Q2 2004 Clark Consulting Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, ladies and gentlemen and welcome to Clark Consulting conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions following at that time. (OPERATOR INSTRUCTIONS) As a reminder ladies and gentlemen, this conference is being recorded. I would now like to introduce Nathan Elwell (ph), who will begin the call today.

NATHAN ELWELL, IR, CLARK CONSULTING: Good morning and thank you for joining us today for the Clark Consulting conference call to discuss second-quarter earnings results. If you haven't received a copy of the press release please call Ashton Partners at 312-553-6747. Before we begin, please be advised that this call may involve forward-looking statements such as projections of revenue, earnings, capital structure and other financial items; statements on the plans and objectives of the Company or its management, statements of future economic performance and assumptions, underlying statements regarding the Company and its business. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the Company's latest SEC filings. The company assumes no obligation to update any forward-looking statements made during the call.

On the line today from Clark Consulting are Tom Wamberg, Chairman and CEO; Tom Pyra, Chief Operating Officer; and Jeff Lemajeur, Chief Financial Officer. We will begin with brief remarks and then open the call for questions.

TOM WAMBERG, CHAIRMAN, PRESIDENT AND CEO, CLARK CONSULTING: This is Tom Wamberg. I'm going to give you some highlights and then turn it over to Tom Pyra and Jeff Lemajeur to go through the financials. We are reporting today second-quarter results.

We had cash flow which went up this quarter $16.5 million from the second quarter last year. We are continuing to the very strong cash flow at the Company. As we have report we paid down all of our bank debt and we have available line of $72 million which we could use of course for acquisitions or other opportunities that come along the way. The cash position for the rest of the year looks particularly good as well. We would expect to generate another 25 to 30 million of free cash by the end of the year and absent any new acquisitions, which of course this something we can't guarantee but we look for all the time, we would probably generate another 60 million or so of cash next year.

We were particularly happy for that in the past eighteen month we have paid down 89 million of debt I think is the number which primarily came from the Long, Miller acquisition. So basically what you're seeing is a reflection of our renewal stream which comes in each and every month. And where we are challenged from month-to-month, new revenue, sometimes we get more, sometimes we get less. The nice thing about the business that we run here is that renewal stream just continues to click along. What has happened ever since we went public is we have always made money, every quarter that we have been a public company. And the primary reason is that renewal stream. Once we book a piece of business, it stays in force typically with high persistency and continues on for many years out into the future.

In fact some recent studies of our renewal stream show that it is worth more than our current share price. If you think of the Company from the perspective of a value proposition, our renewal stream, which some people understand and some don't, we certainly understand it as a present value that is far greater than the value of our share price today.

Let me just touch base on a few other points before turn it over to Tom to crank into the numbers. In the quarter we had an unfortunate experience. A gentleman who had been with us many years has been -- how do I want to say it -- he has been investigated in respect to some insider trading issues. We are very dismayed at that. We have a very firm policy within Clark as how that works. Too, we have zero incentive at Clark to partake in any insider trading activities because we don't trade and we don't give investment advice to our clients. So we have zero opportunity to turn an insider trading activity into a gain for anybody here at Clark on a Company basis.

We're not sure where that is going to go but Bob Gallivan retired last Friday. We've got new people out in the territory making sure we're covering the clients. So far the client reaction has been not negative. People are concerned what is going to happen to Bob and his team but they have been very satisfied, many of them with the work we have done for them. And we don't expect any fall off in business plus it is very difficult to leave Clark when you have a plan in force. It is very difficult to move it to someone else if in fact that is even something that you want to do.

We think that is behind u. It is an unfortunate experience but those things happen from time to time and I can speak from our internal investigation that the Clark folks had nothing to do with this whatsoever and once, again, we don't have an incentive and we also have very firm policies on actions like this.

We also from time to time look at what is going on in the legislative front and we are seeing more and more positive things here. We are seeing absolutely nothing on a negative basis and we are now sitting, hoping that if you follow these things in close detail, that a bill called the FSC/ETI bill will happen before the end of this congressional legislative session. If it does, there is better than a 50 percent chance that there's going to be a provision in there that 1, protects all of the in force life insurance that has been sold which is reflective of our large renewal stream. But 2, codifies a practice that we have always held at Clark Consulting which is one of insuring management people and if it does codify that, any ambiguity whatsoever that is out in the marketplace will be behind us.

And in fact, we have done some things from a trademark basis and some other things to be well positioned to take advantage of this new legislation should it happen. If it doesn't happen, well it is still business as usual anyway but this could take some fence sitters and put them in the camp of clients that would be a great thing for us.

We will talk more …