iStar Inc (STAR) 2006 Q4 法說會逐字稿

Good day and welcome to the iStar Financial fourth-quarter and fiscal-year 2006 earnings conference call. (OPERATOR INSTRUCTIONS). As a reminder, today's conference is being recorded.

At this time, for opening remarks and introductions, I would like to turn the conference over to iStar Financial's Vice President of Investor Relations and Marketing, Mr. Andrew Backman. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us today to review iStar Financial's fourth-quarter and year-end 2006 earnings report. With me today are Jay Sugarman, Chairman and Chief Executive Officer; Jay Nydick, iStar's President; and Katy Rice, our Chief Financial Officer.

This morning's call is being webcast on our website at istarfinancial.com in the Investor Relations section. There will be a replay of the call beginning at 1:30PM Eastern Time today. The dial-in for the replay is 1-800-475-6701 with a confirmation code of 859527.

Before I turn the call over to Jay, I need to remind everyone that statements in this earnings call which are not historical facts may be deemed forward-looking statements. Factors that could cause actual results to differ materially from iStar Financial's expectations are details in our SEC reports.

Now I would like to turn the call over to iStar Financial's Chairman and CEO, Jay Sugarman. Jay?

Thanks, Andy. Welcome, everybody. Let me start with a recap of the fourth-quarter results and some of the highlights for the full year 2006.

First, on the earnings front, adjusted earnings were $110 million in the fourth quarter or $0.91 per diluted share, another strong quarter and a solid finish to a year where earnings reached $420 million or $3.61 per share on a diluted AEPS basis. I'm really pleased by our performance this year, with earnings well above what we predicted at the beginning of 2006.

Second, we had another very solid quarter and full year of originations, with new commitments in the quarter of over $1.8 billion and full-year originations exceeding $6 billion. Fundings were over $1.3 billion in the fourth quarter and full-year 2006 fundings reached a record $4.5 billion. As I have mentioned before, we are covering an increasingly wide spectrum of the investment arena and we are doing it with more people in more places than ever before.

Third, returns and spreads remained quite strong, with the return on equity staying right around 20% and margins holding up in spite of overall market conditions. I want to come back to leverage later, but our well below market leverage levels continue to be one of the reasons we think the quality of our earnings remain particularly attractive.

Fourth, on credit, overall metrics remained solid, with reserves covering the few issues that have popped up as we have grown. Combined with our conservative leverage, the overall balance sheet continues to be in great shape.

Lastly, on the strategic front, we continue to look for markets where we can have an impact and avoid the wave of liquidity moving through the markets. We are spending both time and money seeking out new opportunities, but really don't have anything concrete to bring you up to date on for this call.

With that quick overview, let me turn it over to Katy to fill in the rest of the details.

Thanks, Jay. Good morning, everyone. Let me take a couple of minutes to review our fourth-quarter results before turning to the full year 2006. I will then discuss risk management and our capital markets initiative before wrapping it up with our 2007 earnings expectations and our announced dividend increase.

Let's start with our results. As Jay mentioned, our adjusted earnings came in at $0.91 per diluted common share for the fourth quarter. Our net investment income rose to $128 million. That was up approximately $31 million or 32% from the fourth quarter of 2005, primarily due to the growth of our loan portfolio.

Our return on equity continues to be above our mid-teens target, coming in at 20% for the quarter. Our net finance margin was 331 basis points this quarter, essentially in line with last quarter.

The margins in our lending business continue to hold up well, despite a competitive market, and were somewhat higher than we forecasted in the beginning of the year. Further, we have been able to mitigate some spread compression with our overall lower cost of funds, as we have become an investment-grade borrower.

Our credit statistics remain strong. Fourth-quarter interest coverage was 2 times, and our fixed charge coverage was 1.8 times. Our leverage at the end of the fourth quarter was 2.3 times debt to equity plus accumulated depreciation, depletion and loan loss reserves.

Our current leverage reflects the successful $541 million equity offering we completed in the fourth quarter. As many of you know, we have an asset-based leverage model. Based upon the current real estate market environment, our historical experience, our credit track record, and the aggressive market environment for asset-backed debt, we continue to believe that our current capital model is extremely conservative.

We had another solid quarter from an originations perspective, with $1.84 billion in new financing commitments, up over 10% year over year in 39 separate transactions. We funded $1.1 billion of our fourth-quarter commitments. 72% of our fourth-quarter originations were first mortgages, participations in first mortgages and senior debt commitments.

As expected, our investments in corporate tenant leased assets remained low and represented just 2% of our fourth-quarter commitments and only 32% of our total portfolio at the end of the year.

During the fourth quarter, we funded approximately $238 million from prior commitments, received $371 million in repayments and prepayments, and sold a number of nonstrategic assets for a total of $55 million, net of costs. All of this activity resulted in net asset growth of $885 million for the quarter. As we always mention, our origination volumes and repayment and prepayment activity tends to be somewhat lumpy and will vary from quarter to quarter.

That is the summary for the fourth quarter. Now, for the fiscal year 2006, we had a strong year in a number of areas. As Jay mentioned, our record investment activities for the year totaled $6.1 billion of commitments, up nearly 30% from last year. That brings our cumulative repeat customer transactions to $12 billion or 52% of our cumulative originations.

Our AEPS for the full year came in at $3.61, slightly above the high end of our guidance range. And our revenues grew more than 24% from the prior year, reaching a record $981 million.

Finally, our 2006 fundings totaled $4.5 billion, and prepayments and repayments and asset sales totaled $2 billion, bringing our net asset growth for the year to approximately $2.5 billion. All in all, we believe it was a very good year for the Company on multiple fronts.

Now let's turn to risk management and credit quality. As many of you know, we have a comprehensive risk-rating process whereby each quarter the senior management team reviews each loan and corporate tenant leased asset within our portfolio. We assign two ratings to each loan asset, one for trend versus underwriting, and one for risk of principal loss.

Each CTL asset receives one rating, which encompasses the credit quality of the tenant, the quality the real estate and the remaining lease term. Our scale is from 1 to 5, with 1 being the best or least risky and a 5 having the highest risk.

To give you more insight into the portfolio statistics we provided in the press release this quarter, at the end of the year, over 80% of the structured finance portfolio had a trend rating of 3 or better, which is historically very high and is a side of a healthy and growing portfolio. In addition, only 4.2% of our loans had a principal risk rating between 4 and 5. This is a relatively low percentage based on our historical data. The aggregate corporate tenant lease portfolio risk rating is also at an historic low.

While the overall risk rating for the structured finance portfolio and CTL portfolio improved slightly at the end of the fourth quarter, we did add four assets to our watchlist and moved two assets from our watchlist to our NPL list. Watchlist assets at the end of the quarter represented 1.34% of total assets. At the end of the quarter, we had two loans on our NPL list, which represented just 0.56% of our total assets. In addition, two assets previously on our NPL list were removed this quarter.

In the fourth quarter, based on our assessment during the regular quarterly risk rating meetings, we wrote off a total of $3.2 million relating to our loan portfolio. Specifically, we wrote off $3 million related to an asset in our AutoStar portfolio that was previously on our watchlist. The remaining balance of this loan was moved to our NPL list during the quarter pending further discussion and action with the borrower.

In addition, we received $18 million of the $18.2 million book value of a mezzanine loan that has been on our NPL list since 2003, and we wrote off the remaining $200,000. So we received $0.99 on the dollar for this asset, and this asset actually generated about a 12% IRR over its life.

The $3.2 million of total write-offs for the fourth quarter were charged against our loan loss reserve and had no impact to our fourth-quarter earnings. For the full year 2006, the Company wrote off a total of $8.7 million or 0.13% of the total book value of our loans at the end of the fourth quarter. As we have mentioned in the past, we expect to experience some level of losses within the portfolio, despite our strong credit track record. We believe that the small losses we incurred in 2006 were asset-specific and did not constitute a systemic change or trend within the portfolio.

At the end of the fourth quarter, we had $52.2 million in loan loss reserve provisions on the balance sheet versus $46.9 million for the same period last year. The primary reason for the increase in our on-balance-sheet reserves was the significant year-over-year increase in the Company's overall loan portfolio, which was up nearly $2.2 billion from fiscal 2005. We continue to believe that we are well-positioned and prudently reserved, given our view of the overall market and our portfolio.

One final note on risk management -- we have received numerous calls asking whether or not we have any exposure to the subprime residential mortgage markets. Given the difficult state of that sector, we understand the potential concern, and want to reiterate that we do not have any exposure to the subprime residential mortgage market.

Let me wrap up with a discussion of our capital markets activities, our guidance expectations and our announced dividend increase for 2007.

During the year, we issued $2.2 billion of unsecured bonds and now have $2.2 billion of unsecured multi-currency line capacity. We continue to fund almost all of our investments with our unsecured line, and as we accumulate balances on the line, we expect to term them out or match-fund them with longer-term unsecured debt. During the fourth quarter, we completed a successful follow-on equity offering in which we issued 12.65 million common shares, generating $540 million of net proceeds.

Earlier this quarter, we successfully completed the modification of multiple series of bonds totaling $1.7 billion, which were issued when we were a high-yield borrower, to conform the covenant packages to the $4.3 billion of high-grade bonds we have issued over the past two years. We were pleased that on average, over 95% of all series of bonds consented to the modifications.

We will continue to fund the growth in our business with a combination of unsecured debt and equity. And as we have said in the past, the timing of any issuance depends on our pipeline and level of prepayments, both of which tend to be somewhat lumpy.

Given our successful ramp-up in Europe, we expect a European bond issuance in euro or sterling sometime during the first half of this year.

Now, with respect to our earnings guidance, we reiterated our 2007 diluted AEPS guidance of $3.80 to $4, up 5% to 11% over 2006, and our diluted GAAP earnings per share of $2.70 to $2.90, based on net asset growth of approximately $3 billion.

And finally, as we announced in this morning's press release, our Board of Directors has approved an increase to our quarterly dividend beginning with the first quarter of 2007 to $0.825 per common share or $3.30 per share on an annualized basis. This represents a 7.1% increase over last year's dividend and is in line with our guidance on AEPS growth this year.

So with that, let me turn it back to Jay.

Thanks, Katy. Let me turn to 2007 now. A couple of major themes are at work as we go into the new year. First, it is probably worth me commenting that we start this year with the strongest capabilities in the Company's history. Having started the Company over a decade ago with some very big long-term goals, I am really gratified to see we have achieved most, if not all, of the goals I had in mind back then. And having reached those goals, we can now start executing on an even larger vision and can look to our very strong and deep organization to help realize that vision.

However, I will also point out that we're working with a material handicap in terms of our overall balance sheet leverage. In what has become a more competitive, and in many cases, irrational market, we are operating with leverage that is often half or even less than half of what others are granted for almost identical risks. We have great strength in both our highly equitized balance sheet and in our diversified asset portfolio. And we hope that those strengths will be recognized more fully in the coming year.

While we are committed to running one of the strongest balance sheets in our business, we really don't believe it's fair to run at a fraction of what much smaller and less-established firms are being granted on significantly more concentrated and lower credit quality portfolios. So we hope fairness will prevail and the playing field will return to some sense of rationality during this year.

Lastly, there are some fairly wise folks out there who have described the current investment market as more of a financial casino than one based on value and logic. In that environment, we think we are well-positioned to still find the best odds available and to tilt the odds in our favor wherever we can. But we still look forward to a return to a more thoughtful and value-based marketplace. And we will continue to position ourselves to be the leader in that environment.

Let's go ahead and open it up now for questions, operator.

(OPERATOR INSTRUCTIONS). Dave Fick, Stifel Nicolaus.

Was there a new joint venture this quarter? It looked like from the balance sheet and income statement there was some activity there. Can you talk about what it was?

Yes, the increase in the joint ventures was the result of the TimberStar Southwest addition. We made that at the very end of October, so the differences that you're seeing year to year are from that venture.

And what should we expect in terms of growth there in income for the balance of the year? I know it's speculative, but --

In terms of the joint venture income?

Yes, especially TimberStar.

Yes, I think we have talked a little bit about TimberStar. Obviously, when we make acquisitions in the timberland space, they tend to be a little chunky. And they are very hard for us to forecast. So we are currently not necessarily forecasting increases there. We are absorbing the IP TimberStar Southwest transaction very nicely and expect that to start contributing in 2007.

And then your fourth-quarter origination loan to values were 78% for fixed rate and 71% on the floating against a portfolio that looks like it is about 65% levered. What does that say about the risk curve and the nature of what you're putting out there?

Think about it in terms of loan to cost and loan to value. One of the things we have been stressing over the last couple years is our internal values, I think, have proven to be quite conservative. The market has moved pretty materially in terms of valuations of assets. I would say we have not moved as fast.

But on new assets, we're sticking to a metric of loan to cost -- how many real dollars are subordinate to us. And so we're very comfortable in that 78% to 80% slot for a lot of new transactions where both the borrower and we can actually see incremental value being created -- the value if it was sold is actually higher -- but we don't give you that metric until we have seen that proven out. So I think consistent with past investments that have seasoned and values have moved up, you will probably see those LTVs go down over time when those loans season.

And last sort of global question -- what is the canary in the mine here? What should we be looking for in terms of concerns? You're obviously concerned about things some of your peers are doing, and you think you are mitigating the issues there. But as you know, these things tend to trade together, and where are things going to start running off the cliff? Is it Florida condo development that gets delivered later this year that starts the down trend? Or do we maybe dance by this?

It is a great question. I will tell you our fundamental belief here is that the biggest threat right now is a recession. Anything that topples people's confidence macro-economically, the canary will fall over and die in a lot of places.

So our view is you've got to watch very carefully what is going on at a macro-economic level. Obviously, lots of variables in that equation. But right now, it's not going to be a commercial real estate supply/demand problem that is going to create an issue in our marketplace. It is going to be a loss of confidence, which suddenly gets reflected in a loss of liquidity, which suddenly changes what right now is a don't ask, don't tell kind of philosophy in a lot of our markets where, candidly, people are doing what we view as irrational one-sided investment bets, where, particularly as a lender, that is the worst place to be.

So we see dynamics out there that clearly indicate a very aggressive posture market-wide. And that is probably not going to be shaken until something larger on the macro-economic scale happens. We do have some views on what could trigger that, but we're not really in the business of predicting recessions. We would just tell you if one happens, you're going to see a lot of the excesses in the market come out very quickly.

And so you would say it is a matter of not if, but when.

I don't know. The global economy has a lot of powerful forces behind it right now. There is tremendous liquidity that has been unleashed. That can last a long time. But having lived through multiple cycles, our own view is that is a hard market. It's almost a market where those with the least skills and the least capacity for underwriting are actually going to be the most aggressive.

Susan Berliner, Bear, Stearns.

Just a few questions. One, can you talk about the jump in the loan portfolio in the apartment and residential area?

Yes, we are continuing to see opportunities where capital has left marketplaces. We've not really played in some of the most speculative areas like condo conversion, but we do see opportunities where residential development lost some liquidity and we have been able to step in and provide liquidity at pretty attractive rates.

It is across both multi-family, high-rise and single-family development, still represents a relatively small portion of the balance sheet, but as we have said in past calls, that is one of the places where we're able to dictate structure, dictate price, dictate capital, subordinate to us how it gets its money out, and all things being equal, we would tell you, some of the best risk-adjusted returns in the market right now.

So Jay, that is both multi-family and single-family?

Yes.

And Katy, I was wondering if you could just give us any sort of details on the assets on the NPL list as well as the watchlist?

Sure. The watchlist this quarter has five loan assets. There's not a lot of commonality there. They range from office to residential to auto. Sort of the range of size is 48 to 8 million. These are assets, as we have said before, that are requiring more attention and that we're spending time with borrowers on. But many of these assets, as you know, get resolved and certainly never hit the NPL list. Four of the five assets have principal risk ratings of 3.5 or better and some have 2 and 3s. So it's not a question of concern around the principal.

With respect to the NPL list, as I mentioned, it's two assets. The larger asset is a first mortgage on a mixed-use development site. We have additional collateral from the borrower in other projects, as well as a full-recourse guarantee from him personally. The project development has stalled and the borrower is currently sort of reworking that plan. So we'll be working with him. Obviously, he stopped paying interest on the loan. But we're working with him to review his revised plan.

And I'm not sure if this is a fair question -- can you tell us what part of the country that is in?

It is in the Southeast.

Don Fandetti, Citigroup.

A couple of quick questions. Jay, just wanted to clarify in your leverage comment, are you implying that either you will get higher leverage or some of these CDO shops will get lower leverage?

We don't expect the CDO model to change. It really for us is a great opportunity to see how probability, severity and loss given default is being applied to multiple asset classes. And that is a pretty definitive objective measure we can now look at in a very apples-to-apples comparison and measure against our own leverage targets.

And we would say that it's a pretty shocking comparison. When you look at real credit metrics in terms of concentration, quality of portfolios, depth of organizational strength, and then you look at the relative leverage levels on senior debt, junior debt, almost across the spectrum, as I said, I think we're running at less than half on a asset-by-asset, apples-to-apples comparison. That doesn't seem logical or rational, given the strength of our balance sheet and the depth of our experience in this marketplace.

So candidly, if the model is out there that says this is a probability and this is the severity for these types of assets, that is fine. That is based on a lot of data and a lot of analysis. But I think it needs to be applied consistently across everybody who makes those type of investments. And right now, there's a little bit of a disconnect there when we look at the probability and severity implied by our leverage model versus the CDO model.

So I guess we see a happy medium somewhere in between. But right now, I think we are hamstrung a little bit by a model that clearly is not representative of how those assets are evaluated in most parts of the marketplace.

And then the second question, I wanted to just see what you are hearing from your biggest customers in terms of their appetite for real estate. Are they developing more? Any interesting themes there?

I guess one of the things that struck us is we expected when the curve went inverted that smart, sophisticated borrowers would start shifting toward fixed rate. Obviously, in today's environment, you can pick up 30, 40, 50 basis points by going from the short end of the curve to the long end.

Hasn't happened -- and when we sit and reflect on that and talk to our customers, it's really because they are pushing very hard on the structural element that floating rate gives them, which is almost perfect liquidity. And in a world where liquidity is driving transactions much more so than value, the number of our customers who are willing to lock themselves in and say, I bought it at a great price; I believe in it; I'm going to hold it for a long time, is a lot lower than we thought.

Right now, this market is very focused on buy, keep flexible, flip, wholesale to retail -- those types of transactions are really driving the market. So when you look at our floating rate to fixed mix, you're going to see a preponderance of floating, despite the fact that LIBOR is at 5.35 and the 10-year treasury is down at 4.60, 4.70. That was surprising to us.

On the development side, yes, development is kicking in, but nothing crazy yet. I think costs have moved to a point where lenders are being cautious. It takes a lot of equity capital to get a construction deal out of the ground these days. Those are all good things. As I said, I don't think there's any dynamic we see in the real estate world per se that puts up a red flag for us about the business.

We do think, though, that there is a mentality, not just in our market but in almost all investment markets, that could change if the world macro-economic conditions were to change. And that is the big one out there that is the hardest to predict. But it is going to be the one that is going to have a very material impact on both the liquidity and probably the mental aggressiveness that is running through the business.

James Shanahan, Wachovia.

I had a follow-up question here -- the apartment and residential has consistently, I guess, throughout '03, '04, '05, been closer to, say, 5% to 7% of the total portfolio. A couple quarters ago, Jay, you mentioned that you thought there would be opportunities there and that you would look to put more capital to work in that space. With the concentration now up to 15%, is that a level -- does that represent that shift? Or is there still more to come here?

We are a little bit agnostic in terms of looking for the best risk-adjusted returns, but there are concentration limits at which point we will have to slow down. I think when we look market by market, there's no concentration in any market yet that gives us any pause for concern. So I think we do have more capacity, again, from a geographic perspective or for where you are in the capital structure.

We have done some extremely low-LTV deals, which I don't even consider exposure in these markets. They are just -- we happened to be in the right place at the right time. We were able to pick off an opportunity that has literally in our minds no risk. That, in our minds, is not exposure.

So we are very careful about thinking about value at risk, where we really have dollars and capital at risk, and making sure those concentrations don't reach an inappropriate level. Right now, I can tell you we don't feel that anywhere in our portfolio.

If you were to evaluate some of these projects, predevelopment land loans or a residential tower, construction project, what would the loan to cost be based on your attachment point relative to your loan to value that you would report for that portfolio?

I think there's two questions there. One, we are all over the board. As I said, we have done some things that are at $0.30 and $0.40 loan to cost and others that are $0.75 to $0.80 loan to cost. So again, we're looking at best risk-adjusted returns available anywhere in the capital structure, anywhere in the marketplace.

But for those that are at the higher end of the curve, it is a loan to cost. And typically, we do get recourse in positions where we are uncomfortable with the market dynamics. So we're not giving ourselves the benefit of that recourse generally. We are giving you an LTC based on just real dollars invested subordinate to us.

Again, I would argue we are cautious and conservative enough, we are looking for deals that have significant downside protection. And we think in most of the transactions that we have seen in that marketplace, given our ability to control structure, given our ability to really dictate what the customer must invest, you can do a pretty good job there of really dialing in the risk and reward you want. That is why we find that market attractive for the time being.

And one more follow-up on this question -- when you're looking at a residential construction project at this stage of the cycle and maybe one of the markets that many people believe are [toppy], do you look for -- how do you think about those projects? Do you look for a certain dollar value of committed loan sales before you would get involved? Do those loan sales -- do they have to be greater than your committed loan amount? And how do you think about nonrefundable deposits in markets like Vegas and Florida?

Again, I want to caution you -- we are looking across a very wide spectrum in that sector, anywhere from senior positions in large homebuilders to some specific projects like the type you are trying to drill down on.

You pretty much nailed some of the key criteria you would look at in a transaction like that. You're looking at the caliber of the sponsor. You're looking at the experience of the sponsor. You're looking at how many dollars they've got at risk. You're looking at how much of the market risk has been taken out through prefunded contracts that have significant hard-money deposits. You're looking at the characterization of the underlying buyers. You're looking at the quality and caliber of the subcontractors and contractors and architects.

It is a skilled business if it is done correctly. It is clearly a business we have done for a decade, in some small size, in almost every market. We believe we've got a fantastic team, a project management team on the ground level that does know that business well.

Lots of deals didn't make sense, and many of them got done anyway. Those are the ones that I think we have stayed away from and others have learned hard lessons. But in today's market, I would tell you liquidity is down. Mostly, only projects that make sense on a fairly common-sense basis are getting done. And they are coming to market and they are getting capital, and I would say it is capital that is in most cases very well-structured, thoughtfully put together.

We haven't seen -- and I get this question a lot in terms of some folks who are 100% concentrated on that business -- aren't they in deep trouble? And the answer is, not really. I think the condo conversion market is where you will see problems first. A lot of those deals simply never made sense. The rent-versus-own equation didn't work. You shouldn't buy, you should rent -- and guess what, that is what is happening.

But on the for-sale product, most of the capital structures were pretty disciplined going in. Most of them had significant presales. Most of those presales were real and not some of these fictitious syndicate presales that you have probably heard about. And those are good deals. And there aren't that many of them, but the ones that we have seen have actually been pretty attractively thought through.

And Katy, a quick one for you, please. I think in your prepared remarks you commented what the percentage of your origination volumes have been that were repeat business. And I missed that number. And can you just tell me how that compares to recent quarters?

I think it is about 52%, which is, I think, pretty representative of the business in general. We are obviously expanding our customer base through AutoStar and others in Europe. So to some degree, those are not repeat customers, they're new customers, which we think is good. But we do have a solid core of repeat business.

(OPERATOR INSTRUCTIONS). Douglas Harter, Credit Suisse.

Katy, I was wondering if you could just talk about the trend in G&A expenses you have see over the past couple of quarters, and whether there are any one-time expenses this quarter.

Sure. G&A is up. As we talked about probably almost two years ago now, as we started growing the business, we expected to have an increase in G&A to cover areas that hadn't ramped up and new businesses that hadn't ramped up.

The biggest change this year is the addition of about I think 12% additional staff, really at all levels -- senior levels, mid-levels, and really across the firm, both investments, finance and accounting, risk management. So you'll see an increase in headcount, which obviously dictates an increase in office space, which we are also incurring now.

And then probably the last thing is it is a very competitive marketplace for high-caliber talent. And so we are, in many instances, paying people more.

And with that, Mr. Sugarman, Ms. Rice and Mr. Backman, there are no further questions. I will turn the call back over to you for any closing remarks.

Thank you all again for your participation. Let me turn it over to Andy to close the call.

Thanks, Jay, and thank you all for joining us this morning. If you do have any additional or follow-up questions on today's earnings release, please feel free to contact me directly in New York. Would you please give the conference call replay instructions? And once again, thank you.

Ladies and gentlemen, this conference will be available for replay starting today, Thursday, February 22, at 1:30PM Eastern Time, and it will be available through Thursday, March 8 at midnight Eastern Time. You may access the AT&T executive playback service by dialing 1-800-475-6701 from within the United States or Canada, or from outside the United States or Canada, please dial 320-365-3844 and then enter the access code of 859527. (OPERATOR INSTRUCTIONS).

And that does conclude our conference for today. Thank you for your participation and for using AT&T's Executive Teleconference. You may now disconnect.