Hanger Orthopedic Group Q4 2008 Earnings Call Transcript

Feb.11.09 | About: Hanger, Inc. (HNGR)

Hanger Orthopedic Group, Inc. (HGR) Q4 2008 Earnings Call February 11, 2009 9:00 AM ET

Executives

Thomas F. Kirk Ph.D - President and Chief Executive Officer

George E. McHenry - Executive Vice President, Chief Financial Officer and Secretary

Analysts

Adam Feinstein - Barclays Capital

Lawrence Solow - CJS Securities

Greg Williams - Sidoti & Company

Daniel Owczarski - Avondale Partners

Michael Petusky - Noble Financial Group

Operator

Good morning. My name is Jackie and I will be your conference operator today. At this time, I would like to welcome everyone to the Hanger's Year End Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions)

Thank you Mr. Kirk, you may begin your conference.

Thomas F. Kirk Ph.D

Thank you, Jackie. Good morning to all and welcome to Hanger Orthopedic Group's discussion of our fourth quarter results.

Before starting, let me take a few moments to review with you our declaration on forward-looking statements. During this call, Management will make forward-looking statements relating the company's results of operations. United States Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for certain forward-looking statements. Statements relating to future results of operations in this document reflect the views of Management.

However, various risks, uncertainties and contingencies could cause actual results or performance to differ materially from those expressed in or implied by these statements, including the company's ability to enter into and derive benefits from managed care contracts, the demands for the company's orthotic and prosthetic services and products, and the other factors identified in the company's periodic reports on Form 10-K and Form 10-Q, filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

The company disclaims any intent or obligation to update publicly these forward-looking statements whether as a result of new information, future events or otherwise.

And with me this morning I have George McHenry, Executive Vice President and Chief Financial Officer and Ken Abod, Vice President and Treasure and Director of Investor Relations.

So, this morning I will open things up with a few general comments and then we'll ask George to review the details of our financial results, and then I'll come back on and give you a little color on some of the business in our operations.

From an overall perspective, the quarter contained several noteworthy points. All of our business grew their sales over the fourth quarter of last year, thereby enabling us to have a solid quarter and to grow our pro forma earnings by almost 26%, compared to the comparable quarter last year. This makes it 12th quarter where we have met or exceeded first call estimates.

We continue to see the benefits of the programs we placed into operation over the last several quarters and the results of our people's efforts. Examples are the progression of the high tech products in our patient care business, the extension of the customer and product basis in our distribution business, increases in volume and pricing within the Linkia book of business, and a reversal of a non-coverage decision for our WalkAide product. Our balance sheet and liquidity are strong, enabling us to execute our strategic plans without any constraints.

Now I'll turn it over to George, who will review our financial results and balance sheet changes in detail.

George E. McHenry

Good morning, everyone. Thank you, Tom. As Tom mentioned, Q4 was another solid quarter for the company. We reported pro forma EPS of $0.26 on an 8.6% increase in sales, 29.4% increase in pre-tax income and 12.2% increase in net income. Keep in mind last year's Q4 tax rate was only 30% compared to 39% this year due to a one-time benefit. So our earnings were linear with the pre-tax income when you take that out.

Pro forma EPS for the year was $0.86, a 34.4% increase compared to $0.64 last year.

Now I'll move on to my detailed comments, first on the quarter. Our sales increased by 14.7 million or 8.6%. Our patient care centers had another great quarter reporting same-center sales increase of 6.1% or $9.2 million for the quarter. SPS also had a strong quarter, reporting a $2 million or 11% increase.

The balance of our sales increase came from acquired entities, which accounted for a $3.5 million increase.

Cost of goods sold as a percentage of sales, increased by 2.9% to 47.7% due to the favorable impact of the inventory adjustment on the prior year's cost. Labor cost increased by 1.5 million in the quarter, principally due to the impact of merit increases and acquisitions but showed good leverage as it decreased as a percentage of sales by 0.7.

Material cost increased by 10.5 million or 3.6% as a percentage of sales. The $14.7 million sales increase, accounted for 4.4 million of the increase. The distribution sales increase, accounted for 1 million of the increase and the balance was due to the $4.2 million of favorable inventory adjustment last year compared to a pick-up of 800,000 this year.

Our material rate is comparable to the last year when you factor in that difference in the inventory adjustment year-over-year.

SG&A of $70.8 million, didn't change from a year ago despite of a $1.3 million increase attributable to acquisitions. As a percentage of sales, SG&A declined by 3.4% to 38.1% from 41.5% in 2007.

EBITDA at 26.3 million increased by 2.8 million or 11.9% compared to the prior year due to the factors I just mentioned. Our EBITDA margins increased by 40 basis points from 13.8% to 14.2% this year despite that 2.9% impact of the inventory adjustment I just mentioned. When you exclude the material cost change, we increased our leverage by almost 400 basis points this year, so we did a commendable job of controlling expenses.

Our interest was $1 million less than last year due principally to the impact of lower variable interest rates. Our total leverage is calculated under the terms of our loan agreement; now stand at 3.55 times our trailing EBITDA, which is the lowest leverage we've had since the Norbert Care (ph) acquisition almost ten years ago.

Our income tax provision for the quarter was 39.4% of pre-tax, which is consistent with prior quarters, and based on that our EPS was $0.26 compared to $0.23 last year, a 13% increase.

For the year, our sales increased by 65.7 million or 10.3%. Comp sales and patient care increased 7.3% or 41.3 million for the year. SPS's outside sales increased by 11.5 million or 19.1%. And acquisitions accounted for $11.9 million, which rounds up the balance of the increase.

Our cost of goods sold as a percentage of sales, increased by 0.5% this year due to a 0.9% increase in material cost which was offset by a 0.5 point decrease in labor cost. Our labor cost increased in dollars by 9.8 million due to a combination of increased healthcare costs, merit increases and acquisitions.

Material cost increased by 25.7 million or 0.9% as a percentage of sales due to a combination of the $19.1 million coming from the sales increase and then the balance was due principally to a mixed change to sales. Increase at our distribution business accounted for most of the increase in material cost as a percentage of sales as those sales carry a considerably higher material rate than the consolidated rate.

SG&A increased by 19.3 million for the year but decreased by 80 basis points as a percentage of sales. The increase in dollars was principally due to $4.1 million from personnel cost, 2.9 million in merit increases, 3.7 million related to acquisitions, 3.3 million in healthcare and benefit cost, 3.1 million in variable compensation and 2.1 million that was in our growth initiatives.

EBITDA of 94.9 million increased by 11.1 million or 13.2% compared to the prior year. Our EBITDA margins increased by 30 basis points in 2008 which met our expectations. And again, if you exclude the material cost increase that was attributable mostly to the healthy increase at our distribution business then we increased the leverage on our SG&A and our labor by a 130 basis points, which is again showing, I think a very good cost control.

Interest expense was $4.4 million less than last year due principally to lower variable interest rates.

Our income-tax rate for the year ended up at 39.8%, compared to 37.8% last year. The prior year was impacted by a one time benefit and that benefit was all realized in the fourth quarter.

Moving on to the balance sheet; our AR increased by only $700,000 since 2007 despite a $65.7 million increase in sales and our DSOs remained low at 51 days compared to 56 days a year ago.

Bad debt expense was 2.3% compared to 2.5% last year and our AR over 120 days is a measure of the quality of our receivables was 11.8% of total AR compared to 14.4% last year which is the lowest that has ever been. So our AR is healthier than ever.

Inventory increased by 3.7 million to 86 million compared to the year-end balance last year of 82.2, inventory balance makes sense given our business needs and it's adequate to support our business growth.

CapEx for the fourth quarter was $7.3 million compared to $6.7 million in the prior year. For the year, we spent $19.3 million compared to $20.1 million last year.

Cash flow from operations was $18.4 million in Q4 '08 compared to 21.4 last year, a decrease of $3 million. For the year, cash flow from operations was $53.2 million compared to $51.7 million last year, an increase of $1.5 million. So we had another good year from a cash flow standpoint.

The company's liquidity remains strong. The company had total liquidity of approximately $96.6 million at year end, comprised of $58.4 million in cash and $38.2 million in remaining availability on the revolver after factoring out the Lehman commitment, borrowings and outstanding letters of credit.

Hanger also generated over $30 million in free cash flow from operations in 2008.

Based on these facts, we believe Hanger has adequate cash and borrowing capability to conduct operations and execute our growth plans.

Moving onto guidance; the company is establishing guidance for 2009. We expect revenues in the range of $750 million to $760 million, which will be a growth rate of between 6.7% and 8.1%. And based on this sales guidance, we expect to report EPS of between $0.96 and $0.98, which translates into EPS growth rates of up to 14%, if we hit the high end of the range.

That is the end of my comments. I am going to give the call back to Tom Kirk now, our President and Chief Executive Officer.

Thomas F. Kirk Ph.D

Thanks George. Let's take a few minutes and dwell in to our business operation to what the key drivers were. Obviously, this looked to have a profound impact on our ability to meet the guidance as George just discussed.

HPO, our patient care division, achieved a $9.2 million increase in sales, a 6.1% same-center sales growth for the quarter. The performance for this quarter is partially attributable to the rollout of the CMS fee schedule increase that we received on January 1, 2008. And I'll remind you that that was 2.7%.

That increase in the first year, impacts about 35% of our book of business. And this, combined with the rollout of the increase of other prior fee schedule increases to our total commercial book of business, translates to about a 2% of the 6.1% in terms of our overall growth. The balance of the growth of 4.1% is attributable to volume and mix. And we look at that as about 75% coming from volume, 25% coming from mix.

On January 1 of this year 2009, we received a 5% increase which will translate to about a 2.5% price increase in '09 as that increase marries up with the prior ones to impact our book of business.

The other programs impacting volume and mix are the following. First; is the continued improvement in our Linkia book of business, and let me remind you again that HPO is the primary vehicle for the delivery of most of the services under the Linkia contracts. On an overall basis, the revenue from the Linkia designated contracts was up 16.5% for the quarter, 13.8% for the year.

The second area that has impacted volume and mix is the emphasis that we place on our high performing products, such as microprocessor prosthetic hands, knees and feet components. For the quarter, the revenue from the delivery of these product lines was up 32% compared to the comparable quarter last year and for the year, the revenue increase is about 31%, that's continuing to be an important part of our business strategy.

The third area that is impacting volume and mix in patient care is our use of our Patient Evaluation Clinics and I think I've mentioned these in the past year and that is where we actually contact our patients and bring them back in on a pre-arranged schedule so that we can check their fit and functionality of their devices. These are effective mechanisms of staying in touch with the patients and they produced approximately $4.7 million in revenue for the quarter and over $19 million for the year.

And the last area impacting volume and mix are our sales, marketing and public relations efforts by our practitioners and all those who support them in identifying opportunities specific to their local businesses and then of course they go out and implement the activities to translate those action plans into results.

Few words on the state of the economy, because I think we certainly receive a lot of interest in this area, specifically how that will affect our business. Thus far, we've not seen any evidence that the challenging financial environment is translating into patient care delays. However, we do recognize that if workers loose their jobs and do not find other benefits or COBRA, we may see some stretching out of the time between their visits.

Normally we would also expect to see some increase in the maintenance procedures when this occurs, but today this has not happened. We've not seen that particular phenomena.

Further, it's our understanding that the proposed stimulus plan, that's being discussed in Congress, will contain a provision to help those who have lost their jobs with supplemental payments to offset the cost of COBRA or other insurance that they may have to procure. So we're waiting to see the outcome of this. Obviously, any kind of the stimulus package of this type would mitigate to a certain extent, some of the historical trends that we see when people loose insurance.

On the regulatory front, we continue to support the Amputee Coalition of America or ACA, on educating state legislatures on the issues involved with reimbursement caps and limits and how these caps and limits deprive patients of quality care and doom them to lower levels of mobility.

There are 11 states for the past parity and almost 30 are working on parity legislation today. Seven states have bills on the floor and as I mentioned, we are actively supporting the ACA in trying to get these bills passed.

On the federal level, a bill was introduced into the Senate last year for a national prosthetic parody and that complements to House version and we hope to see action on these during the first quarter of 2009.

Let's turn on attention to SPS, our distribution company. Their outside sales were up approximately 2 million or 11% compared to the fourth quarter of '08 ... excuse me, fourth quarter of '07.

Success in continuing to build sales in SPS's core business is attributable to three major areas: First is a continued leveraging of the location of our new warehouse that we opened in July of '07. This warehouse is in the Pennsylvania and it really provides outstanding access in to the Northeast market, so that SPS can deliver into that geographic area the same kinds of service that it provides in other parts of the country.

The second area that we look at has been a major driver on their sales is their superior customer service and training which has been the impetus for there remaining some new large customers.

And third, is the addition of some new standard and high-tech products into their portfolio, which is evidenced by a new line of modular component tree and microprocessor products that were assumed earlier last year in '08.

And regarding Surefit, the acquisition in custom foot orthotics that we made in July of '07, we are nearly complete with the integration into the Hanger family. We have installed the SPS financial software applications, reengineered the manufacturing processes and also fixed and straightened out order entry to fulfillment processes.

Fourth quarter sales were up modestly by 2%, compared to Q4 of last year. However, December was more than 15% over the comparable month from last year. So, we think that Surefit is really coming into form. In addition, Surefit is preparing to launch a new scanning system to capture image in order to better service its practitioner and patient customers. I think that that's going to be a major development and much better way, much more efficient way, of getting the shape and size that are necessary to make these custom inserts and shoes.

Now let me provide an update on Linkia. Linkia continues in its duel mission of: A; building a chair among the key healthcare companies' books of business, and B; negotiating a fair price for the services provided by the providers within its network.

On this point, they are expecting to reach favorable outcomes with two large healthcare payers this year of price increases. These demonstrate that payers continue to recognize the value that Linkia brings to them and helping them and fold their administrative cost, while ensuring good clinical care and high levels of customer satisfaction to their membership.

The Linkia network consists of the Hanger patient care centers and independent providers and the number of independent providers has grown to 316.

Linkia's book of business revenues for the quarter was up by over 16%, and for the year by almost 14%. In addition Linkia is piloting other services that they could incorporate into their model to provide benefit to the payers. And on the marketing side, they are continuing discussions and negotiations with key national and large regional healthcare management companies, as well as the firms in the workman's compensation segment.

Let's direct our attention now to Innovative Neurotronics. They also had a good quarter by increasing enterprise revenues by almost 24% as compared to Q4 of '07, and on an overall basis for the year they were up 98%, compared to 2007. While their absolute sales were weaker in the quarters ... in the end of the year, the reason for that was that we had an outstanding public relations event that occurred last January, which really acted as a great stimulus to the first quarter and second quarter sales.

And obviously, recognizing the benefit that the PR has in just the marketing, we also recognize the benefit that the PR has in trying to influence the outcome from many of our patients, such as stroke and MS, we are actively working with a number of networks to see if we can get our patients the kind of recognition that they need when they are wearing these devices so we can advertise the benefit and we've redoubled our efforts in this area.

Several significant events have occurred during the quarter on the reimbursement front. First; Medicare issued a specific code for WalkAide attesting to the unique value WalkAide can deliver to the patients. In November, CMS overturned a standing non-coverage decision for WalkAide and they approved the WalkAide for coverage of patients with incomplete spinal types of upper motor neuron lesions.

This was a major achievement and came earlier than we anticipated.

And when CMS reversed the non-coverage decision and gave us limited coverage for incomplete spinal in November, it changed our timetable as well. This November decision and the specific curve that we received in January allowed us to initiate a proactive reimbursement program.

We are engaged with CMS and private insurers in discussing coverage for the other kinds of patient groups. This is a process of working with them to understand their needs and its proceeding quite well. And we can't put a definitive timetable on it. One of the reasons is, right now CMS is actually reviewing the standards by which they judge stroke rehabilitation progress.

Obviously, we are following this very closely and will comply with their decisions on the appropriate parameters that they want to see.

On the third party payer front, the removal of the non-coverage decision opened the door to have discussions with third party payers on the benefit fitting their members with the WalkAide. We've expanded our reimbursement department within Innovative Neurotronics and we are actively working with our patients to support them in their efforts to secure authorization and reimbursement.

Now, this dual track of public and private is the exact same progression that we went through to gain reimbursement on microprocessor needs and other O&P devices. It works, we will get there, and it has been effective in the past and frankly that of that removal of that non-coverage decision was a huge event, and as I mentioned, in opening the door to getting reimbursement from the third-party payers.

And with respect to our clinical trials on the stroke patients, we closed down new enrollment as of November 15, and the final patients are wrapping up their trials. We're still working on the clinicals and once all the participants are through the study, we'll work on getting the results published.

We can't talk about the specific results at this time because this would really tank the results and could end up invalidating our studies. But as soon as we get them complete, as I mentioned, it's our intent to get them out for peer review and get them published, and we're continuing to work with Medicare through this process to make certain that our ultimate submission meets their needs.

And we are confident that this is the best route in trying to get coverage both publicly and privately.

As we stated before, we believe that 2009 is really going to be a transition year for WalkAide. As we look at the guidance that George spoke about, our guidance for '09 contains a pretty healthy increase in sales of about 50% over 2008. But we would certainly expect that once we secured the reimbursement that those sales levels on a year-over-year basis would go much higher. So, we think we've gone down the middle of the fairway on this one, recognizing the third-party payers will obviously be generating more business. Our public relations efforts will help us. But we haven't gone crazy in terms of anticipating huge benefit from WalkAide in '09 and that's pretty consistent with what we've said in other public forums.

And finally, a few words on our acquisitions and other developmental projects. We're continuing to pursue strategic acquisitions. In 2008, we executed 12 acquisitions and they are already integrated into the Hanger family. We're going continue to look for tucking candidates that have strategic value to us in the form of location, the quality of the practitioners and/or favorable products service mixes.

On the development front, we've made some progress and we've initiated some pilots on our developmental projects in Q4 and we'll be starting another one in Q1 of this year. We anticipate a public launch a little later this year on a couple of these projects and we'll be talking to you about those as the year moves on.

So in closing, we believe the results of the fourth quarter demonstrate that our programs continue to yield positive results. However, we recognize that this environment of volatile economic and financial conditions really requires us to be extra vigilant with respect to revenues and of course cost management, and we have put several programs in on that front, and they have been working and we will monitor their performance and ensure that they continue to work in '09.

So, thank you very much and I will now open up the line for questions.

Jackie, would you help us with that.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Adam Feinstein.

Adam Feinstein - Barclays Capital

Okay, great. Good morning, everyone.

Thomas F. Kirk Ph.D

Good morning, Adam. How are you?

Adam Feinstein - Barclays Capital

I am doing well. Very strong quarter, here. Just a few questions, may be just a couple of housekeeping questions. Just wanted to make sure, and I apologize I missed the first couple of minutes. But, did you breakout the pricing relative to the volume in the same store growth number?

George McHenry

We ... same store sales were 6.1. We attribute the pricing to 2% of that and then the balance we split 75% to volume and 25% to mix.

Adam Feinstein - Barclays Capital

Okay. So,... okay, great. And then just on the bad debt side just, do you have a bad debt number for the quarter first?

George McHenry

Sure, bad debt for the quarter was 2.2%.

Adam Feinstein - Barclays Capital

2.2%. And how does that compared to last year, George?

George McHenry

Last year was 2.3% and for the year, we were 2.3% compared with 2.5%.

Adam Feinstein - Barclays Capital

Okay.

George McHenry

So, we... our collections were strong. We've got, actually our reserve went up a bit, even with that lower expense. So we had a very strong year from a collection's standpoint and feel good about that result.

Adam Feinstein - Barclays Capital

Okay. And you made reference to the economy and just clearly a big unknown area, but as you are thinking about bad debt for the coming year, just may be just walk us through a little bit in terms of process. And then just curious in terms of your thoughts, I guess in terms of the past, what's the highest that that number's been?

George McHenry

Well, let me first address your question on the, looking forward into 2009. We, in our ... inherent in our projections that, what with the guidance we just give is about 2.5% bad debt expense. So we were a little conservative in our internal projections, assuming that there could be some pressure on co-pays (ph) going forward.

Now, we think our process helps us in terms of collecting co-pay (ph) and that's where real exposure is as opposed to the 80% that is being paid by the insurance companies or Medicare. And because we collect that before the device is delivered, and which is a process that's pretty similar to what you see when you are in any doctor's office.

Adam Feinstein - Barclays Capital

Okay.

George McHenry

That's really ingrained into our process right now and it's really a part and parcel to the reason we've have been able to, over the years reduce our DSOs and our bad debt expense at the same time. Now, looking back into the past, it's not really ... its kind of apples-and-oranges to go back and talk about our bad debt expense in the past because we have significantly improved our systems and our process over the years. If you go back to 2001 our bad debt expense was up in the 4% range ... 4% plus range. But in 2001 we had 15 different billing platforms.

Adam Feinstein - Barclays Capital

I see.

George McHenry

And then the kind of process we had today. So, we don't think it's possible that that is a place we could even go. And we think we're pretty conservative with the 2.5%.

Adam Feinstein - Barclays Capital

Okay, great. And, one more question and I'll get back in the queue. Just in terms of just margins, you guys did a good job this year in terms of driving the margins higher and just last year in the fourth quarter, you had the issue with the comp accrual but it looks likes you managed through it better this year. So, maybe just talk about that as well, I was just was glad to see the margin leverage and I just want to make sure that will we see a similar thing in 2009?

George McHenry

Well, we were happy as well with the leverage, as I mentioned during the call. For the year when you pull out the cost of materials which is obviously tied into your mix directly, we improved our margins really by a 130 basis points in our labor and our SG&A. We, with the accruals for our, or it's been in compensation we think make sense. They are lined up with our earnings and we got over that that issue that we have in fourth quarter that was partially based on the fact that we had that big inventory adjustment, favorable inventory adjustment last year.

This year our inventory adjustment's only $800,000 and we did a very good job estimating our cost throughout the year.

So, we expect to see continued improvement in our leverage where we're expecting, I think when we talk about '08 guidance, we talked about 20 to 40 basis points and we think we're going to be in that same kind of range this year.

Adam Feinstein - Barclays Capital

Great. Okay, thank you very much.

George McHenry

You are welcome.

Thomas F. Kirk Ph.D

Thank you, Adam.

Operator

Our next question comes from Brendan Strong (ph).

Thomas F. Kirk Ph.D

Good morning, Brendan. How are you?

Unidentified Analyst

Hey, good morning. Maybe just a couple of other questions here. On the cost of goods sold line, I mean what percentage of that ends up being just pure material cost? And I'm just wondering if there is some upside there in 2009 versus 2008?

George McHenry

Cost of goods, our material cost for the year was just below 30% of our sales. So, the rest of that cost is labor and which runs at right around 19%. So, there is some opportunity for leverage in the labor as we increase our sales in our existing base of practices.

Unidentified Analyst

And just lower material costs, you don't think that's necessarily a possibility in 2009?

George McHenry

Well, it depends on mix. It depends on a lot of things, like a lot of other companies we do have a far amount of the imported goods. We do depend to some degree on oil prices staying in a reasonable range, as we use a lot of plastic and titanium in our product. And, the current government policies relative to the economic situation that we find ourselves in could have an impact on strength of the dollar, depending on how much borrowing the government does.

So, those factors could have a negative impact on our cost of materials. Now, flip side of the coin, we are continually working on utilizing SPS, our distribution company, to buy as much product as we can in order to control prices. We had some new products coming out, the WalkAide, things like the WalkAide sales help us since we have manufacturers margins on that and we had some other new products that we're working on this year that could help us on the margin side.

So, I think it's fairly balanced and we could potentially keep our comp right about where it is. I don't think there is a lot of opportunity to bring it lower this year with all the variables that I just talked about.

Tom do you have any other.

Thomas F. Kirk Ph.D

And the only other area Brendon is the utilization factor, and we are constantly educating our folks on how best to fabricate devices so that we can reduce the consumption as much as possible. Rework as obviously a major enemy here. We've just finished with our Education Fair last week and we had many fashions on this.

So, I think we might be able to squeeze a little bit more out from utilization perspective. Hopefully we won't have some of the wild swings that we experienced in 2008 and the leverage that SPS can bring there. We started a whole new program called premium choice products, and that's nothing more than determining the best product clinically and economically for any situation and SPS is proceeding to work with their vendors to put more people into this.

And this is a volume play where we shift our buy on to a smaller number of suppliers in exchange for getting some better pricing. So, we believe we might be able to get a little bit more out of this, but I don't think you are going to see anything of the substantial nature here.

Unidentified Analyst

Okay, thank you. And maybe just one more if I may. Your outlook for CapEx and free cash flow in 2009 and a related point, I'm just curious with the cash on the balance sheet, do you just continue to run high levels there because you don't want to pay down revolver? How do you see that playing out?

George McHenry

Well, first of all, free cash flow and CapEx we expect to spend about $22 million on CapEx in 2009. So we're continuing to invest in the company and we're not pulling back on that. And we... and of course we expect to be able to fund that out of cash flow from operations. We expect our cash flow from operations to be about $5 million less than we reported this year. And that means, so it'll be in a range of 40 to $50 million.

And relative to our cash position and our borrowings, we're not comfortable enough yet with the, the far view of what's going on in the financial ranks to pay down the $15 million that we borrowed on the revolver. But that is something we will consider as 2009 progresses. We will however keep the remaining cash we have. We think it's important to maintain our liquidity, so that we are certain that we can execute on our growth plans, because when it comes right down to it, if it's not able to do that you are kind of sacrificing the future.

So, we think that's very important.

Unidentified Analyst

Thanks very much.

Thomas F. Kirk Ph.D

You're welcome.

Operator

Your next question comes from Larry Solow.

Thomas F. Kirk Ph.D

Good morning, Larry. How are you today?

Lawrence Solow - CJS Securities

Good morning. How are you guys doing?

Thomas F. Kirk Ph.D

Great.

Lawrence Solow - CJS Securities

Just a quick follow up. Is there any particular reason, why you expect that free cash flow to fall 5 million? Is there one particular or is there a couple of factors or?

George McHenry

No, it's just really one thing. After two years of, while reducing our DSOs down frankly, when we are below 55 days that was better than I thought we could do with our present technology and process. And I don't think we'll get that same benefit next year. So that's going to cause us to create a little bit more working capital as we grow our sales in 2009.

Lawrence Solow - CJS Securities

Got you. So, maybe the DSOs got to, will it still be contained and may be got a little head on the sounds it looks like in '08?

George McHenry

I think they'll stay level at 50-51 days

Lawrence Solow - CJS Securities

Okay.

George McHenry

And, but

Lawrence Solow - CJS Securities

Revenues will grow.

George McHenry

Process of 5 day improvement.

Lawrence Solow - CJS Securities

Right.

George McHenry

Obviously has an impact on your working capital.

Lawrence Solow - CJS Securities

Got you, got you.

Thomas F. Kirk Ph.D

And if you factor that against the increase in sales that we gave in guidance obviously even if you stay flat, the number gets a little bigger.

Lawrence Solow - CJS Securities

Got you. And then, and you guys, you discussed, you said you expect about a 2.5% benefit to price for the full year '09 and I think you said it was a 2% increase for the benefit in Q4. Do you happen to know, do you happen to have a full year '08, what that benefit was?

George McHenry

It's about 2%.

Lawrence Solow - CJS Securities

Okay.

George McHenry

As we go all across the board, we look at the ... it's better look at the annual averages because these things come through different contracts at different times.

Lawrence Solow - CJS Securities

Got you.

George McHenry

So, we say two in '08, 2.5 in '09.

Lawrence Solow - CJS Securities

Got you. So, essentially the 5% increase, you are going to get maybe a third of that and then obviously some of the initial increases that you got in 2007 will start to wane off I guess, or it'll start or already been implemented?

Thomas F. Kirk Ph.D

Yes, we had a 4.3 in '07 and 2.7 in '08 and now the 5% beginning in '09. So those things are starting to flow through.

Lawrence Solow - CJS Securities

Okay, and then and as we look out to WalkAide, do you expect maybe towards the tail end in 2009, if you'd see a more broader reimbursed improve but you have to may be spend a little more investments spending on selling expense and marketing of the product or how does that come into play?

Thomas F. Kirk Ph.D

Two areas that we believe can help us quite a bit. One, and we made investment, this is really an investment, in people, we've hired a new Director of Reimbursement back in mid-year '08, and she has just recently added an additional resource and that's because with the changing of this non-coverage decision as I mentioned, it really opens the door for us to work with third-party payers and become their advocates to explain the device.

So, through our Department of Reimbursement as well as to our Chief Medical Officer, we are going out and having discussions with those third party insurance companies, so that they can understand what this is all about and the appropriateness of using the device on various indications.

And by the way we have tremendous support from the MS society. Because they see the benefit and they are working with us to provide some of that education to the insurance companies. So that's one area.

The other area that we are looking at, I would call PR/Marketing. We certainly noticed the impact that the Good Morning America feature had on our sale and we are trying to duplicate that by finding appropriate patients that could showcase the device but more importantly, could at least alert a number of the patients that are out there suffering with this indication that there's hope on the way. There is a device and that'll start building.

So we want to put some more resources into that area to try and get the word out as well.

So, you are right. Through the year we'll be monitoring this action very closely and determining just what is the proper level of resources. That's already built into our budget, this isn't something that we'll have to come in and add.

Lawrence Solow - CJS Securities

Right.

Thomas F. Kirk Ph.D

We've just anticipated doing this. Its part of what we thought would be necessary to get the, approximately 50% sales increase through '09 and really setting this up for '010 when we would expect to see this thing start to take off even in a more profound way.

Lawrence Solow - CJS Securities

And would you kind of accelerate your marketing effort and discussions with these third-party payers once you have, I guess when'd it be make sense to wait until you have your full clinical trial results, positive?

Thomas F. Kirk Ph.D

Absolutely Larry, that's right. You have to go out with something in your hand. We can do demos and people can see it empirically, it's a night and day difference, but obviously they need to be sure that these are not corpse and it's statistically over a broad range of those patients indications that we're really getting at this time.

Lawrence Solow - CJS Securities

And based on current thinking, not asking you will we have these results published, but do you have an idea when you'll be able to show these results to your some of potential third-party payers?

Thomas F. Kirk Ph.D

We think that it's going to be end of first quarter beginning of second quarter, we're going to have something we can go to. The big hang up on this is that if we go with some of the results and they haven't gone through the trials of fire here by having peer review, which is where you really have the experts in the field, this is the cardiopulmonary field, take a look at this things and blast them.

Lawrence Solow - CJS Securities

Right.

Thomas F. Kirk Ph.D

They don't have the, doesn't have the same clout. So, we can control what we can control, which is getting the results analyzed and then working with people to bring them to the attention of the peer reviewers. But we have alluded to the, for example, the inventor of this product, Dr. Dick Stein (ph) has been running some trials in Canada for a number of years and he too has been trying to get those showcased.

And I think he is on his third revision with some of the sources that he's gone to.

Lawrence Solow - CJS Securities

Right.

Thomas F. Kirk Ph.D

That sort of the lynch pin here how quickly you can get outsider's attention and how quickly they're going to give you their blessing.

Lawrence Solow - CJS Securities

Got you.

Thomas F. Kirk Ph.D

So, we're looking at ... we want to get in front of these people hopefully in the first half of this year.

Lawrence Solow - CJS Securities

Got you. But it sounds like you may not get even before until you actually get those results peer reviewed and published.

Thomas F. Kirk Ph.D

That's again an issue.

Lawrence Solow - CJS Securities

Makes sense.

Thomas F. Kirk Ph.D

Yes. But in the meantime we're continuing to work with CMS to understand exactly where they are and what they want to see. And it's really, it's a crazy process but we know that it works, because we've done this on so many other devices, and as you just keep chipping away at this and we will get there.

Lawrence Solow - CJS Securities

Right.

Thomas F. Kirk Ph.D

It's just a matter of trying to get it done the right way, and show people the data in the form that they want to see it.

Lawrence Solow - CJS Securities

Absolutely. Okay, just two more housekeeping questions, sorry to ask so any questions. Do you happen to have an absolute WalkAide number for sales? Or is it, I mean, I guess it was in the ballpark of 10 million for the year, is that?

George McHenry

It's was just under 10 million.

Lawrence Solow - CJS Securities

Okay. And then?

George McHenry

I don't have that...precise number in front of me.

Lawrence Solow - CJS Securities

That's fine, that's fine. And then depreciation for the quarter? I guess you gave that number. Do you have a depreciation number for, outlook for '09, I should say.

George McHenry

Depreciation here...

Lawrence Solow - CJS Securities

You or DNA, both combined?

George McHenry

That's going to tick up a bit in '09, because of the higher level of CapEx. This year we're right around 17 to...

Lawrence Solow - CJS Securities

Right.

Thomas F. Kirk Ph.D

And we're going to be in the 19 million range.

Lawrence Solow - CJS Securities

Got you, and I guess through some of the acquisitions I guess there is a little goodwill on those too so I guess that's also helping to tick it up.

George McHenry

You don't advertise most of that. It's principally will be coming from the higher level of CapEx that we've had to support our growth in projects like the paperless office that we are working on.

Lawrence Solow - CJS Securities

Got, it, great, thanks guys. I appreciate it.

Thomas F. Kirk Ph.D

Thank you.

George McHenry

Okay.

Operator

Your next question comes from Greg Williams

Thomas F. Kirk Ph.D

Hi Greg. How are you this morning?

Greg Williams - Sidoti & Company

Good Tom, Thanks. Thanks for taking my call.

Thomas F. Kirk Ph.D

You're welcome.

Greg Williams - Sidoti & Company

Just had a question on, have you mentioned Linkia, you piloting other services, may be if you can shed some light into what services those may be?

Thomas F. Kirk Ph.D

I am going to be a little vague on this Greg, simply because they are in a piloting stage and we are working specifically with the Pacific Carriers. What's happened here is the carriers have come and being very pleased with the way our network is providing O&P services.

They've asked us, can we pilot some things with you? So, the projects are different by different third-party healthcare payers. So I don't want to let Peter know what Paul's doing because we've signed some agreements in this respect. Obviously, we've given ourselves the flexibility that once we get it up and going through one of them, we can migrate it to the others. But suffice to say they are in the broader area of rehabilitated services, both from the clinical as well as from the administrative side.

And I probably can't go beyond that. But these are things where folks have come to us and asked us, can you include this kind of a service? So we are reaching out to make sure that the appropriate provider network is in place and that we are providing the right kind of human and electronic services to back this up. But thus far, they're going pretty well. And I believe that overtime what you're going see is Linkia is going to be picking up bigger pieces of the overall rehabilitated area in service to these people along what I would call a continuum of care and administrative services.

Greg Williams - Sidoti & Company

Okay, and is it still in the scope of O&P services?

George McHenry

Yes, yes.

Greg Williams - Sidoti & Company

Okay, and I'd just the... one housekeeping question. I assume in '09 guidance you're using 40% tax rate and may be you can help us with the share count as well?

George McHenry

Sure. The... we are using the 40% tax free ... and let me see if I have the share count, again they were about 32.2 on share accounts for the year.

Greg Williams - Sidoti & Company

Thanks, great guys. Thank you.

George McHenry

You're welcome.

Thomas F. Kirk Ph.D

Thank you.

Operator

Your next question comes from Daniel Owczarski.

Thomas F. Kirk Ph.D

Good morning, Daniel.

Daniel Owczarski - Avondale Partners

Good morning. Thanks. I am not sure if you mentioned, George, but just a couple of quick questions going forward. Does your revenue guidance include impact of acquisitions and I guess if it doesn't or even if it does, what's your target, your typical target there?

George McHenry

It does not... it only takes into consideration the partial year impact of many acquisitions that we made in 2008. We do not typically put any at or 2009 new acquisitions into the guidance because we can't control when those deals close. And that makes it very difficult to project for the street, so that's been our practice from the past.

Daniel Owczarski - Avondale Partners

And if you stated that in your mind, what a typical target would be?

George McHenry

Sure. Our target remains consistent with 2008. We want to acquire O&P or related businesses that have annual sales in the $20 million range, throughout the year. That's our goal for next year, which is similar to this year's and I think we ended up bringing in acquisitions with total projected sales of about $22 million.

Daniel Owczarski - Avondale Partners

Okay. And then, just for the first quarter, can you remind us, do you see seasonality there? Is that typically should we be thinking that this is going to be sequentially a decline in their first quarter?

George McHenry

Yes. The first quarter will be very similar to what our first quarters have been in the past. There will be ... we will be reporting less EPS than we did in second, third or fourth quarter this year, in 2008, captain's always talks on the past. And if I remember correctly, we reported about $0.06 in '07, $0.12 last year and we're probably going to be in the $0.14-$0.15 range for 2009. So it is definitely a lower profitability quarter for us.

Daniel Owczarski - Avondale Partners

Okay.

Thomas F. Kirk Ph.D

The weather's the major factor...

Daniel Owczarski - Avondale Partners

Right.

Thomas F. Kirk Ph.D

In what goes on in the winter time and certainly these recent ice storms that we've had through the middle part of the country are pretty good evidence of how that impacts the ability of our patients to get the to the patient care centers.

Daniel Owczarski - Avondale Partners

Right.

George McHenry

And when you have that kind of weather Dan, your amputees just don't schedule for or they just stay home, number one. And then secondly, because a lot of our patients have second indications, health indications there's, a lot them are diabetics, they tend to they ant to chip away at their total year co-pay before they make a big expenditure on a prosthetic device. So this affects our return patients. So, they're more likely to come in, in the second, third or fourth quarter when they've covered a good portion of their annual co-pay maximum.

Daniel Owczarski - Avondale Partners

Okay. And then just moving maybe to a bigger picture, competitive question, you've talked, maybe in the past about the independent practitioners being squeezed in this type of environment. And can you give us any data points or a color or specific issues they are facing now more than ever, anything more concrete than just kind of general commentary because I know that you've talked about that, you might be seeing ... you might be in a better position from an acquisition standpoint?

Thomas F. Kirk Ph.D

I think the squeeze occurs from a couple of perspectives. First is on the materials front. They just don't have the volume to try and negotiate the prices. And as I mentioned earlier, that's one of the key tenants of SPS's strategy, which is to work with the vendors in a very fair way to use that... our volume and our purchasing volume in an effective way to reduce prices.

So, they don't have that advantage, and that's not to say that they are seeing double our cost. They are just not getting the same kind of benefit, and then in an industry where 5% can really impact the outcome in terms of percentage of sales. We know because of the way we do the acquisitions that we can have great visibility into their cost structure. So, that's one area.

The second area is, what I would refer to as the ability to sustain the ebbing flow on the cash flow side, and what you see is that in some cases folks don't pay us promptly and they just don't have the ability when they are faced with meeting payroll and paying the rent check. They don't have the ability to sustain that kind of ebbing flow and we know that because a number of people have come to us and said, I got into this to do clinical work and to help my fellow man and what I'm finding out is, I'm taking home equity loans on my property, et cetera and trying to meet payroll to carry me through.

What ends up happening typically is they finance that on the back of their vendors that only works for so long and then they go COD and then things start to get a little ugly.

So, it is the ebbing flow on the cash flow, it's the higher cost of materials and one of the ways that people try to alleviate this, is through reduction in their labor force. And we've seen some of them actually reduce their technical and their support staff, which now means that the owner of the facility has to go in on Saturdays and on the evenings to make the devices and finally his balance and quality of life starts to come unwound and then too that forces them to not go out and do the kind of marketing that they would like to do because they've got to be hands on in the shop.

So, from all three of those areas, that's what impacts them. And in some cases its not that they're facing bankruptcy, it's just that they get tired. And the folks have said, I don't want to do this anymore. I want to really get out of this thing.

So, that's the manifestation of what we see, that's out there.

Daniel Owczarski - Avondale Partners

Very helpful, thank you.

Thomas F. Kirk Ph.D

You're welcome.

Operator

Your next question comes from Mike Petusky.

Thomas F. Kirk Ph.D

Hey, Mike how are you this morning?

Michael Petusky - Noble Financial Group

Hey, doing great. Good morning.

Thomas F. Kirk Ph.D

That's wonderful.

Michael Petusky - Noble Financial Group

A couple of quick questions. In terms of just, I didn't catch it if you gave WalkAide revenue for the fourth quarter. Did you actually give a number?

Thomas F. Kirk Ph.D

No, we didn't. We just talked about the annual year and the first half of the year the revenues were stronger, so we don't break it out from a segment accounting perspective. But we were ... we are finally loaded because of the Good Morning America piece.

George McHenry

Right. We have 1.3 million in the fourth quarter and we're about 9.1 million for the year. Somebody had asked for the year earlier and I didn't have it right in front of me but have it now.

Michael Petusky - Noble Financial Group

Okay. I am a little surprised I guess pleasantly so that your guidance for '09 doesn't include any acquisition revenue. Can you talk about what you're assuming in terms of the same store growth in SPS?

George McHenry

Sure. We're expecting same store growth in the 3% to 5% range and we're expecting low teens for SPS.

Michael Petusky - Noble Financial Group

Okay. And in terms of what you're assuming in the Linkia relationship, so you guys assuming that you guys get some better pricing from towards the sizable payers or what's your assumption in Linkia? Are you making any assumptions in terms unemployment? I mean how deep have you guys gone in terms of that piece of your business?

Thomas F. Kirk Ph.D

We ... I guess let's talk volume and then price. First off Linkia continues to talk to some other carriers, we've got contracts with all the carriers but what we really like is to either get the preferred contract, which is what Linkia does or the exclusive contract, which is the second basis. And so we have discussions going with the Blues, that's going to be a toughest one because even though they are the largest, they operate in a very, very decentralized fashion. And we also have discussions going with the other carriers.

We hope that by year end those things will come to fruition. We are trying to evaluate the impact of the financial results that some of these folks are seeing. I mean the Blues announced they were down 61% in the fourth quarter. I think it was Humana announced they were down 28%. We offer an alternative in terms of helping them manage their costs. So we're trying to look at where we can be part of their success. And we think that may be this is a good time for us to intensify our marketing efforts.

But we have learned over the years, they do move on their own pace and we aren't going to be influence that much except that wants to update all of our numbers so that they can see the value.

In terms of the price negotiations, some of these happened by contract where we have multiple year contracts with these carriers. And other ones are discreet events; when a contract expires, they're going back in and trying to open up the negotiation on the price front. And as I alluded to in my remarks, we have a couple of these that are ongoing now and we expect that at least one of them is going bear fruition before the end of the year.

And so, we've tried to be a bit conservative in our guidance and assume that we'll get one of the two that we're talking to and we'll pick up some additional volume. And so, in building our estimate for Linkia's book of business, we do go to the level of understanding the customer and where they are in the numbers of customers.

We have not gone to factoring in the level of unemployment to say, what's going to happen to their membership, because the ... I guess the real key to this is whether or not these folks are going to get impacted by the stimulus bill and have alternatives, we also know that Congress, if there's a broader healthcare reform, is looking at doing some restructuring on Medicare advantage. And that could enter into this.

So, from that overall perspective of the unemployment and how it balances with different government programs, we assume that they're just going to be pretty much a wash and that, we're not going to see a gain and we're not going to see any deterioration.

So on overall basis, we still expect Linkia to grow consistent with its past performance but we're not going to slash it in half and nor are we going to double it. So, it's pretty much staying on the same slope as before.

Michael Petusky - Noble Financial Group

All right, one last one just going back to WalkAide. And maybe I'm fixated on this and I shouldn't be, but I had thought that I understood that you guys were roughly around 75 patients. How many of those are still kind of in the process of completing clinicals and how many of them are actually finished or completed at this point?

Thomas F. Kirk Ph.D

We're over 75. We kept as we announced at Q3, we kept the door open to November 15. So now we're up to almost a hundred. We believe that the larger sample size will really work in our favor. 75, we always viewed as sort of the minimum, and we thought as along as we could get people in to the trials, let's get them in and increase the number. And if you remember when we first started this, we had some difficulty trying to get them into the trials and keep them in the trials.

So the real issue was after they went out and paid for their WalkAide, they didn't necessarily want to be in the trial because that forced them to go back on an AFO for part of the regime. So, we had some issues in the very beginning of getting the trials populated. We think we solved that toward the latter end with some things that we did internally without destroying the validity of the test. And as we could get more people, we said let's just keep them all coming and let's try to go for a hundred.

So, we're up in that range now, which we think is going to really benefit us with the larger sample size. And those folks are in the final stages. It's a three way arm, where you are on one device, then you are on the other one, then you go back on the third one. So, we're expecting that as they went in, in November 15, that will probably, it takes about three months to get through that.

We'll get that wrapped up, then we'll do our analysis, our Chief Medical Officer will be working with the principal investigators. A number of them have expressed some interest in trying to co-author some papers and get those out for peer reviews.

So, we think that process is the right one. Get the number up, get all the data in and then go out and get some peer review data here.

Michael Petusky - Noble Financial Group

So, it's essentially though you are saying Tom, I just want to make sure you are saying that you got at least 75 patients completely through the trials. They've gone through the six weeks on, six weeks off. They've done the 18 weeks?

Thomas F. Kirk Ph.D

Yes

Michael Petusky - Noble Financial Group

Okay, and essentially now you've got a minimum 75 and obviously you've been, you're working on the peer preview and CMS's reviewing their standards for stroke rehabilitation. But, essentially on your end, you've at least got a minimum of the work that's needed to be done, done?

Thomas F. Kirk Ph.D

That's correct.

Michael Petusky - Noble Financial Group

Okay.

Thomas F. Kirk Ph.D

That's correct. And we're in this constant dialogue with CMS to really understand and actually just this week there was major meeting, a number of cardiologists, pulmonologists, vascular docs, radiologists, all discussing these latest views on CMS and whether they were appropriate and whether you had to have sub-populations of stroke patients in terms of acute and sub-acute and chronic. And so, this ... it's a ... it is a process and it's a moving target and we're very, very close to it. Actually had a representative at that meeting to know and understand where that was all coming down.

Michael Petusky - Noble Financial Group

Okay terrific, and Tom congratulations on finishing up your first year.

Thomas F. Kirk Ph.D

Hey, thank you very much. Thank you.

Operator

Your next question comes from Larry Solow.

Thomas F. Kirk Ph.D

Hi Larry. How are you this morning?

Lawrence Solow - CJS Securities

Good. Just a quick follow up. In previous quarters, Tom or George, you guys have talked about some new data programs you're working on, anything you could care to share?

Thomas F. Kirk Ph.D

Probably a little premature. Those data programs are in three major areas; one as in Linkia and some other work that we mentioned before that we're trying to do for third parties. And another one is in the, what I'll call the device area, or use in a patient care business. And another one is in our distribution area, distribution business, in terms of a new way to get product. But we want to really get the data tests wrapped up to understand those a little better.

And then as I've mentioned on the Linkia example, since we are working with specific carriers on that, some of the agreements that we have in place don't permit us to go out. They really want to be the owner of that for a period of time and then we can roll it.

So, it's across all the areas of our business. And as we step back and look at our business, well our major driver and our roots are in patient care, we're going to continue to grow that business and feed it with new product, services, and new locations.

We really see the company is having four major footprints, all dedicated to this rehabilitative area within the O&P space. And we want to leverage the physician and patient care, and our distribution business, because we think that there are some opportunities in the adjacent fees area. And frankly, it is a move that is designed to give us a little bit of diversification in terms of where we source our revenues. And we see opportunities out there where we can come in just as we did with Linkia, by bringing a combination of clinical, and admin, and systems, we can help people save money and be a part of their solution.

And that's why we want to go at these things so that we can broaden the company's footprint and move it from a patient care dependency on the fee schedule to one that can provide more consistent growth across all economic environments.

Lawrence Solow - CJS Securities

Okay, great. And then just one other question. Clearly, WalkAide is obviously Innovative Neurotronics' main focused but I know you guys are working on other products, is there anything new and exiting we may be, I don't see but I can, share too much but anything in the pipeline we may be hearing about? And then.

Thomas F. Kirk Ph.D

Yes. But, probably not going to be a first quarter event.

Lawrence Solow - CJS Securities

Okay

Thomas F. Kirk Ph.D

Routinely when we created Innovative Neurotronics, it was with the understanding that we're going to have a family of products in this area. And they have, since their inception really, they've had a number of folks that come to them with the business plans. They're really entrepreneurs. They also maintain a lot of contact with universities that develop product and are anxious to roll that out and we work with an outside firm as well.

Then on worldwide basis, its acting pretty much as an antenna for what's going on worldwide and they bring us ideas and we certainly follow up with them. We probably have looked at, in 2008, at least a dozen different opportunities where we were beyond a cursory look, but we actually got down inside and looked.

And some of those, those three that you have sort of immersed has being quite interesting. We want four things in place before we move on that. And one is a demonstration of efficacy; two is a prototype device; three is some position around the intellectual properties, so that we're not dealing with the commodity; and four is a sustainable business model.

And if we can get people to bring those four things, because we don't fancy ourselves as the research house, we think we've got the makings for a discussion. And so we have found a couple of three of those things and we're engaged in those discussions as we speak.

Lawrence Solow - CJS Securities

Okay, great. Thanks.

Thomas F. Kirk Ph.D

You're welcome, Larry.

Operator

There are no more questions in queue.

Thomas F. Kirk Ph.D

Thank you then, Jackie, very much. I'd like to thank you all for spending this hour and 15 minutes with us. We are proud of the results that our people have achieved in the fourth quarter. George had shared with you our guidance and we are going to go make that happen and be mindful of this economic situation we are in. So we look forward to talking to you after our first quarter, probably about the end of April. Have a good 2009.

Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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