Revlon Inc (REV) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to Revlon's fourth quarter and full year 2005 earnings conference call. At the request of Revlon, today's conference call is being recorded. If you have any objections, you may disconnect at any time.

I would now like to introduce your host leading today's meeting, Ms. Maria Sceppaguercio, Senior Vice President, Investor Relations.

Thank you, Stacy and good morning, everyone. Earlier this morning, we released our results for the fourth quarter and full year 2005. If you haven't received a copy, you can get one on our website at www.revloninc.com.

Let me quickly touch on recent developments in early 2006. Noteworthy is the recent launch of our $110 million equity rights offering. We also announced an organizational realignment, designed to increase our effectiveness and efficiency in meeting the needs of our consumers and retail customers. This realignment is expected to result in an approximate charge in 2006 of $10 million, and to generate related ongoing annual savings of some $15 million. Much of which will benefit us this year.

In terms of some financial highlights for the quarter and the year, which Tom will take you through in more detail, our net sales were up 16% in the fourth quarter, and up 3% for the year. Adjusted EBITDA advanced 28% for the fourth quarter, and was $167 million for the full year. Adjusted EBITDA is a non-GAAP measure that is defined and reconciled to GAAP, in the footnotes and attachments of our press release issued this morning.

Net income for the quarter advanced 39% to $64 million, and we narrowed our net loss for the year to $84 million, or $0.23 per diluted share. We are very focused on and making progress towards achieving our objective of long-term profitable growth, and we are confident in our ability to do so.

Turning to marketplace performance, unless otherwise noted, our discussion this morning of market share and retail consumption is of the U.S. mass market according to AC Nielsen, which excludes Wal-Mart and regional mass volume retailers. The data is an aggregate of the drug channel, Target, K mart and food and combo stores, and represents approximately two-thirds (2/3) of the Company's U.S. mass market dollar volume.

The color cosmetics category according to Nielsen, rebounded in 2005. Specifically, following a category decline of about 1% in 2004, the color cosmetics category grew more than 3% in 2005. In the fourth quarter, the category was up almost 5% versus the fourth quarter of 2004. As we anticipated, our color cosmetics consumption growth helped to drive the performance of the category, resulting in our gaining market share for the year.

Specifically, our total color cosmetics consumption was up 4% in 2005, resulting in a share gain of 20 basis points versus a year ago to 21.6%. This was driven by a 50 basis point increase for Almay to a 6.2% share, partially offset by a 30 basis points decline for the Revlon brand to 15.3%.

For the quarter, our total color cosmetics consumption was up 5.1%, resulting in market share that was essentially even with year ago, with Almay up 20 basis points, offset by Revlon, which was down 20 basis points. Our market share performance for the year was strong in hair color and Beauty Tools, with our consumption in each of these key categories up 9% versus year ago, resulting in share growth. In antiperspirant and deodorant, our consumption grew 3%, resulting in share for the year that was about even with a year ago.

Before I turn the call over to Jack Stahl, Revlon, President and CEO, and Tom McGuire, Revlon Executive Vice President and CFO, I would like to remind you that our discussion this morning may include forward-looking statements, which are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Information on potential factors that could affect the Company's results from time to time, and cause them to differ materially from such forward-looking statements, is set forth in the Company's filings with the SEC.

These filings include our 2004 Annual Report on Form 10-Ka, Our Form 10-K for the year ended 2005, which we will be filing shortly with the SEC, 2005 quarterly reports on Forms 10-Q, 8-Ks including our 8-K filed on September 9 2005, and other SEC files and furnished documents during 2005 and '06, and the press releases issued today.

Also here with us today is David Kennedy, who you will recall is President of our International business, and will become our CFO effective next week, upon the filing of the 10-K. You will also recall that at that time, Tom McGuire will assume the position of President of International. Finally as a reminder, our discussion this morning should not be copied or recorded.

With that, I will hand it over to Jack.

Thanks, Maria and good morning, everyone. And as usual, thanks for your participation. This past year and this past quarter in particular, were exciting and important periods for our Company. We made very significant and measurable business progress, and we're now just beginning to see, in the marketplace, as we move into 2006, at a number of retailers, the relaunched Almay brand, and the new Vital Radiance brand.

Other new signposts of our progress are our new and exciting restaged color cosmetics products from Revlon and our new initiatives in other important categories, such as Hair Color and Beauty Tools, for example. So, I recognize we still have a good deal of work to do, but we are clearly moving this Company forward in a positive direction. As you know, our U.S. retail partners committed to allocate significantly more color cosmetic space for us in 2006.

Resets are still being done, and we expect our incremental space in the end to come in at about 23% incremental, above 2005 levels. We believe this to be a significant accomplishment, and reflects ever-stronger working relationships with our retail partners, and one that sets the stage for what we expect to be strong growth for the Company, that we believe will build as we progress through 2006.

So, let me take a moment to quickly review in more detail our business results for 2005, before I turn it over to Tom to take you through the numbers. Starting with the United States. First, we successfully executed the Company's most significant new product launch in many years. Specifically, Vital Radiance is a first to market complete line of color cosmetics for women over the age of 50. A large, affluent and growing consumer demographic, that we believe has been very much underserved in the mass color cosmetics market.

And secondly, the complete relaunch of Almay, leveraging the growing trend in healthy beauty, which is Almay's heritage, with a deep understanding of the Almay consumer, and her desire for simplicity and personalization. We believe the tremendous success of our 2005 Almay Intense i-Color launch was a real validation of our strategy, and indicates the potential of the 2006 Almay relaunch. We believe that both of these initiatives address the underserved needs in the marketplace today, and our retailers have demonstrated their support and conviction in these launches, by awarding us the increase in space that I discussed.

As always, resets will continue during the early part of the second quarter. And as a result, we believe that you will begin to see the impact of these initiatives in a meaningful way as the second quarter unfolds, and that the full benefits will become evident to you during the second half of the year, in both our retail consumption and our financial performance.

During the year, we also successfully rejuvenated three very important and strategic franchises for us, and had very good results. Namely our Age Defying face makeup franchise, our Super Lustrous Lipstick franchise, and our core nail enamel franchise. In each of these areas, we reversed consumption declines that had been occurring up until 2005, and in the case of Age Defying and Super Lustrous, grew consumption at double-digit rates last year.

For 2006, we're continuing the same strategy, and we're taking similar action with our long wear ColorStay franchise, which we expect to benefit from a new formula, new packaging, and focused marketing support. We also continued to invest in 2005 behind our Beauty Tools and hair color businesses, and we're also very pleased with our consumption growth and market share gains in these important areas of our business. We invested behind Mitchum for the first time in many years, and we're pleased with the new growth track that the business is beginning to establish. Again, after a period of decline.

We also put new energy and focus behind our fragrance business during 2005, and we prepared our entry into the prestige fragrance arena, where we expect a launch in the second half of 2006.

Overall, in terms of market share, we achieved growth for the year in color cosmetics, hair color, Beauty Tools and in antiperspirants and deodorants. In that particular case, we maintained share for the year, with the share gains in the fourth quarter.

In International, we continued to strengthen this important part of our business and we achieved solid sales growth for the year, with each of our three regions contributing to the growth. I believe that the business will continue to prosper under Tom's leadership, and will offer significant growth potential as we move forward.

In terms of financial highlights for the year, we grew net sales by 3%, and we delivered adjusted EBITDA of $167 million. These results include the impact of our new brand initiatives, and as we indicated in our press release, the new initiatives contributed some $33 million worth of net sales for the year, after taking into account approximately $44 million for incremental returns and allowances. Total start-up costs for the initiatives totaled approximately $62 million.

Importantly, and as we look forward, we continue to further our productivity and our margin initiatives. Some time ago, we outlined to the investment community operating margin initiatives that we believe are important components of achieving our destination profit margin targets, which is an operating margin as a percent of gross sales of about 12% by 2008.

These initiatives, as you may recall, include product life cycle management, another way of saying that is fewer, bigger, better approach to new products. In-store merchandising, which would include our carding initiative. Promotional redesign, which is focused on improving our go-to-market approach to creating in-store excitement, for both effectiveness and efficiency. Strategic procurement in our cost of goods sold initiatives, to increase efficiencies and effectiveness on how we buy goods and services. And on our international supply chain initiative which is focused on optimizing supply chain costs of our international business.

We are confident that these initiatives coupled with our ongoing productivity programs will deliver significant margin improvement. In a related action last month, as you know, we announced an organizational realignment and streamlining, also designed to increase our effectiveness and efficiency, in capitalizing on marketplace opportunities, and meeting the needs of our consumers and our retail customers. We believe this effort will improve significantly our overall effectiveness, and have a positive impact on our margins over time.

So, we've made a good deal of progress to strengthen the business and position it for accelerated growth. The new brand initiatives currently being rolled out, do expand our platform for revenue growth.

In addition, the restage actions that we took in 2005, and that we're taking in 2006, along with the advances that we're making in our Hair Color, Beauty Tools and antiperspirants and deodorants, along with fragrances, are all very important components of our overall plan to drive revenue growth. With more to come to leverage our existing brands.

And at the same time, we're aggressively focused on generating productivity across our business to enhance our margin structure and move us toward our objective of achieving long-term profitable growth.

With that, I will now turn it over to Tom.

Thanks, Jack. Starting with gross sales for the quarter, gross sales advanced 16% versus year-ago to $537 million with North America driving the growth. Net sales of $438 million were also up 16%, again, with this growth being driven by North America. Foreign currency translation had a 1 percentage point negative impact on the sales comparison fourth quarter.

In North America, which includes U.S. and Canada, net sales of $306 million, advanced 22%, fueled by the successful sell-in of Vital Radiance and the new Almay, which combined contributed approximately $65 million in net sales, in the quarter, after taking into account some $12 million in incremental returns and allowances in the quarter.

Our Hair Color and Beauty Tools business also posted growth for the quarter. Partially offsetting these positive factors was continued softness of several base color cosmetics franchises which, as we indicated previously, we are addressing through our ongoing strategy to restage and re-energize existing franchises, while simultaneously bringing completely new products to the market.

For International, net sales for the quarter grew 4% to $132 million versus $127 million last year. This performance reflected growth in each of the Company's international regions. Excluding the impact of unfavorable foreign currency translation, international net sales in the quarter were up 7% versus year ago.

On the operations side, we continued to make progress. Our gross profit margin, as a percentage of net sales for the full year 2005, was 61.9% versus 62.6% in 2004. These reported results do include the impact of the launch of our new initiatives, which make year-over-year comparisons difficult. Specifically, the brand initiatives have the total impact. That is the volume benefit and the cost combined, of reducing our gross profit margin as a percentage of net sales by approximately 50 basis points for the full year of 2005. As you will recall, this includes the significant impact of returns and allowances associated with relaunching Almay.

Additionally, you will recall that in 2004, we benefited from licensing prepayments and renewal fees of some $11.8 million, or about 40 basis points of gross profit margin, which also had the effect of hurting the year-over-year margin percentage comparison. So, a total burden on the year-over-year comparison from these two factors of approximately 90 basis points, we did benefit from lower rates of returns and allowances on our base business, which is an ongoing area of focus and progress for us.

Cost of sales for the year was essentially flat, as we successfully offset higher input costs, like fuel, with productivity. Total SG&A in the quarter was up 7% versus year-ago to $180 million. And this increase was largely due to start-up costs associated with the initiatives.

Turning to profitability, operating income in the fourth quarter was up 38% to $100 million versus a strong fourth quarter in 2004. Adjusted EBITDA was up 28% to $127 million, versus $99 million in the fourth quarter of 2004. This performance largely reflected the growth in shipments, and a lower rate of returns and allowances on the base business, partially offset by start-up costs associated with the brand initiatives. In terms of net earnings, we were again positive in the fourth quarter, specifically net income in the quarter was up 39% to $64 million, or $0.17 per diluted share, versus net income of $46 million, or $0.12 per diluted share in the fourth quarter of 2004.

Before I move to discuss cash flow and liquidity, let me quickly summarize the key full year numbers. Gross sales were $1.7 billion, up 4% versus 2004. Net sales of $1.3 billion were up 3%, and adjusted EBITDA of $167 million in 2005 versus $193 million in 2004. Our diluted earnings per share were a loss of $0.23 in 2005, versus a loss of $0.47 in 2004.

Turning to cash flow, for the quarter we used $24 million of cash in operating activities, versus generating $41 million of cash from operating activities in the fourth quarter of 2004. This increase in cash requirements largely reflected the expected increase in working capital and permanent display purchases, associated with launching the brand initiatives, partially offset by growth in operating income in the quarter.

For the full year, cash flow used for operating activities was $140 million, versus cash flow used of $94 million in 2004. As was the case in the fourth quarter, this performance included the impact of the significant increase in working capital and permanent display purchases associated with launching the new initiative. Also impacting the comparison was lower operating income for the full year.

Capital expenditures in the quarter were $9.8 million versus $6.4 million in the fourth quarter last year. For the year, capital expenditures totaled $25.8 million, versus 18.9 in 2004. Permanent display spending in the quarter was $30.9 million, versus $15.7 million in the fourth quarter of 2004, and for the year permanent display spending was $69.6 million, versus $56 million in 2004, reflecting the impact of approximately $19 million in spending, associated with the new brand initiatives.

Cash restructuring and executive severance spending was $2 million in the quarter, and $12.8 million for the full year. Cash interest in the quarter was $31 million and for the year, cash interest was $124 million. The composition of our bank facilities outstanding at December 31, 2005 was our term loan of $700 million, and letters of credit issued but undrawn of $16 million. We had no borrowings under the $160 million multi-currency revolver, or the $87 million line of credit from MacAndrews & Forbes, which has been extended through the consummation of our $75 million market equity offering, that we expect to launch in the second quarter of this year. At the end of the quarter, we had unutilized borrowing capacity and unrestricted cash totaling approximately $243 million, including approximately $12 million in unrestricted cash.

Turning to recent developments, as Maria indicated, we recently launched a $110 million equity rights offering, which we expect to close later this month. We expect to use the proceeds from the offering to redeem approximately $110 million of our outstanding 8.625 senior subordinated notes during late April. We also announced that we plan to issue an additional $75 million in equity during the second quarter of this year to an underwritten offering, with the proceeds to be available for general corporate purposes.

And finally, as Maria pointed out, we announced an organizational realignment, that we expect to result in a charge in 2006 of approximately $10 million, principally in the first quarter. Importantly, we expect some $15 million in ongoing annual savings from this effort, and we expect much of that to benefit us this year.

Looking out over the course of 2006, we expect our financial performance to build. Q1 will be impacted by the aforementioned $10 million charge, and the commencement of marketing investments behind the launch of our new initiatives. As Jack mentioned, we should see the full financial benefit of these initiatives in the back half of the year.

With that, I will hand it back to Jack.

Thanks, Tom. Before I turn it over to Q&A, just a couple of comments and I should also reference the fact that in addition to Tom and David and Maria, I also have with me today, Stephanie Peponis, our Chief Marketing Officer, as well as Carl Kooyoomjian, Head of Operations and R&D. I think our team has done an outstanding job, not only designing and developing these new initiatives, but commercializing them and beginning to execute them into the marketplace.

And so Stephanie and Tom, or Stephanie and Carl are here to help address any questions that you all might have. So, as we discussed this morning, we have made I think a great deal of progress to strengthen our business, and position it for accelerated growth. I must say that we are very excited to be in this position, to continue to position ourself for long-term profitability, and with that, we'd be happy to take any questions that you all might have.

Thank you. [ OPERATOR INSTRUCTIONS ] Our first question comes from Bill Chappell of SunTrust.

Good morning. A couple of things, first on the quarter, or just trying to look at a gross margin on a year-over-year basis. I guess I was a little surprised that the gross margin was down as much as it was, just because I assumed Vital Radiance and some of the new products have higher gross margin. How much of the impact was start-up cost? What would the normalized gross margin have been for the quarter?

Bill, there is some impact in there, of course, from the initiatives, all up and down the P&L. But we did have some increase in write-off of discontinued product inventory. We have, as you may recall, we had licensing income last year in the quarter. We had lower licensing income this year in the quarter, partially offset, and both of those factors were offset a little bit by favorable mix.

Got you. So, I mean, this was not out of the realm of what you expected, in terms of gross margin for the quarter?

Not at all.

Okay. And then second. When you talk, maybe this is more for Stephanie. When you talk about now getting 23% more shelf space versus 25, 23 is still good, but can you help us, what happened in the past months or weeks that changed that? And then any update on how Vital Radiance has done, maybe at Wal-Mart, since that's where it's been out the longest?

In terms of the base gain, we feel terrific about having accomplished that in the marketplace. The change, Bill, is that the retailers, it's a complicated business, door by door, as they finalize every last plan-out of which they are thousands, and do all of the final math. And then added it back up again once all of those planos have been finalized, and ended up at 23, instead of at 25.

In terms of our bullishness about the retail support on all of our businesses, particularly the New Frontier initiatives, and our confidence in Vital Radiance and Almay, the change has absolutely no impact in the forward-looking support of these initiatives.

In terms of Vital Radiance, and I know you've seen it in-store, still it is very early days. Vital Radiance will become available to consumers, as retailers reset their walls, but as you said, Wal-Mart tends to be on the faster side of resets. The rest of the retail community is basically resetting as we speak. We are moving along as we would have expected with Vital Radiance at this point in time, and it looks great in the store.

Great. Jack, since you didn't mention anything on the guidance, is there any change to kind of your outlook for '06? And then the destination margins of kind of 12% by '08?

No, no change at all, Bill. And as it relates to '06, we said that we are expecting strong top line growth, as well as strong EBITDA growth for 2006. So, we're absolutely intact on both our closer impact or outlook, and our longer term outlook.

Great, thanks.

Bob Labick, CJS Securities, you may ask your question.

Good morning.

Good morning, Bob, how are you?

I'm well, how are you?

Great.

Good. I wanted to ask a few more questions on Vital Radiance. I think you said in the past you might be able to give us an indication of where some of that 23% shelf space gain came from. Can we start with that?

Bob, in terms of where that shelf space came from, as we've said in the past, it is a mix, and it is a retailer by retailer decision, and often a door by door decision. It came from a mix across the marketplace.

Is it primarily from other color cosmetics or are they taking space from other --, I understand it's a mix, but maybe the top three areas it came from, competition, you know, other spaces outside of cosmetics, et cetera?

It came primarily from competition, in 2006 there was not a significant change in footprints allocated to color cosmetics versus 2005.

Great. And I guess, you know, following up on that, what has been so far the competitive response to Vital Radiance, if anything? And what lead time do you think you will have until there is one, assuming there is one.

I think as with any new launch, we're tracking theirs, they're tracking ours. Given that Vital Radiance doesn't become available until walls are reset, we are probably a little bit less apparent in the marketplace at this particular moment in time. But it will be just like with our Revlon new products, the new launch of Almay, the new launch of Vital, we have every confidence and expectation that they are tracking it very closely, and will be thinking about how to position themselves against it.

As we've shared, the new product development process in this industry takes a little bit of time, so in terms of that piece of it, we, you know, we will continue to see what they do. We haven't yet seen any direct response to date. But it is only March 1.

Great. And could you at least to the extent that you're comfortable, review maybe the economics of the brand that you're expecting, in terms of gross and operating margins for you, and tell us a little bit about what you learned during, you know, the creation of this brand and the launch of this brand, how you treated this maybe differently than you are acting toward your core brands?

Well, three things on that, Bob. We don't disclose any specifics by brand for obvious competitive reasons. In terms of what we learned around this brand, what we learned is that the 50+ consumer has differentiated important needs, that were not being served in the mass marketplace. And that she was looking for a manufacturer to talk directly to her, with products that were suited for her changing skin, and to make this experience a product offering that works.

These are women who have been in the category since they were 12, 15, 22. They understand cosmetics, and they wanted a line that works for them. What these women told us over and over again, is my cosmetics don't work the way that they used to. We have put into place, and are rolling out in door, a line of cosmetics that will work beautifully for her.

Just to build on that a little bit, you know, we talk about our margin initiatives, in terms of our merchandising approach, how we promote in-store, and all the analysis work that goes into optimizing our packaging choices, along with our cost of goods.

You know, as we develop this new revenue platform, I think it's safe to say that every element of our learnings that we're applying over time to our base business, we've been able to apply to Vital Radiance and for that matter, to the new Almay. So, that's certainly a positive for us in terms of our underlying profitability as we go forward.

Great, that's very helpful. Thank you very much.

Thank you.

Matt [Talezalo], Prudential Equity Group, you may ask your question.

Hi, good morning.

Good morning.

Would you mind talking a little bit about the thinking behind re-entering the prestige fragrance category? It's been difficult to be profitable in that area. Can you walk us through what you're thinking there?

Yes, as you have read, we have announced a partnership with Gemini to re-enter the department store fragrance business in the second half of this year. The thinking under that is the same thinking we used to drive across the whole business, which is we have terrific brands in the marketplace, starting with Revlon.

The Revlon brand has both a history and a current relevance to the fragrance market, and we have established a plan that we feel will be with this business a positive contribution to our overall objective of driving profitable growth. So, you will see later in the year, when we can disclose more of this initiative, how we're thinking about it, and how we're going drive it.

But it is intended to contribute to all of the lines of the P&L in a positive way, and is a perfect place for the Revlon brand to play.

Okay. And the partnership with Gemini, what is their role? And I guess what is yours? How does that all work out?

We at this time in the United States, do not distribute into department stores, and we have a great many initiatives that take up the full-time and focus and expertise of our sales team.

We looked to Gemini to provide us distribution and expertise into the department store channel. We provide products and marketing and all the traditional roles, outside of selling into that channel.

Okay. And then on advertising for '06, I would assume that with the launches and the relaunches you have in the year, that advertising will be higher than it was in 2005. Is that a correct assumption? And also, if so, you know, what's the magnitude of it? Will it be 10% higher, 20% higher, if you can say?

It's a reasonable assumption to expect that we will fully support against these new initiative, as well as against our base business. For competitive reasons, we won't disclose more than that.

Can you say if it will be TV and print, or what have you?

It will be our usual mix of marketing tools. As we have mentioned on Vital Radiance, we are breaking through in the category with a new marketing tool to mass, which is our Vital Radiance Beauty Center, which is a group of beauty specialists on call, to talk to the Vital Radiance consumer about all of her color cosmetics and beauty needs. So, that is a new tool in the mix, and something that we're very excited about bringing to the mass marketplace, as well as to this consumer.

Great. And then lastly, the $62 million in launch costs that you had, how much of that is one-time, and how much will be ongoing throughout the rest of the, you know, next couple quarters?

Hi, Matt, it's Maria.

Hi.

The $62 million is really startup, you could use the term one-time if you want, but it's basically the start-up cost associated with the launch, as we called out in the press release. $44 million of that relates to returns and allowances. And we also talked about accelerated amortization for Almay display walls of about $7 million.

So, the vast majority of the $62 million is already called out. The balance of the 62 that we haven't specifically talked about, really relates to upfront costs for things like the Beauty Center, for, you know, the development of marketing programs and things like that.

Great. Great, thanks, guys.

Thank you.

Ilias Papazachariou of Lehman Brothers, you may ask your question.

Good morning.

Good morning.

I was wondering, what kind of pipeline shipments for the specific growth initiatives should we look for in Q1?

We will complete the pipeline shipments in Q1. They will be larger than our pipeline shipments in Q1 were last year, but as a percentage of the total sales in Q1, they are not, you know, they're not the major factor that drives up the Q1 results. But we shipped most of the pipeline in the year ended 2005.

Okay, great. And other than higher volumes and the resulting operating leverage, were there any other drivers of the reduction in SG&A as a percentage of sales?

No. Nothing to speak of.

And I was wondering, do you see any significant discrepancies in sell-through between AC Nielsen tracked channels, and non-tracked retailers?

No. Generally they tended to move in-line with each other.

Okay. I think in the release you mentioned that several base color cosmetic lines were kind of soft in the quarter. Could you give us a little more color there? Is it the ColorStay lines? Or there's some other ones that you can probably talk about?

We talked over the last couple of years about the Revlon portfolio and that we, back in '02, had had a very high percentage of the total mix that were in decline, because they had not been given attention for a couple of years prior.

The examples in 2005 that we went after are specifically Core Nail Enamel and Age Defying, in 2006 it will be ColorStay. It's probably not worth getting into the detail of any of the other franchises.

We will continue to work against getting a healthy and strong portfolio, and feel like we will be on-track competitively over this year and next to do that. But the major one in 2006, to your point, is the relaunch of ColorStay, which is one of the best in the business, and one of our biggest franchises.

Great, thanks a lot.

Thank you.

[OPERATOR INSTRUCTIONS] Walter Branson, Regiment Capital, you may ask your question.

Thank you, just one thing. Can you give us an idea of your outlook for cash flow in 2006? Would you expect cash flow from operations to be positive in 2006?

We're very focused on cash flow, and we particularly think that these new initiatives, while they're going to require a lot of up-front investment, ultimately will drive a very positive cash flow. We're not putting a, we don't have a forecast out there for 2006, and we wouldn't intend to. But as we have talked about in the past, we're very focused on cash flow. And we will continue to move in a positive direction in that regard.

Thank you.

Thank you.

This ends the question and answer session of today's call. We will now turn things back over to Mr. Stahl for closing remarks.

Okay, I don't have a lot at this point, other than to thank you for your continued participation. We are very excited about the way we continue to reposition our Company for profitable growth. And we very much look forward to keeping you posted along the way, as it relates to our progress. So, thank you again.