McGrath RentCorp (MGRC) 2006 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen; thank you for standing by. Welcome to the McGrath Rentcorp fourth quarter 2006 earnings conference call. During today's presentation all parties will be on a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS).

This conference call is being recorded today, Thursday, February the 22nd of 2007. I would now like to turn the conference over to Jeffrey [Busher], Investor Relations Advisor to McGrath Rentcorp. Please go ahead, Sir.

Thank you, Operator. Good afternoon. I am the Investor Relations Advisor to McGrath Rentcorp and will be acting as moderator of the conference call today.

On the call from McGrath Rentcorp are Dennis Kakures, President and CEO; and Keith Pratt Vice President and CFO. Please note that this call is being recorded and will be available for replay for up to 48 hours by dialing 1-800-405-2236 or 1-303-590-3000 for international callers. The pass code for the call replay is 11081107. The call is also being webcast live by the Internet and will be available for replay. We encourage you to visit the Investor Relations section of the Company's website at MGRC.com.

A press release was sent out today at approximately 4:05 PM Eastern Standard Time or 1:05 Pacific. If you did not receive a copy but would like one it is available online in the Investor Relations section of our web site or you may call 1-206-652-9704 and one will be sent to you.

Before getting started let me remind everyone that the matters we will be discussing today that are not truly historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 including statements regarding McGrath Rentcorp's expectations, beliefs, intentions or strategies regarding the future. All forelooking statements are based upon information currently available to McGrath Rentcorp. McGrath Rentcorp assumes no obligations to update any such forward-looking statements.

Forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those projected. These and other risks relating to McGrath Rentcorp's business are set forth in the documents filed by McGrath Rentcorp with the Securities and Exchange Commission including the Company's most recent Form 10-K and Form 10-Q.

I would now like to turn the call over to Keith Pratt.

Thank you, Jeffrey. In addition to the press release issued today the Company also filed with the SEC the earnings release on Form 8-K. The Company also announced for the first quarter 2007, a 12.5% increase of a cash dividend to $0.18 per share for the quarter, representing approximately a 2.3% yield on an annualized basis.

For the fourth quarter 2006, total revenues decreased from $77.6 million in 2005 to $70.7 million in 2006. Net income decreased 2% from $12.1 million to $11.9 million and earnings per diluted share were flat at $0.47. Fourth quarter 2006 results included $0.8 million of non-cash stock compensation expense required under FAS 123R, reducing earnings by $0.02 per diluted share.

Reviewing the fourth quarter results for the Company's Mobile Modular Division, Mobile Modular total revenues decreased $1.2 million or 3% to $42.6 million over the same period in 2005 due to $4.6 million lower sales revenue, partly offset by higher rental and rental-related services revenues during the quarter. Gross profit on rents increased $2.5 million or 18% to $16.4 million from $13.9 million in 2005, due to higher rental revenues and higher rental margins. Rental revenues increased $2.6 million or 12% over 2005 while rental margins increased to 68% in 2006 compared to 64% in 2005.

Selling and administrative expenses increased $1.2 million or 23% to $6.4 million from $5.2 million in the same period in 2005, primarily due to .5 million of non-cash stock compensation expense related to the adoption of FAS 123R. The combined effect of the revenue decrease, increased selling and administrative expenses, and higher allocated interest expense was a decrease in pretax income of $0.2 million or 2% to $13.2 million for the fourth quarter 2006 from $13.4 million for the same period in 2005.

Finally average modular rental equipment for the quarter was $407 million, an increase of $43 million from the fourth quarter of 2005. Average utilization for the fourth quarter declined from 83.8% in 2005 to 82.4% in 2006.

Turning next to fourth quarter results for the Company's TRS-RenTelco Division fourth quarter total revenues decreased $6.5 million or 21% to $25.1 million compared to the same period in 2005, as higher rental revenues were more than offset by lower sales. Gross profit on rents increased $0.6 million or 8% to $8.7 million as compared to the same period in 2005. Rental revenues increased $1.3 million or 7% as compared to 2005 and rental margins were 43% in both periods.

Pretax income decreased $0.2 million or 4% to $5.3 million for the fourth quarter 2006 from $5.5 million for the same period in 2005 due to lower gross profit on sales.

Finally average electronics rental equipment at original cost for the quarter was $183 million, an increase of $30 million from the fourth quarter of 2005. Average utilization for the fourth quarter decreased from 70.5% in 2005 to 68.4% in 2006. On a consolidated basis, interest expense for the fourth quarter 2006 increased 24% to $2.7 million from $2.2 million for the same period in 2005, as a result of the Company's higher average interest rates and higher average debt levels.

The fourth quarter provision for income taxes was based on an effective tax rate of 34% which was the same as the fourth quarter 2005 rate.

Next I would like to review our 2006 cash flows. We continue to generate strong cash flows to invest in our business and return value to our shareholders. For the 12 months ended December 31st, 2006, highlights in our cash flows included net cash provided by operating activities was $99.1 million, an increase of $17.3 million over 2005. We invested $109.9 million for rental equipment purchases partly offset by $24.1 million in proceeds from used equipment sales. Dividend payments to shareholders were $15.5 million and net borrowings increased $2.4 million for the year, from $163.2 million to $165.6 million. We continue to have a solid low leveraged balance sheet.

For 2006 fourth quarter EBITDA increased $1.8 million or 6% to $34.6 million compared to $32.8 million in 2005 with consolidated EBITDA margin at 49%. Our definition of EBITDA and a reconciliation of EBITDA to net income are included in our press release for the quarter.

Turning next to 2007 earnings guidance, we expect 2007 financial results to be driven by continued growth in our rental businesses, partly offset by increases in selling and administrative expenses with full year earnings per share to be in a range of $1.65 to $1.73 per diluted share.

In 2007, we expect low double-digit percentage growth in rental revenues to be somewhat offset by higher selling and administrative costs as we invest in new market initiatives and upgrade our infrastructure. Selling and administrative costs are expected to increase by approximately 15% compared to 2006. In addition we expect a higher estimated effective tax rate of 39% compared to 36.9% in 2006.

Our lower 2006 tax rate was primarily due to a onetime reduction to the Company's deferred tax liability as a result of a franchised tax law change enacted by the state of Texas in May 2006.

At this point, I would like to turn the call over to Dennis.

Thank you, Keith. Let's go right to our results for our modular rental business. Mobile Modular had a strong year in rental revenue growth. Not only was the fourth quarter our highest rental revenue quarter ever at $24.3 million, but rental revenues increased 12% for the full year to a record level of $91.1 million.

What isn't so revealing in the numbers is the fact that they were produced in spite of a challenging California classroom rental environment due to limited modernization bond funding at the state level. Continuing growth and educational rentals in the Florida market and strong commercial business activity in both California and Texas were the biggest contributors to the overall rental revenue increase.

In Florida, we benefited from the popularity of our hybrid classroom product, class size reduction, the phasing out of older model code modular classrooms and other school facility needs. We will continue to grow our basic educational customers and have now done business with over 50% of the public school districts in Florida since entering the market just three years ago.

Our strong commercial levels in California and Texas were driven primarily by favorable nonresidential construction activity and general office space requirements. Although we saw a 12% increase in year-over-year modular rental revenues, average equipment utilization during the year reduced from 84.9% to 82.9%; and at the same time we grew our active rental assets by almost $44 million or 12% for 2005.

This can best be explained by a lower utilized California classroom fleet offset by new equipment need for growth in both the Florida educational and California and Texas commercial markets. With the passage of the November 2006 statewide facilities bond measure by California voters approximately $3.3 billion is now in place to support K-12 school model modernization and reconstruction projects.

There are also some significant monies available from the bond measure to repair and upgrade existing public college and university facilities. We are anticipating higher California classroom booking levels in 2007, with the majority of the equipment shipping beginning late in the second and third quarters. While this means that we will only see approximately three to six months of rental billings in 2007 we should see a full 12 months of rental revenues from the great majority of these orders in 2008.

We will also -- we also anticipate a healthy flow of new school modernization project opportunities continuing through 2008 from the bond funding now in place.

School modernization and reconstruction projects typically of rental terms from 18 to 36 months or longer. We would expect to see a favorable impact to equipment utilization levels, beginning in the second half of 2007 due to the anticipated increase in California classroom rental activity.

I am pleased to announce today that late in the fourth quarter of 2006 we launched commercial rental market operations in Florida. Our initial startup costs are fairly incremental to our educational infrastructure base. With our investment in our Central Florida sales and inventory center coming online in the second half of 2007, it will support our processing of both educational and commercial buildings for new rentals including the ability to customize floor plans to meet a greater variety of customer needs.

There will be added cost for labor, materials, management, and infrastructure depreciation, no different than our other regional equipment processing centers in California and Texas. Keep in mind it will take some time to develop a meaningful base of commercial rental business in Florida. However we believe that we can leverage our knowledge from other commercial markets as well as from our Florida experiences to date to expedite our growth.

I am also pleased to mention today that in 2007 we will be launching our first new modular geographic markets since our entry into Florida in 2004. We have identified several U.S. markets that we believe will be attractive long-term opportunities for our educational and commercial modular business. In our EPS guidance for 2007 are various costs and expenses associated with these startup operations. We are actively preparing to launch in these markets and will have more to share on our progress throughout 2007.

Now let me turn our attention to TRS RenTelco and their results. Fourth quarter rental revenues was approximately 7% to $19.9 million from a year ago and full year rental revenues rose 9% to $77.8 million. Gross profit and rent increased 23% for the year to $33.3 million.

The significant improvement in gross profit and rents was driven by an increase in gross margin on rents to approximately 43% from 38% in 2005. The improvement in gross margin rents was primarily due to a reduction in depreciation expense as a percentage of rents to 44% in 2006 compared to 48% in 2005. This resulted mainly from the elimination of depreciation expense, related to 24-month assets by the TRS acquisition and our discipline of asset management at the model number level. Lower equipment processing costs, as a percentage of rent, also contributed to the increase in gross marginal rents.

Midway through the first quarter of 2007, business activity levels are higher compared to a year ago. We are anticipating favorable U.S. and Canadian rental markets in 2007 with broad-based demand being driven by emerging wireless communication technologies, semiconductor and consumer electronics product development and manufacturing, and the impact of increasing volumes of broadband, wireless, and video traffic on communication networks.

In 2006, we continued to add the latest technology test equipment products to our rental inventory to support market demand. We entered 2006 with $186 million in original cost of rental assets compared to $154 million at the end of 2005. Average rental equipment utilization for 2006 increased to approximately 70% compared to 66% in 2005.

Finally, we have continued to explore international growth opportunities, including extensive investigation of various Asia-Pacific markets. We also are continuing our efforts at exploring additional test equipment product lines. We will be netting out those findings over the next few months and we will have more to share as appropriate.

Now for some comments on 2007 and our future. Starting in 2007 and continuing through 2008, we will be making key strategic growth and infrastructure investments to support longer term earnings. As a result our 2007 EPS guidance range of $1.65 to $1.73 understates the strength of our continuing core rental operations due to the impact of these initiatives. These new investments include geographic market and segment expansion of our modular business. The new ERP application platform. IT infrastructure upgrades, and greater management bandwidth and staffing.

I would like to comment briefly on these investments. Over the past year, we have identified several U.S. markets that we believe will potentially be attractive long-term opportunities for our educational and commercial modular business. We are now prepared to launch in two of those markets in 2007. We will continue our investigation of our remaining list of attractive markets during 2007 and 2008, with further launches possible in 2008.

It may be of interest to you as shareholders what criteria we weigh most heavily in assessing new modular market opportunities. These items include favorable general and educational demographics; markets that have the potential for an increasing level of educational rental opportunities over the long-term due to facility funding challenges, class size reduction or other catalysts; markets that we believe are prime candidates for product and service innovation; and markets with sufficient critical mass potential that allow us to leverage our regional sales and inventory center structure to lower per unit transaction costs.

We believe that the new geographic markets we have selected to launch in 2007 meet these criteria. However we also note that these are long-term investments that will take some time in order to become material contributors to the Company's earnings. Our investment in our new ERP application platform will enable us to scale our Modular business; create greater customer and equipment information visibility across functional workgroups, and create greater transactional efficiencies. We are targeting going live with Phase I early in 2008.

Our IT infrastructure investments include technology upgrades, greater capacity to support growth and security enhancements. Along with our ERP application investment in systems infrastructure upgrades we are filling various key IT roles and have brought on consultants to support the ERP development, training, and rollout processes.

Having filled various open managerial roles during 2006 we are entering 2007 more fully staffed than a year ago. We will also be adding key management and staff rules in 2007 to support our entry into new modular markets as well as to build greater bench strength for exploring strategic growth opportunities. These investments in new initiatives and infrastructure will put some near-term pressure on earnings. However, they are essential in positioning McGrath Rentcorp for more significant shareholder returns over the long term.

I have a final thought I would like to leave with our shareholders on today's call. In my outlook for the next few years I believe this will be a watershed period for the Company. We will be advancing initiatives such as our new modular geographic market expansion of 2007 and on a parallel track our growth laboratory will be hard at work incubating other potential growth opportunities. I like to refer to this as always keeping our foot on the gas.

Our earnings growth path can take many different forms, including geographic expansion, product innovation, core rental acquisitions, new product lines and Third Lake rental products. This is all about having adequate resources -- resources to execute on selected initiatives and resources that continue working to keep the pipeline of opportunity full. A significant portion of our increased SG&A expenses in 2007 is the investment in these resources in order to create a higher RPM earnings engine over the long term.

With that final comment I would like to now open the floor to questions.

(OPERATOR INSTRUCTIONS). Scott Schneeberger with CIBC World Markets.

This is Amy [Ruterman] for Scott. My first question is about inventory in California. William Scotsman mentioned that they have about 700 classrooms lying fallow in California and they currently have about 100 orders on them -- orders on 100 of them. Can you tell me about your inventory there? You kind of mentioned it when you talked about utilization just in terms of what you have ready to go in California?

Let me share a response to that this way. We typically don't give out any specific numbers on our fleet for competitive reasons but what I think is important to share here is that since the bond measure was passed in November, our opportunity pipeline has been very full. And as you -- in the middle of the first quarter I would say we are very pleased with the activity level insurance of both the opportunity flow as well as our booking levels to date for classroom activity. (MULTIPLE SPEAKERS) In fact, that's probably coming at us a bit more faster than we had anticipated. Which is very good news.

That is within the state of California?

That is correct.

That's great news. Then in terms of pricing it sounds like pricing is probably holding up very nicely in California. How is it in Florida and Texas?

The Texas market, very consistent. Florida in terms of rental, consistent. Sales pricing in Florida is a bit more competitive in the early part of the season.

And generally with pricing we have seen over the last year or so prices continue to firm up on the commercial side of the business. As we mentioned in the past for education, particularly in California, we wouldn't be surprised to see a more moderate pricing environment until players like ourselves put more inventory to work during the course of '07.

So you are saying Florida is a bit more competitive?

I think what Keith is trying to say is the California market in the early part of the season because of the inventory levels will tend to be more price competitive until those inventories get more fully booked and plan to go out and that kind of pricing pressure should be alleviated throughout the year. (MULTIPLE SPEAKERS) utilized. But Florida, rental-wise, does not have that dynamic today.

Then just a question from your remarks. You mentioned in terms of the Florida market I think you said something about 50% of the -- did you say, 50% of the school district?

We have done business since entering the market in early 2004 with over 50% of the school districts in Florida. There are 67 school districts in the state and we've done business now, some form of either sale or rental business with over half of those districts.

Have a couple more questions. Just hopping back to pricing, what are you seeing as far as in terms of your suppliers for pricing?

I don't think there's any material differences there between the current state and this past year so I think that's been at a very stable level.

My last one is on the electronics business. We have heard about a weakness in the wireless headset test market but I think it's more on the international side. Has that impacted TRS in any way?

It has not.

Cliff Walsh with Sidoti & Co.

Dennis, did you say that you were planning on entering two new geographic regions in the classroom business?

That is correct.

Are they going to be spread out through the year or any sense as to the timing of those expansions and potential costs from that?

They will be spread out slightly between the initial launch of one and the other one. That is correct.

So we could potentially hear about one on the next conference call and then maybe one down the road?

That is very likely.

I think you're commenting as well on the expenses associated with those initiatives.

Yes I would assume they would be a little bit upfront.

Yes; they would be upfront. Essentially some of the early costs are hiring costs of new team members and leaders for the parts of the business that we are building on. And then that will lead any revenues that follow from those initiatives.

And is this something that we should three years down the road expect sales and inventory centers as we are now starting to see in Florida?

Our concept has been to build larger regional sales and inventory centers and that would be our long-term desire for these markets. Until we get that critical mass dynamic working for us.

And, Dennis, could you maybe just comment on the state of the commercial market in Florida? What attracted you to it and what kind of expectations do you have for it?

What attracted us to the commercial market is really just having been in the market, educationally, for the last couple of years and just observing what is going on around us. And being able to see the activity levels of not only commercial and residential construction modular needs, but also general office space type needs.

So it seemed like it had a nice diversity of commercial modular business and that was attractive; and to the extent that we had to establish a regional sales and inventory center to support our educational business that infrastructure, to be able then to leverage commercial business does nothing but help us overall. So it was a very natural next step in Florida.

In the past you have talked about potentially adding a third rental business. I'm assuming with new geographic regions and this new product expansion in Florida maybe that's on the back burner at this point?

I wouldn't necessarily characterize it on the back burner. It's certainly in the laboratory as we are looking at a number of different potential third legs. So you have got to keep a lot of things percolating from an idea standpoint because not everything hits. But we are certainly looking at a variety of opportunities and we will continue to do so.

Alan Robinson with RBC Capital Markets.

Can I just ask a little about the EPS guidance you gave? What kind of assumptions does your guidance rely on in terms of modular rental growth through the year? I know it's difficult to get a feel for sales growth but in terms of rental growth how should we look at that through 2007?

What we said in our guidance was we expect low double-digit growth in the rental businesses. We didn't break out the relative mix between the modulars and the electronics. If you look at 2006, you'll see that for 2006 on the modular side we were up 11%; and on the electronics, right around 9%. So you could use that perhaps as an indicator of the relative growth we have seen in recent quarters on the two businesses.

And obviously with some of our comments about continued strength in Florida which has been an important part of our growth, we expect that to continue through '07.

It seems that, for 2007, there are two mechanisms to perhaps make the earnings seasonality more pronounced this year. Firstly, you have got the accelerated infrastructure spending perhaps in the first half of the year and secondly you have got the pickup in classroom revenues for the second half of the year. Is that a correct observation and do you anticipate the seasonality will be more marked this year in terms of earnings?

It's always hard to be precise on that; and as you know, we shy away from guiding individual quarters. Our guidance is for the year, as a whole. I think your comments are reasonable comments and, again, if you look at how the profile of the earnings played out in '06 clearly Q3 and Q4 were very important quarters. We have the seasonality related to our educational business for modulars and as you correctly said we think that will be strong in '07 in the latter part of the year.

So, certainly, there's the possibility for a little bit more expense being seen in the numbers in the first half of the year related to some of these initiatives that Dennis has discussed; and then a little bit more revenue opportunity on the rental side with California education kicking in, in the second half of the year.

So I would say, yes, we could see some of that phenomena. I don't know that it would be dramatic. It might just be a moderate influence on the profile of the numbers.

I might add that then, you get the impact of 2008 of really a full year of what you put out in 2007 for educational rentals. So that's always a very nice plus for the next year.

While on the subject of 2008, can we expect a fairly significant moderation in the growth of SG&A expenses in 2008? It seems that we've had solid double-digit growth in SGA and sales and administrative expenses the last couple of years. Is this the pattern or will we see more of a moderation in 2008?

Again I think if you look at some of the comments we made on the call today and in our release I think '07 is, clearly, a very important year for investment. Some of those investments will carry into 2008 particularly on the IT infrastructure or ERP and then depending on the pace at which we are active in new markets that could continue into '08 as well.

One thing to maybe help you think about this is to observe that one of the metrics we look at is our selling and administrative expenses as a percentage of rental revenue. That number was 27% in 2006.

Based on our guidance today, if you run the math on it our selling and administrative expense per the guidance will be right around 28% of rents and I would expect '08, even though we clearly haven't gotten our finalized plans for '08 this early, I would think that '08 would look more like '07 than 2006.

So I would think of their being a still -- this slightly higher level of selling and administrative expense as a percentage of rental revenues.

Last question. I noticed on the modular side, the average utilization during the fourth quarter was the lowest that we have seen in a couple of years now. What is behind that? Is that mainly classroom buildup ahead of the California initiative driven spending or is there something else behind that?

That is really the biggest element there is the California pace which now with the passage of the bond measure should be alleviated going forward.

(OPERATOR INSTRUCTIONS). [Vikas Boonya] with Carlsen Capital.

I have three questions for you. Congratulations on a great quarter. I think the first question is actually around the initiative that you are investing and so of the SG&A that is going to drive the growth rate up to 50% there's kind of two areas. It sounds like one is in infrastructure and IT type of spending and another is kind of in these new markets. I guess what I would like to understand is how you think about the return on that spending.

Maybe you could give me a bit of color around how -- obviously FLorida has been a huge success for you but in terms of us thinking about where that money is going to go, how do I think about the opportunity that these new markets could provide.

And on the IT side I'm assuming that this spending you guys have done some sort of return calculation as well. And if you we just give us some sort of ballpark way to think about where that spending is going as well?

Let me give you a little bit more color on some of the increase in selling and administrative expenses and try and lead back into the answer to your question. Just to level set everyone in terms of the actual numbers, our selling and administrative expenses in 2006 were $45.5 million. We expect somewhere around a 15% increase in that number for '07 which will take us to a number somewhere around $52 million, so about a $6.5 million increase.

If we look at where the increase is coming from, of the two areas you mentioned both investigating and launching in new markets of which clearly modulars will be an important part, that is somewhere around $2.5 million of the increase. And for the ERP and IT infrastructure related investments that is more in the $1 to $1.5 million range.

Maybe take the IT infrastructure verse. Clearly we look at the payback on that kind of investment but as we have remarked before, part of this is just accommodating the size of the business. We have essentially outgrown some of our earlier systems so this is to accommodate a larger business as we operate today and look forward.

As is fairly typical with those projects we have goals around seeing savings on the transactional side of the business and, ultimately, it will probably help us with some of our compliance costs but the specific targets there and the returns we don't really talk about publicly. But those are our goals as we look forward for a large infrastructure investment of that kind.

Then in terms of the new market investment I'll maybe turn back to Dennis but, philosophically, we are looking to get returns in line with the businesses that we operate today in California, Texas and Florida.

Yes I would echo what Keith just said and there are longer term initiatives and we want to keep that in front of everybody and there's some discovery that has to be done as well. We think over the long-term these investments will do just fine. The pace of growth is something we have got to learn more about in what we might expect there.

But I think Florida if you ask people within the Company I think most people would say Florida has been a pretty significant success. Is that right?

We would characterize it as that without question.

I guess the other question I have is the guidance. And I was just kind of taking a list here of all of the different factors that could affect next year. I appreciate you guys putting out numbers that you think you can hit or veat but when I look at what kind of year you are coming off of and what kind of year you are going into I guess I'm very -- I just feel as like the guidance is very conservative and I just want to get a sense of whether I am thinking about it wrong. Just if you look at the rental, you look at the revenues and you get the costs, you are coming off a year where you did 11% rental revenue growth in what was cyclically a tough year with a weakness in California.

In '07, you are going to get at least three to six months of benefit from the California (indiscernible), all the new electronics equipment that you bought last year should start kicking in. You have a pretty big commercial contract that you put in in the middle of last year that hit the 2Q earnings that is relatively lucrative contract and then on the so -- and you are still guiding to basically the same type of growth and rental revenue this year which seems kind of conservative to me.

Then secondly on the bottom line you are basically guiding to 12% core EPS growth before the taxes and the SG&A spend, which basically means there's no margin expansion despite having better utilization of those boxes that are sitting on the ground in California. The financial leverage you have, the debt paydown that you are going to do, improving yields and electronics and you are not going to have necessarily I imagine, the same kind of second quarter investments in the complex boxes that you put together. Is there something I'm missing or are you just trying to set a reasonable bar and hopefully exceed it?

I think we set -- to take your last comment I think we set a reasonable bar and I will say this about new markets. It's much easier to model cost and expenses that it is to model revenues. So we want to make certain that we have got our bases covered there and then see how those markets develop. But beyond that we will -- everyone take away from that what they want and again we just try to approach guidance responsibly.

(OPERATOR INSTRUCTIONS). Management, I'm showing there are no further questions. I will turn the conference back to you for closing comments.

I would like to thank you all for joining us this afternoon for the Q4 2006 earnings call. We look forward to speaking with everyone again in early May on the Q1 2007 call. Thank you so much.

Ladies and gentlemen, that will conclude today's teleconference. If you would like to listen to a replay of today's conference please dial in to 303-590-3000 or 1-800-405-2236 and enter access code 11081107 followed by the #. We thank you again for your participation and at this time you may disconnect.