FTI Consulting Inc (FCN) 2003 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the FTI Consulting second quarter conference call. At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer sessions. If anyone needs assistance at any time during the conference please press the star followed the by the zero. As a reminder this conference is being recorded today, Thursday, July 24, 2003. I would like to now turn the conference over to Ms. Lisa Fortuna. Please go ahead, ma'am.

Good morning. Thank you for joining us on behalf of FTI Consulting I would like to welcome everyone to the second quarter conference call. By now you should have received the press release for the second quarter ended June 30, 2003, which was sent out last night. Before we begin I want to remind everyone that the conference call may include forward-looking statements that involve uncertainties and risks. There can be no assurance that actual results will not differ from the company's expectations. The company has experienced fluctuating revenues, operating income and cash flow in some prior periods and expects this may occur from time to time in the future. As a result of these possible fluctuations, the company's actual results may differ from our projections. Other factors that could cause such differences include case and timing of additional acquisitions you recollect the company's ability to realize costs savings and efficiencies, competitive and general economic conditions and other risks described in the company's filings with the SEC.

I will now turn the call over to Jack Dunn, Chairman and Chief Executive Officer of FTI Consulting.

Thank you very much, Lisa. I'd like to thank everyone for joining us this morning. I apologize I have a slight cold so I will try to be brief. What I would like to do this morning is provide some information to place this quarter in perspective, outline some of our initiatives for growth and then Ted will address and we will respond to questions about specifics on the quarter.

A little over four years ago, we set out to build a world class financial consulting company with a balanced or portfolio approach to different consultancies. That company would take advantage of the flexibility and skill of its still as well as their complementary capabilities to address their ever-changing clients needs. As they say, a couple things happened along the way first we ran into the excellent folks at Policano and Manzo and based on their experience and deep relationships and their success with their clients we experienced tremendous growth in 2000, 2001 and 2002. Quietly as promised we took the profits from those years and invested them in the other side of the house, that is our forensic accounting network strategies and litigation related practices that today are about 30% of our business.

In 2002, as a result of Sarbanes-Oxley and a number of contingencies which we had foreseen and for which we had planned we were able to join with the exceptional folks at the Business Recovery Services practice at Price Waterhouse Coopers. This opportunity to combine the two top practices in the field was one that management felt and still believes today does not come along very often and should not be missed. Therefore we acted. It doubled our size, doubled our earnings capacity and gave us the best in class practice in a very significant field. It came admittedly, however, at a cost and that cost was that at least for a time our portfolio approach is balanced to the financial consulting, is balanced to the restructuring side, and is in balance in favor of that restructure.

The relevant question it seems to me is what is the future of restructuring, but perhaps more importantly are a completed work, a world class restructuring firm or are we a work in progress, a fledgling financial consulting company that has its best days in front of it, its best days because it has never had better capitalization, a better cash position, a better cash generating capability, better potential borrowing capacity, better management depth, a better pool of talent from our 600 or more employees or a richer target environment in which to supply these assets. Sarbanes-Oxley has not already provided a wealth of work as can be seen from recent headlines for FTI, it has to some extent leveled the playing field for firms like ours to compete with the Big Four to compete in a number of forensic accounting, support and other financial consulting areas.

For the reasons stated management doesn't believe the issue as to whether meet our gross margins as markets of opportunities it's a question of execution. We have never been in the business of over promising and we have never stretched for an acquisition to make a quick fix or to meet a target but based on the strength of our people, we do believe we have a pretty good track record of identifying opportunities and translating them into execution and results. To discuss some of those opportunities and the translation of them into results, I would like to now turn it over to Stew Kahn.

Thank you, Jack. Good morning everybody and thanks for joining us. I am going to talk about our existing businesses and other growth areas. In starting with our existing businesses I will touch on restructuring. I've been in the restructuring business for a number of years. I think it's still strong. It feels a lot like late in the year 2000 when some people thought defaults on debt would be peaking in the early part of 2001. That didn't happen. I doubt the string of troubled company problems has ended for example last week [Merritt] filed for bankruptcy protection.

There are a number of other energy and power companies that are troubled and we happen to have really great energy and power industry expertise. Just reading in the current news the Fed governor today was speaking about the weakness in the economy and possible further rate cuts. On the other hand, if interest rates do increase filings are going to accelerate, or defaults are going to accelerate because there's some foreign base debt that's supporting a number of like retailers and other companies that will become more expensive.

Staying with the restructuring theme for the moment, what we've been doing in part is rotating some of the folks in the restructuring business into other practice areas, utilizing them to, for instance, build a transaction support, due diligence practice as yet another alternative to the big accounting firms, using them on investigation work. Some of them, in fact, even worked on one of the major forensic accounting assignments which I will touch upon in a minute.

We will be opening an office before year end in the U.K. to take advantage of international restructuring opportunities. That will be led by one of our senior people and that we expect that that will grow on a go forward basis.

Turning to the forensic accounting business, there is significant demand in accounting investigation work on behalf of boards and creditors. Yesterday's press release by Freddie Mac cited our work with Baker [Botts] in the investigation of accounting and reporting there. We've been involved in a number of other assignments that have not been made public and some few that have been made public and we continue to be involved in assignments in that area. We have many opportunities for additional high quality personnel additions in our forensic investigation practices in our key markets. Some of that's driven by the Sarbanes-Oxley concerns that some of the accounting firms have and some of the individuals have. I will touch on that again.

In the electronic evidence area, this has been rapidly growing. We've used our technology skills in this area in both forensic accounting and restructuring cases. We've significantly increased personnel in the second quarter by about 50% in that practice area. Other growth areas, Sarbanes-Oxley is driving more and more companies, accounting firms and top practitioners to use our services or join our teams in serving clients. We continue to explore hires and acquisitions in the economic consulting area. We have a couple of highly regarded economists on our staff right now and will be continuing to add to that.

In addition we will be exploring European expansion for our network industry business where we do work for utilities, telecoms and railroads on a strategic consulting for expansions, acquisition and regulation. And we expect to continue to expand our claims management practices. Most of our growth in the future will come from these areas as well as expanding in our existing markets by attracting additional high quality people in the forensic accounting area.

And with that let me turn it over to Ted to highlight some of the numbers in the press release and the tables and then we will open it up for questions.

Good morning. As is our style, I am not going to repeat everything that's in the press release. Nobody wants to hear us do that. But let me point out some of the highlights. In the second quarter of 2003, we were able to actually maintain our margins, our gross margins above 54%, through the methodologies that we employ for compensation of our people primarily. We've been telling you that we have a significant variability to that, and that is the case and we've been able to maintain those margins. We've also set a record in terms of our EBITDA margin for the second quarter of nearly 36%. In terms of our SG&A, our SG&A for the quarter was a little less than $19 million, about the same as the fourth quarter of 2002, which worked out to slightly less than 20%.

Some of the differences that accounted for that SG&A decline between the first quarter and the second quarter of this year really had to do with the transition of our offices as we completed them from the Price Waterhouse Coopers offices where many of our people were resident to FTI offices. We over the last nine months have transitioned 15 PWC offices of the former BRS office to FTI offices, accomplishing some cost savings in doing that.

Timing of various expenditures including promotional activities accounted for a piece of it and last but not least at all is we continued to tighten our management and control of our accounts receivable and so our bad debt write-offs in the quarter, second quarter were less than they were in the first quarter, I might as well jump to that for a moment. Our DSO, which is the net of our receivables, our work in process, net of the client advances and retainers shown on the liability side of our BS, are as strong as ever, in the mid-forties in terms of the DSO. And, again, accomplishing that with some of the lowest bad debt write-offs that we have had.

Moving forward into our cash flows. We, of course, have been always a cash flow generating company. During the second quarter, itself, our cash flow from operations were approximately $35 million. And most of that was pure operations, hardly affected at all by income tax benefits from stock options. For example in the first quarter there was only $9 million of that effect there was only less than $2 million of that effect in the second quarter. Our CAPEX in the second quarter was approximately $2 million, resulting in 5.5 million through the six months, essentially on target for the ten to 12 million of CAPEX for the year that we indicated to you earlier. I would expect that it will be closer to the low end of that range rather than the high end of that range.

Then finally moving back over to the BS, our cash balances of $112.5 million are, it's a rather extraordinary number, especially with debt down to only $35 million as we indicated earlier, that debt phases itself down in the ordinary course of business by approximately the middle of January of 2004. Our stockholders equity has grown to in excess of $428 million, and our working capital ratios are significantly better than two to one. Jack, back to you.

Okay. At this point we would like to open it up to questions.

Thank you, sir. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question please press the star followed by the one on your push button phone. If you would like to decline from the polling process, please press the star followed by the two. You will hear a three tone prompt acknowledging your selection and your questions will be polled in the order they are received. If you are using speaker equipment you will need to lift the handset before pressing the numbers. One moment, please, for the first question.

Our first question comes from Arnold Ursaner with CJS Securities. Please go ahead.

Good morning. Congratulations on a very good quarter. Could you spend more time on the utilization issue. I know you do have a different mix of business with BRS than you've had in the past, but I think it's a number a lot of people are focusing on and to the extent in the past you've had other business with very different utilization rates, can you expand a little bit on this quarter and where you think these numbers are heading?

Arnie, thank you for your compliments. There are differences in the various practice areas in terms of levels of utilization. For example, when we had separate segments that we reported in prior years up through the second quarter of last year, we had, our litigation consulting practices, overall utilization was about 70%, if my memory serves me correctly. And to the extent that the numbers of personnel in the various practices change, that has an impact on the overall utilization. We think that somewhere in the mid 80s I think we said during the last call somewhere in the mid to high 80s would be a reasonable level to get to and, of course, I expressed the view that my target is higher than that. And it still is today higher than that.

However, there is as we discovered somewhat more seasonality in the unit that we acquired versus the units that we had in the past in the financial consulting division. And indeed we expect that it's quite possible that the utilization rate for the third quarter will be lower even than the utilization rate for the second quarter. And that will tend to drive the overall. We are also in the process, because head count and utilization do come hand in hand, we are in the process of analyzing and understanding exactly how many people we do need to handle our current workload and, in fact, we have permitted some of the folks in some of the practice areas to have below budget manning levels while other practices have higher than budget manning levels as we build up for instance the electronic evidence practice.

So I think it's a mixed question that we expect to continue to change. I would expect that the fourth quarter utilization rate will probably be closer to this or perhaps somewhere between this and the first quarter utilization rate. But we honestly don't, we budget that way but we can't necessarily know that all the work is going to come into this practice area versus the other. I know that's a long answer and I am sorry for that but that's the best I can give.

Okay. Thank you.

Next question comes from Mike Tandon with Janney Montgomery and Scott. Please go ahead with your question.

Thank you, good morning. Jack, basically wanted to ask you about the opportunities in the U.K. and the other European markets. Have you seen any business come your way at this point or is it sort of out there for the next couple of quarters and you are looking to develop a beachhead?

We have several opportunities there and what we feel -- we are looking at that area not only for restructuring but also for our network strategies practice. In terms of telecom, in terms of a lot of the issues that are facing the continent and the U.K., they are probably several years behind us in how to deal with that and we are looking for ways to team with folks over there to bring some of our know-how and technology to bear on those issues in cross border transactions so we are very excited about that as well as the restructuring area.

But it does a couple of things for us. We think, one, that even in our domestic work we are seeing an awful lot of tangential work that has to take place outside the confines of the U.S. We think in terms of getting new work here will be an advantage. Plus we believe that the strains of Sarbanes-Oxley are being felt by many of our clients who are U.S. registrants or U.S. based financial institutions who have indicated to us that if an alternative like us is there that the traditional work going to the Big Four, some of that can come our way. So our thought would be to start with a small beachhead of several people from our side and look for folks over there to join us or perhaps potential small acquisition candidates over there and build our beachhead much in the way Policano and Manzo built their business as a couple of folks and then were through getting some seminal clients were able to build that into a larger practice.

And, Stew, you talked about reasonably healthy market in the restructuring world. Can you give us a sense of how the activity levels look right now relative to six or nine months and also for your other business, the non-restructuring practices? And also what was the growth rate across the two areas, if you can break it down?

Let's try to do them one at a time.

Sure.

In terms of activity level and current work, our restructuring folks are pretty much just as busy today as they were six to nine months ago. In terms of additional new opportunities and new filings, it does feel like it may have slowed down a bit but it tends to slow down in the summertime every year. So I am not overreacting to that yet. The fact of the matter is every year in July and August, there are lots of folks on vacation and people tend to get to look at these, these problem loans more closely come the fall because they need to get them cleaned up before year end or identified before year end, in particular in connection with year end financial statement closings. So we see that pick up much greater. In terms of growth rate, I am not sure I remember the rest of your questions.

Just trying to get a sense of what the growth rate was for the restructuring business versus the non-restructuring business, on a sort of a pro forma basis, maybe an indication of where that would fall would be helpful.

I think the best way to explain it is the follow. Restructuring was about 70% of the overall business in the first quarter and it's about 70% of the overall business in the second quarter. And maybe it was something more than that in the fourth quarter of last year, but on a pro forma basis, if you took the restructuring as a piece of the overall operations in '02 it was about 70% of the business, slightly more than 70% of the business for the six months ended '02 versus the six months ended '03. So I think on the basis of that we would think that the growth rates are about the same for restructuring and non-restructuring.

Okay. Just speaking back to the restructuring area, our contacts at least tell us that this is a pretty sustainable growth business right now, at least well into late last year. Do you share that view on the restructuring side?

I do. I do. In my opinion, it's a sustainable business. It's going to take some nimbleness and some creativity but we've got all that.

I guess a final question for Ted, in terms of margins for the other non-restructuring practices, what do you see a few basis points lower than the restructuring businesses, comparable, how would you put it?

On a person-to-person basis, margins are basically the same across all the practice areas. Where they will differ is by the utilizations in the practice areas. Those practice areas that have the highest utilization would tend to have higher margins. We have practice areas that have, in given times have utilizations higher than parts of the restructuring practices. So it's not an easy question to answer. In general, if our entire firm was restructuring versus if our entire company was non-restructuring, you would probably see slightly lower margins on the non-restructuring side.

In the litigation restructuring area and the leg began see litigation support business the margins are lower than they are the rest of the business.

With the exception that business being so variable that.

You are right, when they are very active on trials, that's true.

Great. Thanks.

Next question comes from Adam Waldo with Lehman Brothers. Please go ahead with your question.

Hi, how are you? There's a fairly big disconnect, Jack, at this point between what your actual business is doing with performance year over year revenue growth in the latest continued cash flow and the market value of the casual the market believes that earnings and cash flow are going to decline 30 to 50% over the next several years. Help us understand better why that's not case and secondly given your extensive financial capacity for diversifying M&A deals can you update us on the M&A pipeline and thoughts around potential timing of transactions you are considering if you can comment on that at least directionally?

I'm not sure that I am qualified the first part about the analysis of our stock price. The question is why I don't think it's going to fall off over the next several years?

I guess bottom line why do you believe that the company can continue stand alone to grow over the next several years. Clearly the stock market is telling you the company will see its revenue and earnings decline quite sharply.

I stand amazed at what the stock market has told me many times. After the first quarter I was amazed. I think we have a significant proven track record of an ability to generate cash. I think if you compare us to accounting firms over this last several years or more specifically the consulting practices of accounting firms in good times and bad they have grown because the people are exceptional folks with basic skills that apply to due diligence and to financial services and to damage assessment and to valuation in better times when there is M&A activity and other activity like that, then on the restructuring side included bad times. So if the market is telling us that that we are going to decline in our revenues and our cash flow by 50%, if that's what the market price is telling us, then I think I could speak for a long time and not come up with an answer to that. It's not within our purview that that could happen.

So you remain confident as you look out at your new business pipeline that you could not only grow the business for the balance of the year as Stew already said that you can grow it organically in 2004.

I remain confident in Stew. I remain adamant that I don't see anything on the who are rise zone where our business drops off 50 percent. It's two different questions. If the stock price, I don't know if it was telling us that we weren't going to grow or we were going to decline. But we are fairly confident in our ability proven over the last 17 quarters and the brilliance, if you will of our people and their clients dependence upon them to find work for them to do.

In terms of the second question on acquisition pipeline, I've always feel uncomfortable a little bit answering that because it's like I have something under the blanket here, I can't tell me you how good it is, I think in all fairness transactions like the ability to join with P&M or the ability to join with the exceptional folks at BRS, that was a different world. I'm not sure if that those are replicable but after P&M we didn't think that was replicable.

This is not a bait and switch we are seeing more opportunities than ever as the realities of Sarbanes-Oxley sink in and that's not only from those that are adversely affected by Sarbanes-Oxley but by several boutique firms if we are establish the beach head before anyone else as long as the playing field is level that's our opportunity to go to the Fortune 500 and say we are the equivalent in quality and service to what the Big Four used to be. We are that but I think our job over the next four quarters is to establish a brand of being that so we are not only the small choice, we are a safe choice for those people making the decisions. So I think there are plenty of acquisition opportunities. As I said we will not compromise our discipline in looking at acquisitions because if you don't start with a good price you have an up uphill battle?

Thanks very much, Jack.

Next question, Josh Rosen with CSFB. Please go ahead with your question.

Hi Josh and Greg at CSFB, just wanted to go back and revisited the head count number and I know this is a number that bounces around quite a bit quarter to quarter relative to attrition and hiring [inaudible]. One of the things, perhaps we could use a bit a more color from you guys on where you see that must be maybe not explicitly maybe over time as it equates to generating 15% organic revenue growth. What kind of growth do you need over time to make that happen and where might you look at the net hires over the course of the next six to nine months, if you will?

Josh, we said many times. Of course I do agree with you that the head count bounces - it bounces around daily. I mean, of course with higher and there are people that leave and we give you the exact numbers on an exact date. So let's not make too much of course about a head count in any particular minute in time. With that said, there are three ways in which we grow top line. We can grow it threw head count, we can grow it threw rate increases, four ways, we can grow it through mix, we can grow it through changes in utilization and that's the management of the business that balances all those acts. We can't give you an answer in terms of head count itself without also giving you an answer about the other metrics.

Stew has already talked about where he expects utilizations and hopes them to be over a longer period of time. You have clearly seen the net effect of rate increases and mix increases even from one quarter to the next and that's going to continue. There's even another way. I mean sometimes isn't parts of our practices we tend to use contractors. That tends to be more in the litigation related services of course but it's another means in which we accomplish those objectives. So there are so many variables I can't say to you that we would need a 5% head count increased coupled with a 6% rate increase coupled with a 2% mix change. All of them and every one of that management considers to achieve our goal of 15% or more.

It's also important from a head count standpoint to keep in mind that we increased 400 people last August. We jumped up from the equivalent of 250 or so to 650, 750; continuing operations, total head count. And some of those folks as in every acquisition, have elected to leave. We don't like it when anybody leaves because we think that good people we can put to work doing lots of stuff but we haven't done a purge, we have no punches in the pipeline. We have been changing as I indicated before, we picked up a bunch of people in the electronic evidence area and fundamentally those folks are replacing people who have left. Our normal turnover is, fourth quarter we had a relatively higher turnover because we did loss some folks in the restructuring practice in, not in the acquired restructuring practice but in our legacy restructuring practices. So we are going to have changes like that over time and we are going to change out from having more people in restructuring, perhaps, to more people in transaction support or more people in economic consulting.

Just on the attrition point that you make, can you talk about a pretty steady demand environment and just curious as to the reasons that you might be seeing some attrition or at least a pick up a little bit and where folks might be going?

We have, many of our folks have gone to competitors; who have restructuring practices and wanted some of the talent that we had, and left to go to them. So while some people may think that the restructuring business is disappearing, some of our competitors surely don't think so. They are still quite active in trying to higher our people.

And is there any noise that comes out of the attrition that would flow through into the utilization number on a quarterly basis, for instance if attrition is picking up a little bit this quarter above normal does that create any noise on the utilization front?

I'm not sure I know what you mean by noise. It has an impact. If they view in fact we have an x-amount of work to do and we have fewer people it would increased utilization.

I guess I am asking it from the other side as you deal with people that are leaving, does that cause any [hit] to productivity internally that might affect overall utilization?

I don't really think so, no.

Okay. Well, thanks for addressing the questions.

Okay.

Next question comes from Patrick Swindell with Avondale Partners. Please go ahead with your question.

Thank you. Looking at the potential for acquisitions on the horizon, to touch on the previous questions can you give more color on areas that you think would be attractive opportunities whether that be forensic accounting or some alternative practices that would be a good fit for your business, and then also to the degree that you can speak to that what the relative magnitude of any potential acquisitions might be?

I would rather not discuss the magnitude but I would like to discuss the areas. As we've said a couple of times, we think economic consulting we think would be a very good area for us. We think that it would not only in this time, things in the well business consulting are at least quite if not improving slightly as M&A practice, as litigation practices, other things get better and as they do in an improving cycle will not only help the our areas of that business but it will help the industry generally.

We think it will help, buying a practice at the right sometime, or starting one and it's also a business that can segue us into the transaction support business. When you have people who are the trusted advisors on M&A transactions and combine that with the tremendous capability we have in our restructuring practices to analyze transactions to support them, it's a natural segue and a leader to us in terms of getting into the transaction support business. So we view that as although I hate the word like everybody says they do it's a tremendous synergy in terms of not only synergies increases our head counts or making sure utilization stays high or increases. We are locking again at small scale M&A practices and that would be in the nature of new hires as opposed to an acquisition and then finally, I think as we kept saying we have done a pretty good job of building significant forensic accounting practice.

I think the time now is to look whether through a collection of smaller boutiques or whether it's a larger company to look at establishing a presence in that business so that with impunity in the you can go to the buyers who are now looking to alternatives for the major accounting firms because of Sarbanes-Oxley we have the critical mass and the appear power to handle all your needs whether it's tax, whether it's valuation or whether it's damages or whether it's antitrust sentiment, et cetera and these are areas that we are looking very hard.

To the extent that you have you have $113 million on the BS and you are not able to finds an attractive acquisition in the near term are there any plans for the deployment of that cash?

I think at this point we would be on the left-hand side of the equation in that it hasn't crossed our mind we won't be successful in deploying the cash in the areas that we mentioned. We would look at that afresh if we decided that the M&A market had gone beyond us but right now we are very enthusiastic and confident that we will be able to use that money to create a better return for our investors than we would by for example paying a dividend or by repurchasing stock. But we have a board that's very responsible and we address those issues every time and mark ourselves to market every time we have a board meeting.

To the extent that you are looking at acquisitions out there have you seen any movement in multiples in terms of potential purchase multiples in direction that would be inconsistent with what you might have seen historically?

I don't know if it's inconsistent. I think it is moving up a bit. I think people who are in the economic consulting area feel a breeze at the back so I think they believe -- if you look at the results of some of our more or less competitors out there over recent months, there's clearly an indication that values are improving for those folks. So I think as we've said before where we used to say we would like to be in a five to seven times multiple range I think that multiple can be moving up to five to eight or something like that.

All right. Thank you.

Next question comes from David Gold with Sidote and Company. Please go ahead with your question.

Hi, good morning. Can we for a second, in the release you talked a little bit about seasonal factors during the quarter. Was that just vacation or anything else question should be looking at here?

It's a lot to do with vacation and graduations and weddings. You know, I tried to explain this the last quarter but we have a slightly different population of people in terms of their age census now versus before. We didn't have as many young folks who might be out on maternity leave or getting married as we did within the BRS group that was part of the acquisition. Previously more of our folks were more experienced. So some of that we thought might have an impact in the quarter and in fact it did.

Okay. On that score, I know historically your core business has seen more of a quote "seasonal impact in the third quarter with the summer months. A., do you think the fact that we've seen some of the seasonality in the second quarter might mute a little bit of what you've seen historically? And, number two, on that same score, some of the other groups that I watch run into pretty high attrition in the third quarter as some of the younger folks go back to business school. Is that something that we think might be coming as well?

I think both of those are possible, David. I don't think, though, I think we definitely will see seasonality in the third quarter, and I don't know exactly when whether it's going to be July or August. Even when I had a small farm and I was trying to predict what my monthly revenues were I never knew when people were going to take vacations and it's kind of hard to I go it out and I don't know this year any better. There might be some folks going back to business school as part of the attrition but we haven't seen that as a high attrition item in the past.

As part of the attrition but we haven't seen it as a high attrition item in the past.

David let me point out that in comparison to our legacy business it's not relevant this is going to be the first summer seasons of our new business as constituted starting September 1. There is no doubt that the seasonality in our acquired business was much greater than the seasonality in our legacy business. Historically it was. So the question is going to be, how much of that has been mitigated but to this that it would be better than our legacy business the seasonality would be unrealistic.

Just on the score of guidance just for a second, Ted, if we can just go over for a second I guess on a split adjusted basis would you be looking at call it $1.29 -- 20% gets us to a dollar fifty-five and the upside this second quarter throws another 11 cents on that. Is that right, $1.66, $1.67 or so?

I tell you under Regulation FD analysts have had broader ranges on a lot of companies including ours than there's ever been before. So I can't give you a specific number.

No, no I'd like you to go over with me if I'm understanding the guidance in the release correctly.

What we basically said is if we did better than your expectations in the second quarter by whatever amount we did better than your particular expectations, add it to your particular new expectations, we would be probably anywhere from two to 4 cents better than various folks expectations.

Okay. All right. Fair enough. Thanks.

Next question comes from Martha Nichols with Banc of America Securities. Please go ahead with your question.

Thank you. I wanted to just touch on both SGA levels and the margin levels. Can you talk about whether now that you've spent what you need to on moving the the folks from in PWC into FTI offices the SGA of 19m or so a quarter is roughly sustainable and whether or not that will move around at all on a quarterly basis? Is there any seasonality to that number specifically.

There certainly is some seasonality certainly with the timing of promotional activities in particular. But the general range of 19 to $21 million, for example, is not unrealistic in this calendar year 2003. SGA changes tend to go in steps. They don't go in smooth percentages. So for this year that particular range of dollars, 19 to 21, and that particular range of percentages which is give or take 20 or 21% is the range it's going to be.

Okay.

And it steps up, of course, as you move into the future.

Right. And then maybe taking that down to the EBITDA margin level, obviously this is going to fluctuate around but I think in the past your growth margin target looks more like 52 percent, low fifties, and we are getting up into the mid 50s the last couple of quarters, does an EBITDA margin and a gross margin in the 35 plus range, in the 54 plus range look sustainable to you going forward?

We are not prepared. We've done phenomenal here Mart, in terms of our margins. We are not about to now say that's the new paradigm for the future. This is a great company our margins that surpass almost any of our competitors.

It also if I may depends upon the mix of business. If we get more into the claims management business, we may have higher revenues and lower margin. If we grow our jury research business more, or electronic evidence business, that's going to have an impact on margins, two.

Even new hires of the folks of the caliber we are looking for will have an impact in terms [inaudible] and things like that so, begin, our compact with our investors is you have to leave us a little bit of the difference in that margin for to us reinvest in our business that we have together.

Right. So I guess are most of the businesses that you are looking at when you think about claims management, electronic evidence, jury selection, et cetera, are most of those lower than the core business that you are looking at now?

No, not universally that don't have to be, some might be higher, some might be lower. Some of the foundation for growth includes paying people, paying recruiting fees, paying people sign on bonuses which have near term impacts that, shore short term impacts on margin, that will presumably pay off in the longer term. Some of that investment money, some of that cash we have is for hiring that new talent and paying some of the sign on bonuses that we need to have to pay, he is. So all of that is going to have an impact on margins.

I guess that sums up by saying our goals have been stated by the top and the bottom. How we get there is how our management accomplishes on each of those metrics and they can vary.

Okay. Finally can you talk about, is it possible to disaggregate at all the impact in the second quarter of the seasonality issues that you've discussed and the potential slow down in some of your larger practices? Is it at all possible to even drill down and try to figure out how much of the decline from first quarter to second quarter related strict to the seasonality or non-operational issues, if you will?

We might answer that question in terms of how much of the increase in the second quarter compared to the fourth quarter of 2002, what's due to X, Y, and Z? I mean this is exactly as we had exactly as we had expected it to be. Some of you out there may have come to different conclusions. This is what we expected and we tried to articulate that at the end of our first quarter conference call and talked about those seasonality factors and a mix of effective rates. This is not anything different than what we expected to happen.

In terms of drilling it down, I think the best analysis we can give you is that the restructuring business remains about the same proportionate to the overall business. So within offices, regions, pieces of the practice, emphasis on transaction support or some of the restructuring folks having worked on investigation assignments rather than restructuring assignments, we've got all kinds of changes but over it feels to us, at least, pretty much like a -- an overall seasonality impact.

Great. Thank you.

Eric Woodley with Smith Barney. Please go ahead with your question.

Good morning, guys and congratulations on a great quarter. I wanted to ask a couple of questions, I know you brought on Mike Hamilton, an expert in the utility industry, and I wonder if you are walking on Murat.

We don't talk about specific client assignments, unless they are public information which is the only reason why we mentioned the Freddie Mac assignment earlier.

With respect to the 30% of your business that's non-restructuring, I know you've cited that you saved significant growth in forensic accounting and M&A and Sarbanes-Oxley work, I wonder if you are doing any work in forensic accounting for any of the money management firms, be they hedge funds or money management shops, and to the extent that you can give us some color on what kinds of engagements you are working on within M&A, within Sarbanes-Oxley, within the electronic evidence areas, just trying to get a feel for the opportunities that you are looking at there?

The first part of your question, not to my knowledge are we doing any work in the forensic accounting area for money management firms or hedge funds. In terms of the kind of forensic accounting assignments, we are working on I mentioned Freddie Mac because it's public information. I think there's another one, The Home Store which I think was also some public information in the forensic accounting area. There were numerous other forensic accounting assignments that we can't talk about because we don't disclose our assignments. We let our clients disclose them or they stay undisclosed for any number of various reasons.

In the electronic evidence area, I think some of our electronic evidence folks helped other Freddie Mac assignment. There's some really neat technology I don't know if it was used on this assignment or not but I did here there were 11 thousand hours of take places that had to be listened to and I don't think anybody sat there and listened to them but there is some key word search capability that we have experience with and have used to search for particular words in audio tape and then digitize them and present them in a transcript format. I'm sure that our folks involved in doing that, in that assignment. And that one, I don't know would you call that a Sarbanes-Oxley assignment?

What would I call it? It could be --

I don't know, I mean, I know that even our own board to some extent says, we want to make sure that whoever does the work in connection with certain types of transactions is independent so we don't want to overuse our regular outside auditors and that therefore drives a Sarbanes-Oxley assignment, I guess.

In one of the prior calls you also mentioned an investment in hosting data across the Internet and I was and that it was starting to pay off and I was wondering if you might elaborate a bit on that, if you recall?

I do. I do. That business involves Internet multi-district litigation where law firms in various districts representing a particular defendant need to share information most efficiently. And we actually host in our own data processing facilities, data at a for a number of different companies and I am not at liberty to disclose the names of those companies, I don't believe, and I am particularly prohibited in other cases in disclosing the names of those companies, in connection with multi-district large stake multi-district litigation.

You have done a great job in building cash and paying down debt, did I understand I think it was Ted correctly to say that I think he mentioned phases down debt in January of '04 do I interpret that to mean you intend to pay down debt and eliminate it by January Of '04.

As a normal principal payments take down the debt in January of '04 that is only represented by a hedge that expires. At that point the remaining debt on which the hedge expires is about 15 to 20s million dollars which is due over the next two years but at that minute in time it's quite possible for us to pay off the remaining small amount.

Terrific. Congratulations on the quarter, guys.

[Jason Malmont] with [Fairlawn] please go ahead with your question.

Hi guys, I had two questions. One was I am just trying to reconcile your statement that you don't see things slowing down with what we are seeing with bank non-performing assets trending down pretty hard I just saw a report today that showed a [b----] showing defaults down 10%, from their distress side we are seeing a lack of flow in terms of restructurings, a lot of stuff coming out of bankruptcy, how does that fit with your expectation that things wouldn't slow down on that side?

Well, if the overall market slows do you understand it doesn't necessarily mean that we will. And the reason I say that is because we have the premiere group in serving companies and their lenders in trouble debt situations. And in many cases in the past because we were either too busy to take the work or it wasn't necessarily ideal for us to take it at that time that work would go to somebody else. We expect to gain market share. Could I tell you, quantify exactly how much that is? No. But I can tell you historically having been in the bankruptcy business since the early 1980s that the bankruptcy folks, the good bankruptcy people continue to be busy even though the overall market slows down.

Right. I mean in general wouldn't the quality of the business decline, wouldn't you go from sort of working on large cases like a Freddie Mac or whoever elsewhere where you maybe have got five, six partners full time you have a very predictable chain of cash flow that you can leverage on wouldn't that go to more higher frequency but higher cases that are less leverageable and tougher to manage.

That's what we get paid the big bucks for you is to manage the tougher cases as well as the larger cases. Would the number of big defaults go down? Probably because it would be hard to match the dollar amount of like the WorldCom debt and the U.A.L. debt and those folks who defaulted over the last six months or nine months. But on the other hand [Merritt] is not exactly nothing at 9 billion or 8 billion, there's billions more of energy debt and utility debt yet to go and it's quite possible that we think that those cases are going to be coming down the pike and we will be able to get at least our fair share if not better than fair share of them.

One last question, I didn't know you maybe already disclosed this, on the employees that left, just give us a breakdown of how many of those were sort of the higher dollar partners and how many were the lower level employees?

No, we don't do that.

Did you lose any partners?

We don't have any partners.

Managing, whatever the hell they are called.

We call them senior managing directors and one of our not top team managing directors did leave.

You only lost one. Okay. Thanks.

Patty Joyce with Highbury Capital. Please go ahead with your question.

Congratulations with a good quarter. I had a couple of questions. One was on the growth rate that you indicated in the release of continue be, continuing to be 15%, I am trying to understand market share gain given defaults are down anywhere from 55 to 60%. So I got to believe you are pretty bullish, in terms of how much of the market you think you are going to get. And the second question I had was on the utilization and the head count, I guess we are also a little bit concerned that head count is down and utilization is down from 93 to 85 and in, in an environment where you think you are going to grow 15% organically.

Okay. Let's do them one at a time. Let's start with the first one. The 55% number that you cited?

It's from Moody's.

And the dollar amount of defaults.

No, dollars are down 62, default units of bonds are down 53, and.

And that's YTD this year compared to last year?

That is January through July '02 versus '03,.

And '02 is a rather busy time I think, wasn't that the fallout of the Anderson melt down.

Yeah, absolutely. I think the peak was obviously end of '01 and first quarter of '02.

Enron was the tail end of '01, right?

Yes.

Okay. That still leaves plenty of work to do. I am trying to remember when Moody's was estimating they said that defaults would be down to 400 billion this year from 500 billion last year. And they said it was going to be down 25%. Well, 400 billion is still higher than any year prior to 2001. And that gives us plenty of work to do.

Right. I understand that given that you are growing off of, this year has been such a peak in the bankruptcy cycle, I have to belief that going forward the cycle is presumably is going to slow down but you would have to gain a lot of share to have to sustain that growth which is a little bit conflicting with the decreasing head counts and the weakening utilization.

The other point to keep in mind, and this is just a history allegation for those of us who have been involved isn't the bankruptcy business for a long time but after we acquired Policano and Manzo in 2000, we had a bang out quarter in the first quarter of 2000, it was a terrific quarter. We had a very good quarter the second quarter of 2000, but Moody's came out with a prediction that defaults are going to decrease, so everybody figured we were done, the business was dead. And we've so far had another two very good years of profitable operations and cash flow generation and frankly we expect that they are going to be more defaults that are going to be right in our power alley. We happen to have some great expertise as Jack mentioned before, Mike Hamilton is a nationally recognized utility expert, utility industry expert and we have a few other folks who are nationally recognized retail experts and we expect that we are going to see more business in those areas.

Okay.

It's not going to be so much of a macro comparison as an industry by industry comparison, and where our capabilities are going to be. In terms of growth the reality is that the average rate versus the utilization number gave us the growth that we needed because they are both part of the same equation. They both give us the revenue numbers that we need.

Got it. It makes sense. Okay. Thanks so much.

Michael Grossman with Essex Investment Management. Please go ahead with your question.

Hi. A couple questions. One, I just want to do clarify what the organic revenue growth was in the quarter. One of the analyst earlier said it was 20% but the release said it was up 15 YTD.

It was 15.8% half year to had a half year pro forma basis.

How about in the second quarter versus.

We did not have good information for the differences between the first and the second quarters of 2002 of our acquired businesses and so we didn't want to go out with unreliable information at all. However, nothing we have tells us that the differences were particularly significant between the first or the second quarter as compared to the half.

Fair enough. So that 20% growth rate is 15.8, 15.8 is kind of fair.

Give or take, that's right.

Okay. Then the second question related to, on the bill rate, if you could just talk about how much of that was due to the mix shift because having more senior people just the natural neighbor rate coming up not just your conscious effort you say 6% rate year over year if you could kind of break out the components there?

It is both.

I mean it's not.

We've been saying since last September isn't with our acquired business on a June 30-year and our legacy business on a December 31 year, we would not have simple across the board rate increases on a given date. They would be faced in by practice. They would be phased in by time period. And that's exactly what's happening. They are being faced in and there are mix increases. You can't break it out like that.

Okay. The last question I know every quarter we kind of just hammer the utilization rate question to death, but just why you think it falls again next quarter? Is it more due to vacation or is it.

As simple as that. I suggest that you read, we filed an offering last year the preliminary filings had June numbers in the pro forma. The final offering memorandum, the SEC S-3 had nine-month numbers in it also had six-month and eight-month numbers for the acquired business. If you look at that carefully you can get a feel as to what happened in the summertime of our acquiring company.

Great. Thank you.

[Sandra Maldonado] please go ahead with your question.

Hi, I would like to talk about the third quarter for a seconds, the specifics around how we.

Third quarter?

Third quarter, that's right. What I would like to do is you talked about utilization rate being a little bit lower than what you reported this quarter what does that mean, does it mean 75, does it mean 80%? I would also like to know what head count number and what bill rates we should be using so there isn't a disparity between what you actually report and the consensus number.

Sandra, 15 top, 20 bottom or more, 15 or more top, 20 or more at the bottom. We are not going to get into this exercise, honestly, of second guessing each element of what takes us every day to manage. Because utilizations will vary by practice, by day and so will rates depending on mix and on and on and on. And our goals stay the same, which is deliver to you organic revenue growth and organic bottom line growth and how we do it is a function of management and we've been doing it pretty successfully for quite a long time right now.

I've been following service companies for awhile myself and typically companies can provide some level of guidance on the parameters or the drivers to what gets you to your revenue number and I was wondering if you could be just a little bit more specific than the number you gave for the full year.

We haven't in the past and we will have to think about it some.

Okay. Can we look at 2004 for a second? What do you think the break out is going to be between restructuring and non-restructuring services in order to support 15% organic revenue growth number?

If you think that we are roughly a $400 million business at about 30% of that business is not restructuring, if you assume and I am not even taking this as a given but even if you were to assume that the, say, $280 million of restructuring business stayed about constant at 280, the growth would have to come in the forensic side so that might be about, the non-restructuring side so that might take it up to 180 million from 120 million. And the restructuring business might stay at 280 million.

My guess is that the restructuring business will grow because there are parts of that business like the transaction support business which will contribute significantly on a go forward basis, there's also work that we do in the due diligence area for lenders, new loans and what have you. One would think that one of these days new loans would start picking up. And so I would guess that that business is going to pick up. So I guess if I had to pick I would say probably 300 restructuring next year and 160 to 180 in the non-restructuring businesses.

Okay. And just so I understand, the bill rates on the restructuring versus the non-restructuring are pretty similar.

Yes.

Okay. Last question, and I am not sure if you give this out but what's the target ratio of junior to senior billable professionals?

I'm sure it's a work in progress but if you have something you can share there?

I think we have said that we have about 100 senior people in the organization out of the roughly 600 total billable folks. I don't know if that's enough for you.

Say that again, Stew, I'm sorry?

Roughly 100 senior managing directors or senior people out of our roughly 600 billable folks.

That's.

We think that's a pretty good ratio.

You make mention of a senior managing director that you lost in the quarter. Was that a BRS person or was that someone else in the company?

It's somebody else.

Okay. Are there any employment agreements that are coming due here in the second half of the year of senior managing directors that we need to know about?

Not that I know of. I don't think we generally, there are 100 of them so it's generally speaking the only employment agreements we disclose or discuss are corporate officers and I don't think any of them are coming due.

Okay. Great. Thank you.

[Lou Tice] [with] Bennett Capital Management. Please go ahead with your question.

Good afternoon. I had a couple of questions here. First, maybe you could shed a little bit more light into the GM uptick sequentially? I apologize if you answered some of these previously but the way I am looking at this I see utilization going down eight-point, or 9%, bill rates are up 4%. What else is playing into this? How can gross margin --

Variable compensation affects it and realization.

Improved realization and collectability from clients.

On the positive side and the variable compensation affects it on the direct cost side.

What do you mean by realization?

We have standard rates and we attempt to collect those standard rates from all clients but we don't achieve that 100% all the time. So to the extent there is any improvement in the rate of billing, that affects the revenue number as well.

When you say the bill rate of $360, that's before any discounts or whatever.

That is fundamentally the realized rate with minor variations, very minor.

Okay. Then on the financial question on goodwill, goodwill was up 3 million sequentially, what contributed to that?

I'm sorry what was that question.

Goodwill on the BS if you compare it quarter or quarter it is up 5.3 million.

That is from the date of acquisition of any company you have one year to finalize the allocation of the cost, the allocation of the cost total assets of the acquired company. And over the year that number will move around slightly as various assets that you acquired on the day of acquisition are realizing even more or less than originally anticipated.

Is it possible for you to be a little more specific and say what exactly has been taken up or has the value come down? Have you made any further payments to former partners or owners.

No, there were no other, no payments to any former partners, any former acquired companies. It's mostly in the, it's mostly in the receivable area. It's also somewhat in liabilities in the bankruptcy area for potential disgorgements and preferences.

Okay. Thank you.

Our next question comes from Bill Wilmington with SunTrust Robinson Humphrey. Please go ahead with your question.

Good morning. A question for you on as you look out on how you are going to be evolving your business over the next few years, where you think the target percentage for bankruptcy amount of restructuring is going to settle out. When you think about that, where you think you come out?

Part of the reason why we don't have segments is that you take, for example, the fact that now restructuring has by the people who are would be arguably categorized as restructuring folks, we are doing transaction support, we are doing work for many of the investment banking houses, looking at transactions thing like that, we are doing litigation support, we are doing other assignments. But if you looked at people who's primary roll would be somewhere in that and collateral practices including transaction support, including tax worth, including the M&A that's related to that and you looked at the other side of the house would be more traditional forensic accounting and the network type of strategy, I would think a goal over the next 18 months would be to have those practices come up in the neighborhood of 50/50, something like that, as I say we started with a goal to have a balanced portfolio approach so that would be a goal, not a guarantee.

The question would be do you do that on an organic basis or do you accelerate that through acquisition?

I think we've been pretty clear that we are planning to do that through acquisition the areas would be economic consulting and the forensic accounting area.

I guess the question I would have then, at what point does it become, if you go and you dilute down, let's say, the 50/50, if you are running at a $300 million run rate approximately on the restructuring side, 100 million of other revenue on top of that and you to get it to a 50/50 you need to acquire a couple hundred million dollars in other revenue, then you basically have quadrupled the size of the company in a couple of years which is very impressive and it starts, the question becomes, can you continue to grow at the same organic rate off of that much larger base.

You know what, that would be our goal to do that. Our goal would be to buy businesses that, as Stew mentioned, can continue to carry themselves up the hill with us. We would try to be smart about it. We are talking about a supposition on top of an supposition. We haven't done an acquisition yet. That would be our goal to do that. If that goal changes because of the size or the imperium of compounding we would be the first ones to tell you.

The other question I had was.

The accounting firms have been able to develop billion, multi billion dollars practices, four, six of them did it and then they merged there should be plenty of work out there especially if the improving economy comes about like everybody suspects.

The other question I had was, on the operating margins, with Q2 at an all-time high at 33.7%, very strong, and the question is, are those margins, are those margins going to be sustainable, or where do you think the margin will end up settling out on a going forward basis.

We answered that question already by saying different mix of businesses may have different margins but with don't loss sight of what our goals are, the top and the bottom. The margins may vary because they vary by practices vary by quarter.

We are really looking at an overall.

Things can get as better or they can get different. The focus is on the top and bottom. I don't know what else to say.

The other, the final question I had was, looking, you mentioned that the turnover was a little bit higher in the second quarter, running about 18%. What had it been, just to help me understand that number in context, what had it been tracking earlier and where do you think it's going to go over the next couple of quarters.

It had been tracking 12 to 16 percent over the last six odd months. And in the long run as our mix becomes more and more senior people you would of necessity to expect to revert downward.

Then it looked like the total change in billable head counts was about 23.

From a moment in time to a moment in time, that's correct, Bill, from a March 31 exactly to a June 30 exactly.

I guess the question I had, do you have the total number of departures and a total number of hires to get a sense for what's happening there on an overall basis?

We don't share that information, suffice it to say at that particular moment in time the number of people we had hired which was substantial were less than the number of people that had left for that particular period of time. You can back into it if you knew the average head count during the period of time.

Good point. Thank you very much.

James Lynn with Greenlight Capital. Please go ahead with your question.

Hi, when you talk about acquisitions and buying businesses [inaudible] [inaudible] business lines what sort of multiples do you look to pay? For example what multiples do you look to pay for a restructuring business versus let's say a forensic accounting business or a non-restructuring type of business.

In the past we've said we've been in the five to seven range now, we think it's probably in the five to eight range, something like that it depends if there's a strategic advantage as I say looking at the economic consulting area as an example, they have not had great years in the last couple of years but they certainly have economic engines that can produce a lot of results so it may be a situation where you are looking at a going forward basis or a trailing 12 or a full year where you look and say that the multiple may appear a little higher than that but it's actually on revenues that are fairly predictable of a good multiple.

You don't breakdown, for example for an M&A business you would still pay five to seven times?

It M&A side we would probably do through hiring. We all know how much the M&A guys make and women make so that's typically [hire] is about all we could afford to do there. On the restructuring side, we did two very attractive transactions that were in the neighborhood of 4.5 to five times. I don't personally believe that those types of practices with those types of reputations are available at 4.5 times right now but I think there are practices that are available in the five to eight times multiple that will still not only be attractive on the purchase side but will again meet our criterion that's foremost being able to grow themselves at our 15% rate and add business to our other operations that will enable them to maintain the exceptional utilization rates that we have, whether it's 85 or 93. I think if you look around at other companies those are fairly exceptional utilization rates.

Okay. Thanks.

Next question comes from Verna Borcher with ACI Capital. Please go ahead with your question.

Hi, a couple of questions. I was trying to, I know we talked so much about the turnover but I was trying to get more color, we understand it was more the junior employees that were turning over. Was it junior employees at BRS and related to the acquisition or was it, and was it all voluntary turnover as opposed to involuntary turnover?

I don't think we've had any great number of involuntary turnover, involuntary situations. And I don't, as I indicated before, the senior managing director who left was not from the BRS group. Some people went with her who were not from the BRS group; as part of the overall. And then for the most part, the rest of the folks who left were either mid level folks who were lured away by our competitors and in the restructuring business or junior folks who either wanted to go back to an accounting firm environment or off into a different type of job, or left because of family reasons or other reasons like people always do.

Okay and then just some general questions about competition on two front just so far new businesses in terms of when you are going after new business and various [inaudible] and stuff, has the landscape changed at all do you feel like your win rates are what they had been, getting better, worse, staying the same, and the other type of competition would be in hiring as you look to replace the staff that's turned over. It's been a pretty weak job environment for white collar professionals although I am not sure with the forensic accounting skills whether it's been weak, so how are you, how long is it taking you to fill these open positions as they come up and how are you generally filling them? Is it headhunter, referrals, how has that experience been?

Okay. Yes, you are right about forensic accountants. Even the SEC hasn't managed to spend $107 million in appropriated money to fill its staff with as many people as they think they need, at least according to an article in a recent paper. But we have been able to find folks generally speaking we do use recruitment firms, but most of the best people that we get really do come to us from relationships and contacts and people that we know in other organizations. And the restructuring area there's been some competition for the good folks, but in general we think that our wins are pretty good. In terms of getting jobs. I don't know that, we don't keep a batting average or a score on getting assignments where we have to compete. But I think we are probably getting our share and I expect we will get ours or more down the road.

Okay. Great. That answers my questions. Thank you.

We have a follow-up question from Adam Waldo. Please go ahead.

Not to kill the head count question here, but can you give us a little more sense as you look to the back half of the year, should we expect that the more or less 23 billable staff you lost during the quarter would be replaced perhaps by the end of the third quarter and should we be relatively conservative on head count additions as we go forward after that?

We had always said that we thought we would be somewhere around 600 people budgeted towards the end of the year. Does that mean that we are going to add 13 and you are going to be upset if we haven't?

All right. I hear you.

I don't know. But I think we've always said that our budgeted numbers for the year were somewhere around 600 folks.

Still your goal would be to get back there as quickly as possible here as we move through the third quarter, then?

With the right 13.

With the right 13, yes.

We would dearly love that to be 13 senior people who bring a bunch of deal client relationships with them and we would also like it to be starting after August so that they can have their vacation on the other guy.

And it wouldn't affect your third quarter utilization, right. Thanks.

Gentlemen, there are no further questions at this time. Please continue.

Great. Well just do wrap it up thank you all for being with us. We have a lot of enthusiasm going forward and I think one of the questions, perhaps, Adam, about the stock price we don't always understand it or maybe ever but there's an awful lot of enthusiasm here and we hope we can share some of that with you and with you and that in our future results you can again become a believer in the good things that are happening at FTI.

If you would like to listen to a replay of today's conference please dial 303530, or 800-4052-2236 with access code 544,662. Once again if you would like to listen to a replay of today's conference please dial 30355903000 or 800-4052236, with access code 544,662. I would like to thank you all for participating. You may now disconnect.