Sinclair Inc (SBGI) 2007 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Sinclair Broadcast Group Incorporated 2007 earnings results conference call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. David Amy of Sinclair Broadcast Group. Thank you, Mr. Amy, you may begin.

Thank you, operator. In the room with me today are David Smith, President and CEO, Steve Marks, Chief Operating Officer of our Television Group, and Lucy Rutishauser, Vice President, Finance and Treasurer. Before we begin, Lucy will make our forward-looking statement disclaimer.

Thank you, Dave. And good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors as set forth in the Company's most recent reports on Forms 10-Q and 10-K as filed with the SEC, and as included in our first quarter earnings release which we furnished to the SEC on an 8-K earlier this morning. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. In accordance with Reg FD, this call has been made available to the public along with a Webcast of the call on our website. The Webcast replay will be available until our next quarterly earnings release. Redistribution of this call is prohibited without the express written consent of the Company.

Included on the call will be a discussion of non-GAAP metrics, specifically television broadcast cash flow, EBITDA, free cash flow, and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental detail to assist the public in their analysis and valuation of our Company. A reconciliation of the non-GAAP metrics to the GAAP measures in our financial statements is provided on our website, www.sbgi.net, under Investor Information.

Before we go through the financial and operating results, we wanted to share some highlights that have occurred since our last earnings call. On the retransmission consent front, we reached a four-year agreement with Comcast, one of the larger cable MSOs serving our markets, which allows them to carry our analog and digital signals in 23 markets reaching about 3.4 million unique subscribers. We also entered into a three-year agreement with Charter to carry our analog and digital signals covering 28 stations in 19 markets, and reaching approximately 1.9 million subscribers. Along with some independent retransmission contracts we've entered into, we now expect our total revenue generated from retrans agreements, based on what we have under contract today, to increase from $25.4 million in '06 to approximately $59 million this year. That's a 132% increase. Over 80% of the subscribers in our markets are now under long-term retransmission agreements.

On the news front, we expanded our news on our Fox station in Oklahoma City by adding a three-hour morning newscast, and we are very excited to be part of the Open Mobile Video Coalition which Sinclair and eight other broadcasters including Fox, NBC, Gannett, Gray, [Velo], ION and Telemundo, formed to promote the development of mobile digital broadcasting applications. As you know, Sinclair has been a staunch advocate for the mobility of the TV signal. This technology is in the best interest of our industry, and we encourage all our broadcasting peers to join this coalition.

In case you missed it, we've announced this morning a proposed public offering of approximately $300 million of convertible senior notes due 2027. We intend to use the net proceeds for the partial redemption of our 8% senior sub notes. Not included in our estimates that we provided through our earnings announcement will be an expected interest savings of approximately -- of over $15 million per year, and a one-time charge for the write-off of the redemption of about $14 million that you will see in the second quarter.

Now, turning to the financial results of the first quarter, net broadcast revenues for the first quarter w, due primarily to higher revenues generated from our retransmission consent agreements. Television operating expenses in the quarter, defined as station production and SG&A expenses before barter and including stock-based compensation, were $70.9 million, down 1.9% or $1.4 million from first quarter last year, primarily due to lower news and programming costs. Corporate overhead in the quarter was $6 million, a decrease of $158,000 as compared to first quarter last year. Operating income in the quarter was $37.3 million, an increase of $2 million from last year's result of $35.4 million, primarily due to the higher revenue, lower TV operating costs and lower depreciation expense. This was offset in part by higher film amortization. Net interest expense for the quarter decreased $3.7 million from the first quarter last year, due to free cash flow generation and refinancing the 8.75% notes with lower cost bank debt.

In association with the redemption of the notes, we incurred $15.7 million in debt extinguishment costs, which includes the $13.4 million call premium on the notes and the write-off of debt amortization costs. We had a diluted loss per common share in the first quarter of $0.03 as compared to diluted income per share of $0.11 in the first quarter last year. On a continuing operations basis, we had a $0.03 diluted loss per common share versus an $0.08 diluted income per share. If we exclude the debt extinguishment costs, however, we would have had diluted income per share of $0.10.

Television broadcast cash flow in the quarter, a non-GAAP metric, was $60.4 million, an increase of $9.6 million, or 18.9% higher than last year's BCF. EBITDA, also a non-GAAP metric, was $54.1 million in the quarter, an increase of $9.3 million, or 20.6% higher than the same period last year. The BCF margin on net broadcast revenues was 40.2%, and the EBITDA margin on total revenues was 32.4% in the quarter. During the quarter, we generated $24.7 million of free cash flow, a non-GAAP metric. This is $10.3 million more than what we generated in the first quarter last year. At a $16.50 stock price, our trailing 12-month free cash flow yield on our market cap is 10.3%, and our dividend yield is 3.6%. Lucy will take you through the balance sheet and cash flow highlights.

Thank you, Dave. Cash on hand at March 31st was $15.5 million, capital spending in the quarter was $6.5 million, and we are still on track to hit our full-year CapEx estimate of $25 million to $28 million which we provided you on our last quarterly call. Film payments for the quarter were $20.6 million. That's a $5.7 million decline from the first quarter last year. And for the year, we are estimating film payments to decline by a total of $8.4 million. Debt on the balance sheet at March 31st was $1,347.3 million, and our operating leverage is now at 3.91 times, and that is reflective of our operating and financial performance and our free cash flow generation. So with that, I'm going to turn it over to Steve Marks to discuss our operating performance.

Thank you, Lucy. Good morning. Including political, net broadcast revenues were up 1.5% for the quarter primarily on higher revenues generated from our retransmission consent agreements. The local markets, which comprise 67% of our revenues, were flat, while national declined 5%. The national decline was driven primarily by automotive, few agency buys for the MyNetworkTV programming, and a sluggish Ohio market. We also had $2 million less in Super Bowl ad dollars due to the game airing on CBS rather than ABC. Offsetting the declines were higher revenues generated from our retransmission consent agreements and growth in our Fox stations. Ad spending by the telecommunications sector was up, while services, fast-food, auto, and retail were down.

From an affiliation perspective including political, our Fox stations were up 8.5% in the quarter, and our CW stations were up 2%. Our ABC stations were down 9% due to not having the Super Bowl, while our MyNetworkTV stations, as expected, were down 14.3%. Our CBS and NBC stations were up a combined 4.5%. Revenues generated through our new business initiatives, such as Direct Mail, Better Life and MDTV, were $6.7 million. Political revenues were $600,000 in third quarter versus $700,000 this period last year. With all but four markets reported, our stations' market share grew in the first quarter from 18.1% to 18.5%. As I pointed out, Ohio has been sluggish, with the Columbus and Cincinnati markets down 10% each. Even though this is having a drag on our revenues, our Ohio stations are outperforming the competition and growing market share significantly.

Turning to our second quarter outlook, from a category perspective we are currently seeing strength in telecom and medical. Retail, fast-food services and automotive continue to pace down. For the second quarter, we are forecasting net broadcast revenues to be up 0.3% to down 1.5% from last year's $163.8 million. This includes approximately $1 million less in political revenues, $2.6 million less in network comp, fewer national agency buys on the MyNetworkTV stations, and weakness in automotive. Offsetting this in part is the higher revenue from our retransmission consent agreements, the strong performance of the Fox stations, and strength in telecom and medical ad buys. Early fund-raising by presidential candidates for the upcoming political cycle is very encouraging. We anticipate the 2008 political cycle and the spending to be larger than the 2006 and 2004 levels, and expect some of those dollars to flow into the fourth quarter of this year.

Turning to expenses, TV production and SG&A expenses are forecast to increase a -- by 4% quarter versus $71.6 million last year this period. The nominal increase is due to shifting promotional dollars to the May sweeps and higher news costs for the news expansions. And as Lucy pointed out, our film payments for this year are expected to decline by $8.4 million. For other expense guidance for the second quarter and full year, please refer to our earnings release which we issued this morning. With that, I would like to open it up to questions.

(OPERATOR INSTRUCTIONS) Marci Ryvicker, Wachovia Securities.

Does your $59 million retrans guidance include the additional 20% of the MSOs and et cetera that you have not yet signed an agreement with? Or is this just for what you currently have? And then secondly, can you provide us a revenue breakdown in Q1 for both network comp and for retrans?

The retrans number, the $59 million, is only what we have under contract today. So it does not include Cox or the other MSOs, which we do not have agreements for.

Okay. And the Q1 numbers?

Yes. The total retrans number for Q1, Q1 '07, was $11.2 million, and Q1 of '06 was about $5.8 million.

Okay. And can you give us network comp for Q1 as well, '07?

Yes. Network comp, Q1 of '07, was $2 million.

Great. Thank you.

Ken Silver, CRT.

Can you just give us a run rate number for the retrans? (inaudible) all of the agreements that you currently have were in place for all of 2007, would that $59 million number be higher?

Ken, let me do it this way, because I think this is probably a more meaningful number. Let me give you an estimate for 2008. So with all the deals in there for -- that we currently have under contract in there for a full year, and then any escalators we have, we would be looking at low to mid $60 millions for 2008.

Okay. And that, again, getting back to the last question, that doesn't include the 20% that you have?

That's correct.

Okay, and when do those -- when does that next 20% roll off?

We're in the process of negotiating on those.

Okay. All right, thank you.

John Blackledge, JPMorgan.

Thanks for taking the question. I'm just wondering how local and national is pacing in the second quarter, and how the MyNetworkTV stations are pacing in 2Q? And just your thoughts on new programming at MyNetworkTV impacting ratings and trends, and the longer term prospects for that network. Thanks.

Obviously, we're looking forward to the long-term prospects. There's no question about that. Program changes, they've made significant changes in their line-up, as you're aware. They went to some movies and to this international fight league. And within a couple of weeks, they will be announcing some other changes that will be set for the fall. I believe we've hit pretty much the bottom in terms of MyNetwork in second quarter and we'll begin to build this back up, and it will be a work in progress. The network is on top of it. As you can see, they're aggressively making changes that needed to be made. And we look forward to their announcement in terms of their fall line-up, which will be coming forward with everybody else's announcements in a couple of weeks. Certainly, we've gotten some traction in selling these movie titles, so we're moving in the right direction. The pace on the MyNetwork stations is pretty close to where it was in first quarter, a little bit further behind than first quarter, but not by much. And as I said, I think we've seen the worst of what we're going to see from that network, and we're prepared to build it back up beginning in third quarter. And we're optimistic that the back half of the year will be better than first six months for us.

When you translate the MyNetwork pace into numbers, it's about $5.5 million.

Thank you.

Bishop Cheen, Wachovia.

Thanks for taking the call. On the new convert deal, will this be then issued at the hold co and [pary] with the 6% converts?

It will be issued at the holding Company and pary with the 4.875 converts.

With the 4.875 converts. Okay. And then the -- also at that holding Company are the 6% convertible debentures of 2012?

Right.

All right. And then the funds will partially take out -- what do you have, about $618 million of the 8% bonds outstanding?

That's right, $618.3 million.

All right. And that's May business, so we'll after pro forma balance sheet pretty much done by the end of this month, correct?

That's right.

All right. Thank you, Lucy.

Victor Miller, Bear Stearns.

Thank you for taking the questions. It looks like if you penciled through the -- with flat for the local and down five for national, down about 2% for the first quarter, could you tell us what you're kind of seeing in the second quarter there? It seems like it's probably only mid single-digit level, which is better than most broadcasters are seeing for second quarter. Maybe you can talk a little bit about that. And then may I ask you a question, David and Lucy, on that $300 million convert. I'm assuming it's typical up 20% to 25% from a certain price, and it looks like you're saying it's $15 million of savings. So I imagine you're expecting a 3% kind of coupon on that. Maybe give us a little more detail on those two aspects. And then David Smith, if you could talk a little bit about that mobile TV consortium you've put together, and I guess another technology has emerged to compete with the Samsung technologies, so I guess there is a couple of players. Just give us an update on that. Thanks.

I'll take the pace part of it first, Victor. I think you're pretty much right on the money. Our second quarter performance in terms of spot is pretty close to where we were in first. It's just a pinch behind that. And I think the interesting thing for us which really needs to be amplified is the revenue shares that we enjoyed in first quarter. We increased our revenue share by four-tenths, and that's with eight less Super Bowls and 17 MyNetwork television stations. It's an absolutely spectacular performance. And going forward, the one thing that I would point out that is critical, is we've enjoyed in February late news increases on our Fox stations well over 30%, which going forward will translate into millions of dollars as we enter into the political season over the next 18 months. Our news ratings on the Fox stations have never been higher. We have taken positions in these markets where we were the third and fourth player, and became the second and third player in a lot of markets. And as we enter into that political season, we will derive an enormous benefit from our rating increases, which is being propelled by the influence of American Idol.

Victor, as far as the terms of the convert, clearly that's a bit premature to tell you the end result because we still have to go through the pricing. And I know that's obvious to you, so I don't mean to be telling you the obvious. I tried to imply that it's more than a $15 million interest savings that we're expecting. With the strength that we offer the investor and the media paper that we provide, we think that we can do a lot better than the terms that you're suggesting here on the call. But, of course, we won't know for sure exactly how that's all going to come out until later today. At 10:30 this morning, we have an investor call to go over quite a bit of detail. All the details of the Company, the convert, et cetera. So, for those investors that are looking for that more detail, that will be at 10:30 today.

Victor, regarding the mobile television, as I'm sure you saw at the NAB Show this year, you saw two different companies roll out their view and vision of mobile television from the standpoint of how it's going to perform. And everything I've been led to believe from a feedback perspective is, is that both demonstrations were magnificent on a completely mobile basis, dealing with all the typical issues that one has to deal with, from a [multi-path], et cetera. I think the point of the Mobile TV Coalition is as simple as it's time for the broadcast industry to get together and focus on the business models that potentially lay out there before us, not the least of which is mobile to automobiles, mobile to PDAs, mobile to phones, and how will that translate into what we would expect to be further retransmission agreements with phone companies, with the consumer on a one-off basis, much in the same way we do with cable companies and satellite companies today, or vehicles, or whatever it ends up being.

And I think the efforts that we're going to put forth here in the immediate future toward pushing the standards into the marketplace and working with probably all the automobile manufacturers, both foreign and domestic, all the phone companies, and anybody else who has PDAs, computers, laptops, whatever it may be, is where we're going to go with the platform. I think the fact that as many broadcasters have, on a first round basis, jumped into this thing is kind of demonstrative of how important this is for us as an industry. And I can only tell you, you know our history from the standpoint of talking about this for the last seven, eight years. We firmly believe this is the wave of the future for local television. Certainly one wave. And we intend to ride it. And it's about to begin, I would suspect.

I appreciate that. Thank you.

Edward Atorino, Benchmark Company.

Victor asked some of the questions I had. The retrans numbers are in the broadcast revenues, or in the "other" line?

They're part of net broadcast revenues.

Okay. I thought they were in the "other" line for some reason. Thanks a lot. That's all I had. Victor asked my questions. Thanks.

Aaron Watts, Deutsche Bank.

Two questions from me. I guess first, I was curious if you have any sense for -- the retrans is obviously providing a nice boost for you and definitely a positive. Have you been given any indication that your network partners are going to look to take a piece in one way or another of that upside and new revenue stream that you have?

No.

Okay. And I guess secondly, more on a big picture question, as you think about strategically where Sinclair is headed, given positive market sentiment towards your sector, the healthy multiples being commanded on the private side, can you just talk about, again, mobile TV, you mentioned for the industry and Sinclair, but how specifically for Sinclair do you see moving forward perhaps with regards to your asset portfolio?

Well, I think we've always said that we're certainly would rationalize any asset at any time if it makes sense for us, and suits our longer term view. I think at this point in time, we have no large-scale strategic plan from the standpoint of rationalizing assets, but on a one-off basis we may. Our bigger focus, I think is really to get our hands around mobile television and all its applications and capabilities, and get some sense of what the real economics of that's going to be going forward, before we would ever contemplate doing anything on any kind of scale.

Okay. In terms of adding to your portfolio, is it a little bit of a curse and a blessing that given the multiples we've seen for some of the transactions of late, and sort of -- reflect on your desire to add?

I don't view it as a curse or anything else. I think what continues to go unnoticed by the public sector is that the private market values of our space keep going up. And our sense of that is, that's the right thing that's happening. We've always argued that the private market multiples are significantly higher and the public needs to catch up to that. I think in the grand scheme of things, as we've said over the years, we represent roughly 22% of the U.S. population from a coverage perspective. And there isn't anybody anywhere near us, with the exception of ABC, NBC, CBS and Fox, that are speaking to the local marketplace. So we're not motivated necessarily to go out and buy more television stations. We don't need to do in that today's world. I can understand why lots of other people do, because they don't have the master scale that we have, so they need to bulk up to get the efficiencies and economies that we get. So we're not motivated to go out and buy anything in particular tomorrow. Now having said that, if a transaction comes along that allows us to create some kind of duopoly structure or other structure that makes sense to us in one market, we'll do that tomorrow. Haven't seen any of those in the recent past. But the fact of the matter is, is if they happen, and they make sense, and they can produce the right rates of return, we'll do it. But don't look for us to be a buyer of 20, 30, 40 television stations on a one-off basis. It's just not going to happen.

Yes, I think that part of the discussion really kind of gets missed by the market, the whole partnership opportunities that are becoming more and more available as you see more private equity players become involved in our broadcasting sector. And those are -- they're all about creating -- generating money and returns for themselves, and that's opening up a whole new area of development and opportunity for us as strategic to become involved in partnerships and really generate more cash flow and returns for our investors, as well. And even to take that partnership one step further, at NAB, the discussion about mobile television was pretty broad across all kind of different sectors, the mobile wireless communication industry and their effort to roll out video. And their discussion publicly out there was that they look forward to partnering up with television broadcasters and having our spectrum available to them. So, that area is just an area that provides quite a bit of opportunity for us to put together partnerships that are going to result, or should result in significant earnings for both parties.

Okay, great. Thank you.

Bishop Cheen, Wachovia.

Just a follow-up. By offering the convert, you're leaving a certain level of [ eight in]. Can you give us some color and your thinking on whether you want those to stay in until the next call? Clearly, you've got a lot of capacity and leverage at the op co.

Bishop, that's a good question. And we have not made any decisions on the remaining piece and we'll continue to evaluate those.

Okay. And the mechanism for taking them out is -- it's straight funding, it's not using any kind of claw or any other feature of the bond?

No, it's just -- we have the call rights under the -- .

So you do it under the much cheaper partial call?

That's basically it.

Okay. Thank you.

Lee Westerfield, BMO Capital.

Just two questions, if I may. And the first one relates to, if you can remind us when the Fox and ABC network affiliation agreements may come up for renewal in the years ahead? And secondly, Lucy, if it's available, what the impact on revenue was from local initiatives, like Direct Mail in the quarter, any way you want to characterize that.

The Fox affiliate agreements come up in March of 2012, and the ABC in December of 2009. And then, the new business revenues in the first quarter were $6.7 million.

Great. Thank you very much.

Marci Ryvicker, Wachovia Securities.

Thanks for taking my follow-up. There's been so much focus on retrans, that I was just wondering if you can update us on some of the other initiatives you guys are doing with Direct Mail, Better Life, and your digital initiative?

Sure. We decided quite a few years ago to aggressively go after the local market business that doesn't use TV, and we have been very successful with it. Through this new business initiative, our average unit rates increased by over 30% on every new business client that we put on the air. So the amounts of money that we're billing, which are close to $30 million over the course of the year, is quite interesting in that the $30 million also represents a 30% increase in rate from our transactional business. But one of the reasons we're able to get that type of money is we've been targeting specific sectors with our new business initiatives. MDTV is going after, for argument's sake, the medical segment, which beforehand we were not doing a good enough job getting those type of dollars. So each and every year we take a look at what we want to focus on. This particular year, '07, we introduced this MDTV, and to date, extremely successful. So what we do is we take a look at what's out there, what we're not doing well on, we put together a business plan, and go after it. And so far, so good. It's been very successful for us.

Okay. Steve, I have another follow-up. On your last conference call, you said that it seemed like a lot of the auto guys were sitting out January and February, and they indicated that they were going to spend some money in March. Did this actually materialize?

Yes, we did. We came in March, and we did actually better than we said we were going to do. It started off sluggish when we had the call, but we knew that there was a certain amount of business out there, and we hit the number that we said we were going to hit. In terms of what we're seeing for second quarter, we're going to hit that number, too, and we've been hitting the numbers consistently. So the automotive business is not going to turn around any time too soon. But with that said, we're pacing in the mid single-digits behind, and quite a bit of that is due to the MyNetwork station. So this Company, as it pertains to automotive, even though the segment is sluggish across the country, we're actually doing pretty well with what they're spending.

Thank you.

Victor Miller, Bear Stearns.

For the year, you're saying expenses up 2%, second quarter up 4%. Can you talk about like what is leading to this slightly higher tick of expenses in second quarter relative to the year? Thanks.

Part of that, Victor, is May is an important ratings book for us, so you've got additional promotional dollars in there.

Thank you, Lucy.

(OPERATOR INSTRUCTIONS) Andrew Finkelstein, Lehman Brothers.

A couple questions. First, just going back to that auto, so you said it was -- it sounded like it was pacing down mid single-digit overall, but some of that is due to the weakness at MyNetwork. Can you give us a feel for just -- I don't know if you have the exact numbers, but how it's pacing in maybe the Foxes or the ABCs. Or just a feel for dealer budgets into the TV sector, or your stations in particular.

Most of the decline is on the national spot level. On the local automotive level, we're actually doing pretty well. And that's through, as you just mentioned, the strength of our Fox stations, as well as the strength of our ABC stations. So our second quarter pretty much mirrors our first quarter. It's mid single-digits. And right now, that's the trend. So we don't have anything to indicate that that trend is going to change for third quarter, but if it stays where it's at, we're comfortable that we'll be able to bring in the year as we suggest we will. So basically, the performance, mid single-digits, pretty strong actually, given everything that you've heard about the industry.

Okay. And then just on Ohio, could you talk a little bit more about what's going on in those Ohio markets?

For whatever reason, last year it was Pittsburgh, the year before that it was San Antonio. I think the thing that hit Columbus, actually interestingly enough, is the foreign automotive market is just not spending. And we see that also in other markets as well, but not to the extent that we're seeing it in Columbus. So Columbus is pacing behind the rest of the Company in terms of automotive dollars, and it's almost on every manufacturer.

Is this just a one or two quarter -- ?

And it's not just Columbus, actually. You're seeing it in Dayton, you're seeing it in the entire state. So you're seeing it in Cincinnati and you're seeing it in Dayton, as well. And it's a temporary setback.

Right.

It's not going to be forever, obviously. It's an important state to us. We fully expect it's a cycle that we'll rebound from.

Okay. And then just from a big picture perspective, you guys talked about acquisitions. But just looking at the Company overall, leverage has declined significantly and looking forward obviously into '08, it should decline again. What's the Company's view on leverage, and where you think it should go over time? What's your comfort range? Would you consider increasing it for a dividend, or anything else outside of acquisitions?

I don't see us increasing in today's world for dividends, and I think we have plenty of free cash flow to be able to continue to raise dividends if we choose to. I think right now, we're very comfortable to watch the leverage continue to decline. And at some point in time, when we see the right opportunity out there, where we can produce whatever we need to produce from a rate perspective, we'll move. I think we're comfortable where we are, watching it continue to drop, and watching the marketplace, waiting for the opportunities to come to us.

Okay, great. Thanks a lot.

John Blackledge, JPMorgan.

Thanks. Thanks for letting me take a follow-up. Just two things. First on retrans. Given the numbers that Lucy gave out for '08, it looks at the midpoint of 60 to -- low 60 to mid 60s. Based off your '07 numbers, you're looking at kind of like mid single-digit rate increases. Is that something that we can expect, kind of built in contractual increases in the mid single-digit range over time? And then just wondering, on the cash program payments, do they keep coming down over time, too? Or do they kind of level off? Thanks.

I think in the context of the retrans, you should expect increases, without getting into the specifics of what they are. But you should expect increases on an annual basis.

Right. [Ex-new] deals. Just off the organic stuff, increases, right?

Yes.

And then the cash program payments?

Cash program payments have continued to come down. And we're expecting to see that as far as leveling out, certainly the steepness of that curve is changed to more of a leveling curve. So, I wouldn't expect to see the kind of decreases that we've had over the last couple of years to carry forward at all. So generally speaking, we're pretty close to where the costs are most efficient.

Thank you.

Ladies and gentlemen, there are no further questions at this time.

Well, thank you, operator, and thank you, everyone. And talk to you next time.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.