McGrath RentCorp (MGRC) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp first quarter 2008 conference call. At this time, all conference participants are in a listen-only mode. Later we will conduct a question and answer session. (Operator Instructions).

Now I'd like to turn the conference over to Mr. Geoffrey Buscher of SBG Investor Relations. Please go ahead, sir.

Thank you, Operator. Good afternoon. I'm the Investor Relations advisor to McGrath RentCorp and will be acting as moderator of the conference call today.

On the call today 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 telephone replay for up to 48 hours following the call, by dialing 1-800-405-2236 for domestic callers, and 1-303-590-3000 for international callers. The pass code for the call replay is 11111984.

This call is also being broadcast live via the Internet and will be available for replay. We encourage to you visit the Investor Relations section of the Company's web site at mgrc.com

Our press release was sent out today at approximately 4:05 Eastern Time, or 1:05 p.m. 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 forward-looking statements are based upon information currently available to McGrath RentCorp and McGrath RentCorp assumes no obligation 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, Geoffrey. In addition to the press release issued today, the company also filed with the SEC the earnings release on form 8(K) and its first quarter 2008 Form 10-Q.

For the first quarter 2008, total revenues increased 8% to $65.4 million from $60.8 million for the same period in 2007. Net income increased 10% to $10.3 million or $0.43 per diluted share from $9.3 million or $0.37 per diluted share for the same period in 2007.

Reviewing the first quarter results for the Company's Mobile Modular division, Mobile Modular total revenues $0.6 million or 2% to $35.8 million for the same period in 2007 due to $1.9 million of higher rental and rental-related services revenues partly offset by lower sales revenues during the quarter.

Gross profit on rents increased $1.4 million or 9% to $17.2 million due to higher rental revenues. Rental revenues increased $2.1 million or 9% over 2007 while rental margins were unchanged at 66%.

Selling and administrative expenses increased $0.5 million or 7% to $6.9 million from $6.2 million in the same period in 2007.

The rental revenue increase resulted in an increase in pretax income of $0.5 million or 5% to $11.7 million for the first quarter of 2008 from $11.2 million for the same period in 2007.

Finally, average modular rental equipment for the quarter was $451 million, an increase of $39 million from the first quarter of 2007. Average utilization for the first quarter increased from 81.3% in 2007 to 82.5% in 2008.

Turning next to first quarter results for the Company's TRS-RenTelco division, First quarter total revenues increased $3.3 million or 14% to $27.8 million compared to the same period in 2007 due to higher rental and sale revenues.

Gross profit on rents increased $1.6 million or 20% to $9.6 million as compared to 2007. Rental revenues increased $2.8 million or 15% as compared to 2007. And rental margins increased from 41% to 43%.

Selling and administrative expenses increased $1.1 million or 24% to $5.9 million from $4.8 million in the same period in 2007. Pretax income increased $0.9 million or 21% for the first quarter 2008 to $5.2 million from $4.3 million for the same period in 2007, primarily due to higher gross profit on rental and sales revenues.

Finally, average electronics rental equipment at original cost for the quarter was $235 million, an increase of $44 million from the first quarter of 2007. Average utilization for the first quarter increased from 66.6% in 2007 to 68.8% in 2008.

On a consolidated basis, interest expense for the first quarter of 2008 decreased $0.1 million to $2.5 million from the same period in 2007 as a result of the company's lower average interest rates partly offset by higher average debt levels.

The first quarter provision for incomes taxes was based on an effective tax rate of 39.2%, which was up slightly from the first quarter 2007 rate of 39%.

Next I'd like to review our 2008 cash flows. We continue to generate strong cash flows to invest in our business and return value to our shareholders. For the three months ended March 31, 2008, highlights in our cash flows included net cash provided by operating activities was $25.6 million, an increase of $9.2 million compared to 2007. The increase was primarily attributable to the reduction in accounts receivable and improved operating results in 2008 partly offset by other balance sheet changes.

We invested $21.6 million for rental equipment purchases partly offset by $5.4 million in proceeds from used equipment sales.

Dividend payments to shareholders were $4.4 million. Net borrowings increased $21.1 million from $197.7 million at the end of 2007 to $218.8 million at the end of the first quarter 2008.

We continue to have a solid, low leverage balance sheet.

During the first quarter 2008, the company repurchased 968,746 shares of common stock for an aggregate repurchase price of $21.9 million for an average price of $22.61 per share. There were no repurchases of common stock in the first quarter of 2007. At this time, 210,878 shares remain authorized for repurchase.

For 2008 first quarter adjusted EBITDA increased $3 million or 10% to $34.3 million compared to $31.3 million in 2007 with consolidated adjusted EBITDA margin of 52%.

Our definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income are included in our press release and Form 10-Q for the quarter.

Turning next to 2008 earnings guidance, at this time, based on first quarter 2008 results and our outlook for the remainder of the year, we are reconfirming our full-year earnings-per-share guidance to be in a range of $1.72 to $1.82 per diluted share.

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

Thank you, Keith.

Let's begin with some color on our modular rental business for the quarter. I was very pleased with our 9% in rental revenues, our main driver of earnings growth, to $25.9 million for the first quarter 2008 from a year ago. This increase is primarily related to classroom and commercial building shipments in the second and third quarters of 2007. We should experience a full 12 months of rental revenues in 2008 on a large number of these orders.

The favorable increase in quarter-over-quarter rental revenues was chiefly due to strong classroom rental growth during the second and third quarters of 2007 in Florida and Texas. In Florida, the popularity of our Campus Maker classroom product, class size reduction, and the phasing out of older model [code] portable classrooms continues to support our educational business growth. In the Texas market, we are benefiting from opportunities in both modernization and student growth.

During the first quarter, we saw favorable educational booking levels for the 2008/2009 school year in California, Texas, and Florida classroom markets. Keep in mind that the greatest majority of the classroom rental orders book during first quarter and those that will be booked during the second quarter will not ship and begin billing until the third quarter of 2008 and that virtually all of these orders will be multiyear transactions.

For the first quarter of 2008, our residential construction rental booking activity in the California felt significant weakness in new order activity. Keep in mind that residential construction represents less than 4% of company-wide annual rental revenues historically. We also lower demand and a more competitive environment for new nonresidential construction projects in California that utilize single-wide modulars. However, we are seeing healthy demand for larger, nonresidential construction projects in California emanating from $30 billion in bond measures passed in late 2006 for the building of wastewater treatment plants, dams, levees, and other infrastructure.

The initial good news about these engineering-type projects is that they typically utilize larger modular buildings and have multiyear rental terms.

Commercial business activity in the Texas market continued to be favorable during the quarter and is supported by a strong oil industry sector. In Florida, we saw a marked increase in both commercial opportunities and booking levels during the first quarter of 2008 compared to prior quarters. We continue to be excited about the long-term opportunity to grow our commercial rental business in the Florida market.

For clarity purposes, we define our commercial rental business for modulars as everything other than education. In other words, it includes office, display, and work space for residential construction, nonresidential construction, commercial and industrial businesses, the petrochemical industry, healthcare, and a very large mix of other specialty needs.

In our newest markets North Carolina and Georgia, we are focusing our efforts during the first half of 2008 mainly on marketing our classroom products and services to the educational community. There was a significant amount of pick-and-shovel work to be done with decision-makers in getting the Mobile Modular brand established in these markets. Although we are pleased with the reception that we've received in the market to date, it will take time to gain traction and produce material results from these new geographic investments.

At the end of the first quarter, utilization of our modular fleet stood at 82.3% compared to 81.5% a year earlier and 82.8% at the end of the fourth quarter of 2007. The higher first quarter 2008 over first quarter 2007 utilization level is primarily due to increased educational rentals in Florida and increased educational commercial rentals in Texas.

The reduction in utilization levels from the fourth quarter of 2007 relates mainly from weakening residential construction demand in California.

Finally, we had a solid quarter-over-quarter increase in gross profit in rents of approximately 9% to $17.2 million with gross margin on rents at a healthy 66%, the same as a year ago.

Enviroplex, our wholly-owned California classroom manufacturing subsidiary, had revenues of $1.8 million during the first quarter of 2008 compared to $1.1 million a year ago. Enviroplex's backlog stood at $13.5 million at the end of the first quarter versus $7.2 million at the end of the first quarter last year.

Glenn Owens, our new leader of Enviroplex, has done a very good job in business development and overseeing plant operations in the short time he has been in the role. We are looking forward to the conversion of the backlog into sales revenues over the next few quarters and maintaining a healthy flow of new opportunities going forward.

Now let's take a closer look at TRS-RenTelco, our test equipment rental division. TRS-RenTelco had a strong increase in rental revenues of 15% to $22.3 million from $19.5 million a year ago. We benefited from favorable market demand across a fairly broad base of customer segments, including communications networks, aerospace and defense applications, and semiconductor and consumer electronics product development and manufacturing.

Although our average monthly rental rate declined to an average of 4.6% for the quarter, this was in line with our expectations. The biggest contributing factor during the quarter was the competitive market environment and our push to gain market share.

At the end of the first quarter, utilization stood at 68.4% compared to 66.9% a year earlier. The higher utilization level was driven by a healthy rental marketplace as well as improvement in our sales of earlier generation test equipment inventory.

Gross profit on rents increased 20% to $9.6 million for the quarter compared to a year ago. In addition, gross margin on rents increased to 43% versus 41% last year. Higher rental revenues and lower depreciation and direct costs of rental operations as a percentage of rents drove the higher margin level.

Going forward, we strive to increase gross profits and gross margin on rents as we grow our business levels, better manage our asset pools, and create greater leverage of our centralized sales and equipment processing infrastructure.

Now for some additional comments regarding our EPS results in Q1 and outlook for 2008. As we've stressed over time, the best gauge of health of the company is the growth of rental revenues and gross profit on rents and maintaining favorable gross margin on rent levels. Our first quarter results reflect solid performance on these metrics.

We also benefited from the lower increase in SG&A spend during the quarter than forecasted. This is mainly due to various new order placement positions not having been hired to date or being hired later in the quarter than initially planned.

We also had lower borrowing costs than budged due to the Fed's recent key interest rate reduction.

Finally, our EPS for the quarter benefited favorably by approximately $0.02 per share from our buyback of over 1.7 million shares since late 2007.

On the strategic front, we mentioned on our earnings call in February that we would be speaking later in the year about two initiatives that we were launching in 2008. On of those initiatives is our launch into renting portable storage units under our Mobile Modular trade name.

We're initially incubating this effort out of our Northern California modular inventory center at Livermore and plan on rolling it out in [each of] our regional sales and inventory centers over the next few years.

We believe that we can be highly successful in the rental of portable storage units over the long term for the following reasons. One, we believe that there are favorable customer base synergies with a large number of our modular building rental market segments. Two, we believe that even though it's a steel box, there's room to innovate and improve the product. Three, we believe that when portable storage rentals are incorporated into our regional sales and inventory center overhead structure, supported by a large installed customer base that we can achieve better economics in a broader coverage area from a single location than today's operators. And four, due to a highly fragmented number of operators in this rental space, we believe that we will have the opportunity various smaller providers' rental assets and income streams at favorable valuations as we move forward.

To date we've purchased a variety of portable storage rental assets, have a favorable pipeline of opportunities from our limited initial marketing effort of outbound customer calling, and have received our first orders.

Keep in mind that this is initially an organic effort that will take time to grow into a meaningful level of rental revenues and earnings.

The second initiative that we're moving forward with in 2008 still has some key steps to complete before we are ready to provide any details. We expect to provide information on this initiative within the next few months.

With respect to our new ERP application platform, we plan to complete phase one of the project early this summer and to launch it in October directly following our busy season for modulars. Phase one by far the largest and most complicated component of our IT application investment.

Everyone should be aware that we are in the process of completing our new debt financing that should provide us with a sufficient amount of dry powder to grow our core rental businesses and new initiatives and put us in position to readily act on potential acquisition opportunities.

Strong cash flow businesses, a healthy, low leverage balance sheet, and access to capital for growth have been cornerstones of McGrath RentCorp's success over the years.

As always, we aspire over the long run to produce strong financial results in order to return value to shareholders through both share appreciation and the payment of dividends. We will also continue to be opportunistic in buying back our shares in order to return value to shareholders.

In closing, it's important to keep in mind that there is a countercyclical dynamic to our rental products, especially our modular business that can serve us during more challenging economic environments.

In spite of various negative macroeconomic data and more regionalized concerns, we are off to a good start in 2008. We are pleased with the outlook and opportunity pipeline for our educational rental businesses in our markets. Although there are significant challenges in residential construction, especially in California, and a more competitive nonresidential construction market overall, we have also seen an increased number of large public infrastructure projects. And our contractor business associated with the petrochemical industry has remained favorable.

(Inaudible) rental business is growing nicely and at present has a healthy pipeline of opportunities and outlook.

We are also managing both direct costs of rental operations and depreciation smartly. We are moving forward with our strategic launches and continue our exploratory work on new markets and rental products and we are investing in IT infrastructure and applications to support a larger McGrath RentCorp in the years ahead.

Finally, we'd like to remind everyone of our upcoming annual shareholders' meeting at our corporate offices in Livermore, California on June 4 beginning at 2:00 p.m. We'd also be pleased to provide you a tour of our Northern California sales and inventory center operations for modulars during your visit.

And now Keith and I are available to address any of your questions.

Thank you, sir. We will begin the question and answer session. (Operator Instructions.) Our first question is from the line of Scott Schneeberger with Oppenheimer. Please go ahead.

Thanks. Good afternoon, guys.

Hey Scott.

Hi Scott.

Hey. Nice work on the quarter. I just want to start out first with how healthy the pipeline is and how things are looking order-wise for the educational modulars in California, if you could take us a little bit deeper of what you're seeing for orders, and more importantly, to go in a level deeper, giving us some background on how matching funds work and if the school districts are healthy enough to go forward this summer.

Thanks.

Be happy to. First of all, just the - if you look at the opportunity pipeline and our booking levels through the month of April, we're very pleased where those are at in California and just addressing that market to begin with. So that's in line with our expectations. We're pleased with what we've seen.

There's still a couple of months left here of pipeline coming through into order realization. So we're still working it. May and June, there's still quite a bit of activity to be had out there.

If you break it down a little bit further, the Southern California market has been a stronger market than Northern California this year within the state.

In terms of schools and their ability to take on projects, you know that as you're well aware of, Scott, most of our growth and new order activity is associates with modernization of California schools. The bond monies are in place. There's about $2.6 billion of those monies available from the $3.3 billion from the November 2006 bond measure and so there a healthy sum of money there.

Districts, although there are some here and there that may have elected not to move forward with projects because of a variety or reasons, that number has not been significant.

And for the most part, districts, they've passed their local bond measures or parcel taxes, the state is putting up roughly 50%, they're putting up roughly the other 50%. It's just a matter of those districts that have those monies in place being able to move forward.

So the operating budget dynamics with the state, if there's a shortfall in operating budgets at the school districts, doesn't impact greatly the modernization aspect for school districts. Some districts it can, but for most districts it does not.

Okay, thanks.

And with the $2.6 billion outstanding there, I assume that's out there indefinitely. What are your thoughts - what do you know with regard to the ballot this November perhaps? Anything additional? Or is that $2.6 billion probably sufficient?

My sense is if it's $2.6 billion at this point in time, I'd be very surprised if there's another bond measure in November for facilities in the state, whether it be for permanent construction or for modernization. And it appears now this $2.6 billion would take us certainly through 2009 and into 2010, at least with the pair of glasses we have on today.

Okay, thanks.

Shifting gears a little bit, you're mentioning now a little bit more strongly than we've heard in the past that the infrastructure money is getting spent now in California. Could you take a little deeper on that? What projects are you seeing? How much - I think it was roughly $30 billion approved. Just a little deeper there? Thanks.

Well, the $30 billion, we started seeing more of an uptick in that toward the end of last year and it's carried on into this year. And that's been a real bright spot on the nonresidential construction side of things.

I can't give you more detail [the numbers] of the $30 billion of how much of it has been utilized. But there's still quite a bit of dry powder there. And we've benefited both in Northern and Southern California from those types of projects.

Thanks.

And then just curios, how strong is petrochemical in Texas and could you just take us a little bit more on that vertical and perhaps manufacturing, just how strong the environment is for those and how long you think that'll persist.

Well, it's very strong. And we do business with a large number of the petrochemical plants in Texas and related industries. So all I can say is that has been strong over the last three years. It continues to be very strong. Obviously oil priced at north of $120 a barrel puts a lot of demand on activities with the oil industry and obviously raises the bar in terms of their ability to develop various oil reserves and process that oil.

So it lines up very nicely for us in terms of the types of needs that the plants have on change-outs and other types of maintenance they need to perform in the plants and us bringing modulars to provide the temporary space for them, as well as longer-term projects in terms of doing additions to plants as well as, you know, whatever new refining might be done.

Okay, thanks.

And then on your new portable storage container business, is that just going to be rolled out in California to start? And how is purchasing there? I imagine the containers are getting a little bit more pricy with steel prices going up. You know, you have to buy in bulk to get the volume discount. Can you just speak a little bit about the process of going into that business?

Certainly. Yeah, we are - we're incubating out of Livermore today. And that way it's under the watchful eye of a number of us here. And we have a leader of that business. We've designated someone separately to run that business and to be able to give it its best opportunity for growth, a gentleman by the name of [Mike Buckman], who's been a senior leader with us for the last couple of years overseeing our inventory center operations. And the dynamics are such that if we're buying rental assets, both used as well as new, so it's a combination of items, and then we are raking the used equipment and we're branding that and doing various upgrades to that product.

I would say that the pricing's been fairly stable. We haven't seen - we've been researching this for some time now an over the past year we haven't seen any really significant elevation in the cost of units, slightly, but not significant.

Okay, thanks.

And then finally to just get Keith involved, the guidance does not include share repurchases to be done in the future, only those done in the past, and what is the appetite now for share repurchases?

Thanks.

The first part of our comment, Scott, is absolutely correct. The guidance range we've confirmed today, that does not include any future share repurchasing. And our philosophy there is we do analytical work, we look at the valuation of the Company's stock, where we believe that repurchases would be accretive to earnings and in the best interest of shareholders. We will act opportunistically when the opportunity presents itself. And we'll continue to do that.

Okay, thanks. That's all for me.

Thank you, Scott.

Thank you.

Our next question is from the line of David Gold with Sidoti & Company. Please go ahead.

Hey, good afternoon.

Hi David.

Hi David.

Just a couple of questions for you. First, on the TRS business, there where you commented on competitive pricing, can - are we gaining share there? And if so, how do you measure that?

A good question. The way that we - first of all, yes, we are gaining share. The way we measure it is that we've set up a database of really our competitors' accounts and where we think strongholds are at. And what we look at is basically where those accounts were at a year or two ago or whenever we start tracking. And we look for what progress we're making against those accounts over time. Now some of that can be related to growth in those accounts that isn't pulling market share, but we tend to have a pretty good sense of what's growth and what's not as opposed to true market share going from a competitor versus just additional growth within the account. Some of those accounts we were already doing business with, but we have a very good tracking system of data of where an account was to start with and then we just measure against that how successful we are in booking rentals. And first month's rent is our gauge on that.

And if I remember right, that's some of the larger accounts?

That is correct. Those tend to be larger accounts without question.

Okay. And then that is you commented and I think the past couple of calls about classroom pricing maybe not being exactly where you'd like it to be. Can you update us on that?

Well, what we said is that we expected 2008 to be a competitive (inaudible) environment in California in particular and it's going along as we might've expected.

And one thing I want to make sure everyone's aware of that we have a lot of customers that are in effect they just order off contract like they always have, so although there are a number of projects that are highly competitive, there are also a number of projects that are not competitive and that are done off existing contracts at more standard rates. But that's to be expected with the inventory that was unutilized coming into 2008. And the good news is that we've had a good opportunity pipeline year and booking year thus far in California, but with a couple of key months to go here.

And then did I hear you right? Did you say that you would be - I didn't quite catch it on the bond issue. You said with $2.6 billion left, did you say you'd be surprised if there was another issue into this year or not surprised?

Again, I would be surprised if there was a bond measure for facilities in November, which is the next date in which they could do it. If there isn't one in 2008, the next period in which they could do it would be in a - or the first really primary session 2010 in California, which would be in the first quarter of 2010.

Okay. And then just lastly on the portable storage business, how expensive do you expect the launch of that to be for you, now capital intensive?

David, we mentioned when we gave guidance in February that we had approximately $1.5 million set aside related to exploring and launching new initiatives. As Dennis mentioned, we have [announced] portable storage today, so the costs associated with that are already reflected in the guidance that we gave for the year. And then the second initiative, which we're not going into any detail today, again, we've already set aside that in the budget.

Fair enough. Fair enough. Okay, appreciate that. Thank you both. Thank you.

David, thank you.

(Operator Instructions.) And our next question is from the line of Jamie Sullivan with RBC Capital Markets. Please go ahead.

Hi, good afternoon.

Hi Jamie.

Hi Jamie.

A quick question on the California market and where the bookings for the '08/'09 school year stand, just wondering how much as a percentage of a typical year say is booked through May and kind of where we stand this year versus last year.

You know, it's hard to say because every year is a little bit different. We still have a number of significant opportunities on the table that have yet to have a disposition. But we've had - that's not to say to date we haven't booked a material amount of business. We have, but there's still some significant opportunities on the table.

Okay. So say versus last year, because it sounds like it's a little bit later. Normally the first four or five months is when the vast majority of bookings happen and you're saying June/July also has a fair amount of bookings opportunities as well.

I'm saying May and June in particular. Typically you can get some in July and August, but it's really May and June. We're - we have another solid six to seven weeks of opportunities that will have an outcome.

Okay. And as you commented, most of that, you're pretty much on plan from where you were looking the beginning of the year?

I think we feel very good about where we're at today. Southern California has been particularly strong compared to Northern California. So we are feeling like it's in line with our expectations overall.

Okay, thanks. And on the cost of sales side, it looks like that came in a bit low this quarter, at least for - versus where I was expecting. Anything going on there? Is that the Enviroplex impact?

Nothing unusual if you look at the overall mix in the business. TRS was a slightly bigger percentage of the business in the quarter given the growth rate there was a little stronger, but nothing unusual in the underlying metrics in each division.

Okay. So it looked to me like the - on the cost of sales as a percentage of sales was near historic lows.

But keep in mind, rental revenues grew more than sales revenues and so that will happen because the rental margin is higher than the sales margin when you look at the overall business mix.

Okay. Maybe I'll follow up.

(Inaudible).

Yeah, if that helps you.

Yeah.

Okay. And how big is the portable storage fleet today?

You know, at this point, it's small, but we will continue to buy assets as we utilize them. And we've got a got start. But it's small and should be viewed in terms of a startup but with an opportunity to accelerate with some potential acquisitions or being able to roll it out sooner in our other areas if - provided we're successful in Northern California. And again, to be clear, we're only active in one location today.

Okay. Moving to TRS, still continues to perform well. If we look near term, say 2Q, do - does utilization look to be maintained where we are today?

Well, through the call today, our booking levels in the second quarter have been very strong. So I would expect if the pipeline - if the opportunity in the pipeline continues the way it has and conversion of opportunities to orders, I would expect utilization to stay in a very healthy range, either where we're at today or north of here.

Okay. Great. And then are you seeing any changes in the average rental life as the mix of equipment changes?

In our electronics business?

Right.

Not really.

No? Okay.

It's still on average about five months, somewhere in that neighborhood.

Okay, great. Thank you.

Thank you very much.

Thank you. And there are no further questions at this time. I'll turn it back to management for any closing remarks.

Well, I'd like to thank for joining us this afternoon on our Q1 call. I would love to see as many of you as possible at our upcoming shareholders' meeting on June 4 here in Livermore. That'll also be web cast.

And then otherwise we will look forward to chatting with you again on our Q@ call, which will be in early August. (Inaudible).

[That's it]

Thank you all very much.

Thank you. Ladies and gentlemen, that does conclude our conference for today. As a reminder, if you'd like to listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000 using the access 11111984 followed by the pound key. ACT would like to thank you for your participation. You may now disconnect.