Monroe Capital Corp (MRCC) 2018 Q3 法說會逐字稿

Hello, and welcome to Monroe Capital Corporation's Third Quarter 2018 Earnings Conference Call.

Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results or cash flows. Although we believe these statements are reasonable based on management's estimates, assumptions and projections as of today, November 7, 2018, these statements are not guarantees of future performance. Future time-sensitive information may no longer be accurate as of the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainty or other factors, including, but not limited to, the factors described, from time to time, in the company filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements.

I will now turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. You may begin.

Good morning, and thank you to everyone who has joined us on our call today. I'm with Aaron Peck, our CFO and Chief Investment Officer. Last evening, we issued our third quarter 2018 earnings press release and filed our 10-Q with the SEC.

For the third quarter, we generated adjusted net investment income of $0.38 per share, exceeding our third quarter dividend of $0.35 per share. This represents the 18th consecutive quarter we have covered our dividends with adjusted net investment income. We are very proud to have been able to maintain the $0.35 per share dividend fully covered by adjusted net investment income without any reduction in our dividend since our IPO in late 2012. This is a testament to the overall Monroe Capital firm platform scale, our unique origination capabilities and our credit underwriting and portfolio management process.

As background, the private debt market remains highly competitive primarily due to the amount of new capital being raised this year for direct lending by both existing managers and new market entrants. This capital formation has led to the continuation of a borrower-friendly market where most new deals have aggressive leverage structures and low pricing.

We have stayed the course in executing on our lower middle market senior secured debt strategy. We believe this part of the market will perform well over the long term as it has in prior credit cycles. By adhering to our underwriting discipline and our selectivity in executing only on investments that we believe make good sense for the long term, we are self selecting quality over quantity in this current market. While in the short term this may mean that our loan portfolio may not grow as aggressively as others, our investment strategy and underwriting principles ensure that we will be focused on achieving our long-term goals of delivering consistent earnings and a stable net asset value for our shareholders.

At quarter end, our investment portfolio had a fair value of $482.3 million, a slight decrease from the prior quarter end, and included investments in 66 companies across 21 different industry classifications. This reduction in the size of the investment portfolio was due primarily to much more aggressive prepayment activity during the quarter.

In the quarter, we funded $52.1 million of new business but experienced $60.4 million of sales, repayments, and prepayment activity. While this is not our preferred ratio of new business fundings to prepayments, we have to be patient and let the market come to us as we have always done in the past. We cannot always fit new deal activity into nice and neat 90-day quarterly periods. Evidence of that is since quarter end, we have funded approximately $30.3 million in net new loans.

We are playing a long-term game to win and will not let quarter-over-quarter performance goals or the market dictate our credit and underwriting policies.

As of September 30, our largest position, not including the investments in our MRCC senior loan fund joint venture, which we refer to as our SLF, represented 4.1% of the portfolio and our 10 largest positions, excluding our investment in the SLF, were 34.7% of the portfolio.

Our portfolio is heavily concentrated in senior secured loans and specifically first lien secured loans. 92.3% of our portfolio consists of secured loans and approximately 86.3% is first lien secured.

We are pleased with the construction, diversity and the senior secured nature of our investment portfolio at this point in the credit cycle. As of the end of the third quarter, our SLF had experienced portfolio growth to $134.9 million in fair value, a 42% increase from the $94.8 million at fair value at the end of the prior quarter. The weighted average yield in the SLF portfolio decreased slightly to 7.4% from 7.5% at the end of the prior quarter. As of quarter end, the SLF had debt outstanding on its leverage facility of $81.4 million at a rate of 4.6%, or LIBOR plus 2.25%.

As we have discussed in the past, MRCC is well-positioned for future interest rate increases. Most all of our loan portfolio was invested in floating rate debt with rate floors. Given the current LIBOR level, we have surpassed the level of the LIBOR floors on all our loans, and, therefore, MRCC is situated to meaningfully benefit from any increase in short-term interest rates going forward.

In addition, we have $115 million outstanding in fixed rate debt from our SBA debentures and $69 million outstanding in fixed rate debt from the recently issued 2023 notes, which will allow a significant interest rate arbitrage on any increase in LIBOR in the future.

We have worked purposefully to create approximately $184 million of fixed rate liabilities going into this next credit cycle. We have around $148.5 million of additional capacity today to invest from our current bank line of credit.

We are currently working with our existing lenders to allow us to implement 150% asset coverage ratio in our credit agreements so that we may fully take advantage of the regulatory relief from the Small Business Credit Availability Act, which we have already received shareholder approval to implement.

We continue to maintain approximately $0.46 per share of undistributed net investment income, which, in our view, provides a significant cushion to our ability to maintain a consistent quarterly dividend payment to our shareholders without returning capital.

I am now going to turn the call over to Aaron, who is going to discuss the financial results in more detail.

Thank you, Ted. During the quarter, we funded a total of $44.7 million in loan investments. Additionally, we funded $7.4 million in equity to the SLF. This growth was offset by sales and complete prepayments on six deals and partial repayments on other portfolio assets which aggregated $60.4 million during the quarter.

As Ted mentioned, since quarter end, we have grown the portfolio by a net $30.3 million, investing in 7 new companies and experiencing payoffs on 2 companies.

At September 30, we had total borrowings of $235.5 million, including $51.5 million outstanding under our revolving credit facility, $69 million of our new 2023 notes and SBA debentures payable of $115 million. Future portfolio growth will be funded by the substantial availability remaining under our revolving credit facility, which was paid down with the proceeds from the unsecured notes offering.

As of September 30, our net asset value was $264.8 million, which was down marginally from the $270.7 million in net asset value as of June 30. Our NAV per share decreased from $13.35 per share at June 30, to $12.95 per share as of September 30. This decrease was primarily as a result of unrealized mark-to-market valuation adjustments. In particular, we took an unrealized markdown on our debt investments in Rockdale Blackhawk. During the quarter, due to continued liquidity pressures as a result of nonpayment of outstanding accounts receivable by certain insurance company payers, the company was forced to file for bankruptcy.

As we have stated in previous calls, we continue to believe that the company has significant assets in excess of its debt, and we're pursuing all potential avenues for recovery. It is important to note that the issues faced by Rockdale Blackhawk are unique from a credit perspective. The liquidity issue was created primarily by an aggressive act of nonpayment by one of its insurance company payors. This was not a situation where the company experienced negative patient trends or declining revenue. On the contrary, Rockdale was growing substantially prior to this nonpayment.

Rockdale is pursuing all of its options with regards to recovering this substantial unpaid accounts receivable from an insurance company, and we remain optimistic that there will be a positive settlement based on the merits of the company's claims.

Due to the uncertainty over the timing and the amount of recovery on this investment, we have placed the prepetition debt to this borrower on nonaccrual status at this time.

Turning to our results for the quarter ended September 30, adjusted net investment income, a non-GAAP measure, was $7.7 million or $0.38 per share, a slight decrease when compared to the prior quarter. At this level, per share adjusted NII comfortably exceeded our quarterly dividend of $0.35 per share.

Looking to our statement of operations, total investment income for the quarter was $13.8 million compared to $14.8 million in the prior quarter. The decrease in total investment income for the quarter was primarily as a result of reduction in interest income, principally due to additional nonaccruals and a reduction in fee income associated with prepayments, partially offset by an increase in dividend income from the SLF. While we experienced prepayment activity in the quarter, due to the older vintage of many of these loans, there was no appreciable amount of prepayment penalty due. This quarter generated fee income significantly below our average historical level.

Moving over to the expense side, total expenses for the quarter of $6.1 million included $2.9 million of interest and other debt financing expenses, $2.2 million in base management fees and $1 million in general, administrative and other expenses. Total expenses decreased by $0.9 million during the quarter, primarily driven by a decrease in incentive fees during the quarter. Our third quarter incentive these were reduced due to the total return requirement in our management agreement.

As for our liquidity, as of September 30, we had approximately $148.5 million of capacity under our revolving credit facility. As of the end of the quarter, we had fully drawn all of our available $115 million in SBA debentures.

As of September 30, the SLF had made investments in 39 different borrowers, aggregating $134.9 million at fair value, with a weighted average interest rate of approximately 7.4%. We had borrowings under our nonrecourse joint venture credit facility of $81.4 million.

We would expect the SLF to continue to grow over the next few quarters. To assist with this growth, we recently amended the SLF's credit facility to increase capacity to $150 million, an increase from the capacity outstanding at quarter end of $100 million.

I will now turn the call back to Ted for some closing remarks before we open the line for questions.

Thank you, Aaron. Since going public with our IPO in 2012, we have generated a 44% cash-on-cash return for our shareholders based on changes in NAV and dividends paid since our IPO, assuming no reinvestment of dividends. We believe that this performance compares favorably to our peers and puts MRCC in a small group of BDCs that has delivered this level of performance for shareholders.

Based on our pipeline of both committed and anticipated deals, we expect to increase our new investment momentum for the remainder of the year, with growth in both our core portfolio and within the SLF.

We believe that Monroe Capital Corporation provides a very attractive investment opportunity to our shareholders and other investors for the following reasons. Our stock pays a current dividend rate in excess of 11%, our dividend is fully supported by consistent adjusted net investment income coverage for the last 18 straight quarters, we have a very shareholder-friendly external advisor management agreement in place that limits incentive management fees payable in periods where there's any material decline in our net asset value and we are affiliated with a best-in-class external manager with 7 offices located throughout the U.S., over 100 employees and approximately $6.1 billion in assets under management.

MRCC is one of the few BDCs that has access to distinct proprietary deal flow, which should result in differentiated returns and an increase in shareholder value over the long term.

Thank you all for your time today. And with that, I'm going to ask the operator to open the call for questions.

(Operator Instructions) Our first question comes from the line of Tim Hayes with B. Riley.

My first question, I know this was a seasonally slower quarter. But was there any hesitation to lend in front of the midterm elections? And just reflecting those results, how do you view the landscape for small businesses?

Interesting question. That's a good one. I didn't anticipate that one. No, our companies, we focus on the middle market, lower middle market. And most of these companies have been around for a long time. The space is pretty stable. It's not driven by election results or whether or not one party is in or the other party.

We're more focused on earnings, historical earnings, future earnings. And we think that, if anything, we'll probably end up in a -- we had anticipated a divided House, that was my gut. And we're going to anticipate a relatively stable period where we don't think much is going to get done in Washington with a divided House over the next couple years. And I think it'll be a good environment for lending, provided that the competitive pressures abate a little bit in terms of rate and leverage. But those are the 2 things I'm more focused on.

Got it. Okay. That's really helpful. And then I appreciated your comments on Rockdale. Another credit I'm curious on is Curion. It seems like that was the only new portfolio company placed on nonaccrual. Just wondering if you have any comments on that credit.

Yes. First on Rockdale, I just want to say a couple words there. That's a situation where we had a rapidly growing hospital borrower. And unfortunately, the life we live in today, the insurance companies, sometimes rightfully and sometimes wrongfully, exert a tremendous amount of pressure over healthcare reimbursements. And we had a situation here where this was not an underwriting issue. This was not a credit issue with the company. This was an insurance company that took unilateral action that we feel is wrong, and caused a significant liquidity issue with the company as well as other companies in the same industry. And the company, with our support, is going to pursue recovery of all of the receivables due it, aggressively. So I just wanted to clear that up on Rockdale. And Aaron will talk about Curion.

Yes. So on Curion, just to be clear, because it's a little confusing. We didn't put all of Curion on nonaccrual. What's happened is, the company had a little bit of liquidity softness. The private equity owner chose not to support the company with additional investments. And so we were in a position where we, as part of a restructuring agreement with that sponsor, took over, effectively, some promissory notes that we didn't pay for, which has material upside. We paid a nominal amount. But they have material upside. That is the note that we put on nonaccrual, basically something that we were handed for free as part of a restructuring because the notes themselves, the regular loans that we made originally, are not marked down considerably.

We think there's a really good long-term recovery for Curion; company's still current and paying interest on our notes, on our loans. It's just this one piece that we got as part of a restructuring that wasn't prudent to put on accrual status. Although it's possible we'll get a significant recovery on that and eventually accrue investment income. At this point, it just didn't seem prudent to accrue that.

Okay. Got it. I appreciate the comments on both Curion and the clarification on Rockdale there, too. And if I could just poke at maybe one more. The Worth Collection, another large debt investment that is kind of marked at a little bit of a discount to par, not on nonaccrual or anything. But just curious maybe if you could comment on what accounts for the discount there and if you have any concerns with that credit.

Yes. So look, Worth is an interesting business. It's owned by a private equity sponsor who's been supporting the business. The company's mark this period is basically flat, down a tiny bit since last period. The company's going through a fairly aggressive reorganization plan -- not reorganization plan, but repair to the business. The sponsor's made some management shifts and things appear to be on a positive trajectory there. But for a period, it was a challenged deal because a little bit of the space they're in, they're in a retail space that's pretty unique, sort of an in-person retail rather than an in-store retail, which we felt would be a better strategy given what's gone on with storefront retail. But they've had a little trouble on the recruiting side for new advisors. But everything seems to be headed in the right direction on that deal as of now. So we don't have any significant concerns and nothing's really changed materially since last period.

Okay. Really appreciate that. And then just one more from me, a quick little modeling clarification. The share count looked to just increase a little bit. Just wondering if you could remind me if there was a DRIP involved or if it's some stock comp or what exactly accounted for that.

Yes. So you may know that we have an ATM program in place. And so in the earlier part of the third quarter, we raised a little bit of money accretively under the ATM, something like $2.3 million. So that accounts for the small increase in share count this quarter.

Our next question comes from the line of Owen Lau with Oppenheimer.

Thank you for the comment on Rockdale. Just want to make sure I understand this correctly. How should we think about the path of further markdown and recovery of Rockdale? I mean what is the assumption of the current mark? Does this mark already reflect the recovery?

I'll take a shot at that answer, and then Aaron will fill in. So what we've done is we've got a variety of assets here at Rockdale to collect against. There's facilities and there's some very large accounts receivable. There's a plan in place currently, a legal proceeding, to collect those accounts receivable. Assuming that we collect the accounts receivable, we're going to be covered under our loan, with plenty of headroom there.

Obviously litigation's always a -- there's some unsure and some doubt. So we've taken what we thought was a reasonable mark on that this quarter. We feel that based upon the information we have available to us today and the legal advice that we're getting and the opinions we've received, we think we have a pretty good mark, and hopefully we'll have some upside there. But like everything else, we're trying to do this in a conservative fashion, and we thought it was appropriate to take a mark at this time.

Yes, I'll just add to that. I mean, as you know, we're required to mark every asset to what we believe is the fair market value at every quarter based on the available information. And we use independent third parties to assist us in that process. We've done nothing different this period than in any other period, and nothing different with this investment than other investments.

We've given all the information we have to an independent third-party valuation firm, who has done what Ted has described, which is tried to put reasonable probabilities of outcomes on the assets and the liquidation of assets and the recovery of assets and sales of business units and things of that nature. And I'll just tell you that there's a range of outcomes, some of which are considerably higher and some which are lower. So this is the best expectation of what we think the fair value of the loan is today based on the view of the independent third party and all the contingencies.

Okay. That's very helpful. The next one for me, it's about American Community Homes. I saw they were a little bit marked down on that loan across different tranches. And it looks to me they also withdrew an additional $1.6 million during the quarter, and you marked that down subsequently. Could you please add more color on the situation on that?

Sure. So American Community Homes is an interesting business. It's in the residential mortgage origination space and they also retain a mortgage servicing rights portfolio. If you know anything about what's going on during the most recent period with regards to mortgage originations with the extension of rates and rates going up, the mortgage origination businesses across the country really have seen a bit of a slowdown on both refinancings, in particular refinancings, but also to some degree on new home purchase.

And so the company was unfortunately slow to make adjustments to its business model to account for the reduction in new mortgages and fees associated with that. And so that created some liquidity pressure, which we helped fund, into the business. Having said that, the company has a very substantial portfolio of mortgage servicing rights, which have significant value. And typically in a market where rates are increasing and mortgage originations are slowing, that usually is a natural hedge when you look at the mortgage servicing rights book because mortgage -- and this may be a little technical, but mortgage servicing rights are basically an IO because they're directly -- and what I mean by that is an interest-only strip. So as rates go up, they typically become more valuable not less valuable.

And so our expectation is, is that we have significant downside protection through this fairly large portfolio of mortgage servicing rights. The only trouble with the business is because the mortgage origination business is slow and liquidity became a little tight, it's harder for the company to retain as many new mortgage servicing rights as they would have liked, which would have created more value for us. So instead, they're selling mortgage servicing rights on a significant portion to deal with liquidity.

But long term, we expect a recovery here. The sponsor here has made significant changes to management and has advisors in who have made fairly large cost cuts to the business, which we don't think will impact the business's profitability going forward negatively but only positively. And our expectation is, is that the company can be improved and that our loan will eventually be -- will enjoy a full recovery. And we also have some equity in this business as well, which has some potential upside in the future as well. But for now, this is the fair market value on the loan. There were some additional fundings, though, as I mentioned on this term loan H during the period, which is what you're seeing with regards to the increase in fundings.

Our next question comes from the line of Robert Napoli with William Blair.

So just to -- I guess in line with the stability of the book value and the dividend, I mean, how confident are you, Ted, that the dividend is very solid at current levels? What would it take for that dividend to have to be reduced?

I can't see, based on where we sit today, any issue with the dividend. We've over earned the dividend significantly. We've done everything at a manager level to support that, including waiving incentive management fees when necessary. And I can't see any current situation where the dividend's at risk.

The company, we've got a $482 million portfolio that's throwing off solid income. We've got a lot of really good performing borrowers. We've got a couple that are a little more challenged. But in the scale of things, it's no different than any other loan portfolio. We're going to have 2% or 3%, 4% of our borrowers at any given point in time where we're in more a credit watch. And we've been doing this now since 2012. We're just closing our sixth year. And this is no different.

This quarter's no different than any other quarter, other than we've taken on one particular company. We've got an issue with one of the account debtors, and we're going to treat that like we would any others in a situation. We're going to aggressively go and collect on that debt. We've had signal to the market and we've tried to be transparent in what's happening. And with transparency, sometimes people have questions. But at the end of the day, the dividend is very, very secure. And as you know, I'm a big owner of the stock. And where it is right now, I think there's a lot of upside to where the stock price is.

And I'll just add one thing, Bob. As you know, we are under leverage to our target leverage. So part of our expectation is, as we continue to grow the book carefully, as Ted talked about in his prepared remarks, we should be able to, over time, grow the asset portfolio by taking advantage of some excess leverage, which is really well-priced leverage, and hopefully drive performance to keep supporting NII, which would support a dividend. So that's part of the game plan, right, is that we're definitely way beneath where we've targeted leverage, and that's because we've been really careful about where the market is and what opportunities we're seeing. But our pipeline's pretty strong and the fourth quarter's already seen some nice fundings and some good deals, and we think that can help support the dividend also going forward.

What is the timing of the Rockdale litigation? When would you expect to have a resolution? And is it, I mean, can they get out of bankruptcy? Do you expect them to get out of bankruptcy?

The timing is, there is a proceeding going on now and it's an arbitration proceeding. It's a mandatory arbitration proceeding. So unlike normal litigation, we don't think this is going to last forever, but it's certainly going to be a 2019 event. And we've got a couple of assets that we can move on as well. So my guess is that we'll have more guidance, at least as to the direction we're going, by the end of Q1, and then we'll be able to speak to it. But today, our focus is on liquidating as many of the realizable assets as we can and paying our debt down and getting us back on side with that.

And then just on stability of book value and the incentive fees, what are your thoughts on, do you expect to be paying incentive fees in the fourth quarter or the first quarter? And how confident are you that, I mean, the book value has obviously come down some, that you can maintain or just get stability in the book value?

Well, that's our focus right now is to stabilize book value. We're trying to take some medicine at this point. And we've taken write-downs on some assets where we think from a -- our third-party advisors have recommended and we've done that. We've complied with all of our third-party independent valuation proceeding. And going forward, we're going to continue as a management team to support the company like we always have. And if that means less incentive fees, that's what it's going to mean for us.

Last question. Just the growth of the SLF, what is your outlook for the growth? And what is your expected contribution to earnings from that SLF over time?

Well, I will tell you that if you look at the trends, the trends are all positive there. It's a significant earnings contributor. It's grown at a pretty good clip over the last 2 quarters, and we've just increased our senior credit facility for the JV by about 1/3. We've grown, I think about 40% quarter-over-quarter. And that's a good contributing asset, and I imagine that will continue to grow over the next several quarters.

Our next question comes from the line of Leslie Vandegrift of Raymond James.

The first question on Rockdale. Is Rockdale Blackhawk related to Little River Healthcare that's also in Rockdale, Texas? They both declared bankruptcy on the same day.

Yes. Yes, Little River is the trade name that the company was operating Rockdale Blackhawk.

Perfect. And as of the last August earnings call, I mean, that bankruptcy had already occurred. Was there a reason, was it still not public? Or why was it not flagged on the last earnings call?

Yes. So Leslie, the bankruptcy is kind of not really the determining factor here of recovery. So the issue and what's changed from last quarter to this quarter is, at the time of the call last quarter, it was the view of the advisors that were supporting the management team and the company at Rockdale, that the company would still be in a position to generate significant EBITDA and turn the business around and there be an ongoing entity, and the bankruptcy would effectively just be a reorganization in order to get rid of some facilities potentially and look at its unsecured claims and all the normal bankruptcy-related items.

Since that time in this quarter, there's been a sort of change and reversal of the viewpoint as to whether this company really has significant enterprise value or if it's more of an asset value play. And so we've been consistent in saying that we felt that there was a significant asset value here. But what was imputed in last quarter's mark and expectations when we held the call, was that there might be still some significant enterprise value here which was weighed into the fair market value; whereas, now it's being valued more on an asset value basis.

Okay. And on the DIP loans that are due 12/31, so in this quarter for the new smaller loans, I think one was 5.7 and then one's under $1 million, what's the outlook for those loans?

Yes. So look, DIP loans, usually you start with a fairly tight maturity and it's the lender's option what they want to do. So this will take longer is my guess, than the current maturity. So it's reasonable to assume that there'll probably be some extension on the DIP loans.

Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann.

You took the cost net basis of Rockdale from $18 million last quarter down to $13 million. Do you expect a further decline in your continued pace of exits in this quarter?

Christopher, thanks for the question. That's a good question. We do not at this time anticipate a further decline. We feel that where the asset is marked today is reflective of the recovery value of the individual loan assets that make up the collateral pool.

Got you. And Ted, do you anticipate a resolution where you get paid off or you could basically turn your debt position into an equity position? Is this a company which is still going on? Or I mean, what are we looking at here? Is it going to be just --

Yes. That's another good question. I do not anticipate turning our debt position into an equity position. At this point, we're in, in this particular asset, we're in recovery mode only. And normally, we'd look at, if we had confidence and a going concern value, a going concern operation or a strong management team, we would do that to generate the maximum recovery. Here, we're very, very focused on asset recovery, which is facilities, properties, plants, equipment and some very large accounts receivable.

We're going to take a very aggressive approach on those accounts receivable. We think we're on good grounds. We've been advised by several law firms that we've got very solid recovery prospects here, and we're going to pursue every potential recovery at our debt, over our debt and above our debt.

Our next question comes from the line of Casey Alexander with Compass Point.

Just to clarify, what was the date of the Rockdale bankruptcy?

I think it was -- it was near the end of July.

Near the end of July. Did you sell any stock under the ATM program after you became aware of the bankruptcy?

I'd have to check on that, but I don't think so. Having said that, I want to make this rebuttingly clear. The bankruptcy is not -- a lot of people who don't understand the credit part of it think the bankruptcy is somehow a meaningful element in the recovery of the company in terms of it's negative. Bankruptcy is often very positive as it deals with unsecured creditors through the court system. So the bankruptcy isn't terribly relevant in terms of recovery and mark on this company.

It's really a strategy change. And I'm just confirming, we didn't sell any equity after the Rockdale bankruptcy. But it's not something that's particularly meaningful with regards to the recovery plan. It's just a way to get at a recovery. It didn't change much of the situation with regards to how we viewed it.

Okay. Then did you disclose it as a subsequent event when you issued the baby bonds in October?

I'll have to get back to you on that. I don't believe we did. The question's about materiality. And I don't think we viewed it as a material situation with regards to the recovery on the name.

Well, I would have to say the action of the stock today argues differently. But thank you for taking my questions.

Ladies and gentlemen, at this time I would like to turn the call back over to Ted Koenig for closing remarks.

Thank you, everyone, for joining us on our call today. I look forward to updating you on another call next quarter with some results on some of our recovery actions and our performance for the next quarter. So thank you very much. We'll talk to you soon.

Ladies and gentlemen, that concludes today's call. Thank you for participating. You may now disconnect. Everyone have a wonderful day.