Thryv Holdings Inc (THRY) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the R.H. Donnelley's First Quarter 2008 Results Investor Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will be given at that time.

Please note that today's call is being recorded, as well as webcast live over the Company's website at www.RHD.com.

I would now like to turn the call over to Mr. Jim Gruskin. Mr. Gruskin you may begin.

Thank you and good morning everyone. I am Jim Gruskin, VP of Finance at R.H. Donnelley. Hosting the call today are Dave Swanson, Chairman and Chief Executive Officer of R.H. Donnelley, and Steve Blondy, Executive Vice President and Chief Financial Officer.

Certain statements made today may be forward-looking within the meaning of the Private Securities Litigation Reform Act. We call your attention to our press release for the quarter ended March 31, 2008, and the Company's Form 8-K furnished to the SEC this morning, both of which discuss first quarter results. We also encourage you to review the Company's other periodic filings with the SEC which set forth important factors that could cause actual results to differ materially from those contained in or suggested by any forward-looking statements. Copies of R.H. Donnelley's SEC filings may be obtained by contacting R.H. Donnelley, searching its website at www.RHD.com, or visiting the SEC website, at www.SEC.gov.

This transmission is the property of R.H. Donnelley Corporation and any retransmission or broadcast without the expressed consent of the Company is strictly prohibited.

During today's call we will be making references to certain adjusted figures such as EBITDA, free cash flow, and net debt. For example, costs and EBITDA exclude FAS 123 expense as well as the goodwill impairment charge. In addition, expenses, EBITDA, and free cash flow exclude the impact of certain compensation expense associated with the Business.com acquisition. Net debt also excludes the purchase accounting fair value adjustment.

Some of the aforementioned items are non-GAAP financial measures, and additional information about non-GAAP financial measures as well as a reconciliation between these items, and the most comparable GAAP measures can be found in the press release and related 8-K furnished to the SEC this morning. The press release is available on our website and can be accessed by going to www.RHD.com and clicking on Press Releases. Please review the risk factors described in the Safe Harbor language.

And now I would like to turn the call over to Dave.

Thank you, Jim. Good morning everyone thanks for joining us.

There's three key messages I want to convey today that sum up our activities in the quarter. First, we once again delivered strong revenue and EBITDA. Second, the weak economy impacted ad sales as we expected, and third, we've been hard at work in response to the cyclical and operating challenges we face. These efforts in turn revolve around three activities.

First, we are launching a major refinancing today that will diminish near-term mandatory debt repayments, extend debt maturities, and enhance our operating flexibility over the next few years. Steve will walk you through the details in a moment.

Second, we've launched an enterprise wide cost structure and process review. Our mission is to ensure that our cost structure reflects effective and efficient processes that support the operating environment we envision for the future. In addition, this effort will produce cost savings that will buffer the impact of soft 2008 ad sales on 2009 revenue.

And third, we continue to invest in our interactive products and strategy, sales force training and technology to ensure we can offer the highest value solutions to our advertisers regardless of where or how consumers search for their product or service.

Before moving on to our operating results I'd also take just a moment to comment regarding the impairment charge that we recorded for the quarter. Now while investors and analyst understand these things and how they work, and I don't believe will be surprised or unduly concerned, others that listen to these calls and webcast including our employees may be less familiar with the accounting rules. So I want to make sure that they understand the context and don't overreact.

The impairment charge is nothing more than a noncash adjustment to goodwill on our balance sheet that reflects the recent decline we've seen in the market value of our debt and equity securities. It in no way impacts our debt covenants, tax attributes, cash flows, or any other operating metrics of the company. It simply is the way that we're required under the accounting rules to markdown the goodwill associated with the acquisitions we've made on our balance sheet.

Okay, on to operating results. Net revenue in the quarter grew by 2% to $675 million, reflecting improvements in claims adjustments and the impact of Business.com. Without Business.com revenue was flat. EBITDA came in at $357 million putting us right on track to achieve our full year guidance. Our keen focus on costs and cash flow continue to drive industry leading margins and free cash flow conversion. Free cash flow of $92 million was below last year but better than planned due to timing factors that Steve will explain in a little bit.

Ad sales, the leading indicator for revenues were down 4.8% in the first quarter, consistent with our full year guidance of down mid single-digits, and reflecting an economic environment that has proven every bit as difficult as we anticipated. What began to emerge last year as only regional economic softness in markets highly affected by the housing crisis has spread to include nearly all of the regions of the country that we do business. Ad sales were down across all of the brands and included both local and national segments. Results were particularly soft in our large metro markets, but even many of our small and midsize markets are feeling the effect of this weak economy.

As I mentioned on our last conference call consumer spending and the health of local businesses in our markets is our single biggest key success factor. And although our portfolio of markets have historically exceeded national averages for growth in population, retail sales, and employment, during the last few quarters they have actually underperformed the rest of the U.S.

Small and medium sized businesses are very cautious about increasing discretionary investments in advertising because they're feeling the effects of weaker consumer demand for their products and services. And those businesses being affected by high fuel prices are feeling the pinch on the cost line as well as the revenue line.

So what are we doing about it? First, we are aggressively managing down nonessential costs and reviewing our value chain and processes end-to-end. We've already identified over $30 million of cost savings for 2008 with additional '08 opportunities under evaluation. We're further evaluating opportunities for 2009 and beyond seeking to operate as efficiently as possible without sacrificing the investments necessary to position the company for long-term growth. We are taking both a short-term and a long-term approach on this to right size our cost structure to match our business opportunities.

Now we -- while we believe it's prudent to aggressively manage costs in this difficult business cycle we also realize that we cannot save our way to success. As such we're continuing to invest in and develop the Triple Play and our interactive local search solutions.

Now we're already the leading provider of not just print, but Internet Yellow Pages and search engine marking solutions in nearly every market that we do business. And we're only in the early innings of that. But it's more than just these products. We're also working on our effectiveness in bringing those solutions to market. We're learning a tremendous amount about what works and what doesn't. What advertisers really value and what they don't. And we continue to use these learnings to refine our solutions, our pricing models, and our marketing strategies.

One example's the work our Santa Monica team is doing on the next version of DexKnows.com. We are leveraging Business.com's management and technology expertise to create a local consumer search site that delivers an even better experience to both users and advertisers by delivering better search results, enhanced performance based pricing advertising features, and robust analytics for advertisers, a scalable site architecture and a platform that will enable us to more efficiently distribute our advertiser's content to the rest of the Internet. This will not only help us generate more leads for small and medium sized businesspeople, but will improve our margins as well. We will begin beta testing the site later this year.

Another example is something we call PrepSmart, a new technology tool we've rolled out to our marketing consultants designed to deliver a wide array of marketing information supporting both traditional and digital product lines. It allows us to deliver a more consultative approach with advertisers by creating state of the art media portfolio overviews for establishing the customer's optimal product mix of print, Internet Yellow Pages, and search engine marketing. The tool dramatically reduces the time it takes our sales consultants to prepare proposals that are customized for each of their advertisers enabling them to spend more time with customers and less time in the office.

Another investment has been wireless cards for our marketing consultants. Allowing them the ability to do real-time demonstrations with local business of their visibility on DexKnows.com, and on the search engines, and how our solutions help improve that visibility. The cards also allow them to access all of their advertiser data, sales collateral, and other important information, as well as the ability to process their orders without returning to the office. All designed to make them more productive.

So to wrap up, while first quarter sale results reflected some cyclical economic pressure EBITDA and cash flow came in as planned. I remain confident that with the steps we're taking to prudently manage our cost structure and extending our debt maturities, while at the same time investing in growth in our future we will be well positioned as the environment improves.

With that let me turn the call over to Steve who will talk about the quarter in greater detail, and describe our upcoming refinancing.

Thanks Dave, and good morning. We've been quite productive on the financial front this year. Let me highlight three of our most important accomplishments.

First, we generated strong revenue, EBITDA, and cash flow in the first quarter. Second, we're launching a major refinancing program that will effectively eliminate near-term debt amortizations, extend maturities, and reduce debt principal outstanding. And third, we're making significant progress on our cost reduction program. As a result, we're confirming 2008 guidance.

Let's start with Q1 results. Q1 net revenue of $675 million increased $13 million or 2% versus Q1 '07 primarily driven by Business.com and improved claims performance. Excluding Business.com and bad debt, Q1 operating costs were down $8 million year-over-year, primarily driven by lower production, publication, and distribution costs reflecting our print optimization initiatives. Total Q1 expense including BDC and bad debt of $318 million increased $21 million versus Q1 '07. Q1 expense also reflected aggressive investments in advertising and branding. Q1 EBITDA of $357 million was on plan and represented a healthy 52.9% margin.

At the end of Q1 we recorded a $2.5 billion non-cash goodwill impairment, an accounting charge to reflect recent declines in the market price of our debt and equity securities. Again, this in no way impacts cash flow, compliance with any debt covenants, our tax attributes, or management's outlook for the business.

Turning to interest, in the first quarter we paid $214 million of cash interest while accrued interest expense of $196 million included $18 million of accretion on our discount bonds, $5 million of non-cash deferred financing fees, and $4 million non-cash purchase accounting benefit.

Now just like 2007 our first quarter bears a disproportionate share of interest payments. Our Q1 weighted average interest rate of 7.4% was down 25 bips from Q4 due to lower LIBOR and the benefit of last October's refinancing. Q1 free cash flow of $92 million also included $10 million of CapEx and $40 million use of cash from working capital. CapEx reflects the final stages of our comprehensive publishing systems integration that will complete this summer allowing the remainder of Dex synergies to be released later this year.

Q1 working capital investment primarily reflects the impact of four items. First, higher capitalized selling costs driven by seasonally high Q1 ad sales. Second, lower AP balances at the end of Q1 versus yearend due to disbursement timing. Third, higher AR balances at the end of Q1 due to slower payment patterns from advertisers which is typical in weaker economies. And four, the transition to in-house billing from Qwest in that 14 state region which will lower ongoing costs. Similar to last year, we expect working capital to release cash in the second half of the year.

During the first quarter we applied free cash flow to reduce net debt by $74 million resulting in net debt at the end of the quarter of $9.95 billion representing 6.9 times leverage. Our revolver availability remains a healthy $365 million.

This morning we're also launching a three-part refinancing with the leadership of JPMorgan and Bank of America. The summary of our refinancing plan follows. Number one, $1.1 billion of Dex West bank debt maturing next year is being refinanced with new Dex West credit facilities. This will extend maturities until 2015, and effectively eliminate all mandatory amortization over the next couple years.

Number two, we're also amending RHD Inc.'s credit agreement with outstanding borrowings of $1.5 billion to extend the maturity of the revolver and enhance covenant flexibility, and thereby accommodating additional unsecured debt. And three, as announced in a separate press release this morning, RHD Inc. is offering to exchange new senior unsecured notes for a portion of outstanding RHD Corp notes.

Though final details remain subject to market conditions, as a result of these transactions we expect our total debt balance to decline. And while our average interest expense will increase we have effectively eliminated all near-term maturities and covenant uncertainty.

Last, we're affirming guidance, excluding the impact of the refinancing. As we've said in the past, the key to achieving our EBITDA and free cash flow targets is our ability to identify and implement aggressive cost reductions. To date we've identified more than $30 million of expenses to be eliminated in 2008. We're reviewing our operations and cost structure, aligning people and processes, and enhancing efficiency and effectiveness. We expect to find significant additional and enduring cost opportunities that will further benefit 2008 while positioning the company for sustainable long-term growth when the economy recovers.

That concludes our prepared remarks. Operator, we're now ready for questions.

Thank you sir. At this time we'd like to begin the question and answer session of the conference. (Operator Instructions). The first question comes from Mr. Paul Ginocchio with Deutsche Bank. Sir, you may ask your question.

Thanks for taking my question. Just is that $30 million of cost savings, is that new or incremental? I think you implied that you're actually spending more in advertising and marketing now than a year ago, so I just want to confirm that.

Well, the $30 million in cost savings -- good morning Paul, the $30 million in costs savings is -- versus our original guidance and is allowing us to get after expenses to be able to achieve our revised guidance that we provided in February.

Okay.

The advertising investment is -- we're continuing to advertise heavily. I think in the first quarter advertising is around $17 million expense.

Okay. And I just wanted some clarification on the write-down. Again, so it has no impact on your -- the amortization of the tax asset?

Correct.

So it's an accounting versus sort of -- okay. Just wanted to be clear on that. Thank you.

Thank you.

The next question comes from Mr. Peter Salkowski with Goldman Sachs. Sir, you may ask your question.

Yes, good morning. David I'm wondering if you can give us some sort of sense on how things are progressing in second quarter? I know you guys certainly have been selling those books for awhile and what you're seeing relative to how the first quarter came out, and then I have a follow-up.

Yes, Peter. While we're reaffirming the outlook for the year, we're not providing quarterly guidance and as you know, while we have excellent revenue visibility, ad sales visibility, and you and I had this discussion a couple months ago, is not what it used to be when we were in the print only business. With the significantly higher percent of our sales that are digital sales that have these very short fulfillment cycles, they affect ad sales right up to the last day. So we just are not giving quarterly guidance on ad sales.

Any interest in letting us know what the percentage of revenue is coming from the digital side these days? Being that you brought it up.

Yes, we haven't -- as you know we don't look at the business that way, so we are not disclosing that.

Okay, and then on an accounting issue, Steve I wonder if you can help me on out. On the D&A, what's the trend line on that going forward? The number seems to bounce around a little bit from where it was. Fourth quarter was a lot higher last year, it came back down. Is the 118 the number that's going to kind of stick around, or--?

Sure, good question Pete. The current quarter is more like the trend line. Remember last year's fourth quarter included $20 million incremental amount from the trademarks in the Sprint markets changed to Embarq, and so that was a just onetime item.

Thank you. I forgot about that. And then I'm just wondering if we could talk a little bit about Vegas. I know the book was published in the quarter, how did that turn out in the first quarter relative to how it was back in the third quarter?

Well, as you know we don't give results on specific directories, but what I will tell you is if you can find a worse business environment in the country than Las Vegas right now I'd like to see it. Vegas is as difficult as I have ever seen a market in my entire career.

So you would say first quarter was worse than it was in the third quarter?

I don't have that right off the top of my head. I don't know if it was worse, but it certainly wasn't better.

Got you. Got you. And then I had a final question for Steve. And -- oh, on cost cutting. The $30 million I know you're talking about there being a possibility of being higher. So you're pretty much saying you should expect to get $30 million in the second half of the year then, or is that going -- is that already occur -- has any of that occurred I guess in the first quarter, or should we just expect it all on the out quarters. And then what's the expectation sort of, your thought of how much higher than could be as you look through other processes and plan to look at them?

I don't -- really none of it is reflected in the Q1 results yet. So that's the first part of your question. As far as how much higher it could be, it's kind of hard to say.

Okay, where are we on FTEs end of quarter versus end of year?

Boy, I don't have that number. I think the number's probably down though.

[Maybe] down a couple percent?

If you let us kind of comeback to you about that.

Okay.

I'll have that number at hand.

Sounds good. Thanks much, guys.

Yes.

The next question comes from the Mr. Michael Meltz with Bear, Stearns. Sir, you may ask your question.

Great, thank you. Good morning. I think I have three questions. On the refis, can you give us more of a sense as to what your effective rates are now in the facilities and how -- LIBOR has come down, but there's -- just trying to get a sense of dilution here from the refinancing.

As I said, Michael, our rates are going to go up. Our interest expense is going to up as a result of this, but we're removing any uncertainty. As far as the specifics go, I really don't know the answer yet. I've got an indication and I think it's -- could be 200 or 300 basis points on the debt -- the bank debt that's being refinanced. Something like that.

On -- from the effective swap rate right now you're saying?

Right.

Okay, so you're saying 1.5 billion on RHD Inc. It could be 200 bips higher and the $1 billion dollars of Dex could be similar?

Something in that ballpark, yes.

Okay. Dave, I know the question was kind of asked earlier. You're not giving quarterly guidance, but you did minus [4/8] ad sales in the quarter. Can you give a sense -- have things -- as you look forward do you think things have stabilized and I know you've reiterated your full year range. Just give us a sense as to the better, worse, the same as you look forward.

Well, Michael, what I can tell you is I have not yet seen anything in our fundamentals that indicate to me that there's been any kind of positive turn to the north.

Okay. Fair enough. Last question from me. Steve on the working capital use in the quarter what's the guidance for the full year?

I think it's use of 40 or something like that. I think it's something like -- something in that ballpark. I mean that's published Michael. I don't have it right in front of me. It's around that ballpark though.

So--

42 or something like that.

What Jim?

Yes.

So you're saying your guidance is for 40 -- a use of 40 for the full year?

Right.

Okay. And last question from me. Sorry this is four questions. Is there -- have you -- I was a bit surprised on Idearc's call earlier in the week. They started -- referred to more discounting or effective discounting, just giving much bigger ads for the same price. Can you talk about are you doing anything similarly in your markets?

Yes, Michael. We do -- I don't know exactly what Idearc does, but what we do -- we don't take a general approach to that kind of thing, but we do take a market-by-market approach to those kind of things. And if we have areas where we think that we need to instill more value into the system whether it be by a particular category or by a particular market, our marketing professionals will do an analysis of that particular market and if necessary use programs like that to help increase advertiser value.

Okay. But there hasn't been a dramatic shift in your activity given weaker conditions?

No, and -- but the other thing that I'll say is -- and we've talked about it before, our whole approach to pricing it's really changed over the last couple years where we -- our approach now is a price to value strategy by business category. So what we're doing is we have some categories in our business that have significant pricing power, north of 5%. We have other business categories that have little or no pricing power where we're not rating -- where we're not increasing them at all.

So this is a process that we've been going through for some time.

Okay, great. Thanks for you time.

Yes.

The next question comes from Jaime Neuman with Wachovia. You may ask your question.

Yes, hi, thank you. Can you comment on how Business.com is doing versus your expectations when you bought the asset?

Yes. Jaime they're doing great. It's a -- that has turned out to be a great business in terms of their -- Business.com the business, its actual performance is pretty much right on target with the business plan. And I would say the skill sets that we acquired there in terms of engineering and just -- and Internet management have exceeded our expectations and they're doing a fabulous job.

Have you seen any other departures since Jake has left the company?

Not any unexpected departures. And it's -- quite honestly that team is -- the turnover is extremely low in Business.com in general, and we've got some very, very strong retention packages in place for those folks there and it -- all signs are that it's quite stable.

Okay. Can you comment on what -- in the past you've commented on what Florida and Vegas combined did in the quarter? Can you comment on what they -- what it did this quarter?

I'm sorry Jaime, what was that question?

Florida and Vegas, what those two markets did versus -- in ad sales in the quarter? You've commented in the past, you've broken out those markets, how much worse they were than the rest of the country.

I didn't prepare that this time. Let me just see if I've got anything that very quickly could--

Want me to ask another one while--

Florida and Nevada in Q1 were the two worse performing states. I -- that I can tell you for sure.

Okay. Are you still looking for the number, is that it?

Yes. No. I'm not going to give the exact -- the specific number because I don't have it formatted that way that I'd given it to you in the past, but--

Okay.

What I can tell you is that those -- Florida and Nevada in Q1 were the two worst performing regions of the 28 states we do business.

Okay and then one last on. As far as the $30 million in cost cutting, can you just point out what areas those are? If there's anything in particular that sticks out?

Yes, it's predominantly employee related stuff. Headcounts, incentive payments, stuff like that.

Okay. Okay, thank you very much.

The next question comes from Ken Silver with the Royal Bank of Scotland. You may ask your question.

Hi. The decline in the ad sales in the first quarter, can you maybe give more detail on that in terms of was it customers pulling back to advertising, outright cancellations, decline in rate. Maybe if you could just give us of sense what were the major contributing factors?

Yes, okay, Ken. Let me try to give it to you this way and hopefully that makes sense. And maybe a good way to do it is to compare -- if we compare it to Q1 '07 which was essentially a flat quarter, and just say, how did Q1 '08 compare differently to Q1 '07, and it would breakdown like this.

So we had a -- we started with about $755 million worth of ad sales in the quarter. And of that we would normally -- or in Q1 '07 we had -- we would have had about $166 million come out of that from decreases and cancels. What actually happened is we had about $174 million of decreases and cancels, so about $8 million worse than last year or 1% of the decline attributable to that.

In terms of the advertiser increase which last -- in Q1 '07 would have been about $113 million. This quarter was only about $91 million. So we were $23 million less in advertisers buying more. Now they still bought $91 million more, but we expected $113 million. So about 3% of the delta are coming from that, and in terms of new business that we normally sell, we would have expected about $53 million in new business. That's what we would have had in Q1 '07. We got about $45 million of new business, so we're off about $8 million there, another 1%.

So if you think about the decline where you had a $38 million decline, $23 million of it is just less advertisers not increasing to the extent that they historically do, and $8 million higher decreases and cancels, and $8 million less new business.

Okay. Great. I have one other question about the bond exchange offer that you released this morning. What is the aggregate amount that you're offering to exchange? And I supposed to just add up all the num -- the maximum amounts, or is there some other number?

That's, no, that's correct Ken.

Okay. Alright, thank you.

The next question comes from Jake Newman with CreditSights. You may ask your question.

Hello. Can you hear me okay?

Yes, you're a little soft, but speak up.

I'll pick up the handset. Can you talk more about the trends in Internet advertising here how it's looking in the first quarter and talk maybe about any changes in the kind of demand you've seen. Idearc was talking about fixed -- giving way to pay for performance as an example.

Right. We don't breakout -- specifically breakout Internet from print the way that Idearc does. We just have a philosophical difference in that that our job is to use whatever products that we have, print and online, to grow the wallet share from our advertisers. We have said obviously Internet is a fast -- it's a much faster growing end of our product suite.

In terms of fixed price Internet sales versus performance based, in Business.com it's 100% performance based. So -- and that doesn't change. They don't have fixed price products. In our consumer site, DexKnows.com, it's a -- we are currently 100% fixed fee, or paid inclusion revenue there. However, one of the technologies that's being developed in Santa Monica right now for our new site that we've spoke about is that we will have pay for performance capability included in that as well.

So in terms of trends, we can't really speak to it because we only have that one pricing strategy available to us right now.

But is it showing -- is demand for DexKnows weakening at all as a result of having a fixed fee model instead of pay for performance available?

No, we're not seeing that. We're not seeing that. At least -- our experience and -- is that most small and medium size local businesses are -- they're perfectly content with fixed -- with a fixed fee or paid inclusion models. As you move up the chain in terms of sophistication of advertisers you will find more of a demand or an appetite for performance based products.

Okay, thank you.

Our last question comes from Mr. Stan Manoukian with Libertas Partners. You may ask your question.

Good morning. A couple of questions. First, of 4.8 advertising sales down could you please tell us what part of this just from the 100,000-feet point of view? What part of it was secular, and has been expected as opposed to cyclical?

Yes, Stan that's a question obviously we get a lot, and we believe it's like that it's predominately cyclical. I mean it's pretty hard to deny that we're in a very, very difficult economic environment out there. And there's a lot of things that we look to that says that as well. When we look at our -- our national sales channel which is almost 100% print, actually is performing better than the local channel. So that kind of is a strong indicator to us. The fact that we're seeing that the -- the reason for the decline is more people being conservative about buying more, rather than actually defecting from our products all together. I think that's another sign.

But we also recognize that we're in an environment right now where there's just a wider array of choices out there that advertisers can run to. So for instance, we have advertisers that they're getting behind on their bill for instance. The environment that we're in today it's a little easier for them to make a choice to say, "You know what? I'm not going to get caught up there. I'm going to go someplace else." And so is that cyclical or secular? I guess that could be argued either way.

That's fair enough. I have also question about this exchange over, and currently it appears that total savings if the exchange offer goes through in the form that you just posted this morning. You're going to save about $212 million of principal and debt, and obviously you have some carve out rooms for carve-outs under Dex media, instead of complex. I was wondering, what is total goal of sort of exchanging amount for the whole (inaudible)? Currently you're sort of doing it for 700. What is the total goal that you have?

We're really focused on what we've announced this morning Stan, and not -- don't have other plans at the moment.

Okay. And then last question that I had was about cost savings that you just announced in response for -- in response to the sort of slowdown in the -- in consumer demand. Do you believe that if slowdown continues looking forward, obviously you will have more visibility for 2009 later this summer or maybe in the beginning of fall after you sort of prepare -- start preparing your books. But do you think that in the future if revenue slows down do you think that you will have room for more cost savings or no?

Absolutely. And we think that they're significant.

Okay. Alright, thanks a lot.

Thank you. Operator, do we have any other questions?

(Operator Instructions). The next question comes from Todd Morgan with Oppenheimer. You may ask your question.

Good morning, thank you. I was just hoping you could clarify the exchange terms. There's been some confusion. If the exchange offer's fully subscribed, in other words, the -- you issue the maximum anticipated number of the 11.75, how many bonds would you be taking out of the Dex or the RHD Corp structure?

I think the number's 700, Todd.

So in other words, you would be redeeming 700 million of bonds out of the Dex Corp structure in exchange for a different number of the 11.75.

The bonds would be coming out of the RHD Corp structure, not Dex.

I'm sorry, yes. Yes. Okay. And I guess the second part of that is, can you give us any sense of the thinking behind the various amounts, the maximum amounts you'd subscribe to the various bonds?

We're really not able to comment about that, Todd, publicly. It's a private offering and what you see in the schedule there is what we're offering.

Okay, thanks then.

Thank you.

This concludes today's conference. Thank you for your participation. You may disconnect at this time.

Thank you everybody for your attention.