威斯康辛能源 (WEC) 2006 Q3 法說會逐字稿

Good morning and welcome to the Wisconsin Energy 2006 third-quarter conference call. Before the conference call begins, I will read the forward-looking language.

All statements in this presentation other than historical facts are forward-looking statements that involve risks and uncertainties which are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in the Company's latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission, could cause actual results to differ materially from those contemplated.

During the discussions, referenced earnings per share will be based on diluted earnings per share unless otherwise noted.

This conference is being recorded and all participants are in a listen-only mode at this time. After the presentation, the conference will be opened to analysts for questions and answers.

In conjunction with this call, Wisconsin Energy has posted on its website a package of detailed financial information on its 2006 third-quarter results at www.WisconsinEnergy.com.

A replay of today's remarks will be available approximately two hours after the conclusion of this call. And now, I would like to introduce Gale Klappa, Chairman of the Board, President, and Chief Executive Officer of Wisconsin Energy Corporation.

Thank you, Colleen. Good morning, everyone, and thank you for joining us on this conference call to review the Company's 2006 third-quarter results.

Let me begin as always by introducing the members of the Wisconsin Energy management team who are here with me today. We have Rick Kuester, President and CEO of We Generation; Allen Leverett; our Chief Financial Officer, Jim Fleming, General Counsel; Jeff West, our Treasurer; and Steve Dickson, Controller.

Overall, I am very pleased with our third-quarter results. Allen will review our performance in detail in just a moment, but as you may have seen from our earnings package this morning, we recorded earnings from continuing operations of $0.60 a share in the third quarter of 2006. This compares with $0.56 a share of earnings from continuing operations in the third quarter last year.

Now I'd like to spend just a moment on our continuing effort to upgrade the energy infrastructure in Wisconsin. Our Power the Future plan is fundamental to the principle of energy self-sufficiency. The key components of our focus on self-sufficiency include investing in combined cycle gas-fired units at Port Washington, north of Milwaukee; the construction of two supercritical pulverized coal units at Oak Creek, which is south of the city; and our proposal to build up to 200 megawatts of new wind generation.

Now as many of you recall, back in November of 2002, the Public Service Commission approved the construction of two 545 megawatt natural gas fired units at our Port Washington site. On July 16 of last year, the first unit at Port Washington went into service on time and on budget. Engineering for the second unit went into service on time and on budget. Engineering for the second unit is now essentially finished and most of the equipment has been delivered to the site. Construction of the second unit is currently about 22% complete, tracking on schedule and on budget. The unit is expected to be in commercial service in time for the peak summer season of 2008.

Now let's turn to the status of the two new coal-fired units at Oak Creek. Activity at the site began on June 29, 2005, following the Wisconsin Supreme Court ruling that allowed us to move forward. Since that time, we have made significant progress on engineering, procurement, site excavation, foundations, structural steel, the coal handling facilities and the construction of the cooling water tunnel.

Earlier this year Bechtel Power Corporation, our primary contractor, finished moving approximately 6 million cubic yards of material to create the platform for the plant's main power block. During the second quarter, the boiler foundations for Unit 1 were completed, and we also began to erect the structural steel for the unit. During the third quarter, we continued erecting structural steel for Unit 1 and the steel has now reached an elevation of 210 feet. The final boiler height will be about 280 feet.

In addition to structural steel, Bechtel has been installing the boiler air ducts, the coal silos, and coal piping in the main power block. Foundations for the Unit 2 boiler and the turbine generator pedestal are well advanced and Bechtel has also completed the main underground cooling water system on the site.

We have started forming the chimney shell and we've begun to lay the foundations for the air quality control equipment.

Construction of the water intake system is also progressing quite well. Drilling of the water intake tunnel started in September. In addition, all four down shafts in the lake have been drilled, three of which have been sleeved with 12-foot steel casings. And the major upgrades we're making to the rail infrastructure and coal handling system are on schedule. We expect these facilities to be turned over to the utility next summer as planned to support coal supply to the existing power plant at the site.

So backing up now and looking at where we stand, engineering for the Oak Creek expansion is about 75% complete. Procurement of the engineered equipment and materials is 93% complete. And overall at the end of September, the project stood at almost 19% complete. We continue to be very satisfied with the progress at the site.

Now as you know, there are four major permits needed to build the facilities at Oak Creek. These include an air permit, a wetlands permit, a pollutant discharge elimination permit, and finally, a permit from the U.S. Army Corps of Engineers. We have received all of these permits and each remains in effect unless and until it is overturned by a court or an administrative law judge.

Now in September of last year, we resolved all the legal challenges to the air permit.

Also in February of this year, we resolved the outstanding legal challenge to the wetlands permit.

On the third permit, the Wisconsin Pollution Discharge Elimination System Permit, a contested case hearing was fell during March of this year. On July 10, a Wisconsin administrative law judge upheld the decision by the Department of Natural Resources to issue the permit. In August, however, the parties opposing the permit filed for judicial review of the decision in Dane County Circuit Court. A briefing is scheduled to be completed this December, and a decision is likely to be rendered in 2007.

Of course, we cannot predict the outcome of this appeal, but we believe that the administrative law judge thoroughly considered all of the issues and properly upheld the DNR's issuance of the permit. I would also point out that no new issues have been introduced in this appeal.

And finally, the fourth permit, from the U.S. Army Corps of Engineers, was received in May of 2005. To date, no appeals have been lodged against this permit. Our plan remains to have the first unit at Oak Creek in service in the summer of 2009. The second unit is scheduled to follow one year later in 2010.

We are also investing in one of our other highly efficient coal-fired plants, our Pleasant Prairie station, which is just north of the Illinois border. In the fourth quarter, we expect to complete the installation of new pollution control equipment which includes an SCR for NOx control and a scrubber for SO2 removal. The total cost of these improvements for both units at Pleasant Prairie is expected to be approximately $285 million. Unit 1 at Pleasant Prairie, by the way, recently ended the longest continuous run in its more than twenty-year history. A run of 517 consecutive days.

Now touching on the subject of renewable energy. As we described to you in March of this year, the state of Wisconsin passed new legislation. And that law requires 5% of our state's electricity to be supplied by renewable sources by the year 2010 and 10% by the year 2015. To meet this mandate, we need to obtain approximately 210 megawatts of additional renewables by 2010 and another 610 megawatts of renewable energy by 2015.

The new law does allow the Public Service Commission to delay implementation of the renewable portfolio standard if it becomes too expensive, lessens reliability, cannot be served by adequate transmission, or cannot be permitted on a timely basis.

We have already started developing new sources of renewable energy to work toward complying with the 2010 requirement of 5%. Last year, we purchased the development rights to two wind farm projects, and we had planned to build wind turbines for the combined generating capacity of up to 200 megawatts.

This project is now expected to cost up to $360 million, excluding capitalized carrying costs during construction. Our cost estimate is being driven by the rising cost of materials, high market demand for the equipment, and a weakening of the dollar against foreign currencies. We filed for a Certificate of Public Convenience and Necessity with the Public Service Commission at the end of the first quarter. Technical hearings are scheduled now for November 29, and we hope to receive an order from the Commission early in 2007. If the project is approved, we expect that it will be a traditional utility rate-based investment.

Now moving to our nuclear operations. Operators at our Point Beach nuclear plant safely shut down Unit 2 last week to begin a scheduled maintenance and refueling outage. The start of the Unit 2 outage marks the successful completion of a breaker to breaker run at Point Beach of 461 days of continuous operation.

As many of you know, a breaker to breaker run occurs when a nuclear unit generates electricity continuously between refueling outages without any down time. This marks consecutive breaker-to-breaker runs at our two Point Beach units; the Unit 1 run concluded in the fall of 2005.

And as we announced in February, we are conducting a formal review of our options for the future ownership and operation of Point Beach. The range of options that we initially considered include continued operation by the Nuclear Management Company; a third party operator other than NMC; a return to in-house operation of the plant by Wisconsin Electric; and a sale of the Point Beach facility.

In June, we began a market test of two of these options, a third party operator and a sale of the facility. We have now recently added one other option for consideration. This option would involve the sale of a majority interest in the facility, say 60%, with a majority owner operating the plant. If we selected this option, we would take back a purchase power agreement for the capacity sold, and the capacity we retain would remain on rate base under traditional regulation. Toward the end of this year, we will evaluate the bids we will receive against in-house operation or continued operation by NMC. We plan to complete our analysis by the end of the year.

Now I will turn the call over to Allen, who will give you more details on our financial performance in the third quarter. Allen?

Thanks, Gale. As usual, I'm going to focus my remarks on earnings from continuing operations, but information regarding earnings from discontinued operations is included in the earnings package that we posted on our website this morning.

As Gale mentioned, earnings from continuing operations were $0.60 per share for the third quarter versus $0.56 per share in the third quarter of 2005. On a consolidated basis our operating income was $131 million versus $128 million in 2005 for an increase of $3 million. Operating income for the Utility Energy segment, which is comprised of Wisconsin Electric, Wisconsin Gas, and Edison Sault, was $122 million compared to $119 million in 2005 for an increase of $3 million.

Now positive earnings drivers in the third quarter included improved natural gas margins due primarily to price increases, and on the electric side of our business, favorable recoveries of fuel and purchase power costs. The pricing increases associated with our gas distribution business contribute about $9 million and the favorable recoveries of fuel and purchase power costs, relative to last year, totaled about $8 million.

The primary negative drivers in the quarter were milder weather as compared to last year, and higher O&M costs. While our weather was warmer than normal for the quarter, the prior year was unusually warm. On a year-to-year basis, we estimate that weather reduced our earnings by $3 million as compared to the prior year. In addition, last year our O&M costs were reduced by $10 million due to a onetime favorable settlement of a contract. There were a number of other smaller items that reduced our operating income by a net of $1 million. So when you add up all the positives and negatives, our regulated operating income was up about $3 million when compared to 2005.

Operating income in the Non-utility Energy segment, which is primarily W.E. Power, was up approximately $1 million. This slight increase reflects a full quarter of operating income from the new Port Washington unit that was placed into service in the middle of July of 2005. Corporate and other affiliates had an operating loss of $4 million in the third quarter of 2006 compared with an operating loss of $3 million in the same quarter of 2005.

Taking the changes for each of these segments together brings you back to the $3 million increase in operating income for the third quarter of 2006.

Other income was up $3 million in the third quarter. This change related to increased AFUDC and carrying costs as well as additional earnings from our investment in the American Transmission Company.

Interest expense decreased by $3 million in the third quarter. Now while our gross interest costs actually increased by $3 million as we are building our power plants, our capitalized interest increased by $6 million in the third quarter when compared to last year.

Income tax was $44 million in the third quarter. This represents an increase of $4 million from the same period last year. The effective tax rate in the third quarter was comparable to the rate we saw in the third quarter of last year, so most of the tax increase was due to increased income. I expect our effective tax rate for 2006 will be slightly less than 37.5%.

Adding these items brings you to $71 million in net income from continuing operations for the third quarter 2006 versus $66 million of net income from continuing operations last year. In earnings per share terms, this equates to $0.60 per share in the third quarter versus $0.56 per share in the same period last year.

Now let me turn to cash flow. During the first nine months of 2006, we generated $708 million of cash from operations. In the same period last year, we generated $564 million of cash from operations. This increase was driven by higher cash earnings, favorable working capital conditions and improved recovery of fuel and purchase power costs.

We made capital expenditures of $664 million in the first nine months of 2006. $317 million of this was dedicated to our utility and other businesses and $347 million was for the generating units being constructed as a part of our Power the Future plan. In addition, we paid $81 million in dividends. At the end of September, our debt to capital ratio was 58% as compared to 58.2% at the same time last year. Now given our strong cash flow, I expect that our debt to capital ratio will be just at or slightly below 60% at the end of this year. Our goal is to maintain our debt to capital ratio at no more than 61.5% during the period we are constructing our new gas and coal-fired generation.

We are using cash to satisfy any shares required for our 401(k) plan, options and other programs. And going forward, we do not expect to issue any additional shares.

Another impact on cash this year -- in September, the Public Service Commission approved our request to issue a $32 million refund to Wisconsin retail electric customers. Our request was made because natural gas prices have moderated after a year of unprecedented volatility. Rather than wait for a calculation of the final costs at the end of the year as originally planned, the Company believes it was in the best interest of customers to issue a refund in October.

I would now like to turn to our earnings guidance for 2006. Although there is still uncertainty regarding weather in the fourth quarter, which could impact earnings, given our strong performance through the first nine months, we are raising our guidance to the upper end of our earlier range. Our updated guidance for 2006 is $2.52 to $2.57 per share, excluding the gain on the sale of our Guardian pipeline interest that we booked in the second quarter. Now the gain on the Guardian sale adds $0.01 per share to this range.

As we discussed on our earnings call in August, we have a very heavy maintenance schedule for our fossil units in the fourth quarter as compared to last year. Given that, earnings in the fourth quarter are expected to be down as compared to the same period last year. Our guidance for the fourth quarter of 2006 is $0.55 to $0.60 per share compared to $0.77 per share in the fourth quarter of 2005.

So with that, I will turn things back over to Gale.

Allen, thank you very much. Overall, we are on track for the year and focused on continuing to deliver value for our customers and our stockholders.

(OPERATOR INSTRUCTIONS). Paul Ridzon, KeyBanc.

It is Paul Ridzon. Earlier in the year, we kind of got the impression that the front end would be strong and then the back half would be hurt by fuel under-recovery. Has this $32 million -- has that already been reserved for? And then, to what extent is this now being displaced with higher O&M. Just kind of confused as to the way the rest of the year is going to flow.

Let me take you through just to make sure we are clear on the way fuel has worked. As we have gone through the year, to the extent within a quarter that we believe that revenues we were collecting were from customers for fuel costs -- if we believe that we would actually refund those, we reserved against them. So those revenues, in effect those cash revenues, never went into the income statement. So this $32 million that I mentioned, and actually $31 million of that is principal, so to speak, and $1 million is accrued interest. But that total amount had already been reserved for as we had gone along through the year.

Is that clear?

As we looked at a strong outset to the year, we had a lot of caution that there is going to be a big give-back. Has moderating gas prices impacted that somehow?

Well, as I go back -- and maybe it would be easier to just say all right, we talked about a number of factors that would impact earnings year-over-year as we compared 2005 to 2006. And one of the factors that we talked about was fuel recovery. Last year, we under-recovered fuel $36 million. And my expectation now is that we would be in a fully recovered position, from an income statement standpoint for the year. So that is certainly at the upper end of the guidance because we had been saying that going into the year, we weren't sure we would be fully recovered. In fact, I had said that we would be anywhere from fully to possibly $10 million under-recovered. So on that basis, that is certainly one of the reasons why I'm going to the upper end of the guidance range.

On the other side though, we expected -- last year, we expected a return to normal weather, if you will. Last year, we got a pickup from weather, and actually it has been -- parts of the year have been well below normal. So that was a bigger drag than we expected. So fuel certainly has been better. It is at the upper end of what I had talked about at the beginning of the year. But weather has been a much bigger negative driver than I expected. And volume growth in general has been a negative, where as we expected we would get a pickup on volume year-over-year in a non-weather normalized.

And Paul, O&M is exactly where we expected it to be for the year.

Just another point in addition to Allen's point, though, we have got a normal -- it was planned and is normal, but we have a very heavy outage schedule with both our coal units and our nuclear unit here in the fourth quarter. So that obviously will affect the fourth quarter.

And then the $8 million improvement on fuel under-recovery -- can you characters that is over-recovery, under-recovery? Some mix? I know it's relative year-over-year $8 million, but kind of what was it on an absolute basis?

Yes. I can take you through that. In the third quarter of 2005, we were under-recovered. So for the quarter, we were under-recovered $19.5 million. For this quarter, so the third quarter of '06, we were in a positive recovery position of $2.8. So that would have a $22.3 million swing between quarters. But we also had to increase the fuel reserve because we expected to do a refund, so the reserve increased $14.6 million. So the net impact that you see on the income statement is that $8 million pretax.

So on a gross basis before the reserve, there was a $22.3 million swing. Then you have your reserve of $14.5 and that gets you to the $8 that you see on the income statement.

Nathan Judge, Atlantic Equities.

I have to say thank you for having the conference call a bit earlier this time.

I wanted to just ask you -- during your comments, you mentioned that you're now considering a fifth option with regard to the nuclear assets. And could you just go into more detail into what drove you to consider this new option? And if there was -- perhaps that option was considered or actually was transacted or if a sale was transacted -- and I know you are still considering all options -- but how long Would it take to complete a sale?

Well, let me try to answer your second part of your question first, if I can, Nathan, in terms of the time it might require to complete a sale.

As we have said all along, we wanted to take 2006 and do a very complete and thorough analysis of what the most appropriate options are going forward for the ownership and operation at Point Beach. We are on track with the analysis. We are on track with discussing the options with a number of bidders. And I expect, as I mentioned in the script, that we will complete our analysis by the end of the year and take a recommendation to our Board.

At that point then -- assuming the Board would approve our recommendation. At that point, if there was to be a change of ownership -- and again, we've not made that decision. But if there was to be either a partial or a complete sale, we would have to obtain approval from the state public service commissions and also for an approval from the Nuclear Regulatory Commission. My guess is since there is president for this that we would have at least six months of regulatory approval before any kind of transfer of ownership, partial or complete, would take place.

So I wouldn't see -- again, if we selected the option of sale or partial sale, I wouldn't see anything occurring until second half of '07 -- early second half of '07.

And then, Nathan, in terms of our thinking, again, we wanted to be very thorough in our options. And as we have tested these options in the marketplace, it just became clear to us that really there may well be some interest in a partial sale. And that is why we put that officially on the table. Really, I think, Rick and I view that really very much as just a tweak.

It is within the range of what we said we were looking at, from everything from holding onto it to a full sale.

Just going to the coal plant construction and your construction of the water intake tunnel, could you just give us an update on where that stands? And how much more time will it take to complete that?

As Rick thinks about the time to completion, I can give you an update. In fact, Rick was down in the tunnel on Monday. That's a long way down there. The length of the tunnel will be 9250 feet. The tunnel boring machine is in place and doing very, very well. And at the moment, we are beyond 1200 feet already drilled of the 9250 feet that must be drilled to complete the length of the tunnel.

And Rick, when do you expect the actual completion? Early sometime in the spring of --?

Yes, early next year. But there's other components to it. There's onshore work that has to be done around the circulating water pit. We've got to finish the casing of the fourth down shaft out in the lake, and we've got to grout there. So we would expect to complete the entire tunnel midyear next year to the third quarter, something like that.

But the work is going well in terms of the drilling of the tunnel itself.

At what point can investors take confidence that the tunnel will be materially completed and everything -- there won't be any unexpected -- or is there a part to the construction of the tunnel that is more risky than other parts? Could you just elaborate a little bit more on that?

Nathan, I wouldn't characterize any part particularly more risky. Getting the setup, getting the machine down there was a big hurdle in getting it started. I would just say when we get it complete you could take some comfort in that.

But this is not something that has not been done in this area of the country -- quite a bit. I think there is something like 100 miles of tunnels beneath Chicago. There are tunnels in Milwaukee. So we are not -- this is not serial number one. And the rock that we're drilling through is very consistent. We're not encountering any major problems. We are not having to do any major lining. And based on the geotechnical work that was done up front -- would not expect to find anything unusual in the rest of the drilling.

To reiterate something Rick said, again, we are more than 1200 feet out already. And as Rick reported, the rock that we have encountered is very consistent with what we expected to find. I think that is an important point.

And we are under Lake Michigan now. So we are off of land, under Lake Michigan.

Thank you very much for following up. I know that is the area of investment that shareholders have most risk to, so I just wanted to follow up on that.

Just lastly, could you just talk about a comment you made in your discussion that you're not seeing as much customer growth as you anticipated? Thank you very much.

Actually, it is not the customer growth that we're not seeing as much as we anticipated; it is really volumes. And one of the things we're seeing is basically -- and I think this is pretty consistent with what lots of other companies in the industry are seeing across the U.S. -- there is no question that we're seeing a cooling in the economy. And that is affecting industrial demand for electricity.

The three areas in terms of the industries that we serve across the upper Midwest -- the paper and paper products industry is clearly soft. Demand for paper and paper products is pretty much soft across the board. We have had one major mill closure -- Glatfelter Corporation, which owned a major mill in Neenah, Wisconsin, north of here, has closed a major paper mill this summer and it will not reopen as a paper mill. And we are seeing reductions of Kimberly-Clark mills in the Fox Valley as well. So the paper and paper products industry is soft.

Automotive parts is also -- has really been particularly hard-hit. In fact, in the automotive parts section of our customer group, demand for electricity is down about 12%. Delphi -- many of you will know the name Delphi, an automotive parts company in bankruptcy, they will be closing one of their facilities south of Milwaukee and Tower Automotive has closed.

And then in the food into processing segment, down about 6% over the past twelve months. We have seen one plant, a yeast production plant close. And Cargill, a major food processing and manufacturing company, has sold a plant here in Wisconsin. That plant though is being refurbished, and will be turned into an methanol plant. And that plant will be back online in 2007.

So our customer growth continues, but we're seeing some volume declines I think associated with a significant cooling of the economy right now. I hope that responds to your question, Nathan.

Yes, it does. Thank you very much.

(OPERATOR INSTRUCTIONS). Michael Lapides, Goldman Sachs.

Michael Lapides here. Congrats on a pretty good quarter in a tough demand environment. Wanted to just kind of talk long-term rate base. If we think about the wind plant as roughly -- what was the number? I thought it was $600 million?

No, the wind plant would be about $360 million.

Excluding capitalized carrying costs.

Capitalized carrying costs.

Got it, got it. And how do we think about the rate base for Point Beach in terms of -- is that almost a one for one tradeoff if you were to sell Point Beach in terms of thinking about the WEPCO rate case?

And I will start and Gale, if you want to jump in, please do. But in terms of the plant balances at Point Beach, if you look at nuclear fuel, materials and supplies, and the hard assets of the plant itself, that is right at $400 million. And if you look at the wind investment, you should view the numbers that we talked about on the wind as up-to amounts. I think the $360 million would be for like an 88 unit site. So in approximate terms, it is almost the same amount of rate base as you compare the two. Gale, anything you want to add on that?

I think Allen is exactly right. And one other point that might be useful -- given the investment program we have in front of us, wind generation, emission control upgrades, I really don't see any medium-term diminution in our rate base overall.

Second question, and it is more related to ATC and transmission growth. One of the hardest things we struggle with as analysts is trying to model out the annual rate base growth in CapEx for ATC. We have all seen kind of the ten-year projections and that type of stuff, but getting a little bit more granular, and that is a challenge. Can you offer any guidance or suggestions in terms of how to approach that and how to model that?

Well I think a big question, obviously, Michael, is you can sit and look at the ten-year numbers that ATC has put out in public. But the question then is, how much of that do they actually get cited and approved, and how long does it take, whether you actually have these things go into service over that time period. And these projects in some cases are very highly contested. And it is just very, very uncertain. So I guess, I don't know if it makes you feel any better, but it's just as hard often for me as it is for people outside the Company to kind of figure out exactly what the timing might look like on a capital investment program at ATC.

So in some years, I could easily see it being as high as $400 million. But depending on how things get timed, you could see other years where CapEx might be as low as $200 million. So I think there is going to be a fair amount of uncertainty for quite a while about how the capital ultimately gets deployed in the state.

In terms of our earnings contribution that we have seen from ATC, it is generally within a year. It is pretty level quarter to quarter. So over the first three quarters of the year, if you just sort of average the earnings contribution on pretax terms from ATC, was about $9.5 million, if you looked -- did the same calculation in 2005 it was about $8.7 million. So we have seen some uptick in our pretax earnings contribution. But whether you can see that same change year over year, probably not in the future, because of the uncertainty that I just went through, as well as the big installed base that is already there. I don't know if, Gale, anything that you want to add to that or --?

Only point to add is that I am relatively confident that their ten-year plan is reasonable and will be constructed. It is just a question, as Allen said, of within that ten to twelve-year timeframe how much will get invested each year. And that really depends upon the pace of approvals. And nobody is better than you are at making an educated guess on that, Michael.

Nathan Judge, Atlantic Equities.

I'm going to ask my favorite question, and it pertains to cash flow that comes in. You've cited very strong cash receipts during the year. Could you just quantify how much of that was actually your cash work in progress -- the [quote] that you are receiving up front that is not in earnings?

Sure, Allen will --

In fact, in the 10-Q that will be filed later this week, you'll actually have some detail on that. But you obviously don't have that now, so I will go ahead and tell you what those numbers were in the -- at least for the nine months ended numbers.

If you looked at the amount of deferred carry that we put up on the balance sheet, for the nine months ended September 30 this year, we put a total of $53.2 million up on the balance sheet. So in other words, there's $53.2 million of pretax revenues that were collected from customers, put in a deferred revenue account, but they never went through current earnings.

And then when you and the other listeners get the 10-Q, all of that detail will now be included within the footnotes to the financial statements.

As Allen said, we are adding a disclosure because we get so many questions on this subject, Nathan, that we thought it would be helpful to add a footnote and disclosure to be as clear as we could be about it.

Ladies and gentlemen, this concludes the question-and-answer portion of today's conference. I will turn it back to Mr. Klappa for any closing remarks. Sir?

Well, that concludes our conference call for today. We really appreciate you participating. If you have any other questions, Colleen Henderson will be available in our Investor Relations office. And her number is 414-221-2592. The lines are open. Thanks very much, everybody. Bye-bye.

Thank you for your participation. Have a great day.