藝康 (ECL) 2002 Q4 法說會逐字稿

Good afternoon. Welcome to the fourth quarter 2002 year-end conference call. All lines will be in a listen-only mode until the Q&A session. Instructions will be given at that time. At the request of Ecolab this call is being recorded. I would now like to introduce today's host, Mr. Mike Monahan. Sir, you may begin.

Thank you. Hello everyone and thanks for joining us. This webcast will include estimates of future performance. These are forward-looking statements and actual results could differ materially from those projected. Some of the factors that could cause actual results to differ are described in the section of our most recent form 10K under the heading forward-looking statements and risk factors and in our fourth quarter earnings release. We would like to again remind you that our Pro Forma for 2001 are available on our website in the investor information section and are referenced in this discussion.

Now on to the numbers. Fourth quarter EPS from ongoing operations was 45 cents. Beating our previously stated outlook of 41 to 44 cents and in line with our recent pre-announcement. Net income including special charges was 39 cents. Ecolab's reported consolidated sales for the fourth quarter rose 59%, excluding acquisitions and divestitures, sales rose 9%. Looking at the components, volume and mix were up 8%, pricing was up 1% and currency was not significant.

Sales for the U.S. cleaning and sanitizing operations were up 10%. Acquisitions had no effect. U.S. institutional sales were up a very strong 13% in the quarter with double-digit gains in almost all areas. This strong gain reflected aggressive new account sales efforts, successful new products, the benefits of improved service initiatives and comparison in last year's weakened post 9/11 results.

The food service market which represents the biggest part of institutional and Ecolab's sales continued to grow nicely. We have experienced further steady growth. Travel related areas showed a sharp improvement over last year. They continued their recovery. Leveraging the market growth institutional sales forces focused its efforts, increasing calls on existing customers and continuing pursuit of new accounts, including the previously discussed efforts towards street accounts, as well as an unrelenting effort towards change. Also, very good competitive gains, improved account penetration and increased sales training have helped results.

Recent new product introductions like Oasis Select 4 , are also doing well. There are more new products to come later in the year. We also achieved good productivity in the sales force. Looking ahead, first quarter sales should show good gains for institutional and we look for another strong performance from institutional in 2003. Case sales were up a resounding 12% in 2002's fourth quarter. Led by good gains in QSR.

While the QSR industry has shown moderate growth trends, Kay has outperformed it through a combination of new account growth, better account penetration and more effective field sales coverage. Further, an increased emphasis on sanitation by several of Kays major customers also benefited sales. The food retail business continues to do well, as rollouts continued with major grocery chains and new chains were signed up. New products and programs also bolstered Kay's results, along with an increasing demand for dispensing systems among the QSRs. We expect continued good momentum in Kay's first quarter and for 2003 as a division leverages the QSR trends and as the food retail business continues to grow.

Textile care sales increased 9% reflecting a soft economy last year and a stabilization of the business trends witnessed during the past year. A continued emphasis on service excellence and sales force execution in the account base led to a strong finish for the year and has positioned the division for continued, though modest gains in 2003. Professional product sales increased 5% as gains in janitorial and healthcare offset the continuing phaseout of specialty business. Janitorial sales for the quarter rose as a significant win with an existing customer and new products drove sales.

Healthcare sales were off modestly, as good results in the skin care lines and gains in car wash were offset by the discontinuation of a product line. We finished phasing out some of the noncore specialty business. 2002 was a year of repositioning professional products and 2003 will see the division bolster results by focusing on large national and mid-sized regional corporate accounts and continue to work with the distribution network to attain stronger, steady growth. Water care sales were off 5% in the fourth quarter with modest growth in the hospitality, healthcare and laundry, offset by declines in noncore business as we exit that market. As well as by market consolidations.

Water care continues to follow to circle the customer strategy focusing on sales to the cruise, food and beverage, hospitality and institutional markets. However, sales to these markets were affected by lower customer usage during the quarter. Given the trends in the economy and the markets, sales are expected to be about flat for the first quarter of 2003. Food and beverage sales rose 4% in the fourth quarter, continuing to improve growth trends as focus on new account gains and account retention led results. Good growth in the food and the meat and poultry areas was generated by improved end-customer trends and new products including [INAUDIBLE] and Quadex.

New account gains led the growth in beverage and dairy plant sales rose as we picked up new accounts. The actual offset in trends is the impact of low prices and drought on the agri business. Food and beverage will continue its aggressive new account and retention efforts, as well as, leverage of new products to sustain the renewed momentum. As a result, we look for continued sales gains in the first quarter and full year 2003. Vehicle care sales were up 8% in the quarter, as the division offset an apparent industry slowdown due to the weak economy and drought in much of the U.S.

Vehicle care worked to offset the slower markets by adding more oil company business where industry consolidations is actually benefited us as we pick up market share. And early start to the winter wash season in December also contributed to the fourth quarter's growth. Velocity 3600 has grown quickly and is now our leading product. Vehicle care's launch of the new Harmony product is also going very well. We are looking at further product introductions in the coming quarters. We think these new products along with the focus on key accounts will enable vehicle care to continue to show good growth in 2003.

Though the first quarter will probably start out a bit slow as it compares to a strong first quarter 2002, and as vehicle care initiates new investments in the conveyor market that are expected to yield higher growth later in the year. United States other services operations reported a sales increase of 7% in the fourth quarter, excluding acquisitions, sales grew 6%. Pest elimination sales grew 8% in the fourth quarter showing an improved growth rate over the first half, 6% rate, as momentum picks up. New contract sales continue to gain momentum and one-shot services, such as, a program for fruit flies, did very well in the quarter. New programs like those for food retail are doing well.

Pest elimination should continue to show improved sales growth into next year. Sales for the GCF commercial kitchen equipment business rose 2% in the quarter. The quarter reflected the division's focus on building its standardized operations procedures and the impact of the hospitality slowdown. GCS's new management team is leading the development of standard branch operating procedures to give it an uniform approach across the multi-acquisitions it made to create its national coverage. This approach is being rolled out in the stage process and should give GCS another competitive edge from the rollout concluded later this year.

As an initial step, the back office functions are being consolidated from the current 33 geographic businesses into a single call and administration center. These changes will greatly improve customer service, reduce operating costs, and enable faster growth. The business has begun to reflect these internal improvements with growth expected to develop as the year progresses. International sales measured in fixed currencies more than tripled due to the addition of Europe at the end of 2001. Excluding Europe and our other acquisitions and divestitures, international sales and fixed currencies grew 8%. When measured in U.S. dollars, international sales excluding acquisitions increased 6%.

Sales in Europe rose 15% in the fourth quarter in local currencies, and 12% in dollars when including the UK pest elimination acquisition. Excluding acquisitions, fixed currency sales in Europe rose 5%. Europe's institutional sales increased 9% as a strong new account activity worked to offset a weak business environment in Europe. Overall, European hospitality demand is still off. It is estimated that American and European tourism is generally down over 10%, and as much as 20 to 30% in the Mediterranean. This is further compounded by the economic problems in major countries like Germany.

Institutional has responded to these tough conditions with aggressive sales efforts, generating strong new business growth in independent street accounts, as well as, picking up several new chain accounts. Competitive activity remains about the same as before. We expect new product and sales initiatives to continue to benefit the institutional sales growth in the first quarter. New food -- pardon me, the food and beverage business maintained its robust trend despite the flat and consolidating market, as sales rose 18%. Excluding acquisitions, sales increased a still healthy 5%.

The division continues to benefit from concept selling, new customer gains, new applications within current customers, strong food processing and pharmaceutical sales and new products, like membrain care, [INAUDIBLE] filling cleaners and thin film cleaning. The clean care acquisition which closed in January 2002, is on track and doing well. The outlook for FNB remains good for 2003 as these continued programs, along with new products and programs lead sales. Professional product sales declined 7%. Customer demand remains weak and the market is very competitive. The division is introducing new products and going after market share.

We are also looking at selective approach to new markets. Near term sales for professional products are expected to be challenging. Healthcare sales rose 15% due to a comparison to last year. Excluding acquisitions, sales rose 8%. The healthcare market in Europe is reflecting many of the same conditions as in the U.S. with government cost controls and limited growth in the hospital area. The division is offsetting this with aggressive product introductions, more product differentiation, increased use of market segments and opportunities in the small practice and nursing home markets.

The business acquired in December is looking good. Textile care sales increased 10%. The division also faces many of the same market consolidation and pricing pressure issues as the United States. New products like Oxy Scan and the Pace laundry systems have combined with energy and water management programs to promote sales which may have application in the U.S. and more new products are coming in 2003. Our European pest elimination acquisition is on track in its first full quarter with Ecolab. The acquisition adds a key circle to customer business to our European portfolio and will boost long-term sales and margin growth.

We are continuing to look for more pest elimination acquisitions in Europe, as well as other businesses to broaden our circle the customer strategy. Asia Pacific's fourth quarter sales increased 5% in local currencies. When reported in U.S. dollars sales increased 9%. Fixed currency sales continued to be good with Japan, Northeast Asia and New Zealand showing solid gains. Looking at the segments, institutional sales showed a healthy increase.

East Asia was very strong with double-digit growth in most countries. Sales in Japan grew modestly as they continue to suffer from a very difficult economy and deflationary environment. The hospitality industry has suffered. Australia showed good growth with solid sales in all markets. Food and beverage sales grew nicely. Japan showed strong growth over last year's weak fourth quarter results. Australia's results were down due to the sale of the hygiene services business.

New Zealand sales increased modestly as demand continues to be driven by [INAUDIBLE]. East Asia grew strongly with Korea, China and Singapore all showing strong gains. Fourth quarter sales for Ecolabs Canadian operations increased 7% in local currency and were up 7% in U.S. dollars. Institutional sales measured in the local currency were strong as the focus on new accounts yielded good growth. Food and beverage sales were off slightly and professional product sales grew slightly. During the gains in the healthcare spector which offset a rationalization of the janitorial. Laundry sales were about flat in the quarter. Sales in Latin America were up 12% in local currencies, but decreased 5% when reported in U.S. dollars. In fixed currency, results were up in nearly all countries and were led by Brazil, Mexico, Central America, the Caribbean, and surprisingly, Argentina.

This was an outstanding performance given the challenging economy in Europe and sales declines in Venezuela, where the business has come to a stand still. Our people worked extraordinarily hard to offset the impact of these difficult economies and did a terrific job. Institutional had excellent growth as it leveraged market share gains and new account development. These results were often helped by continued growth in the food retail programs and national account sales. Food and beverage sales also grew nicely capitalizing on the demand for improved sanitation driven by exports, as well as new programs for the meat and poultry processors, the beverage market and an expanded presence in poultry, agri and seafood.

The Brazilian and Mexican pest elimination businesses are doing very, very well. We continue to expect good growth from Latin America in 2002 as our people work to offset currency swings and a mixed economic conditions in the region. Sales for Ecolab's Africa and middle east operations increased 4% in mixed currency. Gains were seen in most areas. Turning to the expense side of the income statement the fourth quarter 2002 gross margin, excluding special charges was 49.9% compared to the consolidated Pro Forma 2001 growth margin, to [INAUDIBLE]up 48.6%. The consolidated gross margin rose 130 basis points benefitting from product mix improvements and cost reductions.

The reported consolidated gross margin for Ecolab's fourth quarter 2001 was 50.2% which excluded the lower margin with Ecolab business. SG&A expenses were 37.9% of sales, 60 basis points above 2001's Pro Forma margins of 37.3%. SG&A expense rose due to higher incentive base expense and bonus accrual, as well as comparison to the year-ago period when costs were restrained in the weak economy and post September 11 environment. Reported fourth quarter 2001 SG&A was 38.0% of sales. The fourth quarter's results include special charges related to plans management announced in January 2002 to undertake restructuring and cost saving actions during 2002.

Actions taken included work force reductions, product discontinuations and asset write downs totalling $12 million for the fourth quarter and $52 million for the full year. All restructuring actions have been announced and recorded. Aggregate charges for the full year were consistent with the previously announced 50 million to $60 million range on a pre tax basis. Also as previously announced we recorded a $6 million gain on changes made to our post retirement benefit plan in the first quarter of 2002. Operating income for U.S. cleaning and sanitizing business rose 8%.

Operating margins were 14.6% compared with 14.8% last year. Profit showed a good increase as the higher sales and benefit of new products was partially offset by investments in technology and sales productivity measures. Operating income for the U.S. or their services rose 17%. Pest elimination continued to show good profit growth while GCS continued to reflect investments in infrastructure. On a constant currency basis international's operating income increased 333%.

Excluding FAS 142, acquisitions and international operating income increased 42%. Profit gains were achieved in all major regions through new products and cost controls. In U.S. dollars and excluding acquisitions, international's operating income increased 69%. Diluted shares outstanding were up 1% to 131.2 million shares. The net of this activity is that diluted pro forma EPS for the fourth quarter was 45 cents from ongoing operations to 32%.

On an as-reported basis net income per diluted share including special charges was up 30% to 39 cents. Of these comparisons currency was a penny per share positive. Now to review the P&L. In summary we are pleased with our performance in the fourth quarter as improving sales growth, core market improvements and excellent cost controls enabled us to beat our forecasted EPS from ongoing operations and post strong growth versus last year. During the fourth quarter 2002, Ecolab contributed approximately $125 million to its U.S. pension plan as a result of normal growth in benefit obligations, lower discount rates and a decline in pension assets in 2002.

At year-end, we were fully funded on an ABO basis. We also lowered our discount rate to 6.75% from 7.5%, but kept the rate of return assumption at 9%, in line with the average of other companies. Pension expense for 2002 is approximately 33.5 million. We presently expect the pension expense for 2003 to be in the $36 million range. Total Ecolab sales and service head count increased 7% in 2002. Excluding acquisitions organic growth was around 3% we discussed in earlier calls. For 2003, total sales and service head count is expected to increase 4 to 5%, about in line with historic trends.

As noted in several of our division comments, we have undertaken a number of sales force productivity measures this year which we believe will enable us to improve service to our customers and create more in effective selling time for our salespeople. This will leverage the sales and service head count additions and reveal a higher impact. Moving to the balance sheet. Our total debt to total capitalization ended the quarter at 39% equal to the end of the third quarter. Depreciation was 55 million in the quarter and amortization was $8 million. Cap Ex was 67 million.

DSO was 58 days down 2.5 days from last year's pro forma when Europe is included. That's a review of the fourth quarter. Looking ahead to the first quarter, we begin by cautioning you the following statements are based on current expectations. These statements are forward looking appeared actual results may differ materially. These statements do not include the potential impact of business or other material corporate transactions that may be completed after the date of the release. The business outlook section should be considered in conjunction with the information in forward-looking statements in our press release which lists factors that may cause results to differ.

As discussed earlier, we continue to expect a solid start to 2003 in the first quarter as continued good results from new account activity, new products and improved operating trends in several areas benefit results. We expect our earnings per share to be in the 40 to 42 cent range in the first quarter. For the full year ending December 31, 2003, Ecolab continues to expect diluted earnings per share to improve to the $2.05 area. We are both very confident and optimistic about our future. I believe we will continue to show a positive performance for 2003 despite the current economic uncertainty. In other words, we expect another year of typical economic results; strong, steady and well above the rest. That concludes my remarks. This conference call will be available for replay on our website through February 28. Operator, please begin the Q&A period.

Thank you. At this time we are ready to begin the Q&A session. If you would like to ask a question, press star one. To cancel your question you may press star two. Once again, that's star 1 to ask a question and star 2 to cancel. First question comes from Robert Ottenstein of Morgan Stanley.

Hey, Mike. I was wondering if you could talk a little bit, I know none of your new products ever, you know, huge home runs , usually it's more singles and doubles. You talk about some new products that you expect coming out in 2003 that you are particularly excited about and how they may be able to impact their divisions?

We mentioned the phaser product out of janitorial, we think that product will be very good this year. Out of institutional, Oasis Pro is brand-new. We expect that one to be very good. It's a significant upgrade over the current Oasis line. There will be a couple more, I think significant ones coming out of institutional later this year. You know, in Kay we have some new products coming along as well. In the services business we are looking at a couple new services to come out of pest, so I think we are all in pretty good shape as we look forward to this year. Europe has a number of new products as well.

How is Oasis Pro an upgrade?

It's a much more concentrated product. The packaging will be much smaller than before, instead of these 2.5 gallon totes, it's smaller basically bag that is about a fifth the size. It's more concentrated. As you know for the housekeeping area that oasis serves they usually have very little room to place these units. So it really takes advantage of the need of customers to have a very small concentrated product they can fit in a small area.

And presumably higher margins?

Absolutely. Greater value for the customer and for Ecolab as well.

Another question. How much do you expect to improve your cost structure in '03 over '02?

Could you define what you mean by that, Robert?

Well, you have the different charges. I'm wondering how much cost do you think you can get out?

Well, we said when we did the restructuring we expected to pick up 12 to 15 cents a share for savings. I think we are on target for that. Clearly we will invest some of that in various things, productivity measures and technology we are doing for our sales and service force.

A net amount for '03 could be a nickel?

Yeah, it will be higher than that, Robert. That's probably about what we had in 2002. I think you'll see a multiple of that.

Okay. And then, can you just -- I know you did give some guidance in terms of the first quarter, but can you just give us maybe subjective feel for business trends in January and February, how things are rolling out from, you know, in the major areas?

If we look at the food service, the lodging areas, I think that -- you know, we are seeing the same things that the analyst reports are showing us which is pretty steady. The occupancy trends seem to be pretty steady, you know modest growth level. Modest level. The restaurant industry is continuing to grow, maybe, you know, modestly. But not much -- not much change in the last few months. Pretty consistent.

Great. Thanks a lot.

Thank you. Our next question comes from Jeff Cianci of Deutsche Banc.

This is David Begleiter, perhaps?

You'll do, David.

Hi, how are you, Michael?

Good. How are you?

Good. Michael in Europe you've done a excellent job with institutional. What we are reading right now is Germany is quite weak. Can you comment on your expectations for Germany in '03 and also comment on European margins, where they finished up in 2002, and what your forecast is for 2003. Thank you.

Yeah. Well, Germany hasn't been very strong for the last few years and continues to look weak. I've seen the same stuff that you have seen, that growth in Germany, I think their GDP is expected to continue to grow at a 1% rate like they have been for the last couple years. We are not looking for any great shakes out of Germany. On the other hand, as you know, we have been pretty aggressive about going after new accounts, independent street accounts, et cetera which is pan Europe and includes Germany as well. I think we'll be be able to benefit with that effort. In terms of margins for joint venture, they ended the year about 9% operating margin and we are looking for improvement into 2003.

Mike, how large is Germany in Europe, portion of the European business?

Somewhere in the 30% area.

Okay. And last question. Within Kay, how large now is the food retail business versus the QSR business?

It's around 10% of the business.

Thanks a lot.

Thank you.

Thank you. Our next question comes from Joe Cianci of UBS Warburg.

Hi, Mike. Still UBS. Pricing you mentioned was up 1%. Gross margin is up. Is this surprisingly in this kind of environment, economic compared environment do you detect, perhaps, new competitor ownership has been a little more stable on the pricing front allowing you to expand margins?

We really haven't seen too much change in the competitive activity, Jeff. And pricing has been pretty steady at 1% for the last couple years.

Well, let me ask it another way. Is the market share gain that you are seeing, you know, come at the expense of pricing? Isn't there typically a trade-off there or is the market more ripe for easy pickings for you guys?

Well, we would never say anything is terribly easy. But, you know, in terms of market, we continue to gain share based on all the measures that we have. We continue to gain share against our competitors. In terms of pricing, you know, pricing has always been an important thing to us so that we can show customers that we continue to present value. But as we've also said, far more important to Ecolab's margins is really development of new products where you can create much more value than you can on a simple price increase.

So the new products, you think, will continue to improve the mix, that's more important factor? You see margin -- do you see gross margin going over 50 and staying there?

Absolutely.

All right. I'll call you later. Thanks.

Thank you. Our next question comes from Mike gully of Bank of America.

Good morning, guys. Three questions, please. Mike, you already prereleased the sales number about a month ago or so. Yet, given the way I had kind of factored things in it looked as if sales in the U.S. were less than I expected, which means, of course, sales internationally were more than I expected. Can you comment on that? Did sales slow a bit during the course of the quarter?

I don't know what your forecast was, Mark, so it's hard to compare against that. Sales came in pretty much where we thought they would be.

Okay. Fair enough. Secondly, given the extreme strength of the Euro and given your increased exposure to Europe, I would think that a strong Euro would have a strong impact on your first quarter second quarter '03 sales. In terms of that 9% sales growth guidance, how much is currency?

I'm sorry what was the last part of that, Mark?

If I take a look, I guess you got into a 9% sales gain in the first quarter, am I right?

Right.

How much of that is currency?

Maybe 1%, 2%, Mark. I don't have that number in front of me. It has to be in that range, though.

Okay, its very modest then, it seems like compared to your exposure to Europe. Are the other currencies that are weaker that are offsetting that?

Asia Pacific, Latin America.

Okay. Fair enough. And then three; tax rate was a little bit less in the fourth quarter than the first 9 months. How much did that benefit earnings in the fourth quarter and what's the tax rate guidance for '03?

Well, the rate was running at about 39.9 for the year and the rate in the fourth quarter was 38.4. So it wasn't much of an impact.

Okay. The guidance for this year?

Sorry, Mark?

guidance for this year? For the tax rate.

About 39, 39.5. Okay. Thanks a lot.

Thank you. Our next question comes from Bob Goldberg of Vernon and Associates.

Hi, Mike.

Hi.

Couple of housekeeping questions. Do you have budgets yet for GNA and capital spending for 2003?

Budgets or GNA for 2003?

Yeah. GNA depreciation and amortization.

Depreciation and amortization?

Yeah, on capital spending?

I don't have those numbers in front of me right now. I know we have them. I haven't seen them as yet.

Do you happen to have there operating cash flow for '02? Full year.

From the cash flow statement?

Yes.

Yes. Cash from continuing opens for the full year or the fourth quarter?

Either way.

For the full year it was 415.984.

Great. And another question if I can. The selling expenses, you're talking about SG&A being 40% of sales in the first quarter. Is that going to be particularly high in the first part of the year in terms of your investments, or is it expected to back off later in the year? In other words what is the -- I'm wondering what the forecast would be for the full year.

Head count growth?

No, for total SG&A as a percentage of sales.

I'm sorry, could you repeat the question?

In the prepared remarks, for the first quarter outlook you said that SG&A is expected to be 40% of first quarter sales, and I was just wondering if that was particularly high early in the year as you are making investments in the business, and is that going to decline later in the year?

No, it really has more to do with the seasonality of the business. The first quarter is usually our lightest quarter for sales. If you look at the quarterly sales usually third quarter is our biggest second and fourth is the next and the first is usually the lightest. I think it has more to do with the sales base.

Would you expect a lower -- in other words what would you expect the SG&A ratio to be for the full year?

Just a second here. I think by the full year it will probably be similar to 2002's.

So roughly 38% then?

Yeah, 38% range.

Okay. Any more planned pension contributions in '03 or --

I hope not.

Thank you.

We'll make whatever the normal contributions are. There's nothing planned at this point. We'll see what the market does and see what our experience is on the assets, as well as the liabilities. But we are not planning on anything unusual, as we said in the conference call, we expect the pension expense to be up a few million bucks, nothing big this year.

Thanks, Mike.

Thank you.

Thank you. Once again, If you would like to ask a question, please press star one. Our next question comes from Mary Beth Connelly of Goldman Sachs.

Thank you. Hey, Mike.

Hi, Mary Beth.

How are you?

Good, how are you?

Good, thanks. I have two questions. My first was kind of going back to the international sales line that Mark had brought up. Our estimates were -- we underestimated that line as well. Sequentially it seems like that's been typically flat from third to fourth quarter and there was quite a big jump this year. Is there anything -- I know everything looked pretty good but is there anything that was particularly strong that you would lying light there?

Fourth quarter versus third quarter sales trend?

Right.

The only thing I can think of is -- are you comparing against 2001? Obviously you have the big impact from 9/11 then.

I'm looking at last year. So it's mainly the weaker comparison?

Last year was very unusual. For example the institutional division was off in the fourth quarter which, you know, usually never happens.

Okay. Then my second question is on the U.S. food and beverage [INAUDIBLE] that you talked about. Would you say that's more due to the underlying demand growth or is it more of a result of Ecolab's improvements kind of done internally such as reemploying the sales force from a generalist to a sales function or maybe the introduction of the sales blitz?

Much more the latter, Mary Beth.

Okay. All right.

I don't think the market's have changed much. Say, by the way in answer to that previous question regarding D&A I think we are looking for D&A to be in the 250 to 260 range and Cap Ex to be around the same.

Thank you.

Thank you our next question comes from Simon Wong of Goldstein Funds.

Say, Simon.

Mr. Wong, you may ask your question. We'll take our next question from Jessica Wong of Disclosure Financial Network. Miss Wong, you may ask your question. We'll take our next question from David Begleiter of Deutsche Banc.

Thank you. Hey, Mike, on the street accounts you have been winning quite rapidly. Do you have a street account win versus loss ratio for 2003?

What do you mean by win versus loss?

I think in prior quarters you have mentioned a four or five to one rate of win versus losses in street accounts for the last few quarters. Is that number still valid, have you -- .

Yeah. We are looking at -- it's not street accounts as much as it is larger business which can measure easier, David. And I think those trends have continued to be very consistent.

Anything from Johnson diversity you've seen at all in the market place that might worry you, or give you pause going forward?

I think it's been pretty much steady as she goes. Nothing really particularly new.

Fair enough. Thanks a lot, Mike.

Thank you.

Thank you. Once again, if you would like to ask a question, press star 1. Next question comes from Mark Gulley of Bank of America.

Michael, you may have addressed this already in terms of the productivity improvements in the sales force. When do you think those might be, you know, wrapped up in terms of this current phase, and are you planning anything else that would improve sales force productivity?

Well, there's multiple programs in various divisions, and so it's hard to pick a phase, you know, for completion. The second thing is, you know, some of the stuff that they are working on now, Mark, is, you know, pretty intriguing and I would never have even thought, you know, you could come up with stuff like that a year or two ago. So what I'm trying to say is I think it will be ongoing. So it's hard to say there's a start and stop point for any of this. I think it's something we look at all the time and work on.

It ranges, Mark, from technology which we talked about using the internet, Hand-helds, et cetera all the way to just very, very basic blocking, tackling, you know, keeping records, follow-ups, things like that. So from the very prosaic to the more advanced things. I know it's not a precise answer but I don't think there's a stop and start point for what we are doing.

Okay. Fair enough. Thank you.

Once again, if you would like to ask a question, simply press star one. If you are using speaker equipment, please lift the hand set to ask your question by pressing star 1.

If there's no other questions I'll be around this afternoon if you have any follow-up. Otherwise I thank you for all your attention and time on this and hope you all make it home out of New York. Take care. Thank you very much.

Thank you for participating in today's conference call. Have a nice day.