Global Industrial Co (GIC) 2004 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2004 Systemax earnings conference call. My name is Liz and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will, however, be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Miss Donna Gehnrich. Please go ahead ma'am.

Thank you operator. Welcome to the Systemax 2004 fourth-quarter and year-end conference call. I'm here today with Richard Leeds, Chairman and Chief Executive Officer, and Steven Goldschein, Senior Vice President and Chief Financial Officer, and Gilbert Fiorentino, CEO of TigerDirect Inc.

This discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the caption forward-looking statements in the Company's annual report on Form 10-K. This call is the property of and is copyrighted by Systemax Inc.

Richard will now go over some of the highlights.

Thank you, Donna. Net sales for the fourth quarter increased by $113.3 million, or 25.9%, to a record $550.8 million, from $437.5 million in the same quarter last year. Net income for the fourth quarter reached $8.2 million, or $0.23 per diluted share, compared to a breakeven at the same period a year ago. The fourth-quarter results include pre-tax restructuring and other charges of $1.3 million in 2004 and $2.9 million in 2003. Excluding the effects of the restructuring and other charges, net income for the fourth quarter would have been $9.2 million, or $0.25 per diluted share in 2004, compared to $1.8 million, or $0.05 per diluted share last year.

Our fourth quarter proved to be a particularly strong sales quarter for both our computer and industrial businesses. North American sales grew 35% compared to last year as e-commerce sales increased 50% year over year. Operating income in North America improved by almost eightfold to $20.7 million. And finally, we had sharply increased earnings as net income grew to $8.2 million from essentially a breakeven the same quarter a year ago. The results were even better when considered without the nonrecurring restructuring and other charges that were incurred. More about that later.

For the full year 2004, we achieved record sales of $1.93 billion. Our e-commerce sales increased 34% over the prior year, affording us the benefit of leveraging our selling, general and administrative expenses. And most importantly, our earnings increased 250% to $0.35 per diluted share, from $0.10 per diluted share last year. Excluding the effect of restructuring and other charges in both 2004 and 2003, earnings per diluted share were $0.50 and $0.21, respectively.

And now, Gilbert Fiorentino, TigerDirect's CEO, will discuss our consolidation and streamlining of our businesses in North America and Europe. Gilbert?

Thanks Richard. Over the past two years, we have consolidated seven businesses running five I.F. systems and four warehouses into a single unified business in North America, operating principally from a single inventory, I.F. system and management structure. We've trimmed hundreds of personnel, many of which were executive level, while substantially increasing revenue. The benefits from this consolidation are obvious when it comes to the elimination of duplicative staff and functions, as well as better use of inventory. Equally obvious benefits stem from greatly improved buying power and availability of advertising programs from our suppliers.

Less evident yet important benefits come from improved momentum (technical difficulty). For example, TigerDirect was recently named the number one employer, the best company to work for in South Florida by the South Florida Business Journal, and was a finalist in the Fortune Magazine Top 100 Employer Roundup this year.

Our internal organic growth rate last year was almost three times the growth rate of our industry, meaning we are acquiring market share from our competitors -- another benefit from being a single, larger operating entity.

In other news, TigerDirect's Website is currently ranked approximately 300 -- up from approximately 1000 in Q4 2003 -- in the world by Alexa, and we're ranked in the top five computer sites only behind Dell, HP, and Best Buy. Visits to Tiger's Website were up over 37% in the fourth quarter year over year, and Tiger's page views were up 42% in the fourth quarter year over year. Tiger's unassisted Web orders were up 39% in the fourth quarter, also year over year.

In Canada, where we operate a Website called TigerDirect.ca, we also showed impressive growth for the fourth quarter. TigerDirect.ca is currently ranked in the top 2500 sites worldwide by Alexa, and that's up from about 4000 in 2003. The visits to our Canadian site increased by 153% in the fourth quarter year over year, and page views increased by 142% in the fourth quarter year over year. Unassisted orders in Canada increased over 228% in the fourth quarter year over year.

In addition to driving additional traffic and sales to our Websites, our customers are using Tiger's Websites for product research and self-service more and more. Examples include enabling customers to track orders online, review order history, print and send duplicate invoices, and more. Our goal is to make the Tiger Websites the most comprehensive and user-friendly in the entire computer industry.

This successful consolidation of our North American operating companies is now complete, and while managing North America with a keen eye on continued growth and profitability, our team is now engaged in reorganizing Europe, particularly the United Kingdom, where most of our European losses are occurring. We're very optimistic about this business and we've already made significant changes there. It's our priority to have positive news for you about our results in coming quarters. And now I will turn this call over to Steven Goldschein, our CFO.

Thanks, Gilbert. As you know, in early February, we announced that we had discovered certain errors in accounting for inventory at our United Kingdom subsidiary. The restated quarterly results for 2004 and annual results for 2003 are included in our press release, so I will not repeat them here except to say that earnings in 2003, which were originally $0.16 per diluted share, have been restated and are now $0.10 per diluted share. We have completed a thorough review of the subsidiary's financial records and have taken the appropriate steps to preclude a repeat of the type of errors that were uncovered. More later about the restructuring and streamlining of our UK operations. Now, to the financial results.

As Richard mentioned, fourth-quarter net sales reached a record 551 million, a 26% increase from the prior year's fourth quarter. North American sales were up 35% to 359.6 million, led by TigerDirect. Net sales for the full year were 1.93 billion, an increase of 16.3% from 1.66 billion last year. Net sales in 2004 included approximately $515 million of Internet-related sales, an increase of 131 million, or 34%, from 2003. North American sales increased to 1.23 billion, a 20% increase from last year's 1.03 billion. The increase in North American sales resulted primarily from continued growth in our consumer business, as reflected by the substantial increase in our Internet-related sales.

With the United States economy improving after several years of softness, we also had strong growth in our industrial products sales in 2004. European sales, stated in U.S. dollars, increased 10.2% to 696.2 million for 2004, which represents 36.1% of worldwide sales, compared to $631.5 million, representing 38.1% of worldwide sales in the same period a year ago. Movements in foreign exchange rates positively impacted European sales for 2004 by approximately 70 million. If currency exchange rates for 2003 had prevailed in 2004, European sales would have decreased by approximately 8/10 of 1% from the prior year. Continued weakness in demand for information technology products from corporate customers in Europe and the effects of exchange rate movements on product pricing in certain European markets resulted in decreased local currency-denominated sales.

Gross profit was $290.4 million, or 15.1% of net sales for 2004, compared to $265 million, or 16% of net sales in 2003. Our gross profit ratio declined throughout 2004 as the result of increased pricing pressures on our computer business both in North America and Europe. The decline was partially offset by improved margins on industrial products.

Selling, general and administrative expenses for the fourth quarter were 64 million, or 11.6% of sales, compared to $61.2 million, or 14% of sales last year. SG&A expenses totaled $260.1 million, or 13.5% of net sales in 2004, an increase of 8.7 million, or 3.4%, compared to 251 million, or 15.2% of net sales in 2003. This increase resulted from approximately 10 million of increased costs in Europe resulting from the effects of changes in foreign exchange rates and $4 million of higher credit card processing fees from the higher sales volume in 2004. The increase was partially offset through restructuring actions taken, reducing our employee count in the United States and lowering salary expense and related benefit costs by approximately 6 million in 2004.

We incurred a total of $7.4 million of restructuring and other charges during the year 2004. Just to review -- in the first quarter of 2004, we implemented a plan to streamline the activities of our U.S. computer business' back-office and warehouse operations, resulting in the elimination of approximately 200 jobs and incurring 3.7 million of restructuring costs associated with this plan. We also recorded $700,000 of additional costs in 2004 related to the completion of our 2003 consolidation of United States warehouse locations.

We implemented several cost reduction plans in Europe during 2004 as well, including consolidation of United Kingdom sales offices. We incurred a total of $3 million of restructuring charges for facility exit costs and workforce reductions in connection with these actions.

We had income from operations of 22.9 million in 2004 and 9.3 million in 2003. The results in 2003 include restructuring and other charges of 1.7 million and a goodwill impairment charge of $2.6 million.

We had losses from operations in Europe for the year ended December 31, 2004 of $12.5 million, and in 2003 of $5.2 million. European results contributed to the decline as a result of decreased gross profit and increased selling, general and administrative expenses. As a result of the decline in our European profitability, in January 2005 we announced additional plans to reduce costs and increase efficiency through the elimination of approximately 185 positions, which is expected to result in 8 million -- in approximately $8 million in annual savings.

Interest expense was $3.1 million in 2004 compared to 2.3 million in 2003. Interest expense increased in 2004 as a result of increased short-term borrowings in the United Kingdom. Interest and other income net was 600,000 in 2004 compared to 800,000 a year ago.

Our income tax provision was $7.9 million in 2004 compared to $4.4 million in 2003. The effective tax rates were 38.7% this year compared to 56.5% last year. The tax rate in 2004 was higher than the U.S. statutory rate of 35%, primarily due to losses in foreign jurisdictions for which we recognized no tax benefit, and losses in a foreign jurisdiction where the benefit rate is lower than the rate in the U.S. The rate for 2004 was lower than the 2003 rate as a result of our ability to utilize carryforward losses this year.

To summarize, net income for 2004 was 12.6 million, or $0.37 per basic share and $0.35 per diluted share, and for 2003 was $3.3 million, or $0.10 per basic and diluted share.

Our working capital was $161 million at December 31, 2004, an increase of slightly more than $15 million, from $146 million at the end of last year. The largest components of this change was a $42 million increase in inventory, offset by a $17 million increase in accounts payable and an $8 million increase in taxes payable. We increased our inventories in the United States to meet the needs of our growing consumer base, as increased stock levels facilitate such sales. The inventory increase in the U.S. was partially offset by a reduction in our European inventories in response to the weakness in those markets.

The increase in our accounts receivable as a percentage was less than a percentage increase in net sales. Our North American accounts receivable decreased as our sales growth here has come primarily from consumer accounts which are generally paid for by credit card in a two to three day shipment-to-cash cycle. The increase in accounts receivable was attributable to Europe as the accounts receivable stated in U.S. dollars increased as a result of changes in exchange rates. We expect that future accounts receivable and inventory balances will fluctuate, with the mix of our net sales between consumer and business customers as well as geographic regions.

We have recently announced the extension of our existing U.S. credit facility for an additional 18 months. We are working out the details presently of combining our U.S. and UK credit facilities in order to give us more flexibility. We expect to complete that in the next two months.

Now, back to Richard.

Thanks, Steve. I would like to thank all of our employees for their efforts in making these results possible. Rest assured we will continue to work hard for all our shareholders. Thank you for listening to our fourth-quarter call, and now we'd be happy to take some questions. Operator, please?

(Operator Instructions). Seth Hammett (ph), RRH.

Once again, although it's better than the last time, you guys just got the press release out right beforehand.

I know; we apologize.

That's okay. Could you just talk about EBIT -- EBITDA for the year and the quarter, how you view that number? The depreciation of course is not included on this sheet. Maybe while you're looking for that -- Richard? Are you around?

Yes, I'm here.

Usually we have a quick discussion -- maybe with the next caller we'll get it -- of the new software product. Can we have that quick discussion now? How is it going?

PCS development is going quite well. We've issued press releases as we have signed up new clients for the software. We're continuing to work on both the development and the sale side of it and we're very excited about both sides of that. We still think we have an exceptional product with a unique offering into the marketplace.

Can you quantify the -- I take it we're still in a cash burn mode on that?

We're not breaking it out yet, but as we develop the software, of course, we're going to -- it's going to take us awhile to have the customer base catch up to what -- have revenues for the customer base catch up to what our investment is. But we are continuing to lose money on it. I don't really view it as losing money. I think it's more like investing in the future.

An investment, right. Okay, fine. Steve is about to give you some EBITDA numbers. But, if you back out of that some numbers for PCS, the EBITDA numbers would be higher. And could you give me -- while we're still waiting for Steve -- well, he might be ready -- but inventory. Somebody walked in my office. What's the story on inventory increases? Is that North American increases in inventory to supply the consumer market? Is that why your inventories are up?

Yes, it's the consumer base. You need to have available inventory to service those customers with a quick turnaround.

And the inventory -- is that diversified? At one point I thought you kind of rationalized the warehousing of such. Or maybe I am missing something.

This is Richard. We've combined now that we have one inventory in the U.S. We have inventory for -- in a central warehouse in Naperville, Illinois for servicing our computer customers. And we still have an inventory at the factory, but that's primarily for building PCs. So we've eliminated all the other warehouses we had for computer inventory in North America, and we have the one. So, we do have -- still have excellent turns. We have excellent turns in our inventory. And the growth was there; it's just really to service the customers. And as you could see by the increase in sales (multiple speakers) we've got the inventory there.

Are you happy with the inventory level? Are we trying to like -- over Q1 we're trying to get it lower, higher, or manage it exactly the way it's being managed?

Are you asking the CFO or the CEO?

You guys I'm sure will speak with one voice on this one.

I mean, the CFO will always tell you that the inventory level is too high, and wouldn't it be nice to have a business where you have growing sales and you don't have any inventory at all?

And as Gilbert will testify for, if you don't have the inventory to deliver to your customers, you're not going to have sales. So, it's a balance that we have to achieve of having the right amount of inventory, and it's something that we constantly monitor to make sure that we have the right amount of inventory.

That said, are you hoping for -- is there any inventory goal for the first quarter that you've articulated internally, or you're quite happy with where the inventory levels are compared to sales?

We have goals for inventory that we have internally that we work towards as -- we're very fourth quarter driven. And actually -- and then first is a very good quarter also. And then second and third it slows down. So, we have plans to manage our inventory towards the reduction in business and then the pickup in business for the fourth quarter.

Okay. And finally, Q1 -- how is Q1 going, Richard?

Sales were very nice in the first quarter.

Super. Steve, are those numbers (multiple speakers)

First, I will give you the numbers you don't have, which is depreciation. In 2004 it was 11.3 million and last year it was 13.9. So if you do the math, EBITDA for 2004 is 34.86 million compared to 23.98 a year ago. So it's a nice increase.

Thanks a lot. That's very helpful.

Stevens Monty, Sky Capital.

Recently one of your publicly-traded competitors commented that they were seeing a slackening in demand in the small-business sector. I'm wondering -- A, are you seeing the same thing? And secondly, how do you view the outlook for your industry today versus what your thinking was a year ago at this time and why? (multiple speakers). I'd like to follow that up with another question after that pertaining to what the problems were a little bit more specifically over in the UK with regard to these bookkeeping errors. Now I'll be quiet. You guys can go.

This is Richard. Why don't you take the first question?

Honestly, we are so small in a market that's so big that we don't really look at what's happening in the industry. We believe that if we can work harder and satisfy every customer everyday that we can take these customers away from our competition, and we should be able to grow regardless of what's happening in macro-economic factors, for example. We're just so small in such a big industry. Take a company like Dell that ships 50,000 PCs a day and they need to be concerned with these overall factors. You take our business, and we know that if we work harder, we can satisfy more customers and take them away from our competition. So, you know, we don't really look as much at the industry as we look at how well we can do internally.

Are you seeing the same slackening that your publicly-traded peer was seeing?

That's the old saying; when the going gets tough, the tough get going. And that's exactly what we're here to do. We're not going to make excuses about the industry or the environment. We're just going to work as hard as we can and do the best job.

I understand what you're saying but you're not answering my question.

Again, we're just such a small company in such a large industry that we're not going to give you excuses about what the industry is doing. We're going to work hard and we're going to do our best, and hopefully do well regardless of what's happening in the industry.

So, you feel you're continuing to grow your marketshare?

That's right.

And then the next second question was -- I'm sorry -- was

In the UK.

Steve, you want to answer it? Steve?

The UK was a confluence of events, I think, that really took place over an 18 month period. We moved, consolidated our businesses, had a large employee turnover. And what we ended up with was some inexperienced people in the inventory accounting area. And they honestly -- the simplest way to say it is they made some mistakes at the end of 2003. It was not caught in the audit. It was discovered when we took a -- Nick took a wall-to-wall physical inventory. And as soon as we knew about it, we went out and corrected it. It's things that should be avoided, lessons learned that when you move and change people, you need longer training periods and times to -- and maybe a little bit more planning on the move itself. But there was no indication in any of the work that I personally did or any of my subordinates that anything was done with any malice or forethought or anything like that. So it was just a confluence of events, I think.

You feel comfortable that we won't see anything similar going forward?

I feel very comfortable that we won't. Yes.

I will let somebody else hop in here now.

Russ Silvestri, (indiscernible) Capital.

A couple of questions, both relating to margins. I mean, talking about the gross profit falling to 15.1 from a year ago, and you're talking about a few things in there, in particular the pricing pressure. Do you expect that deterioration to continue on the gross margin line? And then, second of all, given the leverage you are experiencing on the operating line and what might happen in the UK, etc., where do you think the operating margin can be as you look out at 2005?

Okay. Let me first talk about gross margins. What we see as the U.S. computer business continues to grow and grow, we have lower margins in the U.S. computer business in the mix then we have elsewhere. So as that business continues to grow, we're not necessarily seeing a decline in the U.S. computer margins. What we're seeing is we're seeing that piece of the business -- piece of the pie growing bigger and bigger, therefore, bringing down the overall gross margin.

As we said in the conference call, because of the leverage of our business with the Internet, and with having fixed facilities and somewhat fixed overhead in a lot of areas, as we push more and more business through our existing infrastructure, we should have leverage -- more leverage going forward. The same thing goes in the UK. And maybe, Gilbert, you want to talk a little bit about what we see, and in your experience what we are consolidating here in the U.S. versus what we're going to be seeing in the UK?

Sure. There are really two points. First, the Internet has made the world a much smaller place over the past few years. And as smaller competitors can get on the Internet and list products at much lower prices than a larger company like us with a support and customer service structure, you're finding it to be a much more competitive environment. Especially in Europe, where the Internet has really taken off over the past few years. It's been -- Internet has been important here in North America for five or six years already. And in Europe, you're finding the Internet taking off over the past few years. You're finding smaller competitors going on the Internet, going on these pricing engines, listing things at lower margins, and therefore, it's putting a pricing pressure on everybody. That's the reason why we're having to restructure over there, eliminate levels of management and get a much more efficient business, so that we can compete at what the market has forced us into working, at lower margins.

You asked about what the margins might do in the future. Right now, we're very excited about growing our B-to-B business. Today, our B-to-B business is about half of our total, where we have our consumer being about half and our B-to-B being about half. If we can continue to grow our B-to-B business this year, which runs at slightly lower margins but much higher average orders, you could see a little bit more pricing margin pressure, but that would be because we grew a segment of our business that's running at a lower margin. I don't think it would be bad news; I think it would be very good news.

But then look at your income from operations line, this year versus last year -- I haven't actually computed the exact percentages -- but the percentage this year is a better percentage in terms of operating profit. And it looks like you're going to be able to do more of that after these onetime charges. Do you have a target operating margin in that business?

I don't know how to put this politically correct, but we'd like to make as much money as we possibly can.

But is it a 5% margin, a 2% margin?

I thought the fourth quarter was respectable.

I think we'd really like to be north of 5. Currently, we look at some of our competitors' margins and we see no reason why we can't.

So, 5 is something that you think is achievable and sustainable?

We're going to work very hard to get there.

Congratulations.

Mitchell Paulson (ph), Paulson Financial (ph).

Let's speak to something other than numbers, because that's all I've heard so far. Let's talk about stock performance over the last three years and see why these things just keep on biting us, or something comes up and bites us on the butt and then we go back down. Performance over the last three years has been -- let's put it this way, the last couple of years have not been well. What are we doing to enhance that? What are we doing to get more exposure? What are you guys doing to get more sponsorship, things like that? Can you talk a little bit about that for me, guys?

This is Richard. The first thing that we needed to do is we needed to get the business fixed so we have sales growing and we have profits growing. And that we have accomplished in North America, and as we've laid out some of the plans that we have for Europe, primarily in the UK. But we are doing that there as well. Now that we have the fix, we need to be talking to investors and institutions and going to conferences and such. And that will be our plan for the going forward, to be able to go out and do that. But, you know, as I said, it's really been a concentration on the business. It's been a lot of work for us to get to this point, and we're at a good point. We're not at the best point. We still have a lot of work ahead of us, and we think we have a lot of opportunities in the business as well.

A lot of people though, Rich, they're just -- you know, they've kind of fallen by the wayside, as we know. And we're just trying to -- how can we win those guys back? How can we get -- how can I get a client that sees in one week a 41% drop in the stock, you know, to go ahead and say hey, hold on there, hang in there? (multiple speakers) stumbling blocks. How long can we do that?

We have to deliver consistent numbers. We've done a lot of work. We've unfortunately had to lay off a lot of people and close facilities and such to get there, but we've done that. And we're going to continue to work hard to get there. And I think if we have consistent numbers, we'll have -- and continue with growth numbers like this, we're going to have a very compelling story.

Can I ask one last question, and that would be how do we look from here? Do we look consistent? At least this way for -- if I'm talking to someone across the desk, I want to be able to talk. So I mean (multiple speakers) in your mind (multiple speakers)

From where we're standing now? Yes. Certainly, that's where -- trust me; that's truly our goal.

Thank you.

Andre Gardner (ph), Kelso Management.

(inaudible) Gardner in Boston at Kelso Management. If you go back a couple of years, you consistently made over $1 a share. And given your new revenue level, it seems to me you could do $1.25 without stretching. Is that -- do you have a plan to get there? And my second question is you're starting to open retail stores, which has been a minefield for other people. And what are your plans in that area, and what do you expect to do?

Let me do them in reverse order. Gilbert, do you want to talk a little bit about the stores first?

Sure. Our strategy with the retail stores has been to put retail stores in facilities where we already have presence. For example, we had a business-to-business office manned by about 30 reps in Raleigh-Durham, North Carolina. And when the lease came up for renewal, rather than having just the small office with business-to-business reps in it, we decided to open a store; have the front be a retail store and have the back be a call center for our reps. That's proven to be a very successful move for us for many reasons.

First, we find that in the millennium, people don't want to work in giant call centers -- thousand-seat call centers anymore. A 40-seat call center in Raleigh-Durham does very well for us. Second, since you have communications in and out of the building, you have general management for the building, you have power and a lot of other common expenses that you can split between a store and a call center, each your store and your call center have lower operating costs. So we're not looking to light the world on fire with 200 stores; we're looking to take advantage of opportunities as they arise.

We have a store here in Miami that's part of our corporate offices. We have one in Naperville as part of our warehouse. We have one in Toronto as part of our -- again, our B-to-B sales offices. And that's proven to be very successful for us. We don't have plans again to open 200 stores. We know it's been a minefield for other people, but the way we're doing it is a little bit different, and being able to have corporate sales offices that are smaller rather than larger is attracting quality people for us. So, again, it's going to help us grow our B-to-B segment this year as well.

Is that okay, Andre?

Yes.

And the other question was, again?

If you go back to prior levels of profitability, i.e. three or four years ago you were making $1 a share consistently after-tax. And given the new higher level of revenues, you should be able to earn $1.25 or higher -- $1.50. Do you have a plan to get back there, or were those years that you will sort of -- those kind of profit margins where you'll just never get back to those levels again?

Well, you know, as we said before, if we're targeting greater than 5% operating margins, you can do the simple math and you'll see where we wind up.

I'm sorry; you mean net margins or operating?

Operating margins. So if you do the simple math, you could see where it comes out. I mean, personally, I'd like to make $10 a share. I'm not trying to be flip about it, but you know, we clearly want to go back to making as much money as we made in the past, and we want to make more than we made. We want to make as much money as possible.

Stevens Monte, Sky Capital.

I've got a couple of follow-ups. Number one, at some point are you going to break out your mix of business as between the consumer and the small and medium-size businesses and the large corporations, etc.? And number two, obviously, with average selling prices significantly lower today than they were a few years ago when you were making over $1 a share, I don't think you're going to be able to achieve that level of profits for some time to come. Why don't you comment on both of those points?

Right now, we don't have any plans on what we're going to be breaking out in the future, so that's a rough question for me to answer. We do talk about it in general terms like we did in the conference call, what the split is. But we view the business from a consumer standpoint and a B-to-B standpoint. We're not really selling -- in our B-to-B business we're not really selling the Fortune 50 or the Fortune 100 customers; we're primarily in the small to medium-size, and then the next tier up, going up to the next level of Fortune 500 companies. But we don't really get into the very, very, very large customers. So when we break it out and we're talking B-to-B, that's primarily small and medium and large businesses, just not the very large multinationals. We've given you those numbers. But I don't know if in the future we're going to be giving them in more detail.

On the second part of it, I stand by my answer before, which was that we try to make -- we're going to try to make as much money as possible. We want to beat the numbers that we had in the past, and our goal is to grow the Company and to grow topline and grow bottom-line.

Russ Silvestri.

Just in terms of your NOLs, what kind of NOLs do you have on your balance sheet currently? I would imagine that you'd probably be able to capture some of those now that you're profitable again?

Give us one second while we look up (multiple speakers)

Give me one second to look up the number. The NOLs that we have available are all -- are basically in Europe.

Nothing in the U.S.

Nothing in the U.S. It's all been used. We got our present from Uncle Sam quite a while ago (multiple speakers) -- except for the states; we have some state carryforwards here.

So as I look at your kind of ability to make cash going forward, it's -- on a tax-adjusted rate I should really use a 40% kind of rate?

Yes.

And that's whatever you have (multiple speakers)

Maybe slightly lower, depending on the mix between Europe and the U.S.

Right.

But the carryforward options here in the U.S. are in the state area and they will take quite a few years to realize.

What was the UK number? I'm sorry.

The U.S. I said. The UK number, in round terms, approximately $10 million. 8.5 and 10 million. Okay?

(Operator Instructions). That concludes the Q&A portion of today's conference. I turn it back to management for closing remarks.

I'd like to thank everybody for listening to our call today. We look forward to talking to you next quarter. Thank you.

Ladies and gentlemen, this concludes the conference call for today.