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Cara Ellison Q109 Earnings Call Transcript

Executives

Cara Ellison – Chief Executive Officer
Owen Kind – Chief Financial Officer
Perry Kanaly – Director of Public Relations

Operator

Welcome to the Cara Ellison Corporations first quarter conference call. A recording of this call including the question and answer session will be available for replay later today. Information on how to access the replay is available in the first quarter earnings conference call announcement issued earlier this week, a copy of which has been posted at www.caraellisoncorp.com.

At this time I would like to turn the call over to Ms. Cara Ellison, CEO of Cara Ellison Corporation.

Cara Ellison

Thank you for joining the Cara Ellison first quarter earnings call. Today we want to cover two topics: our first quarter and our view of 2009. For the first quarter our financial results were impacted by the sharp and severe downturn in the economy which began at the end of September. However, compared to our peers, we are weathering the storm very well, very ably.

Pipeline traffic was up 7%, retail electricity is up %3, Broadband eked out a small profit of $2.3 million, which we did not expect until the second quarter of 2010. Across all divisions, we’ve seen a net increase in revenue of 12%.

However, certain of our divisions have seen pressured margins, with aviation’s gross margin dropping 56 basis points from the prior year to 40.9%. Because we foresaw a constriction in orders for airplane engines, we took appropriate measures in 2008 to aggressively cut costs, which helped offset much of that decline.

Adjusted EBITDA for the quarter was $3.4 billion, up $9 million from the same quarter of last year.

Looking ahead, we see a difficult year in 2009. There is no sign yet that the economy has hit bottom and is beginning to turn. We anticipate improvement in each of the successive quarters, but our growth will be limited due to global economic factors that are out of our control.

We remain focused on the fundamentals of our business. Much work still needs to be done but we have a clear direction, a clear set of priorities and a newly rebuilt management team capable of executing the plan. With that, let me take some calls from analysts.

DOUGLAS KEANE, PUTNAM LOVELL: Good morning Miss Ellison and others. Last quarter you mentioned a write-down of $120 million due to the erosion of the dollar overseas. My question is, since the dollar continues to decline, how are you … how are you making money overseas?

OWEN KIND, CFO: Hi Doug, it’s Owen. We’ve created some very effective hedges, and if you have looked at our 10K, which we filed last week, you will see the sale of several merchant assets. So we’re less exposed, for one thing, and secondly, we’ve done some good structuring to keep losses at an absolute minimum.

KEANE: Okay, just one follow up. I have looked at the 10K but I don’t have it memorized. Could you talk about the assets that have been sold?

KIND: We’ve sold our Brazilian power plant and several smaller ones in Uzbekistan, Lithuania, Portugal, India, and Columbia.

KEANE: Okay… thank you.

CYNTHIA BELL, JVS: Good morning. I would like to know what the numbers look like on Broadband. Last time we talked, you had just installed test markets and were saying you’d have a loss of $130 million for several quarters. So how… what was the strategy there?

KIND: Hi Cynthia. Our contracts with Blockbuster was modified to allow us access to a broader customer base. We spread over Comcast and Verizon, which trebled our customer base, allowing us to see a modest profit within a very short period of time.

BELL: Huh. Okay. Thank you very much.

JONATHAN GRUEN, CITIBANK: Hi guys. Miss Ellison, I don’t want to be impolite here but your indictment seems to have been good for the stock. It’s up 17% since your arrest. Can you give us any idea why?

ELLISON: I’m not able to speak about pending legal matters.

GRUEN: Could you comment about why the stock has gone up 17%?

ELLISON: Maybe we are just a very strong company and our stakeholders believe in us.

[Laughter]

SAM WATERS, MORGAN STANLEY: Miss Ellison, I’d like to ask a question, another question, about Broadband. If the reception of the products has been so successful, why then was the profit only barely above the line, barely $2 million, since your 10K says your product is in over ten million homes?

ELLISON: Cara Ellison Corp. has grown in the last quarter, most notably in Broadband. Our agreement with Blockbuster has been successful really before we were ready for it to be, and because of that success, other companies like Comcast and Verizon have partnered with us, which were were not expecting. We grew quite fast, and in that regard we’re a victim of our own success. Those operating expenses that we had to accept to grow were expanded at the same time our customer base was growing.

WATERS: Okay, I guess that makes sense. Thanks.

JASON KATZ, VALIANT: Hi Miss Ellison.

ELLISON: [Unintelligible]

KATZ: Miss Ellison, I noticed you didn’t talk about Little Cara Snack Cakes at all. Could you tell us how the baked goods division is doing?

ELLISON: Our small consumer products division has shown an increase in revenue of 0.3%.

KATZ: Are people eating as much cake as last quarter? Or is there some economic reason the gains in the snack cake industry are so much less than the aviation engines or pipelines?

ELLISON: Katz, go to hell.

KATZ: Miss Ellison, I am only trying to understand your company.

ELLISON: Bullshit. You’re a short seller. You’re trying to decrease the stock price.

KATZ: Miss Ellison -

PERRY KANALY: Katz, this is Kanaly. Your question has been asked and answered.

KATZ: Miss Ellison, did you break up with Jason Bennett?

ELLISON: Is this Perez Hilton?

KATZ: Miss Ellison -

ELLISON: This is crazy.

KATZ: Miss Ellison, when you get out of prison, will you come back to be CEO of this company? Or will it be sold off, piece by piece, to competitors?

ELLISON: Shut your mouth!

KATZ: That’s what’s going to happen.

KANALY: Please, let’s just take another -

KIND: I agree.

KATZ: You’re going to prison and the only part of this company you’ll see again are the Little Cara Snack Cakes they serve to you at lunch. Prison cake! Prison cake!

END TRANSCRIPT

Cara Ellison

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