Nov 13, 2014
Executives
Art Penn - Founder, Chairman and CEO Aviv Efrat - CFO and Treasurer
Analysts
Doug Mewhirter - SunTrust Robinson Humphrey Greg Mason - Keefe, Bruyette & Woods Chris York - JMP Securities Mickey Schleien - Ladenburg Thalmann Doug Harter - Credit Suisse Arren Cyganovich - Evercore Partners Rick Shane - JPMorgan Rob Brock - West Family Investments
Operator
Good morning. And welcome to the PennantPark Investment Corporation's Fourth Fiscal Quarter 2014 Earnings Conference Call.
Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode.
The call will be opened for a question-and-answer session following the speakers' remarks. (Operator Instructions) It is now my pleasure to turn the call over to Mr.
Art Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr.
Penn, you may begin your conference.
Art Penn
Thank you, and good morning, everyone. I'd like to welcome you to PennantPark Investment Corporation's fourth fiscal quarter 2014 earnings conference call.
I'm joined today by Aviv Efrat, our Chief Financial Officer. Aviv, please start-off by disclosing some general conference call information and include a discussion about forward-looking statements.
Aviv Efrat
Thank you, Art. I'd like to remind everyone that today's call is being recorded.
Please note that this call is a property of PennantPark Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers provided in our earnings press release as well as on our Web site.
I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections.
We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our Web site at www.pennantpark.com or call us at 212-905-1000.
At this time, I’d like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.
Art Penn
Thank you, Aviv. I’m going to spend a few minutes discussing current market conditions, followed by a discussion of investment activity, the portfolio, the financials, the overall strategy, and then open it up for Q&A.
As you all know, the economic signals are moderately positive with many economists expecting a slowly growing economy going forward. With regard to the more liquid capital markets, and in particular the leveraged loan and high-yield markets, during the quarter ended September 30th, so those markets experienced volatility due to cash outflows and leveraged loan and high-yield funds.
Those outflows were a result of the global economic concerns, geopolitical risk and expectations that the Federal Reserve would tighten monetary policy. A less robust broadly syndicated loan and high-yield market helped the overall tone in the middle market.
Risk reward in the middle market has generally remained attractive, as the overall supply of middle market companies’ unique financing exceeded the relative demand of applicable lending capacity. As debt investors and lenders a slow growth economy is fine, as long as we’ve underwritten capital structures prudently, a healthy current coupon with the leveraging from free cash flow overtime is a favorable outcome.
We’ve continued to be selective about which investments we make in this environment, given our strong origination network and the size of our company we believe we can continue to prudently grow. We remain focused on long-term value and making investments that will perform well over several years and can withstand different business cycles.
We continue to set a high bar in terms of our investment parameters, and remain cautious and selective about which investments we add to our portfolio. Our focus continues to be on companies and structures that are more defensive, have low leverage, strong covenants and high returns, with plenty of dry powder, we are well-positioned to take advantage of the investment opportunities as they arise.
As credit investor is one of our primary goals as preservation of capital. If we preserve capital, usually the upside takes care of itself.
As a business, one of our primary goals is building long-term trust. Our focus is on building long-term trust with our portfolio companies, management teams, financial sponsors, intermediaries, our credit providers and of course, our shareholders.
We are a first call for middle-market financial sponsor’s management teams and intermediaries who want consistent credible capital. As an independent provider free of conflicts or affiliations, we’ve become a trusted financing partner for our clients.
Since inception, PennantPark entities have financed companies backed by 140 different financial sponsors. We have been active and are well-positioned.
For the quarter ended September 30, 2014, we invested $233 million. The average yield on new debt investments was 13%.
Expected IRRs generally range from 13% to 18%. Core net investment income was $0.34 per share.
We are pleased that we issued 8.5 million shares of common stock as well as $250 million of investment-grade rated five year bonds and an attractive coupon of 4.5%, which will add to our liquidity. We have met our goal of a steady stable and consistent dividend stream since our IPO nearly eight years ago, despite the overall economic and market turmoil throughout that time period.
We are one of the only BDCs to no cut its dividend during this time period. We anticipate continuing this steady stable dividend stream going forward.
Given the current market backdrop, we’ve remained appropriately levered and have plenty of excess liquidity that we can use for both defensive and offensive purposes. At quarter end, our net leverage ratio, accounting for cash on the balance sheet, was approximately 56% and only about 37% excluding SBIC debt.
As a result of our focus on high-quality new investments, solid performance of existing investments and continuing diversification, our portfolio is constructed to withstand market and economic volatility. The cash interest coverage ratio, the amount by which EBITDA or cash flow exceeds cash interest expense, continued to be a healthy 2.6 times.
And this provides significant cushion to support stable investment income. Additionally, at cost, the ratio of debt-to-EBITDA on the overall portfolio was 4.5 times, another indication of prudent risk.
We have plenty of liquidity. As of September 30th, we had in total over $630 million of available liquidity, consisting of $490 million of available credit facility, 75 million of new SBIC debt financing in our second SBIC and over $65 million of cash on-hand.
We had some attractive realizations last quarter. For example, Vestcom refinanced our $39 million subordinated debt position, which generated a 15.8% IRR.
We’ve remained an equity co-investor and received a dividend as part of that financing. Our $20 million second lien debt position in Arsloane Acquisition was exited at an IRR of 19.8% as part of a refinancing.
Despite the recession across PennantPark entities, we’ve had only eight companies on non-accrual out of 334 investments since inception nearly eight years ago. Further, we are proud that even when we have had those eight non-accruals, we’ve been able to preserve capital for our shareholders.
Through hard work, patience and judicious additional investments in those companies, we’ve been able to find ways to add value. Based on values as of September 30th, we’ve recovered 89% of the capital invested so far in those eight companies.
We have one non-accrual investment as of September 30th representing an only 0.3% of the portfolio at cost. As a result of this track-record of low non-accruals and high recovery rate, we are one of the few BDCs who was in operation before the recession who has preserved capital for shareholders while generating a consistent steady dividend.
In terms of new investments, we had another quarter investing in attractive risk adjusted returns. Our activity was primarily driven by growth financings, re-financings and acquisition financings, and virtually all of these investments we’ve known these particular companies for a awhile, have studied the industries or have a strong relationship with the sponsor.
Let’s walk through some of the highlights. AKA Diversified and Z Wireless is a Verizon Wireless premium retailer based primarily in the Midwest.
We purchased 10 million of unfunded revolver and 9 million of additional first lien term loan, Atlantic Street Capital is the sponsor. We invested $41 million in the second lien debt at Novitex acquisition.
Novitex provides outsourced mail, print and document management solutions. Apollo is the sponsor.
Patriot National provides workers compensation claims administration solutions to insurance carriers. We purchased $22 million of additional tranche of first lien term loan and 1 million of equity.
The company is owned by management. We purchased $100 million of first lien term loan and $1 million of equity of RAM Energy.
RAM is an exploration and production company focused on operation in the Ark-La-Tex and Permian regions. The company is primarily owned by management.
Sotera Defense Solutions is a technology and engineering solutions firm. We purchased 90 million of the first lien term loan, Ares is the sponsor.
Turning to the outlook, we believe that the remainder of 2014 will continue to be active due to growth in M&A driven financings. Due to our strong sourcing network and client relationships, we are seeing active deal flow.
Let me now turn the call over to Aviv, our CFO, to take us through the financial results.
Aviv Efrat
Thank you, Art. For the quarter ended September 30, 2014, recurring net investment income totaled $0.29 per share.
In addition, we had $0.05 per share of other income. As a result, core net investment income for the quarter was $0.34 per share.
Additionally, we had $0.07 per share of upfront expenses due to the issuance of the 250 million bond and $0.02 a share of reversal of capital gains incentive fees that were accrued but not payable. As a result, GAAP net investment income was $0.29 per share.
Looking at some of the expense categories, management fees totaled $9 million after 2 million of reversal of incentive fees accrued but not payable. General and administrative expenses totaled $600,000, interest expense totaled 5.6 million and one-time bond issuance costs were 4.5 million.
During the quarter ended September 30th, net realized gain from investment was 1 million or $0.2 per share. Unrealized loss on investment was 25 million or $0.36 per share and unrealized gains from our notes was $2 million or $0.03 per share.
Excess dividend over income was about $1 million or $0.01 per share. And the accretive effect of the issuance of new shares was $0.02 per share.
Consequently, NAV per share went down $0.30 from $11.33 to $11.03 per share. As a reminder, our entire portfolio, credit facility and senior notes are mark-to-market by our Board of Directors each quarter using the exit price provided by independent valuation firms, securities and exchanges or independent broker/dealer quotations when active markets are available under ASC 820 and 825.
In cases where broker/dealer quotes are inactive, we use independent valuation firms to value the investments. Our overall debt portfolio had a weighted average yield of 12.5%.
On September 30th, our portfolio consisted of 67 companies across 30 different industries and was invested 35% in senior secured debt, 37% in second-lien secured debt, 19% in subordinated debt and 9% in preferred and common equity. 68% of the portfolio has a floating rate including 60% with the floor and the average LIBOR floor is 1.3%.
Now, let me turn the call back to Art.
Art Penn
Thanks, Aviv. To conclude, we want to reiterate our mission.
Our goal is steady, stable and consistent dividend stream, coupled with the preservation of capital. Everything we do is aligned to that goal.
We try to find less risky middle-market companies that have high free cash flow conversion. We capture that free cash flow primarily in debt instruments and we payout those contractual cash flows in the form of dividends to our shareholders.
In closing, I’d like to thank our extremely talented team of professionals for their commitment and dedication. Thank you all for your time today and for your continued investment and confidence in us.
That concludes our remarks. At this time, I would like to open up the call to questions.
Question
and
Operator
Thank you. (Operator Instructions) And we will go first to Doug Mewhirter of SunTrust.
Doug Mewhirter
A question on the balance sheet, now you have those investment grade notes out there might have a little more scrutiny from bondholders and rating agencies, et cetera. Are there any hard caps on your total leverage now that you have those notes outstanding?
I know that there was a -- one of your competitors had mentioned that they were limited to 0.7 and even including SBIC. I didn’t know if there are any similar constraints now that you have this debt outstanding?
SunTrust Robinson Humphrey
A question on the balance sheet, now you have those investment grade notes out there might have a little more scrutiny from bondholders and rating agencies, et cetera. Are there any hard caps on your total leverage now that you have those notes outstanding?
I know that there was a -- one of your competitors had mentioned that they were limited to 0.7 and even including SBIC. I didn’t know if there are any similar constraints now that you have this debt outstanding?
Art Penn
No, we live within the SEC asset coverage constraints as always. So there is nothing specifically in the notes but other than staying within the SEC guidance.
Doug Mewhirter
And remind me of your sort of comfort range with and without SBIC your debt-to-equity. It seems like you’re well within that -- you're pretty comfortable now.
Could you remind me how high you generally get to that range before you think about issuing equity?
SunTrust Robinson Humphrey
And remind me of your sort of comfort range with and without SBIC your debt-to-equity. It seems like you’re well within that -- you're pretty comfortable now.
Could you remind me how high you generally get to that range before you think about issuing equity?
Art Penn
Yes so, our target range is 0.6 to 0.8 times inclusive of SBIC debt, that’s the way we think about it. It gives us plenty of cushion but defensively and offensively given the SBIC exempted relief we could theoretically take leverage above 1:1.
Given the portfolio we have, we’re comfortable in the 0.6 to 0.8. And so that’s kind of where we generally would like to be.
Operator
And next we’ll move to Greg Mason of KBW.
Greg Mason
First, could you talk about RAM Energy it’s a really big deal for your size. I believe 8% of the portfolio and just maybe a little broader discussion on how you’re viewing underwriting oil and gas given some of the volatilities here recently in oil?
Keefe, Bruyette & Woods
First, could you talk about RAM Energy it’s a really big deal for your size. I believe 8% of the portfolio and just maybe a little broader discussion on how you’re viewing underwriting oil and gas given some of the volatilities here recently in oil?
Art Penn
First just as backdrop we’ve been involved in energy investing since the get-go it’s been a big part of what we’ve done. I think we’ve invested something like $500 million and have generated kind of mid-teens returns.
So it’s the space we know and we like that we’ve been -- we have some good experience in. We like oil and gas particularly where we think there is good asset value, which is the case here in RAM where we’re lending against proven developed producing reserves where we’re at the top of the capital structure and where there are hedges in place.
So all those elements happened to be in RAM which is one of the reasons we like it. And we’re comfortable with the position due to that.
There is a piece of the position about 27 million that is a shorter term position. It’s a one year maturity that we think the company is going to de-risk and de-leverage through several different ways.
They could de-leverage de-risk through several different ways over the course of the next year. So, you’re right it’s a big position.
We didn’t take it lightly, we agonized however we do think a chunk of it will be short-term.
Greg Mason
And then the marks down in the book in the quarter, can you talk about the potential drivers there, as well as the one year non-accrual Intermediate Transportation?
Keefe, Bruyette & Woods
And then the marks down in the book in the quarter, can you talk about the potential drivers there, as well as the one year non-accrual Intermediate Transportation?
Art Penn
Sure. Just Intermediate Transportation that’s the official name of it, it goes by the name of Greatwide.
It was a non-accrual we had early on, four-five years ago. It has underperformed.
We have put it on non-accrual again. It’s a very small position as we said, 0.3% of the portfolio had cost but it has remained weak.
In terms of the NAV reduction first as many of you know the liquid credit markets and as we said we’re down towards quarter end. A piece of our portfolio is broker/dealer quote and that certainly reflects that.
The biggest driver of the markdown was our position in Affinion, which is a company we’ve been involved with almost six years. We’ve invested in it over a long period of time in different formats.
We feel very good about the deal. There was an exchange that was done, it was six-nine months ago to really give the company three-four years of cushion.
So we do not see this as a near-term non-accrual at all. Part of the mark was due to just weakness in the liquid markets.
Part of it was -- there was a rumor that there was a large fore seller who was liquidating their portfolio. I think management towards the end of the -- after quarter end reiterated their guidance for the full year in the paper has traded better since then.
So we’re comfortable with the position but we never like to see the market volatility like that.
Operator
And next we have Chris York with JMP Securities.
Chris York
Just one question this morning, so outstanding SBA debentures have been flat throughout the year. Yet you’ve recently seen a couple BDCs issue debentures to maximize their licenses.
Could you help me understand how you’re thinking about that capacity? And has recent deal flow not been SBA compliant?
JMP Securities
Just one question this morning, so outstanding SBA debentures have been flat throughout the year. Yet you’ve recently seen a couple BDCs issue debentures to maximize their licenses.
Could you help me understand how you’re thinking about that capacity? And has recent deal flow not been SBA compliant?
Art Penn
Yes, we love our SBA -- SBICs our first quarter call is when we have a deal to put it in those vehicles. Unfortunately for a number of reasons we haven’t found any recently there will be a deal this upcoming quarter ended December that will fit into the SBIC and we’re looking for more.
There is very rigorous boxes that the SBA sets up, SBA does not like energy, unfortunately. So, we’re trying hard it is the first quarter call and we are hopeful that we will use the cash in SBIC 1 and then hopefully drawdown 75 million in SBIC 2 overtime.
Operator
And we have Mickey Schleien from Ladenburg with our next question.
Mickey Schleien
Can you remind me what percentage of assets are in the non-qualified bucket as of September?
Ladenburg Thalmann
Can you remind me what percentage of assets are in the non-qualified bucket as of September?
Art Penn
It’s very small, I don’t have the number.
Aviv Efrat
It’s about 4%.
Art Penn
Aviv is saying it’s 4% or 5%, something like that, so we have got a big bucket.
Mickey Schleien
And given that, how do you think about employing that bucket some of your peers have done things like the SSLP or they’ve done and acquired asset-based lenders, number of things to improve yield and synthetically increase leverage. Is that something PNNT would consider doing?
And if so can you give us some color on what that might look like and when?
Ladenburg Thalmann
And given that, how do you think about employing that bucket some of your peers have done things like the SSLP or they’ve done and acquired asset-based lenders, number of things to improve yield and synthetically increase leverage. Is that something PNNT would consider doing?
And if so can you give us some color on what that might look like and when?
Art Penn
Sure. Look, we look at everything as our fiduciary responsibilities look at all of these different types of things.
We had used it a little bit so far in Europe we did a deal in the UK trust-ins which was financing a pub, a stage in the UK. So, we’ve looked at all these things and we’ll continue to look at all these things.
There is nothing near-term that we see other than potentially gradually looking at deals in Europe for that vehicle, but we’ll continue to look and see if any of these partnerships make sense.
Mickey Schleien
And just a follow-up, if I am not mistaking. You’re carrying $0.21 of spillover taxable income.
Ladenburg Thalmann
And just a follow-up, if I am not mistaking. You’re carrying $0.21 of spillover taxable income.
Art Penn
Yes.
Mickey Schleien
I think in the past you’ve pretty much decided to retain that. Is that the expectation going forward or are you considering it special?
Ladenburg Thalmann
I think in the past you’ve pretty much decided to retain that. Is that the expectation going forward or are you considering it special?
Art Penn
We like operating with some cushion. And so we’re going to retain it for now.
Mickey Schleien
And lastly, there was a pretty meaningful increase in pick interest in the quarter. Was that idiosyncratic or was there a conscious decision to move toward pick deals or what was going on?
Ladenburg Thalmann
And lastly, there was a pretty meaningful increase in pick interest in the quarter. Was that idiosyncratic or was there a conscious decision to move toward pick deals or what was going on?
Art Penn
Just be clear, there is never a conscious decision to move toward pick deals. It’s got to be idiosyncratic due to a particular deal or two.
We prefer cash. We always prefer cash if there is a particularly good risk reward that’s more pick oriented we’ll look to do that.
So, well let’s look into that and we could talk to you later on in the day as to what particular deal or two may have driven that. But we generally like cash.
Operator
And we’ll move next to Matthew Freedman of Credit Suisse.
Doug Harter
It’s actually Doug Harter. Art just wondering if you could talk about the opportunity set you’re seeing today at the higher yields that you were able to achieve in the current quarter?
Credit Suisse
It’s actually Doug Harter. Art just wondering if you could talk about the opportunity set you’re seeing today at the higher yields that you were able to achieve in the current quarter?
Art Penn
So, the opportunity set for us is always deal-by-deal-by-deal. We’re never once -- other than when there is a market correction they achieve, we got to be deploying a lot of capital.
This is always deal-by-deal-by-deal. And we saw some good risk reward this past quarter.
We highlighted some of the names RAM Energy, Novitex, Sotera. We highlighted those in the comments Z Wireless.
You may remember the prior quarter, we actually shrunk in size. This quarter we grew in size.
So it’s always idiosyncratic based on the deal. We’re seeing less attractive opportunities in the down and middle of the fairway LBO, middle market LBO.
We’re seeing more attractive opportunities either as we said in the energy space or in, we’re doing some of these, all these buildups Z Wireless is essentially a buildup that we’re doing with the sponsor where they’re consolidating the wireless retailing industry. So we have some of these kind of consolidation plays we have some energy investments going on.
So it’s looking -- it still fits out parameters which is low debt-to-EBITDA, attractive returns, good covenants. And if it fits we’ll do it and if it doesn’t we’ll shrink.
Doug Harter
And acknowledging that you look at every deal on a individual basis, how would you think about what level of sort of sector concentration in the energy you would be comfortable with?
Credit Suisse
And acknowledging that you look at every deal on a individual basis, how would you think about what level of sort of sector concentration in the energy you would be comfortable with?
Art Penn
We are focused on diversification everywhere we can diversified. So, look, we think we can do a little bit more energy, not a time I think what we hope is to get refinanced and taking out some of the existing energy deals.
So we think we have a little bit more room in energy. But I would not expect the percentages in our portfolio to go dramatically higher from here.
Operator
And we’ll move next to Arren Cyganovich of Evercore.
Arren Cyganovich
Just looking at the origination activity over the past seven or five quarters or so, it’s been pretty strong. Do you expect to have a similar pace going into next year and were there any deals kind of pulled forward into the third quarter because it seemed a little bit heavier than normal?
Evercore Partners
Just looking at the origination activity over the past seven or five quarters or so, it’s been pretty strong. Do you expect to have a similar pace going into next year and were there any deals kind of pulled forward into the third quarter because it seemed a little bit heavier than normal?
Art Penn
So it’s a good point. A lot of what we did in this past quarter was front-end loaded in the quarter.
So, that’s true. In terms of pacing, look we’ve, our statement is we expect to see slow growth.
So, we are seeing repayments and refinancing decline this quarter, quarter-to-date and then may just be because of the little bit of the bullion is off the market which is a positive thing in some ways. Of course we always like to get paid back when we say thank you and people pay us back.
But if we like a company we like the risk reward we like being in it.
Arren Cyganovich
And then the interest income was a little bit elevated or higher than I was anticipating. Was there a certain amount of prepayment income or other kind of non-typical interest income in the quarter?
Evercore Partners
And then the interest income was a little bit elevated or higher than I was anticipating. Was there a certain amount of prepayment income or other kind of non-typical interest income in the quarter?
Art Penn
Sure. So Arren if you look at our income statement, we have this line in there called other income and that’s where we put kind of one-time repayment penalties, fees, amendments, waiver fees and that was higher this quarter.
There were two companies that got repaid, ones name was Vestcom the other is Arsloane Acquisition and the prepayment penalties in those two deals were pretty good.
Arren Cyganovich
And I was actually talking just about the interest income line itself.
Evercore Partners
And I was actually talking just about the interest income line itself.
Art Penn
No, look I think the 13% yield that we generated this quarter and having it kind of earlier in the quarter probably helped that.
Operator
And next we have Rick Shane of JPMorgan for a question.
Rick Shane
We’ve seen the group trade below NAV and you guys had a, what in hindsight turned out to be a very timely equity offering during the quarter. Are you seeing any evolution of the competitive landscape or people pulling back a little bit with the group trading below NAV and capital becoming a little bit more precious?
JPMorgan
We’ve seen the group trade below NAV and you guys had a, what in hindsight turned out to be a very timely equity offering during the quarter. Are you seeing any evolution of the competitive landscape or people pulling back a little bit with the group trading below NAV and capital becoming a little bit more precious?
Art Penn
Great question, it’s certainly something to be tuned to going forward. You would think that overtime if BDCs trade below book value they would be more cautious with their capital well that’s certain our hope, not only other BDCs but the general markets including the liquid markets.
It feels like the markets including the middle market are a little bit more cautious than they were right after Labor Day I think the market started to slight kind of mid-September. So it’s feeling a little bit more cautious and tell us that’s a good sign.
Don’t know how much is directly linked to NAV and where NAVs are in the BDC industry.
Operator
(Operator Instructions) We’ll go next to Rob Brock of West Family Investments.
Rob Brock
You had mentioned that the debt-to-EBITDA was 4.5 times. Could you talk a little bit about attachments points and how they changed and where they are in the capital structure at different levels?
Thanks.
West Family Investments
You had mentioned that the debt-to-EBITDA was 4.5 times. Could you talk a little bit about attachments points and how they changed and where they are in the capital structure at different levels?
Thanks.
Art Penn
Sure. I mean we like being kind of mid-4s overall.
You can see our book though year-to-year it is moving higher up in the capital stack, I think we’re in a about 35% first lien now which is higher than it’s been in a while. So, it’s kind of been steady stable in kind of mid-4s debt-to-EBITDA over the course of the last year.
So, we think we’ve improved our position both higher in the capital stack as well as maintaining discipline around debt-to-EBITDA but that’s really how we manage our risk is by keeping the debt-to-EBITDA multiples low, the market certainly is well beyond 4.5 time as a general proposition we’re seeing deals clearly at 5.5, 6, 6.5 in certain cases in the liquid markets 7, 7.5 times debt-to-EBITDA very reminiscent of 2007 unfortunately. So, if you take kind of 4.5 times it’s kind of been steady for us over the course of the last year and you take kind of the percentages that we have in first lien, second lien sub and equity you can see that we’ve kind of improved, gradually improving our cash endpoint.
We’re also pleased that we are now two-thirds of floating rate on the asset side and almost off fixed on the liability side. So we think we repositioned our fixed floating mix well as well.
So we’re going to continue to try to stay as high in capital stack as we can try to keep debt-to-EBITDA as low as we can try to generate as much return as we can as well as get the company protection and that mean is that there might be quarters that we shrink as we did the prior quarter I don’t know if I am giving you what you wanted in that question but hopefully I did.
Operator
And with that that does conclude today’s question-and-answer session. And Mr.
Penn I’d like to turn the conference back over to you for any additional or closing comments.
Art Penn
Alright, just want to thank everybody for participating today. We will talk to you next in early February.
Thank you very much.
Operator
And ladies and gentlemen, that does conclude today’s call. We’d like to thank you again for your participation.