Option Care Health Inc (OPCH) 2006 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the BioScrip Q3 2006 conference call. [Operator Instructions] I would now like to turn the conference over to Lauren Puffer, Investor Relations representative for BioScrip. Please go ahead, ma'am.

Thank you and good morning. Welcome to BioScrip's third quarter conference call. Joining us today are Richard Friedman, Chairman and Chief Executive Officer, and Stan Rosenbaum, Chief Financial Officer. You may find today's press release on the Company's website at www.BioScrip.com, under the Investor section.

Before we begin, I will remind all listeners that throughout this call we may make statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act, including statements regarding the intent, belief or current expectations of the Company, its directors, or its officers, with respect to the future operating performance of the Company, program success and the Company's integration of its operations.

Investors are cautioned that any such forward looking statements are not guarantees of future performance or the successful execution of the Company's strategic plan and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors. Important factors that could cause some of the differences described above are described in the Company's periodic filings at the SEC, including its annual report on Form 10-K filed with the SEC. I direct you to these documents to understand the current business environment and it's associated risks.

Today's call will consist of opening comments from Rich, a financial review of the quarter and nine months by Stan and closing remarks again from Rich. We will then conclude with a Q&A session. I will now turn the call over to Richard Friedman. Please go ahead.

Thank you, Lauren, and good morning. When we spoke with you last quarter, we talked about the steps we were taking to return BioScrip to profitability. At that time, we identified two immediate priorities. One was to improve our liquidity through enhanced collection efforts and the second was to reduce expenses.

We executed strategic directives in order to achieve these priorities. We reorganized our collections department. We implemented new policies and procedures and instituted new operational processes to ensure better collections at the point of sale.

These actions have enabled us to lower our bad debt expense by $1.6 million from the second quarter. If our current trend continues, we believe that we will be able to further reduce bad debt expense as a percentage of revenues in the coming quarters.

As a result of our collection efforts, our bank debt as of October 31, 2006 was $37.6 million, an $8.0 million reduction since September 30th. Our current availability under our new line is now $44 million. We remain focused on collections and are committed to continuing the progress we have already made.

As to cost reductions, I am pleased to report that we successfully identified and implemented over $7.5 million in analyzed cost reductions in the third quarter. September was the only month in this quarter that reflected the full impact of these reductions. The fourth quarter will have the full quarterly effect.

Third quarter EBITDAO showed a significant improvement over the second quarter, going from a negative (-)$5.1 million to negative (-)$700,000. In the month of September, we actually had a positive EBITDAO. Although we continue to concentrate on improving collections and reducing costs, the key to long-term profitability at BioScrip is increased revenue.

Our specialty services business continues to perform well. We believe that infusion, new specialty product launches, and our community-focused platform will drive growth and profitability in the future. We continue to see significant opportunities in the marketplace. We have experienced much success in the distribution of new specialty products, where BioScrip participates as a specialty provider within limited distribution networks created by manufacturers.

We continue to work closely with manufacturers to expand our portfolio of specialty products and services. New product revenues for the third quarter exceeded $17 million. Our strong performance with both new and existing products makes us a very attractive partner for pharmaceutical manufacturers.

We continue to experience above average growth in infusion. We expect to be much more active in the expansion of our infusion business in coming quarters. We will do this by opening new sites and expanding suites and centers.

Through the community platform, we see opportunities in HIV and other selected therapies on a market-by-market basis. Our continued localized sale efforts, coupled with our increasing visibility within these markets, should create returns in the future.

In addition, in the third quarter we recognized the first revenue contributions from the Competitive Acquisition Program (CAP). Our efforts to educate the physician market on the benefits of CAP have led to an increase in enrollment. The enrollment period for 2007 is currently underway and we will see those results later in this month.

As often happens with newly established government programs, there have been certain system issues in our claims adjudication process, which are outside of our control and may impact current enrollment. Nonetheless, it is early in the process and we hope to gradually see increased participation. Additionally, we are realizing new market opportunities outside of CAP, as a result of being the sole CAP vender.

Now I'd like to turn the call over to Stan for more details on the quarterly results.

Thank you, Rich.

As Rich mentioned, we've concentrated on returning to profitability through cost reductions, improved collection efforts and operational improvements. As previously announced, we have implemented $7.5 million in annualized cost savings in the third quarter. The full impact of these savings will be recognized in the fourth quarter.

Our progress in collections enabled us to reduce bad debt expense in the third quarter, which improved to $2.8 million, or 1.0% of revenue. This compared to $4.4 million, or 1.6% of revenue, in the second quarter, a $1.6 million improvement quarter-to-quarter.

EBITDAO for the third quarter improved to negative $700,000, compared to second quarter EBITDAO of negative $5.1 million. The improvement for the second quarter reflects higher gross profit of $900,000, lower bad debt expense of $1.6 million, lower severance costs of $1.1 million and the impact of the cost reductions previously discussed of $900,000.

I'd like to point out that we adopted FAS 123(R) accounting for stock options on January 1, 2006.

Net loss for the period was $3.4 million, or $0.09 per share, for the third quarter 2006 compared with a net loss of $5.7 million or $0.15 per share in the second quarter. Net income for the third quarter 2005 was $600,000 or $0.02 per diluted share.

We reported third quarter revenues of $280.9 million, compared to $294 million for the same quarter of 2005. Revenue decreases were primarily the result of the loss of Centene Corporation, a substantial PBM Services customer, offset by increases in our other business units, which included approximately $6.5 million of revenues associated with acquisitions since September 30, 2005.

PBM Services, which is made up of our PBM business and traditional mail business, reported third quarter revenue of $61 million, compared to $97.9 million for the third quarter of 2005. This decrease is primarily due to the loss of PBM Services contracts with Centene Corporation, which was partially offset by increased traditional mail volume.

Third quarter revenue from specialty services, which is made up of the infusion, community pharmacy and specialty mail service business, increased 12% to $219.9 million. This increase is mainly due to sales of new biotech drugs, strong growth in infusion sales, the acquisition of Northland Pharmacy in October of 2005 and the acquisition of ITS in March of this year.

Gross profit for the third quarter 2006 was $29.7 million. Gross profit was 10.6% of revenue in the third quarter, compared to 10.3% in the second quarter of this year. Third quarter 2005 gross profit was 10.8% of revenue, or $31.7 million. The decline in gross profit from third quarter of 2005 was the result of programs changes associated with the implementation of Medicare Part D on January 1st of this year and continued industry-wide reimbursement pressures.

SG&A for the quarter were $29.2 million, a $1.9 million decrease from the second quarter. Third quarter 2005 SG&A expenses were $26.5 million. The increase in SG&A over 2005 was due primarily to $300,000 in severance expense related to the staff reductions implemented during the third quarter, $1.8 million of ongoing operating expenses associated with the acquisitions made since September 30, 2005 and $600,000 of stock option expense associated with the adoption of FAS 123(R).

For the nine-month period ended September 30, 2006, revenue increased 12% to $860.2 million, as compared to $769 million reported in the comparable period of last year. Net loss for the nine-month period was $10.3 million or $0.28 per share, compared to net loss of 1.2 million or $0.04 per share in the same period a year ago.

Operating results for the nine months ended in September included $2.9 million of severance expense, $3.9 million of ongoing SG&A expenses from acquisitions, $6.0 million of additional bad debt expense and $1.7 million of options expense.

Moving to the balance sheet, we had $49.8 million of working capital at the end of September of '06 and $189.3 million in shareholders equity. We had $45.6 million of outstanding borrowings on our $75 million line of credit at September 30th and as Rich mentioned, that number has dropped to $37.6 million on October 31.

DSO for the quarter was 40.9, compared to 41.9 in the second quarter, an improvement of one day.

I'd like to conclude with just one statement on my own and that is I've been with the Company now for four months and essentially, when I joined the Company, as related to our last conference call, we essentially had three issues that I was facing. One was that our operating expenses were too high. Second was that our bad debt expense was continuing to be a problem through poor collections and lastly that we had major deficiencies under our Sarbanes-Oxley.

I'm happy to say that we have improved on our bad debts. We continue to improve and if all things go well, I would expect to see more improvement in the fourth quarter. Clearly our $7.5 million reduction in expenses occurred in the third quarter and the full impact will be realized in the fourth quarter.

And just as important, we have remediated one of the major deficiencies we reported under Sarbanes in the third quarter, that being the one associated with AR and we are hopeful and striving very hard to remediate the other two before the end of the year. We have made some very significant progress this quarter. We anticipate making even more progress next quarter and I look forward to 2007.

With that, I'll turn it back to you, Rich.

Thank you, Stan.

BioScrip continues to have a strong platform for future growth. The combination of community, infusion, and our national distribution facilities enables BioScrip to reach a wide range of patients across the nation, while maintaining the personalized service of a hometown market.

We will continue to seek out every opportunity to capitalize on these assets through expanded manufacturer relationships, broadening infusion's footprint, special programs such as CAP, new sales and marketing initiatives, and trends driven by innovations in patient care. We remain committed to restoring profitability and increasing value for our fellow shareholders.

We will now open the lines for questions, operator.

[Operator Instructions] Our first question comes from the line of [Seth Jaden]. Please proceed with your questions.

Good morning. This is Seth Jaden standing in for Brooks O'Neil. For those of following the Company, it's very good to see that the collections are improving and the expenses are being reduced. Could you give us more detail as to how you specifically managed that and perhaps more so how you plan to improve those efforts going forward? Any detail on what to expect going forward would be very helpful.

Good morning, Seth, this is Stan. As we reported to you, at the last conference, we took several steps as related to up front issues that improved our collections on co-pays before they left the store. That was very important to us and as a result of that, our up front collections are up $600,000 per month over where we reported to you at the second quarter of last year, all right.

Since that time, we've taken other steps. One of the things that we're doing is we're piloting a program to put AR reps in our stores. We believe that will help, because that will get our AR person in front of the customer as they enter the store, rather than trying to find them via a statement or a phone call. So we believe that the hands-on approach will help there as well.

Other steps we've taken in this quarter is we are now using our Silverlink phone service and our mail business to, among other things, when we remind customers to reorder their product, that they also owe us money and we're using that as a collection. That is an automatic dialing system.

So, overall, things are improved greatly on the front end and that will reap dividends going forward. The back end continues to be where we next have to concentrate our efforts and certainly to improve our systems going forward.

One of our big problems, as I mentioned the last time and is still a problem to us, is that our pharmacy dispensing system does not have access to our AR system. So we are -- that's the next major step that we're going to take so that we can put a hold on certain customers who have not paid us. But I think that those efforts are paying dividends and I would certainly expect to see our bad debt expense, as a percentage of sales, go down in the future.

That's great. Could you tell me where you are, along those same lines, with your overall systems integration?

Well, as we reported the last time, our goal is to get down to two systems. One, for our infusion business and one common system for our stores and our mail order. We are still not there yet. On the infusion side, we have plans to implement CPR Plus at our New Jersey site and then infusion will be fully operational on one system. That should take place early in 2007.

On the mail order and pharmacy level, we are constantly looking for an off-the-shelf software package that would solve all of our issues. But we have yet to find one that works for us. We continue to look. We are going to engage an outside consultant to help us in that process, as we go forward. We should have more to report back to us some time in the first quarter of next year.

Okay, great, last question. You stated in your release and on the call that a key to your long-term profitability is revenue growth. Could you help me better understand this statement? Because to me it seems logical, obviously, to continue to curb expenses, get a complete handle on the bad debt and attain complete system integration, but also to dispose of any poor margin business to get the Company to profitability.

Am I missing anything? Are you saying that your revenue growth focus will solely be on the high margin components of the business?

Seth, we agree with your assessment. First of all, we will be looking at and are looking at certain of our customer where we feel that the margins are too low, so we are looking at businesses that could be problematic. We also believe that we have more opportunities on the expense side, as bad debt expense, and we anticipate that to improve going forward.

Until we put in, though, the systems that Stan has been talking about that we're working on, we don't believe that we're going to see significant decreases in SG&A on a real dollar basis until we could implement new system and improve a lot more of the efficiencies.

So, therefore, as we continue to work on the bad debt area, as we're implementing the new systems, which will then result in a reduction of further SG&A expenses, that we're going to have to look at where we've been spending the last number of months on the expense side, that we have to continue to grow this business. And we have to look at areas, for example HIV, that has gone beyond the gay communities into the multicultural - into the black community, into Latino communities.

So we need to get back into looking at what made this Company in the first place. Is looking at the HIV multiple, looking at oncology, looking at various disease states that we should be taking advantage of. We're doing an incredible job with the manufacturers and the limited distribution networks and that needs to continue.

We haven't gone far enough in infusion. We've done an incredible job in New Jersey. We're starting to do an incredible job out on the West Coast. We need to expand that platform. In significant margins, there are more and more products going into the infusion center. We believe in infusion centers. We believe in infusion suites and we need to expand that footprint.

So, while Stan and his team are really concentrating on the operational expense side and efficiencies, we have to work on the top line as well for profitable growth.

Okay. That's great. Thank you very much for your time. I'll jump back in.

Melissa Mullikin of Piper Jaffray & Co.

Good morning.

Good morning.

I just wanted to get a little bit more detail, hopefully, about CAP and how CAP actually performed during the quarter. Can you tell us, give us a sense of the scope of CAP revenues during the quarter?

Sure. Sales during the quarter were about $5.4 million. That ramped up about $600,000 in July and it ramped up to about $2.7 million by September.

Yes. Melissa, hi. It's getting close to $3.0 million now per quarter. What we're finding and as I think you know, we're now in the January 1st enrollment cycle for '07. What we're finding is that we have about 1,350 physicians who have signed. But what we're noticing is that the patients being serviced are increasing.

About a month ago we had about 4,500 patients being serviced and now we're up to about 5,500 patients with the same amount of docs. So the program is working and we have some issues, as I mentioned earlier, on the adjudication side by some of the local carriers.

But as it goes month after month, it's still a new program, it's effective July 1. So we will really have to see, but right now, on an annual basis, it's probably in the mid-30's and it seems to be growing every month.

Okay, mid-30's on an annual basis. So early -- and that's mid-30's on a basis slightly more than 1,000 docs. I think earlier you had talked about the potential for analyzed CAP revenue of about $250 million for each 1,000 docs. Is that something that something that you think is a longer-term goal? Or do you think that given the mix of docs that are actually signing on, that may no longer be attainable?

Well, it all depends on utilizers. Of the 1,350 docs who have signed, there's only about 370 or so that are utilizers, so it all depends. When you look at the numbers and you saw 1,350 signing and then only 370 or so were utilizers, you kind of look at that and go, "Okay, why did they sign?" When you first saw it, one would expect that the participating docs would also be utilizers.

So it's still early, but I think the numbers still kind of work. If it comes down to the forecast was based upon utilizers and at that time I don't think we knew much of a difference between participating versus utilizers. So, depending upon how successful the education program and the sign up is for '07, the financial forecast, the revenue forecast will be predicated based upon utilizers as opposed to those who are just participating.

Okay and you said you'll be able to tell us more about 2007 enrollment at the end of this month?

Yes. I think that we'll be able to, hopefully, once we get the information coming in from the local carriers. We don't get that information up front. It has to go through the local carriers and then it goes into Noridian. As soon as we have that information, we'll be able to share it and so obviously, at that time, we'll know a lot more.

Okay. Last quarter you said and admittedly I'm acknowledging that it's very early in the program, but last quarter you said you expected potentially break even or a profit from CAP in Q4. Is that something you still expect or would you think that could be pushed out further?

Well, every sale we make is profitable. It's now a question of recovering the costs that we incurred by setting up CAP. So and those are some costs at this time. But CAP, on a stand-alone basis with its related expenses, is profitable.

Right. Now you were able to ramp down -- you had ramped up -- I think, at one point, you had said about 90 employees, but you were able to ramp that down. Is that correct?

That is absolutely correct.

About how many do you have dedicated to CAP now?

I think it's less than 20.

Okay. And then I had some additional questions on home infusion. Is your infusion services business, is that all clinic-based or do you have home infusion as well where the nurse goes out to the site?

We have both.

You have both? Okay. What percentage of your revenue is home infusion, at this point?

Probably in the --.

Eleven to 12%.

[Inaudible - multiple speakers]?

Twelve percent.

Of your total revenue is home infusion?

Sure. That's about right.

Of $100 million and [inaudible] from $1.1 [inaudible]?

Okay.

I was thinking [inaudible].

We have [inaudible]. Melissa, just to be clear, were you talking about based on the whole Company or just based upon that percentage of the infusion?

I'm talking about the percentage of your total revenue that you would consider to be infusion revenue, so either associated with the clinic --.

Oh, okay, let's correct that.

Okay.

Okay. Our total infusion revenue for '06 will be about $100 million. Okay? Of that amount of money, of home infusion related to that, I would say it's probably about 85 to 90%.

Would be home infusion?

Correct.

Okay.

That's where I thought you were going.

Okay, okay. So the balance of it would be what you're servicing out of your -- onsite in your clinics?

That's right. It would either go into infusion suites or infusion centers or things like -- or physicians, our just shipments to a physician's office for the patients.

In terms of your SG&A outlook, in response to the previous questioner, you talked about -- you indicated that you would have to implement some of these systems before you would see a substantial improvement in SG&A. The one infusion system you said could be in place as early as early '07. What is your outlook for the other systems? I know that you're still shopping around, but do you have an internal timeline by which you want to have those systems in place so that you can better control SG&A?

As soon as possible, but we really don't have a timeline at this point in time.

Okay.

Melissa, it's a major priority in this Company in order to get our systems to where we want them. So, in the last quarter of this year as well as '07 is going to be a major commitment to get those done.

Okay, great. I think that's all I have for now. Thanks, guys.

Thank you.

William Nasgovitz with Heartland Funds.

Yes, hi, good morning.

Good morning.

Congratulations on the specialty services. Revenue was up about 12%. What kind of growth rate do you look forward to in the next year or two, three years down the road, from this particular segment?

Well, I would really like to say that if current trends continue without changes in reimbursement rate, which is always the one thing that you can't control, that you would like to see this trend, if not greater. If you believe the specialty market going from $30 billion to $50 to $60 billion over the next few years, you would like to say that you should follow that trend.

The one thing that we never know or could predict is significant changes or cuts in reimbursement rates that either happen from the government or maybe even some of the major players that are out there. But if everything remains constant, I would surely expect that the trends would continue, as they're continuing now, and hopefully even better.

The funny part is, over the last number of months, as everyone realizes, we've been concentrating significantly on the expense side and really taking the focus and putting it there to improve the profitability. There's going to be a certain point in time that we get to the point on the expense where we're an efficient operation.

We have to start focusing in on the revenue side and as we gain more and more focus, as we put more programs in place, like on HIV and other products - the oral oncolytics, MS, Crohn's Disease - that you will see, hopefully, significant increases on the revenue side.

Okay. You mentioned that $60 billion. Is that like a five-year industry number? Or you said $60 billion, I believe.

Yes. That is correct. I mean, the numbers I hear out there, you can look at Specialty Pharmacy News and other publications, that they actually, they're talking for the last number of years when it was $20 billion going to $50 billion, $30 billion going to $50 billion or $60 billion. And a lot of it's driven by the oncology marketplace. But this is what the industry is looking at.

Okay. All right. Then, on the risk side, are there any other Centene's that you worry about that might leave you?

Yes. We have one customer that we expect that is going to leave in the first quarter of next year, which is representing about $35 million, on an analyzed basis and that's in the PBM sector. That is the only thing that we know today that's at risk.

And why are they leaving you?

Well, I think clearly the focus -- when you look at the major three players in the PBM sector, we just didn't believe a few years ago that we could compete very well within that sector and therefore we started focusing the Company on specialty pharmaceuticals. And based upon the resources that we had and have, we really could only pick certain things to go after and the decision was made to go after specialty pharmaceuticals and infusion, to grow those businesses.

We thought we had a much greater opportunity and so it really has been a maintenance business, retention maintenance. Centene bought a PBM - I think you're aware of that - last year. So this is not surprising to the Company and our drive has to be and has been in the specialty arena.

Okay. Yes. Well, it seems to make sense. Then lastly, on this CAP program, looking out to, I guess, in the intermediate-term again, a couple, several years down the road, assuming that -- well, you said it is profitable today, other than you recovering your embedded costs. But what kind of -- let's just take a net margin on this business. If you're able to get 1,000 docs utilizing the service and you get up to $250 million in revenue, what kind of net margin is possible from this business?

Well, why don't we just tell you what we've said in the past and hopefully we consistent in saying that. When we bid this program, we bid it at slightly more than 4.0% on a gross profit line. What we also believe is the fact that it could leverage the facility and for every $100 million worth of business out there we kind of believed that we needed something in the 14 to 15 number of people in order to operate those businesses.

So, when you go take a look, the leveragability of that, so $100 million, even if you say 4.0%, is $4.0 million and you take 14 people at $40,000, that's $500,000, $600,000, I guess, fully loaded. So you have that ability to start bringing down significant EBITDA or operating income, based upon that leverage. And so the more that that -- the more you increase, you'll still be bringing down probably in the 3.0-plus-percent range before taxes.

Okay. All right. That's very helpful, thank you. And then lastly, why do you think you're the only one that's in this program today?

Because everybody else said no. I mean, that was the truth. This is a program that it started out -- I happen to like the program. We're actually offering a CAP program on a commercial basis and we've been doing that for year. So this is kind of natural to what BioScrip's about. Some of the other companies that walked away from it were very heavy into the oncology business.

We kind of looked at it and said we don't have a large oncology practice. We happen to believe that much of the docs who were going to sign up for it we're going to be rheumatologists and urologists and ophthalmologists and a lot of other "-gists" and not so much oncologists and that's exactly what has happened. And it's created incredible opportunities for BioScrip. It's put us in the Medicaid program in virtually all the states. It's given us opportunities with products that we wouldn't have had before.

So, from BioScrip's standpoint, it seems to have made a lot of sense. From the other companies, you're just going to have to ask them, but I think there may have been conflicts with their existing customer base and reimbursement pressures, especially with the oncologists.

And maybe the 4.0% gross profit margin?

No, I don't think so, because many of those companies out there bidding were less than that. When you look at their -- if you look at some of the distribution companies in the oncology sector, they deal with pretty low margins.

Yes. Well, I congratulate you for being the Lone Ranger and being contrarian. It looks like, intermediate-term, a heck of an opportunity.

Only time will tell.

Okay. Good luck with it.

Thank you.

Thank you.

[Ed Varum].

Hi guys. I just have to tell you that I've been on a bunch of these conference calls and this is the first one that I'm going to get off with a little more confidence, because it sounds like you guys are moving in the right direction.

Thank you.

I have two questions, just to sort of get a fix on the specialty business. Of the 12% growth in that business, year-over-year, what came from the two acquisitions that you made so I can just get an idea of what your organic growth is in the specialty?

$6.5 million.

$6.5 million, okay, and the next question. I'm just kind of curious how the pharmacy dispensing system's connected to your AR system. This, presumably, is coming out of stat script. I would presume that's where the problem is.

Yes.

How did they operate? Obviously it is important to have dispensing tied to AR in the case of stat scripts. How did they operate before?

We are operating, essentially, on a system basis, the way they operated benefit.

No, I understand you're trying to change it. But how have they -- and presumably you're trying to change it because it's created some problems here. But how could a company have operated without an important tie-in like that before? I mean, how did they keep receivables under control, if they did? Maybe they didn't and it just didn't show.

Well that may be true. But I think what happened is that a smaller company at the time used a lot of manual work-arounds to tie things in.

Right.

But the biggest problem, in the system, that we face, on the accounting side, is that when a product is dispensed it automatically goes into our AR system, whether or not it leaves the store.

So that, from an accounting point of view, we spend an enormous amount of time reversing these things out so that we only book through revenue, so that during the course of it, our AR sub-ledger does not necessarily agree to our AR on our balance sheet. And this is always a dilemma for us on the financial side. That's one of the things that we need to correct.

I got you. Okay. Has that had impact on your bad debt expense or is it just a bookkeeping snafu?

I would say a little bit above, more on the bookkeeping side of things, but remember. If it's in AR, it's tough to get statements out that are correct.

Right, right and AR, the receivable is with what, Medicaid? It's not with an individual. It's generally with some payor, typically Medicaid?

Well, it's both. It's both.

Okay. All right. Thanks.

And just one or two other things. One is even on the system side, at the stores. Our direction has been on a limited distribution network, participating in that on the distribution of products.

And what has happened, because the systems aren't really tied together and we can track things very well, we have not been able, across the United States, to utilize our locations for the dispensing of those products. So, as the new systems are put in place and we can now track inventory, we'll have a much greater opportunity for the distribution, in those local markets, of the new products.

The other thing that we've kind of done is we've implemented policy and procedure within the locations in order to improve on the collectibility of the receivables that are being done much more on a local basis.

Okay. Thanks.

[Operator Instructions] Mr. Friedman, there are no further questions at this time. I will now turn the call back to you.

Thank you very much and thank you all for participating. We're all committed to turning this Company and moving it forward. We believe that the fourth quarter is going to look a lot better than the third and we will be restoring this Company and creating shareholder value and we appreciate the support. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. 1