Cinemark Holdings, Inc.
Q2 2015 Earnings Call Transcript

Published: 6 Aug 2015

[Operator:]

Good morning, my name is Felicia and I will be your conference operator today. At this time I would like to welcome everyone to Cinemark's Q2 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. Thank you. I would now like to hand the conference over to Chanda Brashears. Ma'am you may begin.

[Chanda Brashears:]

Thanks Felicia and good morning everyone. At this time I would like to welcome you to Cinemark Holdings, Inc.'s second quarter 2015 earnings release conference call hosted by Tim Warner, Chief Executive Officer and Sean Gamble, Chief Financial Officer. In accordance with the Safe Harbor provision at the Private Securities Litigation Reform Act of 1995, certain matters that are discussed by members of management during this call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause Cinemark's actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the company's SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may include non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release and on the company's website, investors.cinemark.com. I would now like to turn the call over to Tim Warner.

[Timothy C. Warner:]

Good morning everyone and thank you for joining us for our 2015 second quarter results call. Before we begin, I'd like to start by saying that our thoughts and prayers are with the entire community of Lafayette, and all those affected by senseless acts of violence wherever they may occur. Now transitioning to our results, the second quarter achieved phenomenal results. It was the highest grossing quarter in the history of the North American industry, celebrating growth at 9.3% year-over-year. Our studio partners are doing a tremendous job of creating a wide variety of film content as well as spreading their products throughout the year. And the box office is indicative of the patrons' reaction to both concepts. Cinemark's second quarter domestic admissions revenue growth at 12.2% once again outpaced the North American industry by a significant 290 basis points. Our domestic industry out performance was driven by a 6.5% increase in our average ticket price that was propelled by the success of both our 3D and XD screens as well as strategic price increases. Furthering our record-setting trends, we are also proud to report that we now have 34 consecutive quarters of year-over-year U.S. concession per patron growth with the strong 8.4% increase. Our global attendance increased 8.8% during the quarter, that's 6.2 million incremental patrons watching a movie in our theater versus last year, which helped our worldwide admission revenues outperform the North American industry by 740 basis points on a currency adjusted basis. We have now achieved 24 out of 26 quarters of industry outperformance, a statistic that is unique to Cinemark and one that we are obviously quite proud of. A huge congratulations to our entire worldwide team for maintaining our industry-leading performance. We're also pleased to report a 60-basis point expansion of our industry-leading worldwide adjusted EBITDA margin to a solid 24.2%. We consistently deliver adjusted EBITDA margins above 20%, demonstrating both the strength of our company's underlying structure and our diligence in cost control and operating effectiveness in favorable as well as challenging box office environments. All told, it was a record-setting quarter for the industry as well as Cinemark where we set a range of new all-time highs, as Sean will discuss in greater detail in his prepared remarks. Similar to data, other public exhibition companies have reported on their calls, Cinemark's film rental increased due to an unprecedented concentration of second quarter's box office in four very high-performing films. Jurassic World's domestic cumulative gross is more than $625 million to date, Avengers generated more than $450 million, Furious 7 exceeded $350 million, and Inside Out delivering more than $325 million. These four films alone generated nearly 50% of the industry's second quarter box office. As film scales are designed to reward films that drive attendance, the significant concentration of these four films increased film cost for the quarter. We continue to urge you to look at the industry film rental on a 12-month basis rather than a quarter-to-quarter, as it is more reflective of the nature of our business. Year-to-date through June, the North American industry has increased 6.6% over 2014. Also, setting an industry box office record. Furthermore, we are exceptionally pleased that even when comparing June year-to-date to the record-setting 2013 year, the industry is up 5.1%. Through this past weekend, the third quarter has increased 16% year-over-year based on the success of Minions, Ant-Man and Mission Impossible. We continue to be optimistic about the remaining 2015 film slate, and are on track for a record-setting year. We are eager for the upcoming megahit Star Wars and the Hunger Games final, as well as Pixar's The Good Dinosaur; the 24th Bond, Spectre; and Snoopy and the Gang in Peanuts. We're also looking forward to a few new concept films including Joy, a family drama featuring Jennifer Lawrence and Bradley Cooper; Everest, a dramatic climbing exhibition that will leave you on the edge of your seat; and The Martian, based on the best-selling novel by – about a mission to Mars, starring Matt Damon. Our enthusiasm for 2016 also continues to grow as we get more insight into the film slate, especially coming out of Comic-Con last month. Shifting attention to our XD strategy, we continue to experience great success and remain the number one private label premium large-format in the world, with 193 screens globally. We consistently generate a strong premium percentage of box office, and the second quarter was no exception. Nearly 34% of our worldwide second quarter box office was generated from premium formats, including XD and 3D. For additional perspective on how well utilized our XD screens are

[Sean Gamble:]

Thank you Tim and good morning everyone. The diverse second quarter films slate lived up to its promise, fulfilling the broad audiences in both our domestic and Latin American markets and it contributed to the achievement of multiple new highs for Cinemark. Our worldwide total revenues escalated 11.4%, setting at an all-time quarterly record of $800 million. Likewise, our worldwide adjusted EBITDA grew 14.2% to $193.5 million, marking another all-time quarterly record and resulting in an adjusted EBITDA margin of 24.2%, up 60 basis points from last year as Tim previously mentioned. Domestically, attendance grew 5.4%, setting a second quarter record of 49 million patrons. With the strength of premium film content during the quarter, our average ticket price increased 6.5% to $7.67. This combined growth in attendance and price resulted in historic high domestic admissions revenues of $375.6 million, an increase of 12.2% versus last year. Our emphasis on sales incidents also delivered an all-time concessions revenue record of $195 million, a 14.3% increase versus Q2 of last year. Our concessions per patron were again robust growing 8.4% and achieving a historic high of $3.98. Our concessions group continues to excel in expanding and customizing our product offerings on a market-by-market basis, while focusing on customer convenience to deliver a more expedited and satisfying concessionary experience. Overall, our U.S. operations delivered an all-time record with total revenues of $588.4 million. We also generated an all-time high domestic adjusted EBITDA of $143.6 million, resulting in an adjusted EBITDA margin of 24.4%. Internationally, our second quarter attendance grew 15.4% to 27.7 million patrons, setting yet another second quarter record. International admissions revenues increased 5.2% to $127.3 million this quarter and our average ticket price was $4.60 on a reported basis. In constant currency, our average international ticket price grew 11.9%, primarily driven by inflation and the strength of premium formats. International concessions also had another strong quarter with revenues of $64.6 million. Concessions per patron were $2.33, which equates to a 21% year-over-year increase in constant currency. Despite an approximate 24% currency headwind that impacted our second quarter results, we grew total international revenues 7.4% to $211.5 million. Regarding the FX headwind, I would like to reiterate that the vast majority of our international operating expenses are transacted in local currency. So the impacted currency headwinds are predominantly translation based and not transaction oriented. With regard to adjusted EBITDA margin, we faced a challenging year-over-year comp having scaled back expenses during 2Q 2014 in anticipation of an adverse impact on box office from the World Cup, which to everyone's surprise did not materialize until the third quarter. This dynamic led to a significant 24.6% adjusted EBITDA margin last year. That said we are especially pleased that our international segment grew adjusted EBITDA to $49.8 million with a 23.6% adjusted EBITDA margin in the second quarter of 2015. This result exceeds the second quarter of 2013, which had a more normalized historic margin rate by 30 basis points. Returning to our worldwide consolidated results, second quarter film rental and advertising cost as a percentage of admissions revenues increased 200 basis points to 56.7%. This increase was primarily driven by the strength and size of top grossing films relative to last year. This year the top five films represented 55% of the domestic industry box office, while last year, they represented 38%. Furthermore, as Tim previously mentioned, four out of the top five films this year grossed well in excess of $300 million, while the top grossing film last year was approximately $260 million. Concession costs this quarter were roughly in line with 2014 at 15.8% of concession revenues. Similarly, our operating teams were able to hold salaries and wages as a percentage of overall revenues roughly flat to last year, despite global minimum wage pressures and the domestic impact of the Affordable Care Act. Facility lease expenses as a percentage of total revenues improved by 90 basis points. Utilities and other costs also improved 30 basis points as a percentage of total revenues, despite constraints associated with severe drought conditions in Latin America as well as modifications to certain international government pricing regulations. And G&A for the second quarter was relatively flat to 2Q 2014 improving 60 basis points as a percentage of revenues. Collectively, total second quarter pre-tax income was $113.7 million in 2015 compared to $96.2 million in Q2 of the prior year. Our second quarter's effective tax rate was 37.6%, and net income attributable to Cinemark Holdings, Inc. was $70.3 million or $0.61 per diluted share. We wanted to highlight that year-over-year comparisons of net income and EPS are impacted by last year's second quarter effective tax rate of 25% that benefited from certain discrete tax items related to the sale of our assets in Mexico. We continue to guide to a 38% effective tax rate as a more normalized percentage. With respect to our balance sheet, we ended the quarter with a cash balance of $576.3 million and a net debt position of $1.5 billion. Shifting attention to the status of our U.S. footprint, we operated 334 theaters and 4,491 screens in 41 states and 101 DMAs at quarter-end. We built one new theater with 13 screens and closed two theaters with 20 screens during the quarter. We have signed commitments to open seven theaters with 77 screens during the remainder of 2015 and nine theaters with 98 screens subsequent to 2015. We expect to spend approximately $93 million in CapEx associated with these additional 175 screens. As a reminder, the screen growth guidance we provide is a gross number. We also anticipate closing approximately 60 screens during 2015, which is a bit higher than our typical run rate of 25 to 50 screens as we replace theaters and have a few leases expiring on lower performing properties. Our international circuit grew to 169 theaters and 1,229 screens in 14 Latin American countries. During the quarter, we expanded by seven theaters and 40 screens. As of quarter-end, we had signed commitments to open four new theaters and 34 screens during the remainder of 2015 and three theaters representing 25 screens subsequent to 2015. Our estimated CapEx to develop these additional 59 international screens is approximately $43 million. We continue to internally target 100 screens of international growth this year, and we believe this target is feasible based on our current pipeline. Regarding overall CapEx, we spent $70 million in the second quarter, of which $27.8 million was spent on newbuild CapEx and $42.2 million was spent on maintenance CapEx. We maintain our full-year operating CapEx guidance of $275 million to $300 million, excluding the $26 million we incurred during the first quarter of this year to purchase our headquarters building. In closing, we are very pleased with our performance this quarter, both operationally as well as financially. Our diverse global footprint and strong operating discipline continue to yield the results that consistently outperform, deliver industry-leading margins and provide solid returns to our shareholders. Felicia, that concludes our prepared remarks and we would now like to open up the lines for questions.

[Operator:]

Your first question comes from the line of Robert Fishman with MoffettNathanson.

[Robert Fishman:]

Thanks. I have one for Tim and one for Sean, if I can. I'm curious, Tim, what would it take for Cinemark to be open to participating in the Paramount experiment? And are you just looking for a higher economic split of the post-theatrical window revenues? And then, on a related note, are you concerned at all that Netflix's foray into movies set to launch over the coming months and now Paramount's experiment with some of your major competitors could cause a secular change to the theatrical business model?

[Timothy C. Warner:]

No. We obviously had serious talks with Paramount, and we did look at their model. We don't feel it was in either our best interest or our shareholders' best interests but, I think, more importantly, in the best interest of the industry to participate. And sort of reflecting Bob Eggers' comments and we've heard this from a number of studios, they continue to support the theatrical window. And also, I think that Cinemark has been one of the leaders in the industry in working with the studios in establishing the ETS – or the EST window, which continues to expand and grow for the in-home markets for the studios. I think the overall – probably, the strongest window that the studios have, both in the domestic and global marketplaces, you're all aware of what's going on in the in-home window, is the theatrical window. And so it continues to receive really strong support from the studios across the board. And regarding Netflix, to me they have an entirely different business model, there is to drive their subscriptions. And I think what's going on with Netflix is that they are (23

[Robert Fishman:]

Okay. Thank you. That's helpful. For Sean, as you know, there's definitely been some focus on film costs this quarter. I'm curious if you expect to see film costs continue to rise across all studios in the next few years, or does it just come down to the success of the slate, as you mentioned? And then, if I can ask a little interesting follow-up on that, if you were to put yourself back in your previous role at Universal, how aggressive do you think you would be able to push on the film costs going forward, given their extremely hot release slate, and I guess I apologize to ask you to negotiate against yourself here, so.

[Sean Gamble:]

Well, I would say, on the first part of the question on film rentals, I think as you know, the film rental really is driven by mix. You know we operate on sliding scales. And when you look at this particular quarter, it really was unprecedented, with just the concentration of films that were over $300 million and accounted for a sizable portion of the box office. We kind of looked back, and the closest quarter to this quarter, in size of films over $300 million, was 2Q of 2012, where there were two that drove 28% of the box office to, this quarter, we had 49%. So that dynamic is really driven by the mix. So your question on kind of go forward, it really depends more so on mix than anything else, and that's hard to predict.

[Timothy C. Warner:]

And I'd like to add that we'd love to see all the films do over $600 million at the box office, so – because it really drives attendance.

[Sean Gamble:]

Yeah, and you know, as far as the question – from Universal, I think that kind of dynamic has always been the way between supplier and customer. There is always going to be back and forth negotiation, and each side looking to kind of get what's fair for their side. So I don't necessarily see that changing dramatically. There is going to be ebbs and flows in studios that have stronger content one year and lesser content another. And there is really a balancing act between studios. So I can't necessarily say I would expect to see a dramatic change there. It's just kind of the nature of the business.

[Robert Fishman:]

Okay. Thanks a lot, guys.

[Operator:]

Your next question comes from the line of Eric Handler with MKM Partners.

[Eric O. Handler:]

Yes. Thanks for taking my question. So looking at your market share gains in the quarter, very impressive, considering you guys really don't have much, or very little, IMAX exposure. So you said that 34% of your worldwide box office was from premium. How does that compare to last year? And maybe if you could – I don't know if you could do that on a same-screen basis, just to get a sense of the shift in premium contributions. But also, I wonder if you could talk about, is there anything else that helped get such a strong increase in the average ticket price? Because you had both Regal and AMC up around 4%, you guys were 6.5%, so a big difference there, was there some other base increases there that we haven't seen in a while, or – I was wondering if you could just discuss some of those items?

[Timothy C. Warner:]

Yeah. Sean will answer some of the more specific questions. But regarding our XD screen performance, we think that our XD premium large format screens performed in line, or as good as, any premium large formats out there in the marketplace. And so – and then, you know, there has been a lot of focus at Cinemark on delivering a very high-quality 3D performance and as we advertise, we've got the best and brightest. And so we've always had really high-performing 3D performance. And it's also the type of product that's in the marketplace really played well both to the large formats and to 3D and so that combination. And then we also had some strategic price increases. We have always been very upfront that we're the most conservative on pricing, and have been for several years. And if you went back, you'd see that in some previous years, our increase in pricing hasn't been as aggressive. And so Cinemark is in a great position both from XD and 3D concept, but also we're in a great position on pricing.

[Sean Gamble:]

And just to answer your question on last year. Last year, our premium product was about 30% of the box office and just to expand on that, as Tim mentioned earlier, our XD screens generated about 8.2% of total admissions revenues this quarter last year that was about 6.4%.

[Eric O. Handler:]

And how many – as a follow-up, how many XD screens do you have as of right now versus where you were last year, how many more are planned for the remainder of this year?

[Sean Gamble:]

We have a 193 this year and I think we have another roughly about 20 additional ones to rollout. And that's up about 19% from last year.

[Eric O. Handler:]

Thank you very much.

[Operator:]

Your next question comes from the line of Kevin Lee with Stifel.

[Kevin Hon Siong Lee:]

Good morning and thank you for taking my question. Just a quick one. The pace of your domestic newbuilds has accelerated year-over-year and you're expecting newbuild growth in call it the second half of the year of seven new theaters and 77 screens, at a time when your competitors seem to be more focused on retrofits and receipts. Can you update us on your thoughts on newbuilds versus retrofits? Thank you.

[Timothy C. Warner:]

Yeah. We're fortunate because of our – the strength of our balance sheet that we can be opportunistic, whether it's in repositioning theaters or in newbuilds. Obviously there is some great newbuild projects that are coming into the marketplace. And you know we want to be – to make sure that we're participating in the markets where we think it's going to be accretive to us and it is the same with repositioning. We examine it on a market-by-market basis and reposition theaters where it's appropriate. But Cinemark is – and we have tried to tell our shareholders that we think having the strong balance sheet is a strategic strategy to allow us to move either way whether it's via repositioning theaters, newbuilds or M&A activity.

[Kevin Hon Siong Lee:]

Thank you.

[Operator:]

Your next question comes from the line of Matthew Harrigan with Wunderlich.

[Matthew J. Harrigan:]

Thank you. I was curious on the Super League gaming, I know that's bring your own device, laptop. But is there anything you could do in concert with Xbox Live or PlayStation Network? I know you probably don't want to have devices in the theater that you own because there's wastage and all that. But the demographics really overlap into the extent that you could get them involved as partners it seems like it might present an interesting opportunity.

[Timothy C. Warner:]

No, obviously we think it does and we're working with all the different e-gaming companies. We think that that does evolve and it becomes more of a participatory event in the theaters and we're opening to work in with any technology companies or content providers in the gaming range. And you can see that Cinemark is of all the companies have been the most aggressive in this area. And like you know what sort of threw me off because to be candid about it, I had never heard of CaptainSparklez. But when I mentioned that he was coming to one of our theaters to – my grandchildren, they got just extremely excited because they are at the age where they're really into Minecraft. And it is we think one of the great opportunities to expand alternative content and bring a whole different segment into our theaters.

[Matthew J. Harrigan:]

Thanks Tim.

[Operator:]

Your next question comes from the line of Barton Crockett with FBR Capital Markets.

[Chase White:]

Hi guys. It's Chase White filling in for Barton Crockett. Just a couple of questions. You guys drove some pretty impressive box per screen outperformance and also concession per cap growth domestically. What were the key drivers of that outperformance and how sustainable is the concession per cap increase, specifically?

[Timothy C. Warner:]

Well, Cinemark has always been focused – and we'd like to bring it back to attendance – our big focus has always been on driving attendance because if you don't get the patron into the theater, you don't have a chance to really sell them anything. And our concession department has been very creative in coming up with and combining with our marketing department using social media and value packaging, introducing new products into the marketplace. And each quarter they set the bar higher and higher and put a lot of pressure on themselves that they continue to perform at a very high level, and we're very proud of them. And it's a big focus of our company because, obviously, that drives a lot of our revenues. But we think we have some of the best concession people in the business.

[Chase White:]

Fantastic. Thanks.

[Operator:]

Your next question comes from the line of Jim Goss with Barrington Research.

[James C. Goss:]

Thanks. I've got a couple. Tim you were mentioning the – some of the ways in which you're getting some strategic price increases. And I was wondering as the trend to recliners that seems to be more pervasive all-around you than within your strategy that's creating a higher umbrella that is enabling you to make these changes without really having any competitive disadvantage?

[Timothy C. Warner:]

No. I mean, we think that the entire exhibition sector is very focused on delivering a great customer experience. And we complement whether it'd be Regal, AMC or the iPic, Studio Movie Grill, I mean, I could name them all. You know there is a lot more focused on making sure we – as to how we treat and expose the customer to a great out of home experience. And you know, Cinemark, I think, has been the leader throughout the industry and throughout the globe in this area. And we're doing our only – we also are focused on recliners and repositioning some of our underutilized theaters. We think it's more market adaptive. We don't necessarily think that there is one solution that's going to work everywhere, it's the same with our Cinemark Bistro. We have some very successful bistros and food concepts. But again, we don't think it's a concept that works everywhere. And – but that goes back to the core philosophy of Cinemark. And I think what allowed us to achieve a lot of success internationally is that we adapt ourselves to the market rather than expecting the market to adapt to us. And I think that our industry-leading results and because the way I sort of look at all the initiatives that were announced, whether it's by us or by our competitors, it's reflected in our results and, quarter-after-quarter, year-after-year, Cinemark continues to lead the industry.

[James C. Goss:]

Okay. And sort of a corollary, do you – does the trend to recliners at all modify the types and numbers of seats you put in your newbuild auditoriums? I mean, like, how many seats, are they any bigger, maybe not full recliners or something like that?

[Timothy C. Warner:]

Well, with recliners, you basically lose about 50% of your seating capacity. So whether you are building new or whether you are repositioning a theater, you lose about 50% of the capacity. Also – and the reason we use the term repositioning rather than recliner, we don't think you can just go in and put in reclined seats. We think you have to totally reposition the theater and basically think of it more as a new platform in the market. And, you know, remodel the lobby, change up everything, so when the customer walks in there it's a total – it's not just about the recliners, that they sort of see it as a whole new theater in the marketplace.

[James C. Goss:]

Okay. And what's the – separately, what's the Paramount issue? Is it more of the slippery slope issue that, even though a couple of movies that were carved out probably wouldn't really damage anything in terms of impact on theatrical box office, you just don't want to introduce something that's going to then say, how far do we go with this?

[Timothy C. Warner:]

No. I think – and again, every company has to look at their business from their perspective. And Paramount obviously felt on (39

[James C. Goss:]

Okay. And maybe I'll ask one last one. Do you have any early call on 2016, whether you think the industry holds its own in terms of domestic box office? Or do you think there is a big risk of decline, just looking at the slate, from your expertise at this stage?

[Timothy C. Warner:]

Yeah. No I think, coming out of Comic-Con, there is tremendous buzz on 2016. The other thing I think that's going to happen in 2016 is that a lot of Star Wars will flow into 2016, if it's the picture that we think it is. And right towards the end of the year, and we mentioned one of them on our call called Joy, there is also a film out by Fox called Revenant, which is a Leonardo DiCaprio that's going to be released in late 2016 for Academy's – I mean in 2015 for Academy, but it'll flow into 2016. And then you got the reaction to Batman versus Superman, and Star Trek, and the Deadpool and Zootopia and Tarzan, Finding Dory, Ice Age, X-Men, so there is a lot of big concepts – Captain America coming in in 2016. So I think that, although it will be a tough comp, obviously because this year is so huge for the industry, but I think that 2016 will definitely give it a run.

[James C. Goss:]

All right. Thanks. I appreciate your thoughts.

[Operator:]

Your next question comes from the line of Mike Hickey with Benchmark.

[Mike Hickey:]

Hey guys, good morning. Thanks for taking my questions. I guess I was just curious if you could update us your view what you're seeing in Latin America as it relates to sort of the economic conditions? You are obviously on the ground over there and kind of curious specifically about new mall builds and the potential for an M&A, I guess under the economic conditions you're seeing today. Then I have a follow-up. Thanks.

[Timothy C. Warner:]

Sure. Obviously, we've been in Latin America for 20 years and we've seen these economies just boom and go probably – we're really encouraged by as we look at Latin America, because we think we've always been in a content-driven business and I think this last quarter reflects that. The other thing I think that's important for people to note even though these economies may be slowing. The unemployment rates in these markets are at historic lows, and that's another good sign for the marketplace. Regarding mall newbuilds, at least as we look forward for the next year or two, because a lot of these projects are in development or started, it seems to be on track. But to your point, could mall development in some of these markets slow down? That could be a possibility in maybe two or three years out or four years out. But we really don't have that insight at this time.

[Mike Hickey:]

Okay. Thank you. And the – sort of wondering on how your competitors, now they're being more aggressive on recliner installations may be impacting your attendance trends I guess within the relevant competitive zones? Because they seem to be very open about taking share from competitors under this scenario.

[Timothy C. Warner:]

Well, I mean, I think we can let our numbers speak for ourselves. Obviously, we've had a record-setting attendance increases in quarter. When you look at us, our global platform, I don't think there is any public theater in the marketplace that can say that their attendance increased 6.2 million patrons, and that was driven both in Latin America and also on U.S. And so, although, they are doing – and have their strategies to the markets, Cinemark has its strategies and we think it's reflective in our results and we continue to perform very highly in every market that we compete. And we applaud again our competitors and the kind of quality of experience that patrons have access to throughout the theatrical experience. Because we think it's good for the overall industry, because we've never seen them as direct competition to us. We've always seen that that our competition is to get people to the out-of-home experience. And so whether they are going to Cinemark or AMC or Regal, if they have a good experience we think that's good for the entire industry. And I didn't answer the M&A question you had in Latin America, and there are some really high-quality potential acquisitions in Latin America. And whether they would be available or not is another question. But there is some really high concepts down there.

[Mike Hickey:]

Yeah. Fair enough. Thanks for (46

[Timothy C. Warner:]

Thank you.

[Mike Hickey:]

Yeah. I appreciate it

[Operator:]

At this time there are no further questions.

[Timothy C. Warner:]

Okay. Well, thank you very much for joining us this morning. We look forward to speaking you again following our third quarter. Thank you.

[Operator:]

Thank you for participating in today's conference call. You may now disconnect.