Labcorp Holdings Inc (LH) 2004 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Laboratory Corporation of America Holding 2004 First Quarter Results Conference Call.

[OPERATOR INSTRUCTIONS]

I would now like to turn the conference over to Mr. Tom Mac Mahon, Chairman and Chief Executive Officer. Please go ahead sir.

Thank you, Vince. Good morning and welcome to LabCorp's first quarter conference call.

Joining me today from LabCorp are Brad Smith, Executive Vice-President, Corporate Affairs, Wes Elingburg, Executive Vice-President and Chief Financial Officer, Ed Dodson, Senior Vice-President, Controller, and Pam Sherry, Senior Vice-President, Investor Relations.

During this call, as usual, I'll review our financial results and recent accomplishments and then answer the most frequently asked questions about the company.

Before I do, I'd like to point out that our success and growth to date all relate directly to the continued execution of the strategic plan we first devised six years ago. When we crafted this plan, the goal established for LabCorp was clear, to lead the industry in achieving long-term growth and profitability by strengthening our nationwide core testing business and expanding our higher growth, higher value esoteric and genomic business.

By following this plan, LabCorp today has become one of the largest clinical laboratories in the world, as well as the leader in developing and commercializing a broad menu of sophisticated tests that provide critical information to physicians and their patients.

I'd now like to introduce Brad Smith, who has a few comments before I begin. Brad?

Before we begin, I'd like to point out that there will be a replay of this conference call available via the telephone and Internet. Please refer to our press release dated April 22nd, for replay information.

This morning the company filed an 8-K that included information on its business and operations. This information is also available on our Web site. Analysts and investors are directed to this 8-K and our web site to review this supplemental information.

Additionally, we refer you to our press release dated April 22nd for a reconciliation of EBITDA, which is non-GAAP financial information discussed during this call. I would also like to point out that any forward-looking statements made during this conference call are based upon current expectations and are subject to change based upon various important factors that could affect the company's financial results. These factors are set forth in detail in our 2003 10-K and subsequent filings.

Thank you Brad. Our first quarter results are as follows. Earnings per diluted share increased approximately 20% to 61 cents. EBITDA was $191.1 million or 25.4% of revenues, which represents a 15.4% increase over first quarter '03.

Cash flow from operations continued to be very strong, increasing 9.3% to $147.6 million. Revenues increased 5.7% to $752.5 million. Volumes increased approximately 5.7% and the price was unchanged. We have one more sales day in the quarter compared to the first quarter '03.

DSO for the quarter was 54 days. In connection with our $250 million share repurchase program, we repurchased approximately $67 million worth of LabCorp stock during the quarter, representing approximately 1.7 million shares, and at the end of the quarter, our cash balance was $169 million.

Guided by this strategic plan, our achievements this quarter continue to support our objectives of strengthening our scientific leadership and further enhancing our financial performance and long-term growth opportunities.

Our program of expanding the DIANON anatomic pathology model throughout LabCorp is now well underway. Throughout the industry, most labs report clinical test results in a highly standardized manner. Anatomical results, however, have historically been reported in a wide variety of formats, depending upon the pathologist.

With the integration now completed, we have begun to incorporate DIANON's highly standardized system for processing, diagnosing and reporting anatomic pathology specimens into LabCorp. Early this month, we deionized our first LabCorp site, the Center for Molecular Biology and Pathology in Research Triangle Park in North Carolina. Over the next three years, we plan to aggressively continue deionizing LabCorp sites. Deionization will redefine our company's approach to anatomical pathology, and should help position LabCorp as the clear and preferred provider in the field of cancer testing.

I've often talked about being first and being leaders in cancer as a key part of our strategic plan. Those of you who closely follow our industry will recognize that our thoughts about the importance of anatomical pathology have clearly helped shape this industry. This is clear when one follows all the events and changes in pathology laboratory structures, since the DIANON acquisition.

Our partnerships with research and development companies are an integral of our growing our business. We are continually identifying and introducing the most promising scientific advances by partnering with firms that possess unique products and technologies at the frontier of esoteric testing.

These partnerships allow us to rapidly expand our portfolio of esoteric test assays while affording our partners the opportunity to benefit from the breadth of LabCorp's national distribution system.

In March, through out exclusive relationship with BioPredictive, we began offering their non-evasive blood test for liver fibrosis under LabCorp's brand name of HCV, Fibrosure. HCV Fibrosure further expands our extensive menu of tests for Hepatitis C.

Through our agreement with Correlogic Systems, we continue to prepare for the introduction of OvaCheck, their protein patterned blood test for the detection of ovarian cancer. There's currently no accurate blood test available to detect early stage ovarian cancer. If diagnosed early, this common disease is readily treatable and often curable.

Currently, we've expanded the size and scope of our test validation process to include testing and on additional samples. We also continue to be actively involved with the Food and Drug Administration regarding the broader issue of new tests and the specific issue of how and when we plan to offer OvaCheck.

Our relationship with the FDA on this issue continues to be very open and positive. We have met with FDA, and are continuing to provide them with the information they need to better understand this important new test, to address a significant unmet medical need. We are highly enthusiastic about the medical value of this test, and plan to offer it to women in the United States at high risk for ovarian cancer.

With respect to the PreGen-Plus Test launched last August, volumes increased considerably in the quarter and we continue to focus our efforts on expanding reimbursement by the payers and getting the test included in standard of care guidelines, both of which are key to broad adoption of the test.

We continue to make solid advances in establishing our position as a foremost provider of genomic and esoteric testing. Collectively genomic and esoteric tests represents 30% of LabCorp's revenue.

Testing volumes for Hepatitis, excuse me, the Human Papilloma Virus and Cystic Fibrosis still continue to grow as more physicians follow the new standard of care guidelines for the use of these tests. These tests now represent a much higher percentage of our total genomic test volumes than they did in prior periods.

During the quarter we also continued to expand our presence in select markets with new contracts and small, fold-in acquisitions. In particularly, in early March we entered into a new 10-year exclusive agreement with Swedish Medical Center, one of the largest, most comprehensive healthcare provider in the Pacific Northwest.

During this first quarter, we also completed small fold-in acquisitions that help strengthen our market positions in the Atlanta, Georgia and Albany, New York markets.

Now I'd like to review a few frequently asked questions, and our specific answers to these questions.

What makes up your pricing in the quarter?

About one year ago, we forecasted that we expected near-term growth in pricing to be somewhat lower, primarily because of the following: near-term opportunities to increase pure price, especially in our core business are currently limited; managed care price increases are expected to be more modest; further shifts in our testament mix, including significant continued growth in HPV test, which are priced below the average price for this business category. For this quarter, average transaction prices were HIV, HPV, and Cystic Fibrosis were less than their average price in the first quarter of 2003. As a result of shifts in payer mix, and a more competitive pricing environment for those products.

Please keep in mind that HIV, HPV and Cystic Fibrosis are still well priced and extremely profitable. In fact, even though the average price for HPV is below our average price for all genomics test, the average price for Cystic Fibrosis is considerably higher; however these tests currently represent a larger percentage of our test mix today than in prior periods, and will continue to influence the overall, average price for the genomic categories, until other higher priced genomic tests build in volume.

Also, as I previously mentioned on our 2003 year-end conference call, we did expect and experience less high priced plasma testing volumes for this quarter than we did in the same period '03. As a result, excuse me, of significantly reduced plasma testing, by plasma product companies.

Can you provide an update on managed care expansion opportunities?

Managed care growth is one of the major areas of focus for our recently updated strategic plan. We are devoting additional business and scientific resources to this effort and are hopeful that these initiatives will result in new, more profitable agreement and many managed care, from many managed care companies.

Three, can you provide an update on the Medicare competitive bidding project. LabCorp, as well as many other companies in the lab industry, continue to believe the competitive bidding is not only bad public policy, it is also bad for beneficiaries, since it selects labs purely on price, even if they cannot provide acceptable levels of service to beneficiaries.

Currently the Medicare demonstration project is moving slowly. Comments on the proposal are being accepted through 2005, after which the project design will be developed.

We're also working very hard to convince Florida Medicaid that their competitive bidding proposal is also bad public policy, bad for beneficiaries and even bad for competition, since artificially limited the number of laboratories that can serve Medicaid beneficiaries is actually anti-competitive and not good for patient care.

Can you continue to grow EBITDA margins and earnings per share?

As LabCorp has grown, the scope and scale of our expanding national footprint has generated is operational efficiencies and substantial cash flow for investment into esoteric and genomic tests. The portion of our business where margins are the highest and where it has the most potential for even higher returns.

Please also keep in mind that there are expenses we must continue to manage, such as increased cost for employee benefits and insurance. As mentioned on our year-end conference call, our plan to improve EBITDA margins and generate earnings per share growth include reducing our bad debt rate by 50-100 basis points from fourth quarter of '03, during '04, more closely aligning employee productivity with extension volume, and further shifts in our test mix from lower value, lower margin test, to higher value, higher margin tests, particularly in our esoteric and genomic business.

LabCorp's ability to improve EBITDA margins speaks for itself. Comparing our EBIT to margin this quarter for the first quarter '03, LabCorp generated a 210-basis point improvement, from 23.3% of sales to 25.4% of sales.

More importantly for the past six years, on a period-to-period basis, LabCorp has consistently proven that it can continue to improve margins.

How do you plan to use your cash?

We plan to spend approximately 90-$100 in capital expenditures to support our strategic plan. We expect to spend approximately $50-60 million in small acquisitions. We intend to continue and hopefully complete our 250 million stock repurchase program. And lastly, we continue to remain flexible in utilizing the remainder of the cash, particularly as we get closer to the potential convert put this September.

What is your guidance for '04?

Guidance for '04 remains unchanged. Compared to 2003, LabCorp expects '04 revenue growth of approximately 5-7%, including in year revenues of 25-$35 million from small acquisitions, and or new contracts. EBITDA margins in the range of 25% of revenues. Diluted earnings per share growth in the range of 11-13% compared to '03 EPS. Cap ex expenditures of approximately 90-$100 million. Free cash flow, net of capital expenditures of approximately 440-$460 million. Predicted 2004 free cash flow is impacted as compared to '03 by increased capital expenditures and the benefit in '03 of a one-time income tax credit of approximately $50 million. We also expect net interest expanse of approximately $36 million, and a tax rate of approximately 41%. A bad debt rate of 6.5% of sales dropping to 6.25% by December 31, '04. Note that this guidance does not include additional share repurchases made after March 31, major acquisitions and possible significant contributions from new tests.

In closing, our strong, consistent financial results continue to underscore the effectiveness of our fundamental business model. LabCorp's substantial accomplishment in financial, performance, in scientific leadership, in service to patients and providers, but a product of a dynamic, strategic plan, it is updated periodically to reflect and anticipate market dynamics. As a results, LabCorp continues to be a leader in the industry in terms of profitability, cash generation and shareholder return.

Thank you for listening. We are now ready to answer your questions.

Ben, if you can start with getting us into the question mode.

[OPERATOR INSTRUCTIONS] One moment please for the first question. Now our first question comes from the line of Mr. Bill Bonello from Wachovia.

Yes, just wanted to follow up a little bit more Tom on the pricing discussion. It looks like you're seeing year-over-year decreases in client bill and third-party billing. Is there something specific going on in those segments and then I have a follow-up.

The client bill is directly related to the plasma business, Bill, so we probably wouldn't be seeing a year-to-year decline if we flushed out that high-priced plasma business. That sits inside the category of client.

OK.

But as you know, we've been pretty open for the last eight years in showing you those schedules. So I'm not going to show you any more data on that.

In terms of the, did you say the private?

No, the third-party.

No the third party, I think that may be mix shift, but I'm not really sure yet, because we just got that data yesterday, but I think that may be a mix shift in the third-party ...

OK, and then in terms of ...

That third-party, there's a lot of genomic business in that also.

OK, and then in terms of the, you mentioned the you know, the price pressure on HIV, HPV and CF, is that isolated to specific geographies or is that happening across the board.

It's happening across the board. What we see some companies doing is moving to a profitability by account approach. So what, particularly as you know, with the OBGYN, Cystic Fibrosis and Human Papilloma Virus are very significant tests and at LabCorp we've always, and we've never seen data anywhere else, but we've always had these tests priced, we think, at maximum levels, and what we're beginning to see in pockets throughout the country, so I think you should think it's a national situation, is competitors offering those tests at lower prices in order to secure other business from particularly OBGYNs.

OK, great, thank you very much.

OK.

Our next question comes from the line of Mr. Robert Willoughby from Banc of America.

Tom, can you possibly give us an update where the MDS operations are consolidation of those stands, and secondarily, possibly an update on your clinical trial support businesses?

Sure Bob. The MDS operations are fold-in acquisitions. We completed those transactions, Bob, as you know, in mid to late March. We expect significant cost efficiencies from those and we are rigorously now beginning the consolidation project in the Atlanta market, where we now will have in excess in 40 to 45 patient service centers in the Albany, New York market.

So this is a quick fold in acquisition process for both of those. In terms of clinical trials, while it does not represent a significant part of last quarter's business, we have seen substantial growth in that business over the past 12-14 months. So we are seeing substantial process here at Lab Corp. in securing clinical trials. Particularly because we're combining the expertise of NGI, the National Genetics Institute with our ViroMed operation in Minneapolis, and our core clinical testing business here in the eastern part of the United States. So it's become a pretty good business for us.

Do you feel that you're taking share there, or is the market growing for everybody?

I have a sense based on what I'm reading when I follow that industry, particularly the organizations that offer services beyond clinical trials. We think we may be taking share there.

OK, thank you.

Our next question comes from the line of Mr. Tom Gallucci from Merrill Lynch. Please proceed.

Good morning. Two questions.

Morning.

A follow up on price and one on volume if I could. Just in terms of price to be sure I'm clear, the HIV, the HPV, the cystic fibrosis type testing, that's a higher price than your average testing, but on a year over year basis, that was down, that's the way to think about it?

Yeah, the, you probably, I don't have the number right in front of me, but you probably see some PPA pricing in one of your schedules for the Genomex business, right Tom?

Yes, yes.

Generally speaking, generally speaking, the cystic fibrosis test is significantly higher than the average price for the average PPA for the esoteric Genomex business. The HIV is generally speaking in the range of average for Genomex tests, and the HPV is considerably lower in price than the Genomex PPA, not the company PPA.

OK.

What we saw in the quarter prepared not necessarily to the last quarter of '04, or the last quarter of '03, or the third quarter of '03, but compared to the first quarter of '03, we've seen pricing degradation in those measured tests. Although we continue to see rather significant volume increases in those tests.

Right, I guess just to take that one step further, it would seem though, that if all of those tests are higher than just the consolidated average pricing, that the degradation was probably more rapid than the growth of the volume of those tests, is that fair?

No, that's completely unfair.

That's not right?

No, our volumes grew substantially more.

OK.

If that's your question, I want to make sure I understand.

Yeah, that's fine.

Last time, was the volume growth strong? The answer is yes.

Volume growth is stronger than the price degradation in those tests. OK, then in terms of overall volume growth, I guess you pointed to 5.7% volume growth. Just wondering if you had an estimate for kind of a normalized type of number, if you x'ed out buying on for two weeks, and the small acquisitions you mentioned.

Probably about 4.5%, Tom.

Does that exclude leap year issues, and maybe the weather that we had last year, too, that maybe depressed volumes.

Well, let me just talk about the weather since you brought it up. Number one, it's 4.5% would include the impact of the leap year. So, then as you can assume from the volume growth, there's very little volume growth attached to anything other than our actual volume growth. The MDS acquisition was immaterial for the quarter. In terms of weather, this marketplace that I'm sitting in today, the North Carolina, Virginia, South Carolina market did have substantial weather problems this year, as we did in the North Carolina market last year.

So I don't think it's necessarily a good assumption to deduce that the weather of '03 for last quarter was worse than the weather of '04 for last quarter because of the markets we operate in.

OK, great, thank you.

OK.

Our next question comes from the line of Mr. David Lewis from Thomas Weisel and Partners. Please proceed.

Good morning. Tom, just a quick clarification on Correlogic. My understanding of the issue is one both a claims that Correlogic may or may not be making, and number two, whether the technologies in DNA SR, and most of the companies that have had issues with the FDA recently have been able to resolve the issue on a claims basis. But in the case of Correlogic, they simply are not an analyzed specific reagent. Is there any concern that the test is simply not going to qualify under the SR designation?

I don't say, but we've been very careful because there are discussions going on with FDA. The only comment I'm going to make on that are my prepared comments that I've already made. But I would only conclude that I don't know where you're getting your information, but I would not at all take any of that information to the bank. I don't know who your sources are, but from everything I can say, they're completely inaccurate.

OK, so you're still pretty confident the test will move forward.

I'm confident the test can move forward. I wish I could give you exact dates, but I'm confident that a test that's so profound can have such an impact on female healthcare. That all the parties involved in these discussions, companies recognize the importance of this test.

Perfect, moving on to DIANON. You talked a lot about deionization, I'm just trying to understand better what deionization of CMBP was in a given quarterly period? I think you've transferred some psychology business out of the Connecticut facility for DIANON. Is transferring business from one center to another, would that be considered deionization, or are there whole separate series of prophecies that you are referring to?

As a whole, what we're doing, Dave, is we're taking the systems of DIANON that existed in the Stratford, Connecticut facility including the information systems and the approaches in which pathologists read results. And we're training our own pathologist at LabCore on exactly the same system that DIANON had pre-acquisition. Introducing that system into our company, then providing clinicians with the results consistent with the way DIANON provided results pre-acquisition to their physicians also.

So three years down the road what you should expect is a very significant anatomical pathology business at LabCore that uses exactly the same systems that DIANON continues to use post acquisition by LabCore. Not only are these report result systems, but they're internal systems that provide pathologists with approaches to looking at pathology results.

OK, and then maybe one last question for Tom or for Wes, in terms of the bad debt reductions, obviously well on pace there, both DSOs and bad debt reduction. What percent of this reduction if any is tied to a contracting effort, and what percent is tied to good old fashioned billing focus?

(off mic)

OK, so it's 100% just internal billing operation changes.

Absolutely, it's initiatives that we have in place that improve the process. It's all blocking and tackling.

Perfect, and then last question Tom, I have to ask, are the back sciences, just any comments you can make on pricing, stabilization or reimbursement, or sequential volume trends?

Yeah sure, the pricing which you're familiar with is holding. We are getting reimbursed for the test. We continue to methodically get reimbursers to pick up on the, pick the test up. We are looking forward to get some guideline standards so that the test can really take off, and we have seen from where we were in the November, December period, consistent increases in volume on a week to week basis.

The LabCore sales force continues to be very much committed to this product. We are seeing many success stories in terms of doctors getting clinical information about their patients, particularly as it relates to things like polyps that we had anticipated that they may not have anticipated. So all is going well with PreGen-Plus.

So it sounds like LabCore initiatives, specific sales changes last two or three months tied to a dax (ph) PreGen-Plus are definitely working?

We think so.

OK, great, thanks Tom.

Our next question comes from the line of Mr. Kevin Berg from Credit Suisse First Boston.

You talked about the meter managed care contracts, the timing of the contract of when they are offering renewals and the length of these contracts. Are we seeing any extension in these terms, maybe moving more towards multi-year contracts?

They're all multi-year contracts. All of the big managed care contracts that we have are, Kevin, I believe they're three years. They're multi-year contracts. We recently renewed one of the big three, we did that at the end of last year. And we continue to have interaction with another one of the big three towards a renewal, which we anticipate will occur. And the only thing I can really say, further about the managed care contracts is, it's tough. We fully expect to renew these contracts. We fully expect to get more business from managed care. But the negotiations are challenges.

And I guess all of these trends in these contracts, pricing is seeming obviously coming down, are you getting more exclusivity or are they pushing more business towards you?

They're very much trying to help us get more business. The main issue when I deal with the managed care plans, and I actually personally have visited most of the big managed care plans during the first quarter, is their concern about what they call leakage. Which is business, it does not go to one of the contract labs, but goes into more expensive places like smaller laboratories or hospitals. So that all of the efforts that I can articulate from the big managed care plan are trying, reduce lab costs through moving business towards one of the contract labs.

And this very safe pricing is flat, down, up?

To be honest with you, it depends on the managed care plans. We are looking to get modest price increases, and that's what we've said. And if you look at our results for the quarter in the AK, it looks like they're up about 2%.

OK, thank you very much.

You're welcome.

Our next question comes from the line of Mr. Penner Ulrich (ph) with UBS.

Question was answered, thanks guys.

Our next question comes from the line of Mr. Gary Lieberman from Morgan Stanley, please proceed.

Hi, it's actually Stacey Rich for Gary. Sorry to keep harping on the pricing, but I'm trying to (off mic) back into your guidance here. And it looks like you're saying that the small acquisitions and new contracts, about one, maybe one, only two percent.

Are you talking about pricing, you talking about volumes, or are you talking about revenue?

About pricing, but maybe I'm not getting into it correctly, but if you have guidance, five to seven percent of revenue....

Right.

Looks like the acquisition would add about one to 1.5%?

For the year, or for the quarter?

For the year, if you're talking about $25 to $35 million. Is that embedded in that five to seven, is that correct?

Correct.

And your normalized volumes were running about 4.5 to five percent?

That's good.

So it sounds like pricing could either be down, or actually up, is that correct?

That's true.

OK.

It could be down, it could be up, and I can seriously, we don't expect it to be down.

Right.

But, certainly, it is the one area that we're watching very carefully of last quarter. So, what we're seeing, and I think I've said it, what we're seeing is some modest growth in the core business and some challenges in the high end esoteric business. The solution to this, in my mind is to get the HDV fiber sure off and going.

Right.

That's a single source product for LabCore. To get more PRE-GEN PLUSES sold, which will have a positive impact on pricing. And hopefully, at some point later to have OvaCheck (ph) into the market. And that's really been always the focus of LabCore, to get new test into the market that help in the mixed shift area into the Genomex area. And we've seen the benefit of that now for six or seven years, and in this quarter, we didn't see that help us to the extent that it helped us before.

All right, so you're pretty covered over the volume piece at least.

We think, and we've been saying it now for four quarters, we think our volumes are in the four percent range, and we've seen it a little better this quarter. But that's kind of what we've said.

All right, great, thank you very much.

Thank you.

Our next question comes from the line of Mr. or Ms. Ricky Goldwasser from UBS.

Good morning.

Hi Ricky.

Can you provide us some color and trends that you're seeing in the drug of abuse area?

I actually think our drugs of abuse business was up slightly for the quarter, Ricky. I'm going to speculate it was up one or two percent. And we turned asset into growth, the price is not very good in that business, it never has been. That obviously has some influence on price, but not substantial, but we did see modest growth in the quarter for drugs of abuse testing.

OK, then on the December conference call, and in today's guidance, you talked about (off mic) acquisition. Have you made some (off mic), do you expect that you will create additional, more acquisitions in 2004, or are you done for the year?

I don't know, I just don't know to be honest with you. I don't see a lot in the acquisition area, so I don't see anything on the radar. But I'm hopeful there are a couple small ones out there.

And your guidance that includes the one to 1.5% of acquisition. First, the MDS acquisition kind of takes care of that portion?

It's in that range.

OK, thanks.

OK.

Our next question is a follow up from Mr. Bill Bonello (ph) from Wachovia, please proceed.

Hello?

Sorry about that, our next question comes from the line of Mr. David Lewis from Thomas Weisel and Partners.

Tom, just a quick follow up. In prior quarters, or, you talked a lot about cardiovascular testing, specifically lipoprotein sub classification, I was under the impression that you guys are having a significant amount of success in this area, and I didn't come up on the call, so I just wanted to make sure that was still progressing nicely.

That whole area of lipoprotein testing is growing significantly last quarter, and it continues to grow.

OK, and just one last question here. Are PCR royalties, Tom, is there an opportunity, '05, I'm sorry, '04 and '05 from SG&A standpoint, or cost to good standpoint, increased profitability with PCR patents kind of unraveling? Or has Roche pretty successfully converted people to TaqMan and there's limited opportunity?

That's a tough question for me to answer because of my many years at Roush.

That's why I asked Tom.

I think it's fair to say that my impression, what Roush did was just very smart, they (off mic) here on the product side, when your on the (off mic) side, you wonder how they did it. But I don't think the PCR patent expiration will have any impact in the near term on a reduction of royalties unless I'm missing something. And one of the reasons is because of the tack royalties and the whole area of TaqMan which is very new and very exciting and they're all interwoven. But I hope you're right, but I don't think so.

You've got to blame yourself a little bit Tom, because I may have learned from the master, right? Thanks.

Next question.

The next question comes from the line of Bill Bonello from Wachovia.

Tom, when you were talking about uses of cash, you referenced the lions (ph). Can you guys just kind of lay out for us what the scenarios might be, those, I guess are credible come September of this year, just how might that play out?

You know, Bill, we don't really have a clue and that's why we've been conservative about it and that's why we have probably the point of irritated some people been very careful not to talk to people about it yet.

But I think that's probably a fair question to ask on the conference call in July. There are a whole host of things that could happen, including nothing, which is what we hope happens. But, right now I think it's premature to get into that.

OK. But, just, I guess, as a follow up on that, just where the stock price stands today there is no issue in terms of having to pay any kind of contingent principal payments or anything like that?

That would probably be true.

OK. Thanks.

Ladies and gentlemen, as a reminder, to register for a question please press the one followed by the four.

OK, then, if there aren't any further questions, we appreciate everybody's responsiveness and have a good day.

Thanks Ben.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.