Pediatrix Medical Group Inc (MD) 2004 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Pediatrix Medical Group 2004 third quarter conference call.

At this time all participants are in a listen-only mode.

As a reminder today's conference is being recorded.

Before I open up the call to the Pediatrix management team I want to read a forward-looking advisory statement.

Matters discussed during this conference call include forward-looking statements.

All statements other than statements of historical fact that address activities, events or developments that Pediatrix believes, anticipates, intends, expects, or projects and similar expressions are forward-looking statements.

Forward-looking statements are based on assumptions and assessments made by Pediatrix management based on factors they believe to be appropriate in light of their experience.

Forward-looking statements are subject to risks and uncertainties that could cause actual results, developments and business decision to differ materially from those contemplated by these statement.

Pediatrix described uncertainties, risks and assumptions in its most recent annual report on Form 10K filed with the U.S.

Securities and Exchange Commission.

Please see the section entitled risk factors in that report.

Pediatrix undertakes no duty update or revise any forward-looking statements made during this call whether as a result of new information, future events or otherwise.

At this point I would like reminds you that following remarks by Dr. Roger Medel, Pediatrix CEO and Dr. - - Mr. Karl Wagner, pardon me, Pediatrix CFO, management will host a brief question and answer session.

I would like to turn the conference over to Dr. Medel.

Please go ahead sir.

Thank you.

Good morning and thank you all for joining our earnings conference call today.

By now I'm sure that most of you have seen the numbers that we reported this morning which includes record quarterly revenue, operating income, net income and earnings per share, as well as solid cash flow from operation.

In a few minutes we are going to provide some of the detail behind those numbers as well as an update of our fourth quarter guidance and the introduction of our 2005 earnings guidance.

Before turning the call over to our CFO, Karl Wagner, I want to briefly discuss some of the activities that have affected our most recent quarterly results.

As you know during the 2004 third quarter we saw a pronounced increase in a number of our patients who were participating in government sponsored PERA programs, principally Medicaid.

At the same time we experience ad corresponding reduction in the share of our patients who's care was covered by commercial insurance products.

While we had been experiencing a gradual shift over the past several years, a shift that's consistent with the information presented by the American Academy of Pediatrics, the acceleration of that shift during the 2004 third quarter was unexpected.

In September I told that you we were analyzing the factors behind the change in our payer mix and I want to share with you some of what we learned as part of our analysis.

Our findings are not conclusive but they do confirm that several economic factors, the rate of job creation, personal income growth, the greater cost of employer sponsored health insurance born by employees and their dependents, and more liberal eligibility requirements for participation in government health insurance programs have converged to impact our operations.

Medicaid eligibility is set at the percentage of the federal poverty level.

Specific eligibility thresholds vary form state to state but most of the people participating in the various programs consist of the unemployed and low wage earners.

The State Children's Health Insurance Program, or SCHIP provides additional coverage for children who are not Medicaid eligible and who's parents generally do not have the resources to pay the premiums through their employer sponsored plans, or to buy private insurance.

In 2003 with states under fiscal pressures there were efforts to restrict access to government health insurance programs.

In a number of states those restrictions have recently eased.

In Texas, for example, the SCHIP program had historically required an annual premium of $15.

Certainly a threshold that could be met by many.

In July, 2003, with the beginning of the 2004 fiscal year, that annual premium increased 12 fold to $180, or now $15 per month.

Not surprisingly enrollment in the Texas SCHIP program declined as a result of those higher plan costs and stringent enforcement of that plan.

In August of that year Texas curtailed its previous practice of dropping children from the SCHIP rolls when their parents weren't current on the $15 monthly premium and today that premium has been rolled back to the old $15 per year charge.

Not surprisingly SCHIP enrollment in Texas turned positive in August of 2004.

Texas, of course, is our largest state and changes in eligibility there probably had some impact on our business.

This is not an issue that's restricted to policies in one state, however.

Other states eased states, eased restrictions beginning with their new fiscal years that started in July.

For example Colorado had frozen its SCHIP enrollment at the beginning of fiscal 2004 but began enrolling new numbers with the new 2005 fiscal year. o on one side of the eligibility ledger we've seen a trend toward increasing eligibility for Medicaid and SCHIP programs which we believe has created some incentive for low wage earners to enroll in government program, particularly for their children.

In fact the numerous studies demonstrate that when eligibility for public insurance programs expand it has a dual effect of reducing participation in commercial insurance products.

We believe that this process known to economists as crowding out, has been magnified particularly for the patient population that would meet any of the income eligibility requirements of government programs like Medicaid and SCHIP, because many employers have increased the employee burden associated with the dependents coverage.

We believe that higher copays, deductibles and monthly premiums create a disincentive for employees to enroll their children in their employers plans.

At the same time the SCHIP programs typically have higher income eligibility thresholds meaning more families qualify for this coverage.

As we look at the events that we believe caused this abrupt shift in our payer mix it's more and more clear that what we are dealing with is a convergence of several economic factors.

We recognized that a lot of these factors are external to Pediatrix, meaning they are affecting our patient population.

The issues are not, however, affecting our patient volume.

Although there is little we can do to impact these coverage issues one thing we can do is maintain our focus on our core operations.

And that's exactly what we've been doing.

And our efforts are reflected in the very solid results that we've reported for the 2004 third quarter.

During this period we expanded our presence in Houston adding physician services at two area hospitals.

Early in the fourth quarter we've added a new neonatal practice in Atlanta.

So far this year we've spent more than $45 million on acquisitions which is well on our way towards our stated goal of 50 to 60 million for the year.

At the same time we continue to use our capital to repurchase shares.

Since we announced the payer mix shift we've completed the most recent authorized $100 million share repurchase program acquiring 1,800,000 shares in open market transactions.

It is my expectation that the introduction of our 2005 guidance which includes contributions from practices we expect to acquire throughout next year should provide confidence in our ability to continue to grow our business.

At this point let me turn this over to Karl Wagner for a detailed discussion of our quarterly performance and updated earnings guidance.

Karl?

Thanks, Roger.

Good morning, everyone.

In an environment that's become challenging we report very solid results for the 20004 third quarter.

Revenue for the third quarter increased by 9% to a record $158.3 million.

Revenue increased as the result of contribution from acquisitions completed during the previous 12 months,as well as same unit growth of 2.2%.

We did experience an increase in same unit patient volume of 3.9% at our neonatal intensive care units, a number that is in line with our historical guidance.

In fact, through nine months of 2004 our same unit, NICU patient volume growth is at 3.2%.

Overall same unit growth was lower than our historic numbers as a result of a mix shift towards government payers from commercial payers that Roger discussion.

I want to reiterate what Roger said by emphasizing that what we are seeing is a payer mix shift only.

Our NICU patient volume numbers are within our expected range so this is not a matter of substantial increases in patient volume with most of the growth coming from patients covered by Medicaid.

Profit after practice expenses grew by 5.5% year over year to 63.8 million for the 2004 third quarter compared with 60.5 million for the 2003 third quarter.

Margin after practice expenses declined to 40.3% for 2004 third quarter from 41.6 for the same period a year ago.

As a result of lower average reimbursement caused by the payer mix shift.

As a reminder Pediatrix manages a largely fixed cost business model with salaries and benefits for clinical and general and administrative staff comprising the overwhelming majority of our expenses.

We staff our practices based on patient volume and as I stated a few minutes ago, our volumes have been increasing.

The variability in practice expenses is largely tied to physician bonus expense.

During the third quarter accruals for bonuses were impacted by the decline in average reimbursement related to the payer mix shift.

Our efforts to manage our general and administrative expenses continue to succeed.

And in fact they were the principal reason for the maintenance of our strong operating margins this quarter.

As a percent of revenue general and administrative expenses were 12.6% in the third quarter, or 101 basis points lower than the prior year.

On an absolute basis G&A expenses increased only 1% for the 20004 third quarter when compared against the prior year period.

Operating income for the quarter was 41.5 million, up 9% from 38.2 million for the 2003 third quarter.

As I just said, our operating margin was virtually unchanged at 26.2% for the 2004 third quarter when compared to the same period of last year.

Record quarterly net income of 25.9 million for the third quarter was up 11% from net income of 23.5 for the 2003 third quarter.

Due in part to the growth of the business as well as a lower effective tax rate in place for all of 2004.

Net margin increased to 16.4%, up 26 basis points from the same period in 2003.

Earnings per share grew 7% to $1.04 based on 25 million fully diluted share outstanding for the quarter compared to earnings per share of 97 cents based on 24.2 million shares outstanding for the 2003 third quarter.

Pediatrix's balance sheet remains extremely strong.

At September 30, 2004, we had cash and cash equivalents of $30.9 million total debt of less than 1.4 million.

Since the end of the period we have used that cash and approximately $60 million of our $150 million revolving credit facility to acquire physician practices and for share repurchases.

Accounts receivable were $108.4 million at September 30, 2004.

Days sales outstanding increased slightly as a result of a significant disruption in collection activities at our Florida and Virginia regional offices as a result of unusual hurricane activity.

There were several days when business at both Pediatrix and many of our third party payers was disrupted by weather.

Since September we have been experiencing normalized collection activities and we expect that DSO will trend down during the fourth quarter.

On a liability side accounts payable and accrued expenses increased to 111.6 million an amount expected as we built accruals for incentive bonuses that we paid mostly to our physicians in the first quarter of next year.

Cash flow from operation for the three months ended September 30, 2004, was $47.1 million.

Our cash flow benefited from accruals for compensation including physician incentive bonuses.

We used approximately 3 million of our cash for acquisitions, 1.4 million for maintenance capital expenditures, and approximately 34.1 million to acquire our stock on the open market during the quarter.

We've completed our most recent share repurchase program, bringing total share repurchases this year to $150 million.

Obviously the share repurchases affect our earning guidance.

And I want to spend a few minutes discussing the assumptions behind the numbers in the press release issued this morning.

As a reminder, this should be viewed as a forward-looking discussion.

First let me update our 2004 guidance to reflect the impact of the share repurchase.

We now expect to add 4 cents per share to our EPS number for the fourth quarter, increasing our guided range to $1.06 to $1.08.

In addition as stated before we expect cash flow from operation to exceed $120 million for all of 2004.

Now with the introduction of 2004 earnings guidance of $4.50 to $4.60, I want to discuss several important assumptions and I want to remind you of some of the seasonality to our numbers.

The full year earnings guidance assumes that the payer mix remains at current levels.

We've seen no further deterioration which is to say that data for September was relatively consistent with the adjusted levels of August and preliminary information for October suggests the same.

We expect same unit revenue growth will be constrained by this payer mix shift but will be offset by modest improvements from managed care contracting.

In addition we expect same unit NICU patient volume should continue to grow at historical levels of 3% to 5%.

Finally our assumptions include estimated contributions from acquisitions that we expect to make throughout the year.

Our guidance includes an expectation that we will invest $50 to $60 million of our capital to make accretive acquisitions of physician group practices throughout 2005.

Our earnings guidance does not make any estimates for the impact of expensing stock options but change is expected in the second half of next year.

Like many others, we are waiting to see final rules from the Accounting Standards Board before able to comment on the change it will have on our earning.

I'd like to take a minute to reminds you of the seasonality to our business.

Our quarterly earning are usually lower in the first half of each year for several reasons.

The majority of our neonatal physician services are build as bundle day charges and there are few days in each of the first and second quarter's than in the third and fourth quarters.

In addition we have a significant expense hurdle in the first half of each year and most notably the first quarter.

As we match the FICA or Social Security cash contributions made by our physicians and managers.

Finally, first quarter cash flow from operations is expected to be negative as we make incentive bonus payments, 401K matching contributions and tax payments.

These are normal to our business but I wanted to take a moment to remind you of these issues.

I want to thank you for listening to this overview.

We continue to successfully manage a very solid, profitable business and we remain very excited about the growth prospects for this business.

At this point I will turn the call back to Roger.

Thanks, Karl.

At this point let's just open the call up for questions from analysts and shareholders, please.

(OPERATOR INSTRUCTIONS) We will take a question from the line of Bill Bonello, Wachovia Securities.

Please go ahead.

Mr. Bonello.

Can you hear me now?

We can hear you Bill.

A couple questions.

First of all is there any way you can quantify the impact of the Medicaid mix shift on revenue and EPS in the quarter?

At this point we haven't gone to quantifying every change in the shift.

I think we are probably comfortable in saying that the guidance we had previously given for the quarter would have been accurate had we not seen this dramatic mix shift.

All the other factors that we typically talk about for the third quarter, the volume growth being at 3.9% for the quarter was in our range.

The real issue is we didn't get the impact from pricing which we would expect to be positive in the 3% to 5% range for the quarter it was actually negative directly due to the payer mix shift.

We haven't gotten to the point of releasing the quantification of that impact.

That's fine.

Then are you aware of any changes either positive or negative, to Medicaid eligibility in some of your big states that are coming in 2005?

At this point the research that we have done, discussions with the economists and others, we have not seen anything that's coming for changes in Medicaid enrollment eligibility requirements in 2005 that would have an impact.

How about Medicaid reimbursement rates in any of the big states?

There has been nothing in our view at this point on Medicaid reimbursement in any of our large states that's going on positive or negative that we see affecting us next year.

All right.

I will jump back in the queue.

Thanks.

Thanking you very much.

Next we will go to the line of - - pardon me, ladies and gentlemen, next we will go to the line of Andrew May with Jeffries and Company.

Please go ahead.

A couple of things.

First, the physicians generally understand that bonuses are going to be lower this year than year ago and can you give kind of an estimate of how much for a typical NICU position how much lower his bonus will be this year than last?

We have communication with several of our groups out there and I know all of our regional regions are having constant discussions about performance of our practices.

Our financial results for each practices are sent to the medical director of each practice on a monthly basis.

So it's clear to us that they do know what's going on.

You do have to remember we are seeing growth in our practices so it's not a function of a lot of practices that we are going to see a lower bonus necessarily than last year.

It may be that it's not the growth that they would have expected.

And the dynamics are really on a practice by practice basis.

So there are cases as you saw, our same unit revenue growth was 2.2% for the quarter.

It was negative from pricing but there was growth.

But it is being communicated to the practices.

I know that there's been discussion and they understand that there's really not a lot that can happen on the payer mix.

It's not - - we can't control what happens on the patients that walk into the door.

Right.

Some of the downward pressure you've described Texas as being a place where you've had quantifiable, demonstrable impact from a change in the government program.

Are you seeing the same thing on the grounds that it's Texas where you are seeing a lot of deterioration in payer mix?

We've seen the change in several states.

We have seen it in Texas.

I think we said on the call but Texas, one being our largest state it also has the largest differential between what commercial insurance products are and what their Medicaid reimbursement is.

That's primarily because of two things, one, low Medicaid reimbursement from the state as compared to other states, and an environment for physicians in general in the state of Texas that creates higher reimbursement, not just for pediatrics but physicians in general in the state of Texas.

Just make sure I got my arithmetic right on the buy backs that you - - if I'm correct you bought back $23 million worth of stock in the second quarter, I think you disclosed 34 million in the third, and then 150 million year-to-date, and none in the first quarter.

So that means 93 Q4 to date?

That's correct.

Okay.

Good.

Thanks.

Ladies and gentlemen, once again please press start one if you would like to ask a question.

We will hear from Bill Bonello once again.

Go ahead.

If I look at the impact of share repurchase, and I may actually even be underestimating this based on what you just said to Andy, but it looks to me like the share repurchases that you've already completed that you had not completed as of the time you gave your revised guidance downward, might contribution as much as 30 cents of EPS in '05.

And if that's the case it would seem to imply that you expect operating income over recorded '04 results to be less than 10% versus about 8.8% in the most recent quarter.

So I understand why growth would be pretty low in the first couple of quarters in the year but it seems like it would be significantly higher in the back half and just that that target seems fairly low.

So just curious if there's anything else that I am missing impacting growth here, if I'm just not thinking about the numbers right?

And not having all your numbers in front of me, Bill, I wouldn't have said it was quite a 30 cent number for next year.

I think we have to remember when you compare your growth for '05 to '04, I don't know how you're doing it but you can't include the impact in the fourth quarter of this year from the share repurchases but give a whole benefit next year of the share repurchases.

So you're kind of double counting some of that.

That's a good point.

So I think we need to be careful on that.

So when I look at it I get a little different number from a growth standpoint.

We do expect that the first couple of quarters because we are resetting the baseline due to the payer mix change for the first couple of quarters we will have negative revenue growth.

So we do think that that will impact us.

And we are very committed to, once we've set that baseline, to be able to grow this business through acquisitions and through same unit growth in volume and pricing going forward.

So I think the growth numbers may be a little bit better than what you had said.

Wait, negative revenue growth or negative same market revenue growth?

Negative same unit pricing growth.

Okay.

You are not actually projecting that revenue is going to go down year over year?

No.

It was from a pricing perspective.

We do continue to expect volume growth.

Okay.

And this G&A expense level, is that sustainable or are you going to have to beef that up in order to support your growth?

Well, as we grow we are going to clearly have to continue to grow our G&A levels this year we've kept it pretty tight.

I wouldn't say that we are going to expect to see a dramatic drop in it as a percent of revenue, although I think we've shown over the years that we've tried to keep our growth in G&A at a rate lower than our revenue growth and that's something we continue to strive for.

We have seen this quarter very low growth year over year but we did, actually our growth from Q2 to Q3 is a higher percent than it is year over year.

Some of that was the strength of last year.

We had some significant bonus accruals for G&A people in the third quarter of last year as our growth was very strong last year that wasn't repeated this year.

But we have seen sequential growth Q2 to Q3.

I think it was about 3%.

Okay.

So you are not expecting a significant uptick as a percent of revenue either, though, it sounds like?

No.

Then how does the mix shift impact your bad debt expense and just how quickly you collect your cash?

From a bad debt expense standpoint it really doesn't have an impact.

What we at this point we have not seen a shift to a huge amount of self pay where we are going to get less reimbursement which goes to Medicaid and on the Medicaid programs there's not copays or deductibles from the patients.

So we don't expect so see an impact from that standpoint.

From a DSO standpoint I think it's still our desirable to keep it in that 60 days range.

Some of that is impacted dependant upon time of year, you know as we get to a large Medicaid program gets toward the end of the year we do see them lagging out their payments on Medicaid programs.

We have seen a little bit of that from time to time.

So as we have that shift you might have hold backs for a period of time then it will accelerate again.

So our goal is to try to keep it in that 60 day range.

Okay great.

Thank you.

Next, Rick Dutiel (ph) of Columbia Management.

Please go ahead.

Good morning.

Just a question related to the payer mix shift and your thought process as it relates to the economics of acquisitions.

Does it change your philosophy on the economics of future acquisitions and your thought process on purchase price?

Our purchase price is typically a function of multiple of profitability.

The practices we look at, at their - - as we look through the due diligence process, and if you know their profitability is dropping then the ultimate price that they get might differ but the multiple that we are paying for these practices remains constant.

I assume given your due diligence and the pipeline and everything what you're seeing on a global basis or - - is comparable to what you are seeing in the pipeline of acquisitions on a payer mix basis?

Is that true?

Some of that is market-to-market.

So to the extent they are in a market that is seeing more of this shift we would expect to see that in the acquisitions.

When we are doing our due diligence the thing that we are looking closer at is the recent payer mix, has there in the last couple of months been any dramatic changes in that.

I think when we are evaluating the acquisitions we are saying what would a shift in their payer mix mean to their profitability, and what does that mean to our purchase price.

So we are paying a lot more attention to what is, what happens to the purchase price multiple we are paying if there is a shift, if this happens.

Is it still a price that we are comfortable with based upon those potential changes.

And then understanding what we are seeing in the marketplace.

What we had said last call is that our due diligence process was to look at the last twelve month worth of payer mix and the way we have changed our due diligence is not only look at the last twelve month but to look at the last three months and compare that with the 12 months and see if we see a change in that mix.

Is there any, I guess other than rounding smaller deals, are there any deals that have been done given the changes that you are seeing that really don't pencil?

Acquisitions already made now with the new payer mix environment that really don't, the economics don't make sense?

No.

We haven't seen that.

We do, for every deal that we complete we've got a goal for what that deal is going to bring us and we do have on an annual basis, we do sit down and look at what the expectation was versus the actuals for those deals and that gives us some idea of how we adjust going forward.

But as of this point there are no deals that we are looking at where it looks like we made a mistake.

Okay and then lastly, my understanding is the guidance you provided is status quo on the payer mix issue.

To the extent that the employment picture changes to the positive, that I assume would be a conservative stance?

That's correct.

We would expect that, as the employment picture brightens that we would see a shift in the other direction.

Thank you.

Next we will take a call from the line of Rob Hallisey with Black Rock.

My question was just answered.

Very good.

And ladies and gentlemen you can remove yourself from queue at any time by pressing the pound key if your question gets answered.

Next we will hear from Rick Schottenfeld with Schottenfeld & Associates.

Good morning.

I have a couple of questions.

The first is on the payer mix and your comments that it has stabilized at the numbers that you saw in August and early September.

Can you elaborate on what you mean by stabilize?

You had been experiencing a mix shift and then we had this acceleration.

So if we stabilize to go down at the lower mix shift number, that you had experienced earlier?

Or are we stabilizing at that accelerated rate?

Or are we stabilizing at no degradation in mix shift?

When you look at the mix shift that we realized and discussed on our call in September that we saw in August, we have seen a similar mix profile of our business for September and preliminary through October and we've gotten through most of the month information from October.

So the make up of our business as far as payer has been the same for September and October as it was for August.

We have not seen a continued degradation haven't not seen a return to the prior levels.

Okay.

So that the mix shift is still going at that accelerated negative shift that you experienced for those, that six weeks that you commented on?

No.

The shift is not continuing.

The current mix of our business amongst the payer classes has remained the same in September and October.

I want to be sure that no one is thinking that the rate of transition into Medicaid has continued.

That's not the same level of Medicaid business that we saw in August.

It's pretty much the same level we saw in September which is the same level we saw in October, not - - (multiple speakers).

- - Flat.

The level is flat between September and October and August.

It's remained flat, exactly the same.

But for the first half of the year and for '03, you saw the mix shift toward more Medicaid but it was a gradual mix shift.

Is that trends expected to continue?

At this point we have included in our guidance that the mix shift will remain as we saw with a significant acceleration in August that it will maintain at that level.

We can't really speak to what we will see specifically next year based upon eligibility changes or enrollment changes by state Medicaid programs.

At this point we are expecting that it will remain stable.

Okay.

One last point of clarification and I will leave this subject.

This trend had contin - - had been in place for several years at a steady state.

We saw an acceleration of that trend in August and in September.

When you say remain at a steady state, does that mean that step function down that you saw in that accelerated 6 week period we are going to stay at that step function level and not resume the steady sort of trend downward that you saw from the previous years?

The trends for the previous years was pretty minimal changes.

When you look at the three years it was roughly 1 percentage point a year.

If that much, some of that was a function of the major acquisition of Magella, so it had been very gradual over the years.

We have no way predict whether that will continue we have built in our projection us being stable at the much higher percentage of Medicaid that we saw at the end of the third quarter, but not to see that continue to grow.

Okay.

Final question, on the Magella acquisition can you give us an update on the FTC investigation where that stands, and what are the potential remedies based on any action that they might force you to take?

There is really not much to say on the FTC investigation.

Our lawyers continue to have conversations with the regulators.

But there is really nothing to report, nothing has changed.

We are still waiting for them to tell us what their next step is going to be.

As far as potential remedies, there is really no way that I can address that.

We do here from our lawyers that this isn't a situation where we are going to get a fine or anything like that.

So if they were to pursue an action against us which they have not decided that they are going to do that, they would seek whatever remedies they thought were appropriate and I just really can't address what that would be.

One final final.

Have they given you a date at which they would expect to let you hear from them by?

No, unfortunately this is a retroactive analysis of our acquisition of Magella that's now been three plus years.

Because it is a retroactive analysis there is no schedule that they have to be on.

If it was a regular analysis they would be on a schedule and they would say by x-number of days they have to have a certain threshold that they have met.

But that's not the case here.

So, no, we have no idea.

Okay.

Thank you.

Next, Andrew May, once again, please go ahead.

A couple quick things.

First, what do you expect the medical malpractice insurance picture to look like in '05?

Second, do you anticipate that the board is going to authorize a further buy back or now that you are into the credit line do you think enough is enough for awhile?

And third question, any update to provide on the other investigation, the Medicaid investigation?

You know, we think malpractice is pretty much going to be flat.

We are happy with where we are.

We don't come up for renewal until May of next year.

Obviously that's six months away.

A lot of things can happen between now and then with tort reform and all that.

But it's not anything that's keeping us up at night.

The Medicaid investigation, our lawyers continue to have contact with the Medicaid people.

It's a good relationship.

There is some give and take, you know, some back and forth going on but it's all in a very productive manner.

So we continue to work towards getting this resolved and that's really all I can tell you right now.

And Andy I'm sorry, what was the third question?

Buy back.

Oh, the share buy back.

I don't know.

We haven't really talked about it at our board level.

So whether we will address that, I'm sure the question will come up, whether we end up authorizing a further repurchase or not I can't predict at this point.

Great.

Thanks.

Ladies and gentlemen once again please press star one if you would like to ask a question.

Next we will hear from the line of Bill Bonello, Wachovia.

Just a couple last questions, Karl, can you possibly tell us what the share count would be following the completion of your share repurchase that you've done in Q4?

We are looking hang on.

I guess the question is going to come as to what share count, you mean outstanding or you mean shares from a weighted average?

Diluted shares outstanding sort of to date.

We are expecting that and I will just give you a number for next year based upon the full impact of the buy back being in it, to probably be at 23.6 to 23.7 weighted average shares outstanding.

23.6 to 23.7, okay, and I assume that includes some additional, some additional dilution offsetting some of the share repurchase?

Yes.

Okay, and then is there any way you can give us a sense of what you \expect in terms of revenue for '05?

We haven't in the past and today we are not going to start giving revenue guidance.

We've really given growth guidance in the past, and I think that's where we want to leave it at this point.

And as you know at the end of the year we are going to give you quarterly guidance once we are able break that down further.

So at the beginning of the year, next call, we will give you some quarterly guidance.

Great.

Thank you very much.

Thanks, Bill.

Thank you very much.

And speakers we have no one else queued up for questions at this time.

Please continue.

If there are no further questions we thank you for listening this morning and appreciate your help.

Thank you.

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