SpanAmerica's (SPAN) CEO Jim Ferguson on Q4 2016 Results - Earnings Call Transcript

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SpanAmerica Medical Systems, Inc (NASDAQ:SPAN)

Q4 2016 Earnings Conference Call

November 15, 2016 02:00 PM ET


Jim Ferguson - CEO

Richard Coggins - CFO


John Lewis - Willis Investment Counsel

Sam Rebotsky - SER Asset Management


Good morning. And welcome to the SpanAmerica Medical Systems Fourth Quarter 2016 Conference Call. This call is being recorded.

Before we begin today’s call, let me remind listeners that this conference call contains statements that are forward-looking as defined within the Private Securities Litigation Reform Act of 1995. We wish to caution the listeners that these statements are only predictions. Actual events or results may differ materially as a result of risks and uncertainties facing the Company including the inability to achieve anticipated sales growth in the medical segments, the possibility that anticipated declines in sales of consumer bedding products could be greater than expected, the possibility of a loss of a key customer or distributor for our products, risks related to international operations and foreign currency exchange associated with our Canadian subsidiary.

The possibility of having material uncollectible receivables from one or more key customers or distributors, the potential for volatile pricing conditions in the market for polyurethane foam, raw material cost increases, the possibility that some or all of our medical products could be determined to be subject to the 2.3% medical device excise tax imposed by the Affordable Care Act, the potential for loss sales due to competition from low-cost foreign imports, changes in relationships with large customers or key suppliers, uncertainty about whether or not we will continue to be awarded one-time seasonal promotions with major retailers, which can have a large impact on annual revenues and earnings, the impact of competitive products and pricing, government reimbursement changes in the medical market, FDA and Health Canada regulation of medical device manufacturing and other risks referenced from time-to-time in our Securities and Exchange Commission filings.

SpanAmerica is not responsible for updating the information contained in this conference call beyond today or for changes made to this call by the conference call company or internet services.

I would now like to turn the call over to Mr. Jim Ferguson, President and CEO of Span-America Medical Systems. Please go ahead, sir.

Jim Ferguson

Thank you, Dianna. Got a couple of things I wanted to mention as we get started here before I talk about our performance. The first case you are not aware, we made a couple of releases this morning. The first is that our Board of Directors declared our normal quarterly cash dividend, that will be $0.16 per share and that's going to be payable on December 9th to the shareholders of record on November the 22th. So once again we are paying our normal quarterly dividend.

The second item again on release this morning was that at our board meeting Dr. Linda Norman has been elected Vice Chairman of the Board of Directors. She will takes that over effective immediately, and one of the reasons for doing this is that Tom Henrion who is our existing Chairman, he will retire in February of 2018. And what we expect here is that once he retires Linda will replace him as Chairperson or Chairwomen of the Board. So that was the reason behind that to allow her to get a little bit of experience in that role as a Vice Chairman before she moves into the role of Chairman. So that again happened here recently, and we wish her all the best of luck.

So now to our fourth quarter performance. I’ll begin today with few comments about our fourth quarter and our yearly performance, after that I’ll turn things over to Richard Coggins our CFO, he will give you some specific financial details about our business. After that, I’ll talk a little bit about our future opportunities and then we’ll end the session by taking any questions if you might have.

To begin with our fourth quarter sales were down by 10%, that was $15,974,000 versus $17,747,000 and that was in 2015. The lower sales were attributed to the loss of our larger retail customer in our custom product segment. On the positive side, our gross margin rose from 32.5 in the fourth quarter of 2015 to 37.3 in the fourth quarter of 2016. This gave us operating income that was up 13% and net income that was up by 10%.

Our earnings per share improved from $0.43 per share in 2015 to $0.51 per share which was a 19% increase for the fourth quarter of this year. As for the fiscal year, our sales were up 5% to $67,627,000. Our gross margin dropped from 33.6% in 2015 to 32.9% this year. Again, this was attributed to our Black Friday promotion along with the increase and other customer’s products business.

As we’ve talked about in the past, many of those consumer driver products carry a much smaller gross margin. Our operating income rose by 16% to just above $6 million. Our net income increased 6% to $4,247,000 this gave us earnings per share of $1.54 versus a $1.33 in 2015. Overall, the fourth quarter and fiscal 2016 proved to be very solid performances for us. We had positive increases in many of our financial measurements.

In the fourth quarter our medical business provided a sales increase of 2% this increase in revenue was driven by increases in both our therapeutic support surfaces and our bed frames. It was an interesting quarter as things were a little solve through the summer, but when we hit September, things certainly begin to pick up.

We shipped approximately 1 million in final mattresses to a long time corporate customer. We have stocking orders from our rental partner MediLogix totaling about $300,000. We received an order for $400,000 from a facility in Western Pennsylvania, half of that went in September and the other half is in October. We shipped $350,000 to a facility in suburban Chicago which included on-core beds and surfaces. We shipped several containments to Alphacare in Australia and finally our order with the City of Toronto which we've been talking about since the spring of the year, it is once again been pushed out.

We actually started in March, and we moved to May, then we moved to June, then we moved to August, to September and now it looks like that it will be sometime in late December or early January. And all of this has to do with construction issues. This is a new facility and they are having some issues with getting the building finished. So it looks like right now it will be the end of the first quarter or the first of the second quarter before that actually we will ship.

Again the order is in house, it is real live order and we've actually made all of it and we are ready to ship it whenever they are ready to take. Another item to note is that during fiscal 2016 our shipments to Alphacare in Australia totaled approximately $700,000 worth of product. I know that's something that a lot of people pay attention to, because we've done a lot of talking about Alphacare, and that thing we started shipping them in the middle of June so we have shipped them about a nine months periods about $700,000 worth the product. So we feel like we've gotten off to a real good start with them and we expect many things from them selling in 2017.

So then, as we look into custom products business our sales were down by 36% to $3.5 million. This came primarily as a result of the previously mentioned loss of our large retail customer. The bright spot here is that the industrial segment sales rose by 12% for the quarter which gave us a near record performance from this group. The other positive result is that we remain profitable even with the loss of our large customers.

Some highlights for this business include a number of back to school programs which retailers along with which came from a lot of their retail customers and then we also had a continuation of a new piece of business that we had talked about along the way. This was the one that we had previously said that we would be plugging about 30% to 40% of the loss of our to a large retail customer. So we've got that continuation going on all the time.

So we feel pretty good about where we are headed in the conservative business, but we still that some work to do there. Once again, we turned in a nice solid quarter to end a fine year by our company.

And with that, I will turn it over to Richard and let him give you some of the financial details. Richard?

Richard Coggins

Thank you, Jim and thank you to our listeners joining us that. We appreciate your interest in Span. I would like to review the financial results for our most recent quarter and first, I’ll cover the financial highlights from our fourth quarter of fiscal 2016 sales and earnings results. Then I’ll discuss our balance sheet and cash flow for the fiscal year ended 2016 and then finally I’ll turn the call back over to Jim to get his comments on the quarter and our future outlook.

As I hope you saw in our earnings release yesterday, we had strong earnings performance in the fourth quarter which gave us a solid finish to fiscal year 2016. Our big picture trends in the fourth quarter were actually very similar to the trends that we saw in the second and third quarter of this fiscal year. We had a modest decline in sales, a large increase in operating income, a slightly smaller increase in net income, and then another large increase in earnings per share.

Here’s a summary of the fourth quarter performance. Our total sales were down by 10% due to lower consumer sales. Operating income was up by 13% and net income increased 10% because of sales growth and our medial segment and margin improvements in our custom products business. And then finally earnings per share were up 19% for the reasons I just mentioned. Plus the effect of our stock repurchases near the end of fiscal year 2015.

Now, I’d like to give you just a few details behind those numbers. First let’s take a look at sales in the medical segment. Our total medical sales were up 2% in the fourth quarter to 12.5 million compared with 12.2 million in the fourth quarter last year. The increase in medical sales came mostly from our therapeutic support surfaces, but we also had modest growth from our beds and our in-room furnishing products made at our plant in Canada.

Our SpanCanada sales also increased by 2% to $2.8 million in the fourth quarter of fiscal ’16, compared with 2.7 million in the fourth quarter last year. And we saw demand for medial beds pick-up in the fourth quarter, compared with earlier in the year and that trend has continued so far into the fourth quarter of fiscal ’17. We’re encouraged to be seeing an improvement in demand for our medical beds during these last several months.

Looking now at the other part of our medical business, we had solid sales performance among our therapeutic support surface, where sales were up by 6% to $7.2 million compared to with $6.8 million in the fourth quarter last year. Our therapeutic support surfaces make-up the largest part of our medical segment and we’ve seen steady growth in sales of those products throughout fiscal 2016. Sales of our other medical product lines as a group were down during the fourth quarter decreasing by 7% to $2.4 million, compared with $2.6 million in the same quarter last year.

Within this group, sales of our patient positioners were up 3% during the quarter, but that was offset by modest sales decline among our overlays, seating and skin care products. In thinking about the two largest parts of our medical business, I would say that demand for our therapeutic support surfaces has been solid and steady throughout fiscal 2016. However, demand for our medical beds was just average through our first three quarters of fiscal 2016, but as Jim mentioned beginning in the fourth fiscal quarter, we started to see an increase in demand in colliding activity for medical beds, and we’re seeing that trend continue so far during the first quarter of fiscal 2017.

Leading down to our custom product segment, our total custom product sales were down by 36% to $3.5 million in the fourth quarter of this year that was down from $5.5 million in the fourth quarter of last year. And as most of you know the largest part of our custom product segment is our consumer business and our consumer sales decreased by 47% to $2.4 million in the fourth quarter this year compared with $4.6 million in the fourth quarter last year. The decline in consumer sales was entirely the result of the large customer that we lost early in the third quarter of fiscal 2016, which we announced this past April.

We actually replaced about $900,000 of that lost consumer business, with sales to a new customer coming from a new consumer sales program that begin in May of this year. But those these sales were not enough to offset the large account that we lost. The other part of our custom product segment is made up of our industrial product lines, industrial sales were up by 12% in the fourth quarter of this year to $1.1 million compared with $982,000 in the fourth quarter of fiscal 2015. This was a near record for our industrial sales group and we are encouraged by the growth and the solid performance that we’ve seen in this part of our business during the last several years.

Okay, that covers the highlights about our sales performance. Now let’s take a look at our fourth quarter earnings results. Our gross profit level in the fourth quarter increased by 3% to $6 million compared with $5.8 million in the fourth quarter last year. Our gross margin percentage also increased significantly in the fourth quarter to 37.3% up from 32.5% in the same quarter last year. These increases in gross profit level and margin came mostly from our custom product segment and were the result of improved margins within our consumer product lines. And as I mentioned before, earlier this year we’ve taken a number of actions to try to improve the profitability in our custom products business, and we’re glad to see those efforts paying off.

In addition to improved margins in our consumer business, our gross margin percentage for the fourth quarter also benefited from a shift in total company sales mix towards our more profitable medical segment. Medical sales made up 78% of our total sales in the fourth quarter of fiscal 2016 compared with just 69% of total sales in the fourth quarter of fiscal 2015, and so our total mix shifted more towards that medical business which helped our margin percentage.

Now, within the medical segment, our gross profit level was down just slightly by 1% in the fourth quarter of this year compared with the fourth quarter of last year. And our medical gross margin percentage was also down just slightly compared with the fourth quarter a year ago. The decrease in margin was caused mostly by a less profitable sales mix with in our lines of medical beds during the quarter.

Looking below the gross margin line, our operating expenses were down slightly by less than 1% during the fourth quarter, because of slight decreases in selling, marketing and administrative costs however our R&D expenses were up by during 11% during the quarter due to new product developments in our medical segments.

So, this combination of increased margins in the custom products segment and solid sales growth from our medical pressure management products and a modest increase in medical beds sales gave us a 13% increase in operating income, to $1.9 million in the fourth quarter this year compared with $1.7 million in the fourth quarter last year.

And, normally I don’t comment too much on our non-operating income, but we had some noteworthy changes in that category so far during fiscal 2016. Our total net non-operating income decreased by 96% in the fourth quarter of this year down to $4,000 from a $106,000 in the fourth quarter last year. The reduction in non-operating income was entirely due to foreign currency exchange transaction form our operations in Canada. In this case, the Canadian U.S. dollar exchange rate was relatively stable during the fourth quarter of fiscal 2016 and the comparable quarter of 2015, the Canadian dollar weakened against the U.S. dollar which gave us foreign exchange gains in the fourth quarter last year that were not repeated in the fourth quarter this year. And if you also look at our full year fiscal 2016 numbers, you will see the same trend happening just on the larger scale.

As a result of that decrease in net non-operating income in the fourth quarter this year. Our rate of growth in net income for this year's fourth quarter was slightly below our growth rate in operating income. So net income for the fourth quarter was up 10% to 1.4 million compared with 1.3 million in the fourth quarter last year. However, our earnings per share increased by 19% to $0.51 per diluted share in the fourth quarter this year that was up $0.43 a diluted share in the same quarter last year. The higher growth rate in earnings per share compared to net income was the result of having fewer shares outstanding because of our large stock repurchases near the end of fiscal year 2015.

That finishes my comments about our fourth quarter sales and earnings performance. Now, let me change subjects and make a few comments about our balance sheet and cash flow for the fiscal year 2016.

As we are usually able to report, our balance sheet at the end of fiscal 2016 was in excellent shape. If you follow Span closely, you might recall that our balance sheets at the end of fiscal year 2015 looked a little unusual because of the effects of the large seasonal promotion of consumer products that was in process during the fourth quarter of fiscal 2015 and in the first quarter of fiscal 2016. The effects of that promotion have now washed through our balance sheet, so our balance sheet at the end of fiscal ’16 reflected our normal day-to-day operations.

In general, our balance sheet and financial condition are strong, our level of cash is growing again after our large stock repurchase last fall and after funding all of the working capital requirements for last year’s fall seasonal promotion. We have no long-term debt and our equity base is increasing, giving us a strong foundation for future growth.

Finally, let me mention our cash flow performance for fiscal year 2016. Just as our balance sheet has now returned to normal after the seasonal promotion, our cash flow from operations is now reflecting a more normalized view, since the effects of the seasonal promotion have now dissipated.

Cash flow from operations increased by 13% to $4.8 million during the fiscal 2016 compared with $4.3 million during fiscal 2015. So our cash flow performance for fiscal year 2016 pretty closely tracked our earnings performance for the year.

They were two noteworthy changes on our balance sheet that had large, but mostly offsetting effects on our operating cash flow. Our inventories were down by 1.3 million and our accounts payable were down by 1.2 million from fiscal year-end 2015 to fiscal year-end 2016. Both of those changes were related to the seasonal promotion of consumer products that was in process this time last year.

Taking little longer view and washing out the efforts of last year’s seasonal promotion, our fiscal year 2016 operating cash flow of 4.8 million is a very strong performance for Span. Our largest uses of cash during the fiscal year 2016 were first, cash dividends paid of $1.8 million, second, capital expenditures of $440,000 and third, stock repurchases of $210,000. Overall our financial condition is still excellent and we look forward to continuing that trend in the future.

That wraps up my comments on our financial results. I’ll now turn the call back over to Jim for his view on the business.

Jim Ferguson

Thank you, Richard. As we start to look towards the first quarter, we anticipate that in fiscal 2017 first quarter will be down in both sales and earnings, and that’s again we hate to continue to say it, but it has to do with the fact that we have lost this large retail customer along with the fact that we will not be doing a Black Friday promotion this year.

The loss of the Black Friday promotion had nothing to do with anything that we did here at SpanAmerica, the customers just choose not to do an overlay or PAD or a Black Friday offering this year. This was the first time probably in about five or six years that they have chosen not to do. So it wasn’t that we lost it to somebody else or we lose it ourselves basically, it’s just that the customer decided that they were going to do other products as opposed to a foam overlay.

On the positive side, I would say that we expect more favorable quarterly comparisons through the remainder of the year. Even thought, the first one may not be favorable. Once we get buy this first quarter, I think things will be very much more positive as we move through fiscal 2017. In the medical business, we see momentum continuing into the first quarter with the number of new orders being received. Alphacare has continued to order with first quarter sales totaling approximately $120,000. We are right now awaiting the next group of orders to arrive soon, those probably will not ship during the first quarter but we will be ear marked for second quarter ship. Alphacare has been very interesting with the increased products which they have purchased from us. Originally they just wanted our on-core bed, but once they visit our facility in Canada, they saw our full offering and this led them to sell our full line bed frames.

A little while later, they asked for surfaces and finally this summer a couple of their people came here to Greenville for the training and doing this training session, they saw our wheel chair persons, and now they’ve added those to their product offering. So, this relationship with Alphacare started out with just the on-core bed and has morphed into almost and complete full align that they’re carrying SpanAmerican Products in Australia.

Again as for the City of Toronto, I previously reported that their order has moved out, but also want to inform you that in the mean time we received the next order, so we’ve actually got a second order from them and it’s interesting that that one rule ship [ph] before the first order will. That one is scheduled to ship sometime in December. So, probably sometime in mid to late December we’ll be shipping that one and again probably before the original order gets shipped due to the problems with the construction.

Another great opportunity will be to provide about $700,000 worth of surfaces to a facility in Minneapolis in conjunction with an acute care bed frank provider. We’re really excited about this, our sales person worked on this for quite some time. And we think that this is a very good opportunity for us to.

Right now those are due to shipped sometime in late November, early December, but we’ll get that, right now it’s all scheduled to get into the first quarter. So, as you can see we’ve got a great deal of opportunity in front of us as we begin to move into fiscal 2017. These outlined orders coupled with other current relationships such as our distributors, other rental partners, all of these go along to build a nice first quarter for the medical business.

In the custom products business, our driving factor will be to keep this business unit profitable. We’ve said it time-to-time again previously and previous discussions and as Richard has said it a number of times today as I probably said it three or four, you know the main things is we’ve got to replace this Black Friday business, we’ve got to replace the normal everyday business we loss. But in the meantime, somehow we’ve got to remain profitable in that business, we cannot led it deteriorate into the situation that we had in 2014. But we do believe that we have a good opportunity here.

We think that in keeping with what happened in the third quarters and fourth quarters of this year we have a great opportunity to be continue to make that business profitable and we do have some opportunities with some new pieces of business, they could go a long way and helping us with just an increasing sales, will help us help us take care of some overhead and some G&A expenses and thanks of that nature. So we feel pretty comfortable about where we’re headed with that business even though we know that it will be down here after the first quarter.

The other issue as I talked about with the industrial business is we do expect that one to continue moving forward as I said last year we had a 12% or excuse me last quarter we have 12% increase in that business and that looks like that will continue over into the first quarter. And it's kind of interesting to that the automotive business which that one relies heavy on has actually been fairly slow particularly since the summer, but we've got other areas such as packaging foam and then sports equipment foam to try to help fill the gaps. We've talked about a number of those items before that we do, there is some many different aspects of that industrial business and for those of you that maybe new it's pretty much anything that's not medical. So it encompasses a lot of small different types of products.

So, finally as I move into other portion of the business I would report that our material pricing and in particular or foam pricing has remain stable. As oil prices began to climb earlier in the quarter the talk began from our vendors to increase prices, but now as it has become or has started to drop back down there is less of that charter from the foam providers. So we fully expect that to remain stable. There will always be a lot of talk particularly as we move into the first part of 2017 just because historically that’s a time when they try to raise prices. But without some significant change in oil, I do not believe that will happen. So I think that will remain stable.

So, in summary, I would report that we had a fine fourth quarter, which in the medical business should carry over into the first quarter. The first quarter overall will be a tough comparison as I said because we will not have the Black Friday promotion or the everyday business from the large retailer. But again I would say as we said in the release and as I've said earlier we believe the rest of the year will give us some more favorable comparisons.

So in summary we truly believe we’re headed in the right direction, that's not to say that we've got it all under control, but feel like things are doing well I guess the one thing that we’ll have to pay very close attention to is going to be the transition that's going to happen in Washington over the next several months. I know that maybe a question on your mind, but one of the things that I would say is just as it happened when the Affordable Care Act came into being we’re going to have to wait and see before we know exactly what's going to be a fallout from that transition of power from the democrats through the republic of that.

Thank you at his point it is just too early to tell. But again it is a big question mark.

So with that, I will finish and I will ask Diana to comeback and we’ll take some questions.

Question-and-Answer Session


Thank you, sir. [Operator Instructions]. And we’ll take our first question from John Lewis of Willis Investment Counsel.

John Lewis

Good afternoon, gentlemen. Just wanted to follow-up here with a lot of the orders being shipped here in the first quarter, are we likely to see demand continue throughout the year or is this more of a timing of orders thing for the medical segments specifically in Q1?

Jim Ferguson

We believe that we will continue, particularly through the second quarter. One of the thing that happens historically is that particularly in Canada year-end spin downs. So we’ll probably see a little more of that as we move into like November early December, you’ll see some of that kind of start to pick-up and It won’t just be for bet frames, it could be the things also. And then what again happens in the second quarter, you have a number of provinces in Canada where their fiscal year is actually in the March.

So we anticipate some additional spin down business as we get into that part of the year. But one of the things about where we are today, a lot of these orders particularly domestic orders that we’re seeing or think that we’ve been working on for quite some time. So we have a lot of those, we would expect a number of those to continue to fall into the second quarter or the first calendar year. So we feel pretty confident, particularly about the first and second quarter.

John Lewis

Perfect. Thank you. And you obviously jumped on the quarter that we’re all somewhat thinking out there with your finishing comment there. So, really just did you think about Affordable Care Act nothing really to comment on at this point on how things could really change going forward, whatever happens happens?

Jim Ferguson

I think it’s too early to tell, they put forth, the republicans have put forth a number of ideas. But I just don’t think there is enough information for us to react or make a decision on what is going to happen. So I like, we’ve got to play a little bit of wait to see before, before we make up mind as to any move that we have to make.

John Lewis

Right. There are no changes to the play book into the quarter?

Jim Ferguson

Not at this point. No.

John Lewis

Perfect. Thank you, guys.

Jim Ferguson

Thank you.


Thank you. [Operator Instructions]. We’ll go next to Sam Rebotsky, SER Asset Management.

Sam Rebotsky

So as far as the R&D, for the first nine months you spend 8.46 versus 8.78. Did you spend significantly more in this fourth quarter and do we expect significant number of new products to come on-board?

Jim Ferguson

Well, we did spend more than the fourth quarter. But one thing I would say and we had mentioned this in some of our past calls and public reporting materials. Is we do, because the nature of our R&D, our R&D expenditures consist almost entirely of new product development efforts for our medical business. And we occasionally use outside contracted services for that, we do a lot of it in-house, but depending on the project that we’re working on we’ll sometime use some outside sources which are more expensive.

And so the 11% increase that you saw in the fourth quarter is not necessarily the beginning of a long-term trend. It is just a normal quarter-to-quarter fluctuation in our medical -- in our new product development efforts on the medical side. We were flat in that area, if you look at the full fiscal year, our R&D expenses were flat and again being flat doesn’t indicates that our efforts were flat, it just indicates that we would rearrange our spending based on the particular projects that we’re working on.

Richard Coggins

In answer to your question, Sam. We’ll have a couple of potential of couple surface items that will come out in 2017. We got a couple of things that we’re working on in the Canada in the bed frame area. But those will be a little bit further down the road. Those new products and so forth take quite a while to design, develop and get tested and approve. So, those will be a little bit further down the line, but you can -- you kind of bet on that we’ll have a couple of new things on the legacy side of the business.

Sam Rebotsky

Okay. And as far as the Australian customer they’re taking both mattresses and the frame and everything in your, is this what’s going on you’re getting more and more expectance of all your products?

Richard Coggins

Well, like I said they started out all they wanted to look at was the on-core bed frame. And then it move there from the on-core where they saw the other bed frames that we had. So they’re now selling all three. They got introduced to our surface products and they have four or five of those at their disposal that they can bring in. And then finally they added wheelchair cushions after a couple of their sales reps came over during the summer for some training and they got all excited about it, and so now they’re buying wheelchair cushion. So, they have really expanded what they were originally looking for, the number of products that they’re going to bring into the country.

Sam Rebotsky

Okay. And are you able to marry the bed and the bed frame more in the U.S. and what percentage would you say U.S. and worldwide are you able to sell the mattress and the bed frame?

Jim Ferguson

I think right now what the last number I saw is that we’re putting about 60% of all bed frames that are going out have a mattress on them now. And that’s up from less than 5% when we first bought the business. So, we have done a very good job of putting those two items together and interestingly enough the guys in Canada are doing a great job of selling the mattress product along with the bed frame. So, they’ve really done a great job.

It’s been a little slower going here in the U.S., because our guys have had to learn how to sell that bed frame where they were used to selling the surface product. So, that one hasn’t move quite as well as the opposite effect in Canada.

Sam Rebotsky

Well, that's sounds exiting. Do you have any items that you are looking to acquire? Any acquisitions whether it’s in the next year or small tuck-ons or bolt-ons or whatever what’s your thoughts on what might happen?

Jim Ferguson

The answer to that is yes we're always looking. I can't comment because we haven’t made anything public in terms of any opportunity that's out there. So provided I would say that we are always looking, we’re actively pursuing it. The other thing that’s interesting is that we've actually hired person here internally to act as our in-charge of business development. So 100% of his time right now is going to be to focusing on acquisitions, joint ventures, licensing agreements all of those. We got to jump start our business and figure out ways how to grow it faster and you can bet that’s what's on our agenda moving forward.

Sam Rebotsky

So that's positive. The Canadian acquisitions seems to be working very well. It takes a while to sort of integrate it, but that should be another if you find another one that seems it would be very positive?

Jim Ferguson

Yes, I agree.

Sam Rebotsky

And as far as the first quarter of the sales and then profits would be down. Do we have a visibility as far as the whole year what we expect you say we expect improvements in the second quarter and third quarter and fourth quarter. Do we think that we could achieve increased profitability in sales over the current year?

Jim Ferguson

Sam, we haven’t announced any expectations for the full fiscal year yet and that's intentional. We have a reasonable window in our business where we can see the next quarter or next maybe two quarters, but once we get beyond that it's difficult for us to forecast actually. So we haven’t announced that publicly yet beyond the first quarter, but we’ll continue to update everybody on a quarter-by-quarter basis on based on what we are seeing at the time.

Sam Rebotsky

Yes, and one final question, Tom Henrion has been the Chairman for a long time, involved with the company and has significant amount of stock. Do we have any thoughts whether we’re going to, what he would want to do when he comes to 2018 or what we may want to do if stock was offered to us?

Jim Ferguson

We have not approached that subject yet, but I'm sure that he would be willing to sell his back to us and we would have to determine if that would be a good opportunity for us. So, yes I'm sure that will be talked about. But at this point it has not been talked about at this point in time.

Sam Rebotsky

Okay, well you did a very good job for the year, and you are seems to be on your way for expanding Span and good luck and let's hope you just continue doing what's you've been doing.


[Operator Instructions] And it appears we have no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks.

Jim Ferguson

Again, I would like to thank everybody for being with us today. We’ll look forward to sharing our performance with you sometime in February, in early February. Again thank you and we’ll talk to you soon.


Thank you for your participation. That does conclude today’s conference. You may now disconnect.

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