Vector Group Ltd (VGR) 2007 Q1 法說會逐字稿

Welcome to Vector Group's first quarter 2007 earnings conference call.

Before the call begins, I would like to read a safe harbor statement. The statements made during this conference call which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the Company's Securities and Exchange Commission filings.

Now I'd like to turn the conference call over to President and Chief Executive Officer of Vector Group, Howard Lorber. You may begin.

Thank you, Operator. Good morning and thank you everyone for joining us on Vector Group's first quarter 2007 earnings conference call. With me today is Ron Bernstein, the President and CEO of Liggett Vector Brands and Liggett.

On today's call I will provide an overview of our business and review Vector Group's performance for the first quarter of 2007, and review the performance of Liggett Group and Vector Tobacco for the quarter and will discuss recent industry developments. After that, we will take your questions.

Let me start by saying that I am pleased to report that the market momentum that we developed in our conventional cigarette business during 2006 has continued into the first quarter of 2007. Liggett achieved substantial year-over-year earnings growth in the first quarter and recorded the best first quarter earnings in recent history. Despite a first quarter 2007 decline of 4.2% in total industrywide wholesale shipments and a generally challenging environment, Liggett was able to increase its wholesale shipments by 11.6%. According to Management Science Associates, that shipment growth substantially outpaced all of our competition. We will review these results in more detail when we discuss the numbers and during Ron's review of the industry and Liggett's performance.

With respect to Quest, its status is unchanged since our last conference call. We continue to consider the potential implications of the proposed FDA legislation on using Quest as part of a smoking cessation program.

Before discussing the financial results for the quarter and the year, I would like to note that our liquidity remains strong with cash of approximately $138 million at March 31, 2007. In addition, we held investment securities and partnership interests with a fair market value of approximately $108 million at March 31, 2007.

Now I will review the key financials for the three months ended March 31, 2007, for Vector Group and Ron will then review the key financials for our conventional cigarette business and our Vector Tobacco new technology cigarette subsidiary. Our conventional cigarette business includes sales for both Liggett Group cigarettes and conventional cigarette sales from Vector Tobacco.

Our financial results include the March, 2007 settlement between New Valley and the U.S. government under which the Company has received $20 million. This settlement related to a litigation commenced by New Valley in 1994 seeking damages from the United States government for failure to launch one of Western Union's satellites. We recognized a pre-tax gain in the first quarter of 2007 of approximately $19.6 million as a result of this settlement.

For the first quarter ended March 31, 2007, Vector Group revenues were $133.9 million compared to $117.7 million in the 2006 first quarter. The Company recorded operating income of $25.7 million compared to operating income of $20.2 million in the 2006 first quarter. Net income was $23.1 million or $0.37 per diluted share in the 2007 first quarter compared to net income of $10 million or $0.17 per diluted share in the 2006 period.

Now I will turn the call over to Ron Bernstein who will update you on the performance of Liggett Vector Brands and Liggett.

Thanks, Howard. Good morning, everybody. As Howard indicated, we were very pleased with both our financial and volume performance during the first quarter of 2007. Our success for the quarter was a direct result of the long-term growth and pricing strategy that we developed and implemented in 2005. In addition to attaining year-over-year wholesale shipment increases of 11.6% according to Management Science Associates, Liggett also achieved year-over-year retail shipment increases of 9.2%. In both cases, these growth rates were by far the highest in the industry.

The trend that began during 2005 of declining shipments for many non-participants of the Master Settlement Agreement continued in the first quarter and we expect those trends to continue throughout the the year. Of note, we have also seen some non-participants as well as some MSA participants fail to meet escrow deposit or MSA payment requirements that were due April 16, 2007. This is not unexpected as most of these companies sold their cigarettes during 2006 at prices that were insufficient to cover their MSA-related obligations. Unfortunately, and despite warnings from us and others in the industry, the states have failed to take any action to prevent these imminent defaults to the best of our knowledge. As a result, we believe that the states' lack of action has emboldened some companies and that once again, these companies are currently selling cigarettes at prices that will not cover their 2007 MSA-related obligations. While overall allocable share legislation has resulted in non-participant volume declines, the failure to effectively deal with those companies that are not complying with state MSA requirements continues to create instability in the market as well as meaningfully reducing revenues to the states. We have made these arguments to the states in an effort to remedy this obvious problem and we will continue to press this issue with them.

Notwithstanding that issue, we remain committed to success in this market and going forward, our approach will continue to be to strategically invest to build on our existing base with specific focus on achieving best-in-class volume growth. We believe our performance, which I'll detail further in a moment, confirms that our strategy is working.

But first let me turn to the numbers. For the three months ended March 31, 2007, our conventional cigarettes generated revenues of $132.8 million compared to $115.7 million for the corresponding period in 2006. Operating income for the three months ended March 31, 2007 was $35.5 million compared to $30.4 million for the 2006 period. For the three months ended March 31, 2007, Vector Tobacco's operating loss was $2.3 million compared to an operating loss of $3.5 million for the prior year period.

Now let me add some detail regarding Liggett's first quarter sales performance and overall industry activity. As previously noted for the first quarter 2007, wholesale shipments of our conventional cigarettes increased by 11.6% compared to the prior year and overall retail shipments were up by 9.2%. During this same period, overall industry wholesale shipments were down 4.2% and industry retail shipments were down 4.4%.

While it is certain that a portion of the industry decline relates to late 2006 activity by our competitors being paid back in the first quarter, there also appears to be some level of general industry softness. This softness is certainly reflected in the first quarter volume declines experienced by Philip Morris USA.

The bulk of Liggett shipment growth in the first quarter related to Grand Prix, which grew by 143% in wholesale and 97% in retail shipments, respectively. Both Liggett Select and Eve experienced wholesale and retail declines during the first quarter compared to the prior year period but had difficult year-over-year comparisons because of promotions that began late in the first quarter last year. Liggett Select and Eve wholesale shipments declined by 20.9% and 18.3%, respectively, while retail shipments decreased by 10.6% and 8.8%. Going forward, year-over-year comparisons for both of these brands becomes somewhat easier and we expect to see improved results.

Of note, we also saw growth in our private label and partner brand business. We are very pleased with the continued success of Tourney, the brand we manufacture for Speedway SuperAmerica, and the more recent success of Sunoco's Silver Eagle brand and Quick Trips Bronson brand. We look forward to this success continuing throughout this year and beyond.

As I mentioned in our last call, effective January 1 2007, the MSA payment rate increased by approximately $0.70 per carton for all cigarette manufacturers and importers. Approximately $0.55 is released to a contractual increase in MSA expense and $0.15 is related to the annual inflationary adjustment. As a result of this increase, virtually all companies effectively raised prices prior to the end of 2006. As the scheduled increase in the payment rate was widely known, both wholesalers and retailers elected to increase on-hand inventories which led to a substantial trade buy-in of product late in the year. In addition, many manufacturers and importers shipped additional amounts of product to their own field warehouses to hold for 2007 sales. This activity resulted in shipments being pulled forward into 2006, which in turn had the effect of increasing the value of the MSA grandfathered share for all companies that have such share for the full year of 2006 and reducing the value of MSA grandfathered share in 2007.

For Liggett, the effect of the artificially inflated industry shipments resulted in approximately $2 million of additional earnings in '06 and will result in a corresponding industry shipment related earnings reduction in '07. We realized approximately $500,000 of that decline during the first quarter.

As a note, we benefited from taking the anticipated MSA increase last October which kept our early 2007 business far more stable. Additionally, it again demonstrates the benefit of our MSA grandfathered share which allows us to invest in our brands while increasing profits.

As mentioned during the last call, we believe that General Tobacco failed to make a required payment under their separate agreement with the MSA settling states and based upon our understanding of the agreement, continues to be in default. To the best of our knowledge, the states have not taken any action regarding this situation.

In addition, we understand that General Tobacco may have failed to make their full required payment on April 16, 2007. While we are bewildered by the states' apparent failure to diligently address the situation, we will continue to evaluate our options in pursuing this matter independently.

In terms of the competitive landscape, the market leaders continue to pursue aggressive and often conflicting trade programs and Reynolds American continues to aggressively promote both premium and discount products at retail. Reynolds also continues to attempt to use its trade programs to drive lower priced competition out of stores by trying to ship volume to their higher priced discount brands via their so-called EDLP program. Since these requirements often conflict with Philip Morris' program and limit retailers' ability to offer discount products desired by consumers, we are hearing that many retailers are angry with these programs. Further, we continue to believe that these programs may be anti-competitive.

On the litigation front, in the dispute involving the non-participating manufacturer adjustment provisions of the MSA for 2003, 42 of 43 state courts have now ruled that the MSA clearly provides that arbitration rather than litigation is the correct way to resolve the NPM adjustment dispute. We are pleased with these rulings which obviously support the position that has been taken by us along with other participating manufacturers. Several additional state court rulings on this issue are pending.

Additionally, the independent economic consulting firm used to determine that the MSA was a significant factor contributing to the loss of market share of the participating manufacturers for 2003 made a similar determination for 2004.

In conclusion, I'd like to say that we're very pleased with the start of 2007 and look forward to continuing these positive trends throughout the year. Thanks for your attention and back to you Howard.

Thank you, Ron. Before I finish the prepared remarks, the Company once again reaffirms that our cash dividend policy remains the same.

Now Operator, would you please open the call for questions?

Thank you. At this time, we will open the floor for questions. (OPERATOR INSTRUCTIONS) Our first question comes from Mitch [Pena,] RBC Capital Markets.

Good morning, gentlemen.

Hi, Mitch.

Hi, a few questions. First off, I wanted to ask a question I asked last time related to [Douglas Elliman] and the [Pru] debt. Can you give me an idea, I think it was a question for B.K., what's been paid down this particular quarter and what the paydowns have been historically?

B.K.?

Yes.

Hi, Mitch. How are you?

Good.

If you look on page 40 of the 10-Q, and it's under Note 12, Douglas Elliman's debt net of discount to Prudential Investors was approximately $40.3 million at the end of March. And of that amount, about $22.4 million was associated with the senior debt to Prudential and the remaining $17.9 million was associated to -- with the subordinated debt to Prudential or Vector or New Valley. And during the quarter, Douglas Elliman paid down around $3 million of debt.

And can you give us an idea what that's been historically, that paydown?

Last year, the number was around $9.5 million.

For the whole year?

Yes. And his -- and we -- the debt began at 52.5 -- the senior debt began at $52.5 million and the number now is $22.4 million, so around $30 million has been paid down since 2003.

That's pretty fast. Next question is related to the cost of goods sold. There was a pretty good jump this quarter. Can you explain that?

Ron?

Well, I mean the cost of goods sold is up, obviously the revenues are up, and to the extent that on a relative basis the cost of goods are up slightly higher is related to a number of factors. One is, is some increase in cost, which is fairly modest, but includes increase in depreciation expense up in the cost line as well as the MSA increase that's reflected up above the line where the benefit is provided below the line. And third, we have the tobacco quota buyout payments which are predicated on the prior quarter, which is a higher earnings quarter -- sorry, higher volume quarter than in the fourth quarter than the first quarter. So we have to pay at a higher rate or accrue at a higher rate in the first quarter based upon fourth quarter sales. So those make up the basic differences between costs and revenue.

I'm sorry if this is some place in there and I missed it, but what's your national market share right now? What's your MSA exemption?

Our national market share is about 2.6 and our MSA exemption is about 1.95 of market, of the total industry, which equates this year to about -- we're estimating around 7.1 billion cigarettes.

And the 2.6, that's a bump, isn't that? I mean you've increased?

Yes, I mean it's been generally increasing over the course of the last year and a half.

And are you profitable on the amount above the 195?

Yes, we are. It's marginally profitable, but profitable.

Okay. All right. So my next question relates to the proxy actually. It seems that you have got enough cash on the books to to take care of the final payoff of Medallion and anything that I saw in the proxy. And I'm just wondering why such a large bump to 150 million shares? You've got about 58 million outstanding now. That means you have another 42 million authorized that you can still issue. Why such a big bump? Is there something coming up? What's the reason for that?

Mitch, it's more than 58 because you all have options out there, okay? So I think with all the options, where are we, B.K., in the 70s?

No, we're in the 80s. Howard, I'm going to get the number. I'm looking for it.

Thank you. Our next question comes from --

Wait, wait, wait, wait. I'm not done.

Hold on, just hold on. Mitch, it's in the 80s and I think we just think it's good prudent to have it if we need it, if we have to do -- if there's another convert. Nothing is being considered at this particular time.

Right, Howard. It's 84.

Yes, but you don't want to wait until the last second if you have to do it.

Okay. Well, I guess the reason I'm asking is because frankly the converts have been very costly in terms of dilution to me as a shareholder and I'm hoping we don't need to do any more converts, particularly given the cash in the bank and the number of assets you have outstanding. So as a shareholder, I just want to --

We have no plans at this particular time to do anything.

Okay. Then I guess my last question is now that the business seems to have stabilized, it actually is looking very strong, I'm just wondering if you have any plans to give guidance going forward?

No, I don't think we have any plans to give guidance. I think that this year on the Liggett side, there was an increase on the MSA payments, which therefore theoretically should be more money to us because of the exemption. So I think we will play it out through the year, and then maybe make a decision whether we review the dividend policy or anything else between now and the end of the year to see if the increase really sticks and we're generating enough cash to make sense to do something.

Okay. And that MSA, I think Ron mentioned, is $0.75?

No, that was $0.70 cent a carton, right Ron, additional this year?

Right.

I think to us it means about 20 --

Its effect -- yes, $20 million.

If it sticks, meaning if they don't start discounting and so forth. So we're going to play it out for the year and see if that extra $20 million sticks.

So it's $20 million on your current sales assuming no growth, nothing changes?

It doesn't matter because we will be above the exemption so it's $20 million.

Oh, I see what you're saying. Okay, I'm with you. All right. Thank you, guys.

Okay.

Thank you. Our next question comes from Andrew Shapiro, Lawndale Capital Management.

Hi guys, thank you. I have a few questions if you could help me here. Can you update us on the New York property market, how and when -- well, actually I know how and when the Douglas Elliman cash doesn't seem to be patriated, but it looked like New York is somewhat of an aberration of the national market environment because Douglas Elliman's EBITDA for the March quarter, I mean, is up huge from the December quarter. I don't think you have year-over-year numbers, so I can't tell, but it looks like EBITDA was $10.4 million for the March quarter of this year. What was it last year, same March quarter?

Do you have, B.K., there?

Yes, I do. Howard, it was $6.3 million and our last 12 months EBITDA Douglas Elliman is $36 million.

Well look, the fact is they say real estate, the old cliche, real estate is local.

Yes.

The fact is there's probably four or five good markets in the country. New York City, the Hamptons, which we're in both of those, Palm Beach and Aspen, where we're not, and maybe parts of California. Other than that, the country is pretty --

So New York and Hamptons still remains robust?

Very strong, especially on the top end.

Okay, so if it remains very strong and on the top end and you get $10.4 million this year versus $6.3 million last year and it seems $6.3 million last quarter, you're trailing $36 million EBITDA might even be on, we will call it on the rise, until you anniversary this stuff. You're dealing with maybe, and I know you're not -- I'm not asking to pin it down, around $40 million of EBITDA. And am I correct? When I look at this, I see about $40 some odd million maybe in debt, right?

Yes, that's right.

And the multiples that were going on in the market, I think isn't there like a comparable that was a [Fendon] affiliate, you're at what, at a 6, 7 times multiple EBITDA level is the comparables out there?

I think the [Realigy] transaction to Apollo was a bit little higher than that.

Okay.

But that's a different business. That's a franchise business --

Yes, that's true.

-- somewhat less of a risk. But on the other hand, they're getting hurt from the perspective of they're all throughout the whole country and most of the country is pretty lousy.

Right, so I'm just wondering here is, so when applied that kind of multiple, you've got like a $280 million valuation on the Company minus its debt $240 million. Vector still owns 50% of Douglas Elliman, doesn't it?

Correct.

So we're dealing with 120, some type of very large asset value that Vector owns in -- through its 50% interest in Douglas Elliman. What are, I guess, the plans, the thoughts in terms of communicating and/or monetizing the value of Douglas Elliman to Vector that is obviously not reflected in the current Vector market price?

Well look, we -- the board meets often and we consider different alternatives. There's nothing I really want to comment on except to say that we will do as we always have done to -- with the shareholders or try to do for the shareholders is do whatever we can to benefit them and so we always are considering options for all parts of the Company.

Is there thoughts of Douglas Elliman possibly tapping the public markets while the going is good here and I guess gaining its own public market value, Vector a little bit of liquidity, but obviously shareholders of Vector would see and be able to monetize the benefit of the Douglas Elliman valuation?

As I said, I'm not going to comment on anything strategic as to what we may or may not do. But as I said, we -- the Company is run to benefit the shareholders. That's why we pay big dividend, that's why we do the stock dividend every year. Anything we can do to increase the value, we are considering.

Okay, in terms of that dividend historically the Company has not earned sufficiently in terms of overall income the full dividend and it had a return of capital component that used to be entirely return of capital and the amount of return of capital has been diminishing over the last few years illustrating, frankly, that Vector is becoming more profitable. We are now here in May and you do have the NASA settlement gains that came in. What is your current visibility regarding the taxability of the 2007 dividend stream that we are currently receiving?

Well, the good news and the bad news is I think we're down now to about $30 million of NOLs.

That's correct.

And about $16 million of credits.

Well, it's always good to use those up sooner rather than later.

Exactly, so I guess that's the good news and the bad news. So that's good. The bad part of it is we're going to become a pretty big taxpayer pretty soon.

Right. Now in terms of the dividend distribution to us, the return of capital calculation, I don't know, is that even a lie on the NOL issue? Is vector with the NASA gains earning enough this year that your visibility on the 2007 dividend is that it's going to be pretty much no return of capital?

B.K.?

Yes, right now our projections show it will be 100% return of cap -- excuse me, 100% taxable this year and 0% return of capital.

Okay, so the Company has at least earned and is carrying its load in that respect then. Can you update us on the two hotels, the Hawaii Hotel? At what point do you expect to see operational improvement having invested in the retrofit now several years ago and where are we also on the Washington D.C. St. Regis remodel and what your plans are there?

As it relates to the Hawaii Hotel Sheraton, we are discussing ways to monetize our investment, which I think we mentioned last time. There is nothing to report yet at this particular time. As far as Washington is concerned, we think we bought it quite cheap when you look at the marketplace today. We're in the midst of the renovation which I believe will be completed what -- fall, we're hoping, B.K., open in the winter?

Yes, that's correct.

As it relates to real estate, we have sort of been traders. It's hard to do in this market because everything is so expensive but we think we have two good properties. I think we basically have all our investment pretty much out on Hawaii, right B.K.? Or maybe we have a few dollars still in, but I think the refinance gave us most of our capital back. And we will be looking to do something similar or if we have a good buyer, we will be happy to sell it.

Right. Now is the plan in the St. Regis is that they would sell off some of those units as condos or is it to be rented out as hotel or it's too soon to tell?

Yes, it's too soon to tell at this point.

Now, the [Ladenberg] note was converted or it either was exchanged or is exchanging into Ladenberg stock.

We will exchange, subject to the shareholder approval that they're going to get this summer, I guess.

Okay, and do you anticipate that the Ladenberg stock will be distributed to Vector holders as it had been in the past?

We're thinking about it. We're thinking about the tax consequences and we have not come to a decision.

Okay. And in terms of, we will call it investor relations, appreciate these calls, appreciate you being open ended in allowing the questions and all that. You're a smaller tobacco company out there, but you're still one that participates in the industry. What efforts, if any, are you guys doing in terms of expanding of the following on Vector within the analyst community above and beyond the Jefferies kind of consumer product guys, or specialty retail guys, whatever they are?

We really haven't, okay, and that's not saying that we shouldn't. And it's something that we have in mind and probably if we had a good analyst at a major firm, we would like that.

Yes.

But nothing is on the horizon right now.

Because you're really not easily treated in the comparables, and one ought to consider, because of the huge value created in Douglas Elliman, is finding a way of communicating, okay, the Douglas Elliman piece is worth X dollars a share, whether it's $2, $3, whatever dollars of Vector share, and then they value the rest of the Vector on your cigarette cash flow. You're a very compelling comparable here.

I surely agree with that.

Right. So, you guys agree with that and you have a lot of securities, the converts and other financings things you do, it would probably lower your cost of capital to spend a little more effort on that investor relations approach of getting coverage a bit here to enhance us all.

I agree with you.

Great. Thank you.

Thank you. Our next question comes from Judy Hong of Goldman Sachs.

Hi, everyone. Just got a few questions on the cigarette business. Ron, you cited the industry softness earlier in the year. Can you just share your views in terms of whether you think this is temporary or you think there's anything with the high retail prices and the marketplace going on that that may be just more of a secular weakness?

Yes, I think there's two things. First, the -- as I mentioned, the first quarter was, was somewhat affected by the activity that occurred at the end of last year with the MSA increase and the pushing of a lot of product by various companies into the marketplace, which naturally deflated the first quarter. However, there also is some general industry weakness and I think that that's best reflected in Philip Morris' numbers, because obviously they engage in that kind of activity at the end of the year less than many other companies do.

And I think that the softness relates to some general trends. I think that there clearly is an effect on the increasing prices that come about because of the excise tax increases that are occurring and -- state by state and also the smoking restrictions that occur. So I think that those are clearly issues.

There are also some issues of inequity in the marketplace. There's been pretty substantial growth in the roll-your-own category and the little cigar categories. Those really are reflected or based upon the much lower tax rate that these products have. They're taxed at about 10% of what cigarette excise taxes are, which -- and obviously they're cigarettes. So that's something that's being looked at and I think that there's some movement to make adjustments on. And I think in general though that there continues to be movement within the industry in terms of folks moving from higher price brands to more competitive discount products.

Okay. And have you seen or are you anticipating to see any changes in terms of the strategy of Commonwealth now that it's part of Imperial?

Really, I can't give you any input there. Obviously Imperial is an international company, and they have got international standards and guidelines that they operate by. They have a company that's profitable and successful in Commonwealth, so there's no telling what they're going to do and we're just looking at it from the standpoint as we do day by day that they are one of the competitors that we deal with. So we watch their activities and make adjustments periodically based upon what's going on. But I don't -- there's no particular insight that we have relative to what they may be planning.

Okay. And do you have any views in terms of the likelihood of the potential federal excise tax increase next year?

As I understand it, that's pretty much up in the air right now and has not gotten a lot of support and interestingly has gotten some opposition on the Democratic side in the House. So I think that -- it would strike me that at some point, there will be another excise tax. I don't think there's been a federal excise tax increase since 2001. They have deferred to the states, which have been raising excise taxes dramatically during that same period. But it's certainly possible. We're hopeful that if there is some sort of excise tax action that that will at least present an opportunity to correct the imbalance that exists with those other products that I mentioned before. But I think at this point, it's less than 50/50 that there will be an excise tax increase.

Okay, thank you.

You're welcome.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from [Mark McMann, Tedeschi McMann.]

Hey, good morning guys. Congratulations on a good quarter.

Thanks, Mark.

Most of my questions are actually asked so this will be actually pretty brief for me. What exactly is the pricing shares between Liggett Select and Grand Prix at this point?

There is about a $2.50 gap between the two brands.

So would you be like -- would Grand Prix be like a super premium or super deep discount premium and Liggett --

No, no.

-- a discount brand?

The wholesale price on Grand Prix right now is $11.99 a carton and that is at a level that would be -- it sort of borders between the top of the deep discount and the discount depending upon how you want to categorize it. There's still product being sold out there at $9.99 a carton and some less. And really the -- that product is the product that I was referring to earlier when I talked about those companies that are not selling at a level that's high enough to cover their MSA obligations.

What would you put the ceiling at on this brand given the market environment that we're in? Do you think that you can take any other additional pricing power or are you sort of regulated to what the industry does in terms of the pricing on Grand Prix?

Mark, we anticipate pricing, pricing is very different than it used to be. There -- while you do have events like the MSA increase, which trigger some sort of general market increase, that's really the exception rather than the rule. Companies are making pricing decisions on an ongoing basis and we do as well. We look for opportunities. We look to create a balance between volume growth and, and pricing. And we started Grand Prix at $9.99 a carton, so as you can see, it's come up a couple of dollars since the beginning, in late '05. So while I'm not going to predict to you either what the ultimate volume levels will be or what the ultimate price will be, we do anticipate that the brand will be a focus brand for us on an ongoing basis and that it will be a successful brand that's providing profit to the Company.

And lastly, where is Eve categorized now?

Eve is a discount brand and it's -- the price on Eve is slightly higher than that of Liggett Select.

Okay.

But it sits firmly in the midst, middle of that discount category.

Okay. All right. Thanks a lot, guys. Congratulations.

Thanks, Mark.

Thank you. Speakers, at this time there are no further questions so Mr. Lorber, I'd like to turn the conference call back over to you.

Thank you everyone for participating in today's first quarter conference call. As always, Ron or myself or B.K. always available for any questions you may have. Feel free to call us. Have a good morning. Thank you.

Thank you. This call has now concluded. You may now disconnect at this time.