Molina Healthcare Inc (MOH) 2007 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare first-quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. At that time if you have a question (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Tuesday May 1, 2007.

It is now my pleasure to introduce Juan Jose Orellana, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone, and thank you for joining us. The purpose of this call is to discuss Molina Healthcare's first quarter financial results. The Company's earnings release reporting its results was issued today after the market closed. The earnings release is now posted for viewing on our Company website.

On the call today are Dr. Mario Molina, our Chief Executive Officer; John Molina, our Chief Financial Officer; Terry Bayer, our Chief Operating Officer; and Joseph White, our Chief Accounting officer. After the completion of our prepared remarks, we will open the call to take your questions.

Our comments today contain numerous forward-looking statements under the United States securities laws. All of our forward-looking statements are based on our current expectations and assumptions that are subject to numerous known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially. A description of such risk factors can be found in our reports and filings with the Securities and Exchange Commission, which can be accessed under the Investor Relations tab of our Company website or on the SEC's website.

All forward-looking statements made during today's call represent our judgment as of May 1, 2007, and we disclaim any obligation to update such statements. This call is being recorded and a thirty-day replay of the conference call will be available over the Internet through the Company's website at www.MolinaHealthcare.com.

I would now like to turn the call over to Dr. Molina.

Thank you, Juan Jose, and thanks to everyone tuned into our call this afternoon. We had an excellent quarter in many respects. Our financial performance is tracking in line with the expectations we outlined at our Investor Day in January. Our core business is stable and our organization is focused on building on the momentum generated in 2006.

Our premium revenue grew approximately 24% in the first quarter of 2007, primarily due to increased membership compared to the same period one year ago. Setting aside Indiana, our membership grew in total primarily to membership gains in Texas, Ohio and Michigan.

Those of you who follow our Company are likely to have heard the phrase coined by my father, we can manage our medical costs but we can control our administrative costs. During my remarks today, I would like to frame our progress in the first quarter in the context of that business approach. John and his remarks will focus on the quarterly numbers and the financial details.

Managing medical costs calls for the execution of several interrelated activities that can positively affect both our medical management and our unit costs. On previous occasions, we outlined many of these cost management activities so I will not get into them again now. As we've stated in the past, deriving the benefits from these activities does not occur overnight. Instead, positive results take time.

Our legacy business can be collectively defined as our California, Michigan, New Mexico, Utah and Washington health plans. At the end of the first quarter of 2007, these health plans constituted approximately 85% of our membership and contributed 84% of our revenue. We are pleased to report that the execution of our medical management and unit cost initiatives has put our legacy health plan on a steady and pragmatic course that can be observed in our financial results over the past several quarters.

The year-over-year comparison of our legacy health plans shows that their consolidated medical care ratio has declined. This is important for two reasons. First, it provides a solid footing for the Company going forward to. Second, it highlights that a good part of the fluctuation in our business is now concentrated where we would expect it to be in our new state health plan.

In the first quarter, the medical care ratios of California and Washington declined year-over-year. And as expected, the medical care ratio in Michigan increased due to the integration of the [Paypal] plan. With that said, our work does not stop here. There is still plenty to be done.

For example, in California we continue to diligently work on contracting and on strengthening our medical management. These ongoing efforts have started to bear fruit. The decline in the California health plan's medical care ratio sequentially and year-over-year has been driven by many of the initiatives that Steve O'Dell, our California Health Plan President, outlined during our Investor Day in New York.

The California Health Plan's medical care ratio was also helped by a modest blended rate increase of approximately 2.5%. The blended rate increase was higher than the 1.75% we had expected initially. As a reminder, the California Health Plan has multiple contracts as each county is administered separately. The rate environment in California continues to represent challenge to our business as evidenced by other health plans that have exited the Medicaid market. However, we believe that our low administrative costs have enabled us to consolidate other health plans that were having difficulties.

Nevertheless, we continue to work closely with the California Department of Health services in efforts to secure fair and adequate premium rates. For now, the next indication regarding California's Medicaid program, including Governor Schwarzenegger's health-care proposal, may be when the California budget proposal known as the May Revise is released later this month.

As it relates to rates across our other health plans, we want to remind everyone that rate information is received at different times due to different effective dates in our contracts and different fiscal years for state legislatures. In the past few weeks, there has been chatter related to premium rates for Ohio and Michigan. We would like to remind everyone that these proposals are very preliminary and are part of a bigger state legislative and budgetary process. Rate discussions for Ohio, Michigan, New Mexico, Texas, and California are therefore in various stages and after those rates have been finalized, we will communicate them.

Since a solid understanding of the attributes and benefits of managed care is essential in state and federal budgetary discussions, the Company has increased its legislative affairs activities at both the state and federal levels to better inform legislators and regulators about managed care. The goal is to be less reactive and more proactive. Consistent with this approach, the Company's held legislative days in Ohio, Michigan, Texas and Utah. The legislative days involve informational visits to introduce our local health plan leadership to local state officials and political leaders to build awareness of Molina Healthcare and managed care.

Getting back to managing our medical costs, I would like to briefly touch upon our new health plans in Texas and Ohio. During our Investor Day, we discussed in greater detail the medical care cost expectations for these startups. As Jesse Thomas, our Ohio President, outlined in his presentation, there are challenges in incorporating a population previously served under a fee-for-service model into a managed care model. The geographic disbursement of the population, poor access to care, pent-up demand and overutilization of emergency rooms are examples that contribute to higher medical costs in a new market. The higher medical care ratios of our Texas and Ohio health plans, compared to the Company as a whole, are consistent with our expectations and the guidance we provided on January 18, 2007.

Our core general and administrative expenses -- that is, our administrative expenses excluding premium taxes -- have begun to benefit from additional scale. With enrollment growing in Texas and Ohio, the additional revenues associated with our new members have enabled us to spread our administrative costs over more members. This has resulted in overall core general and administrative expenses that are flat on a per member per month basis, but lower as a percentage of revenue. This decline is consistent with our previously stated expectations discussed by Joe White, our Chief Accounting Officer, at our Investor Day.

We were encouraged by the progress in the first quarter, as it confirms that many of the action plans we have executed throughout 2006 are having a positive financial impact on the business. Although there's still room for improvement, we are pleased with our first quarter results and we believe that the Company is in good position to provide improved year-over-year performance consistent with our guidance.

Finally, we are convinced that managing our medical costs and controlling our administrative costs while building for the future is the right strategy. I would now like to turn the call over to John.

Thank you, Mario. Good afternoon, everyone. Net income for the first quarter ended March 31, 2007, was approximately $10 million or $0.34 per diluted share compared with net income of $9 million or $0.31 per diluted share for the quarter ending March 31, 2006.

In the first quarter of 2007, premium revenues were $556 million, an increase of $107 million or approximately 24% over premium revenue in the first quarter of 2006. The increase in premium revenue was mainly due to new membership growth in Texas, Ohio and the membership acquired as part of the CAPE acquisition in Michigan. Combined, the new membership in these three states added approximately $125 million of premium revenue in the first quarter of 2007 compared to the same period a year ago.

Given our withdrawal from the state of Indiana, the Company did not have any revenues from that state starting on January 1, 2007. Enrollment continues to exceed 1 million members. Setting aside Indiana, enrollment increased by 17% from the same period last year. And our sequential membership increased by about 5%. Our organic growth continues to be derived primarily from our startup operations. During the first quarter of 2007, Texas and Ohio combined added approximately 63,000 new members.

As anticipated, our medical care ratio increased slightly to 85.7% in the first quarter of 2007 from 85.3% in the first quarter of 2006. Consistent with what we talked about at our Investor Day, the increase is primarily attributable to the higher medical care ratios of our startup health plans in Ohio and Texas. As Mario discussed earlier, the consolidated medical care ratio of our legacy health plans declined year-over-year from 85.1% to 84.4%. Although the medical care ratio of our legacy health plans increased from 84.1% in the fourth quarter of 2006, this increase, while expected, was lower than what we had observed in the past for the first quarter of the year, when seasonality tends to contribute to higher medical costs.

Our California and Washington health plans saw their medical care ratios decline when compared to the first quarter of 2006. Our Michigan health plans medical care ratio was higher as a result of the integration of the CAPE health plan. As a reminder, the CAPE transaction closed in May of 2006, and is therefore not included in last year's first quarter results. Our New Mexico and Utah medical care ratios were stable.

Net investment income or investment income minus interest expense also increased by approximately $1.9 million in the first quarter of 2007 as a result of higher cash balances and higher rates of return. General and administrative expenses including premium taxes were $63 million for the first quarter of 2007 representing 11.3% of total revenue as compared with $51 million for the first quarter of 2006. On a percentage basis, the administrative ratio remained flat year-over-year.

Our core G&A or G&A less premium taxes decreased to 7.9% in the first quarter of 2007 as compared with 8.5% in the first quarter of 2006. The year-over-year decrease is also consistent with the expectations we outlined at our Investor Day, where we stated that we anticipated core G&A to remain mostly flat in 2007 on a per member per month basis, but would decline as a percentage of revenue. Our core G&A per member per month figures can quickly be calculated from our financial statements by multiplying our revenue by our core G&A ratio and dividing the product of these two figures by the number of member months.

Our Company remains consistent in its reserving methodology. As expected, the days in claims payable decreased sequentially to 54 days at March 31, 2007. This is within the range we had previously discussed for 2007. The current days in claims payables is down from 57 days at December 31, 2006, and down from 57 days at March 31, 2006. Days in claims payable declined as we began paying claims associated with the Ohio and Texas startup health plans, which had previously been recorded as part of the Company's incurred but not reported claims liability. Additionally, the runout of Indiana claims and a shift to capinated contracts also lowered days in claims payable.

I would like to point out that in order to provide more meaningful comparison of days in claims payables between periods, we have added year-over-year claims inventory information to our change in medical claims payable table in our earnings release. A review of this information summarizes that the number of claims, the billed charges of claims, and claims in inventory per member at the end of the period have all declined.

Cash flow from operating activities for the first quarter of 2007 was $36 million. As the Company continues to grow, we expect cash flow to exceed net income. Again, excluding the impact of growth, we would expect cash flow to approximate net income plus depreciation and amortization.

The Company finished the first quarter of 2007 with cash and investments at the parent company of approximately $21 million. Current borrowings on our $180 million credit facility stood at approximately $30 million. The $15 million reduction in our long-term debt on our balance sheet reflects a partial repayment to our credit facility which occurred in the first quarter of 2007. Our subsidiaries had a combined $104 million in excess of statutory equity.

At this time, the Company confirms its previously stated guidance of earnings per diluted share for fiscal year 2007 in the range of $1.75 to $1.90. While we have seen both our medical care ratio and administrative ratio decline, and are encouraged by these results, you should be this aware that today, just ten weeks after our Investor Day, many of the risks and opportunities that we outlined on that day have not been resolved. Until we obtain greater clarity, we believe the most prudent approach is to reaffirm our previously stated guidance.

As we discussed during our Investor Day, some of these risks and opportunities include an expected ABD enrollment rollout in Ohio during the next few months and its associated medical costs; the sustainability of improvements observed this quarter in our California health plan; the finalization of premium rates in various states. The legislative process can be both a risk and an opportunity and although rate discussions in Ohio and Michigan are still preliminary, we did receive a rate increase in Washington and California. The California increase was slightly better than we had expected. Because we hold multiple contracts in California, there may be additional news to discuss at a later time.

Other risks and opportunities include contract amendments, particularly in New Mexico; savings sharing revenue in Utah; and a number of other factors. As we reach resolution on these issues, we will update our guidance for the year, if warranted.

This concludes our prepared remarks. Operator, we're ready to take questions.

(OPERATOR INSTRUCTIONS) Bill Georges, JPMorgan.

My first question is at your Investor Day, you provided a walk-through of the incremental changes from a starting point of $1.50 in EPS to a midpoint of $1.82. Given some of your observations around California and I guess some of the other markets, I'm wondering if you could talk at least anecdotally if not specifically about some of the pluses and minuses you see to that $0.18 in California and then Ohio and Texas as well?

Well, Bill, I think one of the key things was that we got a little bit higher rate increase in California than we had anticipated. That certainly helped. I also think some of the medical cost initiatives that we initiated in California have really taken ahold and shown benefit maybe a little earlier than we expected. John, do you want to add anything?

I think, Mario, that on the negative side we had changes to other plans of -- a [detriment] of $0.19. And a lot of that is based around, as we expected, the medical care costs in Michigan with the integration of the CAPE plan being higher than it was last year. At this point I would say, Bill, everything is tracking as we expected.

And then maybe if you could talk just a little more detail about California. What are you seeing in terms of utilization patterns? Are there pockets in terms of counties where you are experiencing more trouble and how does that breakout in terms of North, South distribution?

I think as you know, Bill, we encountered more difficulties with San Diego following that integration in large part because of certain contractual issues that we had. But overall, I think utilization has been pretty flat. When we look back over the last couple of years for example, hospital utilization has been within 1% or 2% over the past two or three years. So it's been pretty flat. We think the big issue for us in California was to address some of the contracts.

And Mario, let me underscore that. I think this is something we've been talking about now for gosh, the last four, maybe five quarters -- the unit cost issues in California. Terry Bayer has been on the calls talking about that relentlessly, and I think that getting on early and recontracting has been what has shown improvement in California a little bit ahead of expectations.

And just one last quick one. What's your view of longer term days in claims payable?

Bill, we said 50 to 55 days and I think that's where we think it will settle out.

Great, thanks very much.

Tom Carroll, Stifel Nicolaus.

A question on Michigan. Could you tell us or give us maybe a little more color on just the reality of a potential 6% rate change effective in June? I know you said they're still working things out. I think you referred to as chatter. But June is just not that far away. And maybe just walk us through what you're seeing in Michigan right now?

Tom, I was just down in Michigan about a week and half ago. I had meetings with the senior leadership in the House, in their Senate and also the Governor's office. Originally the Governor's budget was approved and passed down to the Senate; went on to the House. The House then did not approve the Governor's budget. They came up with some ideas of their own. They proposed a number of cuts. What I think is going to happen is that we will see a negotiation between the leaders of the House, the Senate and the Governor's office trying to come to some sort of compromise on the budget.

The current proposal by the House will decrease rates but it would do it mainly by decreasing payments to providers. As a result, it would decrease our topline revenue. We don't anticipate that it's going to have a big impact on our margin and then I think that there's also the possibility that rates could change again in October. So I think at this point it's extremely preliminary. This is sort of the first crack out of the box for the House. I don't think that this is the final word.

What do you think the timing is on that June 1 date I threw out? I mean does that get pushed back?

I'm hoping that we will have a new budget and that we will not see this degree of cuts.

It sounds like if anything does happen, whatever the number is, it comes out of your medical expense line as well and margins are -- there's no real impact.

For the most part. I think one of the things you'll see that we have increased capitation costs over previous years and we do have more capitation now in Michigan. But I don't think it's going to be a big difference.

Great. Could also spike out for us your special-needs plan enrollment in California, Utah and Michigan?

You know, we've not broken out that line of business yet. We have approximately between 2,500 and 2,600 members overall. It's still too small to have a material impact on things so we're not going to break it out at this point.

Greg Nersessian, Credit Suisse.

First question was just on the reserve roll forward. It looked like there was a large pop in the prior period reserve development. I was just wondering would you characterize that full amount as being replenished going forward or was there any one-time impact there perhaps related to the Indiana claims runout?

I think that it's consistent with what we expected. It's been replenished and I think on a percentage basis it's about where it was last year.

I guess just on the topic of Indiana. How much of that claims runout remains? Or is that fully -- have you fully paid out all the remaining claims that you're obligated to pay?

I think we probably paid -- three months out, probably 80% of it. There will be stuff that will trickle off the next -- I would say we'd be up to 95% by the end of Q2 and then stuff will trickle in after that. But for the most part it's paid.

And then your membership and your revenue came in a little bit below what I was looking for, any way, for the quarter. I'm wondering are there any big dates coming up in terms of new membership coming on or are you maintaining the membership numbers that you've provided to us in the revenue guidance you've provided to us or are there any changes there?

We are maintaining the guidance as we stated our Investor Day. I think that the Ohio ABD program got a little bit, maybe a month or two later rollout than we expected, so that's about the only change that I would say.

So in terms of growth from here, most of the organic growth would be -- related to new contract rollouts -- would be in Ohio? You wouldn't see much change in Texas, for example?

I believe that's correct.

And then California, the enrollment was down fairly substantially, [8,000] (inaudible) sequentially, anything going on there? Does that have to do with your recontracting or are you losing members because you've terminated contracts with certain hospitals or certain providers that are going -- and those numbers are going somewhere else?

I think we're losing some of that membership in Southern California. Part of it has to do with that. I think part of it also has to do with San Diego County. There is a new plan that's been getting preferential assignment and so that's shifted some of the default enrollment to them. But it's not really unexpected. We had projected California's enrollment to be flat for the year. So at this point I'm not too concerned.

And then just the last question. In the description of the Ohio and Texas MLR, you mentioned that you're looking for the Ohio health plan MLR to decrease due to growth in lower-cost regions. You don't mention improvement on the existing regions in Ohio. Is that because of your contracting in that region or am I misreading that statement?

Terry or John, you want to address that?

This is Terry. You're correct. The contracts drive the MLR in the original regions we entered particularly because they are heavily capitated. And as we have moved into the additional regions with better pricing, it's diluted the impact of the original geography.

So, because of the level of capitation in that original geography you wouldn't much change in that 92.4% as it pertains to that particular county or that region. But the impact is going into new region where the lower MLRs will bring the overall state MLR down. Is that fair?

Correct. I think on a blended basis, the MLR will come down. I also think that as things mature in Ohio, there are going to be opportunities for us to do better job of controlling the utilization, maybe bring down the ER costs a little bit. But as we've talked about before, this is a process that takes several quarters. It's not going to happen over a period of a few months.

Carl McDonald, CIBC.

I was hoping you could update us on the rate increases you're assuming in each of the major markets in the guidance for this year?

Sure, Carl. Washington was a 4% rate increase effective January 1 of 2007. California, we had anticipated about a 1.75% rate increase; thus far with a couple of the contracts you've got a 2.5%, so it's a little bit ahead. And there's a couple more as I discussed before contracts that may provide us with additional rates. In Michigan we are anticipating about a 2% effective October of this year; and I think Mario has talked about the rate environment in Michigan. Ohio, we got a 1% rate increase that was effective January 1, 2007. We expect no additional change to the Ohio rate until January 1 of 2008. And nothing in Texas, nothing in New Mexico; and Utah, as we've discussed, is a cost plus contract.

So it sounds like the only significant change relative to the prior guidance is potential for slightly higher than the 1.75 in California?

That's correct.

And then the second question, just from a conceptual perspective, if you were to get a rate cut, be it in Michigan or any other state, can you sort of walk-through from an income statement how that would flow through? I mean I know in many cases the rate cut is accompanied by provider decreases as well, but generally drugs aren't included so that normally would push up the loss ratio. And then also how quickly you'd be able to reduce SG&A in a situation like that?

I guess the best example is when we had a provider cut in California a couple years ago. The provider rates were cut, I think it was 5%, and that translated into about a 2.5% rate cut to the top line. So, that's the best example we can give.

Ability on the SG&A front?

I think that the evidence from the first quarter suggests that we're tracking right in line with what our expectations are to bring SG&A costs down for the year. So we're just going to continue to plug away there.

Joshua Raskin, Lehman Brothers.

I appreciate the new disclosure, by the way, on the reserving side, it's helpful. First question just -- you mentioned the new market, Texas specifically, and some of the new managed care initiatives that you guys are implementing. How should we think about the early initiatives and what are some of the quickest methods that you can use for these populations that have previously been unmanaged and fee-for-service?

I think that nothing has really changed from what we discussed at Investor Day. What we've got in Texas especially with the Star Plus program -- which is aged, blind and disabled members and a long-term care component -- is going out and reaching out to the members, assessing their needs, putting them under care plans is going to be the biggest thing. It takes awhile and decreasing dependence on ER coverage is going to be a big factor there. And really that just takes time to do that.

That's helpful. Second question, I know guys don't give quarterly EPS guidance but I'm just curious, from the second quarter EPS perspective, should we think about -- the first quarter [was up, so the] 10% year-over-year, but the midpoint of full year guidance is more like 20%. So clearly looking at -- I assume for a sequential increase but -- any general sense or -- I know now that we've moved a little bit closer to the year, any sense on second quarter?

Well, you're right, Josh, we don't give quarterly guidance but what we've said in the past is that the guidance will be a little heavily weighted towards the second half of the year simply because Q1 is always the highest medical care ratio for the year and the fact that it's going to take us a while to get medical costs in Ohio and Texas down. So, I would give that caution to folks who are trying to put together models.

As you know, we've talked in the past about the seasonality and I think that that's important. We think the seasonal trends (technical difficulty) that we're going to have, we'll see the medical costs come down in second quarter, go up a little bit third quarter, maybe also a little but more in fourth quarter. So the second and third quarters tend to be lower than the first and fourth.

Josh, if I could throw a little bit of numbers around, I think that 55% to 60% of our guidance right now would be -- incur in the second half of the year. Then, again, that's utilizing the guidance that we just reaffirmed.

Perfect, that's very helpful. And then just the last question on California, I guess even more specifically around the San Diego area. Now that you guys have gotten these updated rates and it sounds like you came in a little bit better -- from a sustainability, I mean it sounded like previously you were looking at rate increases or the lack thereof that was making it difficult to really operate in some of those markets. Is it fair to say that the legislation is improving short-term for you guys or just from a regulatory standpoint, the rate environment improving?

I'm not sure that the legislative issues so much. I think that the Governor has acknowledged that there are problems with the rates, that they've underfunded the Medicaid program in California. And I think that they are attempting to do something to correct that. Now, if the Governor's reform package goes through as he initially stated, we're looking at [fighter] rates going up to more along the lines of Medicare rates, which would be a substantial increase in the top line revenue. But in the interim until that happens, I think that they are trying to work with us to provide rates that are both fair and actuarially sound.

That's helpful. Thank you very much.

(OPERATOR INSTRUCTIONS) Brian Wright, Jefferies and Co.

Last year in California you went from a first quarter MLR of 83.5 and then through the nine months you were at 88. So, I guess the second quarter is probably in the high 80's, is that fair to assume?

Well, Brian, you know, right now I don't have that number on the top of my head. It did go up, I mean I'm not going to deny that. It did go up throughout the year.

No, what I'm just trying to figure out is California progression this year as far as do we see that kind of magnitude of sequential increase or is that just how California goes? Or because of the recontracting efforts, is it different? That's what I'm trying to get a handle on.

Brian, I think that California is reverting to more the historic patterns of utilizations and costs. We talked about the fact that we have introduced a lot of things to decrease medical costs. We've also talked about the fact that we don't think California can cut its away back to profitability. It's going to need rate increases. But we've already seen a 2.5% rate increase which was better than we anticipated. So I really think that the California story is that it's sort of reverting back to the norm.

And then how many counties are left as far as potential to get further rates?

Four counties are left -- San Diego, L.A., Riverside and San Bernardino.

[Darren Miller], Goldman Sachs.

A question as far as the CAPE health. Can you just remind me why that's running at a higher MCR and where do you expect a Michigan's MCR to trend over the year?

When we acquired the CAPE membership, they did not have as robust management as we did and it was running around 89%, I believe. I think that we would be comfortable in having that settle in between 80 and 83% on a combined basis.

And one other question, just following up on Brian's question. The counties that you're still waiting for rate increases from. On an enrollment basis, what percentage of your enrollment is that in California?

I don't have that off the top of my head. They are some of our larger counties. The Riverside, San Bernardino and Los Angeles, those are an October rate year. So whatever impact we get will be sort of minimal in 2007 anyways.

I think it's a little over half, but it will be towards the back end of the year.

Tom Carroll, Stifel Nicolaus.

Just a quick follow-up. In Ohio, specifically on the ABD business that's going to be rolling in, do you have medical loss ratio targets on that business that are similar to your overall Company MLR? And maybe what's your thought on time period to get there?

Tom, I think that -- and we've talked about the ABD in the past, and specifically with regard to Ohio because it's a fee-for-service population transitioning into managed care with complex medical and psychosocial issues, that we would expect it to take us longer to get to a more stable run rate. We're looking at overall, as we said in the Investor Day, we're looking for the Ohio on a companywide basis at the end of the year to come in at 90.6%. Obviously, because of the seasonality issues that we typically see in the first quarter, Ohio was higher than that. So again, I think in Ohio we're tracking on just what we told people in the Investor Day.

Great, thanks for that. And one last thing. In South Carolina, are you guys looking at that market at all?

Oh, come on, Tom, you know we don't comment on potential markets.

Alright.

Because there are no further questions at this time, you may continue with your presentation or closing remarks.

Thank you very much for joining us during today's call. We look forward to updating you next quarter. Thank you.

Ladies and gentlemen, this does conclude the conference call for this evening. We thank you all for your participation and ask that you please disconnect your lines. Have a great day, everyone.