Oil States International Inc (OIS) 2012 Q1 法說會逐字稿

Welcome to the Oil States International first-quarter 2012 earnings conference call. My name is John and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded. I’ll now turn the call over to Ms. Patricia Gill. Ms. Gill, you may begin.

Thank you, John, welcome to Oil States’ first-quarter 2012 earnings conference call. Our call today will be lead by Cindy Taylor, Oil States’ President and Chief Executive Officer; and Bradley Dodson, Senior Vice President and Chief Financial Officer.

Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent the remarks today contain information other than historical information, we are relying on the Safe Harbor protections afforded by Federal Law. Any such remarks should be weighed in the context of the many factors that affect our business including those risks disclosed in our Form 10-K and other SEC filings. I will now turn the call over to Cindy.

Thank you, Patricia and thanks to all of you for joining our call this morning. The first quarter of 2012 was a great quarter for Oil States. We generated record earnings of $2.43 per diluted share on $135 million of net income and $1.1 billion in revenues. First-quarter results did include a pretax benefit of $17.9 million or $0.23 per diluted share after tax related to a favorable contract settlement in our US Accommodations business. All of our business segments performed well and strong activity continues.

Highlights from our first-quarter 2012 results included record Accommodations revenues and EBITDA due to strong Canadian mobile camp results, and continued strength in occupancy levels and revenues at our lodges and villages. Our Offshore Products segment delivered a very good quarter with continued strong financial results, margins and new bookings into backlog. We reported record shipments in our Tubular Services segment with improved pricing and margins. We delivered solid performance in our Well Site Services segment as margins and volumes held up well despite the shifting of US drilling and completion activities between dry gas and oil basins. Our Accommodations business continues to grow providing strong revenue visibility for our Company through our long-term Accommodations contract.

In our Offshore Products segment, bidding and quoting activity remains robust, particularly for our Subsea equipment and proprietary floating production facility content for delivery and installation into Brazil, West Africa, and Southeast Asia. In North America, oil-directed drilling and completion activity continued to strengthen, substantially offsetting the weakness in natural-gas drilling. Demand for our rental tools and service personnel was strong, particularly in the Bakken, Eagle Ford, and Permian Basin markets. Customer demand for Tubulars remains robust due to strong overall US land drilling activity coupled with increased activity offshore in the Gulf of Mexico, both deepwater and on the shelf. At this time Bradley will take you through more details of our consolidated results and financial position. Then I will conclude our prepared remarks with a discussion of each of our segments in more detail and we will give you our thoughts as to the current market outlook.

Thank you, Cindy. For the first quarter of 2012 we reported operating income of $204 million on revenues of $1.1 billion. Our net income for the first quarter of 2012 totaled $135 million or $2.43 per diluted share. This included a pretax benefit of $17.9 million or $0.23 per diluted share after tax related to a contract settlement. The comparable first-quarter 2011 results were $95 million of operating income, on revenues of $760 million. First-quarter 2011 net income totaled $62 million or $1.13 per diluted share. The year-over-year increases in profitability were primarily due to organic growth initiatives, strong occupancy levels in our Accommodations lodges and villages, increased deepwater spending, and higher US drilling and completion activity.

During the first quarter we reported cash flow from operations of $67 million which was net of $122 million investment in working capital. The first-quarter working capital investment was driven by higher activity levels in our Tubular Services, Accommodations, and Offshore Products segments, generating higher accounts receivable and inventory balances at March 31, 2012. During the quarter, we spent $101 million in capital expenditures, the majority of which were spent on the expansion of our Accommodations lodges and villages. Our net income -- our net debt, I'm sorry -- at the end of the first quarter totaled $1.1 billion and our debt-to-cap ratio was 36%.

As of March 31, 2012 the Company had approximately $738 million of combined availability under our credit facilities, along with $71 million in cash. In terms of the second-quarter 2012 guidance, we expect depreciation and amortization expense to be $53 million and net interest expense to approximate $19 million. Diluted shares are expected to total 55.6 million in the second quarter of 2012 and we currently expect our second-quarter 2012 effective tax rate to approximate 28.5%. We continue to expect to spend approximately $600 million to $700 million in capital expenditures during the calendar year 2012. At this time I would like to turn the discussion back over to Cindy who will review the activities in each of our business segments.

Thanks Bradley. I will lead off with Accommodations since this is our largest segment contributing 58% of our EBITDA in the quarter. Occupancy levels at our major Oil Sands lodges and Australian villages were exceptionally strong during the first quarter of 2012 despite some seasonal flooding in Australia. Accommodations revenues increased 53% year-over-year and EBITDA increased 98% year-over-year primarily due to the 36% increase in average available rooms along with high occupancy levels. We received the full-quarter benefit of new lodges and villages construction in 2011, namely Calliope and Narrabri in Australia and our Henday Lodge in Canada. On a sequential basis, our Accommodations revenues increased 27% -- primarily due to strong Canadian mobile camp activity; a 3% increase in average available rooms in our major lodges and villages; and a 12% sequential increase in revenue per available room due to seasonally high occupancy levels.

In our Offshore Products segment, we generated $186 million of revenues in the first quarter, continuing the strong performance from the fourth quarter of 2011. We reported $36 million of EBITDA in the first quarter of 2012 compared to $38 million of EBITDA in the fourth quarter of 2011. This 4% sequential reduction in EBITDA was due to high revenues from our Houston facility in the fourth quarter of 2011. Reported EBITDA margins for the segment remained at historically-strong levels of 19.5%, reflecting strong industry demand for our proprietary higher-margin products and services.

We booked approximately $180 million of new orders during the first quarter of 2012, maintaining a near-record backlog level of $529 million as of March 31, 2012. Significant backlog additions during the quarter included a major Subsea pipeline equipment order in Brazil for our Houston operation. Our Well Site Services segment generated revenues of $183 million and EBITDA of $59 million in the first quarter of 2012, compared to $187 million and $59 million respectively in the fourth quarter of 2011. Revenues from our rental tools business decreased 4% and EBITDA decreased 7% when compared to the fourth quarter of 2011.

Although first-quarter activity remained particularly strong in the Bakken, Eagle Ford, and Permian Basin Regions, sequential declines were experienced in dry gas basins such as the Haynesville and Barnett shales due to currently weak natural gas prices. Revenues from our drilling segment increased 3% on a sequential basis due to higher day rates and better than anticipated utilization. Cash margins and EBITDA increased sequentially due to higher insurance costs experienced in the fourth quarter of 2011 which did not repeat in the first quarter of 2012.

During the first quarter of 2012, Tubular Services generated revenues of $428 million, up 11% sequentially and EBITDA increased $6.3 million or 36% sequentially. OCTG shipments increased 9% to a quarterly record of 205,400 tons, up from 189,000 tons shipped in the fourth quarter of 2011. Gross margin as a percent of revenues increased to 6.3% during the first quarter of 2012, up from 5.6% in the fourth quarter of 2011. The Company's OCTG inventory increased 13% sequentially to $473 million as of March 31, 2012, supported by customer orders and strong demand particularly in the Eagle Ford, Permian basin, and offshore Gulf of Mexico markets.

Now I'd like to transition and give you more details of our outlook for the second quarter of 2012. In our Accommodations segment, we continue to see strong customer demand for additional room count expansions in Canada, Australia, and the United States. To note, last week we held the grand opening of our Johnstown, Colorado manufacturing facility and are very excited about the opportunity to create jobs in an area of the United States which has a large amount of available skilled labor. In the second quarter of 2012, we expect our average available rooms to grow to approximately 18,100 rooms available, representing 2% sequential growth.

Accommodations revenues are expected to total $250 million to $260 million in the second quarter of 2012 as our mobile camp business will decline sequentially with spring breakups in Canada. Accommodations EBITDA margins are expected to be within our long-term margin guidance range of 42% to 43%. In our Offshore Products segment, bidding and quoting activity remains strong, particularly for production facility and Subsea pipeline equipment in Brazil, Southeast Asia, Australia, and West Africa. This activity coupled with our high backlog level provides good revenue visibility for this year and into 2013. Second-quarter revenues are projected to total $190 million to $200 million, EBITDA margin should continue to be in the range of 18% to 20% given our expected revenue mix.

As it relates to Well Site Services, lower natural gas prices continue to negatively impact dry gas drilling activity in the United States. Thus far, declines in the gas rig count have been largely offset by increases in oil and liquids-rich drilling. With our broad network of over 50 locations, canvassing the active oil and gas regions, we believe that our rental tool revenues will continue to reflect overall US drilling and completion activity trends with particular leverage to high-end multi-stage completions. However, we are seeing some pricing pressures in selected product lines. As a result, second-quarter revenues for our Well Site Services segment are expected to range between $175 million and $180 million with EBITDA margins coming in between 31% and 32%.

Activity in the OCTG market remains strong with a healthy supply-demand balance of less than five months supply of inventory on the ground. Distributor and mill pricing remains steady. Imported product continues to constitute approximately 50% of the market. Our OCTG sales generally follow trends in the overall US rig count. Indications from our customer support continued strong activity particularly in the Eagle Ford, Permian, and offshore Gulf of Mexico markets. We expect our Tubular Services segment to generate revenues of between $400 million and $425 million in the second quarter of 2012 with gross margins ranging from 5.8% to 6.5%.

In conclusion, we reported another quarter of record earnings due to our organic growth initiatives, strong and growing demand for our Accommodations in Canada and Australia, increased deepwater spending, and continued strong US drilling and completion activity. Conversations with our customers remains supportive of our expected capital spending plan for 2012. The outlook for Accommodations and Offshore Products remains particularly strong. Oil States is well positioned in this market environment to deliver good growth during 2012. That completes our prepared comments. John, would you please open up the call for our questions and answers at this time?

(Operator Instructions)

Jeff Tillery, Tudor Pickering Holt.

Bradley, in the Accommodations business obviously in the second quarter you see some seasonal decline in the non-lodged portion of it. The revenue guidance, is that implied that we can see that kind of cut in half sequentially? Is that reasonable? Alternatively, it means some of the RevPAR improvement we saw in the first quarter unwinds in the second quarter.

The answer is both. The guidance implies from first quarter to second quarter, a couple things. One, that obviously we don't have the contract settlement repeat, that's not going to happen. The mobile camp business should decline roughly $25 million to $30 million. And then lastly, to your point, we do historically show higher RevPARs in the first quarter as Canada, particularly at the Conklin Lodge has higher occupancy levels. So it is a combination of all of the above.

So it seems like in the second quarter we may see a little bit bigger fall off than we saw last year in the RevPAR? I guess perhaps Conklin was busier this year than it was last?

It is not just comp. Again, we've got a large mobile camp fleet, when you look at the investor presentation we focus on the semipermanent lodges, but as you know, when we actively support SAGD drilling activities, generally with large open camps, that our mobile and then we also support conventional drilling activity as well. You may see a little more year over year decline simply because we did a lot better this first quarter of this year on a relative basis in terms of penetrating the mobile camp market, in support of growing SAGD operations and a fairly active conventional drilling market in the first quarter this year.

That makes sense. CapEx for the year Bradley, didn't change what you guys talked about before. Only got a fraction of the way there in the first quarter, what big lumps should we expect in the course of the year? Is it going to be second-half weighted or second quarter do you start to catch up with an annual $6 million to $7 million run rate?

We should start to catch up in the second quarter. Obviously the largest driver of CapEx is the Accommodation segment. We've got a handful of expansionary projects that are underway and we should -- that growth has been forecasted to be fairly second-half weighted, and as a result, we will start to see the CapEx pickup in that segment in the second quarter as we start to deploy capital then for the rooms to come online in Q3 and Q4.

My last question just around the Tubular Services business. With inventories building there, clearly you’re not expecting that business -- what should we interpret that to mean around what you guys can see and feel for rig count over the next three to six months?

Well, we've kept consistent our buying patterns and when we buy Tubular inventories it is normally responsive to customer orders. We have a very high degree or high level of committed inventory i.e., backed by customer orders. So take that as a bullish sign, an increase in inventory just means that our customers are requesting more pipe so it is a good sign.

Great, thank you guys very much.

John Daniel, Simmons and Company.

Hey, guys, great quarter.

Thanks, John.

Just two for me, you've had two really strong quarters now for Offshore Products, and the Q2 guidance is really good. But if you look into that crystal ball beyond Q2, given the strong quoting activity, do you see revenue sustain at these levels or in the second half we’re growing from here? Just some quick thoughts?

Well, it is just a very robust bullish outlook for Offshore Products generally. And as long as we maintain consistently high backlog levels I think you should infer that our revenues are going to hold up at high levels consistent with Q4 of 2011 and Q1 of 2012. Mix it that we are bidding is very favorable and the mix and backlog remains positive so I have nothing negative to say at all about the business. There's always the risk of course, that things are lumpier if you will, in the sense that is the incremental backlog going to hit in Q2 or will it be Q3 or Q4, there's always a little of that. But if you just step back and look at the big picture which is relevant in this business, it is a very favorable outlook. We are also obviously if we continue to see that type of growth that we are sensing in the marketplace, we will have to continue to address our capacity to handle that as well. But thus far, I think we've managed all of those dynamics very effectively.

Okay. All right. I was writing feverishly as you were going through your prepared remarks, but you said something about the pricing pressures and Well Site Services, and can you elaborate on which product lines and where, and is it just the gassy markets or is it capacity issues? Just any additional color would be helpful.

The additional color I’d offer you, we look at our sequential performance during Q4 to Q1, I thought we did very well, in light of a lot of movement between basins, but no surprise areas like the Barnett and the Haynesville were sequentially down and when you are doing that, a lot of that capacity is being relocated into basins such as the Eagle Ford and others. We've seen some modest pricing pressure, nothing significant in our wireline support equipment and some of our fluids business. But nothing really material there. If you look at our guidance for Q2 we are expecting and seeing in April a little more downward pressure in the Marcellus, for us, the Marcellus held up pretty well, Q4 to Q1. But we are beginning to see some drop off there. So we really haven't taken our revenues, our outlook or our margin outlook down too much, but I think that what will contribute to that for Q2 is the Marcellus.

Okay. But drilling is holding up?

Drilling is in great shape, yes.

All right, thanks, guys.

Stephen Gengaro, Sterne Agee.

Two things for me please. First, Cindy, any updates on any of the contracts out there for new Accommodation units up in Canada?

What we are seeing right now is just very heavy occupancy levels in all of our major lodges. If you look at as you know, Henday and Wapasu are contracted long and they've been very full for quite a long time. But even in those we can get some improved levels if our customers are efficient, meaning there's headcount in the facilities commensurate with efficient scheduled rotations, but you can get a lot bit of upside there where we tend to have more variability and our demand is in Beaver River and Athabasca and they were essentially full and we added some capacity in the first quarter to those facilities. I can look at my customer list and I don't always know all the projects that they are working on because again, it’s a varied customer base in that region, but my sense is at least a portion of that is associated with some early works on some of the incremental projects that are on the drawing boards. And other work is just associated with existing projects that are ongoing in the region. Really, again, the notable shot in the arm big projects are in Suncor’s hands, they’ve really not come out yet with any definitive timing associated with Fort Hills, Joslyn, or Voyager if that's the question. But I kind of believe that some of our existing facilities may be benefiting from some early planning work associated with those projects already.

Great, that's helpful. And then as I look at the Offshore Products business, is it fair to assume -- maybe I'll ask, is the mix in the backlog in some of these big projects, they’re obviously supportive of existing margins it sounds like. How do you think about those margins unfolding over the next four to six quarters based on the visibility you have from the backlog?

Our backlog mix continues to be very good. We’ve said that all along. A lot of drivers for us in terms of the larger awards are Subsea pipeline work, particularly export pipelines. And if you’ll recall, our Houston operation had a good award in the fourth quarter that was an 18-inch export pipeline on the Lula field. And in the first quarter of this year, we got a strong award as well on the Subsea pipeline side associated with a 24-inch export line and also in Brazil. So those are good content for us and we have pretty good margins on that type of work. Always subject to performance, but we should do well there. And floating production facilities both FPSOs and TLPs are in our backlog currently. Again, a very favorable mix.

Then importantly, a lot of the bidding and quoting activity is around FPSO work, TLP work, and Subsea pipeline work. In addition to that, we’ll always have somewhat of the recurring service work, repair work, crane manufacturing and our large OD conductor casing as well. All of those have differing margin mix, so if we have an exceptionally strong revenue generation associated with one or the other, those margins can ebb and flow within that guidance range that we gave you, but I think the overall message is everything looks good.

Great, that's helpful. Thank you.

Collin Gerry, Raymond James.

I will echo everybody's congratulations on an outstanding quarter, really. My first question is regarding the OCTG business, we've seen some capital markets activity, some M&A and IPO of similar businesses. And what looked to be pretty good multiples. Does that have any impact on your strategic thinking in terms of the Tubular division and its long-term future within Oil States?

Collin, I’m just smiling because what that tells me is that these people are beginning to appreciate it is pretty good business right, and the valuations are reflecting that. I think for us, the key is, does this somehow help people understand our business and therefore, value it more appropriately in Oil States’ holdings and as it should. And so it’s either upside to our stock as it is, or clearly if nobody can figure that out, then yes, we will also always assess what's right for our shareholders.

Absolutely. Maybe a little bit more specifically, there's some of the activity we've seen here recently, does that make the internal conversation or the decision, has that changed things or just perked your interest at all? Or has it always been the same that we’ll continue to monitor what's best for shareholders on a quarterly basis or however it has been historically?

It is more of the same. We are very cognizant of making sure that we are valued appropriately with a long-term view, and this is more in our mind, confirmatory of what we thought the value of that business is. We will certainly assess whether or not people value that into us or whether or not we need to assess it further.

All right. Switching gears, clearly the Accommodations business is doing really well here. You've made some acquisitions in that space. I was wondering if we take historical look, maybe you could compare to us how tight and how active that market is maybe to the peaks we saw last cycle in the '07, '08 timeframe. Are we back to those levels, is there more room to grow? Maybe just describe to us in a little more detail the buzz in Canada right now.

I really have to give the team credit up in Canada and Australia, for that matter. But in particular, Canada in the first quarter, there was literally not a room available. We basically had zero vacancy at the major lodges in the first quarter. I thought Australia performed very well. It is the wet season. We had some flooding down there. It didn't have an impact on our operations, that's more a testimony to our team down there and their efforts. But I would say that that kind of tightness, yes, it is fairly comparable, we used to experience that every quarter in the ‘07, ‘08 timeframe, I mean every first quarter in the ‘07, ‘08 timeframe. This is back to a time of very strong activity.

That certainly provides a good outlook going forward. I will wrap up there. Thanks guys.

(Operator Instructions)

Anthony Walker, Barclays.

Congrats on a good quarter.

Thanks, Anthony.

Drilling down into the Accommodations business a bit more. It sounds like a good percentage of the outperformance in 1Q was the mobile fleet in Canada. Can you update us on the outlook for the US and mobile fleet, has the Permian environment improved? And how many units do you think you could add for the balance of the year in places like the Bakken, Eagle Ford, and Permian where labor seems to be particularly tight?

We are working very diligently on that. We have the state of Texas into our manufacturing facilities in Canada as well as in Colorado to get obviously -- or advance our ability to get those permits in place. We've kind of shifted our thinking in terms of first room working and available from Q2 to Q3 in the South Texas market and we are working diligently with areas in the Bakken, particularly Williston and adjacent areas. Again, I would say that if we've made progress, we don't have rooms out and rented yet, but we made substantial progress, we've opened the manufacturing facility. I was just up there last week. It is a great facility that I think we're going to be very proud of and will manu very high-quality products. So I'd say we’ve made a lot of headway. But it’s still more like a Q3 type of thing.

Okay. And then I guess as a follow up on Accommodations, any change to your view of visible demand in terms of how many rooms you could potentially add during 2012?

No. I think that the overall outlook remains very strong. The Australian market is doing very well. I think we will have opportunities. We've got Karratha that we are adding rooms really at the end of the second quarter, really getting operational in the third quarter. That's 200 rooms. But we are in -- our team is in active discussions with customers at really all of our existing villages to add rooms there. Whether it is 100 or 200 rooms there, it is multiple customers. The outlook there remains very good. And it’s starting to set up for 2013 to look good.

In Canada, think Cindy covered it pretty well. The activity is very strong, we're starting to see early occupancy from some of the next wave of projects. But the timing of when they are sanctioning and their awards will come is still somewhat in questions. Imperial continues to be very active. They're obviously a major customer at our Wapasu Creek Lodge. They sanction phase 2 of Pearl, which is obviously very positive for us. Our current Wapasu contract for Imperial expires at the end of the first quarter of 2013, but we have a great deal of confidence that we will see an extension there for that Lodge. So all in all, I think things look very good and we are -- really of the Canadian rooms we had already planned brownfield expansions of Henday, Athabasca, and Beaver River that account for already 600 rooms of growth, so things look pretty good.

Okay, great. Then last one for me. You’ve talked a lot recently about the visible demand in Australia on the coal and iron ore side of the business. Can you update us on your discussions around potentially adding opportunities for Deepwater and LNG customers?

Well, as you know, one of the areas that we are focused on is the Northwest shelf. We are working currently on our Karratha facility which is the lead, if you will, into that market and we've had quite a lot of active and positive discussions with the customers around the broad opportunities in that area that are Deepwater, but it is also that Pilbara iron ore mining region. There's LNG opportunities along the shelf. And the Calliope Village that we opened up already is supporting early work around LNG development on Curtis Island. So I would just generally say those are underway and I would be shocked if two years from now those facilities aren't meaningfully larger than their original room count.

Sure. Okay, thanks, guys, I will turn it back.

Mark Urness, Credit Agricole Securities.

Very surprisingly good quarter. I appreciate that. Also, just had two questions, I apologize if this has already been asked. I had to jump off the call for a minute, but in terms of expanding Accommodations outside of Canada and Australia, I know you’ve got a full plate in terms of expansion in those areas, but are you beginning to investigate a third leg to this tool?

Yes, we are beginning to investigate that and we are -- there’s some target markets out there that we are looking into. Most of which I’d say the immediate focus is in South America generally. But we cautioned everybody don't expect a big acquisition like a MAC because we just haven't found that quality of an operation really anywhere else around the globe. So I think what we will do is either buy a foothold through a manufacturing concern or a service-oriented concern and then really develop and transition into our develop-own operate model in those markets. And I really don't expect us to do anything until late this year or early next year would be my read today.

Okay, then my second question relates to Well Site Services and drilling and just in general, your North American results were maybe better than most of your peers. And I'm wondering how you managed the shift from gas to oil and why you were able to manage through it without much pain when everyone else seems to have experienced a bit of pain?

We go back and we hit on this, we think. We have a very broad network of operating locations and we have a group of service personnel that are used to rotating and are fairly flexible about shifting from one basin to the other. We’ve got very good strong footholds in areas like the Eagle Ford, the Permian, the Bakken which are strong markets, and when activity goes down, in Shreveport, and Tyler, and North Louisiana, these people want to work. So they are eager to go take a job down at the Eagle Ford or in the Permian or wherever the work is even in the Bakken. And I think the nature of our equipment -- and makes it a little bit different possibly, we are not moving enormous frac fleets, we’re moving more pressure controlled equipment.

We do have issues around DOT transportation managing hours. We’ve brought on some contract personnel to buffer some of the limitations, if you will, around that. I do give credit to a lot of the team, Chris Cragg in our office leads that operation. He's gone through a re-organization integration, rebranding, and has got a lot of people that are just focused on the business and enthusiastic about delivering high-quality services to our customer base. Thus far we've done pretty well. Now, the other thing I will tell you is some of our equipment is backed by proprietary technology, particularly our isolation equipment. You don't see the capacity encroachment that you see in some of the other product lines and where we have and generally our high-pressure equipment we do fairly well in terms of maintaining pricing. Even during times of shifting. If you are in maybe some 10-K type equipment that's a bit more commoditized, some of our wireline equipment, again you’re seeing a little bit of pricing pressure, but it is kind of a combination of all those things, Mark.

Alright, one final question related to OCTG, inventories up to very high levels. You've indicated that is kind of customer driven but the rig count is flat. That would imply to me that the oil-driven plays are more pipe intensive, if you will. Is that correct?

I don't know that it is necessarily oil, it is the general trend of moving toward extended laterals on the horizontal leg, it requires not only incremental footage, but they’re also generally going to thicker-walled product because of the intensity of the fracking work and the pressure pumping work that's going on. Not to mention all the bending and such in terms of setting the casing and those horizontal legs. So I think that's one thing, but notably, we’ve gone from a dead Gulf of Mexico and granted, we are not near to peak activity levels and it is going to be while to get there, but you're coming off a base of almost nothing in terms of Deepwater and shelf demand and so that has some impact as well.

Thank you very much.

Stephen Gengaro, Sterne, Agee.

Just one follow-up and I'm sorry if you answered this. Any update Bradley or am I still thinking about 3,000 room additions between year end '11 and year end '12?

That's the goal.

Okay, great. Thanks.

(Operator Instructions)

We have no further questions at this time.

Thanks, John, we didn't see anybody in the queue on the screen either. It is an incredibly busy week of earnings release. I appreciate all of you that follow our Company, are interested in our performance and took the time to call in today. I do think we will probably see a lot of you at OTC next week. So look forward to it and appreciate your time.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.