ModivCare Inc (MODV) 2004 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Providence Service Corporation second-quarter conference call. At this time, all participants are on a listen-only mode. Following today's presentation, instructions will begin for the question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded today, Thursday, August 5 of 2004. I would now like to teleconferencing to Ms. Alison Ziegler from the Financial Relations Board.

Good morning, everyone, and thank you for joining us this morning for Providence's conference call and webcast for the financial results for the second quarter ending June 30, 2004. You should have all received a copy of the press release yesterday. If you did not, please call Janet Cruz of the Financial Relations Board at 212-445-8453, and she will send one out and confirm your name on our fax or e-mail list.

Before we begin, please note that we have arranged for a taped replay of this call, which may be accessed by telephone. This replay will be available approximately one hour after the call's conclusion and will remain available until later in August. The replay number is 800-405-2236 with a pass code 11004931. This call is also being webcast live with a replay available. To access the webcast, go to www.provcorp.com.

Before we get started, I'd like to remind everyone of the Safe Harbor statement included in the press release and that the cautionary statements apply to today's conference call as well. During the course of this call, the Company will make projections or other forward-looking statements regarding future events or the Company's beliefs about its revenues and earnings for 2004. We wish to caution you that such statements are just predictions and involve risks and uncertainties. Actual results may differ materially.

Factors which may affect actual results are detailed in the Company's Form 10-Q and 10-K filed with the SEC. The Company's forecasts are dynamic and subject to change; therefore, these forecasts speak only as of the date of this webcast, August 5, 2004. The Company may choose from time to time to update them, and if they do so, will disseminate the updates to the investment public.

I would now like to turn the call over to Fletcher McCusker, Chairman and CEO.

Good morning. Thank you very much, Alison. Good morning, everyone. With me today is Michael Deitch, our CFO. We will have some brief comments and then open the line for questions.

As you can see from our release, we continue to execute operationally and continue our rapid growth. For our fourth consecutive quarter, we are reporting record results. Since our IPO exactly a year ago this month, quarterly revenue has grown from approximately $15 million now to over $21 million a quarter. Accordingly, revenue is up 41 percent, earnings are up 123 percent, and our census has grown by 46 percent over the same quarter last year -- the quarter, if you'll remember, right before our initial offering.

For the second quarter 2004, our total revenue again was a record high, $20.7 million, a 41 percent increase over last year, and our managed revenue now has also reached a new record of $29.1 million, an 88 percent gain in our reported managed revenue. Looking at the two together, we are now responsible for approximately $50 million in quarterly revenue versus about $30 million quarter for the June quarter last year.

Total contracts, both owned and managed, have increased from 176 a year ago to 252 today. Following the Aspen transaction and the new Massachusetts contract that we just announced, we will now operate in 21 states plus the District of Columbia, up from 17 at the end of the first quarter and up from 16 states just a year ago. With the additional Aspen census, we now see over 25,000 clients a day, up from 18,000 in June and up from 12,500 a year ago.

Net income for the quarter was another record for us, $1.5 million, up 123 percent from $655,000 a year ago. While we have successfully grown the top line, we also continue to leverage our infrastructure and are realizing synergies from our acquisitions.

We have utilized the cash generated by our two public offerings to make three accretive acquisitions since our IPO. Since the end of the first quarter of this year, we have entered four new states, Pennsylvania, California, Nevada, and Massachusetts, and expanded into Foster Care in Maine and added a drug core (ph) treatment program as an additional service offering based in Las Vegas, Nevada.

All of these states, particularly Pennsylvania, Massachusetts and California, obviously offer significant opportunities for growth. We now have a strong base from which to expand in these markets.

You have heard us talk of California often, and we have until now been reluctant to enter this market. Recently, however, we see the economy stabilizing there. Its bond initiatives have recently passed. The across-the-board cuts proposed in social services have been eliminated, and the state is beginning to prioritize its spending, shutting institutions down in favor of community-based care. You probably noticed there is a referendum now on the November ballot in California to create, in fact, new funding mechanisms for mental health services, so we believe the timing is really very good for us to enter the California market.

In total, our acquisitions, we believe, will produce an additional 13 cents of EPS in 2005, and will fully offset the dilution from our March 2004 follow-on offering. This allows us to enhance our previous EPS guidance of 70 to 72 cents per share to 71 to 73 cents per share now for 2004. We also expect our revenue to be in a higher range as well, in the range of 93 to $95 million.

Our acquisition pipeline remains robust. We will continue to identify these kinds of strategic tuck-in targets that give us new geography or open new services for us. We expect any acquisition to be accretive to earnings, and in addition to the cash on our balance sheet -- you will notice 16 million at June 30 -- that is before the $10 million Aspen transaction, but we have yet to utilize any of the debt available to us on our lines of credit, and it is our belief that we would begin to look to our credit facilities if we continue to close on acquisitions in the near term.

I will let Michael walk you through the details of our quarter.

Thanks, Fletcher. Our second quarter, as Fletcher said, set a record high in terms of revenue and net income. Revenue for the quarter totaled 21 million, up from 18 million in Q1 and up from 15 million in Q2 of last year. We continue to grow organically as well as from acquisition. We closed the Pottsville Behavioral Health transaction on May 3 and continue to ramp up our business activity in our legacy states, as well as our relatively new locations.

Specifically from Q1 to Q2, our home-based revenue was up 14 percent, 11 percent organic and 3 percent from the Pottsville acquisition. Management fees were up 21 percent, 13 percent organic and 8 percent from acquisitions. In Q2, revenue for the entities we manage grew to 29 million, up from 20 million in Q1 and up from 16 million in Q2 of last year.

Our second quarter operating income totaled 2.5 million, which was about 12 percent of our revenue and was in line with our expectations. This compares with operating income of 1.9 million in Q1 and 1.7 million for Q2 of last year. In our second quarter, net income totaled 1.5 million, which was 7 percent of our revenue, which again was in line with our expectations. This translated into 15 cents per diluted share.

At the end of our second quarter, our Days Sales Outstanding from home-based and Foster Care services was 69 days, down from 70 days at the end of Q1. Our management fee DSO was 140 days, down from 154 days last quarter.

With that, I will turn the call back to Fletcher.

Michael, thank you. Just a few words about our previous guidance and new business pipeline that we talked about last quarter, and then we are happy to take your questions.

With the recent acquisitions, again, we expect revenue for 2004 to increase over 50 percent to approximately 93 to $95 million, with EPS now in the range of 71 to 73 cents per share. Again, this does not include any new contract wins or any unannounced acquisition activity that could still occur in the calendar year.

Updating you on our July government procurement cycle, you will remember we previously announced our '04/'05 new business pipeline at just over $13 million. This pipeline represents potential new contract activity for the period beginning July 1, 2004 and ending June 30, 2005. Most of that pipeline is still pending, as many states have yet to complete their July procurement cycle. Today, we have a business pipeline still of approximately $11 million. That is the same 11 of the 13 -- 2 million of that has been awarded or not, leaving us with 11 million still in the July pipeline.

As we have stated in the past, although our win rate has been very good, we encourage investors not to speculate about this pipeline because we have no way of predicting whether or not we will obtain any of this business. And as you can see, the delays have been outside of our control. We will continue to update our shareholders quarterly as to the progress in our pipeline.

We continue to believe the environment for privatization of social services is here (ph), and our ability to execute our payer loyalty, our operational performance will continue to provide additional opportunities to grow and create shareholder value. With that, operator, we are happy to open the line now for questions.

Thank you, sir. (OPERATOR INSTRUCTIONS) Bob Labick with CJS Securities.

Good morning. First question I wanted to ask about the acquisitions you just announced today. They sounded very interesting and positive. Will you be adding any SG&A for these, or can you layer them in with your existing infrastructure?

That acquisition activity, Bob, is unusual for us in that we have acquired contracts from a not-for-profit organization, and that is pretty much incrementally accretive to us. Because we have existing operations in New England and in Maine, we do not expect to have to bring on many expenses to manage those two new operations. So our hope is the majority of that, and I think the way we have indicated it in our guidance, is that it will be accretive.

Terrific. And I know you just spoke about the pipeline, the 11 million. If you were to win it, would any of that hit in this year or -- ?

Yes, the government cycle, which is now postponed, theoretically starts July 1. We have seen situations where contracts are awarded and start dates are a few days after the award. So it is conceivable that we could still have an award announced and have some of that business come online September 1, October, or November. The longer it gets pushed back into the year, then it is likely that that will not result in revenue for 2004. Again, we don't guide to that because it is so unpredictable, but it is conceivable yet that any win could still generate '04 business.

Terrific. And just last question from me, if you could tell us how is your acquisition pipeline currently? Would you expect that you might have any more this year or have you kind of filled up what you can handle to this point?

It remains robust, is the word my attorneys have guided me to use. We do not to track them individually. We don't comment on them by business. But I think we have said, Bob, historically that we are very busy. We have had to double our M&A staff; we have closed on acquisition literally every quarter since coming public. We see no reason that that will slow down.

We have historically said that if we acquired too much business, we might deliberately slow it down to make certain that we've integrated these programs. The nice thing about our most recent activity, most of these will be very easy to integrate, because we have gotten great leadership in every situation. In our Pennsylvania transaction, Frank Milewski, who is now running our Pennsylvania operation, came with that transaction. In California, Jenny Romig, who was their division director, will stay on and run our California business. And in Massachusetts, we have leadership that came with the deal.

So it makes the integration easier, Bob, when we're not having to utilize our own staff to provide the direct operational leadership. So the Aspen people are in fact here today beginning their integration with our corporate staff and back office personnel. So as of today, we do not predict any integration difficulty, so we have not slowed down our acquisition interests due to any integration concerns.

Terrific. Keep up the great work. Thank you very much.

Mark Hughes.

Thank you. Michael, could you give those internal growth numbers again? I was not able to scratch them down.

Maybe I went too fast. Home-based revenue was up 14 percent, quarter-over-quarter, Q1 to Q2. 11 percent organic. 3 percent from the Pottsville acquisition. Management fees were up 21 percent, 13 percent organic, 8 percent from acquisitions, specifically the ReDCo in Pottsville and the Care Development in Maine and Massachusetts.

Do you have the year-over-year numbers by any chance?

Not (indiscernible) for you, but I can. I will be happy to -- you just call me and I'll give them to you.

Very good. And I'm sure it was I was just not writing fast enough. It is this typical to have delays like this, Fletcher? It sounds like it's happened before, but to this degree, is there something else that's the states are wrestling with?

It is atypical but it is logical. Because most of these states, their budgets are flat, their revenue is flat, most of the money that is being created for projects like ours is being reallocated between government departments. And what you end up there with, Mark, is a lot of interdepartmental squabbling about their allocations. So the delays have been bureaucratic and turf issues over limited dollars. And historically, they have all panned out to favor us.

But I think you are seeing more issues raised at the state regarding how they are spending tender dollars, and it has slowed some of the -- even some of the announced proposals for the July cycle have been slowed down. We haven't seen anybody pull them. They would announce if they had terminated the proposal or if they intend not to award it. But we have experienced significant delays in the majority of that business.

Right. Is there anything you can say in terms of census increases? Most of your growth historically has come from just doing better under existing contracts. Can you say what your outlook is there?

We continue to see, continue to expect significant organic census growth. If you look at us over the last year, most of our growth has been in news census from existing business, and we see no trend that would indicate to expect that pattern to slow down or fade off. In fact, in every renewal situation, we typically are asked to handle additional clients.

Any way to bracket, when you say significant?

We can do some work for you in terms of -- going forward, we try not to predict those things, but I think we can do some work for you on organic census growth and it would help you trend out what we would expect the next several quarters to look like.

Historically, it's been the bulk growth of your internal growth has been census.

That's correct.

We've always cautioned against trying to match up for an average revenue per client, because it is so different across the board.

Right. Okay, thank you.

Andrew May.

I work at Jefferies, and have a couple questions. In the investing activity section of the cash flow, this quarter saw -- you had a -- gave rise to a note receivable from unconsolidated affiliate of 875,000 and a transfer of some cash to restricted cash for contract performance, and those were new items, I think, that I hadn't seen before in your statements. I wondered what they were.

Andy, the 875 net receivable was an amount advanced to ReDCo for some long-term obligations that they were required to pay.

That's the Pennsylvania transaction. I think if you go back to our release there, we indicated that we had advanced some money to them as part of that transaction. So that is a ReDCo item.

And the restricted cash, you're exactly right. Especially in Florida, we were required to put up -- well, renew two and add an additional letter of credit as part of our contract cycle down there. So these payers are requiring us to put up a letter of credit for the contract performance. So we take that out of our cash and move it to -- it's really restricted cash.

Fair enough. And the note receivable from ReDCo, over what term is that scheduled to be paid back?

I believe it is two years.

Okay. And it looks like they have enough cash flow to accomplish that.

Yes.

Just doing our quick arithmetic on your disclosure on how additive the Maine and Massachusetts new management contracts were, it looked to us like perhaps the management fee on those two arrangements was less than 10 percent.

Yes, the revenue of those entities combined, Andy, is about $22 million. And we are historically looking at a management fee of about $0.5 million, so you can see that it is dramatically different than our traditional managed business. It is more akin to what we do in New Mexico. And again, our hope is to go in, grow that business, increase our fees over time. But because it was not a difficult business for us to assimilate, then that pretty much is incremental management fee earnings to us.

Right. So the management fee is approximately 500,000. Did I hear you correctly?

Yes.

And you paid $1.5 million for the two contracts?

To date, that's right.

To date. Is the additional amount, upon appraisal -- do you have any way of guessing, is that likely to be a substantial number or do you think it can appraise in line with what you paid?

We do not expect it will be significantly different. The issue there, Andy, is that we have a for-profit entity acquiring the assets of a not-for-profit entity. And what you have to do in that situation is indicate to the IRS, to the state Attorney General, and of course to the Board of Directors for the not-for-profit, that the price paid was indeed fair. So they have retained a third party to do that and we have agreed that we would true up to that appraisal. But we're not expecting that to be dramatically different. It could increase the price, but we would expect it to stay, Andy, within our announced historical multiple ranges.

Thank you. Michael, when you were talking about the same-store sales in management fee, I think you said that part of the acquired revenue was from the Care Development acquisition. Did that actually close in the second quarter?

Right at the end -- last week.

So I presume that's a de minimus amount of second-quarter revenue?

That is correct.

Okay. The cash flow from operations in the quarter looks like it was slightly negative. You had CF Ops 1.3 million at March 31 and 977 for the six months at June 30. Could you talk about what your expectations are for cash flow for the balance of the year?

Let me tell you what happened in the quarter. It is kind of interesting. We were required to pay in this quarter our first-quarter and second-quarter estimated tax payments. It was about $500,000. Two days ago, Ernst & Young informed me that they had finished with our December tax returns, and lo and behold, I have a $770,000 overpayment from last year. So in retrospect, I really didn't have to make those estimated tax payments. So I will benefit from not having to pay those estimateds in the third and fourth quarter.

The other reason it went down just a little bit was we had some accrued legal we paid -- 100,000 in Arizona Purchased Services. We tried to help out our providers near the end of their fiscal years in June, so we were able to catch them up net about 300,000. And all that really contributed to the use of cash in operations for Q2.

Great. And accounts receivable has grown -- again, on the cash flow -- trade accounts receivable up 2.17 million for the year, but you've bought a lot of that, right?

That's correct. And what is really nice, though -- I keep track of this as our aging -- really we have about -- net with the allowance -- only about $200,000 that is over, say, 120 days old. So our aging is very, very current.

Excellent. And you continue to reserve any management fees over a year?

That is right.

And we're not close to having any right now.

We haven't had to do that since we came public.

Terrific. One last question. Could you give us an overview update on the Florida operations, how you think the first half a year of your Lee County activity has gone and your subcontracting activity? I am not really up-to-date on that.

We're very pleased where we are, Andy. Most of it is anecdotal and internal. We are awaiting the peer review process from the state of Florida, which will give you a formal indication of how the state views our work there, and we will release that as it comes to us. But with Boyd (ph) down there, we have very few operational headaches. The infrastructure is built up. The contracts that came on earlier this year are fully ramped, and we will enjoy the benefit of that in Qs 3 and 4.

At 28 cents for the first half, guiding to 71 to 73, you can see clearly we are expecting very strong quarters in 3 and 4, and a lot of that is the result of the Florida ramp-up. So operationally, it is fine. Economically it is fine. In fact, I think our management fee revenues exceeded our expectations there in all of our managed and owned business.

Do you think overall that the constituencies affected by this are -- leaving aside how Providence is doing in it -- that the initiative has been successful in the eyes of the people who have to continue to support it in Florida?

Privatization is controversial in Florida. It has not produced the results that the governor would have hoped. They have had some recent media play, Andy, if you watch the papers down there, regarding some sweetheart deals coming out of some of the bureaucrat's offices to friends of theirs. That is one of the reasons we don't hire any lobbyists, is to try and stay outside of those kind of frays, because they typically arise and people can question the motivation of some of these contracts.

And I think proof is still going to be in the pudding. It is early. The program is just barely over a year old, and I think until some outcome results are there and you can in fact demonstrate it is not only economically productive but it also is producing a favorable outcome, it is going to have its critics. And that is one of the reasons I think other states have been cautious about the full-blown privatization model that you see in Florida, and now being implemented in Kansas.

We never saw it sweeping the whole country. We saw that Florida -- the success in Florida would determine how other states, maybe a handful of states, five or six, would go into kind of the full-blown privatization model.

Most states still prefer maintaining some state regulatory oversight, bureaucratic control, over these contracts. And we have not seen other states abandon and consolidate departments like the state of Florida has. So it clearly has its critics and they are vocal. They have access to editorial comments in the local papers, and I think most people are waiting for those of us that are in the private sector to deliver.

That is very helpful. Thank you.

Patrick Swindle.

Avondale Partners. Looking at the revenue mix during the second quarter, the mix shift that had been in favor of home- and community-based services versus foster care, as we look out into the back half of the year, do you anticipate that in terms of mix, that those would continue at a rate comparable to the second quarter? Or should we anticipate -- obviously you get the change result of Aspen -- more specifically, looking at Foster Care on a run rate basis, where do you see Foster Care going in the back half of the year?

You are exactly right. Foster Care for the quarter was flat. We do see some increases in -- we foresee some increases in Tennessee in the Foster Care; Arizona is ramping up slowly here and their Foster Care takes a long time to get licensed and whatnot. So we see it increasing.

We're not surprised, Patrick. The most topical issue, I think, with the states that we do business with is the home-based programs. It is the most cost-effective. It is the one that can eliminate institutional care in favor of a program that is much more cost-effective. So we are seeing much more interest, if you will, from payers regarding our home-based models, although Foster Care continues to grow. And as you stated, the Aspen transaction is entirely home- and community-based. So you will see some continued growth on that sector. I would think it will continue to outpace Foster Care, but Foster Care is growing.

I would encourage you to read the Pew Report Foundation report -- about an 82-page report that talks about the condition of foster care in this country. And it is clear to us as states look at that, and some states have introduced legislation to deal with some of those deficiencies, that you are going to see some changes and improvement in the whole foster care system.

Next question, looking at the new contracts pipeline, that coming down from just over 13 to 11, of that incremental $2 million that has been awarded, can you give any detail on how much of that you were awarded? And also, can you talk about, for the contracts that were not awarded to you, who you were competing against, and in general terms, why were they successful relative to you?

We do not break pipeline business down with that kind of detail. I will say, Patrick, we won some, we lost some. The competitors remain the local not-for-profit kinds of providers in their community, and again, most of those are smaller contracts, $0.5 million variety, $1 million. So any individual award we don't typically see as material. If there was a large contract, which we typically see as $2 million or greater, we would announce that probably separately and distinct from the pipeline. But most of this is the small, garden variety contracts that we grow every day and we typically don't announce them on an individual basis, and the majority of that, again, is still pending.

And one last question. Looking at SG&A, obviously, with the addition of Aspen it's going to require some infrastructure development out in California to pull them into your organization. In looking at SG&A going forward as a percentage of revenues, do you think that the rate that we saw here in the second quarter as a percentage of revenues is sustainable or do you think that that will tick up as we look out into the third and fourth quarter?

We actually hope to have improvement in margin over Qs 3 and 4. You might see a point or a little more fat (ph) in margin improvements. But remember, we do not want that to get too high. We are not a proponent of 15 percent kind of margins. We believe that ultimately, that could create tension with our state payers, so we are comfortable where it is. You might get some scale or leverage as we continue to grow.

One of the reasons, if you look at Aspen's overall revenue base versus what we have guided to in terms of its EPS contribution, you will see that we have significant infrastructure investment in California, but it is not out of line and should not dramatically affect the overall percent.

Thank you very much.

(OPERATOR INSTRUCTIONS) Barry Linhoff (ph).

Brickler (ph) Capital. Fletcher, I was wondering if you could comment a little bit further on the Pew Commission report. I guess I'm curious to know how you see this being implemented. It sounds a lot like what you have talked about in California, specifically, is consistent with what the Commission recommended in terms of providing more funding, more flexible funding, and I think as importantly, following up and measuring outcomes and effectiveness and efficiency.

Can you maybe just talk little bit about how you see this impacting your business and how it's going to be -- I'm not sure if enforced is the right word, but how the follow-through is going to happen on the Commission's recommendations?

It really will be on a state-by-state basis. One of the challenges with these kind of white papers historically is that they are basically ideological pieces. They do not have legislative commitment. They do not have, typically, funding backing, so they are theoretical exercises. Some of the states will look to that report to change the nature of the way they do business.

It is very consistent with how we have viewed Foster Care. Remember, there are 450,000 kids in the United States in this level of care today that has historically been run by the government sector. And I think this report is a real indictment of the government's ability to find permanent placements to keep kids from bouncing around within the system, and generally the outcomes have been identified as very poor. We do think that opens the door for the private sector. And in California, even recently, the governor has indicated that he is much more responsive now to private sector help because they now believe they cannot accomplish it by themselves.

So that report is very consistent with the way we have viewed the world. We do see some states adopting its tenets ideologically. There has been a bill written in Congress that is designed to revamp the whole foster care system and tie any federal dollars that go to states to the Pew recommendations, but we do not expect that kind of legislation to pass, as typically the government resists trying to influence how states run their social services.

So you may see some strings attached to federal dollars for states to be implementing some of the recommendations, but other than that, that's probably about all the meat that is going to be applied to it. But I think in terms of trends, momentum, indications in terms of how the winds favor us, we believe our model is part of the solution rather than part of the problem identified in that report.

And in terms of outcomes measurement, I know you have done some work measuring the quality of your outcomes and the cost savings, etc., trying to stay away from focusing solely on the economic and cost savings. But I guess I'm curious, in California or more broadly, do you see that gaining any traction at the state level with measuring the quality and the cost-effectiveness of the outcomes that you are achieving versus the state programs?

Unfortunately, no, in terms of how most states contract for services. Very few of our contracts have outcome criteria attached to it, and that is typical of the whole procurement process. Some states are beginning to differentiate providers on an outcome basis. Our outcome, as you suggested, is entirely voluntary. We have not been required by any of our payers to date, in fact, to produce that. The system is still entirely driven economically. We are hopeful at some point that outcome will differentiate, and that is one of the reasons we have invested in these studies and will continue to do that. But tragically, today, no, it is not really a part of the purchasing process.

Okay, thank you very much.

A follow-up from Mark Hughes.

The management contracts in New England that you have acquired, anything structurally different about those that you get a smaller management fee as a percentage of the managed revenue?

The only thing that is really different, Mark, is the last page, which is the price. That was really a give-and-take negotiations with the Board, their ability to afford and their desire to move away from in-house management to outsourced management. So I think it is safe to say that our initial fee is lower than what we would normally expect, but again, we saw an opportunity to get in and change and grow these businesses. So it is our hope that we will continue to, as we demonstrate our capabilities, these organizations become more viable, that that would pay off for us in fee increases.

Any influence from those negotiations or that rate on your other contracts?

No, none of our contracts have most favored rate provisions in them. They are all negotiated with independent boards and range from that as kind of the low end to a percentage of revenue -- I think we average now, Michael, what -- 10, 11 percent is kind of our typical contract.

Right. So there has always been a lot of variety in that?

There has been a lot of variety in that.

Okay. Thank you.

There are further questions at this time. Please continue.

Thank you, everyone. We are really excited about where we are. We are celebrating our one year anniversary since our IPO last August. Michael and I remember that month very fondly. We're very pleased to be where we are and doing as well as we are, and continue to look forward to our continued success.

So again, if any of you have questions, we are reachable individually by phone or e-mail, and we do do that day-in, day-out. If you didn't get anything answered today, please give us a call and we will see you all next quarter. Thank you very much.

Thank you, sir. Ladies and gentlemen, this concludes the Providence Service Corporation second-quarter conference call. If you would like to listen to a replay of today's conference call, please dial 303-590-3000 or 1-800-405-2236 followed by the pass code 11004931. (OPERATOR INSTRUCTIONS) You may now disconnect and thank you for using AT&T Teleconferencing.