Spectrum Brands Holdings Inc (SPB) 2014 Q4 法說會逐字稿

Good morning. My name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the Harbinger Group fourth-quarter earnings conference call.

(Operator Instructions).

James Hart, Senior Vice President of Communications, you may begin your conference.

Thank you, Chris, and good morning, everyone. Welcome to our quarterly conference call.

With me today are Phil Falcone, Chairman and Chief Executive Officer of Harbinger Group; Omar Asali, President of Harbinger Group; and Tom Williams, CFO. During today's call a presentation will accompany our remarks. This presentation may be accessed through the website that is available -- excuse me, through the webcast that is available from the investor relations section of our website at harbingergroupinc.com.

As a reminder this call cannot be taped or otherwise duplicated without the Company's prior consent. Before we begin I would like to remind everyone that this call may contain statements that are forward looking as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to discussions regarding industry outlook, opinions, expectations regarding the performance of the Company's business, its liquidity and capital resources and other nonhistorical statements in the discussion and analysis.

These forward-looking statements are subject to certain risks, uncertainties and assumptions including risks related to the general economic and business conditions and are based on management's beliefs as well as assumptions made by and information currently available to management. When you listen to this call the words believe, anticipate, estimate, expect, intend and similar expressions are intended to identify forward-looking statements. All forward-looking statements made today reflect the Company's current expectations only and although management believes that its expectations reflected in these forward-looking statements are reasonable the Company undertakes no obligation to revise or update any statements to reflect events or circumstances that occur after this call.

Important risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those in these forward-looking statements are identified and discussed in the reports filed by Harbinger Group Inc. with the SEC including Harbinger Group Inc.'s most recent annual report on Form 10-K.

During the call management will provide certain information that will constitute non-GAAP financial measures under the SEC rules such as adjusted EBITDA and adjusted operating income. Certain information required to be disclosed about these non-GAAP measures including reconciliations with the most comparable GAAP measures is available in the earnings press release that we issued this morning. With that we will begin the call by turning it over to Phil Falcone.

Thank you. Good morning, everyone. Thanks for joining us today.

Today we will be reporting another strong quarter and happy to report on the excellent year that we had. I will describe some of the key accomplishments made during the quarter and year, Omar will describe highlights of our M&A activity and operating performance, Tom will provide an overview of our consolidated financial results then we will take some time for some questions.

So quick summary on fourth quarter and the year. A very solid quarter for us and record fiscal year for Harbinger Group. It's the largest ever fourth-quarter consolidated revenues at Harbinger Group Inc. and also a record fiscal year consolidated revenues with growth from all areas of the business as compared to fiscal 2013.

We accomplished this against the backdrop of our success in other initiatives that will help to position our business for sustainable growth, increase cash flow and book value including the raising of an additional $200 million in senior notes in September, improved ratings with Moody's most recently upgrading our Corporate Family Rating outlook as well as the ratings on our secured and unsecured debt. Omar and Tom will describe these in greater detail.

Although this is a quarterly call it is also the end of our fiscal year and you will hear a lot about the quarter from Omar and Tom. The end of the year also gives us enough a good opportunity to take a look at some of our longer-term achievements.

Since our introduction to the markets in 2010 we have accomplished a great deal. We have very strong operating performance and a very healthy expansion of our businesses.

In just four years time we have transformed Harbinger Group Inc. into a well diversified holding company comprised of four segments that generate in excess of $100 million in annual dividends. The capacity for generating considerably more than that amount more than doubled our revenue base.

We have also increased our consolidated assets to nearly $30 billion and have grown our market cap to more than $2.6 billion from when we acquired the holding company in 2009 for $70 million. We have increased the number of businesses we hold from one in 2010 to eight today. And through actions taken to improve the capital structure we have reduced our blended cost of debt by nearly 300 basis points.

With that track record behind us we believe in what we are building here at Harbinger Group and we also seek to use our cash to pursue the highest and best available returns. While we would prefer using our resources to accumulate additional assets capable of producing long-term value and free cash flow, we believe that M&A multiples are relatively high. Some of the parts of the analysis shows what we believe is a gap between our intrinsic value and our trading value and it presents us an opportunity to use our cash to earn a return through the acquisition of our own common shares.

We have an existing $100 million stock buyback program and we used $53 million of our cash to acquire 4.2 million shares of Harbinger Group Inc. this quarter. Through September 30 we have acquired 5.2 million shares for $65.6 million. This program has injected additional liquidity and sent strongly positive signals to the market and we have kept enough dry powder on the balance sheet to preserve optionality for the future, which is very important for us.

We have sufficient flexibility under the program to opportunistically support the stock obviously subject to the ongoing discretion of management.

Turning to the M&A environment, we look for acquisitions that meet specific criteria, one that provide attractive synergies, have sound fundamentals but may need a financial restructuring or operational turnaround; three, have management teams capable of creating long-term value; and four, are long-term cash flow positive businesses. We believe valuations continue to be high in this market. We expect to maintain discipline and not to transact at an uneconomic price.

Select opportunities, however, do exist. We continue to like the energy sector and want to increase our exposure and have wanted to increase our exposure to the operations at Compass. We recently made the announcement following the close of the quarter to acquire the balance of the ownership interest in the business where we now own 100%.

We believe other opportunities may exist in the commodities space if pricing continues to be unfavorable. We have also announced and completed in fiscal 2015 the tuck-in acquisition of a commercial lockset company which dovetails very nicely with existing consumer lockset operations as well as we have had expansion of our European pet business which Omar will discuss shortly.

If you look at the slide representing our corporate structure, it shows our five primary verticals in the assets we hold in each. Highlighting in green is what we have added or expanded over the past 12 months. We have added real estate lending, global energy and infrastructure lending with large very long-term projects.

We've expanded presence in consumer goods through a retailer of women's apparel and related products. We've expanded exposure to the energy through the acquisition of the full interest in Compass. You should expect us to continue broadening our structure, adding more verticals and more attractive assets over time.

Accordingly each time we present this chart at the end of the fiscal year it should continue to change. However, we will always be oriented toward attractive businesses that can generate sustainable free cash flow. Those are just some of the highlights of HRG's quarter and year.

I will now turn the call over to Omar Asali for a deeper review of our subsidiaries' operational accomplishments in the quarter and year. Omar?

Thank you, Phil, and good morning, everybody. As Phil mentioned 2014 was another strong year for Harbinger Group. We are pleased to report a record year of consolidated revenues of $6 billion, which shows a 7.6% growth over 2013.

That revenue growth importantly has come from all lines of our businesses. In terms of some key highlights in Spectrum Brands we had our 16th consecutive quarter of year-over-year growth in our adjusted EBITDA. At Fidelity & Guaranty our annuity sales continue to grow at a very nice rate reporting more than doubling in this past fiscal quarter.

And at Compass our quarterly production remains on par or above expectations in terms of what we had outlined for this business and we continue to prepare for a life beyond the JV structure now that we have acquired our partner. Finally, we continue to build asset management which is our smaller segment and we continue to feel that we are making nice progress in that area.

Moving to slide 12 just to give you a deeper dive in terms of our different businesses starting with Spectrum Brands. In fiscal 2014 the shares of Spectrum Brands appreciated at 37.5% outperforming the S&P. This is the third consecutive year where the performance of Spectrum Brands has beaten the S&P.

We continue to feel very good about the growth potential in that business and what our management is executing on as well as the consumer behavior as it relates to the Spectrum value model of same performance and less price, which we believe is resonating with retailers as well as consumers.

In terms of recent activity, SPB we recently closed the acquisition of Tell Manufacturing, which expands our lockset business into the commercial area. And that is a $3.5 billion market that I think over time we would be able to participate in and sort of expand our footprint.

We also recently announced the acquisition of Procter & Gamble European pet business, which positions us well to participate in what we believe are attractive brands of IAMS and Eukanuba and hopefully we will be closing on that transaction soon.

If you move to slide 13 in terms of just giving you some of the details of the results, as I mentioned, this was the 16th consecutive quarter of adjusted EBITDA growth year-over-year. We feel great about some of the accomplishments of Spectrum and the management team here.

So to highlight a few points, gross profit margins have expanded to 35.4% from 34% last year. Our adjusted EBITDA margins are at a healthy 16.4% from 15.8% last year and this shows a seventh consecutive year of growth in this very critical metric. Lastly, our expectations were to generate $350 million of free cash flow and happy to report this past year the Company generated $359 million of free cash flow surpassing our expectations and we continue to believe that we are on a very healthy track of building both EBITDA, EBITDA margins as well as our free cash flow generation at SPB.

Going forward some of the areas and avenues of growth that we are focused on is obviously continue to build the Spectrum value model across all the divisions and that company, continue to focus on acceleration of our e-commerce capabilities, expanding into new geographies and channels particularly across Europe where we have done well in a very difficult environment and obviously where appropriate continue to focus on tuck-in acquisitions that make a lot of sense similar to what we have done with Tell as well as the P&G business.

Moving on to insurance on your slide 14, continue to feel very good about what we are doing in the segment, which is both Fidelity & Guaranty as well as our reinsurance business Front Street. Total assets under management in this area are at $18.8 billion. Our GAAP book value has increased by 46% at FGL up to up to $1.7 billion and excluding AOCI it has grown at 28% to $1.3 billion.

As I mentioned earlier, annuity sales have been very strong this past year. And we have generated about $2.1 billion of sales at FGL and continue to build our footprint, expand our market share and frankly it's a whole market in the annuities area that has been growing for any of you that follow the insurance space. And we continue to feel very good about our competitive positioning in that market.

Also related to FGL, we continue to feel great about our investment portfolio. This past quarter we purchased about $1.1 billion of assets and have put that at an average yield of a very healthy 4.92%, which brings our whole book yield to about 4.8% and that is roughly a 20 basis point increase from fourth quarter of last year.

Importantly, the book continues to be positioned conservatively and the overall NAIC rating is roughly 1.5 times, which is similar to where we were a year ago. So we are increasing our yield without taking sort of undue or unnecessary risk.

If you move to slide 15 just to discuss the energy segment recently, which is Compass. We are obviously pretty pleased with the acquisition of our joint venture partner, EXCO, so we bought their 25% stake.

To refresh your memory our focus in this area continues to be on long-lived, lower decline rate and lower geologic risk conventional oil and gas properties. Results for this quarter we have been very pleased on both the production levels as well as frankly the management team and their capability to control costs. So we continue to do well in cost improvements.

To give you a sense for this quarter in terms of production we produced roughly 112,000 barrels of oil, approximately 131,000 barrels of NGLs and about 5.2 billion cubic feet of natural gas. Those production levels, the cost improvements and managing our efficiencies are a testament to our CEO there, Matt Grubb and the whole management team. And we continue to feel terrific about this venture and continue to feel that there will be interesting opportunities down the road in terms of expanding our footprint in the oil and gas area.

Lastly, if you look at slide 16 in terms of our different segments is our asset management area. As Phil mentioned, we've expanded in the last few months in this area by building the energy and infrastructure lending platform as well as the real estate lending platform with partnering with CorAmerica. Salus continued to grow very well.

We have originated more than $800 million in loans year-to-date. And Salus has grown by more than $250 million compared to where it was from a quarter ago.

Five Island continues to also perform very well for us and navigating a pretty volatile high-yield environment where the focus of our team there continues to be preservation of capital and focusing on risk-adjusted returns. So as usual this is an area where we are trying to build our capabilities in asset management and we hope that we will be reporting to you further growth in this segment in the future.

Before I turn things over to Tom on slide 17 you will see the different segments that we have. The way we think just to give you some background, the way we think about M&A is obviously we are trying to expand our footprint in the existing segments that we are in as well as looking at opportunities in new verticals wherever appropriate. Phil touched on the frothy M&A environment and the multiples out there.

We maintain our disciplined, patient approach to acquisitions. We are doing a lot of work in different areas but before we transact our lens is a value lens and we will continue to maintain that discipline.

In terms of how we think broadly about M&A, it could be either a synergistic M&A opportunity that fits within one of our existing businesses, or we could be thinking about new platforms to expand again within the same segments that we are in or finally the accretive tuck-ins that we continue to execute on, and you have seen us do that in the consumer product area. As far as new verticals, nothing new to report other than we continue to look for opportunities out there, continue to spend time in the agricultural area which we have mentioned in the past as well as other areas. And the team remains very focused and very busy on looking for opportunities and if the opportunities are at the right valuation we will be hopefully able to execute on them.

With that let me turn it over to our Chief Financial Officer, Tom Williams.

Thanks, Omar. And before we open up the call for your questions I will walk you through some of the highlights of Harbinger Group's consolidated results for this quarter. And I will focus my remarks principally on our performance in the fourth quarter and where it makes sense I will review the full-year 2014 performance.

And as usual I will update our sum of the parts calculation to reflect our performance for the fourth quarter and the full year. So let's begin by looking at revenues.

We reported $1.51 billion in consolidated revenues this quarter as Phil had mentioned. This is an all-time record for fourth-quarter revenues at Harbinger Group. Although the increase is a little less than 1% from the fourth quarter 2013 we did see strong top-line performance in consumer products and asset management this quarter.

However, the consolidated revenues were negatively affected by a 12% decline in our insurance segment due solely to the impact of a large nonrecurring investment gain in the previous year that was disclosed to you at that time. And when you exclude net investment gains in both periods our insurance revenue increased by more than 14% over the fourth quarter of 2013. This is because FGL continues to see strong consumer receptivity for its core products.

Annuity sales continues to be very strong and the investment portfolio continues to be very well-managed. Bottom line, we remain very pleased with the overall performance in the insurance segment notwithstanding the optics of this quarter's reported GAAP revenue.

Elsewhere energy reported a modest decline in revenues that was in line with our expectations. I will remind you that the year-over-year revenue comparisons in energy will likely always be a modest decline so long as lower production in assets owned and managed by Compass run in excess of any new production added from Compass's drilling program.

Turning now to profitability, overall operating income of $569.5 million was down about 23% from the fourth quarter of 2013. The drivers that negatively affected certain parts of our top line had similar impacts to segment profitability this quarter.

Looking at each segments' preferred measure of profitability such as adjusted EBITDA or adjusted operating income, consumer products reported its 16th consecutive quarter of year-over-year growth in adjusted EBITDA reflecting the favorable ongoing mix shift towards areas of Spectrum's strength such as hardware and home improvement, consumer batteries and home and garden products. Our adjusted operating income for insurance declined given the flowthrough impact of the investment gains that had benefited the year-ago quarter which drove unfavorable top- and bottom-line comparisons in the fourth quarter of GAAP reported results.

However, it is important to note when we look at normalized AOI adjusted operating income results at FGL, which has been growing both quarter-over-quarter and year-over-year, it gives you a clear insight and comfort to the true earnings power of this business segment.

Now looking at our adjusted EBITDA in energy, it declined approximately $2 million as we realized lower commodity prices for oil and natural gas and as we incurred certain costs to prepare Compass for its new structure outside of the JV. And finally, operating profit at asset management declined less than $3 million as we continue to invest in our newest capabilities in real estate and infrastructure lending which we expect will meaningfully enhance the value of our asset management platform.

Despite the reduced operating income we narrowed the net loss attributed to common and participating preferred stockholders from $0.67 per share a year ago to $0.51 in the current quarter. This is due mainly to the substantial reduction in interest expense as we benefited from proactive actions at both the HGI and subsidiary levels over the past 12 months to successfully refinance our securities and lower our interest rates.

Turning briefly to our overall performance in fiscal 2014, we reported our fourth consecutive annual increase in consolidated revenues to nearly $6 billion. This is an all-time record level for Harbinger with positive contributions from all lines of business as compared to fiscal 2013. We also performed very well on our preferred profitability metrics with strong increases in consumer products and energy.

Insurance AOI was marginally up as compared to fiscal 2013 which is an accomplishment given the substantially greater investment gains realized at FGL in 2013 as compared to 2014. As we saw in the quarterly results operating profit in asset management had declined modestly as we made an effort to build out our competencies in areas that we expect to contribute to our growth in the future.

Turning now to our capital structure, as Phil mentioned during the quarter we successfully completed a debt offering to the issuance of $200 million in senior notes due 2022 under the existing indenture. As with our recent transactions the offering was heavily oversubscribed. Through this offering our blended cost of debt was lowered to 7.805%, which is a 282 basis point improvement from where we were at the end of fiscal 2012.

With this offering completed the face values of our secured and unsecured debt classes are now $604 million and $750 million respectively and we enjoy significant headroom to all covenants in our debt agreements. We believe the proceeds from the offering will provide us with sufficient flexibility to execute future strategic initiatives as well as increased flexibility at the secured level of the capital structure should future transactions contemplate using debt financing.

Looking at our cash position, we ended the quarter with corporate cash and investments of approximately $516 million. This was an increase of nearly $100 million from the June 30 balance due to the proceeds from the senior secured note offerings along with the receipt of additional $32.9 million of dividends from our subsidiaries in the quarter partially offset by our ongoing investments in acquisition activities which included our repurchase of an additional 4.2 million shares of HGI stock during the quarter for an average price of $12.73.

We believe the cash position we enjoy as we entered into fiscal 2015 will provide us with sufficient dry powder to meet our operating and investing needs. And we remain comfortable with our ability to access the capital markets should that become necessary at some point.

Moving on now to our sum of the parts valuation, we prefer to measure our own performance through the lens of how much shareholder value we have created over the long term. The estimated value of our-sum of the parts can provide and be a helpful indicator of the value that has been created. And although this valuation may fluctuate in any given quarter due to broad market conditions, we believe our long-term performance can be adequately measured by this net estimated value.

And as a quick reminder to our methodology in this analysis, our holdings in Spectrum and Fidelity & Guaranty Life are based on the volume weighted average price for the 20-day trading period ended September 30. The other securities we hold are valued using market prices and are reflected in the HGI funding column of this chart. Everything else including our cash, cash equivalents and corporate debt are measured on book value.

Taken together our estimated value as of September 30 is $15.74 per share. Relative to our June 30 valuation this reflects an increase of approximately 4% or $0.58 of additional value created per share. Relative to our September 30, 2013, year-ago valuation this reflects an increase of 17.5%, or $2.34 of additional value per share that was added.

We believe both of these trends are positive indicators that we are making constructive decisions in how we manage and grow the business and that we are creating value for shareholders. Last, while there is an approximately 16% discount to our September 30 common stock price relative to our intrinsic value, and while this remains higher than we would like, we are pleased with the 26.5% appreciation in the price of our common stock in fiscal 2014 which meaningfully outperformed all of the major indexes over the same period including the NASDAQ, the S&P 500, the Dow Jones and the Russell 2000.

As we exit fiscal 2014 I thought it would be helpful to provide a quick reminder of the underlying strength of our business. First and foremost we have assembled holdings in substantial free cash flow generating assets with diversity in both geography and the market segments each subsidiary serves; second, a strong management team which we continue to enhance both at the HGI level and at the subsidiary level over the past year such as through the hiring of a new Chief Financial Officer at Spectrum, a new President at FGL, a new Chief Financial Officer at FGL and a new CEO at Compass; third, a disciplined approach to acquisitions which in certain instances means we walk away from a deal if we believe the evaluation would prevent us from earning a substantial return; and finally, a clear commitment to long-term value creation as evidenced by the continued appreciation in the sum of the parts valuation.

I want to thank you for joining us on the call today. We hope this call has helped you better understand what we are trying to achieve at Harbinger Group and what we've accomplished over the past year. And we look forward to continuing to keep you informed of our progress.

So with that, operator, we would like to take the questions on the line. And please provide the following instructions.

Thank you very much. (Operator Instructions)

Emil Khalikov, Yost Capital.

Hi. Congratulations on a good quarter.

Are there any updates on your process with Central Garden & Pet? Thank you.

There really isn't other than what you have seen in the public domain. So at this point we have nothing to report on that process.

Perfect. Thank you.

Dusty Henderson, Eagle Assets.

Good morning. Thanks for taking the call. Can you give any update on Frederick's, just if everything is going all right there and if the full team is in place?

Frederick's is probably a little bit more challenging than we ever expected. We have made some management changes and continue to build the team and we are focused on it and have some directional decisions that we need to make over the next few weeks.

But it has been a bit challenging. We still believe in the brand, still think that there is some very good value there. The question is how best to move forward to exploit that value.

Okay. The growth at FGL has been great.

Is there ever is there some level that at some point you guys would want to like pump the brakes? Is there anything like that? It just seems like it is outgrowing the peers pretty substantially.

Obviously we feel terrific about the growth of the company. There's been a number of tailwinds with more people entering retirement age, more people being under saved and frankly the annuity product resonating with many retirees.

Our focus has been to capture that growth opportunity wherever we feel it is profitable and we are being compensated from a rate-of-return standpoint. So what you have seen in the growth of that company has been a disciplined growth where we feel it is really enhancing our profitability. I think that dynamic in that marketplace is going to continue with us for a while.

As more baby boomers retire there is going to be more of a need for those type of products. And frankly the other aspect is from a competitive landscape as there has been some M&A with other participants and some people digesting some acquisitions that they have done, that has enabled us to capture some market share with IMOs and with various agents.

So I think that pattern will continue with us. We expect that we will continue to grow in this upcoming year, certainly not at the same percentages you have seen from the company given now we have more scale. But our expectation is to continue to be one of the top 10 providers in this space.

Okay, super. That's a very reasonable. Thank you for taking the call.

Dan Klein, Highbridge.

I was wondering if you could just give me the current cash balance?

We don't provide any forward-looking guidance as to where we are and how we perform. But we ended the quarter with $516 million of cash, which is ample cash for our needs in the years ahead.

Okay, thank you.

Charles Frischer, LF Partners.

Good morning and congrats on another solid quarter for HRG, everybody. Omar, in thinking about the value for the Compass energy assets, is it fair to take the purchase price that we paid for the 25% interest from EXCO and then multiply it by 4 to get a current fair value for the Company?

I think it is fair to look at the transaction that we just did. Obviously that transaction, Charlie, contemplated the value of the whole MLB, i.e. we were buying 25% of the LP interest and 50% of the GP interest. But I think it is a fair sort of guiding post if you will in terms of how we think about the value for the whole business.

Okay, that is really helpful. And then in theory on your NAV calculation where you have $100 million valuation which is the book value for the energy assets, at a minimum we know that value would be higher on a fair value market basis if the asset were valued to what we think it is worth today?

Yes, certainly. As we disclosed on the sum of the parts, Charlie, we only use the modest disclosure of the book value. Certainly fair market value would be higher than that.

Sure. And as I calculate the NAV of HRG and I look at the discount over the last 6 or 12 months, it looks like the discount is pushing the high end of the discount over that time period. I was wondering if that's how you guys see it and that's what's encouraging you to buy back HRG shares in the marketplace in the last quarter or so?

Obviously to some extent, yes Charlie because buying back shares is just another capital allocation decision that we are making. And to the extent that we feel we are buying at attractive levels we will go and execute on that. And part of those levels is looking at the discount that you highlighted.

So we continue to believe and you have seen what we've done this past quarter and what prices that Tom articulated. We continue to believe those were the right long-term capital allocation decisions to buy the shares at these levels.

Also Charlie you have to take into consideration that the NAV numbers that we gave you are kind of face value. Depending on how you look at the underlying subs it could even be a greater discount and that is how we kind of look at it.

We have our own internal thoughts on the different subsidiaries. So it is not just face value. And I think that is why we look at our stock being as valuable as it is.

No question Phil and that's why I am fully supportive of you guys buying shares back and not that it matters but my NAV is north of 18 of what I think the Company is worth today, so that's a separate issue. I appreciate that's a great response. As we head into 2015, outside of Spectrum and Fidelity, where do you see the most promising opportunities for capital appreciation at the Company?

Obviously we continue to be believers in Compass and in oil and gas and what is happening in that sector. Frankly Charlie you know how we think about the world and seeing the pressure in WTI and seeing where gas is trading, frankly the recent pressure in NGLs, we view those negative moves in the commodity price as a positive for us in terms of looking at properties and potential acquisitions.

And then obviously in asset management we continue to believe that we will be able to create and build quite a bit of value. So I think it's the segments that you see from us that we continue to believe in all lines of our businesses over time will continue to enhance and build value.

Got it. That's great. And then one last question if I could.

How are you thinking about the credit quality at Salus? I know RadioShack has been in the news and some other things but how do you guys think about the credit quality there?

Obviously you have seen a lot of articles about that and we're going to stay away from the different comments that are out there. Suffice to say we are capital preservation guys. That's how our opcos think.

We are also in the case of Salus asset-based lenders. So this is not necessarily cash flow lending and we are very focused on the collateral value there. Very focused on what is happening with that company.

That is a substantial loan. And the Salus team is very engaged with RadioShack, engaged with others to make sure that our position is protected and to make sure that we are focused on it from a capital preservation standpoint. So I think at this point we have nothing to discuss other than what you have read in the public domain but I assure you there is tremendous focus on making sure that our loan is protected.

Terrific. Thanks for great work and I look forward to a great 2015.

At this time there are no further questions. This does conclude today's conference call. You may now disconnect.

Thank you.