雷蒙詹姆斯金融 (RJF) 2002 Q1 法說會逐字稿

Good afternoon. My name is

, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Raymond James second quarter earnings release conference call. All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad, and questions will be taken in the order they are received. If you would like to withdraw your question, press the pound key.

Thank you. Mr. Tom James, you may begin your conference.

Thank you very much. Welcome to our quarterly conference call. Let me begin as is our habit to - by reviewing some of the numbers, and then giving you some background information, and then we'll open it up for questions.

The quarter's revenues were off 13 percent to $378 million. Almost all of that decline is accounted for by a decline of $56 million in gross interest revenues. So as you can see, we elect the option of showing gross interest revenues at the revenue line and that obviously shows a decline for us when in fact, all other revenues were pretty even during the quarter.

I'll have more to say about the interest factor when we get into the expenses here, because actually we had a very similar impact on expenses as the expenses were off 13 percent also, which is 52.4 million. And 48 million of that was a reduction in interest expense. So you can see that almost all the decline that was accounted for by interest cost. And in fact, there's really about an increase of four million there in other expenses.

As a result, net income dropped by 17 percent to $18.8 million from $22.6 million, which resulted in earnings dropping from 46 cents to 38 cents from last year's quarter. And that 38 cents is roughly comparable to the preceding quarter. And in fact, revenues were up four percent when you look at the December quarter verses the March quarter.

So quarterly results, the only other things I would mention in the quarterly reports of note would be that you see a upsurge in investment banking revenues, which increased 29 percent in the quarter to $30,900,000. That's the same kind of inquiries from the December quarter. So there was an upsurge here in activity. It mainly occurred in the month of March.

All be it capital markets activity has been vibrant for the whole quarter, and actually we have a pretty good backlog of transactions largely as a result of our involvement in refinancing, energy-related financing, and growth airline financing. Growth airlines being defined as some of these direct carriers like discount carriers like Southwest, but also some of the

airlines like Continental Express that's about to come out this week where we are typically included as

manager in all of these offerings.

The - when you look at the six months, we pretty much reproduced the first quarter. So overall results were 74 cents, down from $1.13 o a diluted basis. And revenues were off 14 percent to 742 million. And pretty much an effect again occurring from net interest - in interest considerations.

So essentially, I would tell you that we see a little bit of an upturn in the commission side as I mentioned from the prior quarter. And about flat - we're down one percent from last year. But I will tell you I feel a little better tone in the - in retail here and we're probably in the process of starting to bottom out on the retail side of the business. All be it, I'll tell you it's very dependent on what happens with earnings as we can tell from the recent behavior with IBM and GE. Disappointed with their earnings results.

And you see now, today's results, I guess, being impacted by some favorable results on the technology side that are again, causing people to be hopeful about a rapid turn in technology, which we don't really forecast here. We think it's going to be kind of a slow turn on some of these corporate earnings.

So - but I think that's actually not unhealthy. So while we may have a little bit of volatility in the market over the next six months, I think that the opportunity for our retail to begin improving here as we base out is very good. And the margins that we made after taxes were five percent - about the same that they were last year in the quarter. The rate of return on equity was nine-in-half percent. And the book value at the end of the quarter was $16.61.

Important things that - as I focus on in prior conference calls are that FA accounts have continued to rise. As a matter of fact, we crossed the 5,000 level and now we're at 5,025 verses 4,800 in the '96, at the end of the preceding quarter. So that'll be a three percent increase in the quarter or a 12 percent annualized rate. Actually, when we go back 12 months, we have a six-in-a-half percent increase in the sales force. But Raymond James & Associates in Canada have been basically flat and Canada down slightly, so the growth has occurred in our independent contract subsidiaries in the main.

Employee counts are - were down 82 in the quarter, which is about two percent, which means that over the last 12 months, we're off five-in-a-half percent or 300 employees. So, as you can see while we're growing in sales force, we're reducing the cost here at the headquarters. And I continue to stay focus on cost reduction as one of the major drive - key drives that we have - we're undergoing currently.

On the Asset Management side, I would report to you that assets under management rose during the quarter to 17.6 million from 17.1.

excuse me. The - so we have continued to experience net sales during the period.

Some of the growth options during the quarter in our objective list suffered a depreciation so that the appreciation in some of the other objectives like small cap and mid cap were offset - more than offset since we have more money in the growth options.

But we have excellent performance in almost all of our objectives, and consequently, the new

are actually increasing currently rather than decreasing. And we're in the finals of a lot of competition institutionally now, which is as a result of the effort over the last year as we began to go back into the institutional business.

And we're also beginning to increase our sales efforts not just in our Mutual Fund Group but in our - the - in our Private Account Management Group to

broker dealers with good success. So I'm actually quite bullish especially about the Mutual Fund Group in terms of acquisition in the new capital during the remainder of our year 2002.

One additional comment on Equity Capital Market side, we did nine deals in the United States verses nine last year in the comparable quarter, which - I mean, the last quarter - that was the last quarter comparison. But were up total 14 to 11. And last year during that quarter, we only had five.

So you can see that the activity level beginning to pick up, but as I said, it's not really being realized yet because the capital market's activity levels, which precede the offering themselves, of course, has been very active over the last couple of months. And it takes a while for some of these to come to market, although some of these are off of registered directs or pipes, which are automatic offerings from a timing standpoint almost. But these activities are still positive.

I'm actually beginning to see light at the end of the tunnel. So I would summarize where the actual operating results are.

In terms of other effects on the financials this quarter, we wrote down our investment in CSS during the quarter, which is our software, as we reach the equity method of reporting to our ownership exceeding 20 percent. We're basically carrying that asset

nothing but cash so that all the investment in any of the technology in software development is carried to zero. It's a very conservative kind of approach, but the appropriate one because really, it's supplants our own R&D here at the home office. So it's appropriate.

The other thing that occurred with the similar type $4 million number is that we wrote down our investment in Raymond James capital. Again, we employ a very conservative methodology with respect to venture capital investments. In terms of each fund, we return capital before we show any profits, and we don't really mark anything up. On the other hand, if the fund itself marks down because of an impairment of value in some of their investments, we should that. And that's what we did here in RJ Capital.

I actually believe that RJ Capital is good investments, which, you know, we haven't had further financing or haven't had any public offering for. It probably increased in value either as much or nearly as much as does write down so that essentially, this is a very conservative methodology.

And the third thing that I would mention is that we've increased reserves during the quarter. There's been a flood in the industry of

resulting from losses in the market over the last couple of years. It basically charges of unsuitability, and it is true that anything goes down was certainly unsuitable in retrospect. So that's understandable.

But the - actually, a lot of the clients caused some of their own problems as they moved to high tech or to dot-coms in their investment portfolios. Some at their own - perhaps totally, not to say there weren't some FA's that were convinced that that was the place to be.

The - I've noticed in reviewing some of my peer group member's financial results, that they're suffering from the same problems that - at the retail level that we're suffering from. We share a lot of data for round table type meetings on a general basis. And that fact seems apparent across the board.

We seem healthier in terms of maintaining commission rates on our independent contractor because of better recruitment. And also because the independent contractor is really on the front end if he doesn't make his production quotas that he sets for himself because he's got to pay all of his own expenses. So I will tell you we're somewhat more resistant to the downturns than you might think we would be at the independent contractor level.

As I said, I'm actually bullish that our future quarters are going to improve from all three parts of our business here. And that the business is beginning to look better on an industry-wide basis.

And with that, I think I will open it up to questions.

At this time, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad. Again, in order to ask a question, please press star, then the number one on your telephone keypad.

Your first question comes from

of Putnam Lovell.

How you doing? Just a couple of quick questions.

The write-down in the investment CSS, did that - that goes into the other expense line?

Oh - that's a good question. That - we should've pointed that out, that went into the data communications line as we will be - presumably they'll just be eating out the cash until they do another offering at this point. As we mark that,

on a quarterly basis to the equity method, we'll continue to mark that through the data communication.

it really amounts to

substance nothing more than us paying an outside contractor for software development.

So that's about a $4 million number that makes our data communications look that much higher than it really should be - or three quarters of that at least, much higher on an ongoing run rate basis.

Yeah - and really, the reason for that kind of approach relates to the fact that the commercial operations of that software company are certainly not proven and it's focus is still on the operations of the existing OBFs. And when we look at our level of expenditure, we have justified our level of expenditure in this operation solely by the benefit to us in terms of the software that's generated for our use. So it's really quite appropriate, I think, to look at it as an internal R&D effort.

And if I can take the opportunity,

, at the same time, the write-down in RJ Capital, as Tom mentioned, just in terms of where it hid in the financials, we - that shows up in the reduction of our principal trading profits...

OK.

... revenue line item, which we used to call "trading investment profit". We still carry our corporate investments in that line item and it's been the results of the run rate of the seven million a quarter type number from the traditional fixed income and equity. The trading department said it was still intact.

OK.

And then what caused the jump in other expenses in the fourth?

That was - that would be in the increase in

reserves.

OK - yep.

And just one more quick question, in terms of - I know you guys don't provide the segment breakdown here, but did you start to see a profit in the investment banking segment this quarter?

Yeah.

OK.

Actually, we're profitable for the half.

OK.

Your next question comes from

.

Good afternoon.

Are you going to provide details on how much you increase reserves in the quarter?

On net basis, I believe reserves went up about four-in-a-half to $5 million.

OK. Now there's not any one

that you raised, it's just in general in the industry of what's going on - correct?

That's the sum of many cases.

OK.

With regard to the write-down in RJ Capital, you're saying your actual run rate should be at seven million. We're not going to see another write-down next quarter or are you looking that - at that ongoing as well?

Well, as I explained the methodology there, it - I don't think that we're writing down sort of in the way you looked at CSS. Our approach is when we see something that we think has been impaired and at risk not to succeed at all, we just go immediately to zero in the venture capital portfolio.

And somewhere in here, the profitability numbers are going to begin to kick in from having the value - the dollars returned actually exceed the investment in these partnerships. And when that occurs, that would offset any of these downturns.

So I really don't think that this is going to be recurring at all. I think it's - while you might have a small number in some quarter, but the likelihood is that the net over a year period from now on will be up rather than down.

And this one by far was our largest single private equity investment.

OK.

Could you give us, I guess, a sense of how the building is going?

Sure - we're - we have built - or the parking garage is out of the ground. And when I say that, this doesn't go by conventional construction. This is kind of one of these off-site fabricated parking garages. So it's going up so rapidly, it's, you know, if you leave for a week and come back, it looks like you've built two floors.

So it's going to be finished before long. And soon we'll be starting our tower four here, which we have scheduled to be completed by the end of 2003, which is a much longer than our normal building cycle.

And what I will tell you is if, in fact, conditions improve more dramatically that I'm forecasting, we've left ourselves from flexibility in terms of speeding up the process. So we really did that more as a reflection of the impact on our growth plan from

. And we sort of said,

, this is a sixth or nine months kind of delay in our growth plan so lets go ahead and hold up the building by that much. And - but we still have the capacity to speed it up.

OK. And with regard to interest income, do you think we've seen the bottom?

I see some beginning small increases in margin loans. The - and if the market begins to improve in price, the likelihood is that people will use margin a little more. So unless we have another major decline in the marketplace, I really think we've bottom out and we're going to begin to see some increases.

Now the interest rate side of it, of course, is, you know, it's a very short-term industry - interest rate marker. So if in fact the economy begins to show some strength, it's likely the fed will begin to slowly increase rates. And when that happens, we'll begin to see some improvement not just at the gross line level, but also because the "squeezing", generally speaking, has some impact on spreads. Probably most dramatically, in stock loans as contrasted to the margin lending.

OK. julien:

, just one further note on the building, since you asked. Bear in mind that it's about half - a little more than half actually of the tower is scheduled to be occupied by operations that are currently housed in other places - leased spaces, that will be the primary tenants of the new building. So it's not as though we're building the entire building for expansion. It's roughly somewhere between a third and half of it will be for future growth.

Yeah - I guess I wanted to know when those people will probably be moving on - the people who are housed in other areas that you...

At the end of '03, which is still our schedule...

Yeah - OK.

And with regard to the

contractors, I know you're expanding the U.S. independent contractor model, have you - I guess, net, are they - how many have you netted? Are you eliminating people who are not, you know, producing enough? Or where are you eliminating your low producers from?

If you look at the low producer reductions in both of our broker dealers, it's almost for self-fulfilling prophecy because - not because necessarily the person doesn't make enough money. It's because the branch manager at the employee-based firm has an impact on profitability from continuing salary payments to that person or some kind of advance. So they tend to begin to look

when someone has been with us a couple of years and hasn't begun to show good improvement and productivity.

On the independent contractor side, there's some charges related to individuals and carrying individuals that cause the independent contractor manager to think twice about keeping someone with him that may be a net drain. And even the biggest factor with him is that it impacts his own productive ability because

spend more time with a lot of trainees or underproducing reps.

So toward the end of the year when it gets up to the time when we're going to start billing these extra charges, they tend to go through a purge. And, you know, we did some of that in the - in the December quarter.

OK - thank you.

Your next question comes from

.

Good afternoon.

My math - maybe you can help me out with my math. It seems like to me when we add back the increase in reserves and the write-off of your software, that adds about 11 cents to your earnings. Is that fair?

No.

No, that sounds high.

You got to go through bonus reserves, and calculations, and taxes, of course. And when you do - when you go through all the numbers that those kind of numbers go through, it's not nearly as dramatic as you might first assume.

OK.

Well, what's a more realistic level then?

I think it was - I think I calculated seven cents

OK - seven cents.

The second question is with regard to, you know, these next two quarters, normally you see a little bit slower trading activity, you know, given the seasonality it seems like trading peaks from, you know, from October 15th to April 15th, and then trails off as we reach the summer. I was wondering in terms of revenue guidance going forward, you know, how should we model sort of commissions verses investment banking and just overall net

?

I would tell you on the commission side that we had weak comparisons last year for the remainder two quarters. So I don't really see that commissions are going to be beneath those levels.

When you look at immediately preceding quarters, I actually think the impact of an improving economy and some bright spots in our

comparisons, there's more opportunity for increasing gross than a decline for many seasonal factor. And I would also, you know, remind everybody that, you know, we have a lot of this commission revenue as a commission equivalence, which are fees and assets under management. So they tend to be more sensitive to what's happening in the marketplace than to the transaction timing that might go on your normal seasonality.

So I'm actually - I actually think - I'm favorably disposed to looking at these numbers going forward. I think they should be positive unless we have some kind of major decline.

So the 255 level is a good number to use in terms of commissions going forward?

Oh - low number.

You know, I...

We hope

.

I think it's a low number.

OK.

And then how about on the investment banking side? You obviously got a

there. Is that sustainable?

Actually, I would tell you that the quarter was mainly March.

Yeah, revenue has only really start hitting the balance sheet from this - or the P&L from this current

activity in March and going forward.

OK - and, just overall, it sounds like you guys are pretty comfortable with this year's consensus estimates given, you know, the reserve additions that you did and what you see to be further operating leverage, is that fair?

Yeah, if I could be comfortable about anything on a longer term basis in our business, you know, I think that's a fair conclusion.

The fact is that we're so sensitive to, you know, some of these external events, whether it's the world posture in the Middle East, or whether it's another Enron type

and accounting, that I hesitate to say anything other than I know that we've got the fat out of the system. We're pretty lean and mean. And if these volumes tend to increase, we're going to capitalize on it because the operating leverage is going to be very heavier.

OK.

And the last question is, you know, obviously Merrill Lynch has been in the newspapers regarding, you know, the investigation by the New York State Attorney General, how does - how do you approach that kind of, you know, headline risk just in general? Like, you know, obviously you're trying to be proactive in taking reserves

side, but how do you - does that increase the operational risk within the model? Or, you know, how do you approach it even?

Well, the - I guess I would tell you when you talk about it on a general level as opposed to just the research kind of risk, we've had both before actually, where we got negative publicity. Once partially

and the other time, not

at all. And it was a very difficult situation to deal with.

It - I think it was more draining on the people in their time than it was on it - on the economic results. But you really can't protect yourself from that. I mean, if you - what you can really - all you can do is try to run your business as ethically as possible.

And one of the things we're doing on the research side, just to give you an example of that, as you may know, we produced something called Rights and Responsibilities, which is sort of a - our commitment of our financial advisors and the firm to our clients. And what we ask in return from our clients to be able to perform our mission.

We're doing the same thing on the research side, and I'm actually forcing our senior ECM management to make some very tough decisions irrespective of what industry practices are in terms of looking at ways of doing business going forward. And so they're working on that model right now.

And, you know, we have not been afraid to go out in front of the industry on issues like this as we did with the Rights and Responsibilities, which got national publicity at the time. And it was not totally popular with our sales force, I'd have to say. And in retrospect, has been well received and is actually used as a sales document now.

So I think there is that risk that you mentioned both from a research front of a non-performance of a company with which we're associated. I think there's a risk that we could have one of our FAs out of these 5,025 people do something improper. As a matter of fact, over some period of time, it's a guarantee that that will happen based on history. So - and you do have losses associated with those things.

Now I would also tell you that I believe we are very capable of estimating of what those losses are on a kind of a generalized basis based on just pure revenues. Unfortunately, the Accounting Principal's Board and the FCC have not seen fit to allow us to use a percentage reserve basis for setting up reserves. If they did, I would tell you we could deal with this problem without real concern for surprises that impact quarterly earnings.

And the way they're doing it now where it has to be a known potential liability or that's just inadequate. It means the industry over reports earnings on a current basis, because you just don't know all the things related to the generation of current revenues. And you won't know it, as a matter of fact according to our studies, for a seven-year period. So we actually use a lagged analysis to try to construct a model for management purposes.

And, you know, if we had our way

by the concerns of our accountants in the FCC, we would use that because we think that's the most appropriate way to match revenues and expenses for the industry.

OK - I appreciate the answer.

I guess that's sort of begs the question in terms of the reserves that you have added on the

side. Is that - is for known

?

Well, if you might tell from my response, we are going to conservatively utilize the current rules. So, you know, if we think there's any risk at all, based on what we know currently, we know that there's a potential for risk on things we don't know about. So we're going to more than fully reserve or fully reserve, as if we'd have the major claim losses against those ones that we do know about.

So I will tell you we're going as far as we can within the current interpretations of how you reserve. I personally am discussing this with industry leaders later this week, because I want us to make a major effort with the FCC to change the rules. Now, I don't know if I'm going to have much support from other industry people who may not like reserves that decrease current earnings. But...

Yeah.

... I'm so sensitive to earnings quality and always have been that I'm much more - this is not managed earnings I'm talking about. This is realistic matching of incoming expenses that I think it's really important that we get the system changed.

I appreciate the time.

Thank you.

Your next question comes from

.

Hi, Tom - hi, Jeff. How are you?

Hey,

- how you doing?

I'm well, thank you.

Good.

Could you just, you know, talk a little bit about the tone of retail brokerage in Canada and whether that's any different than you're seeing here - better or worse? And, you know, obviously, relative to your, you know, U.S. franchise is much smaller. But, you know, given that Merrill has pulled back in Canada, are you seeing any meaningful opportunities to grow your retail brokerage business in Canada?

I will tell you that if Canada seems to always be impacted on a greater level than we are by both economic

and stock market

. So I would say the retail business there has been impacted more negatively than it has been in the U.S. And I think that's probably part of the reason that you've seen some of the major firms depart at least once from the Canadian marketplace.

The investors are actually very similar in terms of their make up, and needs, and all that sort of thing.

Right.

So, it really doesn't make a lot of sense that the brokerage business in Canada is not a good business.

Now with that being said, I've looked at the numbers on the industry in Canada and they're, you know, they've suffered some losses in the retail firms during the last quarter. IRA industry is certainly profitable overall. It was up according to the SIA to 3.25 billion for the March quarter, which is up slightly over last year. Even if you attribute most of that to the

, the fact is the retail business and related income sources, are still making money in the securities industry in the United States.

As far as our own business goes there, I would tell you we're losing a little bit of money in the retail business, and we're making a little more money than that or about the same amount of money as that in the Equity Capital Market side. But we're pretty strong in the investment banking.

So it's not a drag on earnings. It's also not additive to earnings. I think there's more leverage there than there is in the United States especially if energy prices stay in these levels or go to any higher levels going forward. Now I think there is that opportunity on the gas side.

The other comment I would make in response to the - to the opportunities, we were actually excited about Merrill's departure from Canada because we thought it would be a real recruiting opportunity for us. And I will tell you what's happened has been that the recruiting package there has been much larger than historically has been granted in Canada. And as a consequence, there's been less movement than one might have anticipated.

So in the traditional business, I think we're - we have a good story to sell based on the fact that we're really the only true broker with a good reputation in the marketplace. But at the same time, I would tell you that the competitors who'd sell against us, the

Raymond James is another U.S. broker, they'll probably leave. And, you know, we've got to be able to convince people that that's not going to happen.

The second thing I would tell you is that we're very near to launching investment contractor activities...

Independent.

... independent contractor activities in Canada.

So we think that's a good opportunity for us. There's some regulatory hurdles to get by before we can go with that full speed. But my guess is we're going to have good success there and we're beginning to see some success on that model in the UK now.

Yeah, that was going to be my next question.

You know, how has the

JV, you know, is that gaining any traction?

Yeah, we actually are beginning to make progress on the recruiting front here. And I will tell you we're sort of in - in the nine months between now and year-end - calendar year-end, we're sort of telling time in terms of how successful we are in recruiting.

And it looks like it's going to be more successful than certainly we have been at the beginning. It may be even more successful than our business plan had envisioned. And we're going to recruit more people from the existing broker dealers as opposed to what I'd call the financial planning variety than we had anticipated, which means they do larger gross. So I'm encouraged but I think it's way too early for us to reach a conclusion there yet. And I still think there's a tremendous opportunity. And this is a question of being too early, if we are, in that market. We're not too early in Canada. But we are - we may be too early in the United Kingdom, and, you know, time will tell here. But I am encouraged.

And then - that's great. Thank you.

And then just lastly, any more color you can provide us on the Asset Management side? You know, whether my guess is, you know, the investment advisory services piece of the total is growing faster, you know, to just given, you know, the, you know, the platform of investment advisors

asset - just trying to get a sense of where you're seeing the growth and the flows. You know

...

New sales, I will tell you, were about 45 percent Eagle and 55 percent IAS...

OK.

... and - which as improved. And actually is high relative to what you would expect given the breadth of offerings and the track records of, you know, the outside firms. It's just the inside managers have done so well over the last year, even the ones in areas that are - have underperformed the other areas, we've done very well relatively.

So when you look at growth equity, or you look at large cap core, those activities we have good track records in and, you know, some upper

type performance. And we have tremendous performance in small and mid cap or we're, you know, somewhere between one percent and 10 percent in our bringing managers in that area. So it's - even our equity income objective is performing very well.

So I foresee real good inflows in the mutual funds in the private accounts, and as I said, the institutional activity has picked up now. And we're actually in the finals of some major competitions here. So, you know, we got to win some of these. I mean, it's just going to happen because the performance is so good.

So I'm encouraged actually that the Asset Management - if we get any help on the market itself from appreciation, these numbers are going to have pretty good leverage. You know, we've decided we would just soon accept, you know, 60 days of today. And that would be - that would be just fine for the quarter.

So I think there's real good opportunity there. I'm very excited. And, you know, we're not only hooked into our mutual funds, we're hooked in to outside variable annuities, and other outsiders are selling our products. So, I'm encouraged.

I've got a spreadsheet in front of me that shows our comparison to external managers and I mean, we're just...

Performing

.

Yeah, the performance to them, and we're substantially outperforming. So...

That's great. OK.

Even technology management we're

up the opposition.

That's very helpful. Thank you.

At this time there are no further questions.

I'd like to thank everybody and just finish this with a remark.

You know, we issued a release on Chet Helck, who I have promoted to COO inside the firm, and who has taken direct line operating responsibility for our retail and marketing activities here and some of the related reporting lines, which will substantially decrease the lines that report to me. And that will be extremely helpful in terms of spreading some of this burden of management on the group.

And Chet comes not only with good experience as a financial advisor himself, but as a recruiter - a very successful recruiter for our independent subsidiary, and then ran that whole business development effort for RJFS. So he has excellent cultural knowledge. He has understanding of how our business works and what it takes to sell us verses the competition.

He obviously has a vision of our shortcomings and what needs to be done. So the - it's not just in terms of support, but in terms of the technology that's necessary to run the operations.

So, you know, if I were to name the most important thing that happened during the quarter, disappointment is the most important thing. And as I've kind of said before, we're going through a period where my peer group here at the management level, there's going to be some turnover in that as some of those with less fortitude than I have decide to retire to various more attractive locales from their perspective. And I don't blame them for that. They've earned the right to do that. And we have a team of hungry younger managers here that are certainly willing to take on the challenge.

And more that's important, we're reaching outside. We recently appointed Henry Reyes head of our public finance effort, because our internal guy wanted to cut back his activity. He hasn't resigned from the firm. And I think Henry came from Salomon Smith Barney and had a great track record there. And we actually knew him from a prior association when he worked for us a number of years ago in the corporate side of the business. So I'm encouraged about that.

And there are some good people in the marketplace and we're picking them off where it's appropriate. And so, you know, I really do feel in a good position to take advantage of any upturn when it comes here.

I'd like to thank all of you for participating and we look forward to recovening in three months. Thank you.

Thank you for participating in today's conference call. You may now disconnect.

END