EchoStar Corp (SATS) 2010 Q2 法說會逐字稿

Good afternoon. I will be your conference operator today. At this time, I would like to welcome everyone to the Echostar Corporation Q2 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Thank you, Mr. Kiser, you may begin your conference.

All right thanks, Tracy. Thanks for joining us. My name is Jason Kiser. I am joined today by Mike Dugan, our CEO, Mark Jackson, President of Echostar Technologies, Dave Rayner, our CFO, Paul Orban, our Controller, Dean Olmstead, who heads up our Satellite Services Division, and Stanton Dodge, our General Counsel. Before we get started we do need to do our Safe Harbor disclosures, so for that I will turn it over to Stanton.

Thank you, Jason and good morning, everyone, and thank you for joining us. As you know we invite the media to participate in listen-only mode on the call and ask that you not identify participants or their firms in your reports. We also do not allow audio taping and ask that you respect that. All statements we make during this call that are not statements of historical fact constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by such forward-looking statements. For a list of those factors please refer to the front of our 10-Q. All cautionary statements we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our forward and should not place undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. And with that out of the way I will turn it over to Mike Dugan, our CEO and President.

Good morning or good afternoon, depending on which time zone you are in. As you know we provided our second quarter results, which indicated revenue uptake of about 57% over the same period last year. And operating income improving from a loss of $3 million to income of $31 million in the current period. While most of this growth directly relates to sales to Dish Network, we did have progress across the various business units. While our sales of satellite set-top boxes and related products to North American customers remain consistent, we've also delivered our first cable set-top box orders in Europe and we recently secured additional orders from that customer. We see that as a meaningful step towards entering the international cable set-top box business. In addition during second quarter we launched a swing player moble app for android, added to the number of swing apps we offer for mobile devices, provided consumers the ability to enjoy their video programs from more than 100 different types of smart phones.

On satellite services front, the organization known as the SS, we have seen an increased demand for satellite capacity during the quarter, which secured a multiple year agreement with CapRock to provide bandwidth for government and military purposes. And we signed a long-term transponder lease agreement with Extreme HD, a Company that plans to delivery HD movies and other entertainment in all 2080p format directly to consumers homes. Our VIP TV transport service continues to gain tier two and tier three cable and telephone operators seeking to add HD video channels. So far this year we've assisted Dish with the launch of two new satellites, including Echostar 14 and 15. Internationally our Mexican partnership for direct to home in Dish Mexico continues to perform at a high level and now has well over 1 million subscribers. Meanwhile, on June 1st we launched our high-definition satellite TV service in Taiwan and the marketing efforts are just kicking off this month.

It's too early to be able to provide specific details on the success of this venture. We continue to add to our organization to better position ourselves to pursue and capture new business opportunities. To that end I'm pleased to announce that ken carol's joined us as COO of Echostar Satellite Services . Many of you know ken from previous involvement at Wild Blue and Liberty. In addition we promoted Dave Rayner to our CFO and he is partnering with me on a day-to-day basis to operate Echostar. With that I'll open it up to questions.

(Operator Instructions) Your first question comes from the line of Jason Bazinet from Citibank, your line is open.

Thanks so much. I just have a question on sling. If I go back to 2001 or 2002 somewhere in there, there is a lot of hype about VOD and sort of the commercial complexities or technical complexities, whatever it was, sort of held that product up for many, many years. DVR's came out and sort of ended up dominating the sort of on demand space, if you will, by putting the technology in the hands of the consumer. It seems like we are in a repeat now with TV everywhere, where the concept is there but it's taking a long time to get out into the marketplace. And I was just wondering if you could just comment on what is it that is sort of holding up sling from sort of leapfrogging the industry and getting the technology in the hands of consumers. Is it technical issues or patent legal issues or channel conflict. What's -- why don't we know about this sort of at the main street level as opposed to wall street. Thanks.

Well, I think there is a lot of complexity there. First of all programming access rights have a lot to do with what's available and what can be delivered from a video on demand standpoint. I don't believe there is a lot of technical roadblocks to the continued expansion of that environment. I do believe that customers are somewhat reticent to change and I think the process of bringing content through sling, although I find it very easy and very useful, when I travel I think it's an education process that we are continuing to address and we are definitely seeing uptakes as we make it available to more and more mobile devices and as to Dish I think they're planning to provide a lot more services in that area in the near future and we will just have to see how the development goes.

Would you say you are on plan, though, in terms of your internal expectations for this product?

Well, I don't, I wouldn't say that we've expected an explosive growth, which you seem to imply you think the industry might take. I think we are on plan from a expectation and a budgetary standpoint, but would I like to see it go quicker? Yes, sure I would.

This is Mark speaking. I think the other thing that you need to keep in mind is we have been building the building blocks to give to third parties. We are just going to release a new product very soon that will make it easier for third parties to add sling capability and integrate it with their system. That's a product could name rose or the 700 model. The other thing that we have done is we've done a deal, as you may have seen, with some third party software guys, so you don't have to have a client piece of software, which also slows our growth. Typically to put sling on something we have to develop a client, but we did a deal with Adobe that if you have flash on the system, we won't have to write software for that client. Those are two fundamental building blocks that we really are just now getting out. So hopefully when we get those out we will see a higher uptake from third party people. Okay, thank you.

Your next question comes from the line of Michael Gerstner from MSD Capital, your line is open.

Hi, guys. We read some reports over the last few months about the deal that you guys signed up with Unity Media and I'm guessing that's the international customer that you were talking about, Mike. I wondered it looks like a really major breakthrough to us from our vantage point and I wondered if you could tell us more specifics about that deal.

Well, I think our agreement with the customer would preclude us from providing a whole lot of information.

Can you talk about --

This is Mark I think it's fair to say that we just rolled out with Unity Media. This is in Germany, they're the cable system in Germany, and you know all feedback that we gotten so far is the product launch has gone very successful. As a matter of fact they told me it was the smoothest product launch they've seen in a long time. So we are optimistic that we can prove ourselves in this tough market to all the Liberty properties and get out to market. But it is a breakthrough in the cable industry, but it is Europe.

Unity Media to us looks like it has about 4.5 million subs, which would kind of make it seem like a top 5 US MSO or something along those lines. I mean, are you guys covering -- is the idea you guys will be a sole provider or covering their whole subscriber base over time in their move to digital transition.

Well, I can't comment on Unity's plans, but all I can say is we are there. We're doing a high-definition DVR for them in the cable business. We are just trying to prove ourselves in these new markets day in and day out.

Okay.

And the report is they are very, very happy with the way the set-top interfaces to their consumer. They are happy with the feature set that it provides and we are certainly optimistic within the Company that it's going be a successful new customer.

Understand. I mean I know I don't want to get into what you guys can't say, but is this a lot -- this is more than just a trial relationship from what I read. Is it more of a long-term agreement?

Well, I don't think we can comment on what our agreement is with Unity, but again it's rolling out into the marketplaces that are hi-def DVR. So hopefully we will have a good long lasting relationship with Unity Media and the rest of the Liberty properties over in Europe. We are working hard to do so.

Great. And I mean has this helped sort of crystallize any other discussions with other customers in Europe or Latin America or you mentioned you were making some progress in South America, could you just give us a sense of how other customer conversations are going along these lines?

Well, we are shipping product to Telefonica in Latin America, they are our primary customer. We are working other customers both in the US and Latin America. And as you know, the design cycles in some of these new products is quite long and it also has to tie in to some of our efforts with sling. So we are still working hard and swinging every day and spending a fair amount of effort trying to get some new set-top box business for the Company.

I guess we sort of took a degree of optimism in your statement from the last call or the prior call, Mark, you were making some real progress with your pipeline of prospects. Would you convey the same sense of enthusiasm at this point.

Well, it's a tough market out there. So the US, I think, is really where we are focused to try to get some new customers and it's tough. We got a lot of competition but we've got some good feature sets. We've got a common ownership issue to some extent. Some of them are -- Dish's competitors are a little leery of Charlie, to be honest, right, and we have to prove ourselves there. So we are working hard to try to get, to earn some business in the United States and I think we could see some good growth there, but in saying that we don't have it yet, but we are spending a lot of effort to get there.

Okay. One other question on the other side of the business, then l'll get back in the queue. But I guess over the last few months we've seen Echostar launch or we've heard you guys talk about Echostar 16 and we've seen Dish launch Echostar 15. For some of us who have kind of been around this spinoff since the beginning I think we understood that the original reasons that some satellites stayed in Dish and some went to Echostar had to do with some bond covenants. At the same time we heard Charlie kind of make a distinction going forward that Echostar might be more of a retail business or I'm sorry, Dish might be more of a retail business and Echostar might be more of a wholesale business. So I sort of was wondering when we see Dish launch Echostar 15 and SATS then line up for Echostar 16, what's the distinction as to which satellites are going where or what might be the business reason for splitting those up.

I can't speak to some of the questions you ask about the Dish bonds and so on, although I don't remember or recall that that was an issue. I do believe that it has a lot to do with whose filed for the slots and who let the original contract for the satellites and I believe Echostar 16 was the contract was left. We actually signed that contract after the spin. So that's why it's our bird. The other two birds were, I believe, signed prior to the spin.

Well, and this is Stanton, in the case of Echostar 14 and 15 they were options under satellite construction contracts held by Dish. They predated the spin.

Okay.

But that's part of the logic there.

I mean, I guess going forward would-- maybe the better way to ask it then is going forward would we expect to see just continually some satellites launched out of or some satellites operated out of Dish and some satellites operated out of Echostar.

Well, first of all to be clear, Echostar actually operates all the satellites, okay?

Yes, I'm sorry.

So whether 14 or 15 was built and the payments were made by Dish, we are still responsible for day-to-day operations and so on. And actually all the satellites between the two companies, except for stuff that doesn't associate with Dish, are really run under the same teams, the same guidelines and the same high level of expectation for any of the satellites, whether it's ours or whether its Dish's and we apply under subcontracting agreement with Dish. So as to the future, I don't think we should speculate on where the next contract will be.

I understand. Okay. Thank you guys.

Your next question comes from the line of [Eli Mishan] from Corsair Capital management, your line is open.

Hey, guys.

Hi.

Just had a quick question of looking through the Q, looks like about $450 million of securities were moved from level two to level three and there is a sentence in the Q with explanation says lack of absorbable market data. I'm just curious if you can give a little bit more color on what type of security that is and has there been any -- it doesn't seem like there's been any value impairment, but just anymore color on that.

This is Dave Rayner. Basically what happened there is that we saw no transactions and these were -- this was an investment in a debt issue. We saw no transactions in the bonds and therefore we move it from level two to level three. Doesn't change anything in terms of our view of those investments other than we had no observable data to go in and put a fair market price on it.

Is this one bond issue or are these sort of, this 450 sort of a bunch of stuff that all happened to not have traded.

It was all part of the same investment pool.

Okay. Great, thank you.

Your next question come from the line of Jon Friedland from Porter Orlin, your line is open.

Hi, thanks very much. Dean, I wonder if you could start. I have a couple of question on the FSS business, but perhaps you could start by giving a little more detail on what you are seeing in the supply and demand balance in the FSS environment for your, for the type of capacity that you now have and what you see that as doing over the next couple of years. I want to check and make sure the line is clear here.

Your fine, Dean.

Very good. Well, generally, demand is being driven right now still by the government. We are beginning to see more entrepreneurial activity and, I think, extreme HD is a good example of that and I think as we come out of the recession, of course, everyone has to make their own judgments, but we are beginning to see classic entrepreneurial customer activity now. And it obviously has a long gestation period, but as we look three, four, five years down the road we are having conversations with customers about what type of capacity they would like to have and we're beginning to think about whether we should make investments in new satellites to occupy some slots to capture some of that new entrepreneurial activity. So I'd say it's still early stage, but there certainly is an uptick in interest and activity. So we feel very good about what we've achieved with our current satellites and we see that trend continuing and it's just a question now of us sorting out whether we want to make further investments in that sector.

Okay. Understood. Then, Dean, again could I ask please what is the number of available but unsold transponders that Echostar has in its fleet and maybe we exclude AMC 16 since I understand that's sort of a separate business line that you are going into with AMC 16.

Jon, this is Dave Rayner. That's not information that we disclose in terms of how much capacity we have.

Okay. Is it possible to give some ballpark estimate that would be useful for modeling purposes in terms of percent of available capacity that we might hope that Dean and his new team, now including ken carol, would be hoping to lease up that is not, obviously, not now leased over the next year or two?

As I said that's a level of detail that we are not willing to go in to.

Okay.

What I could say is that we are focusing our efforts now. We have been very successful in KU band, so we are focusing our efforts now on selling the KA band and we do see a lot of demand for that. And it's a matter of sorting through with the various customer prospects where we want to sell that KA band capacity. There is some competing interest for that, which is a good situation for us. And that's going to be the focus of our ken carol and our sales team over the coming months.

Okay. Thank you. And then is it possible, Dean, to focus or to kind of proceed in ernest on leasing up AMC 15 prior to SAT MEX being resolved.

I'm afraid I can't quite follow that question.

Okay. Let's leave it there, then. Could I ask a broader question about your VIP TV project, which as I understand is going to be the primary use for AMC 16. Could you just go over why you perceive this need. Doesn't Dish have a competing business here and what you would bring that would make this business line a superior prospect to others or frankly they're just going out and trying to lease AMC 16 in to the market.

Yes and it's a very good question. The difference is a technical difference and that is that the signal that we transmit for the DSL is a fixed bit rate, constant bit rate signal. And we perceived in our discussion with the telcos that there was enough demand to transmit in this alternative format and by transmitting in a constant bit rate format for them, making it easier to ingest in DSL, they could put in lower cost head ends. That's proven itself out, but the uptake by the small telco's is extremely slow. This is the same problem that IP Prime identified and we have a couple of differences that led us to be a bit more optimistic on it.

But in addition, what we have is a KU band signal rather than C band, which is what IP Prime used. And with the KU band we are able to go into the hospitality and university and other segments that they were not able to approach. So one could envision a KU band constant bit rate signal at a hotel. And so we are working on those market segments now and I would say they show fair bit of promise and we are trying to find the right balance of capacity allocation to this market segment with the demand uptake. It's been a bit slow on the telco side, but we do see some real opportunities in these other segments.

Okay. And also on the FSS side, if I try to model out what free cash flow might look like over the next couple of years, 2011, 2012, unless the satellite construction schedule changes meaningfully it looks like free cash flow should start to pick up substantially in 2011 and then again in 2012. Is that a reasonable conclusion based on your current build schedule?

Dave, I might leave that question to you if you have an answer for it.

I'm sorry could you repeat that question.

Sure, Dave. My question was with regard to the free cash flow that would be coming out of the FSS business. And as I model, it looks as though after 2011 and 2012 you will be finished with the Echostar 16, [CET SAT] and Echostar 16 and therefore free cash flow out of that business should really start to pick up and I'm just wondering if that is a reasonable conclusion based on your current build schedule.

Well, as we said earlier we are not going to comment on our build schedule. We will be evaluating and making decisions on if we are going to have any new satellite construction, so I would certainly be hesitant to forecast free cash flow out into the future. I'm not saying you shouldn't model, I'm saying I'm not going to give you a forecast of what it is.

Okay. And then I will just ask one more question on the FSS side of the business and then I will get back into the queue. With regard to CMBStar, any prospects to repurpose that satellite.

Yes, and we continue to pursue those.

As of this point we don't have anything to announce.

Okay. Okay, thank you. I'll get back into the queue.

(Operator Instructions) Your next question comes from the line of Michael Gerstner from MSD Capital, your line is open.

Hi again, guys, I got back in the queue. But just to go back to Unity Media for one second and not to talk about the deal itself but just glancing at the Q it looks like no financial impact of that arrangement would have shown itself in Q2 yet, if I understand correctly, and that's something that is or has launched kind of as we are speaking here in Q3, is that correct?

I think that's probably a correct statement. Off the top of my head I don't recall if we delivered those boxes before the end of Q2 or not. If we had it would have been a minimal amount.

Understand, okay. One thing we were wondering about Charlie appeared on a stage to announce the Google TV initiatives a few months ago and it wasn't clear to me if he was there with Dish Network or Echostar, but is Echostar involved in the Google TV initiative also or is that just Dish and Google?

We continue to support the initiative as required by Dish, but Charlie was there representing Dish from a Google standpoint.

Okay.

And we continue to provide the necessary upgrades and support to allow them to work on that initiative.

Okay. Understand. And lastly, just one of the earlier gentlemen on the call had asked about the $450 million, the level three investment you guys mentioned. If you recall.

Yes.

You had mentioned that was from the same investment pool. Does that mean the same single issuer or I wasn't sure what you meant.

That's what that means.

Okay, great. Thank you for clarifying that.

Okay, thank you.

There are no further questions at this time. I will turn the call back over to the presenters. I'm sorry we do have one that just popped into the queue, Jon Friedland from Porter Orlin, your line is open.

Hi, thanks. Another question on the FSS side of the business, please. I'm wondering as you are launching satellites in orbital locations where you currently have a satellite whether it is possible to operate two satellites in a single orbital location. So, for example if Echostar three should continue to operate when Echostar 16 is launched whether it's possible to have capacity from both satellites simultaneously for sale and available.

Well, first of all the -- we operate multiple satellites at virtually all locations, I think, right now. You mentioned Echostar 3. We just recently moved a lot of Echostar 3's traffic to 15, but we -- there were periods of time when we were transmitting from 3, 12 and 15 and I think Echostar 6, at the same time. So all four satellites, depending on what frequencies and transponders the broadcast is coming from or the up link is going to, we can have multiple satellites and in fact we do have for Dish and for us some of the older satellites parked in orbit in the same box affectively hot standby to be able to support traffic swaps at any time. So it really has to do with the license and the amount of frequency and bandwidth that's been allocated by the licensing agency and it doesn't have anything to do with the number of spacecraft, except for the fact there are regulations how close they can be to one another and it does have some impact to the ground station the ability to get to all of them at the same time.

Okay. And may I ask why Echostar 1, I believe you -- that was moved onto your books as a lease from Dish in the last 10Q and I wonder why that happened.

Dean, you want to take that or do you want me to?

You, please, Dave, unless I can help out.

It was essentially a limitation that we had on Echo 8, it was being under utilized by putting Echo 1 into place using certain of the frequencies providing service to Dish Mexico, we freed up additional transponders on Echo 8 that we could then lease to Dish. So it was really a method to maximize the utilization of all the frequencies at that orbital slot. Well said.

Okay. And then just a question on the set-top box side of the business. I see in the Q that the terms or the relationship with Dish was extended through, I think, 2012 last month. And I wonder whether terms were much different than they had been prior to the extension and what scope there might be for increasing margins in that business to Dish or others, some other set-top box vendors seem to have margins a good bit higher and I'm wondering if it's reasonable to expect that margins in that business for you all may have some upward head room.

So this is Stan, and I will hit the first part of your question. And the answer is it was extended on identical terms. Dish had a couple unilateral options to extend on a year to year basis and they just exercised one of those options. So for the second part.

I think he gives you the answer for a second part.

I'm sorry what was that?

I think Stanton's answer answers your second part of the question. We wouldn't expect any margin changes today given the extension with Dish business.

Would you anticipate -- is there a longer term scope built into these agreements if you can hit certain efficiency metrics or volume metrics or performance metrics?

No, there is not mainly because we are at very, very high volume and performance metrics already.

Okay. Thanks so much.

Your next question comes from the line of Eli Mishan from Corsair Capital Management, your line is open.

Hi, guys, thanks for taking another question. I was wondering you mentioned that there has been mostly a lot of government activity on the birds and maybe there is -- looks like there is some more entrepreneurial activity happening and that still making decisions on whether to launch new satellites or not, I'm curious if does that mean that most of the capacity on the satellites already out there is mostly being used or is there still some room there to grow before you have to launch new ones.

Obviously, a satellite construction contract is a long-term scenario. You are looking at probably a three year window, so you've really got to be looking quite a bit in the future in terms of where the demand is going to be and what the opportunities are going to be. So as Dean spoke to earlier, we are having discussion with customers now trying to understand what that demand window looks like three years and beyond. Even if we had zero capacity today and we wanted to put more capacity in place, its a difficult proposition given that three year construction window. So really the planning we are doing now is for three years and beyond.

Right. Okay, thanks.

Your next question comes from the line of Jon Friedland from Porter Orlin, your line is open.

Hi, thank you. Dean, could you help us understand as you are talking to customers about capacity need that they may have three years out, could you just discuss what your competitive advantage might be in offering that capacity. We've discussed a number of times on these calls that Echostar is a smaller player in the industry and therefore I'm curious as to why you might be able to offer or what it is you would be able to offer that some of the larger competitors might not.

Well, if I might at first clarify that when we talk about the FSS market, we also have transponder leasing into the BSS market, which is what we do with Dish and Dish Mexico, and hopefully other perspective customers. So when we think about transponder leasing, we need to break it down into the BSS leasing portion and the FSS, the more classic FSS leasing portion where customers take a few transponders for a few years to meet certain requirements and the government falls on that side of the ledger. So I would say as a matter of focus, we really are focused more on the BSS capacity leasing side than we are on the FSS capacity leasing side. Now with that said, we have been successful in the FSS leasing and that's what we are thinking about in terms of further growth.

I think if we can identify growth opportunities on the BSS sides, there is going to be no question that we, if they meet our financial metrics, we are going to pursue those. On FSS side it is a little bit more challenging and your question about competitive advantage is a very good one. Basically the big players, Intelsat and SES, are focused on non-North American markets. They see a faster FSS growth because they have assets in slots that can meet US government requirements and other requirements in zones of military and political interest outside North America. So there is a lot of growth there that they want to go after. They also see growth in developing markets in Africa and other locations. And they see that at relatively high growth rates.

I think we have a little bit of a difference in part because of our history, our heritage and our focus on North America and I would say it breaks down around the difference between growth rate and absolute number of transponders. So from our standpoint even though the growth rate is slower in the US market, the absolute number of transponders that are going to be needed on a going forward basis is still a very large number. I would simply say it's a matter of focus and we may be a bit more interested in investments in the North American market that tie the FSS and BSS markets or opportunities together, so it's a little bit complicated. But I think the simple answer to the question is we maintain a bit more focus on North America than our competitors are showing. Their focus is more in the developing markets.

Okay. That's a big help, thank you,dean. And then could you give some sense to us of what kind of IRR's do you think are available for a properly leased fully leased satellite at this point?

You mean in a generic sense.

In a generic sense, yes.

I think -- well, if we do this -- if you do it correctly you ought to be able to look at something in the low to mid teens. And so the issue then is one of finding sufficient risk mitigation that that becomes an attractive investment.

Understood. Okay, thanks so much.

At this time, there are no further questions in the queue. I'm sorry, we have one more that has just popped in. We have Eli Mishan from Corsair Capital Management, your line is open.

Hi, guys, just a quick question, not necessarily on the quarter or anything new. But just looking at the form 10 when you guys spun out, the businesses were sort of broken down as equipment versus FSS and that sort of when you guys report segments now you shift that to that set-top box versus just services. I'm curious why that was done and sort of what makes more sense to look at.

Not sure I'm totally following the question.

Okay. When you guys spun out, I guess, Dish filed the form 10, the let's say the revenues are broken down as equipment sales versus -- equipment sales and FSS sales, which now has been changed to set-top box and services and so the FSS revenues were a lot more as per the form 10 than what is now considered services, I'm curious why there was sort of a switch. Looking at form 10 it looked like it was set-top box versus FSS, but that's not really what it was because today when you report your set-top box versus services sort of the revenues have shifted from one side to another. Just curious the reporting change is all I'm asking about.

Hi, this is Paul. Nothing has changed, we are still reporting it the same way, all we did was change the nomenclature.

I mean, I guess something has changed because the fix satellite services in the form 10 were making a lot more revenue than what is now called services in your filings. So it looks like you've shifted some of that revenue from one side to the other. So from revenues coming out of fixed satellite services and is now considered set-top box. And I'm just curious what shifted. You may not have this on you, if we want to talk about it offline.

We don't have that in front of us. We filed the form 10 two and a half years ago. We will get back to you with an answer on that.

Great. Thanks, guys.

Your next question comes from the line of Michael Gerstner from MSD Capital, your line is open.

Hi, guys, just a quick accounting question. So you have the joint ventures in Mexico and Taiwan that you've been making some investments into at this point and what line on the balance sheet are those going into.

This is Paul, again. They're in the line that's called, it's in the noncurrent section of the balance sheet, it's called marketable and other investment securities and mainly the other investment security part of that line is what you are referring to.

Okay. That's what I thought, but I wanted to make sure. Okay, thank you. Thanks for the call it's been very helpful to have you guys spend some time answering our questions this quarter.

At this time there are no further questions in the queue. I will turn the call back over to the presenters.

Thanks, operator. That's all the questions, we'll conclude our second quarter call. I want to thank all of you for joining us and bringing all these tough questions forward and we will try to be well prepared at the next call, thank you.

This concludes today's conference call, you may now disconnect