CBIZ Inc (CBZ) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the CBIZ fourth quarter and year-end conference call.

[OPERATOR INSTRUCTIONS]

I would now like to turn the call over to Mr. Steven Gerard, Chief Executive Officer and Chairman.

Mr. Gerard, you may begin.

Thank you, and good morning, everyone.

Thank you for calling in to CBIZ's fourth quarter and year-end conference call.

Before I begin my comments, I'd like to remind you of a few things.

As with all of our conference calls, this call is intended to answer the questions of our shareholders and our analysts.

If there are media representatives on the call you're welcome to listen in.

However, I ask that if you have questions, you hold them for after the call and we'll be happy to address them at that time.

This call is also being Webcast and you can access the call over our website www.CBIZ.com.

You should all have received a copy of the press release, which was issued this morning.

If you did not, you can access it on our website.

Or you can call our corporate office in Cleveland for a copy.

Finally, remember that during the course of the call, we may make forward-looking statements.

These statements represent management's intentions, hopes, beliefs, expectations and perhaps predictions of the future.

Actual results can sometimes materially differ from those projected in forward-looking statements.

Additional information concerning factors that would cause actual results to differ materially from those in the forward-looking statements as contained in our SEC filings, form 10-Ks and press releases.

Joining me on the call this morning are Jerry Grisko, our President and Chief Operating Officer and Ware Grove, our Chief Financial Officer.

Prior to the open this morning, we released our results for 2004.

As you will note in those results, revenue was up.

Same-unit revenue was up for the third year in a row, and our earnings per share were $0.21 a share, which was the forecast we made a year ago.

Although we may-- we achieved the $0.21 a share in perhaps a slightly different way than we expected, and we will explain that in a little bit.

On a very positive note, our accounting, tax and advisory group, our national practice group and our medical practice management group all were up year-over-year and all up above their plan.

In addition, our cross-serving, which is an element that makes CBIZ truly unique in the marketplace, generated $10.5 million in incremental first-year revenue, which was a 35 percent increase over the amount of cross-serving we generated in 2003.

As previously reported in both the third-- the second and third quarter conference calls, we have struggled a bit with 1 benefits and insurance unit, which has had a significant impact in 2004.

We believe that we have the processes and procedures in place to-- to reverse that problem in 2005, but as Ware will explain in a minute, it did give us a significant impact.

Our balance sheet remains strong through the end of 2004, and wea re very encouraged with the operating results of the vast majority of our business units.

With that, I'd like to turn it over to Ware to give you the details of both the third quarter and the fourth quarter results.

Thanks, Steve.

I want to take a few minutes to run through some of the highlights of the numbers we released earlier today for our 2004 results.

There are a number of positives that evidenced the improving strength of the business operations across the board in 2004, and we will talk about these.

But as Steve commented, there are several significant items that are important to understand as you evaluate our 2004 results.

As Steve commented on in his introductory remarks, we made very nice progress in each of our core lines of business in 2004.

However, we continue to experience operating difficulties at 1 of our benefits and insurance business units throughout the year.

We have commented in previous conference calls that the operating difficulties in this unit arose primarily as a result of the rapid growth we experienced in this unit over the past several years.

We found it difficult to sustain a level of client service necessary to serve existing clients and to generate new client relationships.

So we made a decision to slow the growth of this unit during 2004 while we worked on strengthening the operating platform for this business.

Because this unit recognizes a majority of its revenue and earnings in the fourth quarter, the impact from this unit was significant for both the full-year and for the fourth quarter.

For the full-year, revenues from this unit declined by $7.5 million, compared with full-year 2003, which resulted in an operating loss the equivalent of $0.04 per share.

In addition to the impact from this operating unit, we have also previously commented that our operating and general administrative expenses reflect increased legal expenses in 2004, primarily to address and settle several long-standing legal issues.

The major one dates back to activities conducted in 1999 and in prior years.

This has resulted in an increase in legal expenses of $3.2 million for the full-year 2004 when compared with 2003.

You should also note that general administrative expenses reflect additional costs we have incurred in connection with our Sarbanes-Oxley 404 efforts.

For 2004 -- these expenses are approximately $1 million, which includes costs associate from our external auditor, KPMG, as they are performing work associated with our evaluation of internal controls.

On the positive side during 2004, we completed an IRS audit for the tax years 1998, '99, and 2000.

As a result of our active involvement in this process, we achieved a favorable settlement of this audit and we are able to recognize a benefit of approximately $3.5 million in our tax expense in 2004, which will result in a favorable impact of the equivalent of $0.04 for fully-diluted share.

Considering these items, CBIZ recorded total revenue of $520.1 million for 2004, an increase of $13.3 million, or 2.6 percent over full-year 2003 revenue.

Despite the significant revenue decline within the insurance unit mentioned earlier, same-unit revenue in 2004 increased by 14.1 million, an increase of 2.8 percent for the full year.

We recorded continuing growth in our medical management practice, business, as well as increases in our accounting, tax advisory group, our national practices group and our retail group benefits insurance business.

Divestitures that occurred since a year ago, resulted in a revenue decline of $10.3 million, while the impact from newly acquired businesses increased revenue by $9.5 million throughout the year.

For the full year, operating and income was $19.9 million, compared to $28.5 million for 2003.

As I mentioned, the 2004 operating income numbers include the impact of the unfavorable items which I outlined.

Income from continuing operations after tax was $16.9 million for 2004, or $0.21 per fully-diluted share, compared with $16.3 million or $0.18 per fully-diluted share for 2003.

CBIZ continues to generate positive cash flow, which we're deploying into a combination of capital investment in the business, acquisition opportunities, and in share repurchase activities.

With the new credit facility we established in the third quarter 2004, CBIZ now has more flexibility to make acquisitions and repurchase shares as conditions warrant.

During 2004, CBIZ continued to repurchase shares.

With the tender offer concluded in the second quarter, combined with subsequent open-market purchases, we repurchased a total of 10.4 million shares during 2004, at a total cost of $50 million.

Our fourth quarter share count of approximately 78.5 million shares reflects this activity.

And you will note our full-year share count of approximately 81.5 million shares, reflects the weighted average of these share repurchases that were conducted throughout the year.

Primarily as a result of the share repurchase activity, our debt levels have increased.

At December 31, 2004, our bank debt outstanding was $53.9 million.

It is important to note that during the past 2 years, CBIZ has purchased a total of 20.4 million shares at a cost of $83 million.

Our debt-to-equity ratio is now at 21.9 percent as of December 31, 2004.

As a result of the increased borrowings to support share repurchases, the interest expense for 2004, was 1.5 million, which was approximately $450,000 higher than 2003 levels.

We will continue to review the appropriate use of our positive cash flow, but I want to mention that we recently filed an 8-K announcing that the CBIZ board of directors has authorized the purchase of an additional 5 million shares in 2005.

In addition to share repurchases during 2004, CBIZ acquired 4 additional businesses, and we completed the acquisition of 2 additional businesses in January of 2005.

We are continuing our disciplined and targeted approach towards acquisitions and we continue to target those markets where CBIZ already has a presence.

Over the past 10 quarters, we have made 11 acquisitions and we are continually focused on a number of potential acquisition opportunities at any point in time.

Looking further at the balance sheet, our days sales outstanding stood at 79 days at December 31, 2004, compared with 81 days a year earlier.

Now, looking ahead to 2005, we expect to moderate the unfavorable impact from the 1 insurance unit, which we previously mentioned.

I should also add that we expect our effective tax rate will normalize at approximately 41 percent in 2005.

During 2005, our plans will result in additional consolidation expenses as we continue to co-locate operations.

In addition, as required by FAS 123, we will recognize expenses associated with stock compensation in 2005 and our interest expense is expected to be higher as a result of the borrowings associated with our share repurchase activities.

Our 2005 plans also call for attention to strengthening the operating systems for medical management practice business, as this unit's revenues continue to grow at a rapid pace.

In aggregate, these items will result in costs of approximately $3.5 million in 2005, which, by the way, is the equivalent of approximately $0.03 per share in 2005.

Notwithstanding these items, in 2005, we expect revenue growth in the 5 to 8 percent range, and we expect the increased earnings per share by 20 to 25 percent over the $0.21 per share, which we recorded for 2004.

Also, EBITDA is expected to be in a range of 50 to $53 million for 2005.

In conclusion, with the improvements experienced in each of our core business lines, 2004 results included a continuation of the positive trends in our financial performance.

Our operations continue to strengthen, our balance sheet continues to reflect strength.

We continue to generate good cash flow, and we continue to deploy our cash flow in ways designed to strengthen current operations and to address our capital structure by repurchasing shares.

So, with those comments, I will conclude and I'll turn it back over to Steve.

Thank you, Ware.

Just to repeat the conclusion of Ware's presentation, we expect our revenue to increase 5 to 8 percent next year.

We expect our earnings per share to continue to increase in the 20 to 25 percent range, notwithstanding the incremental investment that we're going to make next year in the business.

We are expecting greater M&A activity for 2005 and we're expecting continued growth in our cross-serving initiatives.

With that I'd like to stop and ask for questions from our shareholders and our analysts.

Thank you.

[OPERATOR INSTRUCTIONS]

Thank you.

Our first question comes from Jim Macdonald from First Analysis.

Please go ahead.

Morning, guys.

How're you doing, Jim?

Morning, Jim.

I just want to make sure I understand some of the charges going back and forth here in the quarter.

I think you mentioned legal fees for the year.

How many -- what were the-- what was the legal fee impact in the quarter?

The legal fee impact in the quarter, which, by the way, included a settlement for the final resolution of this case that we needed to address this past year, was roughly $700,000 more than the comparable period in 2003.

$700,000 more.

Yes.

Is this the California case?

Yes, predominantly the California case.

That's settled?

That's been completely settled.

Completely settled.

That's good news.

Congratulations.

In terms of the problem benefits unit, it sounds like you believe you're past the worst of it.

Any more color on that?

And I think you mentioned your costs (ph) in that business were substantial in the year.

Does that also include the extra G&A costs to try to fix that problem?

Yes, the costs, the numbers that Ware gave you showed a significant reduction in revenue.

Most of that was planned by us to reduce the new business until we were comfortable that the operations were sufficiently strong to handle the business and we were providing the level of client service that we had committed to.

Partly-- and that required significant investment in people and in technology.

But because this is really a fourth quarter business, we tend to run losses through the first 2.5 to 3 quarters and make it up in the fourth quarter.

When we reached a conclusion as we were ending the-- getting into the fourth quarter, that we just weren't where we wanted to be, we basically cut off the-- the spigot for-- for revenue.

We believe that we have the majority of the problems identified and are being addressed, so we don't think the impact for '05 is going to be anywhere as large as it was for '04.

But-- but there's still-- this is still very much a back-ended business, and the real test is going to come later in the year.

Are you still committed to keeping this business?

We constantly look at the-- at each of our businesses as to whether it's core business or not and how it fits and how it impacts our client base and the rest of our Company, so all businesses we're constantly looking at and we'll continue to look at this one.

We have no plans to do anything with it right now other than fix it and get it back on the growth track it was on before.

Just one more big-picture question, then I'll come back.

On the acquisition front, any, any new focus there or kind of more of the same?

I'm sorry, you broke up a little bit.

I think your question was, is there any change in our focus for the acquisitions.

And, if that's the question, I would say our focus has been very steady, which is, those products and services we're already in, in the locations where we have a beachhead so we can grow out-- we can expand our ability to better serve our clients.

I think the only-- the only difference in terms of trend is while we'll continue to do as many of the smaller transactions as we can find, we're constantly looking for larger transactions.

The acquisition we announced in the beginning of January of the Nation Smith firm in San Diego is representative of what we're looking for, which is larger, more prominent firms in each of the marketplaces.

Okay.

Thanks.

I'll come back.

Thank you.

Thank you, our next question comes from Robert Kirkpatrick from Cardinal Capital.

Please go ahead.

Good morning.

Hey, Rob.

Could you follow up there on the Nation Smith acquisition and give us a little more detail as to why you found it particularly attractive?

Does it get you into a new market, was the pricing for Nation Smith, because it was a larger firm at a premium to the levels that you've been paying for other accounting tax advisory businesses?

And then secondly, if you could go into, I think your release says that you've done 2 acquisitions since the end of '04, but I think only the Nation Smith one had been mentioned.

All right, Nation Smith is representative of the type of transactions we would like to do.

It repre-- because it was a highly prominent firm in San Diego, wonderfully managed, I think it was the largest independent firm in the San Diego market.

We already had 3 B&I offices in that market, but-- but no accounting capability.

So, in Nation Smith, we found a strong management team, a growth firm, a firm that was in each of the primary accounting tax and advisory businesses we were in, in a market that we already had a foothold in, so it fit perfectly in the-- in the-- in the model we have for acquisitions.

We typically don't comment on our purchase prices, and I'm not going to here.

Other than to say it was a quality firm, and the market drives the pricing.

So you can draw whatever conclusions you would like from that.

Quality firms tend to be higher-- higher-- higher-valued than do nonquality firms.

All right.

We typically-- we're constantly-- I would think our backlog of acquisitions is, of companies we're looking at, Rob, is, at any point in time now, 20 to 30.

It's not in our best interest to get into public discussions of pricing.

I'm sure you can appreciate that.

With respect to the other one, we acquired a wealth management firm here in Cleveland, called Gallery Asset Management, which actually was a press release we issued in November or October, but didn't really close until the first of the year, and that's the other acquisition.

And that's part of our benefits and insurance group now and it's part of our growth in our wealth management initiative, which is 1 of the new initiatives for 2005.

Okay.

And then I noticed, Ware, that you had about 2.2 million in other income during the quarter.

What was that from?

Yes, that is from a combination of things.

When we sell -- as-- we've closed down or sold over 30 businesses in the last 3 years as we've rationalized and restructured.

Some of those businesses have royalties that get paid to CBIZ over a period of time, as part of that initial transaction.

So that money flows in there.

In addition, they're in-- to the tax refund that we received in the fourth quarter, there was an interest component that we were able to book in connection with that as well.

So it's a combination of things that happened in the fourth quarter this year.

I should also note, that when you compare it on a year-to-year basis, we take-- took some impairment charges a year ago with respect to several investments that the Company had made some years earlier.

So the comparison looks very favorable on a quarter-to-quarter basis against last year.

And those impairment charges were in the fourth quarter?

Some were prior to the fourth quarter, but, yes.

The impairment charges, there was at least $800,000, if not, I think, slightly over $1million dollars last year in the fourth quarter.

Okay.

And then, your guidance for 2005, the 5 to 8 percent revenue growth, EBITDA, 50 to 53 million and earnings per share growth that you cited, what have you assumed about your ability to either stabilize or improve your troubled benefits and insurance unit?

Do you assume you fix it?

Yes, Rob, that one is, I'll just comment.

We have assumed that that unit breaks even next year.

It could do better; historically it has done better.

This past year was-- we intentionally made some decisions and incurred some expenses that unfortunately us in a significant way, but for next year, we're looking for a break-even year.

Break-even or perhaps a slight loss for the year.

But, nowhere near the magnitude of what we have lost.

Again, we're not really going to know that until we hit the fourth quarter.

Okay.

And then, what was your CapEx for the quarter?

Or for the year.

Either one.

I don't have the CapEx for the quarter.

I think it's roughly $9 million for the year.

Okay.

We've typically been runny pretty steady at 2 to 2 .5 a quarter and would continue to give you guidance for forecasting purposes of a roughly $10 million capital spending budget each year.

Okay.

And, again, that's mostly systems-oriented types of things as opposed to bricks and mortar.

That's exactly right. 75 to 80 percent of it is related to systems improvements, upgrades and things like that.

A bit of it's associated with furniture fixtures and things like that, connected with the consolidations.

Okay.

And, Steve, with debt, at roughly at 54 million, you're at about 1 times EBITDA.

Is that the high-end of your-- you range right now?

How do you feel about your debt relative to your cash-generating capacity?

I think that we have been pretty consistent and said-- saying that we reach a level of un-- of being uncomfortable at 1.5 times our-- our cash flow.

We're not near that at this point, so I think we've got a fair amount of room.

In addition, the first quarter is our cash out quarter and we're running slightly head ahead of our cash plan today.

So, we've got-- we're comfortable with where we are.

If a-- if an opportunity came along that pushed the debt in the short-term up slightly above 1.5 times, we would-- we wouldn't walk away from that.

But we're-- we're-- we've got another 50 percent before we start to lose sleep at night.

Okay.

And it looks as though the cash flow for the year, both in terms of cash flow from operations and free cash flow was probably down from the level of the last two2 or 3 years.

What would you attribute that to, and what gives you the confidence that you will be able to generate more free cash flow, which is implicit it in your forecast, next year?

I think can you can tie the climb directly to the items we've already identified, which is the operating problems and the loss at the 1 B&I unit plus the incremental legal expenses for the California case, as well as heavy expenditures for Sarbanes this year.

We continue to push for margin improvement in each of our businesses in '05.

I think the margin-- you saw a margin improvement in most of the businesses already in '04.

So, we think when the extraordinary items get out of the way-- or the items we don't expect to reoccur get out of the way, and the continued push for margin gives us confidence that our cash flow number is a good number.

Great.

Why don't I stop monopolizing things and get back in line?

Thank you.

Thanks, Rob.

Our next question comes from Steve Balog From Cedar Creek Management.

Please go ahead.

Thanks, medical practice management.

The gross margin was-- dollars was up a lot less than the revenues were.

Was there a big investment made in that business, and how does unwind or change going forward?

There is big investment.

I think Ware, in his comments, touched on the fact we are going to make a significant investment in the medical practices business in '05.

We actually started in '04.

We are doing some significant systems upgrade and process redesign work.

We're going to continue that investment throughout 2005, and I think one of the things you can look to see-- you will see in '05 is the historical margins that we have gotten from that group will be less.

The revenue will grow in '05, but we're going to reinvest a significant amount of that back into the business.

Would you expect the actual gross margin to be down or just the gross margin percent?

I would expect -- well, clearly the percent will be down.

Right.

The dollars will be up-- flat to slightly up.

Okay.

And Ware, you made a comment about the co-location expenses.

I didn't quite understand what that was, what you were implying for '05.

Was that going to be less in '05 so we would benefit from that or is it just the-- we'd have the more expenses to work through in '05?

More expenses to work through.

As you know, we've had a pretty aggressive program over the last couple of years to co-locate people, and we have done a number of the markets already.

And I think the improving cross-serving numbers are reflective of that.

We certainly have found that where we're able to co-locate, a cross-serving is strengthened dramatically.

And I should note that the co-locations here are to finish some activities in the Chicago market and to co-locate operations in the Denver market.

Both of which are occurring in the first quarter, okay?

So. that will continue as we continue to co-locate markets.

But, I just wanted to be clear that it's a continuing investment we're making in the business to encourage-- to encourage cross-serving.

That's great.

I've seen the-- I saw it in Philadelphia and it works out-- the chemistry seems to work.

Are there-- beyond Chicago and Denver, is that it, or are there more scheduled in more subsequent years?

I'm guessing that San Diego now that you have a big hub there, makes some sense to pull that together.

Yes, that's right.

And, so there will be some activity in San Diego as we integrate the new firm with our insurance business in Southern California.

In San Diego market.

And we also have 2 or 3 different operations in the Atlanta market that we're pushing together as well.

Okay and then lastly, back on the B&I sector, the comments you made early, Steve, I guess the $7.5 million decrease in revenue, loss of $0.04.

You were talking about the fourth quarter or for the year?

That's for the full-year.

Full year.

Okay.

Was the rest of -- okay, so I guess the rest of the B&I was down a little bit as well.

But, that was the main center of it, I guess.

Well, let me clarify.

When you look at our benefits and insurance group, we really divide it into 2 groups.

We have our retail benefits and insurance group, which is, from a revenue standpoint, the bulk of it, and then we have our national businesses, which was separate.

Actually, the retail benefits and insurance group improved year-over-year in terms of revenue.

And their margin was exactly where we expected them to be, given the investment we made there.

That the-- the-- that the decline in the benefits and insurance group came from the-- the special-- the national companies, primarily the one we identified but a couple of the others were off a little bit also.

The other thing I want to add that you need to be clear on in terms of the impact of divestitures, $10.3 million for the year, roughly half of that was due to insurance operations that had been sold in the prior year.

So, when you're looking at the absolute numbers, you need to factor in about $5.5 million in decline from that as well.

Okay.

And, again, to clarify, the troubled B&I unit is in national practices or in benefits and insurance?

No, it's in benefits and insurance, but we make a distinction between our retail benefits and insurance group, which is our retail brokerage business, primarily in the health and the benefits area and to-- as well as the property and casualty area.

We, from management standpoints, we separate that from the other B&I group when we report them separately, so that we can track our national retail businesses more easily against the competitors in that marketplace.

Many of whom are public.

I got you.

Okay.

Thank you.

Thank you, our next question comes from Josh Rosen from Kensico.

Please go ahead.

This is Josh from Kensico.

How are you?

Fine, Josh.

How are you?

Good, thanks.

Most of the questions have been answered.

But, just 3 quick questions.

On the troubled B&I unit, are you able to disclose just-- just how much in absolute revenue that-- that unit generates?

I'm not sure.

We haven't done that up until now.

I'm not sure sort of what purpose that would serve, so let me think about that.

Okay.

Okay.

And the other question is just if, for '05 if can you give any guidance on cash, taxes and cash interest and that's it.

Well, the -- we would expect the tax expense to run about 41 percent of taxable income and we expect the cash taxes to run approximately the same.

Okay.

We have a followup question from Jim Macdonald from First Analysis, please go ahead.

Okay.

You guys have talked a lot about [inaudible] costs while you're forecasting some pretty big profit growth.

Can you talk about other areas where that's coming from, any areas where you're getting the results of some of your cost-saving activity?

Well, we're expecting continued growth from our accounting, tax, and advisory business.

We're expecting continued-- within that both the traditional businesses, as well as our Harborview business, which is our Sarbanes and our internal audit work.

We're expecting growth out of our retail benefits and insurance group next year.

We're expecting improvement in the one troubled unit as well as in some of the other national benefits insurance companies that I mentioned before.

We're expecting continued growth in our valuation business, which had a very, very good year in 2004.

So, as we look across the spectrum of some 55 different business units, we're expecting significant-- we're expecting growth in most of them.

All right.

In terms of interest rate, could you tell us what, where that stands right now?

Our effective cost of borrowing?

Yes.

It's roughly 4 percent.

Average for the fourth quarter.

Okay is that set to go up?

Yes, I think it will probably go up.

I think the interest rate environment is going to go up, and not that our margins on the cost-of-funds are going to go up, more than maybe 0.25 point.

But, yes, we would expect that to go up slightly.

Can I just -- quickly changing gears here again, the guidance you have given includes expensing for stock options?

Yes.

Yes, it does.

Starting July?

Yes, starting July 1, as required.

And we estimate that that will be a cost next year of roughly $850,000.

Okay.

How many shares did you repurchase in the quarter?

Oh, boy.

I don't have that off the top of my head, Jim. 10-- 10.4 million for the year.

And then just one more.

Any update on all this brouhaha about contingent insurance fees and how that's impacting your business?

Well, we're certainly watching it very closely.

CBIZ has not received any inquiry of any type from any regulator anywhere in the country.

The amount of incremental revenue we get on the property and casualty side is relatively small compared to the whole Company.

On our health insurance side, it's also not a material amount.

The-- the insurance carriers-- the insurance industry is now require-- self-generating greater disclosure and we are doing the same thing.

We're making it very clear to all of our clients that from time to time we will be engaged in, or receive additional compensation based on aggregating of business.

We make that information available to our clients if they ask.

We have seen no res-- no negative response from our clients on this.

We were never caught up in some of the things that other people were alleged to have done.

I do think the insurance industry is going to continue to-- that the carrier side of it is going to watch this very closely.

I think they con-- they will look to possibly make changes in some of the formulas and formats that are used.

But at the end of the day, the carriers are going to need brokers they-- they can work with and that they trust and they're going to need to compensate those brokers fairly.

So at the end of the day, we don't think it will have a significant impact on the way we do our business, nor will we have a significant negative impact on the revenue that we expect in 2005.

Okay.

Thanks very much.

Thank you, we have a followup from Robert Kirkpatrick from Cardinal Capital.

Please go ahead.

Thank you.

Again, as I look at your '05 forecast and you did 47 million in EBITDA this year and you're estimating 50 to 53 million.

Most of that seems to be accounted for by the return to a more normal level in legal expenses and the 1 benefits and insurance unit coming up from a $0.04 a share loss up to about break-even.

Hey, Rob, if I could stop you.

If you look at the-- at the page, I think you will see the 2004 EBITDA is 39.

You're right.

No, you're absolutely right.

Then the question becomes-- Can you give us any type of guidance or discussion about the degree of improvement that you see at the ATA business and the other national practice business, because you've already talked about B&I and about MPM.

We expect, in the national practice group, to see continued improvement in some of our technology businesses, in our valuation businesses, as I mentioned before.

Payroll.

In our payroll business, which continues to grow and continues to be strong.

So we are seeing improvement in most of those businesses.

As I said, we are going to make some significant investment, though, in the MMP business.

On the accounting side, we're looking for another almost 1 point -- slightly less than 1 point margin improvement in that business as well for 2005 over 2004.

And how much of that is driven by a mix of having Nation Smith join you and how much of that is just changing the way you're doing business?

Well, I think there are-- there are a number of things happening in the-- in the accounting world today.

Rates are going up somewhat, although we are not in a position to increase them exactly the way the final 4 are.

We are seeing some benefit from rate.

We're seeing some benefit from the expansion of our related MHM accounting firm, who is-- which are acquiring as clients, larger clients.

We're seeing a slightly more robust general market in the accounting industry.

The industry is seeing a more robust market than they've seen in the prior 3 or 4years.

So-- so-- so the accounting group we expect will improve by a combination of new clients, greater revenue and pricing.

Okay and then finally with 55 business units only spending $1 million dollars on SOX 404, I think you may win the award at Cardinal for the lowest spend per business unit among all our portfolio companies.

Rob, it doesn't seem that way.

How did that happen?

Let me.

That million dollars represents what we pay out to third parties.

It doesn't represent the enormous cost in internally of the documentation and the testing by our internal staff and one of the reasons we're able to do that is that 40 percent of our business comes from the accounting industry, so that we have our in-house accountants able to help us do this.

But if I were to add up the internal cost as well as the opportunity cost of people working on SOX as opposed to doing other things, it-- the number's got to be much higher.

You've clearly identified a major issue for all company-- public companies right now which, is the huge cost of SOX and, quite frankly, a cost that is not going to dramatically decline next year.

Okay.

Okay.

And have you gotten any indications one way or another from your-- your outside auditors as to whether they will find you 404 compliant?

As we sit here, you're not going to know definitely until the 10-K is filed, because the last part of the process is the-- is the-- is how you bring all the numbers together and how you put the 10-K out.

We have-- as most companies with this number of units, we have a long list of things that need attention, but we are today, not aware of anything which would preclude our getting a clean opinion, and nor have we been advised by KPMG that they are aware of anything that would preclude a-- an opinion. -- A totally clean opinion on 404.

So, this has been a Herculean effort for our Company.

Because we are a-- after all a consolidation of quite a number of individual small companies, many of whom did not have the requisite policies and procedures.

A lot of those had been developed when they joined CBIZ but never with the-- with the definition and with the complexity that Sarbanes requires.

So, we've got our fingers crossed that we'll come through it okay.

But we're never going to know until the last minute.

But, let me repeat that we are not aware today of anything, internally developed by us or advised by KPMG, which would preclude it.

Great, well, congratulations and keep up the good work.

Thank you.

Thank you very much.

Thank you.

[OPERATOR INSTRUCTIONS]

At this time, we show no further questions.

Well, thank you.

I would like to thank everyone who has called in.

I would like to thank our shareholders for their continued support.

You need to know that the management team and the almost 4700 employees at CBIZ are committed to continuing to improve the results of our Company.

For those employees and business that are listening in, I would like to thank you for your hard work last year, notwithstanding 1 or 2 bumps in the road.

Everybody else did really a great job in '04, and we look forward to an even better year in '05.

Thank you all very much.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

You may all disconnect and thank you for participating.