Korn Ferry (KFY) 2005 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Korn/Ferry international Conference Call.

At this time all participants are no a listen-only mode.

Later we will have a question and answer session.

As a reminder this conference is being recorded.

Before I turn the call over to your host, Mr. Paul C. Reilly, Chairman and Chief Executive Officer, let me first read a cautionary statement to investors.

Certain matters to be discussed during this conference call will constitute forward looking statements within the meaning of the private securities litigation reform act of 1995.

Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company can give no assurance that such expectations will be obtained.

Participants on this call are cautioned to consider the risks related to the assumptions and expectations, and not to place undue reliance on such forward-looking statements.

With that, I'll turn the call over to Mr. Reilly.

Please go ahead Sir.

Thank you John and good morning everybody.

You have to excuse my voice.

I have a little bit of a cold.

I hope it's because our results are infectious, and we continue to have the kind of year we've been having.

You know, we compete in a very competitive market, with high-quality competitors and sophisticated clients.

Against that backdrop, I am pleased this morning to report a strong quarter, as well as another full year profitability for our fiscal year, 2005.

By all accords, 2005 was a terrific year for Korn/Ferry.

In terms of revenue, our performance improved 38% above last year at $452 million.

And I'm further pleased to say that our operating margin nearly doubled year- over- year to 14.5%.

In fact, with EPS of $0.90, we achieved the highest level of net profit in the firms 35 year history.

Not only did we achieve growth in all sectors over the year, but every one of our product and geography also posted significant double-digit growth, lead by a rise in Europe, Asia/Pacific and North America.

From a product prospective, the momentum at Futurestep continued to be impressive, as our middle Management business was up over 57% over last year.

It is clear that the evolution with Futurestep into the recruitment process outsourcing, or RPO business is taking shape.

I will speak more about Futurestep in a moment.

From a sector perspective, we experienced significant growth across every business category.

Led by financial services, industrial and consumer goods, the demand for talent was driven primarily by strong North American confirmation, and overall positive year-end uptick activity.

In addition, many of our internal key metrics also rose during the year, most notably partner recruitment and productivity were up significantly.

Gary Burnison will add color on these a little bit later.

We believe that the cycle is well underway for global organizational expansion, retention and development services.

Now at 24 straight months of U.S. jobs growth, the U.S. economy has added another 3.5 million jobs.

Progressive companies recognize the need too attract and retain the best talent available, especially as many of the worlds economy's are aging at record rate.

In fact in the U.S. white collar unemployment at 2.5% is very low.

This is evidenced by the continued demand not only for executive search offerings, but for Futurestep and leadership development solutions as well.

As I mentioned, Futurestep has significantly retooled its business model over the last two years.

Today the Company is profitable, and operating at healthy margins.

Futurestep now offers a broad range of middle management solutions, which include fully outsourced recruitment, commonly referred to as RPO.

Project based recruiting, Interim solutions and of course, some single search positions.

Futurestep is rapidly becoming known as the pioneer in the RPO stage.

We are pleased by the progress made at Futurestep and remains a vital component to our overall growth strategy and a key differentiator for our business.

Steady progress is also being made in our leadership development solutions business.

Over past 12 months, we have increased revenues 56% globally, based on a strong activity in North America and Europe.

Our LDS offerings include Management assessment, executive coshing(ph), and most recently Executive Center, a web-based employee appraisal and development tool.

Executive Center was initially launched as a beta product with a few clients in Europe, and now will be rolled out globally, over fiscal year 2006.

I look forward to fiscal year 2006.

Our main focus will be growing revenue while increasing, continuing to increase our client satisfaction, taking share, and offering clients that are versified suit of solutions.

We continue to strategically hire new consultants to the firm, and make several other investments to the business.

One of these investments will come in the form of technology.

Over the past few quarters we have been developing a new technology and platform to operate our search business.

Korn/Ferry has always been a pioneer in leveraging technology to facilitate collaboration, improve cycle time, increase efficiency and overall staff productivity.

Our goal is to simplify and expedite the search process, as well as to leverage qualitative information and knowledge as a strategic differentiator.

We will launch the new technology this fall, as well as an aggressive knowledge Management campaign.

This year we'll continue the professional development of our employees at all levels in the organization, providing employees with advanced career development to positively impact client service and retention.

Furthermore, we will strategically invest in promoting the brand and exploring possibly new service offerings.

With strong momentum coming from a banner year for fiscal year 2005, We are optimistic for our business this coming year.

We are encouraged both by the increasing demand for talent and development, as well as the continued realization by our clients, will turn to Korn/Ferry for multiple human capital needs.

At that, I would like now to turn it over to Gary Burnison, our Chief Operating Officer, and Chief Financial Officer.

Gary.

Thanks Paul, and good morning everyone.

As Paul said, today we're pleased to report yet another strong quarter capping off another remarkable year, in which Korn/Ferry recaptured the number one worldwide market share position in the industry, while generating record returns for our shareholders.

Quarter four EPS improved $0.04 sequentially to $0.27, and reached a record $0.90 for all of FY '05, the highest in Company history.

Year-over-year EPS surged $0.55, and was 2.5 times greater than FY '04.

Additionally quarter four Marks the seventh consecutive quarter of revenue growth, and more importantly the ninth consecutive quarter of improved profit margin, and I'll point out all with improving client satisfaction scores.

Our operating margin reached 15% in quarter four, and nearly doubled year-over-year, reaching 14.5% for all of FY '05.

Fourth quarter fee revenue improved to $124 million and grew nearly 27%, versus the fourth quarter of last year, and almost 38% for the full-year, reaching $452 million.

Cash flow surged $50 million in the fourth quarter, bringing our FY '05 ending cash balance to $207 million.

Now let me review the business segment, starting with the executive recruiting.

Fourth quarter fee revenue grew over $6.6 million or 6.4%, versus the third quarter to $109.1 million.

Additional, fourth quarter fee revenue was up at over $21.5 million, or nearly 25% versus last year, and up over $104 million or 35% for the full fiscal year.

Fourth quarter growth was primarily driven by North American, which surged almost $8 million, or 14% sequentially, and $11.6 million, or 22.5% versus the fourth quarter a year ago.

For the full year, North America fee revenue grew over $55 million, or 32%.

In Europe, fourth quarter fee revenue grew 37% over the prior year, and increased an impressive 41% year-over-year, Reaching $110.4 million in FY '05.

Year-over-year growth in Europe was driven by improvements in the U.K., in France, Germany and The Netherlands.

Asia/Pacific finished a very strong year with $51.2 million in fee revenue, up 39%, or $14.4 million year-over-year.

Greater China, India and Japan markets were major growth drivers in FY '05.

Latin America fourth quarter fee revenue grew 59% versus the fourth quarter a year ago, reaching $3.3 million.

For the full fiscal year, Latin America fee revenue grew 29% to $10.8 million, and of course this is without our fabulous partners in Mexico.

Our executive recruiting operating margin improved 22.5% in the fourth quarter, driven primarily by improved profit ability in North America, where operating margins surged 28.7%.

For the full fiscal, executive search operating earnings grew over $39 million or 90%, with an operating margin of almost 21%.

The number of executive recruiting consultants was up seven, to 398 at the end of the fourth quarter, and consultant productivity continued to climb, reaching an annualized rate of a little over 1.1 million per consultant.

Now turning to Futurestep, where fourth quarter fee revenue reached $14.8 million, and up 47% versus the fourth quarter a year ago.

For the full fiscal year, Futurestep grew an impressive $19.6 million, or 57%, reaching almost $54 million of fee revenue.

Year-over-year growth was strongest in North America, where fee revenue grew 82% to nearly 22.1 million.

Futurestep fourth quarter operating earnings were $1.5 million, or almost a 10% margin.

Relative to last year, Futurestep's full year operating ratings improved $6.3 million, or 5.5 times, while our operating margin improved 3.5 times, to 14.4%.

Let me now comment on our fiscal '06 first quarter outlook.

Assuming constant FX rates, we estimate fee revenue will be in the range of $120 to $127 million, and EPS will likely range from $0.24, to $0.28 per share.

That concludes our remarks.

I'll turn it over to John, so we can begin to take your questions.

We'll first go to the line of Dave Conney with Robert W Baird.

Please go ahead.

Good morning and congratulations on a very good quarter.

Thank you.

I noticed, well first of all, I'm interested in bonus accruals the quarter, and then I guess secondly I noticed the salary benefits line looked like it was around 68% of revenues this quarter, and had been kind of in the 63% to 64% range most of the year.

Just kind of wondering where that should go I guess on a go forward basis.

Our bonus are directly related to profitability, and as we double the operating margin year-over-year and finished very very strong in the fourth quarter, the bonus accrual was a little higher in the fourth quarter than this was in the third quarter.

The other thing that impacts that as well is that historically cash collections are always strongest at the end of the fiscal year, and that had a impact as well.

For the quarter, the bonus accrual was $28.9 million, and for all of the year, it was about $91.3 million.

I would expect that as we look into the first quarter, that that comp ratio is going to go back to where it was, say in the third quarter or so.

About that level.

And I want to emphasize David, since we've been here that our bonuses are tied to profitability, and you know what?

We had a record year, and we have very strong bonuses because the partner's delivered a record year.

If they don't deliver results, than the bonuses aren't there.

So what I think we have to remember is that this Company made more money at $450 million than it did at $650 million in 2000.

And we're going to reward the partners for focusing on delivering value to shareholders.

Okay thank you, and just one follow-up.

In Europe, some of the recent macro data points have been a little weaker.

It looks like, you're continuing to do very well there, and just wondering what you saw towards the end of this last quarter, and what you saw early on in this current quarter?

I don't think we're having a hard time tying the macros to our performance, because Germany macros are down, and our business is up.

We're strong and continue to take share I think in Europe.

We've added a lot of partners, we have great team, and we continue to grow in Europe, and I think if you compare against the rest of our firms that are trading in Europe, we're growing at a much faster rate, and I think we're going to continue to have a strong team there, and continue to take share and we've been worried about the macros in Europe for two years, and we seem to be growing like crazy.

Great.

Thanks and again congrates on the strong results.

Thank you.

Next we got to Kelly Flynn with U.B.S.

Please go ahead.

Hi, can you guys hear me?

Yes

Okay, great.

Good work on these results.

I have a couple of questions.

In Europe just to revisit that.

On the number of consultants that you hired, how many did you hire in Europe, and could you give us a little bit more geographic details on kind of where you're hiring them, and then I have a couple more questions as well.

Well, we're trying to hire throughout the world, and we're obviously recruiting in Asia, North America, Latin America, and Europe.

You know if you look back say over last six months, I'd probably say that 40 to 50% are in Europe, something like that if I pick a number off the top of my head.

But we've actually, just like what we've seen in the business cycle here, it's been a fairly broadbased recovery across geographic sectors as well as industries sectors, and our hiring has basically reflected that as well.

Thanks, and then secondly on the equity earnings that was negative I think.

Lower than our expectation.

Can you just detail what went on there?

Yeah, lower than our expectations.

We deconsolidated our ownership interest in Mexico three years ago or so.

And although we treat our colleagues in Mexico like employees, their part of our bonus process, the policies, the technology, historically as we do with our own colleagues around the world, we issue equity based awards stock options to those, we call them employees, colleagues in Mexico.

And when we deconsolidated those operations, we should have expensed those stock options.

So what you're seeing there is substantially an expense for the stock option account.

And what would that look like down the road? is that an adjustment, or something..,

I didn't hear you Kelly.

What did you say?

Sorry, was that a one time adjustment? or

Oh, absolutely.

I think what you'll find in the next quarter is that the earnings will be very similar to what they were in the third quarter.

I'm sorry.

There are sirens behind me.

But the third question.

To some, Futurestep, it seems like the way you guys are positioning that business may position it to partner with some of the human resources outsourcing firms, which we're hearing more about in the marketplace, by providing the recruiting solution.

Are you picking up opportunities on that front, and if so, maybe you could just speak a little bit to how that might evolve, and then even generally kind of what you're seeing on the HR outsourcing front.

Is that a good market for you guys to target?

Kelly I think that obviously everybody is looking at the HR kind of outsourcing piece.

We have not focused on the back office, which I think most of the outsourcers have.

Benefits, payroll and all that piece.

And I think what you're seeing is some of the bigger Companies doing a little bit of the recruiting, but they're not specialized recruiters like we are.

And so we've positioned ourselves as the people that really understand the recruiting part of that phase.

We are not in the back office part of the space.

So, so far the growth has really become to taking over the recruiting, including the recruiting processing, but not the rest of the Human Resource benefit back office piece.

My guess is that as this market matures, there maybe opportunities to partner with some of those people.

But so far, our growth has been a result of just focusing on what we do.

But we've talked about whether we should partner with some of the back office folks, which we really haven't done today.

Okay.

Alright, thank you very much.

Our next question is from Toby Sommer, with SunTrust Robinson.

Please go ahead.

Good morning.

Congratulations on a good quarter.

A few questions.

One, if you could talk about your business in Asia.

I'm wondering to what extent we read some articles in the paper recently about executives moving back to their homeland and wondering if that's a trend that is benefiting you in terms of providing a quality supply of potential executives to the region.

I think that the executive recruiting globally is a challenging business, because as you look at the demographics, there's a tightening supply of executives and white collar workers.

What you're seeing is a big trend, especially in China, that even when I got here four years ago when I spoke at Beijing University, or talked today people in MBA schools here, Chinese Nationals who were here are in Beijing wanted to come to the U.S. for jobs.

What you're seeing now is people graduating wanting to go back to China.

So, you are seeing because of the amount of opportunity there, much more of an inflow of returnees.

Now returnees sometimes western Management styles of people that have worked here don't fit in well with Chinese Companies.

So it sounds easy, but the biggest part of recruitment is cultural fit.

But those trends and movements are increasing, and I think it does benefit global Firms.

We got a solid number one position in China.

We just moved our Asia leader from Singapore to Shanghai.

We're going to announce some new people on the mainland.

We're recruiting in Hong Kong, We;'re continuing to strengthen our China area.

We've opened up Futurestep there.

Sop even though we'vebeen in a leadership position, continue to invest in China and India, which are two big growth markets to build off the base we have there.

So I think global movement will benefit global firms.

And than I was curious in terms of the capacity that you feel you have in revenue per consultant.

Can you speak to that?

What it was on an annualized basis in the quarter, and maybe how much opportunity you have to increase that?

Well the annualized run rate was about a million one or so, and that obviously varies among the forty countries we operate in.

But we we probably have, and it's going to vary by pocket in sectors, but on an average if I had to pick a number, there's probably %10,12%. maybe something like that of additional capacity.

But the other thing that plays into this too is fees, average fee levels.

And to the extent that that goes up, that creates just as much flow through as capacity does.

And our average fees are up 15% this year over last year, so one of our drivers especially in the economic recovery is to keep pushing our fees.

And in terms of sort of broader trends that maybe helping to drive fees higher, are you seeing continued impact in terms of greater emphasis on cash compensation relative to equity?

No, I think cash compensation in the last couple of years have come back, but I don't think the mix has changed.

I think the market has gotten very very competitive, and Companies need to attract the right people.

The hiring market is up, and there are two parts of recruitment.

One is overall employment.

And you know we think, and have been saying for two years that we thought that the employment market was strong.

But the other thing that impacts our industry is velocity.

So you know you see a new CEO being put in an HP, which leaves a vacancy at NCR, which someone will be recruited to and leaves another vacancy.

That goes on all through the industry.

So as people start moving, the velocity of jobs that become open increase, and that impacts our industry too, very positively.

And I'll ask two more questions if I may.

Was curious about your cash balance after paying the bonuses.

Is that what appears on the balance sheet at the end of April, or is your cash on hand ad this point lower?

And then I was wondering if you could touch on the possible new service offerings that you mentioned in your prepared remarks?

Thank you very much.

Thank you, Toby.

The cash balance that I refer to of a little over $200 million is before our bonus payments, and those payments are generally made in July and August.

And then on the question was, forgive me here.

It was regarding you mentioned some possible new service offerings that you're looking into.

If you'd give us a sense or little more color on that regarding magnitude and perhaps timing, if you could give us more detail on that?

We've been a Company that from the very beginning even the recession, said that we're going to focus on solutions.

And I think in a time where people are wondering why we kept our Futurestep business and LDS business.

We've proven that they're good businesses and they're profitable.

This coming year, we're looking at first to continue to grow our core business.

It's a fabulous business with great margins, and we're investing in technology and the knowledge management to improve and to continue to take share there.

And Futurestep and LDS, again we're looking to growing those businesses both organically where we had almost 60% growth in both of those businesses. it's pretty hard to complain about that kind of organic growth.

But also looking at if it makes sense strategically.

If theyre pieces that we can acquire to hold on to those business that help, we're considering those.

And we're also considering other offerings that may reinforce our current offerings.

Of course search and Futurestep.

And I really don't want to get into a lot of detail on that strategy, but we're working with the Board and Management to determine where our next bets maybe.

Thank you very much.

Our next question is from Michel Morin with Merrill Lynch.

Please go ahead.

Yes good morning.

A couple of questions.

First, it seems on the margin front that North America really carried the day here.

And I was wondering if you could comment a bit on whether or not there was anything special this quarter that we may have seen there, and similarly if theres anything in any of the other regions that we should keep in mind in our projections going forward.

And then secondly, I was wondering if you could talk a bit about any trends you may have seen during the quarter,and did you see any strengthening during the quarter or any weakening during the quarter in any given region?

Thank you.

Well we, contrary to the May employment numbers, within one month doesn't make a trend, we have seen during the quarter like we said a broad based recovery.

And that appears to continue.

The Companies are hiring, and the demographic trends are very very powerful longer term.

If you speak to the margins a little bit, the North America operating margin, did surge quite a bit, directly related to the substantial increase in revenue sequentially.

Some of that was due to upticks at the end of the year, and that has a very very positive impact.

Europe although it was down, has had really I would say a phenomenonal year in terms of operating margins.

And Asia/Pacific has been fairly constants in terms of profitability over the last two quarters.

And Latin America came in with a operating margin of something like 10% or so, and that tends to fluctuate between 10% and 15% if you look back over the last several quarters.

So we were very very pleased with the profitability of our different business units across the world.

And overall finishing with a 15% operating margin for the quarter makes us feel very very proud.

Okay thank you, and just one quick question also on the tax rate.

Looks like that one came in quite a bit lower than I had anticipated.

What kind of assumptions should we be making going forward there?

I would assume a 40% rate as you look forward.

Great thank you.

Our next question is from Ty Govatos with CL king.

How are you?

Congratulations on a great quarter.

Thank you Ty.

When I looked at your SGA, I know it was consistent with last years numbers, but well below the first 3 quarters.

Is there any special reason for that, and could you give us some enlightenment on what that number might look like this coming year?

Well, as we talked about the comp ratio being a little bit higher in the fourth quarter due to the strong finish in the operating margin, the G&A expense is a percentage of revenue was a little lower than one should expect in the first quarter.

Those two should generally wash out.

But the reasoning is because of the bad debt accrual that we made throughout the world, and we were making some assumption for several countries in Europe and the Middle East, and our experience turned out to be very favorable compared to the assumptions that we were making earlier in the year.

And Ty did disconnect.

We'll move to Kurt(ph) Muller with RCM.

Please go ahead.

Good morning.

Good morning

Could you please give us the number of new engagements so far since April 30th compared with the time period to that last year?

No we don't have it, nor would we disclose it.

Okay, also -

We're not seeing a fall off in business if you're going to ask that.

I was hoping to get some kind of quantification as to how it progressed, but I'll have to wait about two to three months, I guess. .

Yes.

What was the average fee per engagement in the April quarter also?

The average fee I want to say was about 63 grand or so.

Thank you very much.

Thank you.

And we do have a follow-up from Toby Summer.

Please go ahead.

Just wanted to, I may have missed some of your prepared remarks regarding leadership development services. could you repeat that for me.

I think you mentioned 56% growth I was curious about a dollar figure and so forth, and a little bit more color.

Thank you

We don't - the number's right.

We don't disclose that dollar growth because of the way we report.

We don't report it as segment, but it's been a great growing business.

It is integrated with our Executive Search business.

In addition, we have a unique feature by integrating call that we call search assessment.

We actually - a third of our searches today use an online assessment tool as part of their search which is based off our LDS tools which we're finding is a competitive advantage with our clients also, so it's important business for us not just from a profitability and growth, but strategically kind of carving out some new space for us and positioning.

So you do consider it a different differentiator of your product.

Absolutely.

The tools that we have, the online assessment tool that we use I think is world class, and you'll be reading about it in some of the academic periodicals in this coming year too.

If I could get a little more color on future recruitment of new consultants.

Curious what you anticipate the mix of those consultants being.

Perhaps if you could talk about three buckets perhaps of internal promotions, external hires of people with executive search experience, and maybe a third bucket of people you would anticipate bringing on from industry.

Thank you.

I think you'll see a number of things.

You'll see that we're amongst all the firms probably promote more of our people.

We have like a consulting methodology which many of the firms don't use, where people can work their way up to be consultants.

So be announcing our new class of partners which will be a robust class.

We have people just doing very very well in our business.

I think from the external recruitment, what you're seeing is we're moving more and more to hires from industry that when we first started off with recruitment, I think many of them were from competitors to fill what holes or needs that we felt in certain places.

What we're finding is a growing percentages of people now coming from industry.

And I think we track and our board tracks both new recruits from industry and outside our industry, people have been doing very very well.

And that part I think is through our recruitment process, our recruitment screening and our assessment test.

We have our new recruits taking assessment and compare them against the model, and they've been doing extremely well, much quicker than we expect, because This isn't a apprentice business where you expect people from industry to spend time learning.

So you may see an increasing part.

I don't know if it's 50/50 of industry and competitors.

We don't really target Companies.

We target people that we think can fill a particular need or hole in our region.

If you were to look at industry recruiters, versus overall look of business, would they're annualized revenue be meaningfully lower than you're overall consultant base?

Well new people always have a ramp-up time.

We've been surprised, we would expect an industry recruit, I mean, I think the rule of thumb in the industry has been two year to the fully ramp-up.

We've been amazed at how quickly our industry recruits have ramped up this year.

Partly maybe our training, our selection process, our mentoring.

But we've had great results from our industry people, and have done much better than we thought this year.

Now whether that's an anomaly, will we continue to be able to do that, we'll see. but we have a rigorous recruitment process, and both from a cultural standpoint and ability standpoint, and it's paid off so far.

Thank you very much.

We have a question from Mark Marcon with Robert W. Baird.

Accept my congratulations on ending results.

I was wondering just a follow-up on the last series of questions, Paul and Gary.

Is there any way you can give us a feel for it, I mean we can see what the average productivity level is like.

Can you give us a feel for,if you were to break it down into cortiles like what your top cortiles is doing, and are there any reasons why ultimately you're average person couldn't get to those levels.

And then I got a follow-up.

Mark, I think there are two pieces.

One is, one we're not going to give out because of competitive reasons.

Cortile information But we're seeing in this business is, how do you make the consultants more productive so clients are happier, to oversimplify it.

So there's two pieces to it, is productivity in terms of leverage and support both in technology, information systems and people.

And the second piece that really drives us is average fee per engagement, and there is a physical limit in most markets on of how many searches a person can handle.

And that varies by geography and market and sector.

And so we have a big focus.

We've had 15% increase in average fee, and if you hold the number searches constant, you increase fees 15% again this year.

You know you've made a big gain.

And so our focus is been to increase fees.

Our average fee historically has been lower than our competitor's, but we think there's a little bit of room.

Part of that though is because we're so much dominant in Asia and Latin America that that does bring the global average down.

But we think there's little room for improvement.

We've made great improvements this year, and we'll continue to do that.

What are you seeing in Asia in terms of fees.

The reports that I been getting, particularly out of China is that demand is extremely high, and along those lines, can you talk a little bit about what your two to three year, from a two to three year horizon perspective what your expansion plans would look like in Asia?

Well you know we've been a dominant firm in Asia, and we're hiring and recruiting senior people.

So we're not resting our lorals.

We have great leadership and a team there.

We did a strategic study about a year and a half ago about how do we really leverage up India and China.

So I think the results in Asia are partially is because we've been ahead of the curve.

Demand is extremely strong in China.

We're bulging out of our buildings, we're hiring people.

And we have honestly more work.

We get more offers to do work than we can handle.

Were continuing to grow in a very measured way, like the way we started this process a year and a half ago, and we're ahead of the curve.

Now the Chinese market is still an immature market.

Its huge but it's immature in growing.

I expect Asia to continue to leverage off it's dominant position. it a percent of our business is smaller, but it will continue to grow.

It's interesting I mean if people focused on the different regions, but if you really look at our numbers I think anybody would have been happy with any regional growth number we had.

Sure it's across the world.

I think it's going to be a good year.

Excellent.

Congratulations again.

Thanks.

And it appears there are no further questions Mr. Reilly

Great.

Well we thank you all for joining us, and again, we're very proud of 2005, but it's now 2006.

So our focus is to continue to grow the business.

We're still cost conscious, we don't want to get caught in the mistakes the industry may have made four years ago but we're very optimistic.

So we look forward to talking to you next quarter.

John

That does conclude your conference for today.

Thank you for your participation, and you may now disconnect.