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[Author ID1: at Thu Oct 29 13:51:00 2009

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Golfsmith International Holdings Inc. (NASDAQ:GOLF)

Q3 2009 Earnings Call

October 27, 2009 9:00 am ET

Executives

Joseph Teklits – Investor Relations.

Martin E. Hanaka – Chairman, President & Chief Executive Officer.

Sue E. Gove – Interim Chief Financial Officer, Chief Operating Officer & Executive Vice President.

Analysts

Derek Leckow – Barrington Research's

Fritz Gallagher – Lazard Capital Markets.

Hayley Wolff – Rochdale Securities

Operator

Good day everyone and welcome to the today's Golfsmith International Holdings Incorporated Third Quarter 2009 Earnings Conference Call. We'll note that today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Joe Teklits. Please go ahead, sir.

Joseph Teklits

Thank you. Good morning, everyone. Thanks for joining us today to discuss Golfsmith’s third quarter fiscal 2009 results. As a reminder, our presentation includes and our responses to various questions may include forward-looking statements about the company’s financial results and about future plans and objectives.

Any such statements are subject to risks and uncertainties and could cause the actual results and implementation of the company’s plans and operations to vary materially. These risks are discussed in the company’s Annual Report on Form 10-K for fiscal 2009 filed with the SEC. We issued a press release this morning. If you have not received the copy, you can find it on our website or by calling Investor Relations at 203-682-8200.

Presenting on our call today, we have Golfsmith’s Chairman and CEO, Martin Hanaka, as well as Chief Operating Officer and Chief Financial Officer, Sue Gove.

And with that, I’ll turn the call over to Marty.

Martin E. Hanaka

Thanks Joe and good morning everyone. We appreciate your time and interest today. Joining me in Austin Texas are Sue Gove, our Chief Operating Officer and Chief Financial Officer, Dan Sawall our Chief Merchant, Janette Ramirez, our Vice President and Controller and of course Corporate Counsel.

After my remarks, Sue will provide detailed financials and outline our plans that are underway to improve our future performance, which are built around five key drivers, will detail those later in the call. Of course, we'll answer any questions that you might have.

So if we look at the third quarter, we stayed on defense with really disappointing top line results. We thought we'd see more improvement then we did. Back July, we were down double-digits, that was a trend that started post Father’s Day, business was soft and, I put a $0.07 on the share in a whole as we ended July. So we had some digging to do.

August comps improved, we were high single-digits down, and then in September low single-digits down, it was our best comp month of the year during this recession and we had couple of weeks that were flat or up. So we're encouraged, but as we look towards the fourth quarter October and November are our absolute lowest dollar periods of the year and are very optimistic about possibilities for December.

That said as we went through the quarter, we did have nice sequential improvement and we saw in some of the major categories too. Well mitigating trends and clubs where we had some big decreases in July and they improved to mid-single-digits in September. Consumables are downed a little bit, but they basically followed rounds played.

Apparel went from the single-digits down to flattish and we saw uneven trends throughout our markets. We saw improvement in our transaction numbers where in July we were down mid-single-digits August low and then had higher transaction in the month of September.

And the same thing on conversion where we had poor conversion in July, but it improved throughout the quarter. So we're hopeful that those are the kind of trends that will stick and as we end the fourth quarter with a big December, keeping in mind that December is as large as October and November together, that we can have a better fourth quarter and end the year on a strong note.

Margins are solid but more promotional than we planned, particularly in September, but we had to reduce September. We would take a different look at our marketing pace and rhythm and the amount of discounting that took place. We had solid expense control, we had solid cash management inventory under control as you can see from our balance sheet. We've managed payroll extremely well and our marketing spend was less than a year prior.

Having said that, as we prepared for this call, it occurred to us that as you analyze our performance, every single expense line was down year-over-year. Sue is going to go into detail on that in a moment. The balance sheet, kudos to many people who did a very fine job for us, but it's obvious as we look back at that third quarter that we needed to lower cost even more because we couldn't get the leverage given the sales top line that we experienced.

Some good news, we are gaining share both in units and dollars if you look at Golf Datatech year-to-date, the industry is down about 12% units and at Golfsmith were down 5% units if you total the seven categories that are tracked. There's still pent-up demand out there the research tells us that. Industry consolidation is continuing, the pie is shrinking, but we're getting a larger piece of that shrinking pie, but anything really big, take it discretionary, is being postponed, especially as we look at the irons category, where we have not had success this year.

The average order value has really been doubted now but we are improving our traffic counts, but people have moved to value, that trend has not changed all year and that really is a continuing risk to recoveries to get that big category, irons, that really see improvement. The reality is, we haven't had economic stimulus, there has been no job creation that's led to consumer rebounding. Rounds play are flat or down slightly, the looming tax and healthcare costs you have an overhang of uncertainty that I think are influencing people’s appetite to spend on big tickets. Reticence overall to make commitment purchase whether it's furniture or fitness, got this really in the same category. And we're looking forward to Thursday report, maybe the recent GDP growth outside of government's spending that will again, let the consumer start buying with confidence again, I think, when that happens, you'll see the Golf industry really rebound and I think we're very well positioned to do that

OEMs are not standing still, PING momentum should build, the launch was successful in August and we expect that to continue. We are very excited about TaylorMade’s new R9 Irons family. The Cleveland and Cg Wedges look to be spectacular, and hopefully will be a stimulus. Callaway has a couple of products, the Odyssey putter line and their women's Solair product looks very, very strong. And of course, as we get into next year, Nike has some very exciting launches planned and not to mention MacGregor, which is launching a whole new line of products the first of the year.

So there are some good news on the horizon, that we think we can take advantage of. So in a nut shell as we look forward, we're ready to move to offense as conditions improve. Cash is not a concern, structural change continues, we are gaining share across the house. We are executing better. We are controlling our controllables and we’ll continue to be first to market with new product and with industry stimulus, we hope again when the consumer is ready to spend, Golfsmith will be ready to take care of them better than anyone.

I mentioned five drivers for 2010, the first of course is operational excellence and lots of people will get credit, most of all Sue Gove, which has really lead the way for us all year in this difficult top line environment and she is going to talk about operational excellence as well as some more financial details of the quarter, and then I will close with the other four.

So at this point, I turn it over to Sue, Sue?

Sue E. Gove

Okay, thanks Marty. Good morning everyone. For the third quarter fiscal 2009, we reported net revenues of $90.6 million compared with $101.7 million for the third quarter of 2008. The 10.9% decrease in total revenue was primarily due to an 8.5% comparable stores sales decline and a 27% decrease from our direct-to-consumer channel. Traffic levels were flat to last year, however average ticket declined as we continued to see caution in consumer discretionary spending.

Gross margin for the second quarter was 34.2%, 10 basis points below last year’s third quarter gross margin rate. A 60 basis points improvement related to the lower freight costs and distribution center efficiency and was offset by a 70 basis point negative impact resulting from the change in the classification of vendor funding and from cooperative vendor program that was implemented in the fourth quarter of last year. As you may recall, the reclassification shifted the benefit from gross margin to SG&A.

Heading into the fourth quarter, we are in a very clean inventory position and better than we were in the last year’s fourth quarter, which should benefit our merchandise margins. SG&A expense declined 4.7% to $29.7 million compared to $31.2 million in the third quarter of last year, as a result of ongoing operational improvement, particularly in retail operation contract related savings and our zero based budgeting model that was implemented in 2009.

In addition SG&A included a $425,000 one-time charge, related to a non-recurring litigation settlement cost and without that charge SG&A expense would have declined 6%. Excluding the non-recurring settlement costs, SG&A as the percentage of sales increased 170 basis points in the quarter to 32.4% compared to 30.7% of net revenue in the third quarter of 2008.

The increase in SG&A as a percentage of net revenue was driven primarily by deleverage on lower sales volume. This increase was partially offset by decrease of 60 basis points resulting from the change in estimate related to vendor programs previously mentioned. Store pre-opening and closing expense for the quarter was $180,000 tick-up as compared to a $43,000 charge a year ago.

Included in the current quarter, is a reclassification of $300,000 in relocation expenses related to our Troy, Michigan and Woodlands Texas stores that was incurred in the first half of fiscal 2009. This amount was incorrectly charged to store pre-opening and it’s reclassified to SG&A expense in this quarter. Also included is a $100,000 charge in occupancy cost related to our store in Irvine, California, which is expected to open in the fourth quarter of fiscal 2009.

Operating income for the second quarter was $1.4 million as compared to $3.7 million in the third quarter of fiscal 2008. Net income was $1.1 million or $0.07 per diluted share as compared to $2.8 million or $0.17 per diluted share in the third quarter of fiscal 2008. Excluding the non-recurring litigation settlement cost, net income for the quarter would have been $1.5 million or $0.09 per diluted share.

For the nine months ended October 3, 2009, net revenues was $274.2 million compared to net revenues of $310. 9 million for the same period a year ago. This decrease in total revenue was due to a 9.7% decline in comparable store sales, and a 26.8% decrease in net revenues from our direct-to-consumer channel. Operating income was $4.3 million for the first nine months at the year compared to operating income at $8.9 million for the same nine month period in 2008.

Our 2009, nine month results included a $425,000 one-time litigation charge again in the third quarter, and a $500,000 non-recurring charge related to severance associated with operational changes reported in the first quarter of this year. Operating results for the nine months a year ago included a $1.8 million non-recurring charge related to severance due to organizational changes in last year’s first quarter.

Net income totaled $2.8 million or $0.17 per diluted share as compared to net income of $6 million or $0.37 per diluted share for the nine-month period ended September 2008. Now looking at the balance sheet, as of October 3, total inventory was $79.1 million representing an 8.8% reduction from a year ago. This was on target with our inventory and cash management plan. We expect an overall 5% to 7% reduction in inventory at the end of 2009, which includes the inventory for our new Irvine, California store.

We continued to improve supply chain discipline and Taylor assortments to individual market while, maintaining targeted end stock rate and lowering weakest [Ph] supply in our warehouse. We have approximately $33.7 million of outstanding borrowings under our credit facility and borrowing availability of $19.6 million, this compares to $39.5 million of outstanding borrowings under our credit facility, and $21.8 million of borrowing availability at the end of Q3 2008.

Our goal to achieve operational excellence is sharply in focus, our disciplined approach around driving down cost in now in trend in the organization with competitive bids, contract reviews, and ROI measurement. We are leveraging our product knowledge in our service expertise to drive our selling culture. We monitor key selling metrics and have established rewards and recognition programs as well as used dash boards and leader boards to measure performance.

We've refined our store cost structure, with rent reductions in key locations and we are optimizing our payroll with better staffing towards traffic levels. While we remain cautious about the fourth quarter, we feel comfortable with our inventory position and have the ability to reduce costs and manage the business to align with selling trends. At the same time, we will continue to focus on initiatives to increase productivity and gain market share when spending trends improve.

This concludes our prepared remark and we would now like to, I would now like to return to Marty. I am sorry.

Martin E. Hanaka

In closing, we don’t see much change in the industry conditions and we don’t really see much change in the economic conditions and we're basically going to keep our head down and stay more determined and poised to capitalize when the trend changes.

In a nut shell, shell we think we could make measurable profit impact irrespective of the environment and we got to keep taking share. That said, besides the operational excellence, the result you just heard about and we're really banking on this four other things we really focus on going into 2010.

Number one is we got a fixed direct, we have been accepting decreases as we’ve rationalized our spend there and frankly not all customers are created equal. We’ve done some terrific work on customer segmentation, I think you’ll see that come to live, you'll see us touching our most important segments a lot more often in different ways, we could be investing on our web business more and we'll be building an outlet business to our website as well, that we think will help us win back some business from the third party discounters on the web.

The next thing besides that is going to be improving our retail contributions. This is the series of actions and the foundation of that is building our selling culture even better than we have this year. All costs are under control in our retail business. We are going to be open some new stores. This is another way we think we can get leverage, we’ve identified a number of sites that are all A-sites and that's, you had an opinion of everybody in management here and we think these would all be winners, it'll all be funded with internal dollars that we are generating even under these conditions.

And then finally, we got to build our margins and that’s while, with the mix of product and mix of vendors we see that we can really improve our margin contribution. And so again, irrespective of the environment, we think we can win as we head into 2010.

That does complete our remarks. And now we would like to open up to any questions you may have. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And we'll go first from Barrington Research, Derek Leckow.

Derek Leckow – Barrington Research

Yes, good morning. Thank you.

Martin E. Hanaka

Good morning.

Derek Leckow – Barrington Research

Yeah, Marty, just on the cost side, I wanted to say congratulations. This is obviously great performance and I wondered if in your opinion, have we seen sort of the low watermark on the gross margins and also, perhaps, obviously operating margins are affected more by the volume, but could gross margins continue to improve from here you think?

Martin E. Hanaka

Yes, we do. We actually have a three-year plan and we expect that you'll have some good gross margin improvement sequentially over the next couple of years. A lot of that has to do with the proprietary the mix of business, the growth of our apparel business which has been very strong for us recently and a mix of vendors. In fact, you'll see a lot of it in Q4, we are here to be measurable and meaningful in Q4.

Derek Leckow – Barrington Research

And the margins on the direct side, are those tracking similarly to the margins of the store business?

Martin E. Hanaka

It's a very different business model, they're much lower but don't benefit the same as we move forward, yes.

Derek Leckow – Barrington Research

All right. Great, and then second question is on your gaining market share. That’s a pretty dramatic out performance there. I just wondered, are you still seeing competitors close stores and you said there is some evidence that you saw that provides optimism around pent-up demand and comments like that. I wonder, if you could maybe elaborate on that a little bit?

Martin E. Hanaka

Yeah. Tom did some research on that and his conclusion was that each of the last two years 70% to 75% of the core golfer has delayed his equipment purchases. And again in this economy, it's understandable, so the belief is that, yeah that's going to change and again the OEMs have got some great product out there and when the stars align and we think again this recession I think we'll hear Thursday, that we have positive GDP growth again hopefully the consumer files that and we think a quarter to after that we could really, truly benefit in this discretionary category.

Derek Leckow – Barrington Research

As far as, competitors closing down stores, are you're still seeing that occur or?

Martin E. Hanaka

Yes, that is a trend, I tried to quantify it for the call and I spoke with NGF that does the industry research. They actually call each and every Golf store in the country once a year. And they will be doing that in January, so as we hit the next year, we can give you actual data, but I think it’s clear to say that that number of closings will be probably very similar to last year with just very, very few openings.

Derek Leckow – Barrington Research

I think last time we spoke you mentioned about a 12% decline in doors, is that still about…

Martin E. Hanaka

Yes, I think it was a 11.7% or 11.8% but yeah that’s the net number.

Derek Leckow – Barrington Research

Okay. Very good thanks a lot. Congratulations and good luck.

Martin E. Hanaka

Thank you.

Operator

(Operator Instructions) Todd Slater with Lazard Capital Market.

Fritz Gallagher – Lazard Capital Markets.

Hi guys, this is Fritz Gallagher for Todd Slater.

Martin E. Hanaka

Hello, Fritz.

Fritz Gallagher – Lazard Capital Markets.

I apologize if this has been asked, I was out from the call for a second, but I was wondering if you could talk about the promotional environment, obviously inventories are lower, seeing some pent-up demand, just wondering, when we should expect to see or maybe we've already seen a decrease in the needs for promotions.

Martin E. Hanaka

Yeah, we feel that way and those sense giving away new product and there is a number of new product launches that are beginning really next week right through the first quarter. So our theme for the year has been to have offers, have promotions, have headline stories that are not discounting in nature. And this goes way back to the spring when we were giving away free product with our vendor partners. If Sergio had won the Masters or Phil or Rocco had won the U.S. open. And in this quarter, we gave away a $1 million in free lessons in July, courtesy of our GolfTEC partners, we gave away 25,000 rounds or free Golf in August courtesy of water Golf courses we partnered with, and that’s kind of the thing to see going forward. So, we think the need to have deep discounts is not required for our customer.

Fritz Gallagher – Lazard Capital Markets

Okay, great.

Martin E. Hanaka

You might get value added.

Fritz Gallagher – Lazard Capital Markets

So I know we talked about apparel fixtures in the past just wondering what the rollout schedule is there and any update?

Martin E. Hanaka

Yes, we've rolled out one-third of our stores, couldn’t be more pleased with the presentation, and again our apparel business has been very strong and the margin strong recently. It’s never one thing, but we think it’s a contributing factor, we are going to roll up the [inaudible] in the first quarter of next year, we timed this based on managing our cash and managing our effects in the write-offs. And then the final thirds of the stores will get done in '11.

Fritz Gallagher – Lazard Capital Markets

Okay and MacGregor still on schedule for a full launch?

Martin E. Hanaka

Yes it is in fact, MacGregor balls are in the stores and check in out. You'll see MacGregor wear hats and bags very soon as well, you'll see equipment by the end of the first quarter at the latest.

Fritz Gallagher – Lazard Capital Markets

Okay.

Martin E. Hanaka

All products we saw prototypes yesterday, one of the drivers and the people they really get product think it’s really hard product, so we were excited.

Fritz Gallagher – Lazard Capital Markets

Excellent, and one housekeeping question. The tax rate looked quite well, just wondering why and how we should look at that going forward?

Martin E. Hanaka

And Sue can tell you that?

Sue E. Gove

Yeah, the tax rate is low and will remain that way for the year and I think you can use the year-to-date rate for the year. Given that we’re in a breakeven or slightly below position, and we don’t expect to be a taxpayer, so what taxes, we do accrue are at the state level.

Derek Leckow – Barrington Research,

Excellent, thank you guys.

Martin E. Hanaka

Thank you.

Operator

And next we will hear from Hayley Wolff, Rochdale Securities.

Hayley Wolff – Rochdale Securities

Hi guys.

Martin E. Hanaka

Hi, Hayley.

Sue E. Gove

Good morning.

Hayley Wolff – Rochdale Securities

Okay. I’ve a couple of questions. First you talked about the trends improving throughout the quarter. There have been a number of new products that have been launched, Pings come out with new Irons, Titleist come out with new Irons. Can you talk about how those products are doing in terms of what you can glean about consumer's willingness to pay full price for new product?

Martin E. Hanaka

Yeah, the Ping has done very well and Ping as you know has a very loyal following, so they're fanatical about the brand and the experience, so I don’t know that’s necessarily an indicator of the total industry. The Titleist product has been pushed back and we’re getting very low allocations when it does hit. So we are not thinking that’s going to move the needle, so we get in the first quarter and their production can catch up, but I do think the TaylorMade, R9 Iron product is supposed to be sensational. So I think that can have a meaningful impact but that’s in the future not in the quarter. We saw clubs with big double digit decrease improved, low double digits and then in the mid single, so we think the club business is on the right path. We don’t think there will be much movement in October and November because again there is so low volume demand periods if you really couldn’t move the quarter, but December will be a really key telling period for us. And again with good economic news coming out, virtually every week hopefully people are going to feel better and better and feel that they can spend into these consider purchases.

Hayley Wolff – Rochdale Securities

Good. It seems like you are fairly upbeat about December, I mean is that just easy comparisons or is that….

Martin E. Hanaka

It's definitely easy comparisons Hayley, there is no question about it but we've really I think as a company our merchants and our marketers, I think we’ve done the best job planning a month that we’ve done in my tenure whether it would be in stock, how we are investing and the very best items, no one tells you too much about that but we’ve really put our money where amount [ph] is there, we’ve made some smart investments there. The [Inaudible] has stretched plans for every single buyer, we are promotionally aggressive but disciplined. There will be control on timing with a little overlap of offers and the fore set is probably the best we've had. So I think you’re going to feel it. So yeah, we feel really good about December, we've really do. We didn’t want to waste resources on October, November, because of the headwinds there, but because again the demand is not there but December we are going to be in pretty good shape so knock on wood.

Hayley Wolff – Rochdale Securities

And with all the new product coming out. Do you think the vendors are going to start to get nervous and pull the trigger and discount early?

Martin E. Hanaka

Yeah I don’t think they will in the fourth quarter and I don’t think they will in the first, it’ll come back to second quarter and what we are seeing is that they have a very good control of their inventories right now. They are very disciplined, hence the allocations from a couple of vendors as we go into new product. But we'll get a feel for that as we get into April, May and that’s when the clubs came off last year. So right now, no other indication that they are going to be deep discounting at all.

Hayley Wolff – Rochdale Securities

Okay. And then can you talk about store growth plans and Sue can you talk about some of the expense initiatives that will carry you into 2010?

Martin E. Hanaka

Yeah I’ll do the first and Sue can do the second, and number one is Irvine, we opened in a couple of weeks and I think it is going to be spectacular 40,000 square feet, 15 hitting areas in the store, three GolfTEC lesson areas, a tremendous putting area with great segmentation. We're really, really excited about, we took the best of all stores we've opened at the series seven stores we call it an Xtreme store and that’s kind of the prototype for those markets. We have identified four stores in our budget for next year. They are in all of our operating expense and cash flow forecast, will be in Florida and hopefully California, I don't want to say too much but maybe a new market or two. So, we are well on the path of those, and four stores is what we are budgeting.

Hayley Wolff – Rochdale Securities

Okay and 2011, same kind of store growth or we ramp up?

Martin E. Hanaka

We expect to ramp up the seven stores in 2011 that’s contingent on continued progress and cash and making our EBITDA goals. We're going to have some triggers that we have to head, we are not doing this chronologically, it’s a vent base. So as we succeed, we will invest in more new stores.

Sue E. Gove

Yeah and as we previously stated that growth is self funded with our cash flow generation. So as Marty said, and we will be looking closely to our metrics and our trigger point. And to comment on your other question, Hayley, on the operating efficiencies and initiatives that that will impact 2010, first of all, there are a number of things that were put in place in 2009 that aren’t a 100% anniversaried in 2009. So they will continue to be benefit in 2010 there and that’s particularly around the rent reductions that we have been able to achieve as well as some of the contract reviews that we put in place. Many of the contract improvements win into place late in the first quarter and the second quarter. So they will continue to benefit us into fiscal 2010, but in addition, we are just rolling our scanners in our stores right now, one of our important IT initiative for this year and so the benefits of that will really be almost completely in 2010 and that will not only drive efficiency on the expense side, but as well on the margin side.

We continue to see benefits in the supply chain in 2010 as we continue to refine our model and our channel of shipment. We got labor improvement plan in 2010 particularly related around, tied around labor management and scheduling getting better traffic and using better tools. So we've got some things planned there. In process improvements; process improvements that are underway in a number of areas in the organization. So if you were to generally describe it, I think 2009 was more heavily revolved around contract improvements, and 2010 will be more heavily revolving around process improvements.

Hayley Wolff – Rochdale Securities

Okay, great. Thank you very much.

Martin E. Hanaka

Thank you.

Operator

And from [Tom Hell], [Hell Siturm]

Unidentified Analyst

Good morning people. How are you doing?

Martin E. Hanaka

Good morning.

Unidentified Analyst

Quick question regarding the availability going into the fourth quarter. Last year, you guys hit a deep low with about $6 million available at the end of the fourth quarter. The year prior was about double that, nearly $13 million. Given that the trends of third quarter is down this year versus last year, what are you looking at heading into the winter?

Sue E. Gove

Yeah. And we don’t expect our excess availability. It'll be below where it was two years ago. So we think we're in good shape. Again, we are going to be cash flow positive this year. We had indicated in the past that we're going to be cash flow positive in the $5 million to $10 million range and continue to be on course for that which means that again we're going to have an excess of $10 million availability throughout the fourth quarter.

Unidentified Analyst

Okay. Quick question regarding the two stores, in Florida and California that you are expecting to open, given that the economy really has hit there a lot harder than elsewhere in the country, what is it about these two sites having you to open these up at this time?

Martin E. Hanaka

We'll follow the money, number one, and if you follow money in Orange County, it's a Golf Mecca and we're really not represented. We do predict the modeling and we take that market and you put down where the courses are, and the afluent resident stays on-and-on, you get spread. And we're going right into the bright orange where we haven't been before. So we expected to be disruptive in Southern California result, and as we look at it, [inaudible] one of the highest stores you could possibly imagine. So we think it's a very, very low risk investment. Similarly in Florida and everyone of the sites we are looking at have to kind of meet those criteria. We're not going to open anymore stores that we have to apologize for as they're going to bring down our productivity. So we are ready to make really good solid bets here, and if you look at the universe of possibilities out there, we think ultimately we're sure we can double the size of this chain in really good markets and these couple of stores will add in some attraction.

Operator

And gentlemen, there are no further questions at this time, I'll turn the conference back over to you for any closing or additional comments.

Martin E. Hanaka

They always say it's darkest before the dawn and it has been dark out there, at least on our revenue side and I can tell you that I don’t know if it's two in morning or five in the morning but the dawn is coming and we are really poised to take advantage of it and profit. We appreciate your time and attention and we'll see you at our fourth quarter call. Thank you.

Operator

Ladies and Gentlemen that does conclude today’s conference. We thank you for your participation. You may now disconnect.

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