HNI Corp (HNI) 2005 Q4 法說會逐字稿

Welcome to the HNI Corporation fourth quarter and year-end results conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to Ms. Melinda Ellsworth.

Please go ahead.

Thank you.

Good afternoon and thank you for joining us today for the HNI Corporation conference call to discuss fourth quarter and fiscal year end 2005 results we announced earlier today.

My name is Melinda Ellsworth, Vice President, Treasurer, and Investor Relations for HNI Corporation.

If you have not received a copy of the news release, please call 563-272-7927, and we will send one out to you.

Joining me on the line today from HNI Corporation is Jerry Dittmer, Vice President and Chief Financial Officer, and Stan Askren, Chairman, President, and CEO.

Stan and Jerry will review the results and then open the call for questions.

Before we begin, please be advised that the statements made by the corporation during this call that are not historical facts are forward-looking statements.

These statements may include, but are not limited to, statements of business plans and objectives, capital structure, and other financial items.

Forward-looking statements may differ from actuality, and relying on them is subject to risk.

Factors that could cause forward-looking statements in the conference call to differ materially from actual results are discussed in the corporation's news release and its Form 10-K and other periodic filings with the Securities and Exchange Commission.

The Corporation assumes no obligation to update any forward-looking statements made during the call.

I now have the pleasure of turning the call over to Mr. Stan Askren.

Stan?

Thank you, Melinda.

Good afternoon to everyone.

I'm going to share a brief assessment of the business for year end 2005 and fourth quarter 2005, and then briefly cover our strategic progress, and then turn the call over to Jerry Dittmer, our Vice President and Chief Financial Officer, to review some of the specific financial details.

I'll then come back and share some thoughts on our outlook for 2006, and then finally we'll open it up for questions. 2005 was a very strong year and fourth quarter was a very strong quarter.

For the year we achieved record sales, record operating profits, and record earnings per share.

We feel like we had the right strategy, and that we executed well.

In addition, as I said, fourth quarter was also very strong.

Sales increased 21%, net earnings increased 25%, and earnings per share increased 31%.

For the full year 2005, sales increased 17%, net earnings increased 21%, and earnings per share increased 27%. 2005 results were driven by strong organic growth in both our office furniture and Hearth businesses and solid operating leverage.

We had strong performance from virtually all of our brands, all of our operating companies, and all of our channels.

Our Hearth business, in particular, finished the year with very good performance.

Gross profit margins continued to improve as the benefit of price realization and ongoing cost reduction initiatives offset increases we saw in steel and other input costs.

During the year, we successfully completed distribution acquisitions in both our Hearth and our Allsteel office furniture businesses.

We continued to invest in selling and market initiatives to drive growth and create long-term shareholder value.

We also moved towards a more efficient capital structure, taking on some modest debt to fund acquisitions and share repurchases.

During the year we returned $236 million of cash to shareholders through dividend and share repurchase.

In addition to the numerous awards and recognition that each of our operating companies received, HNI was recognized by Industry Week as one of the top 50 best manufacturing companies and HNI was named by Forbes as one of the top 400 best big companies.

We are one of only 44 companies to be on the Forbes platinum honor role, recognized all eight years as one of the top 400 best big companies since the inception of the award.

What I'd like to do is shift a bit here and share with you -- reiterate our strategy and direction.

We have a string now of several years of very strong performance which we feel validates our objective of aggressive profit growth.

To refresh, we're focused on three core primary strategies to drive aggressive profit growth.

The first is build on our best cost lean enterprise legacy by employing our well developed longstanding rapid continuous improvement philosophy and tools to drive better cost, better quality, faster delivery, and better capital efficiency.

The second is to build market power.

This has been a major area of focus and investment the past few years and will continue.

We've invested to build our brands, improve distribution, develop and introduce new product solutions, and strengthen our selling models.

Then the third, finally, is we're focused on constantly building on our powerful and unique culture and building the capabilities of our people and our organization to perpetuate our positive aggressive profitable growth momentum.

We believe our split and focused business model is working well and split and focused means we're able to effectively compete in almost all segments of the market top to bottom, side to side, with appropriately tuned brands, selling models, business models, and financial models.

We've employed a core plus strategy that first seeks to extract from the core the maximum amount of business from the customers, markets, and product categories where we are the strongest and we know best.

In addition, we're cultivating new plus opportunities outside or related to our core business.

These include vertical markets like education, healthcare, or government, which are pursued by several of our business units.

A plus opportunity includes new geographic opportunities such as our recently announced agreement to purchase Lamex, one of the leading office furniture companies in Asia.

We continue to seek ways to strengthen our distribution in our Hearth business, and contract office furniture business, Allsteel, and have completed several acquisitions in these areas in 2005.

We have been aggressive in funding new investments to achieve aggressive profit growth.

We've increased our SG&A investments where we feel there's a strong prospect for excellent returns in the mid and long term.

We are willing to forgo optimal short term quarterly earnings performance to invest for the future.

This means investors may experience more lumpy quarterly earnings results, as the investments may not necessarily coincide with returns in the same period.

Don't mistake what I'm saying here.

We're just as focused as ever at managing costs and financial performance.

We are spending and investing very carefully and deliberately where we think we can get above average return.

We are careful and calculated on where we're investing shareholders' money including SG&A dollars.

We're pleased with our performance the last several years including 2005, but you should know we're not complacent, nor are we content.

Now I'll turn it over to Jerry Dittmer, Vice President and Chief Executive Off -- Chief Financial Officer to review some of the specific numbers for the fourth quarter and year end 2005, and then I'll finish up the comments with an outlook.

Jerry?

Thanks, Stan.

I will review the numbers beginning with the fourth quarter results.

We experienced strong sales growth in the quarter up 20.9%.

Strong organic growth across our brands contributed $87 million, or 15.9 percentage points, and acquisitions accounted for approximately $28 million of the increase, or 5 percentage points.

As Stan previously mentioned, gross margins improved to 36.5% due to the benefit of price realization, strong volume, and moderation in steel and other input costs.

SG&A as a percentage of sales increased to 27.8% from 26.9%.

Total spending increased $36.7 million as a result of acquisitions, higher freight and distribution costs, continued investment in brand building and selling initiatives, product launches, restructuring costs, and increased profit sharing and incentive compensation as a result of strong operating results.

We adjusted our annualized effective tax rate to 36% from 35.5%, primarily as a result of higher state tax liabilities.

The fourth quarter reflects an effective tax rate of 37.4% due to the $1.1 million recorded in the quarter to adjust for the higher annualized tax rate.

Diluted earnings per share were $0.67 in the fourth quarter, an increase of 31.4% from $0.51 in the prior year quarter.

During the quarter, we repurchased just under 3 million shares for approximately $147 million at an average $49.90 per share.

Earnings per share were positively impacted $0.03 due to the company's share repurchase program offset by $0.03 related to the restructuring charges and $0.02 due to the impact of the effective tax rate adjustment.

In November, our board approved an additional $200 million for the company's share repurchase program.

At year end, $143.5 million was remaining under the current repurchase authorization.

Now a few comments on our year-to-date results.

Sales for the full year 2005 increased 17.1%.

Strong organic growth across our brands contributed $265 million or 12.6 percentage points, and acquisitions accounted for approximately $92 million of the increase or 4.4 percentage points.

SG&A as a percentage of sales is also comparable to prior year levels.

However, total spending increased $99.5 million as a result of acquisitions, increased freight and distribution costs, restructuring charges, continued investment in brand building and selling initiatives, product launches, and higher profit sharing and incentive compensation.

Interest expense increased to $2.4 million related to planned revolver borrowings to fund acquisitions and share repurchases.

Diluted earnings per share for the full year were $2.50, an increase of 26.9% from $1.97 in 2004. 2005 earnings per share was positively impacted $0.11 as average shares outstanding decreased by 2.5 million shares as a result of company's share repurchase program.

Earnings per share was also positively impacted by $0.02 due to the reduction in our effective tax rate from the prior year, offset by the $0.04 for restructuring charges.

During the year, we repurchased 4.1 million shares for approximately $202 million at an average $49.82 per share.

Now let's move to our segment results starting with office furniture.

Sales for the quarter increased 23.7%.

As previously mentioned, we experienced strong organic growth across all brands, representing $72 million or 17.9 percentage points of the increase.

Strategic acquisitions represented $23 million, or 5.7 percentage points in incremental sales.

Operating profit margin decreased to 8.5% from 9.5% as a result of increased freight and distribution costs, restructuring charges, and investment in selling, new product launches, and strategic distribution acquisition.

For the full year 2005 results for our office furniture segment, they were as follows.

Sales for the full year increased 18.1%.

As Stan previously mentioned, we experienced strong organic growth across all brands representing $219 million or 13.9 percentage points of the increase.

Strategic acquisitions represented $66 million, or 4.2 percentage points in incremental sales.

Operating profit margin decreased slightly due to increased material, freight and distribution costs, restructuring charges, and investment in selling, new product launches and strategic distribution acquisitions.

Moving to our Hearth segment.

Sales for the quarter increased 13.4%.

Organic growth represented $15 million or 10.4 percentage points.

Acquisitions represented $5 million or 3.1 percentage points of the increase.

Operating profit margin increased to 15.1% from 12.6% in the prior year quarter, largely as a result of higher sales volume and lower material costs.

Overall, our Hearth operation reported very strong performance for the quarter.

Moving to the full year 2005 results for our Hearth segment.

Sales for the full year increased 13.8%.

Organic growth represented $46 million or 8.8 percentage points.

Acquisitions represented $26 million or 5 percentage points of the increase.

Operating profit margin increased to 12.6% from 11.9% in the prior year quarter largely as a result of higher sales volume and price realization.

Now let's look at some other financial metrics for HNI.

We continued to generate strong cash flow of $201 million during 2005 up from $194 million in 2004 due mainly to higher net earnings.

During the year, we funded $34 million in acquisitions and $202 million of share repurchases with cash from operations and $140 million of borrowings under our revolving credit facility.

During the fourth quarter, we increased the size of our revolving credit facility from $150 million to $300 million in accordance with the terms of our revolver agreement and extended the maturity one year to 2011.

No other changes were made to the terms and conditions.

As we look forward at 2006, depreciation and amortization will be comparable to 2005, capital expenditures will be in the range of $50 million to $55 million in 2006 due to increased focus on new products and process improvement, and increased investment in investment -- I'm sorry, increased investment in distribution.

We anticipate the effective tax rate will be 36.5% in the first quarter.

If the credit for increased research activities is renewed, this would allow to us reduce the rate to approximately 36% for the year.

As we have previously announced, the acquisition of Lamex, which we anticipate will close the latter part of the first quarter, will be funded through cash and borrowings, that will increase our debt position and result in higher interest expense throughout the year.

Unallocated corporate costs will be approximately $50 million for the year, and this will include higher interest costs and option expense.

We began expensing stock options in 2006 and anticipate the impact on EPS to be approximately $0.04 for the full year.

That wraps up our financial comments.

Now I will turn it back over to Stan.

Thank you, Jerry.

Let me talk a bit about 2006 here briefly.

We anticipate 2006 will be another good year.

However, the industry growth trends have moderated from the strong levels we experienced in 2005.

BIFMA forecast shipments increasing 7% in 2006 compared to 13% experienced in 2005.

The housing market is also expected to soften from its record levels, but we anticipate we'll continue to remain at historically healthy levels.

Overall for the year, we expect to continue to outperform our industries and deliver solid top line and earnings per share growth.

First quarter 2006 office furniture organic sales growth will be good but not as strong as the extraordinary levels seen in the first quarter 2005 as trends have moderated.

Although the housing market is expected to soften, we expect to continue to gain market share in our Hearth business, as we grow sales with large builders, and we increase penetration of the remodel and retrofit markets.

Gross profit margins are expected to increase slightly over the prior year quarter and for the full year, as we continue to manage costs.

SG&A as a percentage of sales will increase approximately 1 percentage point in the quarter and approximately 0.5 percentage point for the full year as we continue to invest in our furniture and Hearth distribution, product development, and product launches, and experience higher freight costs, and we expense stock options.

So with that in closing to all of our member owners I want to thank you for your contributions to our success in 2005 and your ongoing commitment to another good year in 2006.

With those comments complete, we'll be glad to open it up to questions.

Thank you. [OPERATOR INSTRUCTIONS] We'll go to the line of Matt McCall with BB&T Capital Markets.

Please, go ahead.

Thanks.

Good afternoon.

Good afternoon, Matt.

Let's see.

I did have a question about the Hearth segment, and you kind of just addressed it, but since you just talked about it, I'll ask it anyway.

The forecast is for starts to be down 6%, 7% this year, but you're thinking your business could be up, and you mentioned growing share with the big builders and what else did you just say?

I mentioned the remodel and retrofit.

Right.

Can you -- can you expand a little bit on that?

Is that -- is that -- Are you not already in with most of the big builders, or is it just that you're improving that relationship, and then -- comment more on that remodel, retrofit, if you could.

Sure.

Our focus has been and continues to be on large builders as well as all builders, Matt, but we've had additional focus on large builders who are, as a group, gaining share.

And so our plan as they gain share in a softening market is to gain our share with them, and that just has to do with giving them better front to back sort of solutions.

Giving them aggressive programs and trying to penetrate that business more deeply.

We have agreements, arrangements with all of those large builders now.

It's simply, though, taking more of that share as we go forward.

And it's just -- it's hand-to-hand combat sort of stuff.

Secondly, the remodel and retrofit market is, as you may or may not know, the whole remodel housing side of the business is huge, and the fireplace side of the business, we believe, there's opportunity for to us do a better job of merchandising that product, of sort of providing formats, retail operations, product solutions for people that want to sort of upgrade their home, that they make a choice for our Hearth product.

And so there's no one specific sort of action.

It's kind of a composite action to do a better job there.

Are you talking about any new distribution channels there or just your existing distribution network?

It's primarily existing distribution, Matt.

I'm going to hop around here, a little bit.

The freight costs you talked about, I think you quantified them at $13 million, and you said it came from inflation and from increased shipments.

Can you break that down?

What part of that was inflation?

It's about half and half.

I guess it's about $8 million of volume and $5 million inflation.

And Inflation, we're talking about fuel.

It's really fuel and capacity pricing.

Okay.

Okay.

Then looking at the acquisitions, the revenue from acquisitions was a little bit higher than I was expecting.

Can you give us kind of an outlook for what '06 looks like?

What -- what each quarter would look like if we just assumed the acquisitions made today?

Yeah.

The acquisitions we've made thus far will increase our revenue in 2006 by about 2%.

Okay.

Let's see.

This is -- this is more of a -- I guess -- a strategic question.

A lot of talk in the industry about some of the contract folks moving downstream into kind of your core middle markets.

I guess, first question is, what portion of your business -- well, no, the first part of this question, are you seeing any impact from -- from migration from those folks down into the -- into the middle markets?

I mean, from the results, it looks like the answer is no, but I just wanted to answer -- to ask it, and see what your thoughts are.

Well, I think in general, Matt, I mean, it's a very competitive market.

And we have great competitors that do a good job, but we're not just standing by waiting for them to come take our business.

We are focused every day on taking care of those customers, of putting in place the appropriate business model so that we can serve those customers very very well.

So are we seeing an impact?

Certainly.

Every morning we wake up we walk into a competitive marketplace.

But we think we're holding our own.

What about the -- your business with some of maybe the aligned dealers from those contract furniture manufacturers?

How much exposure do you have there?

We don't break that out, Matt, but, you know, we're able to compete effectively there as well.

That's fair.

Okay.

Thanks a lot.

Great quarter.

Thanks, Matt.

Thank you.

We'll go to the line of Chris Thornsberry from Raymond James.

Please go ahead.

Good afternoon.

Can you hear me all right?

Yeah, Chris, go ahead.

Just a follow-up on Matt's question.

Using 2% on the sales gets you roughly $50 million, I guess, in acquisition expectations?

Now, that's - that's including Lamex or is that not including Lamex?

That’s what you have done up to this point, right?

His question was acquisitions that had been completed.

So it'd be -- it's about 1.5% to 2% and at $50 million, it's in the ballpark, and -- but that does not include Lamex, which as we mentioned we plan on closing it towards the end of the first quarter.

Okay and that's about $70 million, right?

That's what their sales were in the prior year, correct.

Okay.

So would we assume, then, just for modeling purposes, first quarter and second quarter probably have more of the existing acquisitions, but then you'd start to see the Lamex more -- a -- a little bit larger impact as the second half of the year kind of unfolds?

That is correct.

Could you kind of give a little bit more clarity on the selling and investment in the brand-building -- how much did you have in the fourth quarter incremental versus last year?

Can you go into that a little bit?

Chris, I'm sorry, but we don't break that out.

Okay.

I know that's -- it seems like you're spending more of that in office furniture now.

Is that kind of how it's going, or are you spending equally?

How does it -- what -- how does it look going forward?

Certainly office furniture is -- is where we've stepped up over the last several years but we likewise are investing where we see opportunities, in the Hearth business we'll invest there.

But we're investing in building brands, selling models, new product solutions, distribution, those are the areas where the money is going.

And you mentioned for '06 your outlook is to have that SG&A percent as a -- as a -- expense as a percentage of sales up about 50 basis points driven by mostly this investment in brand building and distribution and things like that.

Should we assume that you have kind of stepped up to a higher level of SG&A spending indefinitely?

That's probably safe.

Okay.

Going further into the office furniture segment, the decline in the margins, is that principally just due to the -- you had the facility shut-down expenses, and you had the downtime expenses as well as the brand building.

Does that explain all of that right there?

Yes, that's pretty well it.

Should we see any more of the facility shutdown costs going into first quarter or into the second quarter at all?

No, they're pretty well behind us at this point.

Okay.

All right.

Just two more real quick questions if I may, then I'll yield to others.

One's more of a housekeeping issue.

Have you bought any more shares since the end of the fourth quarter?

Can you tell that to us at all?

We really don't comment on that at this point.

Okay.

And then the last one was in terms of the price increases.

You guys have seen a positive impact of pricing in this quarter and I think in the last couple of quarters.

Is there a point this year where your past price increases kind of anniversary or have you put any new ones -- or is there a plan to put any new price increases through to offset some of these costs you're seeing in freight, and fuel, maybe, some resin costs, inflation, you're seeing?

Are there any planned price increases you have coming down the pike?

I'll take that into two different pieces.

One is, we do anticipate about 2 to 3 percentage points of favorable price in the first quarter due to the timing of our 2005 pricing action.

And then as far as going forward, we will continue, obviously, to evaluate our pricing by each operating company and each business that they're in, and they'll look at the input costs, competitive factors, etc. throughout the year, but at this point right now, we do not have any announced price increases.

Okay.

And along those lines, have you seen any kind of a major change in discounting activity on the project side of the business?

Chris, let me -- yeah, the answer there is that again is -- continues to be very competitive.

I wouldn't say there's any major breakpoint from what we've been experiencing.

Let me clarify what Jerry said too on the price increases going back.

We don't anticipate a lot of price increases.

Some of our operating companies are putting in place some small price increases but it's not a huge impact on our full year.

Just to be really clear with you.

Okay.

Thank you very much.

We'll move on to the line of Susan Maklari with UBS.

Please go ahead.

Hello.

Hi, Susan.

It seems like you had a really strong pick up in the fourth quarter coming off of the third.

And, can you just comment on whether you saw any seasonality in there or there were some large projects that came through or just kind of give us a sense of the nature of the demand?

Yeah, I think what we said -- what I said in my comments is that we saw a strong performance from -- another way to say it is all segments, all channels, all brands, all companies.

The contract segment, in particular, was strong.

The second thing I would say is the Hearth business also contributed extra in that fourth quarter.

We saw a significant bump in Hearth stove sales primarily around sort of increased fuel costs, homeowners wanting to fight back, you might say, and so they're buying alternative fuel appliances such as wood stoves and pellet stoves and that led to exceptionally strong performance for the Hearth business.

And then on the gross margin side, I know that you've kind of given us some sense of what we should be looking for in the first quarter, but as you go out through the year, can you give us some idea of what you're thinking in terms of raw material costs and maybe how we should be modeling that?

Pretty well for the -- pretty well have it flat for the year as we mentioned and we're going to continue, obviously, to look at energy and oil-related costs, etc. but at this time, don't have any planned increases for that in price net to cover any of those.

Okay.

Thank you.

We'll go to the line of Todd Schwartzman with Sidoti & Company.

Please go ahead.

Sidoti.

Good afternoon.

For the full year are you using the 36% to 36.5% tax rate?

Yes, right now we're using the 36.5% for the quarter and depending on what happens with the -- as I mentioned, what happens with the -- I'll get you the exact words here for you.

Yes.

With the R&D tax credit, that has not been approved yet for this year, so we are not able to take that into our effective tax rate.

If that is approved, we will be able to move it down to 36% but at this time cannot do that.

And as far as CapEx at $50 million to $55 million, can you break that out by segment?

No, we don't break that out.

Okay.

Last question for Hearth products in the first, I guess, six weeks now of '06.

What's the tone of business been with the homebuilders as opposed to the retrofit customers?

I think our business is still good.

I think certainly homebuilders and, you watch what's going on in that market, you read it every day in the Wall Street Journal, which I know you do, like I do.

Certainly starts are slowing down, and our new construction is bound to slow down some.

So nothing out of the ordinary?

No.

Okay.

Thanks.

[OPERATOR INSTRUCTIONS].

We'll go to the line of Matt McCall with BB&T Capital Markets.

Please go ahead.

One more follow-up, please.

You mentioned increased debt levels.

I think the Lamex acquisition you said funded from cash and additional debt.

Can you talk about what debt and cash levels are going to look like following that acquisition?

Yes, as we previously mentioned and as you can see from our balance sheet, we've got approximately $143 million of debt at the end of 2005.

We will fund the acquisition of Lamex with our cash and borrowings.

We anticipate debt will be in the range of $175 million to $225 million at the end of 2006.

End of '06.

Okay.

And did you disclose what the price of the Lamex was?

No, we did not, just the sales of $70 million.

Okay.

All right.

That’s all I had.

Thanks a lot.

Great, thanks, Matt.

We'll go to the line of Craig Kennison with Robert W. Baird.

Please go ahead.

Good afternoon.

Hello, Craig.

Most of my questions have been addressed, but I wanted, Stan, if you would just to have you explain how you're building this market power and looking more like three to five years out, and specifically, if you could, give examples of where you're building market power and what investments you're making to achieve that.

Wow.

That's a good question.

Let me see if I can give it to you succinctly, Craig.

We talk about this core plus.

The first thing we think about for each of our operating companies, and I'll remind that you we have operating companies that are competing in the contract segment and sort of the mid-market segment, the entry-level segment.

Each of those operating companies are thinking about how do they deliver more, better, faster with less to the customers that they're doing business with today?

And it's just simply grind it out, take better care of them, give them better solutions, give them better service, all the way through.

And that's the first thing we tell them they need to be thinking about when they walk in in the morning.

And how are we doing that?

Part of that is some of our investments are investing in brand building, so that's all the way from advertising to showrooms, significant investment in selling resources.

Feet on the street, tools for the sales force to execute their jobs.

We also are investing in product development, and then the corresponding product launch.

So it's the marketing sort of things around product launch.

The collateral material, the launch events, displays.

We're investing in distribution.

So where we have distribution that we think is capable and committed, has the capital, has the character, then we are working with them and investing with them in multiple ways to help them and help us collectively in the market do a better job.

The second part of this is the plus side.

And the plus side is really taking our existing model and adapting it in some way to more effectively serve something that's close but not quite the same.

A great for instance would be kindergarten through 12th grade -- education.

HON Company has sold a lot of dollars into those markets, primarily case goods, seating, so desk, chair, file for education.

We determined that we are ideally suited to provide a broader offering of classroom seating, classroom desks, cafeteria, tables, those sorts of things, through the same sort of distribution.

And what that means though is we put in place selling specialists, and you'll see this throughout the company -- through the different companies, selling specialists that know how the edu -- how the K through 12 education -- what their needs are, how they buy, what the process is, to help our existing sellers go to market.

We're going to K through 12 industry trade shows, putting together collateral material, and really working that aggressively.

And there are multiple sort of markets and multiple types of initiatives around that plus that is requiring investment.

Often that investment is sort of maybe this term that isn't going to pay off for a couple of terms, but we think that's a smart thing for to us do to continue to sort of grow and invest in the business so that we've got lots of legs on this initiative, we call aggressive profitable growth.

And does that strategy really dictate your acquisition strategy?

In other words, do you identify that you've got a hole in terms of your market power, and you could fill that more easily with an acquisition?

Is that how you think about it?

That's exactly how we think about.

And so --

We always do the make/buy though as well, so in the case of K through 12 and the whole classroom seating and the classroom desking, we thought should we buy or can we sort of use -- often it's P&L dollars, it's SG&A dollars to go build, and -- and -- or would it be better to go buy?

So we think about that constantly, and that's part of what drives our acquisition.

Any sense that you'd like to share with us as far as where you feel like you need to fill some gaps in your market power?

I think I'm going to pass on that one.

Figures.

Thank you so you much.

Congratulations on the quarter.

Thanks, Craig.

Appreciate it.

Thank you.

We have no further questions.

Please continue.

Okay.

Well, again, as always we're pleased that you took the time to join us and to listen to what we have to share about 2005 year and fourth quarter 2005, and we look forward to talking with you soon.

Thank you, and have a good afternoon.

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