ModivCare Inc (MODV) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2012 Providence Service Corporation earnings conference call. My name is Chantilay and I will be your coordinator for today's call. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end that this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Alison Ziegler of Cameron Associates. Please proceed.

Thank you. Good morning, everyone, and thank you for joining us for Providence's conference call and webcast to discuss financial results for the third quarter ended September 30, 2012.

Before we begin, please note that we have arranged for a replay of this call. The replay will be available approximately one hour after the call's conclusion and will remain available until November 15. The replay number is 888-286-8010 with the pass code 3268-1979.

This call is also being webcast live with a replay available. To access the webcast go to www.provcorp.com and look under the event calendar on the IR page.

Before we get started I would 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 may make projections or other forward-looking statements regarding future events or the Company's beliefs about its financial results for 2012 and beyond. 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 filings with the SEC including the Company's 10-K for the year ended December 31, 2011. The Company's forward-looking statements are dynamic and subject to change. These statements speak only as of the date of this webcast, November 8, 2012. The Company may choose from time to time to provide updates and if they do will disseminate the updates to the investing public.

In addition to the financial results prepared in accordance with generally accepted accounting principles stated in the press release and provided throughout the call today, the Company has also provided EBITDA and adjusted EBITDA non-GAAP measurements which present its earnings on a pro forma basis. Providence management utilizes these non-GAAP measurements as a means to measure overall operating performance and to better compare current operating results with other companies within its industry.

Both EBITDA and adjusted EBITDA are measurements not determined in accordance with or an alternative for generally accepted accounting principles and may be different from pro forma measures used by some companies. A definition, calculation and reconciliation to the financial statements of each can be found in our press release.

The items included in the non-GAAP measures pertain to certain items that are considered to be material so that exclusion of these items would, in management's belief, enhance a reader's ability to compare the results of the Company's business after excluding these items.

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

Alison, thank you very much. Alison has been marooned in Hoboken for the last week, so we are happy to see you surface and dry.

Welcome from Tucson; we are all actually together here today working on our 2013 budgets. We bring all of our managers in this time of year for a three-day round of budgets. So here together in the same room is Michael Deitch, our CFO; Craig Norris, our Chief Operating Officer; and Herman Schwarz, CEO of LogistiCare. And as usual we will all be available to take your questions following our scripted remarks.

We are happy to report that Q3 was a much better quarter operationally for us with the notable exception being Canada. You will remember from our annual meeting that we identified four what we called hot spots that were negatively impacting our operating results, our Canadian social service operation and three non-emergency transportation states.

Canada has shuffled its delivery of services and we were awaiting the rebid of our entire book of business. Fixed contract announcements were outstanding at the end of last quarter. We can now report we won two of those, lost two of those and then the Ministry postponed the final two. Without any ability to forecast the final two awards, we are forecasting our Canadian revenues to drop by about 50%. This triggered the impairment review in Q3.

We are required to seek an independent valuation under these circumstances and compare forecast results to our initial acquisition expectations. Through that process the resulting anticipated decrease in earnings requires us to basically mark to market the intangible value associated with this acquisition, which in this case was about $2.5 million or $0.19 a share.

Even if we are subsequently awarded these contracts, the timing is such that will not affect this impairment charge and, of course, we don't get to adjust the impairment charge once it has been taken. Without this charge EPS for Q3 would otherwise be $0.28, a very good seasonal quarter for us.

Also during the third quarter we've begun to show adjusted EBITDA numbers to -- as Alison said, to better demonstrate our operational performance and provide a more complete picture of the unusual items that have impacted us this year from impairment to start-up to strategic review expenses. This presentation is also consistent with how most of our peer companies now report.

Of the three NET states previously identified as negatively impacting our operations, we have resolved the rate issues in one of those states. As to the other two, one state has agreed to rebid its contract and we remain in negotiations with the third. We are bidding in three new states that have opted to outsource transportation -- Maine, new regions in North Carolina and Rhode Island.

Collectively this represents $100 million annually of new business. We won about $170 million of annual new business in 2012. We have elected to pass on the NET Alabama bid and, of our current book of business; only one contract term is ending in 2013, that is Oklahoma, currently about $30 million of revenue.

You will notice that we executed on our previously announced stock buyback. We purchased and retired 293,000 shares at an average price of $11.87. I have authorization to continue this buyback for up to another 250,000 shares. I will let Michael now talk about the quarter and the new adjusted presentation.

Thanks, Fletcher. In our third quarter of 2012 revenue totaled approximately $280.3 million, up from approximately $235.6 million for the third quarter of 2011, a 19% increase. For the three months ended September 30, 2012 as compared to three months ended September 30, 2011, social services segment revenue decreased 6.2% and transportation segment revenue grew 34.4%.

Third-quarter operating income totaled almost $5 million which was 1.8% of our revenue. This includes an asset impairment charge totaling approximately $2.5 million for our Canadian operation. This compares with approximately $5.9 million and 2.5% of revenue for the third quarter of last year.

Third-quarter net income totaled approximately $1.2 million which was 0.4% of revenue. This compares with approximately $2 million and 0.8% of revenue for the third quarter of last year.

Third-quarter diluted earnings per share totaled $0.09 on approximately $13.3 million diluted shares standing, compared with $0.15 diluted EPS for the third quarter of last year.

Our effective tax rate was approximately 62% for the quarter. This unusually high rate resulted primarily from permanent non-deductible items applied to a relatively low pre-tax earning amount including the impairment charge and as discussed in our Form 10-Q for the quarter. For the full calendar year of 2012 our expected tax rate is estimated to be approximately 46%.

At the end of our third quarter our days sales outstanding was 32 days and our management fee days sales outstanding was 81 days. Cash provided by operating activities was good in Q3 totaling $22.8 million, allowing us to report cash provided by operations of $39.9 million for the first nine months of this year.

During the quarter we redeemed approximately 2.5 million of convertible notes. At the end of our third quarter we had almost $63.8 million in unrestricted cash and short-term and long-term debt obligations totaling $140.5 million. Subsequent to quarter end, in October we paid down the outstanding balance on our revolving line of credit totaling $8 million. With that I will turn the call over to Craig Norris, our COO.

Thank you, Michael. For the quarter our direct client census on the social services side was approximately 51,000 clients, this is a decrease from the prior year quarter of roughly 6,000 clients. This census decline primarily relates to reductions in our workforce and job training programs both in Canada and in the US. We did, however, recently sign a $6 million award in Wisconsin for workforce services that will improve these census numbers going forward.

The NET segment had approximately 14.8 million individuals eligible to receive services under our LogistiCare division, an increase of approximately 4.4 million eligible members compared to the same quarter of 2011. All direct and indirect clients are being served from 526 local offices in 41 states, the District of Columbia and Canada. Combined between our owned and managed entities there are approximately 11,500 employees serving 846 contracts.

For this quarter there was a rather large reduction in the social service segment contracts. This primarily is due to external pressure on our tutoring business as a result of policy changes to the No Child Left Behind Act. The changes in the Act allowed school districts to opt out of the tutoring benefit and we have seen this impact our contract renewal rate. This remains a relatively small part of the social service business overall and we will have only minor impact on annual revenue in 2003.

The year-over-year decline in social service revenue is primarily in the workforce development and job training programs in Canada and in the US, including one contract we did not renew due to poor funding levels. The Wisconsin award will improve on this revenue in 2013 by $6 million.

Our core Medicaid operations within the social services segment performed mostly at plan overall, especially considering this quarter had the summer seasonal months of July and August.

And lastly, we are finishing negotiations on a large $28 million social service contract that we have been awarded as a pilot to privatize a child welfare system in one region in a southern state. The terms of this contract are currently being negotiated and we anticipate that we will begin providing services in 2013. We expect revenue just over $13 million in the first year under this contract. With that I will hand off to Herman for more details on LogistiCare.

Thank you, Craig, good morning, everyone. The NET segment enjoyed a solid third quarter as our revenue continued its impressive growth and margins improved to targeted levels. The new business added over the past year generated a year-over-year revenue increase of 34.4% and we continued to experience quarter-over-quarter growth, albeit a more normal 4%.

During the third quarter we added new business in Georgia with the start of the last of the three regions we won in the RFP process last year, we also implemented phases 3 and 4 of the New York City contract which included the boroughs of Manhattan, the Bronx and Staten Island and we also added a new contract in Wisconsin.

In addition, we continue to add new populations to our managed care contracts across the country, but especially in California, New York, Florida and Hawaii.

Most encouraging in the third quarter was the improvement in margin in spite of the usual seasonal impact of higher utilization in that quarter. Our gross margin in Q3 was nearly a point higher than the same period last year and reflected the efforts we have been making in improving the transportation expense.

This margin improvement was achieved without any benefit of better pricing from our clients, although in selected contracts, as Fletcher mentioned, we continue to negotiate to adjust our per member per month rate.

Additionally, in spite of the growth in ASO, or administrative service contracts, like New York City where operating expense represents a higher percent of sales, we have managed to control the spending in these areas and kept the percent to revenue relatively flat.

The sales pipeline is active as three states are in procurement processes right now, Maine and Rhode Island are both in the decision making stage. We submitted bids in late October and anxiously await the announcement of the awards. Main is split up into eight regions, so there will likely be multiple awardees, while Rhode Island is a state wide procurement.

The third state is North Carolina which has initiated its RFP in the last couple of weeks. This state is split into three regions and could be awarded by region or state wide. This submission was originally due on the 15th of this month, but we have just recently been told that it will be delayed by a few days.

Our pursuit of new opportunities is tempered by the fact that if we cannot make a contract work and the client will not consider a rate adjustment, we will execute a timely exit from the contract. As such we will be exiting the Arkansas market as we head into 2013.

This is a case where the rate we were being paid was not suitable so we worked out a short-term deal that allowed the state to rebid the contract. The new RFP was based solely on price and, while a few of our competitors chose to offer the highest discount allowed, we determined that the pricing at that level did not generate a positive margin.

For the same reason we also did not bid on the RFP in Alabama that was discussed on last quarter's call. We will continue to maintain this discipline as we work through negotiations with other states. I'll now turn the call back over to Fletcher.

Herman, thank you very much. It is been an amazing year; we are very grateful to you and your staff. We have seen a lot of states on the social services side paralyzed lately awaiting the outcome of the election. Most of her Medicaid colleagues have been unwilling or unable to plan for Medicaid expansion, especially in Republican led states.

With the Democrats solidly maintaining control of the White House and the Senate the Health Care Affordability Act will no doubt now be the law of the land; states can opt out but we expect very few will. This means somewhere in 2014 approximately 11 million new enrollees will enter the Medicaid system.

We are in Tucson as we speak planning on how this Company can maximize our efforts through this window of opportunity and we remain very bullish on our position in Medicaid as we expect to see the rollout of additional NET states, as Herman has described, and we fully expect to see the flatness in social services begin to reverse in July of 2013.

And we have already won, as Craig mentioned, $20 million of new business for calendar 2013 in that segment. With that we will take questions.

(Operator Instructions). Rick D'Auteuil.

So, the Canadian margin impact from the rebids, Fletcher, I assume is directionally down, but --.

The margin is not the issue so much, Rick, as the volume of business versus what we acquired. We lost about 50% of our revenue and about 50% therefore of margin. The margin percentage we are still okay with, but that results in a mark-to-market kind of situation.

So we still see opportunities in Canada, we committed to hang in there. These two postponed contracts we still hope get awarded. Our Wisconsin win that Craig described was modeled after the Canadian programs. So it is worthwhile for us to stay involved. The issue is really a timing issue in terms of business loss that triggered the impairment triggers.

A couple things, so on the two that haven't decided yet, two regions that were postponed, you are the incumbent. So when you say 50% decline does that include the loss of those or what does that assume?

Well, our whole book of business was rebid there, so we went roughly from $22 million of revenue to $12 million currently awarded. So there is still some revenue outstanding, but we don't -- we can't at this point tell you when or if those contracts will be let.

Okay. So but the $12 million includes just your two wins, it doesn't include the ones that are still up in the air?

Correct.

Okay. But you are still providing a service for the two that were postponed, right?

No, no.

Oh, you're not.

That would be new business.

Okay. Is there -- I think that was all in one province. Were there opportunities in Canada outside of that province to expand the services?

Hi, Rick, this is Craig. Yes, that -- the primary business when we acquired WCG was in British Columbia. We have since expanded our reach to other provinces around Canada including a federal contract that we work for veterans in Canada. So we very much see expanding beyond this province and get out from under just one payor there essentially.

So there are opportunities. The system is moving a little bit slower than I would like certainly, but we are reaching out beyond where we started this business. I am confident that we are going to continue looking at these new areas and growing this business. It is just taking a little but longer than I would have liked.

We have won our first contract in Alberta.

Okay. Actually, Craig, while you are on then, on the Wisconsin win, that's the $20-million-something annual?

That is the $6 million.

The $6 million. So what was the -- did we identify -- oh, a southern state, okay. On the southern state, when you called that a pilot, is that the pilot revenue or is that the full -- is there an opportunity, if it goes from a pilot to something more than a pilot, to be substantially larger?

Yes, I mean this is a pilot within one state and how it goes, the state will evaluate the outcomes and they may pursue expanding it in other areas of the state. So it really is a true pilot that can grow beyond what we are reporting for this current contract.

Probably not in 2013, Rick.

No, I understand. On Herman's side of the business, just so I understand, there is a -- Oklahoma was the mentioned contract that you called it ends next year. Is that one that we are not going to pursue or -- I think you said Arkansas you have opted out of? I just want to make sure I have got that right.

You got that right. Arkansas, we agreed with the state that they should go back out to rebid given the contract. So we have a structure we could execute and opt out in June of this year, but agreed to extend to allow them to RFP -- to put out an RFP. We got the pricing we wanted during that interim period.

So by the first part of next year they will have -- they have already secured a new broker and that broker will be coming in. So we opted out of that one. Oklahoma we have exercised all the options that are available, so that contract just expires next June and they have already got their RFP out on the Street for the rebid.

And we are bidding on that one.

Okay. And then on Arkansas, what is the revenue impact on that?

About $10 million to $11 million.

And it was for margins you are saying?

At the rate that we were being paid prior to June, yes.

Okay. So -- and then on the new opportunities you sized as the $100 million, what is the timing around those? The three states -- well, Maine, new regions in North Carolina, I think Rhode Island would be a new state also, right?

No, all of them would be new states. North Carolina is currently running their own program. They've put out to bid in both -- where they have three regions, it is not clear whether they are going to award a region or by state. So I think that is what we were trying to say there.

Timing, I can't recall offhand exactly, Rick, but I think either the first part of next year or mid- -- I guess it really depends on when they award it. They have all been delayed a little bit already. So it is kind of hard to go by the schedule they originally published.

But both Rhode Island and -- well, Rhode Island is July 1 of next year, that one I do remember because we are involved there through June in a subcontracting relationship. So they're scheduled for July 1, I believe Maine is earlier than that and North Carolina is probably sometime Spring to June time frame.

The bids are all in, right?

All but North Carolina are already in. North Carolina goes in about the end of the month.

We are awaiting decision announcements on those, Rick, probably in the fourth quarter.

And Maine was to be done in regions also, right?

Correct.

And you responded to (multiple speakers) of those?

We responded to all -- there are eight regions, we responded to all eight with some caveats on a couple that were not as desirable as stand-alones. So we are not quite sure how they were awarded. The reason it was done regionally is because they do use some regional (technical difficulty) regional transits did respond to the bid for their specific regions. So that really leaves six regions that are open to kind of the national brokers.

Okay.

Now the other regions could go to a national broker, they may decide to give them all, but frankly I would be surprised. I would expect the transits to get the regions that they bid on.

Okay. The -- where you were displaced in Arkansas there was a new vendor. Was this one of the vendors that has fallen down in a prior program or was this a new player?

Neither. This is a company that we took business from in Georgia in the most recent RFP. So they historically had a presence in Georgia and a little bit in Tennessee and that is about it. They are a minority owned company out of Atlanta that we know fairly well. And they picked up two of the three regions in Arkansas that we are exiting. And the other one was given to a local agency.

Were there any net start-ups in this quarter?

Wisconsin -- a new contract in Wisconsin started September 1 and the Georgia regions started July 1, and then the New York phases that I mentioned.

But how about quantifying the start-up cost?

$250,000.

Okay. And in the Q4, what is the expectation?

$500,000 for the really large influx scheduled for January 1 of the managed-care population in New York City, it's about 2 million people.

Okay.

So we are already starting to staff and train the additional staff we are going to need to handle that starting January 1.

In our adjusted EBITDA presentation, Rick, we are backing out those start-up costs, so you will see them to the penny.

Okay. And then the impact of Sandy, not that it is a positive event, but sometimes weather is a positive for your business, weather events are positives. And it hit New Jersey, which is a major state for you guys. So any thoughts at this point on Sandy impact on utilization?

Yes. I fully expect that our fourth-quarter utilization will be down as a result of Sandy. Obviously we incurred additional cost in our other call centers because we moved calls and supports. Obviously we have six operations in the states that were impacted, so we could not get staff in and lost power -- actually, we did not lose power in any of our operations but our staff had a hard time getting in, as you can imagine. So we did run over time and things like that in some of the other locations. But we do anticipate a positive impact from the storm.

Just to -- on the social service side, Rick, we will probably see some impact primarily from our school-based business in a few states because of the storm. So, we will have a little bit of downside on the social service side on the opposite end.

Okay. Herman, the one rate resolution, was that a large state or not?

Yes.

Okay. And was it a retroactive solution or was it -- and when does it kick in?

It was not retroactive, so there is no pick-up there that you can expect; it is scheduled to kick in as of November 1.

Okay.

But that is assuming everything can get signed, which hasn't happened because of the impact of Sandy.

Okay. And any progress on when you are still negotiating or not?

Well, the election ended this week which was the reason they couldn't make a decision, so hopefully we will know something shortly.

Okay. Thank you very much.

(Operator Instructions). Mike Petusky, Noble Financial.

I guess a few questions, although a bunch of them did get asked and answered there. Could you guys size the opportunities, even just in round terms, in Maine and North Carolina and Rhode Island?

Collectively we can, it's about $100 million. We try not to differentiate by state because it gives away some of our bidding proprietary information. Collectively they're about $100 million a year.

Yes, that piece I caught. So let me just try to drill down a little bit on the North Carolina contract. Are there just three regions in North Carolina or are there more than that? I guess essentially what I'm asking is are you -- or is Charlotte being included in that or Raleigh-Durham being -- are the population centers being included in those regions?

Yes, the state is split into three regions for purposes of this RFP including all of the major population. So in some form or another the entire state will be under a broker model. The question is just whether it will be under one sole-sourced broker or split into multiple brokers.

All right. On the net rate negotiation that was successful, is there a specific reason you can't identify that state?

We ever do, it's always --.

It is not signed yet, so until it is I would rather not.

Okay.

We typically don't talk about rates, so --.

I think you've talked about New Jersey previously and I think probably at least a few people are speculating that maybe this is New Jersey. And I guess what I am just wondering is I think you have talked about talking to New Jersey previously.

No, I had said that New Jersey is one of the states that we are talking to. So if you want to speculate that it is New Jersey, certainly you can.

Okay, all right.

They would qualify as a large state, as Rick asked. But frankly all three of the states that we are talking to that Fletcher talked about are what I consider to be large states.

Okay, okay, fair enough. Just jumping over to the $28 million southern state on the social services side. So you say you expect revenue of over $13 million in the first year and you called it a pilot. The $28 million -- I mean are you saying $13 million because it doesn't start at the beginning of the year or this is a contract that ramps over time if it is continued from the pilot stage? I mean how should we be thinking about that -- how that ramp would go?

Yes, so the -- it is less than $13 million because it will ramp up over the first quarter or two. So you won't have a full year of the revenue there.

Okay. All right, but on an annual basis --.

Multi-year contract, right?

Yes, it's a multi-year contract. So in year two we will be up at the $28 million, but year one in 2013 it will ramp up from the first and second quarter primarily.

It is a single region in a state, Mike, that if it is successful might go state wide. It's a multi-year contract; the $28 million is the fully ramped value probably starting in 2014. And we are not being cute about identifying it we are under a confidentiality agreement that until the contract is signed we can't identify the state.

Okay. All right, great. And you guys mentioned that you are in your budgeting process and Fletcher you conceded that this was a really unusual year, a tough year and in some ways you guys were a victim of your own successes.

As you look out towards budgeting 2013 and modeling 2013, I mean is your expectation that you guys will I guess first give guidance and then that your confidence level in terms of your guidance, if you do give it, will be say considerably higher than maybe what it ended up being this year?

Whether or not we guide is a Board call and I think there are different opinions at the Board level as to whether we should or not. What we don't want to do is obviously guide and miss. We did a lot of that this year, as you suggested, because of a lot of the things that impacted us particularly around the start-ups.

We've identified three very large contracts that we could win, one that we have already won, so it is clear we will have start-up expense in 2013. So if we were to guide, Mike, it would probably have to include some sort of range so that we can anticipate the investment considerations in the event we win a contract.

Reform, we'll begin to see some of the initiatives toward the end of 2013, most of that is 2014 business. We are highly confident that it will have significant impact to both sides of our business. We have kind of got to let the government to get through what they intend to do in that regard.

But the enrollment will be up, it will be -- LogistiCare is paid on an enrollment basis. We expect social services referral volume to increase. So we would anticipate, and now I'm getting too close to guidance probably, but we expect both segments to be up in 2013 over 2012.

Okay. All right. And obviously you guys got active again in share repurchase. One thing that obviously communicates is that you think the stock is cheap; the other thing it may communicate is maybe you are not seeing a lot in terms of M&A. Could you just -- Fletcher, could you just talk? I know you have tried a couple times and gone down a path in terms of some assets, but can you just talk about the M&A landscape and how you guys view it right now?

Sure, it's an intuitive question. Our cash has never been better, as Michael said, over $60 million, so we have some opportunities that the Board has authorized. One of those is to continue to chip away at the convert, which we did in the last quarter. We will as that comes available to us. We will continue to buy stock back particularly at these prices.

We do remain active in the M&A space, but we don't have anything queued up to the point where that is imminent for the rest of this year. So probably the highest and best use of our cash short-term is to delever and to buy some of our stock back.

Okay. Well listen, congratulations. It feels like you guys are maybe getting a little bit more of a handle on -- again, I don't want to beat up on you too much because you did signed a whole lot of contracts, but this quarter just somehow feels a little bit better than maybe the previous quarters. Thanks.

That is high praise coming from you, thanks (laughter).

(Operator Instructions). Rick D'Auteuil.

I think about a year ago you guys had a reserve for an insurance issue when you were insuring some of the drivers on the LogistiCare side. The thought was that that would likely bleed back to you guys after some time went by. Is there an update to that?

I believe we have run through that, right, Michael?

Yes, I was going to say there will be no bleed back out of that, Rick. We have unfortunately experienced some fairly large claims that have settled and used up that reserve. So while we have been hopeful that the actuaries were being very conservative it turns out that they were fairly close in their estimates in terms of how those things would settle.

Okay.

And we have terminated that product.

Right, no, I understand that is now behind you. Is there any business beyond the one contact that was mentioned on Herman's side of the business that might be a candidate to hand back to a state, either on the social service side or on the LogistiCare side of the business because it's got inadequate margins?

The two states we continue to discuss rate with; we would terminate if those are not successful -- would and could. There's really nothing on the social services side we are not content with.

Okay. All right, thank you.

Clara Houin, Avondale Partners.

I just have a couple questions. One, G&A was 4.3% of revenues in 3Q 2012; is this a good run rate to use going forward?

Well, we're not giving guidance but, yes, it is a more normalized amount. In Q2 we had some -- we call them one-time expenses for lack of a better term. We had some lease breakage costs in Canada, unfortunately we had a -- our dear director passed away and there was some stock compensation invested in that regard. And then in also Q2 we had some professional fees that were really nonrecurring. So that is the reason Q2 was higher than Q3.

I think what we have said, Clara, publicly is we expect our margin targets -- we expect to return to kind of our historical margin targets in both segments.

Okay, great, thanks. And then on LogistiCare, is there any reason why LogistiCare margins should not improve in 4Q 2012 given the traditional seasonality in the business?

Should improve in 2012, you mean for the rest of the year?

Yes in 4Q, yes.

There is no reason it should not improve, no.

Okay, thank you. I think that's it.

At this time there are no further questions and I'd like to turn the conference back over to Fletcher McCusker for closing remarks.

Thank you very much. Thank you, everyone. Happy holidays. We will be on the road in January, both in New York and Florida, so look for us there. If you would like to touch base, maybe give Alison a call and we would be happy to visit you or see you at one of those conferences. And if you have any questions we didn't get to, please call Michael or I after the call. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.