Paramount Global
Q4 2005 Earnings Call Transcript

Published: 23 Feb 2006

[Operator:]

Good day everyone, and welcome to the CBS Corporation fourth quarter and full year 2005 earnings release teleconference. Today's call is being recorded. At this time I would like to turn the call over to the Senior Vice President of Investor Relations, Mr. Marty Shea. Please go ahead, sir.

[Marty Shea:]

Good morning, everyone. Thank for taking time to join us for our fourth quarter and full year 2005 earnings call. Joining me for today's discussion are Sumner Redstone, our Chairman; Leslie Moonves our President and CEO; and Fred Reynolds, our Executive Vice President and CFO. Sumner will have some opening remarks, and then we will turn the call over to Les and Fred for strategic and financial issues. We will then open up the call to questions. Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's news release and security filings. A summary of CBS Corporation fourth quarter and full year 2005 results should have been sent to all of you. If you did not receive the results please contact [Punam Desay] at 975-3667 and she will get it to you. A webcast of the call, the earnings release and any other information related to the presentation can be found on CBS Corporation's corporate website, cbscorporation.com. Now I will turn the call over to Sumner.

[Sumner Redstone:]

Thanks, Marty and good morning, everyone. Thank you for joining us. I just want to offer a couple of thoughts before turning the call over to Leslie. First of all, I could not be more pleased with the execution of the split which went smoother than anyone could have expected. We now have two focused and nimble companies. They each have clear investment strategies. Here at CBS we have a tremendous content company with the best management in the media business. CBS is a company that will generate great cash flow as it grows and we intend to return the value we create to the shareholders. Let's face it

[Leslie Moonves:]

Thank you very much, Sumner. Good morning, everybody and once again, thank you for joining us. I am very, very excited to be here today as we put the split behind us and tell you about the strategies and the businesses of the new CBS Corporation. First I would like to say a couple of words about our overall performance and some significant positive events. Keep in mind these numbers are pro forma, as if the separation had occurred on January 1, 2005. Given that assumption, we were at $0.41 per share for the fourth quarter of 2005 and $1.59 for the full year. And, our free cash flow of $1.5 billion was up 10% for the year. As you know, building businesses that throw off cash is what we do. Excess cash allows us to do a number of things, most importantly share it with our investors in the form of what we hope to be an increasing dividend. In a few minutes, I am going to hand it off to our CFO, Fred Reynolds, who will discuss these results a bit more, but before I do I want to take a couple of minutes to thank and commend our Chairman for his vision about the split. Thank you, Sumner. The new Company has been in existence for less than two months and we are already seeing the benefit. We are more focused, more nimble than we were just eight weeks ago. Our management team is extremely strong. It is so good to be out on our own. Just look at what we've accomplished in the short time since we began trading as CBS Corporation on January 3rd. We increased our dividend rate by 14% to demonstrate our confidence in our ability to generate strong free cash flow. The same week, we announced the creation of a new broadcast network, the CW, to appeal to valuable young demographics while at the same time eliminating a network that was posting losses year after year. Also in our first month, we closed on the acquisition of CS TV, expanding our holdings in the lucrative world of college sports, cable and new media. Plus, we announced our intention to divest Paramount Parks, a great business that just didn't fit with our strengths. Also as part of our effort to extend the reach of our world-class content to emerging technology platforms, we launched the first partnership of its kind with Google. A lot of activity in such a short time, and these are just the highlights. Add it all up and you have a Company that is leaving the past behind, a Company that is totally on the move. I want to talk briefly about our businesses and where we are with them right now. Television, our largest segment, CBS continues to have more breadth and depth of success than any other network

[Fred Reynolds:]

Thank you, Leslie. What I would like to do this morning is first highlight our fourth quarter performance, focusing on the pro forma results. As Leslie mentioned, our pro forma financial statements are consistent with the S-4 which was filed late last year and assumes that the separation occurred at the very start of 2005. The three most significant changes that the pro forma financials reflect are (1) the number of shares outstanding -- they are reduced in half to about 765 million shares; (2) new Viacom is shown as discontinued operations; and (3) our interest expense than as-reported results as we assumed that our debt was fixed at $7 billion. So with that, let me discuss our performance. I would like to then wrap up with a discussion of the non-cash impairment charge which we announced today of $9.5 billion and then briefly discuss our as-reported results for the fourth quarter of 2005. Let's start off with the fourth quarter of 2005. Total revenues for the CBS Corporation were $3.8 billion, up 2% to year-ago fourth quarter. Pro forma operating profit before depreciation and amortization, or OIBDA, excluding the impairment charge, was $779 million, up 3% over the fourth quarter of 2004. Now our OIBDA margin in the fourth quarter of 2005 were 20.4%, and that is up slightly from about 20% in last year's fourth quarter margin. So we saw improvement in our operating margins. As Leslie mentioned, our largest segment is television, which consists of the CBS and UPN networks; TV stations, King World, Paramount TV and Showtime. Our television segment has revenues in the fourth quarter of 2005 of $2.5 billion, up 1.4% over year ago. Revenue growth in the quarter was led by our broadcast networks, where sales were up 5.8%. TV stations were down 2% in the fourth quarter overall. However, if you look at November and December they were up 2.5% and 6% respectively over 2004, as these two months were largely unaffected by the heavy political spending in the fourth quarter of 2004. Television OIBDA in the fourth quarter was $444 million, up 9% over the comparable period in '04, driven by higher revenue and lower costs, largely lower programming expenses at the CBS Network. Radio's revenue in the fourth quarter was $543 million, down 1% to a year ago. OIBDA for radio totaled $215 million, and that was down 10%. OIBDA was down approximately $30 million due to a gain on the sale of a radio station in the fourth quarter of 2004. If you exclude the gain on the sale of the radio station in the fourth quarter of 2004, radio's OIBDA would have been up 2% in 2005's fourth quarter. So up 2% if you exclude the one-time gain in the prior year. Outdoor, as Leslie mentioned, had a really solid fourth quarter. Revenues were up 3%, somewhat muted by some foreign exchange, the dollar strengthened against the euro and the U.K. pound. While OIBDA increased to $147 million, or up 7% over 2004 fourth quarter. As you know, our outdoor business in New Orleans was really whacked very hard by Hurricane Katrina, with losses and extraordinary expenses hitting us in the third and fourth quarters of 2005. Outdoor's fourth quarter OIBDA would have been up in the mid-teens had we not incurred these hurricane-related expenses, but still a solid 7%. Parks and publishing had a strong fourth quarter, closing out 2005 with a strong revenue gain, and OIBDA of $40 million, up 60%. Our parks business extended their season into the fall and winter and drove incremental revenues and profits. Simon and Schuster had a number of bestsellers in the fourth quarter that drove its profitability. Now turning to the non-cash impairment charge. As you know, FASB 142 requires an annual review of goodwill for possible impairment. In the fourth quarter of last year, we analyzed our market value of the Company versus the goodwill we carry on the books, which is approximately $39 billion. Based on our current market value, the amount of goodwill needed to be reduced. A $9.5 billion non-cash charge resets our goodwill for our television and radio segments to the appropriate amounts, using very realistic assumptions. Now let's quickly turn to the fourth quarter results on an as-reported basis. Operating income, excluding the impairment charge, was $647 million, up 3% over 2004 fourth quarter. As-reported earnings per share was $0.17 on a diluted share basis, assuming the shares outstanding were pre-split, or about 1.5 billion shares outstanding. Finally, as Sumner and Leslie both said, free cash flow. A big hit for us in the fourth quarter and all of 2005. Full year free cash flow for CBS Corporation was $1.5 billion, up 10% over 2004. Not only were we successful in converting a significant amount of our OIBDA to free cash flow, we were also very successful in managing our working capital, an area of continued focus and opportunity for us. Before we wrap up, we want to mention that we did provide guidance for the full year. As we have stated in the past, we expect our revenues to grow in the low single digits, and we expect our operating income and earnings per share to be mid single-digit growth. This excludes any of the expenses that would relate to expensing stock options going forward. With that, I think I will turn it over to Marty and we will take your questions.

[Marty Shea:]

We will open the call to questions.

[Operator:]

Thank you, gentlemen. (Operator instructions) We will go first to Victor Miller with Bear Stearns.

[Victor Miller:]

Good morning, thanks for taking the questions. First of all, can you contrast the offering that you will have for your potential affiliate base of CW versus what Fox announced yesterday, which is My Network TV? Secondly, could you talk a little bit about the transition in radio? Obviously the radio business was down 270 basis points, we think, as an industry in the fourth quarter. You beat that by 170 basis points, but now you've added another 27 stations into the mix. What should we realistically expect as we go into the first quarter, the earliest part of the transition, and as we look toward the year? What should we expect, really, for the radio business? What can you do?

[Sumner Redstone:]

All right, Victor, I will answer the first question with Leslie and I will turn over the second to Fred. The CW versus My TV, number one, we already have a base of 50% of the country between the Tribune stations and the CBS stations. We have a very, very strong station base. We are also getting a lot of activity right now, as we speak, from different affiliate groups throughout the country who are bidding on getting CW. I know the Fox people announced My TV and nobody should ever under-estimate Roger Ailes, but it took UPN 12 years and WB 12 years and they are better off together. So we are very excited about the affiliate base we have. The economics, we are looking at a number of things. Obviously we want to have what we call programming fees from them, but we are also looking at, what is the best station for our network? That is also a factor. So there are a number of factors in there, but we are putting together a group of affiliates that are going to be spectacular. As I said, out of the box CW is going to be stronger than UPN. It is 1+1=4. We are very excited about it. We wish My TV good luck.

[Fred Reynolds:]

Victor, let me just try on the radio side to answer your question. Clearly, the comparables with the 27 Howard stations are going to be difficult, not only in the first quarter but in the first few quarters of 2006. We look at the business, both the Howard stations -- the 27 -- and the non-Howard, the other 151. So I think you have seen our CBS Radio Group outperform this segment, the non-Howard stations we expect would outperform the radio industry. I just would only caution that the first quarter is always difficult when you have an Olympic year in there. Everything is ranking a little bit later. We are more encouraged today than we were maybe two weeks ago when we started February, because it seems like the back half of February and March are picking up a little bit. It is going to be tough to read. I don't want to be any less clear, that it is going to be tough to read the first quarter because of the Olympics, because of the non-Howard stations. We look at both and we expect to outperform the industry.

[Victor Miller:]

Thank you.

[Sumner Redstone:]

Thank you.

[Operator:]

We will go next to Jessica Reif Cohen - Merrill Lynch.

[Jessica Reif Cohen:]

Thank you. A couple of questions. Could you discuss any interest you might have in Univision? Given the regulatory issues, I wonder if you could participate possibly as a minority strategic partners? Secondly, Les, could you expand on what you said in your opening remarks about the dividend? You mentioned that you hopefully will have a higher dividend over time. I want to know your thinking on that currently. Finally, just to go back to the Fox Network question. How does it -- it is not really 100% clear how your affiliates will get compensated. Could you be more specific about how it affects affiliate compensation and maybe even marketing plans?

[Leslie Moonves:]

Sure, let me go through them. Univision -- Look, we look at everything, Jessica. We have major FCC issues. As you know, our Television Station Group is at its limit right now; our radio stations in many markets are at the limit. Whenever there is an opportunity like that, I don't think there is a media company in the world that is looking at Univision. I don't want to comment any more than that. The regulatory issues are pretty extreme there. I don't foresee anything further on that. In terms of the dividend, I thought it was significant that we went out and Fred and I did an investors meeting about three or four weeks ago, and we announced an increase in our stated dividend. I think that was as much financial as it was symbolic about our intent as to how we are going to use our cash, that we intend to continue to increase the dividend. I think shareholders and investors should feel very confident in that we are going to be giving money back constantly, and it is our goal to keep increasing it. I think the fact that we did that three weeks into our operation should have been fairly significant. Now regarding the Fox Television Station, the Fox announcement and the CW stations. Let me just announce, when we did the deal, the initial deal was made up of Tribune and CBS stations, which encompass almost 50% of the country. Tribune is paying reverse compensation to the CW network. That is happening. We already have offers in many, many markets to pay reverse compensation. Once again, as I said earlier, that is only going to be one of the factors. The other factor is having a very, very strong affiliate base so the network soars, which we think it will. As I've stated, I think this network will be profitable from day one. The other advantage for us is obviously our 11 CW stations already become immensely more valuable than they had been as UPN television stations. The third part that CW works for us is, most of the new content are going to be joint ventures between Warner Brothers and CBS. As you know, as we go forward content is going to be extremely important, not only for the CW Network but for all of the other uses we can have. So we are looking at it as a three-way victory, CW. Both network stations and content for us. Once again, Fox will have it a bit tougher than we will.

[Jessica Reif Cohen:]

Thank you.

[Operator:]

We will go next to Anthony Diclemente - Lehman Brothers.

[Anthony Diclemente:]

Hi, good morning. Thanks for taking my question. You just posted $1.5 billion in free cash flow in 2005. Many of The Street analysts -- ourselves included -- are looking for about $1.15 billion to $1.2 billion in free cash in '06. I think the difference, and the big reason for the gap is negative working capital, people are looking for about $350 million to $400 million in negative working capital in '06. This question is for Fred, and the question is

[Fred Reynolds:]

Anthony, thanks. Let me take you through. Free cash flow for us is, after everything is paid -- capital spending, taxes, you name it… a change in working capital, a change in net assets. It is everything, so we don't change that number. It is the cash in the bank at the end of the year. Let me take you through. Yes, we had an extraordinary year on working capital. Part of that, as you would expect with revenues sort of flat, we did collect a lot of the receivables. That is a focus, to drive down our DSOs. That was part of the reason. With revenues up only a little for the year or relatively flat, that we were able to drive down working capital. You have to look at our business a little differently. One, the normal business does not use a lot of working capital, probably $0.20 on every incremental dollar of revenue, somewhere in that range, is what we need in working capital. But we do have some non-cash revenue and non-cash profits that come in, in our syndication arm. That has a little bit of variability year to year, because in the second quarter of '05 when we announced a sale in syndication to cable, the accounting rules make us recognize all of that revenue and we have both the current and long-term receivable from, in that case I guess it was one of the cable networks. So that is something we look at and that could drive the variability. I do think we are going to see a lot of growth, as we said. We will grow low single digits in revenues, so we won't be able to work down the working capital as much as we did in '05, but you can count on us focusing on driving down. The big numbers we can drive down are receivables. We don't have inventory. We don't have widgets, we just have receivables and we have programming costs. So we will try to be as illuminating to you when we have the periodic, each quarter sales of syndicated product to the cable networks that may drive non-cash, for that quarter, revenues and profits, we will illuminate that as fast as possible. We are a cash flow machine. That is what we are about. That is what Leslie holds us to, that is what Sumner holds us to and we are going to be focused, all of our divisions, on driving down our receivables and holding the payments going out as long as we can to make -- we only have about $12 billion of non-goodwill assets, so we have to make those turn, go fast. That is certainly our commitment to you.

[Anthony Diclemente:]

Okay.

[Operator:]

We will go next to Doug Mitchelson with Deutsche Bank.

[Doug Mitchelson:]

Thank you very much. General consensus is the upfront will be flat to down slightly this year. (1)Do you feel differently, Les? (2) The big story last year for CBS was Thursday night; it seems that is the big story again this year. Are you already achieving the same CPM pricing on Thursday as NBC? If so, how much revenue upside do you still see left on Thursday nights? Thanks.

[Leslie Moonves:]

I don't know who you are getting that consensus from, but our people are telling us that the upfront is going to be up close to 4%, if not more. By the way, in most of the last 10 years far exceeded what the expectations are. I think you have been talking to too many advertising executives, Doug, who always at this time of the year start the march -- the upfront is going to be down, the upfront is going to be down. And then guess what? Come June, the upfront is up. I can almost guarantee you the upfront will be up. In terms of Thursday nights, we are obviously very pleased with our performance on Thursday. It continues to be strong. Overall, it continues to be an opportunity. Broadcast television is doing extremely well. You look at ABC, you look at Fox, you look at us, we are all doing extremely well. NBC is having some gains here and there. The network groups are doing extremely well. It is time that people realized that broadcast television is still the place to be. Once again, some of the drumbeats maybe should be around broadcast more than some of the cable assets. In terms of CPMs, it is hard to -- you know what? We don't necessarily split out a CPM. We make overall deals. When you buy CSI on Thursday night you are also buying some other shows. So it is hard to assess how much CPM growth there will be on Thursday night, but it continues to be the best night for us and we continue to be pretty strong on that night.

[Doug Mitchelson:]

Do you think there is still some more revenue potential gains from NBC on Thursday night coming for CBS?

[Leslie Moonves:]

No question about it. There is more money flowing in everyday on Thursday night.

[Doug Mitchelson:]

Thank you.

[Operator:]

We will go next to Kathy Styponias - Prudential Securities.

[Kathy Styponias:]

Hi. Two questions. Les, you mentioned that the traction that Showtime is gaining, especially with the shows such as The L Word and Sleeper Cell, et cetera. I was just wondering if you could go over for us how much cash flow is currently being generated by Showtime, and/or where the margins are, given that HBO throws off about $1 billion plus in cash flow. So how much upside potential, how much of a swing factor, could Showtime be? Secondly, if someone can comment on what sort of trends you are seeing so far into the first quarter with respect to television advertising? Yesterday on their call Viacom mentioned that the dollars are being placed later and later into the quarter. I am wondering if you are seeing the same sort of trend. Thanks.

[Leslie Moonves:]

Let me talk about Showtime first, Kathy. Obviously, HBO was built on great programming, first and then the money and the subs follow. I think the fact that Weeds won a Golden Globe award and that the star of that show won a Golden Globe award and for the first time, I think in many, many years, Showtime is now on the map and being talked about in the same breath as HBO. Yes, HBO makes considerably more money than Showtime. Fred, what is the number on Showtime right now?

[Sumner Redstone:]

We don't break out the segment numbers.

[Leslie Moonves:]

Right, right. It is part of the TV segment, but there is a lot of upside to this.

[Sumner Redstone:]

There is a tremendous amount.

[Leslie Moonves:]

There is a lot of upside, we don't make nearly as much as HBO but we are growing every year, and I think this original programming is absolutely going to help us in terms of that. In terms of first quarter scatter, one thing -- and as Fred said, this is a screwy first quarter. In February -- by the way, this has all changed recently -- in February of this year, we have the Olympics, we have the Academy Awards, we have the Super Bowl and we have the Grammies, all squished together. I know the Academy Awards is the beginning of March, but it is sort of all together in one month. It used to be, Super Bowl was January, the Academy Awards was April and the Olympics only comes around in February once every four years. So it is hard to ascertain what the scatter market is. All we know is, as we head towards the rest of the season we are starting to get a great deal of post-Olympic interest, and we are starting to get very high rates for our scatter post-Olympic so we are very excited. We've held our power, so we have original programming through March, April and May and we expect the scatter market to be very, very strong for us.

[Kathy Styponias:]

Thank you.

[Operator:]

We will go next to Andy Baker at Cathay Financial.

[Andy Baker:]

Thank you very much. A couple of questions. Could you just give us a sense of how much revenue might be at risk -- on the money-losing transit contracts, if you were to get out of those -- and then how much potential there is on the profit side for getting out of money-losing contracts. That is one. Secondly, on Showtime, can you just remind us when your studio deals expire?

[Leslie Moonves:]

I will do the Showtime question first. Most of the deals expire within a couple of years, within two years. So that is very exciting for us as we look to the future, because we are going to have more freedom to do what we want to do and get the product we want on Showtime. Once again, another reason why we are confident Showtime can grow considerably.

[Fred Reynolds:]

And Andy, on your transit comment, this is sort of like addition by subtraction. I am not as worried, and Leslie is not as worried, about the revenue. That is why in Outdoor maybe the revenue growth wasn't as strong but the profit growth is very strong. We don't want profitless revenue. We want to make a lot of money on all of our contracts and if they don't meet the hurdle, we don't bid. So again, I think you should be focused on that too. We are going to have a lot more profitability out of outdoor, it is going to have a strong '06.

[Andy Baker:]

Can you give us a sense of how much the unprofitable contracts have been draining from your bottom line then, over the past year?

[Fred Reynolds:]

Let's say it has certainly put a damper on the profit growth of Outdoor. My guess is in at least 4 or 5 points of growth, and maybe more depending on the year. It has at least been 4 or 5 points of growth on the bottom line.

[Andy Baker:]

Thanks a lot.

[Leslie Moonves:]

Thank you.

[Operator:]

We will go next to Arian Mueller with Credit Suisse.

[Arian Mueller:]

Thank you, good morning. Two questions. One, can you give an update on the potential sale of theme parks? Are you looking at publishing perhaps, as we saw Warner Books go to Lagardere recently? Secondly, I am trying to model free cash flow going forward using the various components. You have talked about working capital, but could you talk about taxes, CapEx. On taxes, do you have NOLs? What kind of effective tax rate should we model forward? Thank you.

[Fred Reynolds:]

I will take both. On parks the process is underway. We have a number of interested parties that are going to be looking at the business over the next several weeks and hopefully by some time in the second half of this year we will have a very attractive proposal from suitors to buy. Leslie does -- and I think we all agree that Simon and Schuster is a good content company, and particularly you can get real excited about the digital devices that come down that are going to be wanting to have something in those devices, such as the electronic books. I don't think that is something that we would want to consider because of the content aspect. As far as the tax rate, I think you ought to assume a 42% tax provision. We are working hard to get that down. It is a tick or two higher than we had when we were combined with Viacom, because we don't have as much exposure outside of the U.S. in low-tax countries. We are working feverishly both at the state and local level and on federal to see if we can't work on that. You ought to assume a tax rate in the 42% range. I think that answers --

[Leslie Moonves:]

CapEx.

[Fred Reynolds:]

And CapEx should be just -- thank you, Leslie, I am getting old and I forgot the question. The CapEx should be just slightly higher than this year, as we showed in the release today. For the year it was $376 million. We are only going to be up slightly higher because of the timing difference. We are building a new station out in L.A. We sold the Chicago station this year and we sold the [takeout] station this year, but the building of the new one is next year. So it is probably going to be about $20 million to $25 million more. It may not be that high, but you should sort of count on that. We hope to beat it.

[Arian Mueller:]

Okay, great. Thanks.

[Operator:]

We will go next to Anthony Noto with Goldman Sachs.

[Anthony Noto:]

Thank you very much. There have been a lot of questions about free cash flow, and I was wondering for 2006 if you could just lay out a target for EBITDA to free cash flow conversion, both with and without the pension liability? The second question, obviously most investors are going to look past these write downs and impairment charges. I was just wondering, there has been a lot in your statements about upside and guarantees. I was wondering if I could bait you into giving us a target for ROIC for the next couple of years? As you do acquisitions, if you will commit to disclosing what the internal rate of return on that acquisition is from a forecasted standpoint in the components? Thanks.

[Fred Reynolds:]

Anthony -- I will take that, Leslie. Thanks, Anthony. We don't really give an outlook on the free cash flow, but again we are focused on making sure the OIBDA converts at a high rate to free cash flow and again, our commitment is to really work our assets to get more cash out of them. I think you can count on that. I think because of just the timing of the pension investments and all of the things that we do to pre-fund the pension plan, I think it would be difficult right now to give you that kind of guidance. As we make the decisions, we will certainly communicate them so you won' t be guessing where we went on that. On ROIC, I think at this point, we introduced to all of our management that we are looking very closely -- and as Leslie said at the outset, this is something he is focused on every day -- so we've introduced to our management that we are going to look at return on invested capital with the goodwill, without the goodwill, so that we can drive that return. Clearly our goal is to exceed our cost of capital by a lot. If you take goodwill out -- which I can't do, Leslie can't do and Sumner because that is our shareholders' money -- but if you take that out, a low teens kind of return on invested capital with a cost of capital around -- some of you have us at 9%, some 8.5% but somewhere between 8.5% and 9%. Obviously as you load in now some $30 billion of goodwill, we are below that cost of capital. That is unacceptable to us and it is unacceptable to our shareholders.

[Anthony Noto:]

Great, thank you.

[Marty Shea:]

We will take one more question, please.

[Operator:]

That question will come from Michael Nathanson with Sanford Bernstein.

[Michael Nathanson:]

Thanks. I have one for Fred, and it is following up on Anthony's question. Rather than talking about forward-looking commentary on conversion rates, the question I think people are trying to struggle with is, in '05 specifically, how much benefit was working capital as a real number? And then what was the pension investment in '05 that you guys put through?

[Fred Reynolds:]

We did use some working capital, but not a significant amount. So it wasn't a negative, in other words it wasn't a source but we did use some working capital. We did not make and we are not required to make a pension investment in 2005. We are not required to make a pension investment in 2006, however in January I think we noted this in a previous meeting, we did put $50 million into the pension plan. So it is a pre-funding and it is tax deductible. We are going to look at that again as a source, a use of our free cash flow. We think, and I think many of you believe, that is a pretty good return on our investment. It is a low teens, I calculated around 13% IRR on pre-funding it. As long as we get the tax deduction -- and you can't over pre-fund because then you don't get a tax deduction. There is a corridor in which you have to stay within in order to get a tax deduction. So we put in $50 million, we will likely put in more this year, but some analysts have said we should fund it all up in one fell swoop. That won't happen this year because we won't get a tax deduction.

[Marty Shea:]

Thank you very much for joining us this morning. Deborah and I will be around for the rest of the day to answer any more questions. Have a good day, everyone. Thank you.

[Operator:]

This does conclude today's conference. We thank you for your participation, you may disconnect at this time.