1. Trevor Fetter
Q2’ 08 Conference Call
August 5, 2008
Thank you, operator, and good morning.
I’d like to begin by referring back to two points I made at our investor day in early June: first, it
appears that we passed an inflection point nine to 12 months ago and are steadily improving our
performance; and second, our results for the quarter continue to demonstrate that our growth
strategies and performance improvement initiatives are working and driving improving results.
I am very pleased with our same-hospital admissions growth. In addition to extending our steadily
improving trend over the last 12 months, this is the best result that we’ve generated in more than
four years and includes solid growth in both surgeries and paying admissions.
These results included some noise in the statistics as we once again actively managed our portfolio.
As you know, results for continuing operations reflect not only our ongoing core hospitals, but also
two hospitals that we lease from a real estate investment trust and that we’ve recently announced we
will cease to operate when the leases expire.
I’m going to give you some statistics for same-hospital continuing operations that exclude those two
hospitals, so you can get a better idea of the performance of our ongoing core business. Going
forward, we will refer to these as the “core, same-hospitals.” Both sets of statistics are laid out on
slide 4 in the presentation we posted to www.tenethealth.com this morning.
Core, same-hospital admissions increased by 2.2 percent. Paying admissions also increased by 2.2
percent. Outpatient visits were basically flat in the quarter, marking an end of the declines that
we’ve had for the last 18 quarters, and extending the improving trend that we began showing eight
quarters ago. But more importantly, paying outpatient visits were actually up by 0.6 percent due to a
decline in the number of charity and uninsured outpatient visits. We’re gaining success from our
Medical Eligibility Program in qualifying more patients for Medicaid and other government
2. programs. This success is coming from a new tool that’s being utilized by our Patient Advocates to
assist in the screening process. We’ve also placed more patient advocates in our emergency rooms.
Commercial managed care admissions were down by 1.7 percent. Although negative, this is a far
better number than what we reported in the first quarter. Beneath the surface, however, our success
in building our commercial business is even stronger. That’s because within our eight primary
Targeted Growth Initiative service lines, commercial managed care admissions were up 1.9 percent.
The primary reason for the sizable difference between overall commercial admissions and
commercial admissions in targeted service lines is that more than 90 percent of the decline in
commercial volumes can be explained by a drop in Obstetrics services. As we’ve explained on these
calls and at our investor days for the past two years, the Targeted Growth Initiative generally targets
OB for de-emphasis. As I mentioned at the outset, our strategies are working, and this is one
Turning to pricing from all payors, we obtained good increases in the quarter. However, the pricing
increases slowed relative to the very strong pace we reported in the first quarter. While for
competitive reasons we no longer disclose commercial pricing alone, the overall pricing statistic
masks the strength that we’re continuing to achieve with commercial payors. There are two main
reasons. First, the industry tradition of using the term “pricing” synonymously with “net revenue
per adjusted admissions” allows changes in patient mix to obscure true pricing changes. And
second, we achieved relatively higher volume growth in lower-priced markets like Florida. As we
knew that this patient and geographic mix shift was likely, we said on our first quarter call that the
very strong pricing growth that we reported in the first quarter would probably moderate. Having
said all that, our commercial pricing growth was actually greater in Q2 than in Q1.
Our performance on costs was also solid with only a 3.2 percent increase in same-hospital
controllable operating costs per adjusted patient day. This increase even included a significant jump
in supply costs, in part, because of the result of the strong 2.3 percent growth we experienced in
surgeries. I should add that the increase in surgeries is even higher, at 3.0 percent, when we use the
3. core same-hospital statistic. We believe that the growth in surgeries represents additional evidence
of our success in implementing the Targeted Growth Initiative.
Biggs Porter will take you through the specifics of our Outlook revisions reflecting both our strong
first-half performance and the financial implications of divesting certain hospitals and other assets.
And while the individual impact of each of these actions is relatively small, this is a good
opportunity for us to walk you through the detail so you can refine your models as you see fit.
Since we last discussed our 2008 and 2009 Outlook with you, we have taken the following actions:
• First, we announced or completed the divestitures of five hospitals in California. This
includes the planned divestiture of USC as well as four other hospitals, two of which have
leases that will not expire until early next year. Although we hate to part with USC, we
believe the transaction will be attractive from a financial point of view. The other hospitals,
in the aggregate, were unlikely to ever contribute to free cash flow and faced economic
difficulty in complying with the state’s seismic regulations.
• Second, more than four years after we announced our intention to divest them, we
completed the sale of Encino in June and will close on the sale of Tarzana later this month,
removing a significant drag on free cash flow.
• Third, we have entered into a deal to monetize our investments in Broadlane, with the cash
expected to be received in the third quarter; and,
• Finally, we continue to move forward on the sale of 31 medical office buildings.
• In the aggregate, and in conjunction with other actions that are part of our overall balance
sheet initiatives, we expect to raise cash in the range of $750-$950 million, of which $650-
$850 million should fall into this year.
As we receive the cash, we will deploy it in the most efficient way, but, at present, in terms of
modeling the impact, you should assume that we will use most of this cash to retire debt. As
investors often focus on EBITDA, don’t forget that the positive impact of these transactions on
shareholder value will be driven below the EBITDA line. In our debt retirement example this
becomes very clear.
4. So, in our example, while these transactions may reduce EBITDA on a full run rate basis by $50
million, their disposition will have a net positive impact on 2009 pre-tax income and free cash
flow of up to $30 million, after reflecting an assumed $80 million pre-tax savings in net interest
expense and depreciation. The transactions also eliminate $50 million of one-time seismic costs
and end roughly $40 million of annual negative cash flow from Encino-Tarzana.
There are a couple of things that are important to remember:
One: this doesn’t all happen at once. USC, for example, has already been moved to discontinued
operations, which reduces our EBITDA from continuing operations immediately, but the cash
proceeds won’t be received until later in the year. Of course we’re still retaining the operating
profits and cash flows from the hospital until it is sold, but those results now show up in
Second: it may turn out that we do not use all of these proceeds to retire debt. We remain very
focused on growing our operations and, should an opportunity present itself offering a superior
means of deploying the cash, we will seek the highest risk-adjusted returns for our capital.
Again, Biggs will have more to say about our Outlook, but, at a very high level, I am pleased that
we can substantively confirm our existing range for adjusted EBITDA for 2008, adjusting it only
for the USC divestiture and its prior anticipated contribution of $25 million to adjusted EBITDA.
I am even more pleased that we can maintain our $1 billion objective for adjusted EBITDA in 2009
and the related objective of approximately breakeven free cash flow, despite these divestitures and
the monetization of the assets mentioned above.
The bottom line is that we expect this series of transactions to unlock incremental value for our
shareholders. We are strengthening net income and free cash flow, and taking some risks off the
5. Finally, I’d like to pre-empt a question that we hear repeatedly – namely, are we seeing any impact
from the general economic slowdown on our operations? Although you might expect a weak
economy to adversely impact “elective” procedures, we have been unable to identify any adverse
impact to date.
Of course the health-related economy is still strong. According to the Bureau of Labor Statistics
report of July 10, employment in the health care sector has increased by 350,000 jobs in the last 12
months and was only one of only two sectors, along with mining, that showed positive employment
growth in June.
Our local markets are also doing better than the economy as a whole. The 3-month net change in
unemployment in markets that represent nearly 80 percent of our hospitals remains better than the
national average. This is based on May 2008 data, which is the most current available.
A weak economy might also be expected to manifest itself in increased uninsured and charity
volumes and/or bad debt levels. While most components of these metrics grew in the second
quarter, the increase was fairly consistent with our recent trends and no cause for alarm.
Finally, the credit worthiness of our overall patient population has remained stable, as has the rate
of employment of our uninsured patients.
With that, let me turn it over to Steve Newman to offer his thoughts on the quarter.
6. Stephen Newman
Q2’ 08 Conference Call
August 5, 2008
Thank you Trevor and good morning everyone.
As Trevor said in his introduction, we are very excited about the mounting body of evidence that
our strategies and initiatives are working and can be expected to drive continuing improvements in
our operating results.
You can see this in total admissions growth, the specific volume growth in our targeted service lines
and the significant net expansion of our active medical staff.
Over the next few minutes I’ll explore each of these topics, and I think you’ll see what I mean.
While you already know that core, same-hospital admissions were up by 2.2 percent for the quarter,
you’ll be interested to know that, with the exception of our Southern States region, every other
region was up by 2.5 percent or greater. Furthermore, Florida’s turnaround is actually accelerating
with admissions growth reaching 3.0 percent for the quarter. I couldn’t be happier with the
turnaround and the trajectory of our volume growth in Florida. The Philadelphia market also
generated strong growth with admissions increasing 5 percent. We expect this dramatic admission
growth in Philadelphia to be somewhat muted in the third quarter and beyond because of
enhancements we have made in the use of InterQual screening of patients presenting to our
Philadelphia hospitals. This rigorous preadmission review results in a significant number of patients
being assigned observation status rather than inpatient status. I would also point out that because
neither Florida nor Philadelphia offers a large commercial managed care population in our primary
service areas, volume growth in these markets doesn’t contribute much to a rebound in aggregate
commercial admissions for the company. Nonetheless, this Florida and Philadelphia growth is
solidly profitable, and their growth will help to drive our profitability.
7. The 1.4 percent admissions decline in our Southern States Region was our one weak spot for the
quarter and continued a softening trend we have seen for the last three quarters. These losses are
concentrated in several of our hospitals that previously have been strong performers from a volume
perspective. Increased competition from not for profit health systems and increased turnover in our
A team leadership have contributed to this decline. We have recruited new leadership team
members to several of these markets and are taking other actions to offset competition including
increased physician recruitment and focused capital investment.
While the 1.7 percent decline in core, same hospital aggregate commercial admissions was a weaker
result than we would have liked, the fact remains that there is growing evidence that our growth
strategies are working.
Looking just at commercial admissions growth in the eight service lines, which are the primary
focus of TGI, commercial admissions in these lines grew by 1.9 percent. The delta between the
growth rate of aggregate commercial managed care admissions compared to the growth rate of the
targeted service lines is 3.6 percent. As Trevor mentioned, this is compelling evidence of the ability
of our TGI program to “move the needle” relative to this critical objective.
Results like this don’t happen by chance. We have implemented many programs and initiatives
which have contributed to this success. The acceleration of capital expenditures announced two
years ago is now fully “on stream” and our market-leadership in quality metrics continues to
distinguish the value proposition our hospitals offer physicians, patients and payors.
The final step in this process has been the successful execution of our Physician Relationship
Program, or “PRP.” We use PRP to deliver to physicians the message of the progress we’ve made in
service, clinical quality, technology and capital investment.
We have made significant progress towards our ambitious goal of replicating our 2007 performance
in the net expansion of our physician base. We added more than 1,000 physicians in 2007, and we
are confident we can do so again in 2008. In the second quarter, we made 3,836 visits to 2,109
physicians presently without staff privileges at our hospitals. This is the largest number of visits
8. made to the largest number of unaffiliated physicians since the inception of our program and is the
cornerstone of our redirection strategy, which we continue to emphasize and expand.
These visits are really paying off. In the second quarter, we added a net of 354 new, active staff
physicians, including 119 physicians added to the medical staff of our new hospital in El Paso. Let
me emphasize that this growth is net of attrition. To bring consistency to this analysis, I have
provided these physician numbers for the 50 hospitals we will operate on a go-forward basis.
Specifically, I have excluded USC and Norris, Garden Grove and San Dimas, as well as Irvine and
These new physicians are providing Tenet with a very solid flow of incremental inpatient and
outpatient referrals and were critical in producing the outstanding positive admission growth
numbers I shared with you a moment ago.
I know many of you would like the admissions data of these new physicians as a means of
forecasting our future volumes. Let me assure you that we are tracking this metric closely, but we
are not yet prepared to disclose the specific productivity of this cohort of new physicians. Before
sharing the growth statistics from these new physicians, we’d like to get a few more quarters of
experience under our belts. This will allow the admissions data to stabilize and avoid the risk of
providing misleading numbers.
Our marketing efforts are not limited to new physicians and the expansion of our medical staff. We
also devote significant resources to a companion effort designed to maintain and strengthen
relationships with our existing staff. To this end, in the second quarter we made 14,657 visits to
7,642 different, individual physicians with existing staff privileges at our hospitals. This program
identifies developing issues relevant to the physicians’ practice experience in our facilities to
address opportunities to improve satisfaction levels among our existing staff. While this program is
long-term in nature, it also produces measurable direct and immediate benefits. In the second
quarter, admissions to our hospitals from these physicians increased 5.0 percent compared to the
same group’s admissions in the second quarter of 2007.
9. Let’s spend a few moments reviewing the results of our outpatient business focus.
We continue to see improvement in the growth trend for outpatient volumes as the aggregate for the
quarter has improved to unchanged compared to the second quarter of 2007. Our actions also drove
an increase of 0.6 percent in paying outpatient visits for the quarter. Notably, our freestanding
ambulatory surgery centers increased procedures 28 percent. This was driven by recent acquisitions
as well as organic growth in many of the freestanding centers. We are extending the lessons learned
in our freestanding centers as best practices into the existing hospital and campus-based outpatient
operations and expect to see an inflection point where our aggregated outpatient volumes turn
positive in the near future.
Finally, I want to mention the exceptionally strong performance we saw in surgery. Our inpatient
surgeries increased 1.4 percent and outpatient surgeries increased 4.2 percent when compared to
those core, same-hospital volumes in Q2 ‘07. Most notably, commercial general surgery increased
3.4 percent, and commercial orthopedic surgery increased 5.3 percent compared to the second
quarter of 2007. Through the activities of our Performance Management and Innovation group, we
continue to focus on improving throughput in our operating rooms as we strive to make them more
efficient and inviting for our existing surgeons as well as those we have recently recruited or
In summary, the results of this quarter provide incremental evidence that we have passed the
inflection point on so many metrics, most significantly, inpatient volumes. We are meeting our
objectives through innovative strategies, including an increasing focus on growing our medical
staffs, refining and building our services consistent with our targeted growth initiatives, expanding
and organically growing our outpatient business while simultaneously maintaining our disciplined
approaches to managed care contracting and cost management.
With that I will turn it over to Biggs Porter our chief financial officer. Biggs…..
10. Biggs Porter
Q2’ 08 Conference Call
August 5, 2008
Thank you Steve and good morning everyone.
I have two primary objectives this morning:
• First, to walk you through the numbers for the quarter and offer some insights into the
relationships between volume, price, cost and earnings; and
• Second, to explain the refinements to our outlook for the balance of 2008 and into 2009.
I’ll start with a review of the quarter.
As already mentioned, the quarter experienced the best volume growth in years, including growth in
TGI admissions, our most-important area of commercial profitability. We also had good pricing
growth, better than our full year outlook going into the quarter, but lower than the first quarter as we
expected. Cost control was good at the FTE per Adjusted Patient Day level, and we saw reductions
in malpractice expense.
Although we posted improved results for the quarter, the magnitude of the improvement was
obscured somewhat by two non-performance related items: the reclassification of USC and two sold
hospitals to discontinued operations and the charge we took for the dispute with the government
over GME reimbursement at Modesto. If you normalize for these, our adjusted EBITDA results for
the quarter would have been $191 million.
We also had what seems to be an anomalous shift in patient mix and stop loss payments, which
would have further improved our results had we had what we believe would have been a more
normal quarter. I will talk about this more in a moment.
11. The decision to place USC into discontinued operations is driven by the accounting rules, which
require you to place a business into disc ops when its disposition becomes probable. This is a fairly
high bar, but based on the current status, we believed that we crossed over that point in the quarter.
As you may recall, leased facilities will stay in our reported results until the leases terminate. In
order to facilitate an understanding of how our outlook is or is not affected by the elimination of
Los Gatos and Irvine from our core same hospital results, we have presented our outlook for 2008
both on a basis which includes and which excludes those two REIT hospitals, whose leases will not
be renewed as a part of our settlement with HCPI.
I encourage you to devote some time to examining all the slides we posted to our Web site this
morning. The financial histories depicted on these slides provide restated financials after removing
Garden Grove, San Dimas, Irvine, Los Gatos, and, most importantly, USC from core, same-hospital
As you look at all the slides now shown on a core same-hospital basis, you’ll observe that broader
trends of the recovery are still readily apparent, if not improved.
Before I leave the subject of dispositions, as Trevor noted, although we will lose some amount of
same-hospital EBITDA in 2008 from USC, San Dimas, Garden Grove, the MOBs and Broadlane,
there is greater value generated in terms of our ability to reduce net debt and generate a positive
effect on cash going forward. While there is an immediate reduction in adjusted EBITDA from
continuing operations this quarter, the benefits from the improved balance sheet will not be fully
realized until all the sales are complete.
With respect to volumes, both Trevor and Steve have commented on the important resurgence in
volumes we experienced in the second quarter so I won’t spend a lot of time on volume. However, I
will reiterate that our performance demonstrates a very powerful and compelling trend for total
admissions, an emerging stability in our outpatient business and an improving trend in TGI
12. With respect to revenues and pricing, our second quarter volumes were converted into strong same-
hospital revenue growth of 5.9 percent. This growth would have been even stronger had it not been
for an unfavorable swing of $22 million in prior cost report adjustments. Without this swing, same-
hospital revenues would have grown by 7.0 percent.
Commercial managed care revenues in the quarter were up 7.5 percent, or 8.1 percent on a core
basis, despite the 1.7 percent decline in core same-hospital commercial admissions and the 1.8
percent decline in commercial outpatient visits. This clearly demonstrates that we are achieving
substantial benefit from our managed care negotiations.
This increase in managed care revenues is net of payor shift in the commercial sector toward
national plans, which we calculate resulted in a reduction in revenues of approximately $6 million
in the quarter.
This increase in managed care revenues would have been even greater had it not been for the
anomalous shift in patient mix and stop loss payments I referred to earlier. The stop loss variance to
expectation was approximately $7 million. The patient mix element is difficult to estimate, but what
we saw was that pricing growth in the quarter skewed slightly toward the commercial product lines
where we had volume declines. This was not the case in the first quarter, and we expect it to
normalize again going forward, giving us even greater pricing benefit for the remainder of the year.
In general, in addition to our Q2 2008 commercial pricing trends, we have several positive impacts
projected in the second half of 2008 and into 2009. The significant majority of these
positive impacts are in our control since they are associated with agreements that have already been
executed. With the recently signed contracts in Florida, we now have signed contracts covering 91
percent of our commercial rates for 2008 and 74 percent for 2009.
Our strategy of achieving commercial rate parity in all our markets also continues to achieve its
objectives, and we can confirm that we are still on a path to capture the $81 million we included in
the EBITDA walk-forward we discussed at Investor Day. We also still have some remaining
opportunity on the rate parity front and will be looking to capture it in our remaining negotiations.
13. We are also making progress on the “pay for performance” front. You will recall we discussed a
range of $35 to $40 million as the opportunity for receiving incremental quality payments in
aggregate over the three-year, 2009 to 2011 time period. For purposes of our walk-forward which I
will discuss later, we have included the midrange of $5 million in our 2009 estimate.
Turning to the trends in same-hospital controllable operating expenses…
These were on a favorable trend, rising just 3.2 percent in the quarter on a per adjusted patient day
basis. The only cost item which was up significantly in the quarter was supply costs, which
increased by 6.5 percent.
There are a couple of factors which need to be taken into consideration when assessing the meaning
of this growth. First, we saw 2.3 percent same-hospital growth in total surgeries, or 3.0 percent in
our core hospitals. This is good business, but growth in surgeries clearly drives up our supplies cost.
Secondly, our supply costs in the quarter were substantially offset by added revenues, including
from pass-through provisions in many of our contracts with payers. For the remainder of the year
we expect supply costs to stay higher than the prior year but in our walk forward of full year 2008
and 2009 we also assume this to continue to be offset by higher revenue.
On bad debt, there are numerous drivers of the numbers for the quarter. We experienced an $11
million increase in bad debt expense in the quarter, due to the increase in uninsured volumes, but
more significantly the effect of higher prices. And, although a more complicated matter to explain,
lower reclassifications to contractual allowances also negatively effected bad debt on a sequential
and year over year basis. The effects on bad debt from higher pricing and contractual allowance
reclassifications have no net impact on EBITDA because the effects are offset at the revenue line.
Also, our collection rates and bad debt reserving levels are improving. However, movement
between aging categories in the quarter offset the benefit of improved collection rates.
14. So to summarize, although slightly offset by differing elements of mix or shift, our earnings
benefited from gains in volumes, pricing and continued cost control, clearly demonstrating that our
strategies are working.
Turning to cash, as stated in the release, we had positive adjusted free cash flow in the quarter and
improvement in cash provided by operations relative to last year. Our cash balance also increased
from the second quarter to $352 million, due in part to our receipt of $41 million of proceeds from
the sale of San Dimas and Garden Grove. Also, including what we have already collected, we
continue to expect to generate between $750 and $950 million in incremental cash from our
initiatives to improve the efficiency of our balance sheet and the sale of USC, with $650 to $850
million of that expected this year.
On working capital, we maintained the benefit of accounts payable and cash management discipline
in the second quarter. We have not yet made progress on reducing accounts receivable days, but we
are holding steady and have initiatives in place to achieve reduction in this metric by year end. This
represents one of the primary areas of subjective estimation relative to our full year projection of
adjusted cash flow from continuing operations. Having said that, adjusted cash flow from
continuing operations improved by $13 million in the quarter and by $87 million year-to-date
compared to last year.
As you may recall, our normal trend on cash is to have a negative cash flow in the first quarter,
resulting from the pay down of year end payables and the annual payment of our 401K match and
incentive compensation. We then stabilize in the second and third quarter with the most significant
cash generation from operations occurring in the fourth quarter due to the year-end build-up of
accounts payable. We expect that general trend to continue this year.
Let me now turn to our outlook refinements. From a substantive standpoint we are confirming our
outlook for 2008 as we provided it on our first quarter earnings call on May 6 and updated at our
investor day in June. At those points in time, I also spoke in some detail as to the value drivers and
risks and opportunities, so I will not reiterate all that here, but will instead focus on what has
15. While we have updated our 2008 adjusted EBITDA outlook from a range of $775 to $850 million,
to $750 to $825 million, this basically only reflects the pending sale of USC which was expected to
contribute approximately $25 million to EBITDA in 2008. The expected full year EBITDA on the
other hospitals we disposed of in 2008 was not large enough to require adjustment to the range. I
might also note that we are absorbing the $16 million charge on the Modesto GME dispute, without
lowering our range.
We have made a parallel reduction in 2008 cash from operations to reflect the USC move to disc
ops, lowering it by $25 million to a range of $375 million to $475 million. We have put slides with
updated cash walk-forwards on the Web.
In terms of line item value drivers of EBITDA, based on first-half performance, we have revised
our outlook for 2008 outpatient visits to be a growth of negative 0.5 percent to positive 0.5 percent
from the previous 1 to 2 percent. This is offset by expected higher pricing on outpatient visits,
which we have raised from a range of 4.5 to 5.25 percent to a range of 7.0 to 8.0 percent. The
reduction in the outlook for outpatient visits in no way undermines our belief that there is real
progress being made here, or our belief that we will have a positive trend going forward, but rather
just reflects the averaging effect of the first-half results. You will note in the slides that we have
reduced our estimate of cost growth per adjusted patient day to a range of 1.5 to 2.5 percent
compared to 2007. Although we continue to drive on cost, this reduction in cost growth per APD is
not due to new cost initiatives, but rather to forecasted increases in adjusted patient days for the
We have previously discussed the full economics of the USC transaction, which includes a cash
payment reflecting book value of USC which was $311 million at March 31, 2008. We continue to
believe that this transaction is accretive, but in addition to the increase in cash and reduction of net
debt, the positive financial P&L impact moves down the income statement to below the EBITDA
line beginning next year. This is also true of the other dispositions, including Broadlane and the
MOB sales. However, even though these asset sales taken alone have a negative effect on EBITDA,
at this time we believe they can be offset at the EBITDA line in 2009 primarily by improvements
16. over the 2008 run rate resulting from slightly higher admissions growth in 2009 at 2 percent, the
maturing of operations at Coastal Carolina and Sierra Providence East Medical Center, and from
other non-acute activities. This is something that we will be able to validate as we complete our
planning for next year.
You can see on Slide 25 on the Web, we are using a lower starting point in 2008 and 2009 in our
EBITDA walk-forward to reflect the effect of the USC move to disc ops in 2008. However, as I just
mentioned, we have offset that lower starting point in 2009 and are continuing to hold our $1 billion
2009 adjusted EBITDA objective.
So, to summarize one more time before we go to questions:
• We are making great strides in demonstrating the success of our strategies on inpatient
admissions, the targeted elements of commercial admissions, and in outpatient visits
• We are achieving significant pricing and revenue improvements as a result of our managed
• We continue to control costs and hold bad debt expense at levels in the boundary of our
• We have improved cash flow year-over-year,
• We are substantively unchanged in our 2008 outlook,
• And we are holding our 2009 objective of $1 billion of adjusted EBITDA and approximately
break even free cash flow.
With that I will turn it over to questions.