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Rocky Brands, Inc. (NASDAQ:RCKY)

Q4 2010 Earnings Call

February 15, 2011 4:30 PM ET

Executives

Brendon Frey – ICR

Mike Brooks – Chairman and CEO

Jim McDonald – EVP, CFO and Treasurer

Dave Sharp – President and COO

Analysts

Mitch Kummetz – Robert W. Baird

Reed Anderson – D.A. Davidson

Operator

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Rocky Brands Fourth Quarter Fiscal 2010 Earnings Conference Call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator instructions) I would like to remind everyone that this conference call is being recorded.

And we’ll now turn the conference over to Brendon Frey of ICR.

Brendon Frey

Thanks. Before we begin please note that today’s discussion including the Q&A period may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such statements are based on information and assumptions available at this time and are subject to change, risk and uncertainties which may cause actual results to differ materially. We assume no obligation to update such statements. For our complete discussion of the risk and uncertainties, please refer today’s press release and the reports filed with Securities and Exchange Commission including Rocky’s Form 10-K for the year ended December 31, 2009.

I’ll now turn the call over to Mr. Mike Brooks, Chairman and Chief Executive Officer of Rocky Brands.

Mike Brooks

Thank you and thanks to everyone for joining us this afternoon. With me on today’s call are Dave Sharp, President and Chief Operating Officer and Jim McDonald, Chief Financial Officer and Treasurer.

We are very pleased to be speaking to you today and sharing fourth quarter results that were a significant improvement from a year ago. Total sales increased 8% to $66.7 million driven by a 14% or $6.6 million gain in our wholesale division.

Our Work, Western and Duty categories also delivered double digit percentage gains during the fourth quarter led by Work which was up 20%. Throughout the year, these businesses have been building momentum fuelled by new innovation, brand extensions and more focused sales and marketing efforts. The consumer response, to many of our new products introductions has been very encouraging and as leading to strong sell-through, IRE orders and improved shelf space at our large network of independent regional and national camps.

It is also worth noting that sales in our retail division were flat with the fourth quarter of 2009. This performance represents our best year-over-year sales comparisons as we begin transitioning this business to a web based order platform and direct ship delivery method.

As you may recall, this process started in earnest about 2 years ago. While it has taken some time to iron out a few cakes and get some of our customers comfortable with this new business model, we feel confident we are now in a position to profitably grow that business in the years ahead. Our solid top line growth coupled with the reductions we had made in our SG&A over the past couple of years allowed us to significantly improve our operating platform.

Our overall fourth quarter performance was a great way to close out a successful year. During the back half of 2010 we began to witness the returns from our combined efforts to improve the company financially, strategically and operationally.

Financially, we have lowered our SG&A approximately 17% or $20 million over the past 2 years, well at the same time reducing our debt level by 60% or $52 million. Strategically, we have worked hard to improve the market share of our Rocky, Georgia Boot, Durango and Lehigh brand. And operationally, we reduced our sales force overhauled our retail platform and more recently began to expand capacity at our manufacturing facility in the Dominican Republic and explore other production options in the Caribbean Basin. We view our company owned facilities as a key competitive advantage, and not just from a speed to market prospective, but from a financial one now as well.

In 2010, the cost of producing a pair of boots in these two locations nearly reached parity. And when you factor in the extra duty on goods out of China, the Dominican Republic has become a much more attractive option that it was only a few years ago. After providing about 20% of our inventory needs in 2010 we expect production of 30% of our unit volume in 2011. While there is still more work to be done, we started 2011 in a much better position to pursue our future growth strategies.

I will now turn the call over to Jim to review the financials.

Jim McDonald

Thanks Mike. Net sales for the fourth quarter increased 8.2% to $66.7 million compared to $61.7 million for the corresponding period a year ago. Wholesale sales for the fourth quarter increased 14.4% to $52.5 million compared to $45.9 million last year. The sales increase was driven by a 24% gain in our Work categories with our owned brands Georgia Boot and Rocky increasing 18% and 42% respectively.

Our Western and Duty sales also grew nicely, up 13% and 18% respectively in the fourth quarter, while our Hunting sales decreased 12%. Retail sales for the fourth quarter were $12.4 million compared to $12.5 million a year ago. Finally, military segment sales were $1.8 million versus $3.3 million for the same period in 2009. The decrease in military sales was driven by shipments of footwear under our contract with the GSA that was announced in August 2009 and began shipping late in the third quarter of last year.

Gross profit in the fourth quarter was $24.3 million or 36.5% of sales compared to $22 million or 35.7% of sales for the same period last year. The 80 basis point increase in our gross margin was driven by the increase in wholesale sales, which carry a higher gross margin in our military segment.

Operating expenses were $19 million or 28.4% of sales for the fourth quarter of 2010 compared to $19.1 million or 31% of sales a year ago. Income from operations increased 86% to $5.4 million or 8.1% of sales for the period compared to operating income of $2.9 million or 4.7% of sales in the prior year.

Interest expense was $1.7 million for the fourth quarter of 2010 compared to $1.8 million a year ago. The decrease is attributable to reduce bonds versus a year ago combined with lower interest rates as a result of the new $70 million revolving credit facility with PNC Bank signed in October 2010. This decrease was offset by a non-cash charge of approximately $1 million associated with differed financing cost related to the extinguishment of our previous credit facility in term loans.

As a reminder, we closed our new credit facility with PNC Bank during the fourth quarter to quickly review it’s a five year agreement with availability to borrow up to $70 million. So it secures the company’s financing out until 2015.

The current interest rate is very favorable of LIBOR plus a 150 basis point. With these new funds we retired the $11 million remaining on our senior term loan, which carries an interest rate of 11.5% and paid off all GMAC borrowings, which carries an interest rate of LIBOR plus 300 basis points Based on today’s interest rates, we expect our 2011 interest expense to be approximately $1.5 million compared to interest expense of $6.5 million in 2010. Heading into 2011, we are now in a much better position to generate free cash flow that can be utilized for working capital purposes and to further reduce debt.

Net income for the fourth quarter increased to $3 million or $0.41 per diluted share compared to net income of $900,000 or $0.16 per diluted share in the fourth quarter of 2009.

Our effective tax rate for 2010 was 31.7% compared to 36.5% for 2009. The decrease was the result of determining the capital investments in 2010 and our operations in Dominican Republic which reduced our taxable income. We thought of making additional capital investments in these operations in 2011 and anticipate our effective tax rates will be approximately 35% for 2011.

Now turning to the balance sheet, inventory increased 6.2% to $58.9 million at the end of the fourth quarter compared to $55.4 million on same date a year ago, funded debt as of December 31, 2010 decreased 36.9% or $20.5 million to $35.1 million compared to $55.6 million at December 31, 2009. This decrease is primarily the result proceeds from our equity offering in May 2010 and cash generated from operations.

Dave will now update you on the growth initiatives we are working on for 2011.

Dave Sharp

Thanks, Jim. As Mike and Jim have both commented, our sales increase in the quarter was driven by the velocity of our Rocky and Georgia work boots and our wholesale division. The focus in 2010 on building our work category has like to expanded market share. For the year, the Georgia brand sales increased 15% and the Rocky brand sales increased 34% from a smaller base. This occurred for three reasons, first, at the beginning of the year, we launched new deal at affinity programs which rewarded accounts if they placed basic stock fill-ins every one or two weeks. This program improved our retails and stock position and they were able to generate more sales, thus they reordered even more.

Second, this program was supported by a new B2B capability, a website the BPO’s could go to and learn about our product availability which is very skill intensive and placed orders themselves. Popularity of the site grew throughout the year, and we have begun a second phase, rolling out new functionality where we are now proactively marketing office to retailers based upon their business type and they’re buying behaviors.

And last, and perhaps most important as we reported two years ago, we re-ramped our development process, so as to go to market with more relevant product, product that is readily adopted by our dealers and readily accepted by the consumers. During the year, 10% of our Work boot sales were from new products, though it was probably shipped for the first time in 2010, this is a record for us. But we’re plus a leading industry publication recently validated our product excellence when they pulled retailers regarding innovated design in the category, unseeing a competitors of ours, which had have before web plus award for 11 consecutive years, the retail community voted Rocky brands as the most innovative. So, we have a great deal of momentum in our Work Boot division. And we believe that we will continue in 2011 to steal shops based from our competitors with our new products and customer affinity programs.

Regarding the sales of our Outdoor Honey Boots, although the season started slowly with unseasonably warm weather in September, we benefited later in the season from the long sustained winter with record cold temperatures and precipitation.

For the year, sales ended up flat with 2009. We are optimistic about our ability to improve sales in the category this year. Our retails have sort through their inventories extremely well, it has no carryover inventory. And early bookings point to improved business with a few of our major customers.

With respect to our Western business we had a strong fourth quarter. Sales were up 13% with solid performance from our Durango brand. Sales in the category were up 4% for the year. Because of my customer acceptance of a new product which will ship in second quarter and early indications of acceptance of the fall ‘11 line, we expect high single digit growth in our Western business this year to find new products retail well.

Now turning to our international expansion efforts, this remains a major focus in growth strategy for our company. In 2010, we managed to grow our small base of business outside the United States by 50% from $5.6 million to $8.5 million. Our strategy involves finding the right distributor that is with local knowledge of the Work, Western and Hunting markets with the right organization in our targeted regions. We are pleased with our progress. We now have two distributors in the UK with one pending. We have 5 distributors in Continental Europe in 23 countries with three additional pending agreements. We have one distributor in the Caribbean and we recently signed a new distributor agreement for Central America. We have other agreements pending in Japan and Israel. Today most of our success has been in the Hunting and work categories. But we remain optimistic that we will have commitments in 2011 for our lifestyle offerings. Most of our distributors are new, many of them start with small test orders, if their test experience is satisfactory, growth can be dynamic.

Now for an update on our Military Boots, not those sold by the contract of the Department of Defense, but those sold to individual soldiers at the Army Air Force Exchange Services and PX’s and recorded the sales in our wholesale division.

Sales surged up 24% in the quarter in this category. And we were able to keep up with this demand gearing up the manufacturing facility that produces these goods. We continue to invest in and build our commercial military business with new products. These products include basic military combat footwear with improved comfort features, and innovative designs.

Initial deliveries of a new featherweight boot for physical training and garrison use saw a tremendous sell-through at retail indicating strong market demands for this unique product. Sales of this product should yield positive impact in the first half of this year.

With respect in the sales of military boots to the Department of Defense we currently have contracts totaling $2 million for delivery in 2011. We expect that there will be other contracts led this year and we will bid for them aggressively, but as always we are focused on building branded business with products in the channels where we enjoy the best margins.

So, to summarize our growth strategies in our wholesale division, it will continue to be centered around customer segmentation, brand and line extension, penetrating markets outside the United States and capitalizing on the growing popularity of our military boots.

Let me now expand on Mike’s comments regarding our Lehigh retail business. In this new economy we provide the lowest cost safety shoe solution for the now more than ever expense-conscious work place Safety Director. Now these customers can purchase the footwear be it our web portal in order to fulfill direct to the consumer to it a free carrier. This is modest costly than the old model of taking the footwear to customers and fitting the products on to the customers on our trucks.

At the beginning of 2010 we operated 19 centers which serviced 67 trucks. Today we are operating 11 centers serving 55 trucks. Our investments in technology are enabling rich analysis allowing us to deploy trucks in markets where this cost intensive service can be profitable. And at the same time, we’ve been able to identify and retire marginal or unprofitable trucks in centers. And other than for the downsizing our fleet is improved inventory utility. Most of the inventory can serve this business is now centrally located. We’re optimistic about this transformed business model which is now quite profitable and we believe that we’ll be able to reverse the declined sales trend over the next 12 months.

Before I turn the call over to Mike for his closing comments, we want to touch on product costs and supply issues in China. This seems to be on top of my topic right now. And we know that this will again be a challenging year sourcing from China. Tactically we’re engaged in reengineering some products and re-sourcing others. It should be well noted that in 2010, we ramped up the facility we own in the Dominican Republic and will ramp up again this year by another 15%. This facility will now supply 30% of our footwear needs this year. Obviously, we will enjoy some fixed cost leverage from this ramp up but more importantly, we will have far better control over our supply as we see many chimes that was with constraint capacities.

As we reported on the previous call, we raised prices at the beginning of 2011 approximately 5%. Regardless of where inflationary pressure takes prices this year, we believe that we will be able to remain competitive because of our diverse supply base and strong brands.

I’ll now turn the call back over to Mike for his closing comments.

Mike Brooks

Thank you, David. The past several years have not been without challenges both internally and externally. However, after digesting the acquisition of EJ Footwear, integrating our two organizations, rightsizing our operating platforms and emerging from the economic slowdown, things began to fall into place in 2010.

Looking ahead, I believe we have a solid business plan in place to continue profitable expansion of our business. With a much improved balance sheet, we now have more resources to invest in our powerful portfolio of brand and expand our share of the work Western and outdoor markets. Today, I’m more excited about the company’s future than ever. We have assembled a great team that I’m confident is up to the task in delivering sustainable sales and earnings growth and returning increased value to our shareholders over the long term.

To close, I want to thank all of the Rocky employees for their commitments and dedication. Your efforts, day-in and day-out is what drives our success, keep up the great work.

With that operator, we’re now ready to open the call for questions.

Question-and-Answer Session

Operator

Thank you. We’ll now be conducting a question-and-answer session. (Operator Instructions) Our first question is from Mitch Kummetz with Robert W. Baird. Please go ahead with your question.

Mitch Kummetz – Robert W. Baird

Yeah, thank you. First off, let me congratulate you on the quarter and the year. And I’ve got a number of questions. First of all actually it’s a housekeeping question. You mentioned the gross margin was up 80 basis points on the quarter and Jamie talked about growth in the wholesale. Could you tell us what the gross margins were across the business segments, wholesale versus retail versus military?

Jim McDonald

For our wholesales, the gross margins for the fourth quarter were 35%, 47.5% for retail and 2% for military.

Mitch Kummetz – Robert W. Baird

Okay. And that’s a pretty big up-tick on the retail side. What explains that – I guess I was under the impression that the transition actually was hurting the gross margin there so has something changed or did I not understand that correctly?

Jim McDonald

No, I think that – I think we’re returning to more normalized margins. I think our margins earlier in the year were down slightly as we had some operational issues there we needed to address as far as billing and things like that. So I think we’re more back in that 47.5% or 80% range seems like more sustainable going forward.

Mitch Kummetz – Robert W. Baird

Okay, great. And then, just on the margin, I guess on the costs, David, you addressed that to some extent. But, could you just remind us where the transition that you guys are ramping up your production in the Dominican and also with the price increases that you’re taking? First off I guess where you’re seeing kind of all in, in terms of increase in costs in 2011? And then, again how much of that gets offset by the price increases?

Dave Sharp

It seems that we’re going to be able to maintain our margins this year. We see the cost could increase as much as 10% maybe 12%. But some of these markets will affect – the commodity markets that affected our business are pretty dynamic. And so we really don’t know what that affect is going to be.

Jim McDonald

I think, the other thing, Mitch, this is Jim that from at least on wholesale, we feel good about maintaining those margins on a percentage basis because we’re the business that we’re not going to be in the next year in the Dickies, the license in the Dickies that happens our lowest margin. And if we complete those sales with higher margin sales, it should help at least maintain the wholesale margins – that the margin – wholesale going forward.

Dave Sharp

And for the same reasons Mitch, we’re replacing some of the military business.

Mitch Kummetz – Robert W. Baird

Right.

Dave Sharp

With brand of business.

Mike Brooks

And Mitch, this is Mike. There’s two things going on here, it’s the inflation that is happening. But it’s also getting delivery of products and last year everybody that I know in the shoe business suffered in getting, including us in getting what we needed on time-to-timely basis from our sourcing partners in China. So, you can’t sell it if you don’t have it. We like the fact that we’ve been in business in Dominican Republic for 24 years, we have downsized that when we could make more money, bring the shoes out of China. And we started to reverse that last year and we have some advantages. So I feel good about where the company is.

Mitch Kummetz – Robert W. Baird

Got it. And then on the wholesale business, I mean, you seem to have some good momentum there especially on the Work segment. And David you kind of ramped through that in your prepared remarks, and I think you, the one that you specifically kind of referred to your outlook for 2011 was I think it was Western you said up high single digits. But it sounds like Work and outdoor should also be up. I’m just wondering you expect them to be up a similar amount or –?

Dave Sharp

Yes, yes. I think that’s what we have planned.

Mitch Kummetz – Robert W. Baird

Okay. And then on the retail business which was flat and then you talked about the transition there in terms of the number of centers and trucks that you ended the year and how that compared to last year. Kind of what is the plan for 2011, are you pretty happy with where those numbers are, do you expect the centers and trucks to continue to come down and do you think if that retail business could return the growth in 2011?

Dave Sharp

Well, yeah, I mean we have – we’re planning, we had business plan flat for the year. We’re going to continue to look at the profitability of these trucks and centers and will operate them if they are profitable and we will down them or not.

Mitch Kummetz – Robert W. Baird

Okay.

Dave Sharp

But currently, the trucks and centers that we are operating are operating profitably.

Mitch Kummetz – Robert W. Baird

Okay.

Dave Sharp

Old habits are hard to break, we all know. But, I’m seeing some successes from the retail division in large corporations throughout America that give me great confidence that the dollar saving is so great to the buyer of the footwear, somewhere this year, early next year they’re going to be coming here and grow.

Mike Brooks

We’re – Mitch, we’re committed probably more than ever to continue transitioning to this model.

Mitch Kummetz – Robert W. Baird

Okay. And then, two last questions that’s a good lead into the next one, which is on the SG&A that’s come down both in dollar terms and as a percentage of sales. And a lot of that I would imagine has to do with that transition. So is that something that you would expect to continue to trend down in dollars in 2011 or are you looking to invest in other areas of the business there?

Mike Brooks

Well, I think that – I think we do have some savings coming in our retail division there. But we do have a variable about 15%, 12% to 15% variable SG&A for distributing cost and selling cost and things like that. So, absolute dollars provided, we have that high single digit sales increase that we would see saving in absolute dollars.

Mitch Kummetz – Robert W. Baird

And then, last question on the interest expense. Jim, I think you said on the last call or maybe the one before, you are looking for about a million and a half on the year is that still where you are expecting it?

Jim McDonald

Yes.

Mitch Kummetz – Robert W. Baird

Okay, great. Thanks. Congratulations.

Jim McDonald

Hey, thanks Mitch.

Operator

(Operation instruction). The next question is from Reed Anderson with D.A. Davidson. Please go ahead with your question.

Reed Anderson – D.A. Davidson

Good afternoon. Let me also add my congratulations on a great finish to the year.

Mike Brooks

Thanks Reed.

Reed Anderson – D.A. Davidson

Couple of questions, first off, on back on the Dominican expanding capacity, I’m just, I mean, what physically did you add – add another 50% of capacity versus what you have there? It’s that just the matter of adding a line, is it adding – what do you need to do to actually get there and how quickly can that happen?

Mike Brooks

Reed, in the industrial freeze on that we are in and I’ve been in from day one, there were probably 50 apparel factories that shut down in the past 5 years.

Reed Anderson – D.A. Davidson

Okay.

Mike Brooks

So we are grabbing up empty buildings in the same zone.

Reed Anderson – D.A. Davidson

Okay.

Mike Brooks

Converting them to shoe, whatever we need from warehousing to shoe manufacturing, Jim mentioned that we put new equipment, new machinery and equipment, size and patterns. And the slow part is really training the associates where up to like 1,500, 1,600 associates. But we’re ramping it up as quickly as we can, keeping in mind the quality and on time delivery is critical.

Reed Anderson – D.A. Davidson

Obviously it’s ongoing, but by midyear you feel like you’ll have a lot of that in place?

Mike Brooks

Yes. I mean we started the earlier this time last year. And we ramped up heavy in the second half and we have kept that going with, again picking up, we picked up two new, not new buildings, new to us. And we have just organized ourselves to make a lot more pairs and hiring the people buying the equipment, buying the last in the dice and buying the raw material.

Jim McDonald

The other tax advantage that we got in, I’m sorry, Reed, in 2010 and we are going to continue in 2011, because of the investments that we made in equipments. So we made – we made more investments than ‘10 than we are going to make in ‘11. So we are well along the way to be able to produce the kind of numbers that we want to in 2011.

Dave Sharp

And I think, I’ve always been a shoemaker. My dad’s always been a boot maker. My grand – I’m proud that we are still in the boot making business and not just sourcing. I think that gives us creditability and some small advantages. So I think it, I think it’s good, I think it’s good for the company and we want to take advantage of it when it’s in our favor.

Reed Anderson – D.A. Davidson

Absolutely. And then, related to inventory, I mean are you one of the few people to who haven’t really didn’t showed up big inventory jump coming out of the fourth quarter. I’m just wondering if Jim, you could give a little color on that. I am suspecting some of that is related to what’s been going on with Lehigh business et cetera. But if you could just provide some color on why inventory was not below like other peoples and what it might, is that going to start to grow kind in line with (inaudible)?

Jim McDonald

Well, I think it – we are certainly focused on better inventory management and inventory returns and as bid for a while. I think that our inventories were not up that dramatically because we are still as Mike said having some difficulty getting, in getting our products and we may have been able to have some more sales in 2010 that we would have availability to product more. So, and the other thing is, the sales the inventory increase we did have but we know that our inventories at the end of 2009 were lower than we would like them to have. So, we think the inventories are still, maybe go up a little bit. But we feel pretty comfortable where we are at right now. And certainly as we do more in our facilities, our lead times are shorter which allow us to have, to better turn our inventory.

Dave Sharp

That’s an interesting, what you’ll find and what we know is that the Dominican operation is added inventory to the raw material. But is taken away from finished goods because we can get those goods in about 10 days versus 30 days from China so, it’s always a given and take.

Jim McDonald

And you’re also right having inventory and we closed several, I think 15 of our sectors at the end of 2009 last year and having that inventory in one location allows us to have about less inventory for that operation, for our Lehigh operation. The other dynamic is around that makes us customers and we the channels of distribution that we are in we still have a lot of consolidation in customers and the larger customers like to take it direct. So we never (inaudible).

Reed Anderson – D.A. Davidson

David, you gave that statistic about, I think it was 10% of your sales were from new products or something like that. I mean does that, I realize it’s probably hard to pinpoint, but does that number go up further this year, I mean because like what I saw you at the trade. I mean you got a lot of new stuff out there in a lot of different areas? I’m just, is that going to continue to be a piece that drives top line annuity sort of thing or was that last year kind of anomaly?

Dave Sharp

No, I think for the future, in order to get the line extensions that we want, we obviously going to have to add new products. Traditionally that work category that I was speaking of specifically where we had 10% from new that the 10% of the business was from new products. That’s a category that is rarely refreshed when businesses is good. But we also had in the Western category, 30% of the products were new. And of course, what we’re hoping is that those products do very well at retail, sticker retail, and have some legs, two seasons, three seasons, four seasons and the retailers continue to sell back in.

Reed Anderson – D.A. Davidson

My last question is just on the international piece, which you get obviously of a small base it’s growing very nicely. So is that something, I mean, can you grow that another 40%, 50% this year. And then secondly, I guess, what types of, what products, like are really driving that, I mean is that’s your whole line, I’m suspecting it’s not. I’m just curious, some color on that?

Dave Sharp

Where we had a lot of success immediately was across Europe and Hunting. Where the brand has always been – there’s always been some distribution there, but with retailers. So we were never well priced because we were selling direct to small retailers and very small commodities, it wasn’t economic. Today, we are not selling direct to retailers, we’re selling distributors and they’re taking the goods direct from our facilities from China, from the Dominican Republic. We’ve also got some work products placed throughout Europe and in South America. And we’re currently at the pure show in London, this past weekend we were there with our Giant by Georgia line. And we’re going to be in Moda which is another European show based in the UK next weekend. And then we’ll be at the AWI show which is the Shot show for Europe in Nuremberg. And also in Milan at the MICAM show in a couple of weeks, three weeks. So, we’re very active over there, we’re beginning some traction. And as we’ve said some of these distributors have pretty good wherewithal and a pretty competent and right now we’re just in test mode with them.

Reed Anderson – D.A. Davidson

That’s great. Well, best of luck you guys. That’s it from me. And good luck in the next year.

Mike Brooks

Thanks Reed.

Jim McDonald

Thank you Reed.

Operator

(Operator Instructions) There are no further questions in queue. I’d like to turn the call back over to management for closing remarks.

Brendon Frey

Great, thanks. Thanks everybody. We’re proud of the year obviously a lot of wonderful things happened. But that’s old news, we’ve got to deliver in 2011 which I’m comfortable we will. So thank you very much.

Operator

This concludes today’s teleconference. You may disconnect your lines. Thank you for your participation.

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