藝康 (ECL) 2002 Q1 法說會逐字稿

This is an unedited realtime transcript. An edited version with proper case and full speaker names will be available shortly.

All participants please stand by. > > Good afternoon and welcome to the ecolab 1st quarter conference call. This call is being recorded. If you have any objections, you may disconnect at this time. I'd like to turn the call over to Mr. Mike monahan. > > Thank you. This webcast will include forward look pg statements. They could differ. They are described in the section of our most recent form 10-k. One copy with -- one caveat. There are changes due to required accounting changes. We have provided what we believe is a clear presentation of our results through our pro form a tables. Please bear with us and we'll try our best to work with you. Now on the numbers. 1st quarter results were on the high ends of our previously staetsdz outlook. As we expected, the positive i at that time industry has gn begun to show improvement. Starting with the pnl, rows 34%. Excluding acquisitions at fixed currency rates, they rose 2%. Volume and mix were up 1% to 2%. Pricing was up 1%. Sales for u.S. Operations increased 3%. Volume and mix were plat flat. Acquisitions added about 2%. Sales for the u.S. Cleaning and sanitizing operations were up 1%. Acquisitions had no affect. U.S. Inns sfugsal rebound. Travel related areas which represent about a third of sales were off slightly versus a year ago but have shown improvement since the 4th quarter. Institutional sales force reacted with aggressive sales effort increasing calls on customers, pursuing new accounts, improving penetration and existing a counts, increasing sales training and making competitive gains. New products, solid endurance, a more simplified dispensing equipment and the product program are doing very well and there are more new products to come later in the year. Productivity improvement and tight cost controls helped. Looking ahead, industry and customer forecast call for continuing improvement through the balance of the year and we expect -- qsr accounts were mixed. Over all, qsr showed good trends. -- pursuing new accounts and by increasing penetration in the existing accounts. Food retail service business continues to do very well in the court quarter. New products and programs also bolted results and we see increasing demand. We expect good results in 2002 as k benefits from improving trends and as the food retail business continues to grow. Texas tile sales fell about 2%. The end markets remained relatively flat but our new products are receiving an encouraging response from customers. While the overall march correct mains challenging, we think the remaining quarters could see better trends. Lower distributor orders due in part to inventory reductions in the slow economy -- cause janitorial sales to decline. The previously discussed phase out of special business also affected sales. Health care sales rose modestly as good sales in the skin care lines were partially offset by the dincontinuation of the product line. We continued to phase down the non core business and this will offset gains over the balance of 2002. As a result, while the core business is expected to grow at good rated, we continue to expect reported sales will look flat to off slightly. Water care sales fell 4% in the quarter as milder weather affected boiler sales and as we exited non core business. The business continues to benefit and in particular sales to food and beverage, hospitality and health care markets. We expect sales to pick up in the 2nd quarter as water care continues to benefit. Food and beverage sales fell 5% in the 1st quarter as it compared against a very strong quarter last year. They have continued to show slow growth and consolidation. There may be some signs of stabilization. New products are beginning to help results as inspects meet car cuss wash -- begin to take hold and improve our differentiation and sales opportunities. Further -- will help sales in the second half. The division has also under taken more aggressive sales efforts and picked up several new accounts. There is also stren ending in customer restengs tension. We expect the 2nd quarter to show improved results extending through the balance of the year. Vehicle care sales rose 6% in the quarter. The slower economy hurt the more expensive conveyer washes and mild winter weather also affected demand. We offset that by adding more oil company business. Vehicle care's launch of the new solid detergents is going well. It gives us a strong competitive advantage. Further, we have just launched a new line called harmony which will combine solids and liquids in a line for the conveyer market. We think the new products along with the focus on kia counts will yield goofed gains in 2002 for vehicle care. United states other services operations reported sales increase of 13% in the 1st quarter. Excluding acquisitions and divestitures sales grew 2%. Pest elimination sales grew 6% in the 1st quarter. Revenues were affected by the soft lodging industry trends. Some customers deferred certain non core services to cut their cost. Pest elimination is focusing on selling new customers, new market opportunities and in fens tense find cross selling, more street business and marketing additional services to additional customers as it seeks to offset the current market issues. It is developing new programs to deal with developing pest issues like bed bugs. We believe pest elimination will begin to post improving are growth in 2002 in second half as it returns to double digit trends. Excluding acquisitions, however, sales were down slightly. Continuing the slowing trend. Gcs was also affected by the business downturn as some customers delayed non critical repairs. This hurt both the repair and parts business. In addition, corporate accounts sales were slow in the 1st quarter. In respond, -- further it is developing programs to add new customers and increase business with existing customers. The 2nd quarter should begin to reflect the hot I talts industry's recovery and the outlook remains good. International sales mesh eshd in fixed currency nearly tripled. Excluding acquisitions international sales and fixed currency grew 5%. International sales excluding acquisitions declined 6%. Sales in europe rose 7% in the 1st quarter. Excluding acquisitions, sales rose 2%. Europe's institutional sales increased 4% as market trends reflect the u.S. Showing gradual improvement from the 4th quarter but still running below last year. The new line of solid products continue to enjoy good growth and institutional added new business with chain accounts. Good competitive gains are benefiting results. The food and beverage maintained its goods trends. Excluding acquisitions, sales increased 9% despite the flat market. The division continues to benefit from concept selling, new customer gains, new applications a strong pharmaceutical sales and new products. Professional product sales were flat as equipment sales offset modest gains in product sales. The market remains very competitive and near term sales are expected to be flatish. Texas tile sales increased 5%. While the division also faces many of the same market consolidation as the united states, its sales rose nicely. New products have combined with energy and water management programs to promote sales which may have application in the u.S. Asia pave 1st quarter sales grew 3%. When worth in u.S. Dollars, sales declined 5%. Fixed currency sales continue to be good wih southeast asia and new zealand. Institutional sales showed modest growth. Japan and new zealand showed growth. While other areas were mixed. Food and beverage shells showed moderate growth also led by strong results in new zealand and southeast asia where growing markets drove results. 1st quarter sales for ecolab's canadian operations rose 9% and 4% in u.S. Dollars. Institutional sales measured in local currency increased 6% as the focus on new accounts yielded good growth. Pro figures natural product sales were strong led by gains in the health care sector. Sales in latin america were up 10% and flat in u.S. Dollars. Results were led by brazil and mexico. Mexico and the caribbean have been hurt by the decline in travel. Our people worked hard to offset thinks impacts and did a tremendous job. Institutional lever and market share gains and new accounts development. These results were also helped by continued good growth in the food retail programs and national accounts sales. Food and beverage sales rose double digit capitalizing on the rising demands for exports and new programs for meat and poultry processors. The brazilian acquisition is doing well. While we continue to expect good market share gains from latin american p tourism declines combined with weak economic conditions will continue to challenge the division. Argentina and venezuela which combined represents less than $15 million in annual sales have suffered in those country's you are moi. However mexico and brazil remain in relatively good shape and should allow latin america to report decent gains in the 2nd quarter. Sales including africa and export operations were good. Local currency growth was 4%. Sales and south africa grew double digit. Even israel had a modest increase. We've now come to the expense side where the impact of the changes begin to show up. I also refer you to our web site where we've published statements showing data for 2001 and 2000 on a post acquisition and post 142 basis. In 2002, ecolab began reclassifying certain cost as a result of adopting a new accounting regulation. Effect was to move certain sgna cost to a component of revenue and reduce sales. Also beginning this year, we began classifying repair part costs as cost of sales rather than in sgna as in years before. We have restated our 1st quarter 2001 income statement for these reclassification changes. So the prior year periods are comparable to 2002. These restated numbers are reflected in the 1st quarter 2001 published numbers in the press release. These changes are also described more fully in footnote two of the annual report and shown in our pro form aes on the web site. On this reclassified basis the consolidated gross may margin was 49.6% compared with 52.3% last year. Excluding the special charges shown in the press release income statement, the 1st quarter 2002 gross margin was 50.3% compared to the consolidated pro form a 2001 gross margin -- of 51.3%. This year over year comparison is further affected by some subsequent classification changes made in 2002 regarding europe's operations. Excluding these changes ecolab's consolidated 2002 gross margin was off about 40 basis points. With u.S. Gross margins flat and europe's down slightly. Within the next month we intend to reissue the non gap pro form as on the web site. As we have said before, it's a key focus of ours to raise europe's gross margins as we move forward. Sgna expenses were 38.8% of net of sales. And down from 2001 pro form a margins of 39.6%. Reflecting the previously mentioned subsequent classification change in europe's numbers, ecolab's con sol indicated margins improved about 20 basis points. Margins for u.S. Operations declined in the quarter while non european international margins rose slightly. Europe's margins are higher than eco labs consolidated margins and they have the affect of increasing the overall margin. Operating income for our u.S. Cleaning and sanitizing business rose 7%. Excluding the affect of adopting faz 142 operating income rose 2%. The operating margin rose to 16.6% from 15.6% last year due to the adoption of faz 142. If good wiffle amortization is excluded the 2001 operating margin would be 16.3%. With 2002's30 basin improvement reflecting tight cost controls. Reported operating income for u.S. Other services declined 6%. Acquisitions had no affect on operating income. Continued to show good profit growth but results were affected by investments in the infra from a structure. Operating income declined 13%. Acquisitions were not significant. On a constant currency basis, operating income increased 86%. Without faz 142, the increase would have been 66%. Excluding acquisitions and faz 142, international operating income declined 18%. Results were hurt by weak results in north asia. The strong u.S. Currency which increased the cost to import certain of our products that we only manufacturer in the usa higher raw material cost for our local country manufacturing operations. In addition our mix was less favorable. In u.S. Dollars and excluding acquisitions, interest nationals reported operating income fell 17%. Diluted shares outstanding with flat. The net of this activity is that delighted eps was 37 cents from on going operations. Our total debt to total cap racial ended the quarterer at 44%. Amortization was $7 million. Spending wags $46 million. Dsl was down two days from a year ago levels in the quarter. That's a review of the 1st quarter. Looking head we begin by cautioning the following statements are based on currents -- they do not include the potential impact of business transaction that may be completed after the day of this release. This business outlook section should be considered in conjunction with the information in our press release. As discussed earlier, we expect the current challenging market conditions will show further dprad wall improvement in the 2nd quarter. We're working hard to offset these impacts and expect earnings per share to be 44 cent per share range. The effect of the one time events is shown in the president release. For the full year-ending december 31, 2002, ecolab ektd a -- -- this is also before any potential good way impairment. Again the effect of one time events is shown in the president release. -- press release. Please call my office if you would like to attend. That concludes my remarks. This conference call will be available for replay through april 30. Before we begin the q & a. Period, we realize we have give in you a lot of numbers and you may request additional information that we do notphave available at this moment. We'll try to respond to as many questions as we can but may need to follow up later on others. Such follow up conversations will be conducted within the spirit and meaning of regulation fd. > > Thank you very much, 6 at this time we'll begin the question and answer session. If you would like to ask a question, please press star one on your touch tone phone. If you are using speaker equipment, lift your hand set prior to pressing star one. And once again, that's star one to ask a question. One moment please while our questions register. Our first question comes from karen -- from meryl lynch. > > Good afternoon, mike. gt; > Hi, karen. gt; > How are you? gt; > Good thank you. > > A couple of questions. One with the international business, -- could you talk about how we might see that business roll out over the next few quarters and I'm thinking about the profitability and your ability to take costs out and maybe you could help us out with what your target margin might be and including all of international national because that what is you report but the lion's share of that is europe anyway. > > We have said that we thought that europe would trail the u.S. In showing a continual gradual recovery going forward so that's what we're looking for in terms of margins, we're beginning our activities where we're restructuring and integrating ecolab into -- ecolab and we'll be driving those margins further. We ve a got a goal of rising margins for the operation. That will be balanced with investments we will be making in new businesses and acquisitions but I think that as we go forward I think a target 6 raising operating margins maybe half a percent a year is reasonable. > > Okay. And then also I just had a follow up on two things that you comment on in your prepared 'remarks. One was at qsr, you were saying the results were mixed. Can you clarify what the drivers might be in that market that might make why things weren't stronger and what might or might not make that change in the upcoming quarters and also you're going to be more aggressive with cross selling. Can you talk about to what extent gcs currently over laps and what you might be doing to get more penetration there as well? > > The overall all sales were up nicely. What I was saying is that among the various customers that -- k has there was some variety. Some of them were up nice and 'some were off. So what I was referringing to were the qsr customers but not the overall sales. > > Any insight as to why there are different trepdz? Do you think it's a customer oriented thing as opposed to a market issue? gt; > I think it's more customer related and for that I guess talk to a restaurant analyst. > > Okay. Cross selling. > > Any place that has a kitchen or kitchen equipment is going to be a potential customer. For example now they are actively engaged in the cross selling efforts with pest and institutional. And they've stepped up those efforts in this quarter. gt; > Do you have any statistics to what percentage of your pest and institutional customer base is using gcs. > > It's a new business. It's one that we're still developing so at this point, i don't have any specific numbers. But I think you're right in that is a big opportunities for us to develop that. gt; > Okay. Terrific. Thanks, mike. > > Thank you. gt; > Our next question comes from gayle, yang. gt; > You commented that vehicle care were each have been affected by cost reduction programs that your customers -- could you comment on when you might expect those programs 20 to come off and so restoring those business trends? > > Vehicle care what we're saying is that people went down scale. They went from the conveyer wash which mighting be $25 a shot to the oil company or gas station to where it might be $6 for a car wash. That's the trend. It wasn't so much from our customers as it was their customers. In gcs we did talk about some customers holding back repairs. Our expectation is as the economy recovers, people have to go back and make the repairs that are needed. > > If you look at the restaurants industry, it's not doing too badly so why do your customers feel -- two questions. Why would they feel a need to cut back and secondly given that they have cut back apparently, how much more growth to dove they need to see before they start buying? > > I can't answer. At what point everything kicks in but what we've seen is if a large kitchen has let's see flee -- if one of them goes down, they operate on the other two. But at what point they fix the third one, your guess is as good as mine. My guess is that as things progress here as they start to see the balance pick up, they will start making those repairs. > > Given that you were sort of flat, in the 1st quarter, your guidance for the 2nd quarter is to be flat to making up a little bit, given that hotel comparisons have improved through the 1st quarter, why wouldn't you expect to sear much stronger year over year in the 1st quarter versus the 1st quarter come sons that you did see? > > As you know the industry is still below last year and i think the crossover points that most people looked at is midsummer. So that's one thing we're balancing it on. Still a year over year basis. Clearly it is better than it was in the 1st quarter. 4th quarter. > > The comparison you had a difficult comparison because you had a lousy 1st quarter versus the previous year. And the second quarter, the hotel industry is going to be better so why wouldn't your year over year comparison be that much better. gt; > We'll see the year over year sales accelerate. And when we come to the 2nd quarter again we're looking for a better performance than the first and for the third and fourth should be better than the prior. Sequentially we'll see better comparisons as we go along. Second thing is as are don't forget internationally we still have an anchor dragging which is japan. So over all, we've got a mix issue but domestically we're looking for a recovery and we'll see that as the numbers unfold. > > Okay. Could you just quickly comment on what the -- creativeness of europe is? Joint venture. gt; > For this year? gt; > So far in the 1st quarter, what did you see. gt; > To eps? > > Yeah and by how much? gt; > That was about flat. gt; > Okay. gt; > We kind of said this year would be night ralph. gt; > So you have already seen that? > > Yes. gt; > Can you give us the dna for '01. gt; > Deoperation yaegs and amortization -- I'll have to get back to you. > > Next question comes from steve jacobs. gt; > Good afternoon. I didn't catch at the beginning of your comments where you were talking about volumes, mix acquisitions, etc. For both consolidated and u.S. Can you go through that again. > > For consolidated, excluding acquisitions and at fixed currency rates, sales rose 2%. The components of that were volume and mix were up 1-2. Pricing was up 1 and currency was a negative 2. For the u.S. Sales increased 3%. Volume and mix were flat, pricing was up one and acquisitions added 2. gt; > Great. Okay. How come your guidance for interest expense is going up sequentially from 12010.5 million to $12 million. > > We had thought it was going to be higher in the 1st quarter. If you remember in the 4th quarter we said it will be around 12 or so and what happened we did not place the debt until later than expected and we enjoyed the much lower commercial paper interest rates. So 1st quarter was actually a little bit lower than expected and 2nd quarter is more in line. > > In most of your segments, you mentioned new account wins. Is there some specifics some way you can quantify what the magnitude is over all? > > Yeah. I mean I don't have numbers in front of me here but when we go through each division, i can do this at another time. Go through the divisions and where we've seen the wins and losses. > > All right. That will be fine. gt; > Thank you. Our next question comes from robert-- > > Couple of questions. One has there been any change in customer retention patterns in the usa in europe over the last three and 6-month periods and can you give us a sense of where they are? > > I think that they are about the same as they were. A couple of divisions seem to improve. gt; > What about institutional? gt; > It remains quite high. gt; > So there has been no change there at all over the last six months. > > Everything looks pretty strong. It's always had high retention and maintains that today. > > Can you give us an update in terms of what is going on with the independent strategy? gt; > I think that's working out very well. We picked up incremental sales in the quarter from the effort that we had starting last year. We're continue to go back to that strategy where we're going after small independent accounts. As you know, that's an area where we have if you will under pen separated. We're strong into change and not as strong in the street accounts and we're going there to get our fair share. > > When is the business that you want in the 4th quarter last year start hitting the books this year. > > I'm sorry. gt; > When did you start-- > > We're seeing it already. There were several millions in institutional. The other thing is the -- lie has been doing well and that's one of the key product lines for the street accounts. gt; > So you got about $2 million incremental from the independence in q1? Judge close enough. gt; > Okay. And just last question. Sales force hiring. What is it looking like in the 1st quarter europe and usa what are you looking like for the year? gt; > Right now we're approaching it cautiously, robert. With business being where it is, we haven't done anything in terms of new hiring I think for the rest of the year we'll see how it goes and add appropriately as the business comes along. You'll see us increase the head counts. gt; > No sales force hiring in the 1st quarter. > > It was flatish. Typically we target around 5% and if things pan out like we expect, we won't be very far from that. But again we are going to do a wait and see and be prudent in adding people. gt; > So you're taking extremely cautious approach in terms of expenses? > > Absolutely. gt; > Thank you very much. gt; > Thank you. Our next question comes from mary beth co-naturally. gt; > I wanted to ask by b johnson -- leaver and see if you've seen any more progress or competition on that front. > > Nothing new. > > And also in terms of I know you're thinking about doing some acquisitions to strengthen your europe business and just wanted to see if you have anything in mind at all or what areas you're looking at in particular? > > We've said that one of the first areas we're going to go after is pest elimination and that's a new business area but at the same time as we did the clean care acquisition in january so we've already put one on the books and we'll probably do some others but also looking for new business, too. > > Thank you. > > Our next question comes from jeff --. gt; > Trying the figure out the hankel swing here on the consolidation. We had $200 million sales it looks like. And wondering how much of that income swing is to jv because a year ago they only did $2 million on an equity basis. Is that swing half due? > > I think you're pretty close.3 > > So and that would imply a quite low margin on stuff you folded in from the jv on a pretax basis. > > Right. gt; > Is it as low as you saw in the 4th quarter? Any improvement. When do you expect those margins to move and by what magnitude? > > I don't think you're going to see thing change overnight. That's the work that we've got going forward. gt; > Is it 1% a quarter conservative improvement see sequential look -----. > > Maybe for them half a point a year. This year we expect to make progress on that. We'll should see some things happen toward the second half of the year. > > And that was international total. gt; > No we're talking about just europe. gt; > And from this low level that doesn't take a lot of years the get to the u.S.. > > If all we're doing is driving the margin in europe that would be one thing but at the same time that we're trying to drive margins we're also trying to expand the business in new businesses. We're going to be launchings new products and doing a lot of stuff in europe. gt; > And on the cost side have we just begun that and won't you see benefits? > > Clearly, as we've said before, we were a partner in the joint venture for 10 years so a lot of costs were taken out. There are still some as we've announced that we're going to go after but I think that more than anything for us is a top line strategy. The joint venture wasn't acquired as a cost reduction effort. It was to grow revenues and with that the margins. > > Okay. I'll leave it at that. Thank you. gt; > Our next question comes from chris cache. > > Hi, mike. I think you mentioned that the u.S. Pricing was up 1%. I'm wondering if there are any pluses or minus is there across the different business units or is it 1% across the board? > > I think it's pretty representative of what was going on. > > So you're not skiing any pricing pressure say in institutional or the hospitality sector. gt; > The customers don't agree with it with open arms but i think it's pr etty stable. > > And then following up on the european margin discussion, curious if there is something different about the business in europe that perhaps a structural thing. Do you have a bigger mix of business or distribution that drags our margins there versus the us that you have to address. > > Yeah. Clearly there is and you hit the nail on the head. There is a different mix in europe. When you look at the sales institutional in the u.S. Represents about 40% of our business. If you look at europe, it's maybe about 30%. Janitorial sales around 25% in europe and here in the u.S. They are under 10%. So it's a different business mix. The other thing is that europe tends to be much more of a distributor business than direct and you get better margins with the direct. gt; > Okay. And then just one follow up on the comment about did I terse see. -- diverse team. Nothing new there. -- I've kind of heard that the transaction should close first week of may. I was just wondering if there were any rumblings at all. > > We haven't heard anything beyond what I think has been stated in some news releases and some comments that they have made. There is nothing material that we've heard beyond that. gt; > Okay. Fair enough. Thanks, mike. gt; > Thank you. > > Thank you. And once again if you would like the ask a question, please press star one on your touch tone phone and to cancel your question, it would be star two. > > If there are no further questions, I know you guys probably have a lot of calls. Able around the rest of the afternoon if you need me. If that's it, I'll say thank you very much and have a good day. > > We cover a couple of more questions. Did you want to take them. gt; > Sure. gt; > . gt; > Our next question. > > Good morning, mike or good afternoon. Couple of questions. When you talk about -- you've had hen well now can you comment what the performance has been versus your expectation. Has there been any surprises and can you update us beyond looking for acquisitions that will drive performance in the business. > > First of all, I think the performance of europe has been very good and itsy clearly as good if not exceeding expectations on the top line giving the economy and the markets that they were n. In terms of other things, we've been pretty clear about what we're doing there. As we said, we are they are part of a global restructuring that we're undertaking across all operations. We've said that we're looking for new acquisitions to expand the businesses starting with pest limb nation. -- elimination. We've done realignmeants to reduce the matrix structures. So it's all that we've talked about. There is nothing new there. gt; > But it's progressing about as you expected. And no surprises good or bad? gt; > Right. > > My second question is your other north american businesses have seen margins decline. I understand that they are still building out of the infrastructure. At what point are we going to see the inflection of margins starting to get better? Is it a question of sales or -- density on some of the services businesses or-- > > Which margins are you look at? > > I'm looking at operating margins for others. > > For the other services. gt; > Exactly. gt; > Yeah what you're seeing is just what you've said. It's e reflecting the development and expansion of the gcs business. If we go back to the pest elimination business back in 1958, it took several years to roll that out and to become profitable and I think you're going to see the same thing as they build scale and mass. > > Okay. But is there a timetable in mind. Are we years away or quarters away? > > Think that as we've reached if you will critical mass in terms of coverage, that as we complete infrastructure upgrades over the next year that we should start the see the margins pick up after that. > > So like a 2004 event then? gt; > Yeah. gt; > Okay. Very good. My last question is it's getting close to midyear which is the time that you said you were going to finalize the restructuring plan and all of the detais. How is that progressing? gt; > There is nothing to update what we've said is that we would deplete both of the or identify both of the activities by midyear and we're on target for that. > > We'll have those completed in the 2nd quarter. > > And there will be an announcement at that time? gt; > I don't know if there is any announcement to make. We took one in the first quarter. We'll take another one in the second and it's not like a grand manifesto. gt; > Fair enough. Thank you very much. > > Thank you and our next question comes from mark gully from banc of america. gt; > A couple questions. I'm going to ask the question directly. Can you give us the sales for the so-called joint venture so we can roll that into our model? gt; > Sales for -- there are about $210 million. > > Okay. gt; > And as jeff said, the up income was just a little over 10. gt; > Thanks with all of the puts and takes, can you give us an underlying tax rate for the quarter and what it will be for the balance of the year? > > The tax rate was 39.9%. > > Okay and then for the balance of the year? gt; > About the same. gt; > Okay and then I just wanted to ask the question about the guidance. If I take the guidance for the full year and -- you come up with 50 cents a quarter for the third and fourth. That would represent a substantial gain over last year. But still a want to make sure I'm doing the math right and know you're talking about a gradual recovery. In lodging and restaurants but kind of tough to see how a gradual recovery drives 50 cents a quarter for the second half of the year judge first of all, as you know there is seasonality where a 3rd quarter is typical least larger quarter. Secondly, what I think your a going to say is continued pick up in the institutional area. Up 3% in the 1st quarter. I think that in the second half will be back towards its more historic range of 6-8%. So we'll see a significant pick up in the sales growth for institutional. All of the various divisions are looking for the 2nd quarter to show a pickup in the business such that it looks like the 1st quarter could be the low for a number of them. So in terms that and then the second thing is the margins will pick up as well as the business. But again if you look at the historic seasonal patterns, you'll see the 3rd quarter is always our largest. > > I understand that. Not to beat a dead horse here but I think a question about second half earnings -- bulls your cautious sales force additions. It seems to me that those are your two key drivers. It appears that the second half will be a challenge to make the goal. gt; > I don't think so. First of all if we look at our head counts, it's not below last year and last year we were relative -- we were driving sales pretty we'll have don't forget when you're looking at sales force additions look at productivity. Waved some substantial shlg product-- > > Okay. That helps a lot > > Sales per account are up significantly. gt; > Okay. Thanks. gt; > Thank you. There are no further questions. I would like to turn it back over to > > > You thank you for your time able around this afternoon if you have any further questions. Thank you very much and have a good afternoon.