宏盟集團 (OMC) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Omnicom fourth quarter 2009 earnings release conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

At this time I would like to introduce you to today's conference call host, Executive Vise President and Chief Financial Officer of Omnicom Group, Mr Randall Weisenburger.

Thank you and thank you all for taking the time to listen to the fourth quarter 2009 earnings call. We hope everyone has had a chance to review the earnings release. We posted to our website both the press release and a presentation covering the information we will present this morning. This call is being simulcast and will be archived on the website. Before we start I have been asked to remind everyone to read the forward-looking statements and the other information that's included on page one of the investor presentation and to point out that certain of the statements made today may constitute forward-looking statements and that these statements are present expectations and actual results and events may differ materially. We will begin the call with brief remarks from John Wren and following John's remarks we will review the financial performance for the quarter and at the end John and I will be happy to take questions.

Good morning and thank you for joining the call this morning. Overall, fourth quarter results were in line with our expectations. Results in the quarter improved when compared to the previous three quarters, but still reflect the reductions in annual advertising and marketing spending initiated by clients in the first and second quarters of last year. As economies improve, we believe that the worse of the recession and its impact is behind us. While not all of our clients have finalized their budgets for 2010, we anticipate that many clients would at least modestly increase spending in the second half of this year.

Turning to our performance and what we expect, we have always placed a premium on strong operating management and we've held our agency leader to very high standards. At an operating level, we've challenged our industry leaders to carefully manage costs and adjust the offerings to better meet the needs of their clients. Across the business, our agencies have effectively managed their cost structures over the past year. While continued cost control is going to be required, we feel good about our individual agencies' ability now to focus on growing their businesses over the next 12 months. In 2009, we also did an excellent job in strengthening and improving our balance sheet and capital structure. Together with capital management, we are now in a very strong position to deploy our capital and grow our business via investing in challenge, investing in start ups and acquisition and utilization of our free cash flow. Over the past 12 months we continued to heavily invest in management training and development as we believe that strong managers and leaders are a key strategic advantage in our business. In 2010, we will make additional investments by expanding many of our programs, including Omnicom University, to emerging markets.

In the digital space, as many of you know, we have a dual strategy of building strong capabilities inside our existing agencies and adding new specialty skill sets. First, we believe that a clear path for success in the future would be to continue to integrate these skills around our traditional businesses and make them adapt as quickly as possible to the changing media environment. Second, we plan to expand our portfolio of specialized digital properties and we should be making some targeted acquisitions and funding a few start ups as we get into the beginning of the new year. Also, in 2009 as I said, we enhanced our capital structure and we reduced the debt on our balance sheet. Going forward, we expect to invest the precash flow differently this year back to acquisitions and increase in dividend, and the resumption of our share buy back program.

As you know, we have always followed a disciplined acquisition strategy. Our focus is to target companies that fill specific strategic needs and in 2010, we expect to be more agressive than we have been in the last 12 months. I especially focus on extension of our geographic portfolio as we look at opportunities around the world. You might note in the fourth quarter we acquired control of our long-standing affiliate partner in the Middle East, Impact/BBDO. Impact has 13 offices in seven countries and should enhance our offering in that region. Finally, as has been widely reported the Company ended its relationship with Chrysler. But excluding Chrysler net new business for the quarter exceeded $900 million, so our Company is performing well when given the opportunity to win new business.

Before I turn it back to Randy, I want to mention given the severity of the recession I am proud of our managers and employees of what they were able to accomplish in 2009 and I think at this point we are poised as the market improves to grow our businesses again. With that, I will turn it back to Randy.

Thanks, John. In summary, the fourth quarter was a solid finish to what I think can safely be called the the toughest economic period in our firm's history. On the whole, our agency management teams on both the client's side and the operations side did an outstanding job of guiding their individual agencies through the difficulties they faced this past year. They were successful in delivering the highest quality services to their clients and at the same time managing their cost structures in a way that delivered solid results to shareholders. While the economic challenges are certainly not completely behind us and the results of businesses vary widely by business type and geography, over the last two quarters, we have begun to see some optimistic signs of recovery in certain places and more widespread areas of stability. While the results overall for the quarter were ahead of our expectations, as I mentioned, it results vary widely by type of business and geography.

By geography there are basically three speeds. In the US, business continues to stabilize with some signs of recovery and few industry sectors. In Europe, we saw business take a further step down in the third quarter and that general trend continued into the fourth quarter. And lastly, excluding Japan, Asia and most of the emerging markets, China, India, Latin America, the Middle East and Africa, all showed year-over-year growth. By business type, our recruitment marketing and advanced businesses continued to have a difficult time and from an industry perspective, the auto category remained very difficult. These isolated areas weighed down what were otherwise relatively good overall performances in brand advertising and marketing services.

Going to the P&L. As I mentioned our revenue performance overall was ahead of our expectation and showed sequential improvement from Q3, however measured year over year revenue declined 3.1% to $3.27 billion. Operating income decreased 10.9% to $399.6 million and our operating margin for the quarter was 12.2% which was in line with our expectations and our EBITDA margin was 14.3% which was down about 75 basis points from last year and little bit ahead of expectations. Year-to-date, our EBITDA or EBITDA margins were down approximately 60 and 90 basis points respectively which we feel is an exceptional performance on the part of of our agency management teams especially given the rapid change in the economic environment that we all experienced from the end of 2008 through the first half of 2009. I also want to point out that we did in the fourth quarter take a pretax charge of $33.2 million in connection with the loss of our Chrysler business. That charge consisted primarily of least cost, the write off of leasehold improvements and some severance. In addition in the quarter, we had a net pretax gain from several transactions that in the aggregate total about $32.4 million.

Net interest expense for the quarter was $28.6 million which was up about $4.7 million from last year and down about $300,000 from last quarter. The increase from Q4 of 2008 was the result of our issuance of the $500 million 10 year senior note last July as well as a decrease in interest earned of foreign balances due to rates. Off set by lower borrowings and lower interest rates on our revolver and commercial paper facilities in 2009. Versus the third quarter of 2009, the decrease was primarily due to reduce borrowings on our short term facilities. On the tax front, our reported tax rate for the quarter was just about flat versus last year at 33.6%. Bringing the year-to-date tax rate to 34% which was up from 33.6% last year. The aggregate result was net for the quarter declining 15.3% to $229.6 million. For the year Net income declined 20.7% to $793 million. And diluted earnings per share in the quarter declined 16% to $0.73 bringing the year-to-date total to $2.53. For the quarter we had average outstanding diluted shares of about 313 million. We finished the year with outstanding diluted shares of 314 million. That's a good number going into 2010. We have again, in the first quarter of this year, started to repurchase our shares and would expect to utilize our excess cash after dividends and acquisitions to continue to repurchase shares throughout the year.

Analyzing our revenue performance. On a year-over-year basis, the US dollar weakened against most other currencies, as a result FX had a year-over-year effect of increasing our revenue for the quarter by $130.5 million or 3.9%. For the year, even after the positive move in the quarter, FX remained negative 3.4% or $454 million. Looking ahead. If rates stay where they are. We expect FX will be positive in between 3% and 4% in Q1 and flat to marginally down for the full year. Revenue from acquisitions net of dispositions was negative $25.1 million in the quarter, or about 0.7%. It was driven primarily by the divestiture of our direct readvertising business earlier in the year. Organic growth was stronger than expected for the quarter, declining only 6.3% or $211 million.

While all of our businesses have been negatively impacted by the recession, a few areas that we have highlighted in the last two quarters continue to be worth noting. First the auto sector which last year was our largest sector was down about 25% organically or about $86 million. The auto sector alone accounted for about 40% of our organic revenue decline in the quarter. Events and sports marketing area also continued to struggle in the quarter down almost 27% organically and our recruitment marketing business was down almost 70% in the quarter and about 50% for the full year. This business has been negatively effected by both the economic environment and the shift to the internet. These three areas together, while accounting for only about 16% of our global Q4 revenue last year and 12.4% of our global revenue this year, they accounted for almost 70% of our organic revenue decline.

As for mix of business, brands advertising accounted for 45% of our revenue and marketing services 55%. As for their respective organic growth rates brand advertising in the quarter was down 4.8% and marketing services declined 7.4%. Breaking down marketing services revenue a little further. CRM had negative organic growth of 7.3%. However, similar to Q2 and Q3, the CRM performance was significantly impacted by our events in sports marketing business. Excluding those results, organic growth for CRM was down only 4.4%. Public relations was down 9.3% and specialty communications had organic revenue decline of 5.8%. Two of the larger areas in the specialty communications category are recruitment marketing and health care. Recruitment marketing, as I mentioned, was down about 70% in the quarter and about 50% for the full year. Fortunately, our health care businesses have performed very well and as a result of strong new business efforts organic revenue was marginally positive in Q4 and down only about 1% for the full year.

Our geographic mix of business in the quarter was 50% US and 50% International. In the US revenue declined $129 million or 7.3%. Acquisitions net of dispositions reduced revenue by $22.6 million or 1.3% and organic growth was a negative 6% or about $106 million. As was the case through the first three quarters. Organic revenue performance was somewhat skewed by our performance in three sectors, auto, events and recruitment. For the US in Q4, these sectors contributed only 13.9% of our total revenue and accounted for 100% of organic revenue decline. Said another way, The other 86% of our US business combined had flat organic growth in the fourth quarter. International revenue increased $23.7 million or about 1.5%. FX added $130.5 million or 8.1%. Acquisitions net of dispositions reduced revenue by $2.5 million and organic growth was a negative 6.4% or $104 million. Internationally we had relatively strong performances in the UK, India, China, Singapore, Australia, the Middle East and Africa, Latin America and Canada. In developed Asia, Korea showed positive signs of growth for the first time in several quarters while Japan continued to be negative. With the exception of the United Kingdom, most markets across eastern and western Europe performed below average.

Looking at revenue by industry, the auto sector represented 11% of our revenue in 2009 as compared to 14% in 2008. This reflected an overall organic decline for the sector of about 25% for for the year. Healthcare and consumer product sectors, due to the relatively strong performances during the year, both increased their share of our revenue while the other sectors remained relatively constant.

Moving on to cash flow, operating cash flow for the quarter and year-to-date was very strong. Overall working capital performance has continued to be very good. Our primary sources of cash net income, stock based compensation and depreciation and amortization totaled $1.1 billion for the year. And our primary uses for cash were dividends which totaled $187 million. Capital expenditures which totaled $131 million this year versus $212 million last year. Acquisitions including earned out payments totaled approximately $137 million this year versus $362 million last year. Share repurchases were only $15 million this year versus $847 million last year. As a result of the above, over the course of 2009, excluding working capital changes, we reduced our overall leverage by about $650 million. As the current credit picture chart shows, including changes in working capital, our year-end debt position improved by about $1.3 billion down to $663 million. As a result, of the reduction in our outstanding debt balances, our leverage ratio, or total debt to EBITDA ratio, improved to 1.4 times as of December 31st and despite the decline in EBITDA for the year, our interest coverage ratio remained exceptionally strong at 13.2 times. I should also point out that in December we terminated a partnership we had created earlier in the year to purchase our 2031 convertible notes and those bonds were permanently retired. And finally from a liquidity perspective, we finished the year in a strong position with cash and undrawn committed credit facilities, totaling about $4.1 billion and we had additional uncommitted facilities available totally $363 million. With that, I'm going to now open up the call for questions.

(Operator Instructions) We will go to William Bird with Banc of America Merrill Lynch. Please go ahead.

Good morning, John I was wondering if you can you talk bigger picture about what clients are saying about 2010 ad spending plans?

It does vary, Bill, industry by industry. One positive sign, which we are seeing at least domestically in the United States, the auto sector I believe is spending more money. Most likely, it is a war for market share which is going on right now. And I think that war will continue well into the first half. Other industries, in general, I would have to say that clients are looking into their budgets and where there is an a ROI, they are modestly increasing those budgets as we go into this year. That's what I am seeing at the moment.

Can you talk a little bit about how you see the year developing? And I know you don't give quarterly guidance or anything of that nature, but as you think about the shape of the year, when do you think it is reasonable to see a return to positive organic revenue growth?

I believe in the second half is what we are looking at for sustainable growth. The first quarter this year will be a little challenged because we are still cycling through cuts that were initiated in the first quarter of last year. There will be a modest challenge as we get through the first quarter. January numbers, which we have seen a flash, were positive and certainly indicate that we are moving in the right direction. I think once we get into the second quarter, we will be against easier comps and we should start to see the impact of some of these modest increases that we were just talking about.

Thanks, one final question on the buyback that Randy alluded to. How active do you expect to be?

There is a number of things that our board will consider when they meet later on today. One is an increase in dividend. They've certainly reauthorized us to purchase back shares and as I mentioned, we are looking at a number of acquisitions. Can't project how many of them we will complete. As Randy has said many times, the use of our free cash flow is really for those three items. If I had to prioritize them I would say that, one hopefully a dividend increase if the board approves. Two, acquisition activity and then residual free cash flow will go to share purchases.

Thank you.

The next question is from Alexia Quadrani with JPMorgan. Please go ahead.

Couple of questions. First one on the organic revenue growth in the fourth quarter that came in better than expectations and I think you said better than budget as well. Was there one particular segment that surprised a bit on the upset or was it just a moderation of declines across the board?

The general businesses in the United States were a bit better than we expected. As I mentioned, 86% of our business in the US was flat. So that was pretty positive results.

Then, when you look at the three areas that you highlighted, obviously being very negative in the quarter, the events, the auto and the recruitment, have you seen any signs of improvement in the first quarter and I know you've only seen January so far, but do you see those declines moderating in the first quarter?

Well, auto is going to be a little mixed and we are seeing a little bit of auto pick up. We lose the Chrysler business effective the end of January. So that's another 1%, 1% of our revenue decline just with the Chrysler account. That's kind of a step up and a step down. I think we are seeing more activity in the events sector. Certainly hearing more about events picking up. Recruitment, I think the hope is we are going it cycle our numbers here pretty soon.

With the auto business, the Chrysler business you mentioned, can we assume everything sort of walks out the door on January 31 or walked out the door on January 31 or did you already see some of the business leaving impact your numbers in the fourth quarter?

I don't believe there was an impact in the fourth quarter. There might have been a year-over-year decline.

There wasn't a sequential change in business from Q3 to Q4.

Last question is if you could comment on margins and profitability. You have mentioned a pick up in incentive comp and obviously there will probably be some more severance associated with Chrysler Q1. Correct me if I am wrong there. How do you view profitability or margin improvement this year given hopefully better revenue trends?

I think Q1, margins with negative organic growth expected in Q1, I would have to expect margins to be down a little bit in Q1. I think we expect margins to be flat to maybe a little bit positive for the year, but it will be back ends loaded as we start to see some organic growth.

Thank you.

Next, we will go to Dan Salmon with BMO Capital Markets. Please go ahead.

Good morning, thanks for taking my call. Randy, can you quantify your exposure to Spain, Greece, Italy and Portugal as closely as you can?

Yes, but not off the top of my head. I will have someone look for those answers while we talk and we will get them back to you.

Let me go to the other two quick ones then. First, looked like there was a little up tick in the depreciation number this quarter and I was just curious if there is a specific reason for that and if that's a run rate going forward?

Let's see, some of it is just coming off of CapEx and timing and some of it, I think a couple million dollars of the increase is associated with Chrysler shut down. Right off of resolves in Detroit.

Okay. Then just, I would be interested to hear your general comments on working capital. It was quite positive in the fourth quarter and I know there have been a lot of efforts in that area throughout the year, and if there was anything in particular that it helped drive it in the fourth quarter? I would be interested to hear.

The fourth quarter working capital, because of seasonal issues is always sort of a better quarter. We put a very significant amount of effort behind working capital management starting at the end of last year and really redoubled or tripled our efforts in the space. I have to say our management teams at the network level and at the agency level, have really done an outstanding job over the course of the year. I thought we historically have done a good job and they proved we could even do it better. I was very proud of them.

Great. When you get that trouble year up exposure that would be great as well.

You wanted Greece, Spain and Portugal?

And Italy was as well. As a group is fine.

As soon as we get it, we will say it.

No sweat. Thank you.

Next question from Jason Helfstein with Bernard Oppenheimer. Please go ahead.

Hi. Jason Helfstein from Oppenheimer. Two questions. One, as your auto plate opens up post Chrysler, what business is up for grabs, maybe you want to handicap some of your chances there? And then when we talked to you in the past, one of our senses is that your frustration with certain clients having basically overcut or over simplified their marketing plans and at the end of the day the client is always right, but I am just wondering if we've started to see yet clients coming back to you saying we are did overcut. We're not ready to go there now, we don't have money, but our plan is to get there and if that helps you feel better about the business going forward? Thanks.

With respect to the first question. Forgive me for not using this format for not sharing with you what I am thinking in terms of going after new auto opportunities, but rest assured we are. I can't predict when the result will occur, but we will prosper. With respect to second question. Repeat it for me?

So, I think one of the frustrations by people in your business has been clients basically used the recession as a way to simplify their marketing spend, in many cases it was because they had to spend less money, so if they previously divided the US up into five geographic areas to target, they went to two to save money. That may not have been the right business decision, but they had to do it. Are you starting to see clients come back to you saying we oversimplified our marketing spend or our marketing method and while we are not ready to go back to the way we used to market because we are not comfortable with our spending, we acknowledge that we were drowning in our cuts and we plan to spend more and basically go back to somewhat the way it was. Looking for color if you had some acknowledge by clients that in some industries they really over cut spending during the panic?

I am not in party to those types of conversations where, we are seeing clients come back and add money and increases to their budgets if we compare money year-over-year basis. It's because they see opportunities to grow their market share. I couldn't characterize the conversation the way that --

I think cost containment is still a pretty high priority, at least from what I have heard from clients. Well, I have heard from our people and talking to clients.

Thank you.

Thank you.

Next question is for Brian Shipman with Jefferies. Please go ahead.

Good morning, embedded in your comments for a return to organic growth in the second half, could you talk about your expectations for that metric with respect to the Euro currency zone and can that market come back as it has historically, I would say in the six to nine months after the US markets with the unique problems many other countries are having in Europe? Thank you.

It is hard to be specific. As Randy mentioned, it is really three stories. You have Asia emerging markets which are growing, the US which is showing some signs of recovery and in the third and the fourth quarter, we saw somewhat of a step down in Europe and we haven't seen that stabilized completely yet.

I think we are steamy are certainly not the economists to predict what is going to happen in Europe. Right now there is certainly, it is certainly not -- it hasn't kept pace with the recovery in the United States or the rest of Europe, and obviously the rest of the world. There is obviously a lot of discussion and concern about some the markets in Europe. I did point out, the UK was actually -- did very well for us in the fourth quarter. So, it is not necessarily everywhere in Europe.

Thank you.

Thank you.

We go to Meggan Friedman with William Blair. Please go ahead.

Great, thanks. Have a longer term question as well. In the past we've talked about organic revenue growth of GDP plus or minus 100 basis points or more, are there any structural changes in the industry that would prevent that from being the case going forward in a recovery?

No, I don't think so. The trends that drove that were continuing to have a -- the shift towards digital as well as continuing fragmentation of ways of marketing and fragmentation of the consumer, those were all positive for the industry. I don't think those are going to change.

I just might add, that is a long term view of growth over GDP as opposed to any particular quarter.

Right. Thank you.

Sure, thank you.

Next go to Tim Nollen with Macquarie. Please go ahead.

Hi, another question on Europe, please. You mentioned UK did very well and I think that is quite surprising. If you could explain why? And also, in Europe, I remember coming out of the last recession, you were fairly late in cutting costs in Europe and I wonder what your cost effort has been if there is more severance yet to come in Europe? Thanks.

I think our businesses have done a good job at managing they're cost structures and keeping them in line as fast as possible with the changes in their business. In many parts of Europe obviously adjusting staff levels is more expensive and more difficult that it is in say the United States. I think we have done a fairly good job at it. There, as we mentioned, was a step down in business across much of Europe in the third quarter that continued in the fourth quarter. So, I would expect that we are going to have more severance or more cost adjustments related to that activity unless for some reason it turns around very quickly. That thinking it is going to turn around quickly is a bit optimistic.

In the UK, can you explain why you did so well and also if you have a comment on France, I think you said in Q3 on your call, I think you said France did very well.. Could you comment on those two countries please?

I think in Q3, France took a step down and Germany took a step down. Those are the two markets for the first six months of the year had actually out kind of outpaced Europe for us. The UK is a combination of some new business activity or wins that are finally hitting and in a couple of our businesses they just had good performance.

Okay. Thanks.

We will go to Matthew Walker with Nomura. Please go ahead.

Thank you very much. I was wondering if you could first of all perhaps give at least for the full year a percentage split of your costs of salary and O&G. The second question would be, given the shape of the comparisons, why do you think that H2 will be when you are positive rather than Q2, is it because clients will hang back to make sure that the consumer is recovering before they spend or is there any other significant reason. And the third question is on China. I was wondering if you can give us your revenue exposure for China specifically and say a little bit more about the good win of the yearly business?

Okay. I don't have a good memory. I know the second question was about the second half versus second quarter. I think we are going to have positive organic growth in the second quarter, but that's the, that's sort of the question. I think we are certainly much more confident about having positive organic growth in the second half. But, we will see how that goes. Your other two questions, I didn't remember.

The first one was the salary in O&G expense split and the third one was on China exposure. You obviously won a lot of awards in China. I was wondering if you can say a little bit more about quantifying the China business and say a little bit more about the (Inaudible) wins and the factors behind that?

Well, let me handle that last question. Our business in China has been growing at a very rapid pace. From a number of levels. One extending our relationship with clients and some multi national clients that we service in other parts of the world and many new Chinese clients that we are meeting as we move forward. Also, reputationally, our product, our companies, we made a significant amount of progress over the course of the last two years, as evidenced, as you referenced I think, to the recent digital awards in China where we swept the recognitions. Specifically , we are -- wherever we can get a tune to pitch for business and show and demonstrate to potential clients what our capabilities are, we have had a terrific track record. And I think that's reflected in some of the new business wins that you referred to. The

The first question, I am trying to get the numbers. Going back a couple of questions ago, the question Greece, Spain, Portugal and Italy, for the full year. They total a little less than $400 million of revenue for us.

Just one comment on that. Of that, we haven't done the analysis, but there is many multinational clients with budgets that make up that revenue. So it is not simply local, domestic companies in those markets.

Our next question is from James Dix from Wedbush. Please go head.

Thank you, gentlemen. Three questions. I guess, thanks for the break out on some of the those headwind items you are faced with in the fourth quarter. You indicated that excluding them, the rest of your business in the US was around flat in the fourth quarter. Is it looking flat in the first quarter, or better or worse than that? Then do you think there are any particular regions geographically where you are notably gaining or losing share, and in particular in the US, how do you think you are doing market share wise versus your competitors? Last one, on media spending mix, are there any particular platforms where you are seeing particular strength or weakness in growth and is that having any particular impact on your growth or margins?

Last one is easy, no. I don't know about individual platforms and it wouldn't have an impact, a meaningful impact on our overall performance. Our media buying and planning business is the about 12% of our total revenue. Breaking out one platform within that on a global basis serve, it wouldn't be enough to have a significant impact. Didn't hear all the other questions. Let me answer one question back. I just got the numbers. Our salary and service cost for 2009 was about $8.450 billion and our office and general was about $1.895 billion. Now, if you go back and repeat the couple questions I didn't get.

Sure. You broke out some specific items which were hurting your growth in the fourth quarter and you said that the rest of the business which I guess is around 86% of your business in the US was flat in the fourth. Is that trending better or worse in the first. And the other question was just any particular regions, in the US in particular, where you think you are gaining or losing share versus competitors?

First one. I don't have any first quarter trend data. We barely go January revenue and we haven't had a chance to analyze it at a depth that would tell me there are some categories did versus others. I suspect a trend is continuing. We started seeing things moving this way in the third quarter -- we started seeing some of this throughout. For the last few earnings calls we have been trying to provide the break out of things like events, recruitment and the auto because the relative performance of those sectors was so wide relative to some of our other areas. The fourth quarter that obviously got highlighted when in the United States especially, so as the US has recovered, the year-over-year falloff in those three sectors is just over 100% of organic declines. It is showing sort of the wide range of performance between those and the rest of our industry sectors.

One bit of caution on the first quarter is we have to reference the Chrysler loss. That is approximately 1% of our overall revenue and it is much more significant domestically in the United States than it is globally.

Anything on the share issue?

No. I can't think of an area where we are not competitive if not superior.

Okay. Great.

Thank you.

We will go to Craig Huber with Access 342. Please go ahead.

Most of my questions have been answered. I have a housekeeping question first. What was your full time equivalent employee count at the end of the year? I believe it was 68,000 at the end of 2008. I have a follow up too.

Okay. We will have someone see if we have that.

Then, while you are looking for that.

Craig? 63,000.

Thank you. And then also, I don't believe you provided this for awhile. Out of -- can you break down the revenue split out of your top 1,000 clients by your major categories, how it was maybe for full year 2009? Do you have that handy?

We actually put it in the investor presentation. There is a slide there. You mean the one percentage is the top thousand.

Yes, out the top thousand. By industry.

Well, by industry, we have a chart and it is page six.

I missed it then. I apologize.

We show revenue by industry for last year and this year for the full year.

Okay. Very good. In the fourth quarter of 2008 your project related revenues was down significantly, as you talked about. Can you talk about how that much that improved in the fourth quarter 2009?

No. We didn't do that calculation in that way. I think what the numbers reflect is that certainly in the auto sector, which Randy say there was a decline in sports and events marketing. Any projects related to those industries we didn't see come back at all in the fourth quarter. A lot of other clients did increase their spending in the fourth quarter where there were market share opportunities. It wasn't as severe as it was fourth quarter over last year, but it wasn't back to what it was prior to that.

Lastly, Randy, you had roughly $600 million in cash into the third quarter, about $1.6 billion or so into the fourth quarter for seasonal reasons. Do you generally think roughly $300 million to $350 million that cash, your own cash can do what you want with and the rest is sort of clients?

I don't kind of view it that way. It is our cash. It is a swing in. It's a swing in working capital. I wouldn't necessarily want to take that -- I wouldn't take that cash and go out and buy something and not have available lines of credit to replenish it. We need that available working capital in the system. There's, I think the $300 million maybe you are talking about is cash that kind of needs to be in the veins. It's cash in lock boxes and cash in transition pretty much all the time.

Very good, thank you.

If there is any more questions. We probably have time for one more.

That is from the line of Peter Stabler from Credit Suisse. Please go ahead.

Thanks very much. Randy, could you comment on the expense lines. O&G is down very substantially versus 2008. Can you provide a little color on how durable those cuts are and if we are going to see pressure on O&G expenses in 2010 and what specific areas those might be?

I think our Company did an outstanding job of managing their cost. Travel is down. People cut Christmas parties, cut network conferences. They managed their cost very actively this past year. On a long term basis, it is not realistic that those costs remain at those low of levels. At the same token, the other item in this is real estate cost. That takes longer to adjust. So, those items are probably up on an organic basis year-over-year because they take some time to manage. They will come down overtime. We will be able to adjust our infrastructure costs to be in line with our revenues or in line with our head count. You can't do them quite as fast. While those costs are coming down some of these other costs will work their way back into the system.

If you look at O&G as a percentage of total revenue and look back to a couple of years to lets say 2006, 2007, would you expect that a couple years out from here you would drift back to that level, or was there some level of step change in savings that you found kind of fundamentally that could change and bring in lower going forward?

The number as a percentage of revenue is actually up year-over-year. So, while the number is down, it obviously hasn't moved down as much as our revenue moved down, and again, in that line item some of the things that are managed I think our people have done an extremely good job of managing. Some areas are difficult to manage on a short term basis. We had a very rapid change in the economy and our revenues. So while people can adjust head counts in some places very quickly and they can try to manage these managed costs, we can't exit real estate, we can't exit computer licenses and office furniture and those sorts of things that quickly. Over time they will adjust. Leases will roll off, and computer licenses and things that we don't need them, they will expire and we won't renew them, but it takes a couple of years to get those in line. As an percentage, office and general expense last year was about 15.8% of revenue and this year is about 16.2% of revenue. I would think we will get them back more in line with last year. It would probably take us another year or two, I would suspect.

Great. Thanks very much.

Great. Thank you.

Any closing comments?

No, thank you all for taking the time to listen to our call.

Be safe.

Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect.