Innovate Corp (VATE) 2002 Q3 法說會逐字稿

Good evening ladies and gentlemen and welcome to the Primus Telecommunications third quarter 2002 financial results conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

I would now like to turn the call over to Mr. Jordan Darrow, vice president of Primus.

Mr. Darrow, you may begin.

Thank you. Good afternoon everyone and welcome to Primus' third quarter 2002 financial results conference call and web cast. I am Jordan Darrow, vice president of investor relations of Primus.

For those of you who have not yet received the earnings release, it has been posted and can be viewed on our web site at www.primustel.com. However, here are some highlights.

In the third quarter of 2002 Primus set a record level of $26 million EBITDA. The company expects EBITDA for the full year 2002 to be in the $100 million range. We attained positive free cash flow in the third quarter. Our operating income reached a record level of $6 million. Our revenue increased 4 percent over the prior quarter and our cash balance increased by $11 million in the third quarter.

Representing Primus on today's conference call are Paul Singh, chairman and chief executive officer, John DePodesta, executive vice president and Neil Hazard, executive vice president and chief operating and financial officer. We will begin with formal remarks from management regarding the company's third quarter performance and recent developments. This will be followed by a question and answer session.

Before we begin, please be advised that the statements made by the company during this presentation that are not historical facts are forward looking statements for the purposes of Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. These statements may include but are not limited to revenue and earnings projections, statements of business plans and objectives and capital structure and other financial matters. Forward looking statements may differ from actuality and rely on them as subject to risk. Factors that could forward looking statements in this presentation could differ materially from actual results are discussed in the company's Form 10-K and 10-Q filings with the Securities and Exchange Commission. These filings may be obtained from our web site at no cost. The company is not necessarily obligated to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

I now have the pleasure of turning the call over to John DePodesta.

John.

Thank you Jordan and good afternoon ladies and gentlemen.

It may not be readily recognized but a subtle but significant shift of focus has occurred for PRIMUS. Over a year ago we announced that our goal was to be a survivor. Given the environment in which that goal was announced, many considered it an extremely challenging if not an overly optimistic objective.

But buoyed by the cumulative stellar performance we report today, I can now declare that PRIMUS is a survivor. And our focus going forward is now to concentrate on how we grow our profitability for the benefit of our stakeholders. The reason that we are able to make this shift is a consequence of our dramatically improved and sustained operating performance combined with a much-improved balance sheet.

Indeed, the third quarter results had accelerated that progress. Revenues, again, grew this quarter at a sequential rate of four percent over the prior quarter and we added over 300,000 customers in this quarter alone. Gross margins improved. Costs and debt were reduced. EBITDA reached a record level of 26 million or 104 million annualized.

Which is more than triple that of the third quarter 2001. And to top it off, we achieve record operating income and had positive free cash flow. And we aren't done.

As our guidance for the next quarter projects further improvement. As we focus on our new objective, we will seek out situations where we can judiciously deploy our precious capital to generate profitable growth. Our recent transaction involving the U.S. retail customer base of cable and wireless is a good example of how such an outcome can be creatively structured.

We will have more to say concerning our growth initiatives when we furnish our guidance for 2003 early in the next quarter next year. Ideally, to bolster our prospects for additional acquisitions as well as to fuel organic growth, access to additional capital would be desirable. As the company continues to improve its balance sheet and key operating and financial ratios, we believe that our ability to access additional debt and equity capital are substantially enhanced.

Let us examine some of those key ratios. At the end of the third quarter, our net debt to annualized EBITDA ratio was slightly over five times, as compared to almost 24 times one year ago. We are approaching the range of respectability. Another key ratio, interest coverage, has improved from .37 a year ago to 1.5 times for the most current quarter, an improvement of over 300 percent.

It has been encouraging to experience the recent rise in our stock price. Over the last quarter there appears to be an improvement in the telecom sector generally. While challenges still lie ahead, the market seems to sense that the major disasters in telecom may be behind us. This positive bias and the general sentiment together what we would like to believe is the delayed recognition of the substantial progress PRIMUS has made, may be the causes of the recent activity in our stock.

While encouraging, let me assure you that we are hardly content and recognize that our stock has a lot of ground to make up. To that end, we are committed to pursue profitable growth and further debt reduction to provide the key basis for upward momentum in our share price to reward our loyal investors. That is our mission and responsibility.

I'd now like to turn it over to Neil to report on the quarter.

Thank you, John, and good afternoon. I'm very pleased to report that we continue to achieve exceptional operating results for Primus Telecommunications Group in the third quarter and at September 30th, 2002. These are one of the best quarterly operating results we have every achieved in our history. In an adverse economic climate and a troubled telecom sector, Primus has been able to grow revenues significantly from the second quarter while others have decreasing revenues. We achieved near record gross margins and we delivered record-breaking EBITDA of $26.2 million, which is over $100 million per year EBITDA run-rate and there's more to come in the fourth quarter.

We also continue to reduce our long-term debt, which is now $613.7 million at the end of September. Our quarterly expense on this debt has been going down and is now approximately 15.5 million per quarter. We now have positive EBITDA to interest expense coverage of 1.7 based--1.7 times based on the $15.5 million run-rate for the fourth quarter and this ratio will approach two times by year-end.

We also achieved record-breaking income from operations in the third quarter of almost $6 million. And best of all, we generated $11 million of cash in the third quarter after paying all of our interest expenses, working capital, cap ex and debt payments. Our September-ended cash balance, restricted and unrestriction, is $79 million versus June of 68 million. We've delivered significant sequential quarterly revenue growth of $9.3 million from Q2 to $261 million in the third quarter. This should put us solidly over the $1 billion revenue mark for the total year 2002. Our customer base increased during the quarter to 2.8 million customers. Our gross margin reached a near-record high of 34.4 percent of net revenues and $90 million. This continues to reflect firming of prices in the market, higher margin data and Internet revenues, lower costs for carrying our traffic, and more traffic carried over our own network.

SG&A for the third quarter was $63.6 million, which is down to 24.4 percent of net revenue which is a new record low for Primus in the past two or three years. We continue to rationalize, downsize and eliminate sub-scale and EBITDA negative products and businesses during the quarter. The net result was achievement of record-breaking EBITDA of $26.2 million, which is 10 percent of net revenue, also a new record high for the third straight quarter. Our interest expense was $17.6 for the quarter, which is a recent low point due to our continuing debt reduction efforts. Cap ex spending in the third quarter was $8.6 million. Our new cap ex commitments are success-based only to support new customers and revenues. For the full-year 2002, we see cap ex spending in the range of $25 to $30 million.

For guidance for the remainder of the year, we continue to see modest revenue growth and increased EBITDA. For the total year 2002, our goals remain revenues of $1 billion and EBITDA in the $100 million range. Efforts to reduce our long-term debt continued during the third quarter, and we negotiated a reduction of $5 million with one of our vendor debts. Our total long-term debt at the end of September was $613.7 million with annual interests payments of approximately $62 million per year. And we ended the quarter with $79 million total cash, restricted and unrestricted.

So in summary, our business is doing the best that it ever has in a tough economic industry and capital markets environment, and we continue to work to increase our revenues, reduce our costs, increase EBITDA, reduce debt, and generate cash.

Paul Singh is here with us, and I'd now like to open it up for your questions.

Thank you. We will now begin the question-and-answer session.

If you have a question, you will need to press the one on your touch-tone phone. You will hear an acknowledgement that you have been placed in queue. If your question has been answered and you wish to be removed from the queue, please press the pound sign. Your questions will be queued in the order that they are received. If you are using a speakerphone, please pick up the handset before pressing the numbers.

Once again, if there are any questions, please press the one on your touch-tone phone. One moment, please.

We have Chris Roberts from Tejas Securities Group online with a question. Please state your question.

Good afternoon, guys. Thanks for taking my call and congrats on a solid quarter.

Two quick questions - first, am I right in my calculation of a favorable working capital adjustment of $16 million?

The - I calculate that the fund - yes, working capital was favorable during the quarter. We did generate cash from working capital. My calculation is approximately $7 million.

Seven million? OK.

Seven million was derived from working capital.

OK, thanks. And second, could we get some background on the elimination of five million in vendor debt? Is that what the $3 million payment was for during the quarter?

No. The - again, it was - won't disclose who it was. It was one of our vendors.

Right.

And it was a negotiated settlement. It involved very little cash. The $3 million that you see was, you know, net - those were cash payments for primarily principal payments on capital leases. So ...

OK, so that was amortization of existing cap leases.

Yes, the vendor debt negotiation involved a number of different items, but actual cash was very, very little.

I see. Did that elimination of the five million vendor debt occur after the close of third quarter numbers? Because when I compare the vendor debt balance, it seems like it only went down one million to 153 million versus 154 million in 2Q.

No, that's correct. And - no, it happened, you know, as of - as of the end of the quarter - September 30. You had some additions on there of some new assets principally we took an additional circuit on the Southern Cross Cable System between Australia and the U.S. And, you know, as you know, that is - we've got a vendor financing arrangement with the Southern Cross Cable System. So that was, you know - you know, five million came off. That was in - add-on. And the reason for that is that our traffic has grown so much in Australia for the Internet traffic and we are now the second-largest DSL provider in Australia next to Telstra. So, we've had tremendous success and take-up with DLS circuits and new customers, and as you know, all the Internet traffic has to go back and forth between the U.S. So instead of using and other providers for overflow, you know, the economics were right to put the traffic on our own facility.

Right. So net/net then your debt went down by one million?

Basically, yes.

OK. Thank you very much.

We have from on line with a question.

Please state your question.

How are you, guys? Just I wonder if you could explain or give a little detail on the Cable & Wireless acquisition that you're making, what kind of cash outlay that'll be?

You know, we had a separate press release on that in September and it's a rather unique deal because the way it's structure is they are, you know, shutting down their network getting out of the voice business in the U.S. And the structure was that they will transfer - we purchased their customer base and they want to transfer their customer base to Primus. And the way it's structured is that we only pay for the customers that actually do accept Primus and get transferred over. So it's really a - what we owe is really a function of how many customers come to Primus.

And the amount - the amount for each customers that we would owe has been financed by them over a two-year period. So there's - there is a down payment and the rest is financed over two years.

OK, so it's not in a huge way?

No.

OK. Thank you.

That's correct.

Thank you.

We have David , a private investor, on line with a question.

Please state your question.

Congratulations on a great quarter. I just have two quick questions. The first on the growth of the customer base, approximately 300,000 customers added. That seems to be a little over 10 percent of your customer base. Is that all done through internal growth? Are we seeing a fallout from WorldCom? How were you able to accomplish it?

The second question would be for Neil Hazard, do - are we going to see any change in the depreciation/amortization leveling out at 20 million or is it - should we see a decrease in the upcoming quarters of that? Thank you.

The - I'll take the first. On the customer base, couple of different things going on. You know, yes, we did grow up to 2.8 million customers. Our - that's a combination of factors. You know, first, that our ARPU, our average revenue per customer, you know, had - did decrease slightly because, you know, one, price; the second is there's a recession. People tend to, you know, conserve, spend less on phone calls, you know, particularly international ones during a recession. So, you know, we have to have more customers to generate the same amount of revenue.

The fixed-line customers did - retail customers did increase during the quarter. And in addition, we had particular success in Europe with our prepaid international calling cards. We hit a record number of customers and record amount of revenue for international calling cards in Europe, which, you know, are pretty accepted, very big business over in Europe, more so here than in the U.S. So they're widely used by all, you know, all different types of customers. So the combination of those, you know, will, you know - it accounts for the increase.

On your second question, depreciation/amortization, as you know, under the new standards, you know, we have stopped amortizing our goodwill. And, you know, whereas we do have to re-evaluate it every year we don't amortize goodwill anymore. We do still amortize things like customer lists that were acquired through acquisitions and those have a typically short lifetime. So, you know, yes, you know, it should -- we're not adding fixed assets. So, yes, it should be, you know, out they're not growing the rate it has in past years.

OK. If I may make a comment on the customer base. One, it is mostly internally generated customers and the second part I think is important is, just like Neil said, during times the average revenue per customer comes down slightly but the key asset is the number of customers just as the economy improves and each of the customers spend a little bit more money that would also be a catalyst for our EBITDA growth and revenues.

We have , a private investor online with a question.

Please state your question.

Yes. Again, congratulations for another great quarter. A couple questions on cable and wireless. You mentioned in your press release expected revenue of around 150 million with a associated expense around maybe 32 million or rather the acquisition costs around 32 million. Can you comment on what expectation there might be as to how much of that 150 might actually hit the bottom line? Can you give us an indication as to how profitable that business is and when you might actually start putting those customers online?

The project of moving all those customers over is a very complex one involving, you know, a lot of different teams from, you know, network, you know, the CLEC, the bell companies, the local exchange carriers, back off the systems, billing, et cetera, et cetera. So we have -- so far we have received FCC, Federal Communications Commission, approval as well as most of the 50 states approvals for those transfers. So that was the first step and I'm happy to report that we've accomplished that and right now the teams from both companies, Primus , are working very closely together to start this whole migration process which, again, a lot of it has to be done independent on the LECs and the local carriers. The actual, you know, ultimate outcome of how much revenue is, it will be dependent, as I said, about -- on how many customers, you know, are successfully over. The 150 million was our guess at the time for when all is said and done but it will take a period of time to wrap up to that.

The $32 million figure was sort of a maximum amount that we would pay if the majority -- most of the customers did come over but, as I mentioned before, the good thing about the contract for us is that we only pay for customers that actually migrate over. So it's less than that revenue comes over not be paying less. As we say in the press release, all of this is in process. We will, hopefully, start to see some of those revenues coming on stream in the first quarter and, you know, it will be a gradual ramp up next year and it is, you know, this business is profitable for us, it's good gross margins and, you know, our -- we do expect good, positive EBITDA off of that revenue. So it will be accretive to our EBITDA.

OK. Two other questions regarding Cable and Wireless again. I note that you apparently are trying to deal with or anticipate dealing with the independent contractors that previously worked for Cable and Wireless. Can you comment as to what impact their presence may have? As I understand it's your intent to have them promote the PRIMUS line, if you will, so whether you can comment on what impact that might have either in numbers of sales reps in the United States or anticipated impact on additional revenues.

And then lastly, regarding your balance sheet in light of the heightened scrutiny telecom's and other companies are getting, is there anything that PRIMUS might deem to be an eventual write off in regards to recent regulatory pressures or what not? Is there anything that might be coming up in terms of a one-time write off or something like that?

On the first question, I can't , I think you're referring to people that we term as agents and most of the business that had in the U.S. was through independent contractors or agents. And that actually sits very, very well into PRIMUS' structure because as you know we had purchased the assets of several years ago out in Fairfield, Iowa, and they had all the systems and all the set up to handle agents business through agents.

And so we actually have excellent systems and excellent, you know, Web sites and everything. Excellent customer service to these agents. So we, you know, they're contracts with Wireless are transferred to us so they are our agents and, yes, we do intend to keep them. And what's more important is we do look for them to generate more business in the future and more revenue as they expand, you know, their business over what they have today.

OK.

Regarding the balance sheet, you know, as you know, we did take a fairly significant write off of goodwill and fixed assets at the end of December of last year. And there are some new accounting standards as you point out, that have come up and we are, you know, evaluating those.

You know, I can't speak for what's eventually going to happen in December but I'm pretty confident that most, if not all, of the write offs were taken last year and that, you know, won't - there aren't any, you know, really big, significant write offs that we'd be forced to take this year.

OK. Thank you.

We have Romeo Reyes from Jefferies & Company on line with a question. Please state your question.

Hello. How are you doing?

How are you doing?

Good, Romeo.

Good. Good. I have a couple of questions for you. Can you perhaps go over the, you know, margins on wholesale and also on retail? And can you perhaps tell me - I don't know if you went over this previously, but can you perhaps go over how much of your traffic is on net versus off net and what the corresponding margins are there?

The - there's really no significant changes in gross margins from last quarter. You know, our wholesale margins, you know, I think we've said in the past, you know, range anywhere from, you know, high single digits to mid double digits.

Retail margins for domestic services can be in the range of 35 to 45 percent. For international they can range as high as 60 to 70 percent depending on the countries and the routes. The increase in the margin for this quarter, you know, as I said was really a function of, you know, more customers, more minutes and lower, you know, network costs from our providers and a better retail mix.

We're selling more data Internet services and, you know, those of course are higher margins up from the 70, 80 percent range.

What's the mix right now between wholesale and retail?

It's 76--the revenue's 76 percent retail, 24 percent wholesale for ...

And can you just go the, you know, movements of cash in the quarter. I'm trying to reconcile my cash flows here. You had 26 million of EBITDA, you said you had a positive change of seven million, net interest appears to be about 18 million out, so that gives me cash flow from operations of 16 million or so, if I added that up correctly. What am I missing?

I think you need to add in also the allowance for doubtful accounts, our sales allowance, which is a non-cash item.

And that was six million?

Yes, of seven million so I think that the cash provided from operations is $20 million for the quarter.

OK, .

But after interest paid on it.

Great, thank you very much.

We have Vik Grover from Kaufman Brothers online with a question. Please state your question.

Hey, guys, congratulations. Looks like I still owe you a trophy.

Still waiting for this.

Well, we'll have to have one made for you, probably. I've just got a couple of questions, a lot has already been asked, but first thing, just looking at the minutes, can you talk about the decline in domestic minutes in the Americas? Why were they down so sharply sequentially? Is that wholesale or is that a sign of your grooming of sub-scale customers and where do you see that going for the fourth quarter? Second question, I don't know if it was asked. If it was, I apologize, but can you give us the contributions to the quarter from the past deal in Canada? And maybe discuss the integration of that entity. And then a last question kind of from a higher level, can you talk more about your Internet Telefany strategy, especially the Microsoft deal, and I think it was four countries, you know, what are you planning further with Microsoft and what do you see in the other countries that you can do to leverage your network? Thanks a lot.

Just a on the minutes, I think that's really attributable to wholesale that, again, focused more on international. The minutes have shifted over--also minutes have shifted over much more toward Europe and less in the U.S. and passport online, again, that was fairly recent and I think a little too early to tell you, the integration is just starting on that one. But the--we are very proud of our voice-over Internet services and, you know, we have been quietly making, you know, a lot of progress on those services. Right now, today, our--Primus' viewer IP network reaches over three hundred cities around the world in over one hundred countries, so it is a huge global network for and today we are carrying 2.5 million minutes per day on on that network. As, you know, I think we've spoken in the past, you know, our network is all Cisco based so it's a brand name known and, more importantly, you know, our network is open network architecture, which means any, you know, company around the world can hook up to us, it's not proprietary like some of our competitors and we have--we have our own in-house backroom systems which track all the traffic and the minutes and the billing, you know, which we own and run and are very, very good. Some of the, you know, new things we've been doing is, you know, we have, if you noticed by a couple of press releases, we have teamed up with several large PTTs now, large carriers, who are starting to accept as a service and we've announced a deal with the PTT in Columbia and south America. We also have a deal with a PTT in Peru, Malaysia and Barak in Israel is the second largest carrier. And as well, you'll see some announcements coming forward as we do have some deals in the works with wireless providers in both Latin America and Europe.

The Microsoft deal - and so, you know, it's a very extensive V-over IP network today carrying a lot of traffic. The Microsoft deal is kind of a new add-on, which, you know, starts to go after the retail user of V-over IP, and, you know, as you know, you know, we have - when you buy any computer now with Microsoft XP, when you click to the icon of "Make a Phone Call," now you'll see Primus listed as one of those choices. And we've now rolled that out in seven countries today - Australia, New Zealand, Malaysia, Singapore, Canada, U.S., and the U.K. And, you know, it's - we had a - and planned in the future - I think near future would be continue in India, Brazil, other countries - other Primus countries . So, it has pretty extensive worldwide rollout, and again, whenever you buy a computer with Microsoft XP Primus.

Now, we haven't been - you know, there's - we're not - there's a lot of potential with the revenue - you know, we've done which means we really haven't advertised this. We haven't spent a lot of money announcing things like that, but, you know, so far we have over a thousand retail customers who have already signed up for the service and we're carrying about 100,000 minutes a day over for the Microsoft V-over IP product.

So I imagine because you're not really paying any - you're not originating access, what would the margins on that retail business be? I mean where do - what should we be thinking of? Maybe a 50 percent - 60 percent margin product?

It's in that range, yes. I mean, you know, we've - we also - you're right. You don't pay access, but we also price it accordingly to where you lower the price and make it cheaper for someone to make a phone call via their computer versus picking up the landline phone.

OK.

But, yes, they are - they are very good margins, and they're, you know, certainly the same or better than our other retail services.

And just as important is, you know, as you extend it and as the trend towards getting PDAs and Microsoft software in the cell phones, I think it also positions us as you see more and more of technology in handheld wireless devices. So country network MSN deal and more, you know, countries opening up, this also positions us in the future to use this technology as the wireless world develops. And Microsoft is going to be a big part of it.

So, in that case, you'll use this technology to basically circumvent maybe, you know, high international calling rates and you'll initiate calls out of your cloud to cell phones?

We will do - there are all kind of applications ...

Right.

... in the future.

Thanks a lot, guys. I've got to go to the trophy store.

Once again, if there are any questions, please press the one on your touch-tone phone.

We have from on line with a question. Please state your question.

Hi, guys. Can you talk about volume and pricing I guess subsequent to quarter-end I guess October and the first part of November? And as we look at your growth cash flow going forward, is it mostly going to come from increased revenues in gross margin or is there anything to do on the G&A line going forward? Thank you.

You know, we really - we're just finishing reporting the third quarter, so I'm not sure we're ready to - we have too much data so far on the fourth quarter. But, you now, our - as we said, we expect modest increases revenue, so, yes, our minutes, our volumes, you know, continue to, you know, stay the same to increasing in October and November and, you know, customers keep increasing. So, you know, those are the same type of trends, a continuation of the third quarter trends.

You know, the cash flow, again, it's really, you know, derived the old fashioned way, we get customers, we bill them, we collect it, and, you know, we - you know, our goal is to keep increasing the cash flow from operations and increasing our cash. And, you know, there's - the SG&A I think, as you notice, it did tick up a little bit in the third quarter. So, you know, I think all of the low hanging fruit has been obtained and we've gotten a lot of efficiencies. But that's not to say there's more to be done because there's still more SG&A to be saved in terms of consolidating call centers around the world. As you know, General Electric, for instance, I think has moved most of their customer service over to India. And, you know, you think you're calling somewhere in the U.S., you're actually calling India to one big center.

We started that in Europe where we've set up one call center in Glasgow, Scotland, to service all the Western European countries. And, you know, I think there are further opportunities to continue those consolidations and, you know, may consolidate with U.S. and Canada and so forth. So there are - there are more but, you know, it won't be as steep a decline as I think you've seen in the last six quarters or so.

And one question on cap ex, you guys reiterated the cap ex number for this year. This is ample spending in terms of - I mean, does it do anything - any problems with your network spending this kind of cap ex at these kind of levels?

No. I mean, our network is great. We have announced - told people in prior calls that we had a huge cap ex spend and network build in 1999 and 2000. We spent about $200 million per year building the voice network, the overlay data network, the Internet access network, the DSL network in Australia.

So I think you're really seeing that we had two years of very, very heavy capital spending. We built the network, it's all state-of-the-art, you know, equipment and fiber and everything else and now you're just seeing now where the traffic is starting to catch up to is and use it. And, you know, the cap ex is really just to support, you know, new customers and new equipment. We don't really have any need to expand anything. And it works great. The quality's great and it's working fine.

OK. Thanks, guys.

We have , a private investor, on line with a question.

Please state your question.

Hi, guys, congratulations on a great quarter.

Thank you.

Thank you, .

I'm interested in the new groups that have been purchasing large block of shares, particularly the latest 13G from Brenner Investments five million shares. You guys been in contact with these guys and how they were able to get so many shares on the open market, basically my question? Also with and RS Investments, also buying big blocks the last few quarters. Can you comment on that, Paul?

, the only comment I would make is that, yes, we are aware of the identity of those major shareholders. We're delighted to have them as part of our shareholder base. We think these are very committed shareholders to the company. And particularly with respect to the Brenner Group and , they have over the last couple of quarters accumulated for their public filings a fairly substantial holding. And we view them as investors for the long term that recognized a real value in the Primus stock and I think are reaping some of that reward currently.

With respect to how they have gone about accumulating their positions, I'm really not privy. That's within their . .

singh Now was there any relationship with the shares that left their hands into these groups?

Whether or not there were any block trades that were effected, that may have been the case.

singh And also the Cisco 1.2 million shares also might have been?

Again, that could have been a block as well.

singh OK. So you guys are monitoring blocks of groups that want to get out and kind of hoping that big investors might want to take those blocks?

No we don't -- we don't necessarily -- we don't have any exchange going on.

singh OK.

That happens in the marketplace.

singh Right. OK. That's all I have. Thank you very much.

Thank you, .

We have time for one final question. Our last question comes from from .

Please go ahead with your question.

Yes. Hi. I would like to know if you have any covenants -- I mean trade facilities and, if so, what are the covenants on the trade facilities.

We have two which you might term bank or credit facilities financing accounts receivable. One in Primus Canada against the Canadian accounts receivable and the other in Australia funding the Australian accounts receivable and neither of those have covenants and other than that, that's really our home -- our only bank debt. The only other covenants that apply are the ones contained in our high yield bond securities.

Thank you very much.

OK. That concludes Primus' third quarter financial results conference call. Replay information can be found on our web site at www.primustel.com. The replay information will be available in about an hour and can be accessed until the end of November. That's for the telephone conference call. The web cast will be available indefinitely.

We thank you for joining us this evening and hope you have a good evening. Bye.

This concludes today's teleconference. Thank you for participating. You may now disconnect at this time.