Presstek, Inc. F4Q08 (Qtr End 01/03/09) Earnings Call Transcript

Presstek, Inc. (PRST)

F4Q08 Earnings Call

March 18, 2009 8:30 am ET

Executives

Kathy Makrakis - Director Investor Relations

Jeff Jacobson - Chairman, President and Chief Executive Officer

Jeff Cook - Executive Vice President and Chief Financial Officer

Analysts

Jim Ricchiuti – Needham & Company

Matt Campbell – Knott Partners

Bill Musser – New Frontier Capital

Presentation

Operator

(Operator Instructions) Welcome to the Fourth Quarter 2008 Presstek, Inc. Earnings Conference Call. I would now like to turn the presentation over to our host for today’s call, Director of Investor Relations for Presstek, Kathy Makrakis.

Kathy Makrakis

Welcome to the Fourth Quarter 2008 Presstek Earnings Conference Call. This is Kathy Makrakis, Presstek’s Director of Investor Relations. On the call today are Jeff Jacobson, Presstek’s Chairman, President and Chief Executive Officer and Jeff Cook, Executive Vice President and Chief Financial Officer.

Before we begin we will need to briefly cover the safe harbor provisions. Certain statements that will be made during this call are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward looking statements.

These risks and uncertainties are detailed in our press release today and also in reports filed by the company with the SEC including its Form 10-K. Investors should not place undue reliance on forward looking statements as a prediction of actual results. In addition, certain of the information in this presentation include non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP financial measures is provided in our press release.

Today’s call is being recorded and a replay will be available. Details on how to access the replay are included in our release. On the call today Jeff Jacobson will comment on the full year and our progress on our business improvement plans and Jeff Cook will then go through the fourth quarter financials and then we’ll take your questions.

With that I’ll turn the call over to Jeff Jacobson.

Jeff Jacobson

As Jeff will review the quarter in a few moments I will address the full year and the progress we have made as a company against our goals. In October, 2007 we announced a business improvement plan which had very specific and aggressive goals. The actions we took as part of this plan enabled us to report a significant profit improvement in 2008 despite the most severe global economic pressures I have encountered during 22 years in the industry.

Our business improvement plan target was to improve our cost structure by $20 million by the end of 2009 and I am pleased to report that we have already achieved $22 million in savings during 2008 which both exceeds our goal and is also one year ahead of schedule. We have accomplished this by attacking our cost structure in a consistent, disciplined way.

Key elements of our plan included manufacturing productivity improvements, procurement savings, service business rationalization, recovery of raw material increases, and improved operating discipline, the centralization of product warehousing and distribution activities for North America in Des Plaines, Illinois, improved productivity and rationalization of sales activities, lower general and administrative expenses, and the consolidation of certain customer care activities into the company’s Hudson, New Hampshire operation.

Overall the company has reduced it workforce excluding Lasertel 16% since the beginning of the program. Our full year 2008 financial results reflect the success of these achievements. Despite a 22% revenue decline caused largely by the economic slowdown and the continued erosion of sales of our traditional products the company improved operating income by $18 million and gross margins improved from 28.1% to 35.6%. Full year net income from continuing operations was $3.1 million versus a loss of $10.4 million in 2007, a $13.5 million improvement.

Including discontinued operations the company reported net income of $500,000 versus a loss of $12.2 million in 2008, a $12.7 million improvement. In addition to improving profitability we have reduced debt net of cash $11.2 million or 49% since the end of the fourth quarter 2007 and $25.2 million or 68% since its peak at the end of the first quarter of 2007.

We also made progress in other areas in 2008. We settled several legal issues and sold a Lasertel land and building in Tucson, Arizona for $8.75 million which we used to further reduce debt. Finally, we determined our Lasertel business was not strategic and initiated a sales process for the business which has generated strong buyer interest.

In 2008 one of our more important accomplishments was that we began to implement a strategy of selling fully integrated solutions with a focus on digital printing and computer to plate products. We feel confident that this strategy will position the company to achieve its vision of being a leading global provider to the graphic communications market by delivering high quality, fully integrated digital solutions and services while forming all encompassing relationships with our customers.

Key elements of this strategy are expanding into new markets and enhancing our go to market channels, building our portfolio to expand our reach to include larger customer segments, delivering integrated solutions that enable all encompassing customer relationships. When the economy improves we believe we have significant opportunities to grow our business and have identified and are targeting a multi-billion dollar addressable market.

While any company that sells capital equipment is going to be impacted by the current economy, we have a compelling value proposition to approach customers in this environment. A lower cost, more efficient, high quality print solution in our DI presses and in an expanded product offering of CTP output devices our DI presses directly address customer concerns regarding profitability.

A recent industry study indicates that our DI presses improve customer profit margins, reduce make ready times and increase productivity and revenue growth. In 2008 we refreshed our complete line of CTP offerings to include a broader range of speed, capabilities and levels of automation for our two, four and eight page output devices and our chemistry free thermal digital plate technology is a growth opportunity as print providers seek alternative that lessen the impact on our environment.

During 2009 we will continue to execute our strategic vision. In addition to our business improvement plan savings and as an offset against continued worsening economic conditions, at the end of 2008 we identified an additional $4 million of cost saving measures for 2009 including the delay of salary increases where permissible by law.

However, we remain focused on continuing to strengthen our ability to grow the business once the economy begins to recover. In that regard, we plan to make investments during 2009 critical to growth in both DI and CTP adding key CTP resources as well as key people throughout Europe and Asia. These investments are self funded through reduced spending in other areas.

I cannot conclude a discussion of 2008 and our business improvement plan without mentioning the Presstek team. It goes without saying that we are not pleased with our 2008 revenue performance. However, despite the worst economy we have encountered the Presstek team delivered a year to year profit improvement from continuing operations of $13.5 million and achieved several significant goals including the development of a strategy of selling fully integrated solutions with a focus on digital printing and computer to plate products.

The significant reduction of debt net of cash, the launch of eight new products and creation of five new partnerships with industry leaders, the improvement of our international footprint with key new distributions, the addition of key talent including experienced management to focus on driving growth both in and outside the US, the resolution of several key legal issues and finally the establishment of a solid financial foundation driving expenses down 22% and improving gross margins by 750 basis points.

I am extremely pleased with this progress and congratulate the team for delivering a significant profit improvement in these difficult times. The progress we made in 2008 will allow us to navigate the current economic challenges while our team focuses on opportunities to drive future profitable growth.

With that I will turn the call over to Jeff.

Jeff Cook

Fourth quarter revenues were $42.3 million a decline of $15.6 million or 28% versus the fourth quarter of 2007. Excluding the impact of currency revenues declined $15 million or 25%. US sales declined 26% while European sales excluding currency fell 24%. Total equipment sales declined $10.4 million or 52% with lower sales in both the US and Europe. Consumable sales declined $4.8 million or 17% primarily in the US largely driven by lower print volume related to the economic slowdown and the expected sales increase and sales erosion in our analog traditional products.

Service revenues declined 14% driven to a large extent by declines in our traditional contract dates as well as the impact of lower commercial print volumes due to the economic slowdown. We are pleased, however, to report continued improvement in our US equipment attachment rates which grew on a full year basis from 25% during 2007 to 60% in 2008. This improvement will be reflected in sales when the warranty period expires.

Gross margin for the quarter was 37.9% as margins improved in consumables and services. Consumable margins improved from 47.7% in the fourth quarter of 2007 to 51.2% and service margins improved from 27.2% to 29.7%. This is due in large part to our business improvement plan and the overall operating and cost disciplines we have created in the company. Equipment margins increased slightly from 11.5% in 2007 to 11.7% in 2008.

Operating expenses were $16.9 million in the quarter versus $21.7 million in 2007 a reduction of $4.7 million or 22%. The lower costs in 2008 resulted from the following; benefits related to the business improvement plan, lower amount of professional fees as our 2007 results included expenses related to our review of inventory, receivables and European operations, and lastly a reduction in legal expense.

As discussed in our last call, operating expenses ran higher in the fourth quarter versus the third quarter of 2008. The increase is due to higher marketing spending related to the Graph Esko show, higher legal fees and increased reserves for bad debt in recognition of the current economic environment. In addition, fourth quarter 2008 included an extra week of payroll as our fiscal year concluded on January 3, 2009.

The operating loss this quarter was $0.9 million a $2 million improvement versus the $2.9 million loss last year. Interest and other income increased $1.2 million due to currency transaction gains and reduced interest expense. Interest expense of $215,000 during the quarter including discontinued operations decreased 75% from $865,000 in the fourth quarter of 2007 as a result of our significantly reduced debt levels as well as reduced interest rates.

Income tax expense for the fourth quarter includes the valuation allowance of $0.5 million related to certain research and development credits earned in prior years. Our EPS from continuing operations in the quarter was $0.02 versus a loss of $0.06 a year ago, while the loss per share including discontinued operations was $0.01 an improvement of $0.07 from the prior year period.

Cash and cash equivalents at the end of Q4 were $4.7 million and total debt at the end of the quarter was $16.5 million. Our debt net of cash was therefore $11.8 million and $11.2 million or 49% reduction from a year ago.

We also announced that we settled an insurance contract lawsuit in the first quarter of 2009 and as a result received settlement proceeds of $1.2 million. This benefit will be recorded in the first quarter of 2009.

Over the past 22 months we have focused on instilling financial discipline and improving processes across the company. I am pleased to report that we have fully remediated three of the four material weaknesses reported in our 2007 10-K. The weaknesses we remediated related to revenue recognition, account reconciliations and journal entries, and inventory.

Regarding our outlook for 2009 it’s difficult to predict revenue given the current environment. However, we do expect revenue pressure to continue in the first half of 2009 with a sequential revenue decrease in the first quarter of 2009 versus the fourth quarter of 2008 of approximately 15%. Our overall gross margin was exceptionally strong in the fourth quarter of 2008 and some element of that strength was attributable to lower equipment sales. In 2009 we expect gross margin to decline from full year 2008 levels as a result of foreign currency exchange pressure.

We had been targeting to reduce debt net of cash to zero by the end of 2009 and have made great process to date in debt reduction. However, the current economic environment could result in a delay in achieving this goal. The company conducts ongoing assessments of the valuation of goodwill, other intangible assets, long lived assets and deferred tax assets. Depending on market and economic conditions, impairment could be identified in 2009 which would result in non-cash impairment charges.

Finally, we announced we will be filing a Form 12b-25 Notification of Late Filing with the Securities and Exchange Commission regarding our 2008 annual report on Form 10-K. The late filing is caused only by delays in documenting supporting schedules for the report. We expect to file the 10-K within the 15 days allotted by the Securities and Exchange Commission.

That concludes our formal comment and we will now take your questions

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Jim Ricchiuti – Needham & Company

Jim Ricchiuti – Needham & Company

Can you comment at all, you’ve given some guidance with respect to gross margins and revenues for Q1? Can you talk a little bit about operating expense in as much as operating expense was a little higher then expected in Q4?

Jeff Cook

In Q4 we were up a bit. We had expected that because of the timing of the trade show and the extra week of payroll but it’ll be back down more in line with earlier quarters as we go into 2009. It was kind of an aberration there in the quarter.

Jim Ricchiuti – Needham & Company

Going a little more deeply into gross margins for ’09 if I heard you correctly you’re anticipating gross margins a bit lower in ’09 versus ’08?

Jeff Cook

Yes, overall in terms of the impact of the foreign currency, the strengthening dollars has hurt us a little bit. I think we’ll see slightly lower margins in the new year.

Jim Ricchiuti – Needham & Company

Any other factors contributing to that besides currency, I assume also the issue is also revenues certainly that contributed to it.

Jeff Jacobson

So much of its going to depend upon the mix. Jeff is right; the foreign exchange would have a negative impact. Jeff indicated that we think sequential revenues Q1 ’09 versus Q4 ’08 will be down in the range of about 15%. A big part of that will be equipment. You would say that that would give us more of a mix of consumables and services which would tend to keep the margins up.

I think what we’re looking at as the year goes on if we can see an improvement in the second half of the year and if we start getting much more of an equipment mix that would drive the overall margin down in addition by then hopefully we’re starting to penetrate some of the larger accounts where I think they’ll be using more consumables that would drive more gross margin dollars but perhaps due to volume discounts could drive the margin percentage down.

Jim Ricchiuti – Needham & Company

If I look at the business and look at some of the areas that have been most affected by the recession, clearly the DI business. Is it also true if we look at the CTP business and even the traditional business at least from the standpoint of Q3 the business appears to have held up somewhat better?

Jeff Jacobson

If you go and look at any documents that are published print figures, print volume is down. There are a couple of things, certainly anybody, you’re right in the capital equipment world has been hit very hard and I think Q1 certainly harder then even Q4. The reason for that as much as anything is one, the economy has gotten worse and number two is people are extremely cautious as the year begins because they want to see how things roll out before they make any decisions.

Our funnel for capital equipment is the highest it’s been but getting people to make decisions right now is extremely difficult. From a consumable standpoint there’s no question that print volumes are down right now as advertising is down. That’s why you’re seeing it in the consumables area. If you get into certain segments which we don’t have a lot of business in but I think you’ll see it for some of the other companies, newspapers have been hit tremendously hard.

That doesn’t impact our business significantly at all its insignificant but when you look at overall print figures that certainly drive the overall print figures in the industry.

Jim Ricchiuti – Needham & Company

In the past you guys have talked about operating margin targets. Clearly this is a very different environment we know that. I wonder if you could help us understand what type of leverage you might see in the model looking out to 2010. We’re not asking you for revenue guidance but just how should we think about the way the model might develop if we see a recovery in the economy next year.

Jeff Jacobson

You said a mouthful there in terms of a recovery in the economy. The good news is I believe we have gotten this cost structure and our gross margin structure to a point where if the economy comes back, eventually it will it’s a matter of when, I feel very good about what can happen to the operating margins in this business.

However, let me underline however, if you look at what we’ve guided for first quarter 2009 and if things were to stay at that point then we’re managing this business to stay cash positive. That’s what this is about right now. With the pressures everybody in the economy is feeling, this is the worst economy in the last eight decades since the great depression. The goods news is we’ve gotten our debt structure down so much that as Jeff said before our interest expenses were $215,000 down about $600,000.

We talk often; I can’t imagine what would have happened if we didn’t take out the $22 million in costs, get our debt down and our interest expenses down so significantly. The good news is while a lot of other companies are showing significant losses we’re at a point where we had a significant profit gain and in ’09 as we saw first quarter worsen our goal is can we stay cash positive.

The big decision we have to make as this goes on, I am not inclined, in all due candor and we’ve had this discussion, we’re going to watch this very closely, to cut much more deeply into this business because I think then you start to constrain what I believe is a winning strategy of moving up market, moving into the international markets, investing in CTP and investing in DI and I think then it hurts the long term growth.

I’m prepared to “tread water” for a couple of quarters provided we could stay right around that range of cash positive. If we were to see things materially worsen, different story. When we came on board we gave a goal of what we believe this business can do from an operating profit structure and with the strategy we developed in 2008 with the cost structure we put into place we still believe we can do that.

The question will be when and I don’t mean to be evasive its just in this economy it’s so hard to predict the revenues. Right now this Presstek story is all about revenue growth. What we’re going to do now is focus a lot more on the consumable side and getting consumables going because it’s going to be a little difficult to sell capital equipment for a little while.

Jim Ricchiuti – Needham & Company

Clearly this is the worst environment you’ve seen in your career. As we look at the customer base how do you go about allocating resources to the market? Your customer base it sounds like is pretty clear its shrinking particularly I would guess your smaller customers but on the other hand even some of the larger customers you’re targeting are seeing considerable stress in the business. Can you talk a little bit about how you’re adjusting to that?

Jeff Jacobson

This gets back to the strategy. Point one is, as you said, move to the larger customers who are having a little easier time of this, they’re bigger; it doesn’t mean they’re having an easier time. Even the very largest customers when it comes to spending $500,000 they’re not inclined to do so in this environment just as we are not inclined to spending $500,000 if we can prevent it.

One is moving up market, two is you may have seen some announcements; we’ve actually increased our international presence. We hired Guy Sasson the first week of January to be the President of our European operations. We just hired somebody in France basically as a country manager for France. We hired someone in Eastern Europe and we’ve hired someone who’s going to start April 1^st for Western Europe. At the same time we just added somebody into our Asian operation really to get the Asian channel up and running.

What we’re going to do is probably reallocate some of our resources as capital equipment constrained to put more of these resources into consumables. What I do like about our position is once we get the consumables up and running the point where we want to again from a plate standpoint CTP plates we have less then 1% market share. When you go to the big customers is can you get a portion of that. We said earlier we have a multi-billion addressable market between CTP and digital printing.

We categorize that somewhere in the neighborhood of $6 plus billion and our business is under $200 million, we finished the year at $193 million. There’s a lot of share that we can go get and that’s what our focus is going to be. If anything that will, in these very difficult times, give us the chance to gain the relationship, gain the trust of these larger customers so when things turn we hope we’re in a position to get a larger portion of that business.

Jim Ricchiuti – Needham & Company

Is it safe to say with the investments you’re making over in Europe with some of these key hires it sounds like the European economy is probably worse off then the US economy so we won’t see much in the way of progress there?

Jeff Jacobson

It’s all going to come down to share. You’re right about the European economy, I was just there last week we had all of our European distributors together. It was interesting because their dynamics were very positive but there’s no question they’re feeling the same stress of the US market and I’d say in certain countries even significantly worse then the US market.

I think what’s happening is some of our larger competitors are really going through difficult times and in fact some of our larger competitors are actually retrenching, terminating dealers. That makes Presstek a very viable opportunity and alternative to come to as a partner.

Jim Ricchiuti – Needham & Company

You talked about identifying some additional costs that you could take out in 2009. Can you elaborate on that as to how we see that flowing through in ’09 and maybe in which line items in general?

Jeff Cook

We’ve taken out, Jeff said the $4 million and we also did additional cuts to fund the investment and the growth there into the business. Where you’ll see the impact it’s probably evenly split between OpEx and cost of goods sold, maybe a little more towards OpEx then cost of goods sold. It is split between the two areas.

Jim Ricchiuti – Needham & Company

In OpEx it sounds like R&D you guys are focusing on some new product development. Is the cost savings more in the sale and marketing G&A area?

Jeff Cook

Yes, you’ll find it in the G&A area, the delay in the increases that Jeff mentioned will be spread throughout. You’ll see it in those areas. Of course in the costs it’s some of the various productivity improvements in the manufacturing area. I think that’s where you’ll primarily see it. The investments we’re making to continue growing will show up as the year goes on in R&D and then sales a lot of it change and some of the skills there.

Jeff Jacobson

The reductions we’re making, we’re doing everything we can not to impact the selling organization too much. That’s why we had a leadership team meeting in December, we said this story now with where our cost structure is, is all about growth and it’s going to be a very difficult economy for some time. We still have to keep driving this.

We’re going to have to make some significant cuts and $4 million after everything we had already done with the business improvement plan was pretty significant for a business our size but we did it so that we could make the additions that I mentioned in Europe, in Asia, and CTP resources in the United States.

Jim Ricchiuti – Needham & Company

Your consumables gross margins in general were probably almost the highest level in five year, four and a half years. On the consumable side you alluded to maybe becoming a little bit more aggressive in going after that market. Am I reading too much into that, is that a potential area where you think you could potentially drive some more revenues even if it means being a little bit more aggressive?

Jeff Jacobson

Certainly and especially from a mix standpoint. As we get more CTP business those margins would be below our average consumable mix so from a mix standpoint as we can increase that that would drive down just from a mix standpoint. As I said before as we move into the larger customers with volume discounts we would expect the gross margin dollars to increase in their relative gross margin percentages to come down.

Jeff Cook

You’re right, that is a scenario that we are going to be focused on for growth. As Jeff said, people will not be investing in as many new machines this year as we had hoped but they will be still doing printing so we’re going to focus more on the consumable side.

Jeff Jacobson

The other thing that drove some of those margin improvements really had nothing to do with pricing or even mix it was just the efficiencies in our supply chain and manufacturing operations.

Jim Ricchiuti – Needham & Company

Anything you can point to with some of the larger customers in terms of success?

Jeff Jacobson

No new ones since our announcements other then just the funnel. I don’t like to keep talking about the funnel because until they turn into sales it really is somewhat meaningless. What I keep telling the team is stay focused, stay motivated because I know a lot of people in this industry, you see them with their heads down and you see them somewhat de-motivated. This is the time where I tell the team this is where you really make the investments, you work even harder because then when things do turn you’ve done all the legwork already.

Operator

Your next question comes from Matt Campbell – Knott Partners

Matt Campbell – Knott Partners

If you could give us a sense about we’re far along into Q1 now and you’ve given some guidance to a degree on the quarter over quarter revenue being down 15% was that right?

Jeff Cook

Approximately 15% yes.

Matt Campbell – Knott Partners

Can you give us any sense of the granularity within the month? Are you seeing any sense that February might have been better then January, do you want to talk to that at this point?

Jeff Cook

No, I wouldn’t say something, traditionally for equipment it all tends to come in towards the end of the quarter so March would tend to be the bigger month. It always happens that way no matter what the economy is like. On the equipment side it’s hard to see any differentiation between the months. From a consumable standpoint fairly steady through to the month.

Matt Campbell – Knott Partners

What gives you a hope that the second half of the year may pick up?

Jeff Jacobson

You’re right its hope. I have no better crystal ball then anybody else in this global economy of when things are going to turn. I can’t say that I’ve seen a lot of positive indicators. We’re just planning for the business as if things will hopefully get better. Could this go throughout all 2009? Of course it can. I just don’t have any better crystal ball then anybody else.

Matt Campbell – Knott Partners

One of the larger printing companies yesterday had a conference call and they suggested that they felt like they have won a number of orders and they were just awaiting the go sign and that they believed as well that the second half of the year they would start to see a pick up so maybe we are going to see a trough in the revenue line first or second quarter.

Jeff Jacobson

When we speak to our sales people in the sales regions they say this is one of the most frustrating environments for them as I said the funnel before is really at a peak and they said they believe in more normal times these would have closed. When the economy does turn the proof will be in the pudding then.

Matt Campbell – Knott Partners

How problematic has it been for potential customers who want to buy a machine but haven’t been able to because they can’t get access to credit?

Jeff Cook

Certainly that does happen there’s no doubt. We still have good sources for funding; they’re still active in the market. They continue to ratchet up the credit approval threshold. We have had a few deals that we can’t do right now because of that. I would say between that and just customers fear in moving forward is what’s slowing things down. The pipeline of opportunity still remains very robust. A lot of people very, very interested its just they’re being cautious right now and waiting to see.

Matt Campbell – Knott Partners

The large customers that you signed up last year are they happy with the products at this point?

Jeff Jacobson

The response from our customers has been very positive and as a matter of fact as I said as I was speaking earlier today there’s demonstrated profitability improvements from using, especially the DI press. What we have to do is make that press ubiquitous, we have to demonstrate to the DI’s the bridge between traditional offset and digital printing. We believe there are a lot of fundamental benefits for our customers in terms of quality, cost improvements, and it’s our job as things turn and that’s what we’re working so hard at to say how do we make DI a mainstream product.

Operator

Your next question comes from Bill Musser – New Frontier Capital

Bill Musser – New Frontier Capital

Could you update us on the timing of the Lasertel transaction and are you seeing a level of interest there that would validate what you hoped you might get for it?

Jeff Cook

There’s a good level of interest for it. We’re actively working that. Several parties that are going through and doing they’re review. I’m optimistic on that. From a valuation standpoint were we still work that with them and once we get that resolved we’ll look forward to making an announcement on it.

Bill Musser – New Frontier Capital

When might that all come to a conclusion?

Jeff Cook

It’s hard to tell. I would hope that during second quarter we could identify and settle on the individual that’s actually going to buy it and then probably look for a close sometime late in the quarter.

Operator

At this time we are showing no further questions available.

Jeff Jacobson

Thanks everybody for calling in. It’s nice to hear some friendly and familiar voices out there. I want to say, despite disappointing revenues there were many accomplishments which the Presstek team can be proud of in 2008. There were not many companies which showed a significant profit gain in ’08. However, 2009 is a new ball game and as I said before this is certainly the most challenging economy in the past 80 years.

In this environment our very short term goal is to stay cash positive. I believe very firmly that we have a winning strategy. As I also said before I’m somewhat hesitant to cut too deeply and risk the long term benefits for Presstek. We will certainly monitor the progress very carefully and adjust our course as necessary.

I’ll tell you what I tell our sales teams. My grandmother as many of you have your grandparents used to use the same saying and not to compare our customers to horses by any means. My grandmother’s favorite saying used to be “you can bring a horse to the water but you can’t force them to drink.” What I tell our sales team is this is the time you’ve got to work harder then ever.

As a matter of fact, we’ve implemented what we call two call program which means whatever number of calls they made in ’08 I want them to make an extra two calls per day, one in the morning and one in the evening so that’s 10 per week and if you’re working 50 weeks a year that’s 500 extra calls for the year.

What I told them is their job this year as the economy is where it is, is all about taking these beautiful stallion horses that are in this industry, lining them up so hopefully when the economy is ready to turn they’ve done all the hard work and the horses will be ready to drink. That’s what we’re focused on doing. I want to thank you all very much for calling in and I hope you’re all doing well.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.

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