ABM Industries Inc (ABM) 2004 Q3 法說會逐字稿

-- (CALL IN PROGRESS) -- joining us for our review of fiscal 2004 third-quarter results ended July 31, 2004.

I'm Henrik Slipsager, President and CEO of ABM. Joining me today are George Sundby, Executive VP and CFO, Terry Petty, Executive VP and Chief Operating Officer, and Linda Auwers, our Senior VP and General Counsel. On the call today, I will provide an overview of our operational results for the third quarter and then George will review detailed financial results for the quarter and the nine-month period ended July 31, 2004. I will then conclude the prepared remarks section of this call with the summary of the operational aspects of our earnings for the quarter as well as discussing our expectations for the remainder of fiscal 2004.

Before we begin, I would like Linda to present the safe Harbor statement.

Thank you, Henrik. Before we begin, I need to tell you that our presentation today contains predictions, estimates and other forward-looking statements. Our use of the words estimate, expect and similar expressions is intended to identify these statements. These statements represent our current judgment on what the future holds. While we believe them to be reasonable, these statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of the important factors relating to our business are described in our Form 10-Q quarterly reports, Form 10-K and the Form 10-Q that we filed earlier this year with the SEC.

Thank you, Linda. In the third quarter of fiscal 2004, we achieved record revenue of over $623 million, an increase of approximately 10 percent over the same period last year. Our GAAP earnings were 27 cents per diluted share, which is at the high end of our guidance stated on the June conference call. This includes 1 cent per diluted share of non-cash compensation expenses.

Basically, all of ABM's operations performed very well with the top four businesses in terms of operating profits generating 20 percent or higher increases in year-over-year comparison. This was the first full quarter of operations for Security Services of America, SSA, which we acquired in March and we are on track with its integration into ABM Security Services. Revenue for our security operations were up 56.8 percent while operating profits increased 36.7 percent.

In addition, we secured a number of new contracts across our janitorial, engineering and parking business lines, as well as renewing a number of existing accounts and expanding services with some of our customers.

In the third quarter of fiscal 2004, we repurchased 500,000 shares of stock and paid our 153rd consecutive dividend. Yesterday, ABM's Board of Directors approved an all-time high fourth-quarter cash dividend of 10 cents. Recently, we released our operating company Web site, which projects the – (technical difficulty) -- of today by being mindful of the rich history and tradition that makes our company unique. We encourage those listening on the call today to visit our Web site.

But before I get into more discussions of our lines of business and what we expect for the remainder of 2004, I'd like to turn the call over to George for a review of our consolidated financial results. George?

Thank you Henrik, and good morning, everyone. I'd like to review our consolidated financial results for the third quarter and nine months ended July 31 as reported in yesterday's earnings press release. Included in the press release are summarized financial segment information for the two periods. Our third quarter Form 10-Q is scheduled to be filed later today with the SEC.

For the third quarter, net income was 13.4 million or 27 cents per diluted share, compared to 11.7 million or 23 cents per diluted share for the third quarter of 2003. As you may recall, with the sale of the elevator operation in the fourth quarter of 2003, we have reclassified all revenue and expense of Amtech Elevator Services as income from discontinued operations. Therefore, 2003 third-quarter net income includes 1.2 million or 2 cents per diluted share of operating income from the discontinued Amtech elevator operation. Please note that we have independently calculated the per-share amounts of net income and income from continuing operations for the 2003 period, and this resulted in the per-share impact of the income from elevator.

Income from continuing operations was 13.4 million or 27 cents per diluted share, up 2.8 million or 27 percent compared with the 10.6 million or 21 per share in the same period last year. The increase is due to our recent security and janitorial acquisitions, new business in engineering, janitorial and facility services, renewing existing contracts at higher rates and expanding our services with existing customers. Janitorial, parking, engineering and security all posted operating gains of 20 percent or greater with parking and security showing the highest increases of 48.6 percent and 36.7 percent respectively.

The lighting division remains a challenge as it continues to be impacted by lower sales due to the continued lack of capital project-related work. While janitorial benefited from the acquisition of the initial assets in April, it also had one fewer stay of labor in this year's third quarter versus last year's third quarter and that favorably impacted profitability of our fixed-priced janitorial contracts.

As you may recall, last year, we felt a -- last quarter, we felt a negative impact from two extra days of labor costs. For the fourth quarter, our janitorial operations will have one fewer day of labor expense compared with the fourth quarter of 2003.

As Henrik reported, sales and other income for the third quarter of 2004 increased 54.7 million to 623.8 million or a 9.6 percent increase from the 569 million for the third quarter of 2003. Acquisitions completed in fiscal year 2003 and year-to-date 2004 contributed 40.3 million of the increase. Security experienced the largest increase at 56.8 percent or 23.6 million from the same period last year, due to the sales from the acquired SSA businesses.

Other strong divisions were janitorial and engineering. Janitorial increased 24.2 million or 7.1 percent, the majority of this increase coming from the acquisitions of Hgo and Initial with the rest generated from price increases and new business. Engineering showed an improvement of 7.1 million or 15.9 percent, all from either new business or expanded services.

Parking was essentially flat. Parking revenue, as you know, includes reimbursed costs, which totaled 54.3 million, which is down 800,000 from 2003. Fewer retrofit projects caused the lighting sales to decrease 3.1 million or 10.3 percent.

Gross profit margin, which is defined as sales and other income less operating expenses and cost of goods sold, was 11 percent in the first quarter of 2004. This is an increase from 10.1 percent in the third quarter of 2003 due again to the price increases in janitorial and security, one fewer workday in the third quarter of 2004 for janitorial, and the termination of unprofitable airport contracts in parking.

For the quarter, sales, general and administrative expenses was 46 million compared to 41.4 million for the corresponding 2003 period. The increase of 4.6 million or 11 percent was primarily due to 3.1 million of SG&A expense attributable to the Hgo, SSA, and Initial acquisitions, higher professional fees primarily related to Sarbanes-Oxley compliance, as well as the higher costs associated with two chief operating officers with the transitioning in of our new Chief Operating Officer.

Intangible amortization expense in the third quarter totaled 1.3 million, compared to the 300,000 for the same period of 2003. The higher amortization was due to intangibles acquired in the business combinations completed in fiscal year 2003 and year-to-date 2004.

Effective federal and state income tax rates for income from continuing operations was 35.7 percent for the third quarter, compared to 31.8 percent last year. The 35.7 effective tax rate was based on the higher estimated rate of income from continuing operations versus the 2004 of 37.3 percent, compared with last year's 35.3 percent. The estimated tax rate reflects a higher estimated state income tax rate, due to the combined income tax return filing requirements in certain states where separate income tax returns were previously filed.

Turning to the nine-month results, net income was 27.3 million, or 55 cents per diluted share, compared with 26 million, or 52 cents per diluted share. The 2003 period includes after-tax income from the discontinued elevator operation of 2.4 million. This represents 5 cents per diluted share. Income from continuing operations was again 27.3 million or 55 cents per diluted share, which is up 3.7 million, or 16 percent, compared to the prior year. The impact of Horizon, Ballet, Hgo, SSA and Initial acquisitions and improved margins contributed to the increase. All operating segments showed improvements with the exception of lighting.

Sales and other income for the nine months increased 100.9 million, or 6 percent, from 1.684 billion for the year. Fiscal 2003 and completed 2004 acquisitions contributed 96.5 million to the sales increase. New business in janitorial and engineering and price increases were partially offset by the decreased project sales in lighting and the termination of unprofitable contracts in janitorial, parking and lighting.

Gross profit margin was 10.1 percent for the nine-month period compared to 9.7 percent for the prior year. The higher margins were primarily due to lower sick leave and other operating expenses, the termination of unprofitable contracts in some of our operations, as well as price increases on services performed in janitorial and security and the successful renegotiation of contracts in parking. These offset some of the losses of unprofitable contracts and the higher state unemployment insurance expenses, especially in California, that we are experiencing across all lines.

For the first nine months, SG&A expense was up 4.8 percent to 132.2 million, again due to the previously mentioned acquisitions and higher Sarbanes compliance costs.

Intangible amortization expense for the first nine months of 2004 totaled 4.1 million compared to the 0.8 million. The 2004 number includes a $900,000 catch-up of 2003 related amortization. The effective federal and state income tax rate for the nine-month period is 35.7 percent and this compares to 33.8 percent for the prior year. For the remaining quarter in 2004, I would anticipate a combined effective state and federal tax rate of 37.3 percent.

Turning to the statement of cash flows, cash from continuing operations for the third quarter was 6.6 million, which is down from the 25.8 million reported last year. The decline in cash flow was primarily due to increases in Accounts Receivable at quarter end, which grew by 5.8 percent during the quarter compared to a 5.7 percent quarter-over-quarter growth in sales.

For the nine-month period, cash from continuing operations was up slightly at 42.9 million. Capital Expenditures for the quarter totaled 3.1 million, and we have spent 9.3 million on a year-to-date basis. We continue to anticipate that our quarterly capital expenditure rate will be in the range of 2 to $4 million.

Turning to our stock repurchase programs, during the quarter, as Henrik reported, we repurchased 500,000 shares at a cost of $9.4 million or an average cost of $18.77. Year-to-date, we have purchased 600,000 shares at an average cost of $18.46. Under our current authorization from the Board, which expires at the end of this calendar year, the Company has 1.5 million shares remaining. We expect to continue to use our cash flow to opportunistically repurchase shares in the market from time to time.

Moving onto our balance sheet, we continue to have a very strong financial position with almost 50 million of cash and cash equivalents and no debt. The decrease in our cash position from 111 million reported at the end of last fiscal year is primarily related to the acquisitions of Security Services of America and the Initial janitorial services, our stock repurchases and dividend payments.

The major asset on our balance sheet continues to be Accounts Receivable, which increased to 307.9 million from 287.9 million at the end of last year. Accounts Receivable that were over 90 days past due decreased 4.2 million to 24 million, or 7.8 percent of our net outstandings, from the previous year-end reported numbers of 28.2 million, or 9.8 percent. However, the 24.2 million does reflect a $5.5 million increase from the end of the second quarter.

Days of Sales Outstanding at quarter end remained basically level at 51 days outstanding. Our allowance for doubtful accounts has increased 1.3 million to 7.6 million from the 6.3 million reported at the end of October, 2003.

Insurance reserves at July 31 were 136 million, which is up 3.4 million from the prior quarter. For the nine-month period, the insurance reserves have increased 9.4 million as we have increased the insurance charge to our operations by about 11 percent. Most of the increase is related to the cost of our workers' compensation program.

With that, let me turn the call back to Henrik, who will give his perspective on this quarterly performance and the outlook for the remainder of 2004. Henrik?

Thank you, George. I will now briefly describe the operational results for the quarter and highlight some of the areas we plan to focus on for the remainder of fiscal 2004.

Janitorial -- our janitorial operations under the leadership of Jim McClure had a good third quarter with revenues and profits ahead of forecast. (indiscernible) revenue increase came from northern and southern California.

Operating profit from continuing operations year-over-year increased approximately 29 percent in the third quarter of 2004 partly due to one fewer workday in the quarter, acquisitions, as well as an overall improvement in job profitability.

The Northeast continues to make excellent progress in the quarter. Sales from New York and continued improvement in controls and expense management help dramatically. We've seen some signs of improvement in the overall economic climate in select markets and continue to believe that janitorial will gradually benefit as this economic turnaround continues to take shape and occupancy rates start to rise. That work, which usually comes in as high margins, is starting to increase and I'm optimistic that the decline we experienced (indiscernible) during the recession and subsequent lack of growth since the economy started to rebound is changing.

Parking -- I'm very pleased with parking's performance during the third quarter. Operating profits of $3.4 million is the highest ever for Ampco and it's the result of increased air traffic at many of our accounts, restructuring contracts in certain regions and adding new customers at higher margins. However, it's important to remember that the third quarter typically is the strongest quarter for Ampco due to summer air travel.

Security -- the Security operation's strong results were primarily due to the SSA acquisition, which we closed in the middle of the second quarter. In addition, we were awarded several major contracts during the third quarter and particularly on June 24th, we announced ABM Security's multi-year, multi-million dollar contract with the U.S. Postal Service. Prior to our acquisition of SSA, being awarded a national account was difficult if even possible, due to our limited geographic coverage. I'm pleased with how quickly our expanded security operations were able to capture this type of account. We feel that our security company has a competitive advantage now that it is one of the largest U.S.-owned and operated security enterprises.

Engineering -- the engineering operation continues to impress and surpass third quarter's expectations with a 16 percent increase in revenue from the same period last year. The growth came from increased staffing at existing jobs as well as new business in both northern and southern California. With minimal overhead added, it was very profitable growth. We've discussed this leverage in our business model before and this quarter is a good example of how that can work.

Lighting -- lighting remains a difficult operation for ABM. In better times, our sales are supported by energy sufficient retrofit projects but with the reduction in corporate capital spending, we are getting significantly fewer retrofit projects. In order to offset the decrease in retrofit revenue, we are operating with a much smaller sales force than in the past. This is about to change, as our new President Eric Lazear is beginning a major sales effort.

In addition, we continue to monitor expenses and look for ways in which we can reduce operational and overhead costs without compromising the level of service. Since these changes will not be completed until the end of the calendar year, we expect our lighting operations to experience another difficult quarter but we're very confident that Eric and his team are focusing on the right opportunities.

ComAir and facility services -- although ComAir didn't achieve their quarterly target for sales and operating profits, I'm encouraged that their backlog continues to grow and expect this line of business to show gradual improvement once the economy rebounds enough for our customers to initiate expenditures in these projects. Facilities service gained a new major contract which contributed to the sales increase and improved operating profit.

In closing, we're very pleased with our progress for the first nine months of fiscal 2004. Revenue is up 6 percent while income from continuing operations is up over 16 percent. In the short term, we are focused on achieving our fourth-quarter objectives and continuing to strategically position our portfolio of services to meet the current demands of our customers and in the markets in which we compete in planning for fiscal 2005 and beyond. We believe our national presence, diverse service capabilities, technology and financial strength enables ABM to differentiate itself from its competition. We remain committed to increasing sales and finding ways to reduce costs by leveraging our investment in technology and people. We will continue to utilize our strong balance sheet and operating cash flow to capitalize on organic growth opportunities to make complementary and accretive acquisitions and increasing shareholder value through our dividend plan and stock repurchase program. In providing guidance for our fiscal fourth quarter, which is exclusive of any future acquisitions, we believe 25 to 30 cents per diluted share is achievable. For fiscal 2004 guidance, we continue to expect 80 to 85 cents. This also excludes any future acquisitions.

At this time, I would like to open the call for questions.

(OPERATOR INSTRUCTIONS). David Gold with Sidoti & Company.

Good morning. A couple of questions for you. First, the janitorial business -- I guess, by my calculations, this is the first time in awhile in a number of quarters where you've actually experienced organic growth. You made some comments about renewing some contracts at some higher pricing. I'm just curious if you could give us some color on that.

I don't think I made that comment; I think we have areas where we have renewed contracts at higher prices, but we also have had contracts where we renewed at lower prices. There's no certain segments of the market; it's very competitive. So I think, overall, I think if you talk (indiscernible) of contracts, it's pluses and minuses. I think that is as close as I can come to that.

So in that case, the upside was more a function of newer business there, then?

I would say so.

Can you quantify maybe hard the effect of the one less workday? I guess, by my estimate, I would figure that's about 2 cents at the bottom line?

That's correct, David. It's about 1.7 million pretax on our fixed-price contracts.

1.7 million, perfect. Then just lastly, Henrik, in the fourth-quarter guidance of 25 to 30 cents, it seems like pretty much barring lighting across the board things are improving and certainly going in the right direction. I guess I was just curious if there's any reason to be believe -- the 25 cents is down from this quarter -- if there's any reason to believe that your EPS might -- would come in a little bit (indiscernible) a quarter?

In our forecast, there's no major surprises; the only little surprise we had was, as George talked about, the increased tax rate, which I think comes up to close .5 cent. But the fourth-quarter forecast is based upon the feedback we've got from our divisions.

Very good. Thanks so much.

Jeff Kessler with Lehman Brothers.

It's Scott Schneberger (ph) for Jeff Kessler. Nice job in the quarter.

First question, was there any pickup in tenant occupancy in the buildings you serve and any resulting pickup in higher margin specialty projects?

We start to see -- at least I don't know how much is in the quarter but I can tell you in certain markets, we are starting to see that there is an increased demand for extra services. But again, you also have markets such as Chicago that is somewhat depressed, you know, it's still the high vacancy rates, etc., ect. So I think, in select markets, the answer is yes; we've seen an increase in demand but still, we have markets that are a little behind.

Okay, but on a net basis, going in the right direction?

I think so.

Great. It looks like you had a nice benefit from the SSA in the quarter. Just with regard to SSA and Hgo, are those progressing as you had hoped? Any surprises good or bad those two acquisitions or the integration of them?

I would say that basically all the acquisitions that (indiscernible) can think about the last two or three years are pretty much performing up to our expectations. SSA and Initial is absolutely performing up to our expectations as well.

Great, thanks. Finally, any change to your outlook with regard to acquisitions -- still targeting the same areas? Any thoughts on international as opposed to domestic?

We always have thought about international, but it's only thoughts right now. When it comes to acquisitions, yes, we will still continue to focus on acquisitions. I think we have proven that we are willing to and show willingness to do greater acquisitions, bigger acquisitions than we have done in the past, and we will continue to do so in the future. Our cash flow remains strong. In spite of a growth of 10 percent, we still experienced the same level of cash flow as last year. So we have to cash flow to do it and we are not leveraged as of yet, so hopefully we will have some good opportunities coming up.

Pat English with FMI.

Good morning. George, the quarterly cash flow number -- can you just reconcile that again? You mentioned the Account Receivable being a factor. DSOs, at least by my calculation, are actually down slightly, and I guess sequentially revenues up 23 million and I believe and Accounts Receivables up 16 million. Were there other factors for the cash flow number besides Accounts Receivable?

No, the main driver was the increasing Accounts Receivable, which for the quarter was up 17.2 million change quarter-over-quarter. That was the primary driver. If you look at the past five to six quarters, generally we have done a very good job at keeping the growth in Receivables or actually having a decline in Receivables be below the change in the quarter-over-quarter sales. This quarter was really the first time that we kind of took our eye off the ball and Receivables grew at 5.8 percent compared to the sales going at 5.7 percent. So, nothing of concern and the cash flow in August has seemed to indicate that we are getting payments back on track.

How about the allowance? Can you make a comment? It picked up in the quarter.

Generally what we have as far as allowances, we develop specific reserves with regard to any account that has any delinquency and then we have a general reserve, so with the growth in overall Receivables, you generally would see an increase in our allowance -- nothing specific with regard to any large receivables. We have one or two that we are monitoring but nothing -- (multiple speakers).

How about the over 90 days? The two you were mentioning, the 4.2 there?

Yes, they are.

Okay.

It was basically -- the uptick really actually occurred in the month of July, so it's not that we've grown out a lot; it's just items in the 60-day bucket have moved to the 90-day bucket, and we're working close with operations to try to eliminate that.

George, just the housekeeping -- D&A for the quarter? The depreciation and amortization for the quarter?

For the quarter, it was 4.5 million. That includes the intangible amortization.

One last question -- Henrik, what specific areas is Terry Petty focused on at this point in time?

Specific area he focuses on?

Yes.

I'm looking at him right now, and right now he is focusing on me. (LAUGHTER). (multiple speakers) -- Terry has gotten an all-around education, a speedy education of business over the last three months or four months and is slowly but surely stepping into each of the operating units. The full benefits of Terry I'm expecting to start to take in starting at nine o'clock today (LAUGHTER) so, he's moving ahead very well.

All right, thanks.

David Liebowitz with Burnham.

Good morning and let me add my congratulations for a fine quarter. Did I hear you make mention of the fact that you were able to raise prices in at least one of your divisions in your prepared remarks?

We have been able to raise prices through escalations in the margins. We've been, as a matter of fact, been able to do that even in the tough times, especially in union (ph) markets, so there are pockets where we've been able to raise prices but you know, there's not a major change from that whole thing, David. In union markets, union increases are the driving force for increases; it's always been that way.

When you raise prices because of the union contracts, you are able to maintain your margin as well as the increased wage to the employees?

In most cases, we are even trying to improve margins and increase times.

Excellent. One last question -- you said you've attained critical mass in parking. Having said that, is there any chance you might reverse Company policy and actually start owning the lots or real estate itself?

I think it's a good question, David. The question that we have to ask ourselves is, how do we deploy our capital the best way? I still believe that we have a greater return on our investments, on acquisitions and existing businesses than going to own real estate. I unfortunately am not a specialist in real estate and have not surrounded myself with people who knows real estate that well, so I still believe that real estate is for the real estate owners and we are a service company and will do the acquisitions on the service side.

Excellent. Thank you very much.

Will Marks with JMP Securities.

Good morning. A couple of quick questions actually first for George, what were the reimbursed revenues and expenses as part of the parking?

For the quarter, it was 54.8 million, and that was down 800,000 from the prior year's quarter.

Okay. Then just one more sort of general question, maybe for Henrik -- I definitely understand that the relationship with office building occupancies in your business. Can you just briefly discuss how some of the other real estate asset classes come into play, like malls ,for example? I know that, in the past, this has impacted your lighting division.

Would you repeat the last part of the question one more -- (Multiple Speakers)?

Sure. I guess I'm wondering how -- if you can address certain other real estate asset classes besides office buildings and how they impact your business. In the past, you had mentioned malls I think as a business, the regional malls, retail real estates, how that has impacted your lighting business in particular.

I understand your question now. I would say that, if you take the industrial side, the industrial side I think is categorized by a purchase on the national side more than ever before. In other words, it's moving away from site-by-site purchase to national purchases. We've seen that several times even this quarter. I think we have an example where we've been awarded a nationwide account. That is clearly our benefit that there is a centralization of these efforts because we are one of the few companies that, one, lives up to the standards of suppliers that these major companies want, and two, be a national -- two national companies that can maintain their service on a standardized way. So, the industrial I think is going to be a major growth area for us.

You talk about malls. When we talk about lighting, we talk of retail stores and retail chains. The mall is a totally different business. We are still not too excited about malls, and that is primarily due to the fact that it drives a very, very, very high insurance margin and is not really an area where I see a major growth will come from.

Thank you, Henrik. That's very helpful.

Kevin Monroe with Thomas Weisel Partners.

Good morning. The past few quarters, you've had a pretty strong acceleration in the engineering segment revenue growth rates. Is this kind of a broad-based improvement, or are there a couple significant contract wins that you will anniversary a few quarters from now and that growth rate will moderate, or is it just kind of a -- we expect similar type growth rates going forward?

Yes, yes, and yes. (LAUGHTER). I was in this conference call I think a year and a half ago crying over the fact that we didn't lose accounts but some accounts cut back and that affected revenue. Now, when the economy is coming back a little bit, I am smiling because now some of the revenue we lost is actually coming back.

Secondly, that division has been very successful in some new sales, very, very good sales, very prestigious accounts and I hope it can continue. They've done very well this year and I'm very proud of their performance.

Now, in your prepared remarks, you guys mentioned you are ramping up the sales effort in the lighting business. Can you quantify what the impact that might be on your margins, going forward, or kind of the incremental cost of doing that and how long -- is it a couple of months? Is this a couple of quarters that this is going to have an impact?

I don't think, first of all, I don't think you're talking about a material impact on the Company. What you're talking about is specific. We went into some kind of detail with lighting because we really didn't have any other problems to talk about. So at this particular time, we are refocusing lighting. We do expect to have some cost associated with these additional salespeople for a period of time, and you know, it takes time to generate sales. So I expect this fourth quarter, as I think we made clear, that the lighting (indiscernible) the fourth quarter will be depressed, even though we expect them to be profitable. We do expect this investment to pay back hopefully in the latter part of '05.

Great. One final question -- I mean, your operating margins by segment were pretty strong for all the segments in the Company with the exception of security was down a bit year-over-year. Is that a reflection of SSA coming in for the first quarter or is there something else going on in there?

Are you talking about bottom-line margin?

Operating margin within the security business.

I'm just getting the margins right now in front of me.

The operating profit, Kevin, that we show in the segment information.

Right, right.

(inaudible).

It could be amortization.

I think it's amortization on the contracts that we don't have on our existing business but due to the change in our accounting policies that we explained last time, the segment is being hit by amortization of contracts.

Okay, thank you.

And customer intangibles.

(OPERATOR INSTRUCTIONS). A follow-up question from Pat English with FMI.

Henrik, where do you see operating margin reaching in this next cycle with the acquisitions you've made? Do you think we can exceed where we were four or five years ago?

I think, with the proper mix of business -- because it is really a mix of business -- it's very difficult for me to go in and talk of profit margins overall because, as you know, as you can see in our segments, it's all over the place. A company that really drove high margins in the past is lighting, as we say, which is very dependent on project work. They are now dragging our margins down. If lighting comes back and gets up to the same profitability level as it has been in the past, that will surely help. I think the expansion in the services that we've done through acquisitions, most of the acquisitions I think will be accretive to the percentage of profit, going forward. So hopefully we can get back to the levels we were at but again, it's not a short-term situation. But you can see also in this particular quarter how fast some of the areas as a matter of fact can improve.

At this time, there are no further questions. Mr. Slipsager, are there any closing remarks?

I just want to thank everybody for listening to our fourth-quarter results and I look forward to talking to you in three months. Have a nice day.

This concludes today's conference call. You may now disconnect.