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Animal Health International, Inc. (NASDAQ:AHII)

F4Q2010 Earnings Call Transcript

September 7, 2010 10:00 am ET

Executives

Jim Robison – Chairman, CEO and President

Bill Lacey – SVP and CFO

Analysts

Mark Arnold – Piper Jaffray

Jeff Johnson – Robert W. Baird

John Kreger – William Blair

Alan Weber – Robotti & Company

Brad Evans – Heartland

Operator

Greetings and welcome to the Animal Health International fourth quarter 2010 conference call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Robison, chief executive officer for Animal Health International. Thank you, Mr. Robison. You may begin.

Jim Robison

Thank you. Good morning, everybody. Welcome to the call. Bill Lacey is with me this morning. Bill's going to review the quarter and fiscal year-end results. And then I'll make some comments. We'll open it up for questions then and discussions. Bill?

Bill Lacey

Thanks, Jim. Good morning. Before we begin, I'd like to point out that today's conference call is being recorded and will be available for replay on our Web page at ahii.com, under Investor Relations.

In addition, I'd like to remind you that some of the information discussed on this call, particularly our guidance for fiscal year 2011, our competitive position, future business prospects, revenue growth, and market opportunities for the coming fiscal year contain forward-looking statements that involve risk and uncertainty. These statements are based on current expectations. Actual results may differ materially from those set forth in such statements. Additional information concerning risks and other factors that may cause actual results to differ can be found in the company's filings with the SEC.

Please note that in addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non-GAAP financial results, including EBITDA. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in the press release.

Finally, AHI has provided, in its earnings release and will provide in this conference call, forward-looking guidance. We will not provide any further guidance or updates on our performance during the year unless we do so in a public forum. AHI does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

I'll now provide you with the financial results for the fourth quarter fiscal year 2010. Net sales, compared to last year, increased 5.8%. Net sales for the quarter were $172 million, compared to $162.5 million for the same period last year.

Gross margin increased $2.5 million, with $1.5 million due to sales volume and $1 million due to improved profit margins. Our margins in the fourth quarter were 16.6% of sales, compared to 16% in the fourth quarter last year.

SG&A expenses were 12.8% of sales, compared to 17.4% last year. SG&A expenses were $22.1 million, compared to $28.2 million last year. Remember, last year included our provision for bad debt of $2.7 million and a $1.8 million charge for accelerated stock option expense resulting from voluntary forfeitures.

EBITDA was $7.1 million, which was an increase of $6.9 million from the year earlier quarter of $0.2 million. Net income for the fourth quarter was $0.7 million, compared with the fourth quarter last year net loss of $39.2 million. Included in net income is $1 million net of tax for the non-cash amortization of the interest rate swap, which were unwound earlier this year. Last year, the company recorded a $35 million impairment of goodwill.

Fully diluted earnings per share were $0.03 versus a $1.61 loss last year. Earnings per share without amortization or cash basis EPS was $0.7. Earnings per share adjusted for amortization and the costs associated with unwinding the interest rate swap was $0.11 per share.

Let's talk a little bit about results for the fiscal year. Net sales for the fiscal year were $668.9 million, compared to $666.9 million last year. Net sales in the first half declined 6.1%, while sales in the second half increased 7.5%, both compared to the same periods last year.

Gross margins declined $2.6 million, with $5.2 million due to reduced profitability with one of our suppliers, while profitability with our other suppliers increased $2.3 million. Sales volume contributed $0.3 million. Margins for the fiscal year were 16.6% of net sales, compared to 17.1% last year.

SG&A expenses declined $9.5 million from last year as a result of cost reductions, including $4.5 million for bad debt and stock option forfeitures discussed earlier.

EBITDA for the fiscal year is $21.9 million, which is an increase of $4.4 million from last year. Net income for the fiscal year was $1.3 million, compared to last year's loss of $36.9 million. Last year included a charge for goodwill impairment of $35 million.

Fully diluted earnings per share were $0.05 versus a $1.52 loss last year. Earnings per share without amortization or cash basis EPS was $0.23. Earnings per share adjusted for the one-time charges were $0.32. One-time charges included the legal settlement in the second quarter of $0.04 million in foreign currency write-off in the third quarter of $0.04 million and the amortization of expenses associated with unwinding the interest rate swap of $2.9 million. The after tax amount of these items was $2.3 million or $0.09 per share, resulting in an adjusted earnings per share of $0.32.

At the end of June, they were 41 days of networking capital. Our average for the last 12 months was 43.5 days. Capital expenditures were $0.5 million for the quarter. The fixed charge ratio is 2.25 times on a trailing 12-month basis. The company's in compliance with its bank covenants. And at June 30th, 2010, the company's availability under its revolver totaled $34 million.

We believe that guidance for next year that our EBITDA for the new fiscal year and in June 2011 will be in the range of $25 million to $27 million.

And with that, I'll turn it back over to Mr. Robison.

Jim Robison

Thanks, Bill. We felt the quarter was another sign of our company's return to growth and improved profitability. And following a relatively strong quarter in Q3, we're encouraged.

Our service levels are currently very high. Our managers and sales force are fully engaged with our customers. We have several exciting products and services that we're in the process of launching. Our customers' businesses, as commented by several of the analysts and noted in the industry, are increasingly profitable. Our vendor relationships are good. And we see that as our industry becomes increasingly profitable that our sales and profitability will reflect these improvements.

The first two quarters, as Bill noted for the year, were relatively weak and pretty tough. The last few quarters were strong. We think this starts a good trend for coming into the new fiscal year. In the fiscal year, we plan to add 15 sales people, open three locations, launch significant new products and services, and continue to pursue acquisitions where appropriate.

So all-in-all, we felt the quarter is very good, obviously coming out of a tough year and a tough time for our industry. And we're very encouraged and excited about the new fiscal year.

With that, I'll open it up to questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from Mark Arnold with Piper Jaffray. Please proceed with your question.

Mark Arnold – Piper Jaffray

Good morning, guys, nice quarter.

Jim Robison

Thanks, Mark.

Mark Arnold – Piper Jaffray

I guess just to start with – on the guidance, maybe you can just – Jim, can you just give us a sense as to how you feel or how much better do you feel about visibility into market demand over the next four quarters relative to the previous couple of years when you guys had given guidance?

Jim Robison

We thought last year, at this time, that the industry would improve. Everyone was anticipating that milk prices would be heading north rather quickly. They didn't. The beef business dragged a little bit. Milk prices are currently in the $16 range, a little bit of bump in feed costs. But it looks like – certainly, our customers have gotten through the toughest of times. And particularly in the dairy business, they are seeing some continued challenges. But I think at least they're all very hopeful. And they're purchasing averages are starting to reflect that.

On the beef side, the numbers are very low. There've been a number of articles recently in some of the financial journals about the beef industry global demand, domestic demand, a relatively tight supply. So we have very good visibility on the beef business.

As you know, there's more than a one-to-one correlation between profitability and spending. It's really exponential. As profitability goes up, cattle owners start to reach for yield. One of the ways to drive yield is through animal health products. And so, you spend more on animal health products when they've got good profitability in order to drive yield. So we think in the beef business, we're going to have a pretty good year in front of us. And we do believe the dairy business is at least stable and very highly likely going to continue to improve on a forward basis.

Mark Arnold – Piper Jaffray

Just to elaborate on both of those points a little bit more, what are the things that still have to happen in the dairy market to see a more meaningful impact on your financials?

Jim Robison

The cow numbers are down, but the supply is fairly flat the prior year. It's always good to see a pickup. As the economy starts to return, people start to dine out more. And that creates more demand. And we think that's going to have to be one of the drivers, and then secondly, exports as well. The challenge we have in front of us right now is what's going to happen with feed costs. And I think that there's still some uncertainty around feed costs, but we should be through that the next couple of months.

Mark Arnold – Piper Jaffray

And then on the beef side, you talked about the numbers being low to a tight supply. In terms of the way these animals are moving through the system though, are we seeing a more typical fall run this year? And if so, to what extent have you guys factored that into your guidance for the September and December quarters?

Jim Robison

We should see more of a typical turnover of the calves. Typically, a beef – cattle will gain about twice as much weight in a confined environment as on grass. So as they try to drive yield, they're more likely to bring them in lighter, which means they're more likely to use more animal health products.

When we saw the grain prices, corn prices, which is the primary feed for cattle, spike to almost $8 a bushel, everyone kept their animals on grass for prolonged periods of time. They were also losing money on their animals generally. So we should see more typical cycles, which means that the regimen of vaccines and growth promotants and antibiotics are generally higher. So that's encouraging.

I guess to your questions, we have – we have more confidence around revenue and profitability visibility for this coming fiscal year than we've had for quite some time. Also, I'd like to note that as our industry starts to grow and becomes healthier, the manufacturers are more likely to return to providing rebates for growth and for volumes. So we think that's an opportunity as well.

Mark Arnold – Piper Jaffray

Okay. I have two more quick ones. Your press release gives guidance and explicitly mentions it does not include contributions on any future acquisitions. There are a couple of distressed production animal distributors out there right now. Are acquisitions a reasonable possibility over the next year?

Jim Robison

I think they always are. Obviously, we're pretty highly leveraged because of our reduction in EBITDA. And it's going to be a little bit difficult getting a substantial size done. We're going to have to go through some effort to address the capitalization issue this year. That's obvious. And as we do that, we'll give thought to the acquisition opportunities and what we might be able to take advantage of.

Mark Arnold – Piper Jaffray

Great. And lastly, just the 15 salespeople that you expect to add this year, would they be on the production or companion animal side? What's the breakdown?

Jim Robison

Our strategy on the veterinarian side is really mixed practice. It's in the tertiary cities and the rural environment. But our veterinary business is growing more rapidly than our production business. And the additional reps are pretty much split between the two, even though our veterinarian business is about 25% of our overall revenue.

Mark Arnold – Piper Jaffray

Great. Thank you, guys. Next quarter again.

Operator

Our next question comes from Jeff Johnson with Robert W. Baird. Please proceed with your question.

Jeff Johnson – Robert W. Baird

Thank you. Good morning, guys.

Jim Robison

Good morning.

Jeff Johnson – Robert W. Baird

Jim, I guess following up on Mark's question there on the sales reps, I'm assuming that add 15, a lot of that is just coming from PVP remnants and not necessarily in acquisition there. But you can hopefully pick off some of those guys in territories. Is that the way to think about that?

Jim Robison

Yes. We're planning on adding three facilities. So as we add facilities, we'll build out as well. And then also, I think with some of the merger activity within the industry, there'll be some good candidates on the street. We've gotten very good, in the last couple of years, of adding salespeople and successfully bringing them to commission, the normalized compensation program. And so, we think that 15 is a reasonable number for the year, but they are split between vet and producer.

Jeff Johnson – Robert W. Baird

Yes. And I guess my question there, Jim, is more focused on should those reps – those will be more than likely – some of those anyway, some will be experienced reps who have good relationships already, not just hiring green field guys who need to go out and build relationships?

Jim Robison

No. I think there are some reps out there that have existing territories and aren't going into a green field situation. And certainly, within that mix of 15, there'll be a number of those as opportunities avail themselves.

Jeff Johnson – Robert W. Baird

Yes. Okay. And then, you made one comment about feed costs and maybe getting some clarity on that over the next couple of months. The two issues going on right now, obviously, is the wheat export ban out of Russia. Does that impact you guys at all? I know it's caused the wheat prices to go up. But how does that impact your business? And then two, is corn following just – does the wheat price move higher or is it related to E15, and we should get clarity on E15 here over the next few weeks?

Jim Robison

I think certainly, by the end of this calendar year, we should have clarity on the ethanol legislation and EPA blending standards. And that's an unknown. I can't find anyone in a position of authority really speaking to that. So we're looking forward to that being cleared up. I think there's a little bit of – I think the most recent bump in corn prices has been caused by a little bit of a concern around yield being off slightly.

The Russian wheat situation exacerbated wheat prices globally, obviously. And those prices have come off their highs. That can disrupt our wheat market. But we've really not had a normalized beef cattle cycle over the last couple of years. So we're not substantially – we don't think that's a risk factor on our numbers.

Jeff Johnson – Robert W. Baird

Okay. That's helpful. And Bill, should we be thinking about any gating throughout the year, issues with your EBITDA guidance of $25 million to $27 million? Any one-timer seasonality or other than seasonality issues we need to account for in our model as we think about the next four quarters?

Bill Lacey

None. No. And I'm looking forward to not having any.

Jeff Johnson – Robert W. Baird

Understood. And then obviously, Jim, you referenced the capitalization issue and probably the need to re-fi the $40 million revolver here. Is that why we're not seeing net income guidance, just EBITDA guidance, and assuming we'll have to figure out whether it's an equity or debt down the road offering?

Jim Robison

That's exactly why there's not any EPS guidance in there.

Jeff Johnson – Robert W. Baird

Okay. Any thoughts you can provide to the market, Bill, around that issue?

Bill Lacey

We've found that the credit markets are getting more available to us. As we've gone through this process, we've got several – we've got probably 10 or 12 indications of interest. And they are across the board of different options. I don't see any problem at this time getting that $40 million refinanced. But I don't want to play any cards on this conference call about how we might do that and give out any leverage I might have as we go through that process now.

Jeff Johnson – Robert W. Baird

Understood. Why did the interest expense pop up this quarter though relative to the last few quarters running at about $2 million – plus or minus a few hundred thousand, right around $2 million? Now we're over $3 million this quarter.

Bill Lacey

The only thing I can think of is we had that last amortization of that interest rate swap.

Jeff Johnson – Robert W. Baird

Maybe I'm just not subtracting that out, yes. But as I look at it forward, the interest expense next year, the safe assumption would be that we're maybe back to a $10 million to $12 million annual run rate assuming a re-fi, and maybe we move off that depending on how you re-fi?

Bill Lacey

I don't have that number right now because I don't know which way we're going to go on this refinancing. But keep in mind that we were paying about 5% on the interest rate swap, which gave us an artificially high interest number for what we had last year. Our debt will not go up during the year. So hopefully, we can do this thing. And it'd be fairly flat to last year.

Jeff Johnson – Robert W. Baird

Okay. That's helpful. Thanks.

Operator

Our next question comes from John Kreger with William Blair. Please proceed with your question.

John Kreger – William Blair

Hi. Thanks very much. Bill, can you tell us if you had any unusual swings in either rebates or bad debt reserves in the quarter?

Bill Lacey

We did not, either one.

John Kreger – William Blair

Great. And for your guidance for the coming year, what revenue growth do you have baked into your expectations at this point.

Bill Lacey

We're thinking somewhere in the 7% range next year. You can probably think in terms of about $700 million to $730 million of revenue next year.

John Kreger – William Blair

Great. And do you think you can – should we assume stable gross margins or do you think you can find some way to leverage that?

Bill Lacey

Let me put it this way. We didn't put in our business plan any rapid improvement in margins. I hope there's some there as we got through some seasonal promotions with some of our larger vendors that will pick us up more margins that we didn't have last year. But to forecast – because those things are episodic and come-and-go, I don't put those in the forecast. So we basically forecasted everything relatively flat.

John Kreger – William Blair

Okay. And then one other question about your full year fiscal '11 guidance, can we assume that free cash flow would be reasonably similar to your EBITDA expectation? Or do you expect your working capital to change in the coming year?

Bill Lacey

I think we will – we were relatively flat this year. We had a big source in working capital last year as the business declined. This year, working capital, we'll use cash I'm sure as we started to grow the business again.

John Kreger – William Blair

Okay. So it'd be a little bit below the EBITDA.

Bill Lacey

Right.

John Kreger – William Blair

Okay. And then finally, Jim, I think you mentioned a couple of times that you expect to roll out some new products and services in the coming year. Can you just elaborate on that?

Jim Robison

Yes. We've got a couple of things that we've been working on for two-and-a-half to three years. One is a fermented vitamin supplement that is pretty exciting. There's a competitive product that is made through a chemical synthesis that currently sells about $36 million into the industry. And we're just finishing up preliminary customer trials. And the results have been very good.

We really aren't – in our current numbers, we really don't have a big pop of these products. Still, they should grab share gradually over time, and we think ultimately become material. But it's hard to forecast exactly when.

And then, another one is a product that addresses the methane issue from cattle. And it's a compound that reduces methane, actually turns it into CO2, which is a substantial reduction in carbon emissions. So that project is one that we hope to launch this fall. Those are a couple of the two we are going to be rolling out this year.

John Kreger – William Blair

Great. And then I guess one more, the year-to-year mixed vet business seems like it's had much better performance over the last couple of quarters, anything in particular driving that from your perspective? Do you think it's more share gain or a better environment?

Jim Robison

We've got the right products. We've picked up a flea and tick product about this time last year. We've done extraordinarily well with it. We've got very high bill rates. We've got a good geographic strategy. Our costs are in line. So we basically got everything working. And that business' profitability is up very nicely for us last year as was the top line. So it's just really all come together.

John Kreger – William Blair

Great. Thanks very much.

Operator

(Operator Instructions) Our next question comes from Alan Weber with Robotti & Company. Please proceed with your question.

Alan Weber – Robotti & Company

Good morning. First question, Jim, when you're talking about the new products, I didn't quite catch the first thing you told. And that's some kind of a supplement. What was that again?

Jim Robison

It's a fermented vitamin supplement.

Alan Weber – Robotti & Company

Okay. And when you were talking about adding three new service locations, what markets are those for?

Jim Robison

You can pull the map out and look at where we're not. It's really self-explanatory, but one in the southeast, one in the northeast, and one in the Midwest.

Alan Weber – Robotti & Company

Okay. And then, Bill, I missed this part. What was the quarter cash interest expense?

Bill Lacey

Let's see.

Alan Weber – Robotti & Company

Well for the year, I guess both.

Bill Lacey

Cash interest for the quarter was about $1.4 million and non-cash was about $2 million. So our total around it was about $3.3 million of total interest for the quarter. And for the year-to-date, it was about – cash was about $6.2 million. And non-cash was about $4.4 million, for a total of $10.6 million.

Alan Weber – Robotti & Company

Okay. Great. Thank you very much.

Operator

Our next question comes from Brad Evans with Heartland. Please proceed with your question.

Brad Evans – Heartland

Yes, good morning. And thank you for taking the question.

Jim Robison

Hi, Brad.

Brad Evans – Heartland

Jim, I'm just curious where you sit today when you look at both the dairy market and the cattle market. Can you just give us your historical experience in terms of the duration of recoveries and where do you think we are with respect to those markets in terms of where they are in their cyclical recoveries?

Jim Robison

My comments are extremely speculative. And these markets have been very hard to forecast. But if you go back – if you go back to the December of '03 and we had the mad cow situation that was unprecedented. And we saw a really tough market follow that. And we've essentially lost the export market to Asia. And it never really quite fully recovered.

We then saw grain prices spike to incredible levels, which was, again, never seen before. We've seen contraction of supply in the beef business substantially since the reduction of beef cows. Those are momma – cows that have calves are 40-year or 50-year lows. The dairy numbers have come down.

I guess my point, Brad, is we've never seen this kind of a prolonged challenge within the industry. It's a couple of years at least. And there've been a lot of wash-up customers. And loss of the – or I should say lack of regained export market.

My sense is if this recovery will be different, and different in that we're really gaining exports back. If you look at the Wall Street article two-and-a-half, three weeks ago, it spoke to that. There've been a couple of other articles that have come out. So I think the – as the global economy recovers, almost 7 billion people, and I think there's an estimate that about a third of them have the real high – they're very strong drivers for additional proteins in their diets.

So I think the export markets are going to continue to come back. I think the restaurant demand will improve. And I think we could be in for a several-year run with improved economics. So I think it should be a relatively good period for the industry.

Brad Evans – Heartland

Thank you for that color. And just one housekeeping item, did you end the year about shorter than 30 field reps? Is that right?

Jim Robison

I think it was 222.

Brad Evans – Heartland

Okay.

Operator

Our next question is a follow-up with Jeff Johnson with Robert W. Baird. Please proceed with your question.

Jeff Johnson – Robert W. Baird

Hi. Thanks. Jim, I just want a clarification, if I could, on the methane product that you're talking about. I'm assuming that's the lagoon product. Is that correct?

Jim Robison

Yes. We've sold that historically as a product that addresses the solids and the composition of the lagoons' pump-off into – onto the crops. We've tested it down that that product has an ability to reduce carbon emissions within lagoons through a conversion of methane to CO2. Methane is 23 times more dense than carbon and CO2 is.

So if we're able to continue our studies and if the field trials come through, it looks like they're going to at this time, we think that there's an economic opportunity to capture carbon credits. Knowing about the carbon credits market, that's a really lousy market right now. But I think most people feel that with the EPA having a significant hand in determining what industry has to do with regard to compliance, even if the absence of legislation, the likelihood is the carbon credit demand will expand over time.

Jeff Johnson – Robert W. Baird

Okay. And that was a good answer to my question. So you haven't yet settled the carbon credit trading issue. It's just you think that will happen as the product moves along here.

Jim Robison

We're very close to getting that done, yes.

Jeff Johnson – Robert W. Baird

Yes. Okay. Fair enough. Thanks.

Operator

Our next question is a follow-up from Mark Arnold from Piper Jaffray. Please proceed with your question.

Mark Arnold – Piper Jaffray

Just one follow-up here, you've talked a little bit about the rise in feed costs. Being from a relatively large corn-producing state, corn producers that I've talked to have commented to me about the much larger than normal spread between the future prices in Chicago versus end market prices that they can get for their crops and the end market prices being substantially lower.

If you guys know the answer to this, can you just give us a sense for what percentage of – or what percentage of producers buy their corn at end market versus at the prices that we all follow here on the exchanges?

Jim Robison

I can't give you a percentage. But I think the common practice is to buy 60 days to 90 days – to contract for 60 days to 90 days product. And a lot of that's done through actually buying on the spot market than – and then storing the grains.

Mark Arnold – Piper Jaffray

Okay. Thank you.

Operator

Our next question is another follow-up from Brad Evans with Heartland. Please proceed with your question.

Brad Evans – Heartland

Thanks for taking the follow-up. I'm just curious, if you were to – if we would take your comments, Jim, in terms of thinking about this as a multi-year recovery. Could you just give us your thoughts in terms of where you think you can return the business, too, from a profitability perspective over the cycle in terms of assuming a – obviously, this will – it's a profitable less cycle and I knew had an operating margin that was less than 1%. Where do you think you could return the operating margin in more buoyant market conditions for your business?

Jim Robison

During our peak, we were in excess of 5% of EBITDA revenue. I think we're actually approaching 6%. And I'd like to get it back to that level. And that's why it puts much time and effort into our proprietary offerings. Certainly, this moving package goods made by large manufacturers won't bring a lot of gross margin to the company. But these proprietary initiatives, when fully developed, should be pretty impactful.

I also believe that if you look at the – if you look at the run with Pfizer, we had a five-year run where we grew sales of about 25% – 20% on a compounded annual basis. And they provided margins prior to discounts in excess of 20%, with discounts in the high teens. Pfizer cut margins by about 60% ultimately. And I think, although they may not admit it, given the stress within the industry and some of our competitors going through what they're going through and having experienced what we experienced, I think that the consensus is that Pfizer's not providing sufficient margins.

And with competitive offerings being relatively attractive, I think over time – and I think Pfizer's actions indicate this. They're probably going to come back more normalized margins. We've certainly demonstrated that we can affect share. And that we can affect share by – it's not a favorable economic outcome to underpay us or any other distributor for handling and promotion of the product in the industry.

So when you look at proprietary products, when you look at relatively healthy relationships with manufacturers, when you consider an industry that is becoming increasingly profitable, and then all of that compounded by the struggles we had and the launching of companion animal component of our vet business dragging down our earnings, we had a fairly tough go there for two or three years. Those things are either turning or have largely turned.

So I guess it's a very long answer to say to you that we have not lost the commitment to get the company back up to previous earnings levels. And I think we can get that done over the next three years or so.

Brad Evans – Heartland

Okay. I appreciate that color. And just last question for me then, it sounds like, with respect to the refinancing on the right-hand side of the balance sheet with the respect to the revolver and the term facility, you feel like you can manage that in this environment through this refinancing? And if you were to raise equity at any point in the future, it'd largely be in combination with an acquisition? Is that a fair comment?

Bill Lacey

I think that's a fair comment.

Brad Evans – Heartland

Okay. Thank you.

Bill Lacey

We're not going to do an equity offering at $2.50 a share with where we are today.

Brad Evans – Heartland

Glad to hear that. Thank you.

Operator

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Jim Robison

Thanks for joining us on the call. And we appreciate your interest. Everyone have a good week. Thank you.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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