Colliers International Group Inc (CIGI) 2004 Q3 法說會逐字稿

Good day everyone and welcome to FirstService Corporation's third quarter fiscal 2004 earnings release conference call. Legal council requires us to advice that the discussion schedule to take place today may contain forward-looking statements that involve risks and uncertainties. Actual results may be materially different from those contained in these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's report on Form-10K and the company other filings with Canada and US Security Commissions.

And at this time for opening remarks and introductions, I would like to turn the call over to the President and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Good morning everyone and thanks for joining us. As the operator has mentioned, my name is Jay Hennick and I'm the President and Chief Executive Officer of FirstService and with me today is John Friedrichsen, our chief financial officer. The format for today's call will be the same as the previous calls. First, John will begin with a detailed financial results and I'll follow with the quarterly operational highlights. If you would like more details, please speak up during the question and answer session period at the end of the call. John?

Thank you, Jay. We generated good results across the board in our third quarter with all of our service lines delivering growth compared to our third quarter last year. Revenues increased 20% to 152.1 million from a 126.7 million in the prior year. Acquisitions contributed 5% of this growth while the increase in the Canadian dollar relative to the US dollar contributed 6%. About 30% of our revenues are generated in Canadian dollars, which have been translated at a more favorable rate compared to last year. In terms of our earnings, we are essentially neutral to the change in exchange rates.

On a segmented basis, in our consumer services segment, third quarter revenues totaled 27.5 million up from 19.1 million or 44% reported in the same period last year. Internal growth was 27% with the balance coming from the four acquisitions completed in October of 2003. Continued strong system-wide sales growth at Paul Davis restoration and California closets as well as several of our California closets franchises contributed to the strong internal growth. In our integrated security services operations, third quarter revenues were up 15% to 32.6 million from 28.2 million in the same period last year.

All of the growth was internally generated as no acquisitions have been recently completed in this segment; about 9% of the growth and revenues was due to the stronger Canadian dollar relative to last year. On a sequential basis, revenues were up 10% during our third quarter. Revenue from residential property management operations totaled 54.9 million compared to 46.8 million in the third quarter last year, an increase of 17%. Acquisition related growth was 6% with the balance attributable to internal growth both in core management and other ancillary service revenue.

Business service revenues increased in the third quarter by 14% to 37 million from 32.4 million last year. The higher Canadian dollar contributed approximately 3.8 million of this growth resulting in 3% internal growth net of the impact of foreign exchange.

Turning to EBITDA, consolidated EBITDA for the second quarter totaled 9.5 million up 16% from EBITDA of 8.2 million in the prior year quarter. The consolidated EBITDA margin for the quarter was 6.2% down slightly from 6.5% the prior year. Consumer services EBITDA totaled 2.6 million as compared to 1.3 million in the third quarter of last year. About half of the 1.3 million increase was attributable to the four acquisitions completed last October. Margins were 9.5%, an increase over the 6.6% reported in the prior year period and similarly benefited from the after mentioned acquisitions.

Our integrated security services business generated EBITDA of 2.6 million in our third quarter up 24% compared to 2.1 million last year. Margins were 7.9% for the quarter up from 7.4% in the prior year period and were impacted favorably by slightly higher gross margins and systems installations and the mix of revenues, which included a greater proportion of revenues generated by systems integrations services relative to security guard services.

Residential property management EBITDA for the quarter was 2.2 million or 4% of revenues versus 2.1 million or 4.6% of revenues in the third quarter last year. The decline in the margins was attributable to slightly higher insurance costs and continuing under-performance in our restoration operations. EBITDA in our business services division was 3.9 million, an increase of 5% compared to the 3.7 million in EBITDA generated in the third quarter of last year. Margins were 10.5% versus 11.4% a year ago. Though excess capacity in our U.S. film net operations continued to negatively impact margins new client wins have slowly begun to increase our utilization and this is expected to continue.

As I outlined in my comments in our first and second quarter conference calls, translation of our Canadian dollar denominated results into U.S. dollars is positively impacted by a strengthening Canadian dollar however portions of our results in our business services segment is negatively impacted offsetting any gains to EBITDA. This portion relates to customer support services provided to U.S. customers and invoice from US dollars but the corresponding costs to deliver this service in Canadian dollars excluding the impact of FX the EBITDA margin in business services would have been 11.7% versus the 10.5% reported.

Net earnings for the quarter overall were $2 million an increase of more than 50% compared with 1.3 million reported in the third quarter of last year. Resulting in diluted earnings per share of 14 cents compared to 9 cents in the prior year period. Cash flow from operations totaled 30.8 million of the first three quarters were fiscal 2004 up 15% over the 26.8 million for the same period a year ago. Capex totaled 10.6 million up from 8.1 million in the same period last year. We expected to invest in the range of $12 to $13 million in capital expenditures for the full fiscal 2004 year.

In terms of acquisitions we have invested about $15 million year-to-date much of that in the most recent quarter. At the end of the third quarter our $90 million revolving credit facility was fully available to fund future acquisitions. Our covenants with our bank and institutional lenders remain well within the established guidelines our debt EBITDA ratio at the end of the quarter was just under 2.7 times the mid point of our target range of 2.5 to 3 times and well below the maximum of 3.5 times.

We also announced today a restatement of previously reported results. As part of a normal course of financial statement review process undertaken by the Securities and Exchange Commission we have agreed to restate our results to reflect a change in accounting with regard to two of our franchise businesses. In particular, we have reported additional deferred income taxes with respect to franchise and tangible assets acquired as part of the acquisitions of California closets and Paul Davis restoration and have a just the amortization of these assets to reflect the pattern of use instead of an indefinite life.

The pattern of use is based on franchisee attrition rates and presently equates to an amortization period of approximately 35 years in the case of California closets and approximately 25 years in the case of Paul Davis restoration. None of these changes have any cash impact on the company. The financial statement impact of changes is to increase amortization expense by approximately $800,000 and reduce net earnings by approximately $400,000 for each of the years ended March 31, 2004, 2003 and 2002. On a diluted EPS basis the annual impact of the changes is approximately 3 cents per share for those years.

The cumulative impact on retained earnings as at December 31, 2003 was $1.3 million. It's important to note these accounting changes are not related to the operating performance of either franchise system. Not withstanding the higher amortization of the franchise intangible assets both Paul Davis restoration and California closets have reported strong results each year since they were acquired. Furthermore, we are confident that our investment in both of these outstanding franchise systems are currently worth considerably more than our cost to acquire these businesses.

To reflect the restatements we expect to file and amended SEC form 10K for the year ended March 31, 2003 and an amended forms 10Q for the periods ended June 30, 2003 and September 30, 2003 as well as applicable Canadian filings all within the next couple of weeks.

Looking forward to the balance of fiscal 2004, we have revised the outlook presented during our third quarter conference call the estimated revenue between 590 and 600 million EBITDA between 54.5 and 56 million and diluted earnings per shares between $1.27 and $1.32. We now estimate revenues for fiscal 2004 to be between 610 and 620 million EBITDA between 55 and 56 million, and diluted earnings per share between $1.27 and $1.30. This revised outlook includes the 3 cents per share impact of the amortization of intangible assets previously mentioned.

At this time our preliminary outlook for fiscal 2005 calls for revenues between 650 and 675 million EBITDA between 60.5 and 63 million and diluted earnings per share between $1.40 and $1.50. Consistent with you're updated outlook for our current year diluted earnings per share range for fiscal 2005 includes 3 cents per share for the additional amortization of intangible assets.

The amounts included in our preliminary outlook for next year assume an average U.S./Canadian dollar exchange rate of 78 cents, no change in interest rates and no new acquisitions completed between today and March 31, 2005. We are currently in the midst of our annual budgeting process and expect to finalize this process prior to the end of the year, March 31. Now I would like to turn things over to Jay for his comments. Jay?

Thank you, John. As you can see we've posted very strong results for the quarter. In fact, we're seeing some very promising signs in all of our business units and expect to be able to continue to deliver strong performance for the balance of the year and beyond. Both consumer services and integrated security services delivered record results with exceptional revenue and profit growth.

We also delivered strong revenue growth in residential property management and profit picture was better than last year. And in business services we also delivered solid results both in terms of revenues and profits for the first time in several quarters.

Our cash flow from operations is always a highlight and this past quarter was no exception. Year-to-date our cash flow from operations totaled about $31 million, which was 15% higher than last year which itself was a record year. For the full year, we expect our cash flow to be about $35 million and that should be excellent news for our shareholders.

FirstService is at the point in its development when we can use our own cash flow in the ordinary course of business we can use our cash flow to finance annual Capex requirements and we can use our cash flow to finance our tuck under acquisition program both of which without having to dilute share holders. This allows us to add earnings and earnings per share consistently without having to access the equity markets unless there's good reason to and both these things will drive our share price to even higher levels sooner than you think.

And speaking of acquisitions, as you know, we announced four acquisitions earlier in the quarter which will add about 10 million in annual revenue an about $1.8 million of incremental EBITDA. Over the next year, we expect to pick up the pace of acquisitions in all service areas and to add at least $10 million of incremental EBITDA to our current level. If we're successful, that should add at least 20 cents per share on an annualized basis to the preliminary outlook for the coming year. Put another way, I would be very disappointed if we weren't able to substantially exceed the $1.50 per share top end of the range for the coming year.

Let me now take you through some of the more specific highlights from the quarter. As I mentioned in consumer services, we had a tremendous quarter in every respect. Revenue was up 43%, about half of which came from internal growth and EBITDA was up more than 100%with a third of it coming from better operating results across the board. Both are pretty impressive by any standard. The college pro franchise system stood out again with another record season, Paul Davis restoration was up 13% for the quarter and California closets was up nicely as well. And our franchise operations continue to perform ahead of expectations both in terms of revenues and profits.

The pillar to post and floor coverings international franchise systems acquired earlier in the quarter added a total of 400 new franchisees to our franchise families an both of these systems are now integrated into our operations. We are excited about the possibilities in both franchise systems but we are particularly pleased with the acquisition of pillar to post. This is a business we've been after for several years.

Pillar to post is North American's third largest player in the home inspections business but it is consistently been ranked number one in its category for a number of reasons but in particular its unique operating system. Among other things, pillar to post home inspection system completely analyzes the condition of the new home and estimates the useful life and replacement costs of its key components. This very important information for both new homebuyers but also for lenders who want to make sure that the future maintenance costs are in line with their expectations.

During the quarter, we also added two California closets franchises, one in San Francisco and the other in Toronto to our increasing number of company-own franchises. There are a number of benefits to our franchising strategy and one of them was clearly evident in our third quarter results. The more we add year-round revenue to consumer services the more we offset the seasonality of our law and care operations and our college pro painters franchise systems. In our view, not that there's anything wrong with seasonal businesses.

We've been very successful over the years dominating these market segments and we expect to continue to dominate these segments in the future. Now let me turn to integrated security, a division that also delivered very strong results for the quarter. As John said, revenues were up 15%, and EBITDA was up 22% over the prior year, all of it came from internal growth. Our U.S. operations continue to experience strong quarter over quarter operating results and new sales activities give us a very positive outlook for the balance of the year and into next.

During the quarter, in addition to our usual business activities we began another high profile security installation for the Federal Reserve Bank in Washington D.C. That's right, Alan Green span will be carrying our access card. And our installations at the Rockefeller center and a number of DuPont's manufacturing plants throughout North American are also in progress. We are busy. In Canada, we've also seen an uptick in new sales activity with a very strong pipeline there as well.

The five-year out sourcing contract with 14 hospitals in the province of British Columbia has now been expanded to include yet another hospital and large installations for the Royal bank of Canada to install electronic security system has have cash operating centers across Canada are well under way. Needless to say, we're very bullish with this entire segment.

We're also pleased with the results in residential property management. Revenues were up 17% over the prior year and profits were better than expectations. We now manage more than 2200 properties containing more than 450,000 residential units in 14 U.S. states. And equally as important we administer more than $900 million annually in service and product purchases for our clients.

Our results in Florida were particularly strong, given the tremendous surge in new high-rise development over the past number of years. Many of these buildings are now coming on stream (ph) and as the leading player in the market we're getting our fair share of this new activity and more. Generally, revenues and margins in new buildings are lower in the early years because fewer things break down or need repair but as time goes on, the opportunities multiply.

The residential property management business is a business with long-term contracts and high retention rates so we bide our time and look for these opportunities. And we capitalize by providing services like landscaping, staffing our properties with superintendents and onsite engineers and maintenance workers and by selectively providing other services like swimming pool services, HVAC and plumbing services.

And the more we surround our clients with additional services the stronger our competitive position becomes and the higher our revenue and profit potential. But we also capitalize by looking for ways to add value to our clients, which in and of itself helps to add to our competitive advantage. We do this by leveraging our combined buying power in areas such as financial services, insurance brokerage and trash removal to name a few. In these cases we earn brokerage fees an administrative fees, which now total more than $3 million a year all of which fall to our bottom line.

And over the last year, we've also found ways to consolidate our back office functions in areas such as transfers and disclosures, collections and violation processing and all of these things are starting to help our margins and you'll see that start to come out as the next few quarters start to roll through. And we're feeling much better about business services. Revenues were up 14% over the prior year and EBITDA was up 5%, all of which gives us a very confident feeling for the balance of the year.

In fulfillment we continued to add new business during the quarter. I'm sure all of you by now are aware of the massive new program sponsored by General motors to give away a thousand vehicles across North American. Well, we're the ones managing that program for GM. When you go out to a car dealership to test drive a new GM product, we're the ones at the other end of the onstar system determines if you're the winner and providing GM with some very important information that they require for their client and product knowledge.

We're also hard at work finalizing the rollout of the new Exxon mobile initiative to distribute speed passes across the U.S. The new five-year contract to manage this program begins to generate revenue in late March and it could be the beginning of an even larger work relationship with Exxon across North American.

We also had very solid results in our business process out sourcing area. Best buy and future shop in Canada had a very strong holiday season resulting in higher volumes than expected and new contracts to process corporate taxes returns for the Canadian government and to manage the new loyalty program for best western world wide are now fully operation, those were the highlights for the quarter. And now operator would be pleased to open it up for questions for anyone.

Thank you very much. [OPERATOR INSTRUCTIONS] And our first question of the day comes from Matt Litfin. from William Blair & Co. Please go a head.

Good morning, congratulations on the quarter.

Thanks.

Thank you.

Jay, I think you spoke on the last call about another potential platform acquisition. What's your current thinking on that? Do you have the management wherewithal to do that at this point?

Well, we're always looking for an additional platform. And we absolutely have the capacity and ability to take it on when the opportunity is right Matt. And you know, until that time, it's business as usual and we're feeling pretty bullish about our existing service lines. So the answer in a long-winded way is absolutely.

Do you -- just to follow up on that, do you feel that it's necessary to have major synergies with your own business lines? Or would you consider a platform that was a good business in and of itself?

Well, surely, we would consider another service line that was a good business. But if we're able to add an additional platform that has synergies, you know, it really helps to just cement the opportunity. Managing as many properties as we do gives us a great opportunity to add business to any larger platform and so you know, that's obviously an area that we would have stronger interest in terms of a new platform.

Great. One more, if I might for John. Corporate overhead expenses, last couple of quarters ticked up a little bit versus historical numbers. Should we consider the, you know 1.7, 1.8 million range to be the new quarterly expectations from here?

I think it's a little bit higher. But you know in the range of 1.5 to 1.7 probably a decent range there. Is an impact there as most of these costs are Canadian dollars here at the head office level so there is some increase as a result of that. And there's a variable compensation related accruals contributed to these as well.

OK. Great. Thank you.

And our next question will come from John Dubois with Raymond James.

Good morning, gentlemen. Pretty good quarter, congrats. First off, the strong results at Paul Davis and California closets which is driving the consumer service group, I'm just trying to nail down is that a sustainable uptick? What particularly is the work done and I imagine some of it has to do with the tax rebate checks that everyone got in the U.S. in August? Is that a fair statement?

No, I mean, I wouldn't, John, attribute it to something so narrow. I mean this is really I guess a continuation of a trend we've seen for some time. You know, we had a fantastic quarter, both those segments I don't think it's something that it's a sustainable at this level. But you know, it was really nothing particularly unusual except that consumers still spent in the U.S. and the Paul Davis restoration, California closets franchisees and all are taking advantage of this and driving their businesses hard.

Right. OK. And I guess the second part of that then is you're still seeing -- you're not really seeing that same uptick in your painting and restoration on the property management side. I'm just wondering why that doesn't recon (ph) solve with the general consumer on the consumer side an your residents on the property residential management side?

While I think part of it is scale John. The restoration activities we undertake in our property management business are much more significant. Most restoration, Paul Davis restoration is fire damage, flood related, needs to be done right away.

Right.

And things along that nature. But the restoration side and property management, these are large scale projects and longer time lines associated with these projects and quite frankly we're being a lot selective in terms of what we take on as well. So I thinks that the attributable factors. And it's a different customer base. In Davis closets you're dealing directly with the consumer whereas restoration activities we have only in south Florida, they're all, in effect, commercial jobs that can be timed based on the availability of funds that our clients have and/or the necessity to actually retrofit a building. So there is -- there's a different customer component to that side of our business.

OK. Great. And then just on the security business, you mentioned some good large projects that are coming on stream or have come on stream. In the past couple of quarters, you mentioned that the larger projects were sort of dragging down the margins because it's inherently a lower margin business, but you still have those large projects but now you're seeing an up tick in margins. I was just wondering if you could reconcile that for me?

Certainly as some of these jobs came to a conclusion, particularly the Rockefeller center job, I mean those are --that was a conscientious decision to take on that job at a lower margin, that project is completed now pretty much, and we have in filled the rest of our capacity with other projects with better margins. I think it's that simple and I think we're returning now to margin levels, which would be more consistent with our ongoing expectations for the business.

OK. So actively taking price concessions is on the decline then, could you say.

For now, yeah. Again, it's very oppotunistics, if something comes up and we feel there's good long-term potential we need to take it on slightly less than originally, we'll make that decision but nothing like that right now.

OK. That's great. That's all I have for now. Thanks.

Next is David Newman with National Bank Financial.

Good morning, gentlemen.

Hi, Dave.

Very good quarter. Just a few questions on the business services. What is the leverage that you guys have on revenue and EBITDA if you get the utilization rates up to let's say I know what do you consider to be practically a normal operating level?

Well, I think you would have to look at some of our historical margins, David. That's where the -- that's where we would get to.

Yeah.

Where we're presently in the -- you know, across the expect to be in the low, you know, teens. You know, we were at one time generating, when we were at full capacity, 18%, and 19%. Now, certainly the environment is a little bit different and filling that capacity is likely going to be done with revenues, which are quite -- not quite as profitable as they have been in the past. But you know, 15%, 16%, I think is very doable if we get our capacity utilization up again.

And on the top line in terms of timeline, where do you see --let's say you get to 80%. What would be the revenue opportunity there?

Well, let me -- well, John, it's figuring that out. Today, we're probably at around 72% capacity. For us full capacity is around 90%. That's what we used to trail at. And so, we still have some work to do to fill that capacity. In terms of incremental revenue, John, I don't have an answer on that.

Probably it would be in the range of 20 to $25 million.

Very good and obviously a key theme around the world right now is this whole out sourcing theme to China and India and places like that. Do you guys view that as a threat or an opportunity?

Well, it's interesting you raise it. In our fulfillment area, obviously, anything out sourced outside of North American doesn't apply to us because our clients want their product strategically placed in different markets and in fact that's one of our competitive advantages. It does impact us potentially in our business process out sourcing. We have been -- we have been testing the idea of out sourcing you know on our own now in India for a period of time. And we've had mixed success, frankly.

So we see it potentially as an opportunity to reduce some of our costs. We haven't seen those costs come out of the system just yet. We also wanted to be in a position to help our clients coordinate doing that kind of out sourcing services should that come up. It has been more discussion now than anything else. Now, this is a smaller part of our business. The type of work we do in business process out sourcing is typically with governmental agencies, provincial agencies that basically have a vested interest in keeping the work local. So, that's been some of the response.

And obviously in the product support area, there's the potential may be for something to go overseas, but we haven't seen it yet. We are, John, at capacity I think now in all of our call centers. This GM program is substantially bigger than we expected it to be and we're bursting at the seams and it's a nice feeling.

Excellent. And I guess last question, on the housing side, if you see a situation where obviously mortgage rates are relatively flat, but they're calling for let's say late '04, early '05, rates may begin to move up. And more importantly you are seeing bit of this sort of associated demand for housing in the US and in Canada. Would you see any weakening at all in terms of property management consumer services on back of that?

Well, I don't think it will impact property management in any area other than the potential sale of new condo projects coming on stream in the future. But anything that's already constructed which is substantial would not be impacted at all by that which is one of the great things about this business.

Right.

Consumer service would be impacted I think because a lot of the growth that we're seeing has come from clients refinancing their homes or buying new homes and using that as a reason for -- as a reason for upgrading some of their current, you know living standards. But we're seeing a lot of co-cocooning happening, people are spending money on making their homes feel and look better and that's impacting us positively. So, I don't have an answer. But in the interim, we are taking the business and doing it profitably.

Very good, thanks gentlemen. Appreciate it.

At this time, there's one name remaining in the roster. [OPERATOR INSTRUCTIONS] And we'll now go to Bill McKenzie with PD Nukes Crust (ph), please go ahead.

Hello, guys. Just had a question with respect to the acquisition outlook and your comments on you know your goal of acquiring $10 million of EBITDA next year. I was just wondering, sort of what the foundation is for that number and what, you know, what are you seeing out there? Are there suddenly a lot more opportunities out there to acquire or is it more just a reflection of you getting more aggressive and if it's the latter, if it's a matter of FirstService Corporation getting more aggressive as opposed to more opportunities, is there any thought to deviating from your historical valuation metrics that you've looked to in terms of that sort of four to five EBITDA range. Do you see that going up? Do you think you need to spend a little bit more to get deals done now or not?

Actually, we're seeing, there are two factors. The first is there are more opportunities in our world today than there were last year, last six months; we've got lots of activity. They are smaller, typically our tuck under activities are smaller opportunities. But there is more in the pipeline in terms of that. And in terms of the acquisition multiples on existing tuck under situations. No, we're in -- we're pretty sound ground in every area. Potentially, with the exception of the security area, I think, valuations are moving up a little bit there.

And you know, depending upon the right opportunity, we might press our valuation up. But we're not talking about up significantly. It's marginally. The area that we might have to pay a bigger multiple is a significant new platform. For us to add another platform, it would have to be a significant business. And significant business in the, you know, $150 to $200 million range. And for the right business, we're going to have to pay higher than our historical target is on acquisitions. But it will be the right one when we do it.

But until then, we're just going to continue doing our thing and adding opportunity. The $10 million number, frankly, is you know, just business as usual. If we could pull down some of these deals that we have in our pipeline over the next 12 to 18 months, we will add annualized $10 million to our run rate.

And so that $10 million does not assume sort of a sizeable platform acquisition that potentially could be a little bit more expensive, it would be more as you said business as usual, tuck under as traditional valuations?

That's right.

OK, and then, John, just on the consumer services side, I know most of that revenue is in the US, but was there any Canadian dollar impact on the sales?

About 4%.

4%.

4%.

OK.

4% of revenue growth would have been attributable to FX.

Just one last thing on the margins within management services, you know talked a little bit about why they're compressed. Some of the things going on there. I was just wondering the timing in terms of when you would expect margins to stabilize and start expanding. Does it start right away next quarter? Or is it more another two or three quarters that we expect margins to be a little tight there and then start expanding?

Well, first of all, there's seasonality to that margin in that business.

I understand that. I'm just looking at a year over year basis.

Our outlook for the next quarter would be more of the same. But beyond that going into the first quarter of next year, I think we see margins - the potential for margins to go in the opposite direction and start to increase. The next quarter, we're kind of in a holding pattern on this right now.

OK. Great. Thanks very much.

You're welcome.

We'll now go to Bill Chisholm with Dundee Securities.

Yes, good morning. Just a couple of minor questions. I guess one area where you said was still underperforming was the restoration business in the property management side. Is that still a volume problem or is it plenty of business but low margin business?

Bill, it's so not material. I think we mentioned it. It's not material, but in answer to your question, it's not volume at all. It's margin. And it's just delivering as we work out some of the lower margin business that we took on a year ago; we're still feeling the impact from a margin standpoint on some of those jobs. But you know, we're talking about a business that, at best, is a $20 million a year business for us, which is, I don't know, what is that percentage revenue for us?

Insignificant. Insignificant. But it just impacts the margins.

It pisses us off.

OK. One more for John, on the balance sheet, I noticed the accounts receivable as well as the accounts payable went up $15 million since March, is that a reflection of the franchise business and the changing nature of the business?

First of all, it's FX related. Any dollar amounts that are on our balance sheet and receivables and payables obviously we are up about 20% because of the change in FX and also it's attributable to some of the acquisitions that we have done.

OK. That's it. Thank you.

We'll now go to Robert Staple with CIBC World Markets.

Hi, I'm calling on behalf of Ron Schwartz. With regards to customer services, the recent acquisitions, how much did they add to EPS in this last quarter roughly?

Well, we don't break those out on an EPS basis, but in terms of the contribution on the EBITDA line would have been about 600,000 or 700,000.

OK and with the closet business, California closets, how is the business with the Home deeply, are you still trying to sell away from that? Or is there an update you can give on that?

Yeah, it's still in test phase. It's doing OK in some markets. And it's doing less than OK in other markets. We're there. We're happy we're there. But it's not something that has generated any significant, you know, incremental activity for us.

Right. OK. And you just mentioned this a moment ago for the last question, but or the last caller, but is the restore in the RPM, is it right size now? You're saying it's insignificant on the low margin business, but is it right size now? Is everything kind of running at a run rate where you're happy with on the revenue side?

On the revenue side, yes.

OK.

On the margin side, I think our margin is still going to be contracted for another quarter or two.

Right.

Until we get rid of those last few jobs.

Yeah, we've got to work on the remaining jobs that we're contracted to complete out. And that's expected to conclude within the next three, four months. So, once we get into the beginning of next year, we should be in a position where on a revenue basis, we're running where we want to be and the margin should be seeing some improvements.

OK and pricing going forward is again, you're going to stay in line with what you want to do rather than this low margin stuff.

Right. For sure, it's not going to be - it's going to be much more focus on margin as opposed to just revenue generation in that segment. We have a new team that's all over that.

OK. Great. Thank you.

And Bill McKenzie has a follow-up question. Please go ahead.

I just wanted a follow-up question on the '05 guidance. I know you haven't gone through your full business review process for '05 yet but you've come out with a '05 guidance number. I was just wondering on the timing as to when you do it - sort of more detailed review for '05 and if you've incorporated any sort of conservative bias into the outlook given that you haven't done as much as of a detailed review as you might otherwise have?

Well, I mean it certainly is conservative. At this stage, it's only prudent to do that. We expect, Bill, to really complete the process by our year-end. We're fully in the process now. We'll be conducting reviews from head office level through February and March. And then we will be finalizing this and likely updating this or I guess confirming our preliminary view some time in May when our year-end results are announced. So it is to answer your question, yes, there's a conservative bias to this at this point.

OK. Great. Thanks a lot.

There are no further questions. Mr. Hennick, I'll turn the conference back over to you for any additional or closing remarks.

Thanks very much everyone for joining us. And the 11:00 time slot will be the regular time slot for conference calls going forward. We find it to be more convenient from our perspective and I think it ties everybody closer to the actual issuance of the numbers.

So with that, I would like to say good-bye to everyone and we'll speak to you next time.