TAVA CC Q&A Part 3 of 3
Operator: Jamie Houde from Scudder/Kemper Investments, please go ahead with your question.
Jamie Houde: Hi, guys. Great quarter.
Man: Hi, Jamie.
Jamie Houde: Just calling- I kind of ran out of questions here. Mainly I want to ask you what the plans are for TAVA/Beck. Obviously you all have built a pretty profitable venture here. And I was wondering what the plans are after the year 2000 work has dropped off. Are you going to buy them out or are you just going to close shop?
John Jenkins: We certainly don't intend to close shop. The, you know, actual structure as we go forward is yet to be determined. And, as I alluded to before, we've actually started a kind of a formalized planning process right now to pick a direction and start building that post-Year 2000 strategy today and not wait until the end of the game.
You know, the same drivers are there as in our core business with, you know, the client base and the different level of contact point in that client base. So we're very excited about it. The fundamental drivers in that industry with deregulation and cost performance pressures on utilities in general, you know, the- nobody's building new power plants, so people need to understand absolutely how to leverage everything that they have from a capacity standpoint, all drive in the direction of spending money on sophisticated operational IT systems.
I will say, something I forgot along the way, I think Larry Hagwood mentioned it last time, that as a result of that relationship plus our consulting piece we have a major international opportunity in front of us that involves the privatization of a particular country's power grid.
Jamie Houde: Wow, sounds good. Next, actually I did want to get your assumptions on the growth of TAVA/Beck over the next few quarters. Things kind of got started very- a lot more quickly than I expected.
John Jenkins: Right. I don't know that we have- we've got- we actually have a management meeting in the next two weeks here where we're going to rehash that. I think the assumptions on the table are- you know, they got started faster. I would say that we would expect something in- you know, we certainly wouldn't expect it to double in the, you know, quarter on quarter. You know, I would expect a, maybe another 20 percent additional business volume.
But we need to be a little careful because of the, as Ken Trbovich pointed out, where these guys are in the cycle with content of tool sales versus remediation, that kind of thing. So I don't know if that- it's a long-winded way of saying, you know, we don't have a real detailed model except certainly we don't expect it to go back the other way as we sit here today.
Doug Kelsall: Yeah, I think that, just to follow up on that a little bit, Jamie, you know, when I look at it I don't- the contribution did come in much quicker than I think we expected. And I think as a result of that you're not going to see the continued growth, as John mentioned, probably as quickly. And I would expect it to be, you know, showing what I would consider to be some modest growth and not a situation of that level of contribution, you know, doubling in a short period of time.
((Inaudible)) I'm wrong, but I see that as kind of the nature of the business. They were able to ramp up quickly on some significant large contracts that had some billing rates that were, you know, very nice and that had a fairly high level of front-end tool sales, so they were able to generate some good profits early on as a result of those early contracts.
Jamie Houde: Okay. One quick question on Mangan, your acquisition, when do you all expect income to be contributing, bottom line?
John Jenkins: Well, I think that the earliest we would expect- I mean, let's say we did hold to our November 30 closing target, you know, you'd see minimal effect in, you know, our second quarter so it'll be third quarter.
Jamie Houde: Okay.
Doug Kelsall: It's a profitable entity so we certainly don't expect them to be generating any losses once we close the acquisition. We expect them to be, you know, when we close it to be generating profits immediately.
Jamie Houde: Are we to expect any dilution?
Doug Kelsall: There will be some dilution, but, as John mentioned, we have the acquisition structured so that it will be an accretive acquisition, not a dilutive acquisition- with some dilution in terms of the number of shares that we issue but it should be accretive to earnings.
Jamie Houde: Earnings. Okay. I had one on the tip of my tongue and I lost it. Oh, are you all in talks with anybody for making acquisition? Are you seeing anybody out there you're interested in, and in what sort of fields?
John Jenkins: Do that again, Jamie. Do we have more acquisitions in the pipeline, is that the question?
Jamie Houde: Yeah, and in what fields.
John Jenkins: Yeah, we have some other activity going on. The one that comes to mind immediately is probably more in a product-based arena that would be a nice supplement to a number of our businesses. And we've got some other, you know, some other service companies. But one of the things that we're also looking at here, is given the acceleration of our consulting side and the interest in this vertical enterprise integration, that maybe stepping into the manufacturing focused ERP arena might be something we consider.
Jamie Houde: Okay. Last but not least, I saw you guys this morning. I saw your presentation. And you all had a slide up where it showed your products and partners. And there was a mention of SAP and Microsoft. Could you go over your relationship with those two?
John Jenkins: SAP is just that- not a partner, Jamie. That was a slide that said the package confidence that we have in house, Microsoft is- you know, you can't do business in this arena without knowing Microsoft. We have in-house competence on SAP. We're not an SAP implementor, but we have people who know their way around SAP and can work the integration from the process (label) into SAP.
Jamie Houde: Okay. Great, thanks, you guys. Great quarter.
Man: Thanks, Jamie.
Operator: If there are any additional questions, please press the 1 followed by the 4 at this time. Gentlemen, I'm showing there are no further questions at this time. Please continue.
John Jenkins: Okay, great. Thank you, Jason. John and Doug, the call's gone on a little longer than we expected, but there's a tremendous amount of great news to bring to everybody. I appreciate your time. I do want to review a couple things. The gentlemen- John and Doug spoke at Wall Street Forum this morning, I have just recently- I just logged on to that at www.wallstreetforum, you can see a recap of the actual slide show and video of John on that Web site if you want to go to, once again it's as recent as this morning and it's wallstreetforum.com.
With that being said, we can get you any additional packages. We thank you all for taking the time out of the day. John, Doug, congratulations and, unless you have anything further to add, thank you very much for your time.
John Jenkins: Great, Thanks, Scott. Thanks, everybody.
Doug Kelsall: Thank you.
Operator: Ladies, and gentlemen, that does conclude our conference for today. You may all disconnect, and thank you for participating.
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