to compensate for that in the guidance we've given you in the third and fourth quarter.

Thanks, guys.

Thank you. We'll go to Celeste Brown of Morgan Stanley.

Hi, guys. Good morning.

Hi, Celeste.

With the construction disruption and it's sounding like a pretty significant impact in your RevPAR plus so many issues with group bookings this year, is it possible that we could see a higher RevPAR growth rate in 2008 than 2007? I'm not asking for guidance but just given everything that you're seeing in the disruption this year?

You know, that's a great question, and deserves a great answer. The short answer would be, it's possible, yes. It's awfully early and I know you're not asking for guidance and you'll be happy to know I'm not going to give you guidance because it's so early and we really have a lot of work to do to understand on a granular basis with all of our GMs and all of our hotels where we think we'll end up next year, so it's premature to do that, but there is a possibility. I think if one were being conservative right now, you probably wouldn't guide to a better result next year than this year, but let us get a little bit further into the year and see how group bookings which are already strong continue to develop and let's see how this year finishes out and we'll give you a sense of that. Obviously, we feel good about next year. We just have to do a lot more work to figure out exactly where we think we'll be.

Okay, great. Thank you.

Thank you. We'll go to Bill Crow of Raymond James.

Good morning, guys. Two or three questions. Chris, what's your CapEx outlook for 2008 look like at this point? Do you think you're going to be as aggressive on the renovation program?

It's a bit less. I think that -- of course part of it will depend on ROI repositioning projects that we're working on right now and how many of those meet the smell test in terms of beating our yield requirements but based on what I see right now, I think a way it would be modestly less than where we are in '07 and then '09 obviously would drop off pretty materially from there.

So the disruption that we're experiencing this year will continue but at a lesser degree again next year?

Yes, I think that is the right way to look at it, Bill.

Okay. Could you just give us an update on cap rates? I know you're not buying anything, you continue to bid but not win. Is it your sense that cap rates have backed up 25, 50 basis points or where are we from the private market perspective?

I have to say my sense is they haven't really moved much at all. You would think that cap rates would start to move up if debt rates -- given debt rates have been moving up, the mortgage market has been a little bit rattled and spreads and have widened. Treasuries had been of course increasing now treasuries, we'll see what they do today, they are probably going up today I assume with the inflation report but generally have moved back down, spreads have actually come back in a little bit, so the debt markets are pretty -- they got a little bit out of whack. They seem to be getting a little bit better kind of more in line.

We'll see what happens with all the subprime worries and whether that continues to ripple through or not but, as I sit here today and as Jim Risoleo our Chief Investment Officer and our team look at deals, I have to say as much as you might kind of intellectually argue there should be some change, I haven't seen it. There's still an awful lot of money that is out there and in particular in the U.S, but really around the world, chasing hotel assets. There's far more supply money than there is supply of product, and as a result, I -- I -- you just haven't seen much movement.

And then finally, Chris, either you or Ed mentioned the delay or the deferral of acquisitions plus increased disposition activity will have a dilutive impact on your EBITDA guidance. Can you just quantify that if you go back to last quarter where you were and how much of that is reflected in your guidance?

Well, we brought the top end of our guidance down by 10 million, so I think that's a pretty good indicator of what we think.

And you think that's essentially all attributable to the external growth/sales?

There's a meaningful component of that that is.

Terrific. Thank you.

Thank you. We'll go next to Joe Greff of Bear Stearns.

Hi, this is (inaudible) for Joe Greff. I was hoping you guys would comment on what sort of renovation impact you guys are expecting for '08.

I think the short answer is a little bit less than we're experiencing in '07 just as a result of ultimately spending less money and having less overall disruption, and obviously as we get into '09, well '08 will still be a pretty big program, it will be less than '07, we get into '09 you'll see significantly less disruption and you'll really both in '08 and particularly '09 start to get the real benefits of all the capital that we've been putting to work in our ROI repositioning projects which obviously take some time to execute on and get stabilized so it only gets better in the sense of less disruption and more benefit in terms of getting -- starting to get the significant returns on all these investments we've been making.

Okay, thanks a lot.

Yes.

Thank you. We'll go to Harry Curtis of JPMorgan.

Good morning. Chris, I wonder if you could comment on the other revenue strengths. What was its source and if you could comment on its sustainability.

Yes. Harry, it was in a few different areas, some of which is sustainable, some of which is not. I would say the most significant areas were garage, kind of parking garage revenues. We had a particularly good quarter in that regard, whether we can continue to sustain the levels we've seen in an increase in that, the long term I don't know but we do -- we have been generally getting better revenue growth in that category frankly for the last five years and we expect to be able to continue to get better-than-normal kind of growth in parking and garage.

It was in internet telephone largely driven by the internet side of things. We are obviously getting greater usage and having great success both in the guestrooms as well as in the meeting space and selling internet connectivity and so how long it's sustainable I don't know but I think we'll continue to get reasonably good revenue growth there, and then the last which is probably not sustainable of the major components of other were attrition, cancellation fees, as I mentioned we had a couple isolated cancellations throughout the portfolio, not something we studied carefully that was a systemic problem but just isolated for specific reasons like a pharmaceutical cancellation because a drug -- the FDA didn't approve a drug or something of that kind, so very isolated. Those come and go. They're sporadic and it would be hard to say that we can continue to sustain that. We don't expect to. We think this was a little bit higher cancellation activity than we normally have and it will probably drop back down.

Thanks.

Thank you. And with no further questions I'd like to turn the conference back over for any additional or closing remarks.

Well, we appreciate you spending this time with us today. I think we had a good, solid quarter in the second quarter. Obviously as you can tell from our comments we expect to finish the year with really strong results and feel really good about '08 and frankly '09 and where we are generally in the cycle. We'll be back with you after the third quarter to give you an update on our results for the third quarter and our outlook for things going forward. I hope everybody enjoys the rest of your summer and get some time to have a little bit of fun before we're back to the fall. Thanks and again we appreciate your time today.

Thank you for your participation. That does conclude today's conference. You may disconnect at this time.