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Mobile Mini Inc., (NASDAQ:MINI)

Q1 2008 Earnings Call

May 8, 2008 12:00 pm ET

Executives

Steven G. Bunger - Chairman, President, and Chief Executive Officer

Larry Trachtenberg - Executive Vice President and Chief Financial Officer

Analysts

David Manthey - Robert W. Baird & Co.

David Gold - Sidoti & Company

Scott Schneeberger - Oppenheimer & Co

Philip Volpicelli - Goldman Sachs

Brandt Sakakeeny - Deutsche Bank

Theodor Kundtz - Needham & Company

Jim Young - West Family Investments

Operator

Good day everyone, and welcome to the Mobile Mini Incorporated first quarter 2008 conference call. At this time I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. I will now turn the conference over to Mr. Steven Bunger, President and CEO. Please go ahead sir.

Steven Bunger

Good morning, I want to welcome everyone to Mobile Mini’s 2008 first quarter results conference call. With me is Larry Trachtenberg our Executive Vice President and CFO. To start with Larry is going to read the disclaimer, outline the press release and give you his comments, following that I will give you my comments and then open the call up to Q-and-A. With that said I will turn it over to Larry.

Larry Trachtenberg

Thank Steve. We issued a press release this morning detailing our first quarter 2008 operating results. This release is available on our website and can also be accessed through various web-based news services. Our From 8-K containing the press release has bee filed and is also now available. Before we get started I would like to read through our legal disclaimer. This conference call may contain forward-looking statements particularly regarding our anticipated merger with Mobile Storage Group, our ability to continue to grow our existing markets and to expand its new markets. Our ability to finance our business and operating results and prospects for the remainder of 2008, 2009 and beyond, which involved risks and uncertainties that could cause actual results to differ materially from those currently anticipated.

Risks and uncertainties that may affect future results include those that are described from time-to-time in the Company’s SEC filings. These forward-looking statements represent the judgment of the company at this time and Mobile Mini disclaims any intent or obligation to update forward-looking statements. We also note that in connection with proposed transaction with Mobile Storage Group we will be discussing today, Mobile Mini has filed and will be amending a proxy statement relating to special meeting of its stockholders and other relevant concerning the proposed transaction with the Securities and Exchange Commission.

Before making any voting or investing decision stockholders of Mobile Mini are urged to read the proxy statement regarding the proposed transaction and any other relevant documents carefully in their entirety when they become available, because they will contain important information about the proposed transaction.

Due to certain legal restriction we may not be able to answer all questions post today. In this conference call we will discuss certain non-GAAP financial measures such as EBITDA and free cash flow. Reconciliation of how we define and arrive at EBITDA and free cash flow are included in our Form 8-K. Mobile Mini today reported its first quarter financial results which were inline with our internal expectations, revenues for the first quarter increased by 7.6% to $78.5 million, from $73 million last year. Revenues increased -- lease revenues increased 6% to $70 million from $66 million last year.

EBITDA declined 7.2% to $29.5 million from last year’s EBITDA of $31.7 million. Net income for the quarter ended March 31st, 2008 decline to $10.7 million, $0.31 per diluted share as compared to net income of $12.7 million or $0.35 per diluted share for the same quarter of last year. The company’s operating margin was 30.3% as compared with 36.7% during the same quarter of last year. We continue to experience some weakness in our California, Arizona and Florida branches related to the weakness in construction activity in those states. That weakness was offset in large part by continued strong growth in Europe, where revenues increased by over 40% year-over-year.

As we have pointed out in the past, this European growth required considerable infrastructure build out, our expense structure increased by over $1 million per quarter between the first and third quarters of 2007. The effects of those cost increases can be seen in our year-over-year comparisons. However, margins in Europe hit their low point during the third quarter of 2007, and have since been increasing. Once we add in the considerable operations of Mobile Storage Group in Europe, we should – we would expect much stronger operating results in the U.K. In addition our year-over-year comparisons were impacted by $700,000 accrual related to higher fuel cost and $1 million of one-time expense reductions we have benefited from last year.

During the quarter ended March 31st, 2008 we significantly cut back on our capital expenditures and generated free cash for the first time since we adopted our leasing model. We generated $4.5 million of free cash flow, versus the cash requirement of $11.5 million during the same quarter last year. Our leased fleet capital expenditures, net of proceeds from the sale lease fleet units was $14.8 million, our PP&E CapEX totaled $1.7 million. We generated $20.9 million of cash flow from operations. The company maintained it’s already very strong ratio of funded to debt to EBITDA this ratio stood at 2.96-to-1 at March 31st, 2008.

We have consistently maintained the strongest balance sheet in the industry, which has enabled us to take advantage of the Mobile Storage Group merger opportunity. Even after this merger our balance sheet will remain strong as we continually to expand the portable storage industry. Today we also affirm 2000 guidance -- 2008 guidance, earnings per share guidance first issued in December. Based on the actual growth in our business achieved during the first quarter and the trends we are seeing in the second quarter today and planning we’re doing for the integration of our business with Mobile Storages business.

We continue to believe that there will be some accretion in the Mobile Storage transaction this year that’s before merger related expenses that we can achieve earnings per share of between a $1.50 and $1.60. That transaction is expected to be quite accretive once the full synergies of the transaction are achieved in 2009 prior to the merger -- and ones our integration plans are finalized we expect to update our complete guidance for revenue, EBITDA and earnings per share. Before I end my remarks I would like to point out to our listeners that earlier today Mobile Storage Group filed its Form 10-Q with the SEC. That filing is now available on the SEC’s website.

Just a few highlights, with the quarter ended March 31st, 2008 Mobile Storage Group reported a 14.1% increase in lease – lease related revenues over the first quarter 2007. A 12.3% increase in total revenues and 18.7% increase in adjusted EBITDA and their definition of adjusted EBITDA excludes non-cash stock option expense. During the last 12 months Mobile Storage has acquired 70 market locations in the U.S. and they note that their increasing in quarter-over-quarter SG&A expenses of 10% is largely attributed to expenses associated with staffing and managing their new locations and they expended direct sales efforts.

The first quarter of 2008, Mobile Storage had an average utilization rate of 76.3%, which was the same rate they had for the first quarter of 2007. We won’t be able to answer specific questions about Mobile Storages first quarter operating results on this call, but for additional details about their first quarter results please refer to their From 10-Q. In addition you can also listen to their quarterly conference call which will be held on May 14th, that’s next Wednesday beginning at 1 PM Eastern Time and to obtain further information on the conference call, you can email Mobile Storage directly. The email address is investor@msginvestors.com. I would now like to turn the call back over to Steve for his remarks.

Steven Bunger

Thank you Larry. I am very satisfied with the results of the first quarter. At first we were able to increase our revenues during the construction and economic slowdown even with our higher concentration of business in the Southeast and Southwest. The other important accomplishment is we significantly reduced our CapEx in the first quarter from over $8 million to $1.7 million which resulted in our first free cash flow for the quarter in our company's history. This was quite accomplishment because the first quarter is always our weakest quarter of the year, as our seasonal customers return this storage units in December and January.

From the sale prospective we increased our sales revenue by 21.7% in the first quarter of 2008, compared to the prior quarter while keeping our sales gross profit margins strong at over 30%. The increase sales revenue were primarily in the U.S. there are no particular market or market segment. We do continue to see lower utilization with this primarily result of the construction weakness we have experienced in Arizona, California and Florida. For the most part these markets have leveled off and stopped contracting. We are seeing some continued weakness in Southern California, but our other branches across the rest of the country are holding their own and in many cases growing quite nicely.

The increase leasing revenues comes primarily from core rental customers who are non-contractors and non-mass discount retailers. We are not competing in a zero-sum market place for the vast majority of our customers. Most of these customers -- of these new customers rent one container and have never used portable storage prior to hearing about our very differentiated product line. With our sales and marketing program, we are expanding the size of the portable storage market which is helped us to grow in past economic downturn. We did experience lower operating and EBITDA margin as already mentioned but these were expected and primarily the result of our expansion in the Europe and additional cost associated with implementing our business model and from some higher fuel prices.

Like any other market entry transforming to the new business models will negatively effect the operating margins in the short run but we will set the platform from much stronger rental revenue growth in margin expansion once the fixed cost are in place. Our fixed -- our U.K. fixed cost were all in place by the end of the third quarter of 2007. We’re working on some initiatives that will increase our yields and profitability in the U.S. and the U.K. On April 1st we added a fuel surcharge to all new rentals in the U.S. Based on April results, we expect that to generate over a $3.5 million of additional revenue per year on an annualized basis. In addition, we raised rental rates on some of our proprietary products. In the U.K. we are implementing fuel surcharges and higher rental rates on all products effective June 1st.

I would now like to give you an update on the Mobile Storage Merger. As you might imagine we are heavily into the merger planning process. The good news is everything we are learning about Mobile Storage and the business combination further solidifies why we believe this transaction is so strategic and transforming. Many of Mobile Storages strengths our weaknesses and many of strengths our Mobile Storages weaknesses, we are viewing this merger is an opportunity to bring up the best of the best for the combined organization. We’re pleased to have hire Mobile Storages top executive to observe and rule with the combined company as Chief Operating Officer of Integration, two Senior Vice President in the U.S., and one Senior Vice President in the U.K., a Vice President of Mergers and Acquisitions, and a Vice President of National Accounts.

In addition we are in the process of interviewing Regional Managers, Branch Managers, Sales people, Dispatchers, Office Managers, drivers and year personnel form both companies in all market looking for the best of the best. In some cases we will promote some of these very good managers, in other cases we will pick in the overlapping market the best of the best of the two employees. Some of the Mobile Storage strengths include, we have an Extensive National Account Department and National Account customer base. We also at a very robust almost real time dash board financial system they will benefit Branch Managers and Senior Management. Mobile Storage has the strong outside sale force. We have many branches across the United States and a very good mix of overlapping new branches for the combined company.

Mobile Storage has also has a very strong presence in the U.K. where we have very low market share in critical mass. The combination will quickly increase margins in the U.K. In addition Mobile Storages has demonstrates the ability to grow effectively through acquisitions a talent so important during more trying economic time. On the other had we have a very strong inside sales force and sales culture, we have the ability to grow geographic market internally without the requirement to do in market acquisition. We also have a very differentiated rental product that is better tailored for non-construction customers with our high security and easy opening door systems.

Mobile Mini also has a strong ERP system for branch employees and monitoring sales activity. In addition to that we have a very strong balance sheet. The other reason this merger is so strategic is we’re able to offer our customers local delivery rates and localized service in 21 markets in U.K and over 80 markets in U.S. In addition we have 100% coverage for local deliveries in the U.K and being virtually every major City in the U.S which will greatly benefit the national account customers. The overlapping branches provide the opportunity to produce significant synergy opportunities we estimate the synergy opportunities is at least $25 million per year and attainable by the end of 2009. With the overlapping markets, we will have an excess number of containers that we can transferred to near by branches where they can be better utilized, as well as the effect of significantly reducing our CapEx requirements for the next couple of years.

The critical mass, the cost take-out and the CapEx rationalization will create a free cash flow business. We will use our free cash flow to reduce total debt and deliver the balance sheet overtime. Mobile Storage had -- in addition one of the other and most important things during this economic slowdown is Mobile Storage has a little market share in markets that Mobile Mini has strong market share and especially in markets that are being affected by the most recent non-residential slowdown in Southern California, Arizona and many markets in Florida. In additionally, we continue to believe the transaction will enable us to achieve earnings of $2.10 per share in 2009.

Lastly, we will be able to combine the best employees of both companies to grade a very strong organization with a strong balance sheet and excess cash flows. From a timing perspective we expect the transaction to close between late June and mid July.

That concludes our prepared comments, and now I would like to turn the call over to the operator for the Q-and-A session. Operator?

Question and Answer Session

Operator

(Operator Instructions) Our first question comes from David Manthey with Robert W. Baird. Please state your question.

David Manthey - Robert W. Baird & Co.

Does the guidance now include accretion from Mobile Storage Group?

Steven Bunger

We believe that -- what we have said is that the Mobile Storage Group acquisition will be accretive a by few cents in 2008, so we did not change our guidance as a result of the Mobile Storage Group acquisition.

David Manthey - Robert W. Baird & Co.

Okay and the increase in yield was that primarily due to mix or pricing and can you discuss the growth rates among the 10 foot wide units versus the eight foot?

Steven Bunger

The growth between the 10 foot wide and the eight foot wide, we don’t disclose for competitive reason. The rate increase is a combination of some mix; our fuel surcharge and offset also by average lower rates in the UK and actuality if you took out the effects of the lower rates in the UK, I'm not sure what the number is, but the number would be higher than what we're reporting.

David Manthey - Robert W. Baird & Co.

Okay. Thank you and then last question, in terms of the accrual or increased pickup cost, because of the fuel prices is that recoverable in anyway? I guess the question is, do you charge fee for pickup or is that just factored into the contract on the front end?

Steven Bunger

We will be charging a higher fee for pickup with our fuel surcharge, so it in affect will be recovered overtime.

David Manthey - Robert W. Baird & Co.

But, it will be factored into new contracts, you can’t recover it on existing contracts right?

Larry Trachtenberg

There is a -- we actually believe that on some of the existing contracts in the future, we will be able to recovery part of it.

Operator

Our next question comes from David Gold with Sidoti & Company. Please state your question.

David Gold - Sidoti & Company

It’s a couple more one; on yield Steve or Larry, for the year after all said and done what might you expect?

Steven Bunger

I’m not sure of the question?

David Gold - Sidoti & Company

What should we look for by way of yield improvement after you’ve implemented the gas surcharge and you have done the April 1, increase in the U.K.?

Steven Bunger

Actually June 1, in the U.K.

David Gold - Sidoti & Company

June 1. Sorry.

Steven Bunger

We haven’t quantified it, but we do know that the fuel surcharge alone in the US represents $3.5 million of additional revenue, if we run rate that out and then in the UK it will take a little bit of time, but that will be somewhat significant.

David Gold - Sidoti & Company

Okay.

Steven Bunger

That’s the why we put it.

David Gold - Sidoti & Company

On the US fuel surcharge that went into effect one?

Steven Bunger

That went into effect April 1, so we got one month of that and we very much -- yeah one month of it.

David Gold - Sidoti & Company

And then on the slowdown in purchases, just wanted to get a sense, how much of that is the -- I think you commented that you had moved around some of the fleets. How much of that is maybe better fleet management versus a more conscious effort in slowing down given the slowdown at top line?

Steven Bunger

If it’s still -- our business is still driven by customer demand. So, if we don’t have demand we wouldn’t buy assets nor would we move assets, but the reduction CapEx is primarily where we have certain assets that we have lower utilization in certain markets and instead of buying an asset in a nearby market like we had in the past we decided -- we made a conscious effort to transfer assets between cities, so it’s actually a combination of both. We spent about $200,000 in the quarter, moving assets between the city which is a lot of money but it actually saved a tremendous amount of CapEx.

Operator

Our next question comes from the line of Scott Schneeberger with Oppenheimer. Please state your question.

Scott Schneeberger - Oppenheimer & Co

I guess first off, could you speak a little bit to the environment out there; it sounds like still Southern California maybe slight deterioration, but otherwise Arizona, Florida is stabilized. Talk about the good areas -- I think you had mentioned Texas, the Mid-west, the North-West before, could you just kind of take us around geography-by-geography and then I will have a follow-up there?

Steven Bunger

Okay. It really hasn’t changed. The Mid-West is still doing nicely; the really strong markets are still the North-West and Texas. Southern California that would be Los Angeles and San Diego, it’s not that they’re contracting heavily but we will have one good week and then one bad week and one good week and then one bad week and since the net is we are going backward a little bit, but the North-East is holding up on because they don’t really have a lot of market share, but the definite weaknesses are really Fort Myers, Miami and Southern California are the areas that we are probably most concerned with.

Scott Schneeberger - Oppenheimer & Co

Thank you and then kind of along the same theme, across your -- is that specifically a non-res? Is that in retail or is that in other manufacturing with other verticals you may have; could you kind of breakout where you seeing along those?

Steven Bunger

Well, it's primarily in the construction piece of our business, because what we find is the other parts of our business -- when you take out the seasonal fourth quarter, continues to grow easily even during slowdowns in the timing.

Larry Trachtenberg

And then those markets -- and those particular markets, that’s where we would also have some of our residential exposure.

Scott Schneeberger - Oppenheimer & Co

And I guess if you could -- the percentage you can -- the utilization number was a bit low, seasonally I think that occurs in this quarter a little lighter than what we'd expected, but not too surprising. Could you just speak to -- are you doing special things with regard to utilization right now, position for the merger, is what we saw in this quarter; a good run rate for the second quarter of pre-merger just some thoughts there. Thanks.

Steven Bunger

Well, we are doing a lot of planning as it relates to the merger because, they have excess fleet, we have excess fleet. We don’t need the combined excess fleet together and so we will be moving that inventory and we actually have it in our models to reposition across the country to get the inventory in the right locations, but we will be putting a lot of focus -- it’ll -- the merger will negatively affect utilization because of the combined companies. But, what I will provide us is that we won’t need to buy a whole lot more CapEx for the next couple of year because we basically bought our CapEx.

Scott Schneeberger - Oppenheimer & Co

And then and finally, you had a bunch of containers in the Gulf region that you mentioned for a few quarters announce that you were refurbing proactively? I think you mentioned that would go to the end of the first quarter maybe a little into the beginning of the second quarter; could you give us an update, if that’s largely come?

Steven Bunger

Yeah. Actually we have -- we actually were able to finish that project a little bit earlier and our repair and maintenance during the first quarter was back to pretty much to historical level.

Operator

Our next question will comes from Jamie Sullivan with RBC Capital Markets. Please state you question.

Jamie Sullivan - RBC Capital Markets

Question on the repair and maintenance side; did you say that a one level is now normalized or as we move forward?

Steven Bunger

In the first quarter it was at a normalized level.

Jamie Sullivan - RBC Capital Markets

I was Wondering if you seen any changes in April from your observation first quarter?

Steven Bunger

In terms of

Jamie Sullivan - RBC Capital Markets

In terms of where the weakness is if utilization is similar to levels that you saw in one quarter, any changes there?

Steven Bunger

No, it’s pretty much, I mentioned in the remarks. Besides the South West and the South East the business is still performing very well and then in many markets in the south, we are starting to see stabilization. In fact almost all those markets are stabilizing, so yeah they are not growing, but they are stabilizing.

Jamie Sullivan - RBC Capital Markets

Right okay and then on some of the distribution of the fleet, was that purely from Mini years is that some early preparation for what you are thinking the combination will look like?

Steven Bunger

That was purely for us and also knowing that the combination is coming.

Jamie Sullivan - RBC Capital Markets

Right; okay and the fuel surcharge that was $3.5 million on an annualized basis.

Steven Bunger

Yes

Jamie Sullivan - RBC Capital Markets

And that began on new contracts on April 1 in the U.S.

Steven Bunger

Yes.

Jamie Sullivan - RBC Capital Markets

Okay, great and then just -- what was -- can you remind me the operating cash flow number for the quarter?

Steven Bunger

Operating cash flow was I believe $20.8 million, let me just check on that.

Operator

Our next question comes from the line of Philip Volpicelli with Goldman Sachs.

Steven Bunger

$20.9 million.

Philip Volpicelli - Goldman Sachs

Thanks. Just with regard to my question, when I look at the utilization rates, the rate of decline has been abating as we bottomed out in the second and third quarter of '07, and we are only down about 2.6 percentage points in the first quarter of '08. Should we expect that trend to continue as we go through '08? Is that mostly absorbing the European units?

Larry Trachtenberg

Question is on the utilization rate?

Philip Volpicelli - Goldman Sachs

Yeah, if I look at the utilization rates, Larry they were down about 400 basis points roughly in the second and third quarter of 2007, year-over-year and then, as we look at the first quarter, here you're down about 260 basis point. So, you have seen a gradual improvement in the trend and I am wondering if we should continue to see that improvement as we go forward?

Larry Trachtenberg

Yes, I think we should especially because we have started moving units and cut back on our purchases so our goal really is -- our goal at this point is to move units when we need them and to only add units -- certainly on the more expensive units -- only to add units where we going to get the very high returns on -- high internal rates of return, so we should be seeing better smaller and smaller Deltas until we get to the same, we kind of level off at same utilization rates just last year.

Philip Volpicelli - Goldman Sachs

And then with regard to yield that trend has actually weekend as we’ve gone from the summer of last year to now. Is that something where you were able to increase prices on your -- some of your European product and now you’re kind of going back to more normalized environment dealing with the weakened U.S. economy?

Larry Trachtenberg

No, I think on yield, it’s because the number of additional units in Europe has increased. Europe’s become a larger peace of the business and the units, there are smaller and rent for a little bit less, but I think what you will see going forward. If anything is -- I mean our goal right now is to increase prices on some of our custom units and to run this your fuel surcharge through and the goal is to focus more on pricing.

Philip Volpicelli - Goldman Sachs

I understood. Okay and then with regard to the repositioning, can you quantify how much you have taken out of Florida and California. I guess Florida, California, Arizona, or is that too sensitive?

Steven Bunger

Actually I don't even know how to quantify it to be honest with you. It’s beyond answers that everywhere.

Philip Volpicelli - Goldman Sachs

Okay. You mean it’s everywhere in otherwise your de-fleeting everywhere or your move --?

Steven Bunger

Well, like this example I might have an expensive office in Dallas and they need that same expensive office in San Antonio you note this strong market I might even move that inventory too.

Philip Volpicelli - Goldman Sachs

So you are moving more inventory rather than purchasing inventory and under utilizing other stuff.

Steven Bunger

Yes. We have been mainly been moving the more expensive inventory.

Philip Volpicelli - Goldman Sachs

Okay and do you have a sense of how much that’s cost you in terms of transportation costs, is it a couple of million bucks, is it 10 million bucks.

Steven Bunger

No, we spent about $200,000.

Operator

Our next question comes from Brandt Sakakeeny with Deutsche Bank. Please state your question.

Brandt Sakakeeny - Deutsche Bank.

Hi, Steve and Larry. Just to follow up to that. Larry is that expense as incurred or is that cost capitalized to move the fleet around?

Larry Trachtenberg

That’s expensed as incurred.

Brandt Sakakeeny - Deutsche Bank.

Okay and then with respect Europe, you have growth rate obviously fantastic up in the high 30s. How sustainable is that versus do you think that just near-term pickup from the investment and do you expect that to decelerate to a some more normalized growth rate?

Larry Trachtenberg

It’s hard to predict that. We actually, it’s pretty common what you do in new markets to see that kind of growth rates as we do in new markets implement our business model. So, it might not be as sustainable as that rate especially when we combine the two companies, it will be more difficult, but there is nothing in trends they tell us anything differently right now.

Brandt Sakakeeny - Deutsche Bank.

Okay, okay great and then did you give a CapEx for ’08 both for your own PP&E and for trucks and stuff as well for container purchases?

Larry Trachtenberg

Well, I think on our last call we said that our PP&E for the containers and offices would be around $60 million for the year.

Brandt Sakakeeny - Deutsche Bank.

Okay

Larry Trachtenberg

And for CapEx, we have -- because of the merger we will have some additional CapEx to get everybody on the same platform and some other items, so PP&E CapEx will be higher this year than normal but it will be probably in the $30 million to $40 million range.

Brandt Sakakeeny - Deutsche Bank.

Okay. So, that’s -- sorry, CapEx of $30 million to $40 million?

Larry Trachtenberg

CapEx for equipment.

Brandt Sakakeeny - Deutsche Bank.

Okay.

Larry Trachtenberg

For like the delivery equipment, computer systems.

Operator

(Operator Instructions) Our next question comes from Theodor Kundtz with Needham & Company. Please stat your question.

Theodor Kundtz - Needham & Company

Yes hello guys. A quick question, I was just thinking about that CapEx number. Now what kind of a condition are the units in at Mobile Storage; do they require much upgrading or are they…

Larry Trachtenberg

They're actually in -- when Welsh Carson bought Mobile Storage, a couple of years ago -- two three ago, they spent the first year literally getting rid of a lot of the assets that needed to be gotten rid. So they've already spent the pain of getting rid of assets that aren't rentable and getting the fleet up to speed. So and they've also shifted from buying used containers to buying all brand-new storage containers that they put into our rental fleet. So they do have some van trailers mainly in the East Coast that are somewhat North of what we would call non-core assets, that we would continued their process of taking the net of our fleet, but overall besides that they have a very strong fleet.

Theodor Kundtz - Needham & Company

What is going -- what’s happening with the prices of the container has been, prices starting from ‘08?

Steven Bunger

Yeah, prices are -- because of the economic climate in China and steel, if we were buying them, which we’re not, they probably going to be up 10% to 20%. But, we don’t anticipate needing to buy any.

Theodor Kundtz - Needham & Company

Okay, okay. I mean you don’t need to buy any at all?

Steven Bunger

I mean it will be rounding ours.

Operator

Our final question comes from Jim Young with West Family Investments. Please state your question.

Jim Young - West Family Investments

Yeah. Hi, you had mentioned the lower operating in EBITDA margins weren’t where you expected that to be, it had expanded into Europe, but could you kind of quantify and breakout the impact from Europe relative to the impact that you realized in the US given the softer environment?

Steven Bunger

If we give revenue numbers in Europe we really don’t typically break out information further the that other than, what we said, which was that EBITDA margin were at their low point, at the end of the third quarter.

Jim Young - West Family Investments

So again was that all attributable to Europe or was that partly an impact here that you saw in the US?

Steven Bunger

It was what an Impact -- I am not understanding the question.

Jim Young - West Family Investments

Was the lower operating EBITDA margins all attributable to Europe or was it partly attributable to the softer environment here in the U.S.?

Steven Bunger

Well, if you compare -- what we did say in the presses release was that if you compare the kind of the fixed SG&A expenses of Europe versus in the first quarter of ’08 versus ’07 it’s about $1 million more in the first quarter in ’08 than there was in ’07. So, that portion results in -- there is over $1 million dollars worth of expense in Europe that results in the lower operating margin, due to Europe. The reminder is primarily due to the other items we discussed in the press release.

Operator

There are no further questions. I will now turn the conference back to management.

Steven Bunger

Hello, I thank you everyone for participating in the conference call today and I wish everyone a great day. Thank you.

Operator

Ladies and Gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.

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