Sun Communities Inc (SUI) 2005 Q1 法說會逐字稿

Greetings ladies and gentlemen and welcome to the Sun Communities First Quarter 2005 Earnings Results Conference Call. At this time all participants are in a listen-only mode. A brief Question and Answer session will follow the formal presentation. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded.

At this time management would like me to inform you that certain statements made during this conference call, which are not historical facts maybe deemed forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in this morning's press release and from time to time in the Company's periodic filings with the SEC. The Company undertakes no obligation to advice or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said that I'd like to introduce the management with us today, Mr. Gary Shiffman, Chairman and Chief Executive Officer of Sun Communities Inc. and Mr. Jeff Jorissen, Chief Financial Officer of Sun Communities Inc. Thank you gentlemen. You may begin.

Thank you and good morning. First quarter earnings as announced prior to the opening of the markets today were funds from operations of $14.7 million or $0.72 per share compared to $17.0 million or $0.80 per share in 2004. Net income for the first quarter was $0.6 million or $0.03 per share, compared to $5.6 million, or $0.30 per share in the prior year. Revenues for the first quarter were 51.7 million compared to 49.7 million in the first quarter of 2004. And the first quarter results include Origen Financial's 2004 restatement, which reduced results by about $332,000 or nearly $0.02 per share.

And I would like to begin with a review of the first quarter portfolio performance at Sun. We leased 289 net sites in the first quarter, with improved occupancy basically across the entire portfolio, although nearly half of these newly leased sites are in our new community development. Thus far, in '05, we're filling 9.9 sites per day in the portfolio, while we are losing 7.3 sites per day, which represents a net daily fill of 2.6 sites, which is up from the spread of late February, where we were at around 1.2 sites per day.

Currently there is substantial traffic and demand throughout the portfolio. The sales of new and used homes in our portfolio by Sun Home Services totaled 111 this past quarter compared to 106 in the first quarter of '04 and 90 in the fourth quarter of '04. Delinquent rent of $1.1 million was at nearly the lowest level since the first quarter of 2002 and bad debt increased by related legal fees and reduced by late fees, was a net positive of $88,000. The number of repos in our portfolio stood at 555 at the end of the quarter, which was down from 648 in the first quarter of '04 and down from 610 at the end of the fourth quarter of '04.

New repossessions in our portfolio are running at an annual rate, which is about 10% lower than the final 2005 total, which again provides modest support. The expectation that our repos peaks in '03 and/or '04, right around 1400 in each of these years. And as we've discussed previously, repos represent the single most negative factor impacting occupancy -- and as they recede, occupancy stats should correspondingly improve. Additionally, with the news in our portfolio first quarter, The Manufactured Housing Institute reported that shipments from new manufactured homes for the month of February increased around 10.7% year-over-year for the month, representing the fourth consecutive month of the year-over-year double-digit increases in shipments. So, we remain again cautiously optimistic that we are starting to see this type of slow return.

The same site portfolio of 122 communities experienced NOI growth of 1.3% resulting from revenue growth of 1.2% and expense growth of 1%. While the occupancy of the same property portfolio had a net positive gain of 233 sites during the first quarter and occupancy increased from 85% to 85.6%, same property revenue and net operating income increases would have been approximately 3% and 4.3% respectively were they not negatively impacted by the loss of occupancy last year from March 31, 2004 to December 31, 2004, and by some improved cut-off for seasonal RV revenue at December 31, 2004, which is a result of the implementation of our new processing systems.

The Company retired $50 million of perpetual preferred operating partnership units and acquired one property located near Tampa, Florida for approximately $7.3 million, comprised of just under 700 recreational vehicle sites and 31 manufactured home sites. And pursuant to an authorization by the Board of Directors, the Company repurchased 69,000 shares of its common stock at an average price of $35.33 per share during the first quarter of '05. And at this time, Jeff and I would be glad to take any questions.

[OPERATOR INSTRUCTIONS] Jordan Sadler, Smith Barney.

Good morning. My first question is regarding the positive improvement you guys saw in Michigan and I guess Texas during the quarter, and even Ohio. How much -- and maybe we could start with Michigan. How much is that? What is going on there? Do you think -- and what do you think will be the impact from sort of the sluggish job economy that you are seeing in Michigan these days?

Well, I think that all eyes are towards GM and Ford as they are every 10 years or so, and there is two schools of thought. One says they threaten to reorganize once every 10 years and seem to make it through and then the other school of thought is kind of like the sooner they get this over with the sooner they can start making more than a $150 for each car they produce. And certainly in the Michigan, Roswell area, Sun's portfolio has been negatively impacted over the last 4 years or so. However, car sales overall remains pretty decent. The profitability definitely has impacted how the automotive and Roswell related companies approach their work staff and reductions.

And I think that what we are seeing at this particular time is something that bottomed out over the last 6 to 12 months. And again in these areas that we've had continued decline in occupancy, we are seeing at least stability in occupancy. Vacancy is not increasing and then some of the select areas where we have been buying the repos in the communities at discounted prices and they are able to offer the rental units. In those areas we are competing very, very favorably with the multifamily and we are in fact picking up some occupancies. So, if we were to run our current rate out, which we are not suggesting anyone do, and net occupies the leases this first quarter, we would be significantly above twice our annual budget for the year.

However, we were significantly above the first and second quarter of '04 and then had increased vacancy third and fourth quarters. So, we want to be very cautious and not use the run rate, I think that is certainly a fair statement to say that through this date we continue to see occupancy gains that are ahead of budget. We continue to see demand and all efforts of management are to see us go into certainly second, third, and fourth quarter with this above budget--

Can you remind me -- do you include rentals in the net lease site number?

Yes.

Okay that includes rentals. So, of the 289 how many of those were rentals?

I don't think we have that number for you but it is something we can certainly dig out. We don't differentiate between the 2.

How many rentals do you have in the portfolio in total today?

There are about 2400 rentals in the portfolio.

That is occupied?

Yes.

I may have the number wrong but -- I think at the end of last quarter was it 2000 or so that you had occupied? You guys remember?

Yes. That is correct. 1957 or 2000. Something in that area.

So, you are getting the most traction on -- sort of the rentals. And are these -- I guess it seems-- are these mostly used homes or new homes?

Yes. I think that when we wrapped up year-end comments on the last call I had mentioned that we will have a continued philosophy to acquire what we consider value-priced homes that are -- in our communities from the finance companies. These are the repos. These are all relatively new homes that are held for sale or lease from -- sold by the Company and returns are averaging about 15%. The money invested less the expenses to operate and repair the homes on an ongoing basis.

What are they costing you on average and what are the rents on average?

They are costing us on average rate around $28,000 per home.

And the rents are -- on the renting just a home is what -- $300 to $400 range?

Right around $600. But that is a combined rent and includes everything.

With the ?

Correct.

Okay. And then could you just -- what was the contribution from Origen and where does that show up on the income statement now?

Well, because Origen hasn't released, it is included in other income at this point in time.

Okay. And that means that you don't want to say what it is because they haven't been released, or did you take a .

It's not a matter of don't want to. We can't.

Right. I was just wondering if you were doing a reserve or guesstimating what it was rather than -- had an actual number in there.

I would call it -- what is in there a knowledgeable estimate subject to them closing their books, having their auditor review and releasing their number in probably another 2 weeks or so. I mean, what we have indicated is that included in their other income line is the effect of their 2003/4 restatement, which impacted us to the extent of $332,000. So, that number -- the restatement number is in there as well as an estimate of their first quarter results.

Okay. Moving over to the balance sheet, I noticed that inventory declined from 26 million, roughly at the end of the year to 20 million. It is down about 6 million. Can you walk me through? It looks like you sold you have about $3.5 million of sales. What happened to the difference? Maybe wasn't included in the inventory number.

Well an unoccupied home is considered inventory. So that can be a new home or pre-owned home. If the home is sold, obviously it's removed from inventory and flows to cost of sales. If in fact it moves into the rental program, it goes into fixed assets and it is depreciated. So, I guess if you want the sources and uses of that balance sheet light item, the inputs would be acquisitions and the reductions would be either sales or rentals.

Do you know these numbers, the acquisitions that were made there in the quarter, the purchases I guess?

During the quarter, we acquired 337 pre-owned homes and 460 new homes.

And then you rented about 400 and sold a few 100 or so...

And then have the rest obviously inventory, that is correct.

Maybe on the sources and uses of cash, sources and uses, you could help me out with the cash numbers, well, would be my last question. I noticed cash is down $80 million, you obviously did the redemption for $50 million, and you bought a property for sevenish, and there is $23 million for the period. What happened to the rest of it?

Well, I've to get a cash flow analysis to go through that in detail. I think there was some additional debt -- debt reduction, that was the first quarter dividend payment, probably around $12 million. So, that is going to take care of probably --

Yet your SAD was bigger than your dividend for the quarter, so that should get uneven, even money.

Okay, I see what you are saying. It actually -- you know how that is. You really end up having to analyze each item, which we haven't prepared our 10-Q yet. So, we don't actually have this statement of cash flow available at this point.

Did you put the earnest money down on acquisitions or anything like that?

.

And then just may be the acquisition pipeline, that's my last question. Thank you.

I think that as we provided long term guidance after our refinancing there were two things that we had to accomplish and we think are very achievable over the next 5 years and that is to grow occupancy back to more normal historical levels and we are starting to make some headway on that. The second thing is to utilize the cash from the refinancing for such things as the stock buyback, we bought about 1.1 million shares to pay down on the preferred and the balance obviously for acquisitions. To date, we have done about 9 communities since the refinancing, $120 million, and I think 34 of that was -- that's how we put out about $86 million of net cash proceeds. And I would say that is about 50% of where we would like to be. I announced on the last call that a very significant transaction was moving forward much slower than we had expected to close and it is questionable what will happen with that particular acquisition and beyond that we closed the one for seven million this first quarter, have about $23 million of acquisitions in the pipeline at this particular time and any given number of them in due diligence that are in different stages. So, acquisitions are a key factor in how rapid we do get to the guidance that we have given and something we are very focused on, but I think we are also trying to make sure that the acquisitions are in markets where we think we can get to substantial future growth as opposed to the softer markets. So, it is generally nothing as robust as we would like, but we are just picking them up 1 or 2 at a time.

Jay Leupp, RBC Capital Markets.

Jay Leupp here with Brett Johnson. Can you discuss a bit your -- more of your share buyback activity that you mentioned in your opening comments and how you are weighing that decision versus acquisitions and possibly new development. And then following that talk a little bit about acquisition cap rates in your markets and the prospects either for new development on your part or your competitors?

Well, I think that the cap rates certainly have come down a 125 basis points over the last couple of years, certainly a big factor, that has been the availability of very cheap debt. Cap rate ranges that we are generally looking at are seven, and it will go above or below it depending on the given asset and the given market and the dynamics of each individual property or portfolio as they come up. I think that we had shared after the financing how we have -- we are going to look as a Company of balancing the uses of cash between the stock buyback repayment of the perpetual preferred and acquisitions we were granted by the Board of Directors, the authorization for a million shares of stock, given pricing, based on the analysis that they did to acquire the stock and best use of capital. We fulfilled that million share buyback and set a target to acquire another million shares with pricing parameters that they set and we have an ongoing program in the market that allows us to be in the market to this preset program at all times buying stock under that authorization that they gave us. And anything you want to add to that, Jeff?

I think that covered them.

Did I answer your questions, Jay? I don't know --

Yes, that the share buyback given the weighted average price that you bought shares back at last quarter, I mean how did that equate to for example, doing a new acquisition at a 7 cap, was it more accretive or less accretive in your mind?

Well, I think one has to look at it over a period of time and make some assumptions with regard to how the growth is going to be layered in over that period of time. And I think that that's what we've tried to do, balance our dry powder and our availability of capital to acquire the property, when obviously the long-term capital return is greater on the acquisition. And I think if you can run an acquisition off of 7 cap rate or so and get 5% revenue growth on an annual basis, control the expenses when you look out 3, 4, 5 years, you begin to cross over the lines where you can't get a better return on the acquisitions. At the same time, I would caution everyone the acquisitions have been slower of that type than we would like to see out there, although we continue to work on them. And it's very, very dilutive and costly, it has been for us to keep the cash idle when we are paying 5% roughly in interest on it. So, the decision is obviously made by comparing those two points of view, and you'd see the results of it without giving the specifics of where the buyback is set now.

And then the comments that you made earlier about how this was the fourth month in a row of year-over-year gains in shipments of manufactured homes. In your own data points in the industry, do you expect this trend to continue, or is it continuing into this quarter? And in your view, what percentage of those shipments wind up in existing communities?

I think it's an excellent question. I don't think that we could on this phone give you a definitive response as to what we expect over the next few quarters, we are cautiously optimistic, we've been cautiously optimistic before, and the whole challenge in the industry has run 2, 3 years longer than I ever anticipated. Occupancies have decreased to levels that in 20, 30 years of operational experience amongst our staff here, we have not seen them dip as far as they have dipped. So, when we look at 4 months, when we look at a couple of quarters, and we really don't have enough to base it on to definitively tell you that we expect a rapid turnaround. I think that clearly that I would say that we are more optimistic at everything that we see, when we look at delinquencies, when we look at late payments, when we look at net increase in the occupancy throughout the entire portfolio at Sun. When we combine that with the MHI information, which I received for February, which you referred to, I think there is an indication that there is some solid slow, but momentum taking place out there and I'm trying to remember the second part of the question.

Would you just -- if you look at those incremental shipments, what percentage of those shipments in your view or your industry experience wind up even in existing developed communities as opposed to have mountain home or something -- some other difficult --?

Yes, mountain home has obviously been the large segment that pushed shipments for manufactured housing to grow to 20-year highs in the late 90's and 2000. I think that we still look for between 20 to 25% of the homes to end up in a community based lease situation and the balance to go to land home packages.

And then just lastly the one part of my first question was just new development, if you are seeing much in the way of competition, starting and building new communities and new markets.

I think that generally the cost of acquiring and building new communities today versus the very slow absorption related to a tapping industry has stalled any expansion or development with a rare exception. I think we have got 60 sites slated for this year where you have got opportunities where there are still pockets of very, very strong growth. Those areas obviously, you can look at California, you can look at certain aspects or things that are going on there, Arizona, where you just happen to have some greater demand and supply and when you compare alternative cost of housing, the differential is so great that you can do some expansion and development.

Alexander Goldfarb, Lehman Brothers.

Good morning. Just following up. Gary, your comment about California, was that in general or was that for you guys?

I think that we have, you know, carefully been looking at what's going on with the communities there. We have got one potential acquisition that we have been reviewing and what we found here is that they still are generating substantial rents in excess of what the rest of our portfolio gets just based on supply and demand and the cost factor in California.

Are these coastal properties, the property you are looking at, is it coastal or is it inland?

It's ten miles inland.

Okay, and is it a senior community or all agent?

It is a OH community.

Okay, so there is no rent control issues?

No, there is no rent control on this specific one.

Next, going back to your share buyback, I know this is the million share program. You bought 69,000 shares. Were there any other additional shares under this new program or 69 is the first?

Sixty nine are the first buyers under the second million share authorization.

Okay. Next, Jeff, can you just go over the interest expense line. It seems to have gone up, I don't know if that is because of the change in same store portfolio or maybe there were developments that were capitalized before and now getting the P&L but your debt seems to stay the same, but interest went up about almost $2 million or so?

Well, I think if you look at the levels of debt going back into the first quarter of last year...

No, I am talking Q4 to Q1.

Oh! Q4 to Q1?

Yes, it was 12.7 million or so in Q4 with comparable amount of debt over all.

I know there is only about 20 -- well, there is a couple of things here. What we have classified as perpetual POPs that had a fixed term and rate on, they used to be classified as preferred OP units and the dividend on them was in that line item below on less income allocated to minority interest. So, on this press release, those amounts have been reclassified to interest expense in accordance with the relevant accounting literature. So, that could be part of it, I know that we only capitalized, I think, $25,000 of interest in Q1 of this year, I don't have Q4's number, but it would have been hard for that to be any that getting smaller than 25,000 and I guess the rest of your question would require some more detail analysis which I can do later today.

That will be great if you can get back to me.

It is expense from Q4 to Q1.

Right and just if I understand correctly before -- on the Preferred that you are saying is now part of the interest expense line, so therefore the $50 million preferred that you just took out, we would expect the Preferred OP Unit line to go down next quarter?

That would be correct.

Great, next question is if you can just talk about the change in the same store pool, it seemed to have increased to about 14 communities and obviously there was not going to be changed and then the rental revenue increase doesn't seem as much as we would have expected given the first quarter. If you can just talk about the sites that came on?

Well, I would have to actually get a listing to identify the specific properties that were added to the same property portfolio, they would have to be properties acquired more prior to January 1 of 2004, likely 11 of those would be the consolidation of the Sun chain of properties, which occurred right at the end of '02. So, at the end of '02, we had in '03, '04 anyway they could be at -- the answer is I therefore have to look at a list to see exactly what the new ones are. The weighted average rental increase in the portfolio for Q1 of '05 was 3.97%, which is always a little bit lower than what we get for the rest of the year because it includes all of the Florida and many of the Florida communities are tied in some way safer form, they are related to CPI or to local market situations which are heavily influenced in Florida by CPI. And then of course the -- as we indicated, we indicated the reasons why we have got the -- why the revenue growth in the same property Q1 over Q1, was a little lower than what we would normally expect.

Okay, but if I look on your portfolio math in the front of this supplemental, it looks like Florida showed a large increase over 700 sites increased in Florida and are the 14 new communities that are now in the same store pool are those from Florida?

I think that would be very unlikely. I mean the 700 site increase would be the property that Gary described that we bought in Q1, so if you are comparing Q4 to Q1 that would account for the 700 site increase in Florida. And I don't think we have acquired any other properties in Florida any time in the last couple of years. So, that would not be the source. But as I said, it's on the list, it's just a matter of looking at the list and finding out what the ad properties are.

Okay that would be great because it will be helpful to understand it, because there is a 240 basis point change in the last 50 days, so it would be interesting to know if that is because of lease up or is it the new properties that are in the same store are of lower quality or there is some credit issue, is it something like that? The final question is the pending acquisition I think involved some issues. Is that part of the $40 million or so that you referenced on the last call that you are hoping to do with the recap?

I am sorry to have to re-ask that -- I missed the beginning of --

Okay, there is a property, which has been -- you wanted to acquire but I think there were some FX issues that were delaying the acquisition. Is that part of the $40 million that you are planning -- of acquisitions that are planning to be done with the remainder of the recap? More to the point is what amount of acquisitions should we model for the rest of this year?

Well I think that we are looking at $23 million for the rest of the year, which is a number that's 50% less than we were originally budgeting for the year and that is just based on what I discussed earlier that we have been very disciplined, we have not closed the one larger acquisition that we had expected to close at this time. So, that's been more like 1Zs and .

Okay, and that's the total value, that's not just equity investment, the $23 million, correct?

That's correct.

Art Havener, A.G. Edwards.

Hi, it's actually filling in for Art. Of the net sites leased this last quarter, would you see a substantial pick up in the manner, there are any type of concessions or discounts been offered at those properties?

I would say nothing out of the ordinary and in fact very few concessions at all and certainly not like we had in during 2 and 3 years ago.

It's basically been a renters market where they've been renting and we've been focusing turning the renters into sale where we can get them approved by traditional financing sources and then it is moving from other locations that naturally and typically happened as people have job transfers and things like that, but there are no significant brand concessions or anything like that.

Okay. Last conference call, you guys said its about 75% in your net loss sites more 15 in your communities in 2003 and 2004. Did that -- how are those communities performing in terms of the new leased sites?

I think that we were waiting for the quarterly results and not to put you up, but next week is our management meeting on the operations side and that kind of gets identified at that particular period of time, and what we are -- recently we are able to do it at year end, it is because we thought more confident with the results of the data and it is nothing that we have prepared at this particular time or by the next phone call over two quarters into it. You will get some sense of what's happening regionally with the occupancy increases in the portfolio certainly if they are going at the rate that they are going out right now. We think the data will be much more meaningful.

Okay. I think the cap rates on the acquisition you guys made in Tampa?

I am looking for a piece of paper that Jon Colman usually drops after me. I am not safe right around 7.5, based on annualizing the last year's income with whatever rental rate increase was already contracted for.

And then also, would you guys put your book value per share at in what component of Sun Home Services goes into that?

Well, I mean, Sun Home Services has the rental homes and the new home inventory are probably their primary assets which are substantial. So, but I have not done any kind of like a consolidating analysis of net asset value for share at this point in time, so I can't share any specifics with you on that. I mean, if it something that you're really interested in we can follow up later.

Okay. That's good. That's all I had.

Brandon Strazer, UBS .

What's the difference between the 2 million and other income in the operational quarterly disclosures and then on the actual income statement that reports 1.6 million? I think in the sale of operations you have 2.16 million.

Yes, it's ancillary revenues have been added to interest in other income combining to 2160 in the supplemental to add up and they're broken out separately in the footnote. So, 1657 plus 503 guess it is a 2160 that you're seeing in the supplemental data.

[OPERATOR INSTRUCTIONS] Jordan Sadler, Smith Barney.

Just one other housekeeping item. In the other adjustments line item net, was it about $1 million bugs during the quarter? What is in there -- I don't seem to see a gain on land sales up top. Is that just the interest rate swaps and cap agreement?

What exactly are you looking at Jordan?

Other adjustments net and in page 10 of your supplemental a million bucks. It's right below the perpetual preferred distribution.

Include the valuation adjustment related to interest rate swaps and the interest rate cap agreement. There is no gain on land in Q1, and it would include nonreal estate related depreciation, which I'm not certain what that number is, but we know what it represents. That's what the million would be, most of its going to be the interest rate cap adjustment.

Which -- is that the same as the 359 that's on the following days, that valuation adjustment?

Yes. I believe it should be, but I actually don't do the mechanics to put in this together.

And then backed out a couple of lines later I see, other adjustments 406,000 is a net gain of 600,000 this time, where I guess it looks a little bit bigger than usual?

Well, I will get with the experts to put this together and find out and I'll get back to you.

Super.

Dan , George Weiss Associates.

One question. I just wanted you to maybe talk in a little more detail about the acquisition environment, specifically you know just the nature of your competition with the sellers are, what kind of product you are seeing on the market, and then sort of talk about cap rates as well. You are just talking about severance and cap rate. What kind of property they employ, with occupancy, what kind of, if it's going to little more detail?

I think, that clearly were, it's been challenging for us. There was a plenty of acquisition opportunities that the nature of which we are not interested in acquiring. They are very challenged properties. They have suffered through lot of the occupancy loss, perhaps, as I said before these are more matured communities that have not required a lot of focus or attention in many years and what's happened to the industry in the last four or five years, the owners have woken up and discovered that their cash flows aren't what they were, but they perhaps need to invest large sums of money in refurbishing and CapEx, and all of a sudden they're deciding they want the cap rates that were offered down, two and three and four years ago, when the communities were in a much better shape. So the discipline has been to stay away from those communities and the focus, and those cap rates, we are asking the same cap rates as the better communities. The focus is then to look at the stronger markets or the markets where we find the rent or other ancillary revenues have not been developed as much as we think we can develop them or the expense savings due to being able to separate immediate utilities in those types of things that have not been done. So, its kind of low hanging fruit for us, as well as the areas that have more positive job growth and more a size of positive economic indicators, so those are the things that we are focusing on, and then the third thing that we have been focusing on is the RV communities that have been performing very well for us for the last five, six, seven years, and are insulated from the difficulties that manufactured housing has had with regard to the financing, with regard to the repossession from the other things that have taken place in those communities. So, the one community in Tampa, the 700 sites, about 31 of them have the sites and we will look at a couple of more opportunities that we have tied up similar to that. So, it's just a lot of discipline and a lot of caution to make sure that we are buying the right communities, just not buying communities.

Can you talk little more about the competition?

Yes, I think that the competition is in the area of the lower quality communities where they can get 75 to 80% financing at again very well interest rates and still get a decent return on their equity and then slide out what happens with occupancy and CapEx. I don't think there is any significant different competition than there was there five years ago or ten years ago and then side out what happens with occupancy and CapEx. I don't think there is any significant different competition than there was there 5 years ago or 10 years ago. Certainly, Equity Lifestyle, I think, are too busy with a lot of things that they are doing and we have not come across them on the competitive nature. Shato no longer exists. Hometown is out there from time to time, but I don't really think that we have been bumping heads on the acquisition side. So, it is not so much an issue of competition as it is an issue of identifying the right quality opportunities.

Great, thanks.

[OPERATOR INSTRUCTIONS] Gentlemen, there are no further questions at this time.

On behalf of the company, I would like to thank everyone for participating in the first quarter. Certainly we are eager to watch these trends continue and look forward to sharing good news with you at the next quarterly earnings release and conference call.

This concludes today's conference. Thank you for your participation.