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Executives

Robert Weiner – VP, IR

David Smith – Chairman and CEO

David Bronson – EVP and CFO

Analysts

Eric Coldwell – Robert W. Baird

Bob Jones – Goldman Sachs

Rodney Phata – William Blair

Arthur Freeman – J.P. Morgan

PSS World Medical, Inc. (PSSI) Q1 2009 Earnings Call Transcript July 24, 2008 8:30 AM ET

Operator

Ladies and gentlemen, thank you very much for standing by and welcome to the PSS World Medical fiscal year 2009 first quarter conference call. During this presentation, all participants are in a listen-only mode. (Operator instructions) As a reminder, this conference is being recorded on Thursday, July 24, 2008.

And it’s my pleasure to turn the conference over to Mr. Robert Weiner, Vice President, Investor Relations at PSS World Medical. Please go ahead sir.

Robert Weiner

Thank you, Donna. Good morning everyone. Thank you for joining our fiscal year 2009 first quarter conference call. Today on the call, our speakers are David Smith, Chairman and CEO; and David Bronson, Executive Vice President and CFO.

We issued our first quarter press release last evening. The release and the financial workbook for the first quarter call are available on our Web site at www.pssd.com. The financial workbook contains GAAP and non-GAAP financial measures that provide greater detail into our business.

Now, I'll read the forward-looking statement. During this call, we may make a number of forward-looking statements regarding revenue, gross margin, operating expenses, operating margins, earnings per share, and other matters that are not historical matters and facts. These statements involve a number of risk and uncertainties that could cause actual results to differ materially from what is expressed or forecasted. For a list and description of certain of these risks and uncertainties, we refer you to the forward-looking statement disclosures in today’s press release, and to the other information provided in our most recent Form 10-K and other SEC filings, copies of which are available from the SEC in the Investor Relations section of our Web site and from us in Investor Relations.

The company wishes to caution listeners on this call and its replay not to place undue reliance on any such forward-looking statements, which statements are made pursuant to their Private Securities Litigation Reform Act of 1995, and as such speak only as of the date made. The company also wishes to caution listeners that it undertakes no duty or is under no obligation to update or revise any forward-looking statements.

Let me also remind you that we may reference certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You will find the reconciliation charts at the end of our financial workbook and in our Form 8-K submitted to the SEC. Thank you.

Now, changing gears, I would like to go over a few upcoming investor-related meeting dates. On August 21st, we will hold our annual stockholders meeting here in Jacksonville. We welcome shareholders' attendance. We plan on being in Chicago and Milwaukee on August 27th and 28th, respectively, for investor meetings. We will also be attending and presenting at the R.W. Baird Small Cap Healthcare Conference in New York on September 10th. And finally, we are planning a European trip the week of September 27th.

For our call today, we will follow our formal remarks by a question-and-answer session as prompted by the operator. We will limit the call to no more than one hour in duration to be mindful of other reporting companies and investor events today.

I am now pleased to turn the call over to David Smith, PSS World Medical’s Chairman of the Board and Chief Executive Officer.

David Smith

Good morning. We are off to a good start. The new three-year strategic plan incorporates many moving parts, changes, and investments but we are executing effectively and continuing to identify new opportunities to modify our tactics around our seven core strategies.

Now to be honest, Q1 of year one is a scary time with so many new initiatives in motion, all based on analysis, assumptions, and assessments, including investments with results not yet visible, all of which is occurring in a changing economic environment. The economy is definitely making our process interesting, but so far, nothing unexpected or unanticipated. Fuel costs are high. However, our cost to deliver is better than planed due to our execution and performance. There is real upward pressure on product cost, but we have been proactive with our supply chain, our vendor partners and our select brand management.

Probably the most important thing to me, early in our plan rollout, we see real connection between programs, customers and people. The current economic conditions are showcasing our customer solutions as more relevant and timely not less.

I think our results speaks for themselves, 8% and 6% revenue growth in the two businesses, and 25% and 31% growth of operating income and earnings per share. These results were achieved though, as we aggressively moved forward in our plan investments and strategic priorities.

And I'll talk a little bit about some of those activities. For example, we reorganized the physician business and spent over $0.01 just moving leaders into new positions for maximum future effectiveness and execution of our growth initiatives. We added almost all the new headcount for the year for all the strategic priorities already in Q1. There are many new faces to get to know here.

Our sourcing strategy continues to march forward. Select products grew 23% in the quarter. Now we offer 1,200 SKUs from 78 factories in 8 countries. Our select products represent a high quality alternative especially in a rising price environment like we have. We've also been proactive in discussions with vendors outlining the plight of our customers with concrete proposals of supply chain savings, marketing opportunities and customer solution alternatives for products.

Our solutions programs are gaining real traction. Our homecare blitz netted 500 customers with independent homecare agency growth of 13% in the quarter. Our elder care momentum program launches ahead of target for customer signups and gross profit contribution. The momentum was built by customers. It shouldn't be a surprise to us that our costumers like it.

In our HIT strategy, we helped Athena hire 13 new specialists to directly support our field teams, plus we retrained 160 of our sales representatives. We closed 54 deals, but for me, we saw a real groundswell and surge of activity, and we build a pipeline for future quarters. I expect a significant ramp up of traction for this product. Our customers are very receptive. We just needed to get the support formula right.

On the self force bandwidth strategy front, we experienced a big increase in e-commerce ordering in the physician business. E-commerce revenue percentage was a whopping 33% on Smart Scan and My PSS, with 3100 new e-commerce costumers in the quarter. This trend is strategically important as we free up time for our reps to consult and deliver new solutions to our customer base.

As for the big environment, in Washington, the political environment for the next 12 or 18 months I think will be more entertaining and productive for changes or new directions for health care. It's only the first quarter; nothing has surprised us or changed our view on the 19% three year growth goals, or our $0.94 to $0.96 earnings goal for fiscal 2009.

We're very focused on the well-being of our costumer and people, our investment strategies and programs are now more timely and important not less in the current economic climate and are more positive not less in our strategic position and in our future. Now, David Bronson will talk about the quarter.

David Bronson

Thank you, David, and good morning. Our first quarter was, as David mentioned, was marked by solid growth in revenue and profit across almost all categories. Consolidated revenue grew 7.6% with physician revenues growing 8.2% and elder care business showing growth of 5.8%.

Let me share a few details of that growth. In the physician business, select brand grew by almost 23% in the quarter. Pharmaceutical products grew by 12%. Total branded products grew by over 6%. Equipment declined slightly, about 2.5% decline from prior year.

On the elder care side, our revenue growth in Q1 was 5.8%. Skilled nursing growth of 4.7%, overall home care growth of 7.6%, and as Dave mentioned home health agencies up 13% with several hundred new costumer sign ups, and select brand in the elder care business grew 23% in Q1 as well.

Growth in all these categories combined for about $33 million of new revenues over prior year, with almost 11% of that number dropping through to operating incoming Q1. This produced 24.5% growth in income from operations with consolidated operating margin growing by 52 basis points, the physician operating margin grew 66 basis points, and elder care improved by 43 basis points.

Our model of leveraging our cost structure with revenue growth, while working hard to lower our cost to deliver to improvements in operations, continues to provide returns despite us being in a period of increasing commodities cost. And as David said, the big challenge for our team has been the fuel cost increases. Fuel that we purchase for our delivery fleet has gone up by almost 45% from prior year first quarter and we spent about $2.2 million on gas and diesel in Q1, but we are able to largely offset those increases with improvements in our warehouse and delivery operations while maintaining our high service standards.

Aligning our incentive compensation programs with our strategic objectives at all levels in the organization continues to unleash creativity and innovation in our distribution organization, as well as our back office and corporate staff areas. We have pay for performance plans, where employees can earn higher incentives based on measurable productivity gains, and they have been rolled out throughout the company. Finally, earnings per share of $0.17 for the quarter grew by just under 31% from Q1 of last year. Cash flow from operations was $13.7 million in the quarter, a good start to our goal of $73 million to $77 million of operating cash flow for fiscal year 2009.

Overall, working capital turns continued to improve, in particular, in accounts receivable with consolidated DSOs of 43 days. We are managing receivables very carefully given current economic conditions. Our internal hurdle rate for investment decisions remains 30% return on committed capital, this is how we establish a return benchmark for anything that we do, any of our initiatives, whether it’s an investment in a new product, technology, an acquisition, or a new service offering. And return on committed capital for the consolidated company in the first quarter was 20.4%, a 220 basis point improvement form last year’s first quarter.

We also track, and we know you track, our globally sourced inventory. We had about $31 million at the end of the quarter. This has added about two-tenths of a turn or about a quarter of a turn to our consolidated inventory that has a return on committed capital which is a multiple of our 30% hurdle.

At our Investor Day a few weeks ago, Brad Hilton, our Senior VP of Operations talked about operation simplicity. We are set on a path to make the lives of our costumers, employees, and suppliers easier and less complex by simplifying the way we conduct our business. Now, much of this work is reshaping how our employees fill and deliver orders for costumers and how we interface with each other in our costumers and suppliers.

As I said before, our first step is to align compensation. Pay for performance programs are in place in our warehouse operations and are starting to have effect. One area in particular has been reduced turned over and improved quality metrics in our warehouse night crews. This is important cost savings for us. This program rewards top performers not only monetarily but also as recognition and advancement opportunities.

Now, let me wrap up with some discussion about strategic investments. As you are aware, our acquisition strategy has been and continues to be focused on fold-in acquisitions, distributors that are in the same business we are, that are $10 million to $15 million in revenue.

We will also evaluate and acquire companies that are more strategic in nature, and during the first quarter, we made one that straddles to both the fold-in and the strategic categories. We announced the acquisition of Cascade Medical Supply up in the Pacific Northwest which fits the fold-in description because it's Medicare Part B billing and that piece of it will be folded into our existing ProClaim business. It also has competency in the Medicaid billing services and the supplies that provides to the assisted living market, which is historically been their strength. We are excited about the prospect of leveraging this competency across our national book of elder care business.

Cascade will also help us leverage our ProClaim billing services unit, which is part of the elder care business, and expand our scope to Medicaid services and increase the scale of our offering to the assisted living markets. We are very pleased that the principal owners of Cascade will be staying on with us to help us accomplish that goal. There are a number of other M&A opportunities currently being evaluated. Most of these are fold-in businesses, but we are looking at several strategic deals as well. The economics of these transactions have to meet our internal hurdle rates, however, we are not going to overpay. Our approach will be a balance of strategic and cultural fit, while providing an appropriate return for shareholders. This is a very good time to have a strong balance sheet with capacity to take advantage to these opportunities.

And just in conclusion, in these current conditions, they do provide challenges and risk for all of us, but we believe they also presents some really good opportunities if you are able to combine the right business strategies with adequate financial and people resources. We believe we have that and we remain confident in our ability to reach our one year and three year financial goals. I'll turn the time back over to Rob for questions.

Robert Weiner

Operator, if you could prompt the group for questions, we'll begin the question and answer session.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from the line of Eric Coldwell of Baird. Please go ahead sir, your line is open.

Eric Coldwell – Robert W. Baird

Thank you. Can you hear me?

David Smith

Yes, go ahead.

Eric Coldwell – Robert W. Baird

Good morning. First question a little bit small, maybe insignificant but in your financial workbook, we noticed that you have a new revenue line called Corporate Shared Services and I'm just curious what that line might entail and whether this is something that we should be building into out model going forward or it's a one-off event?

David Smith

Eric, we have said that there are probably other markets that would benefit from our select products to help build the pipeline and our cost position. So, it's really early in the process. I don’t know if the model should change yet. I think we need some more time to build some of those relationships. But I do expect us to have opportunity to sell our select products in other markets that don’t compete with our current channels and in our current customer base, and that was to one customer who is selling the product in South America. So I don’t know that I would build your model yet, it's a little early, but that is what that product line is.

Eric Coldwell – Robert W. Baird

And Dave, so am I correct in assuming that this doesn’t cannibalize anything out of physician or elder care, it is unique standalone business and targeting perhaps alternate site markets and international, is that the read?

David Smith

Yes, that's exactly right. It doesn’t have anything to do with our physician or elder care or home-care customers. These are going to be markets, maybe Canada, maybe a different industry in the US, or South America. The health care system is a little different there, it's a little more mixed than it is here in the US. So, you wouldn't be able to say alternate site for South America. It actually ends up in hospitals and clinics and physicians' offices and all kind of places in South America.

Eric Coldwell – Robert W. Baird

Okay, that's great. And any profit from that, would that be a reduction to the expenses in corporate shared services?

David Smith

Yes, that's correct.

Eric Coldwell – Robert W. Baird

Okay. Second question, very good job on the DSOs in both segments and I know you have a pretty tight leash on credit quality with your customers, but we did notice that your elder care bad debt jumped roughly $1 million versus where it was last year at this point, anything specific, any takeaways?

David Smith

We had one customer bankruptcy that actually happened jut after the end of the last quarter. It was not material, but we recorded that this quarter, and that customer is in bankruptcy. We expect to get some recovery there, but that's what affected that.

Eric Coldwell – Robert W. Baird

Okay, understandable. And finally, a little more of a, I guess, strategic question. We have seen a lot of price inflation in supplies going into some channels of the med surg market, gloves, comforters, gowns, straights, et cetera, to hospitals. Hearing more and more talk about manufacturers taking price hikes and in some cases hospitals and GPOs not pushing back as much as they historically would have, because they realize that the manufacturers need these price increases. Are you seeing this with your branded suppliers? If so, to what extent and what impact does it have on your model?

David Smith

Great question. First, I would tell you it's a little early in the year a lot of people are trying to figure out what they're going to do, or it's really early in the process. And many manufacturers are trying to determine what they're going to do or how much they're going to do. I think we're alone in this one. I think we haven’t seen other distributors do this. But we contacted our largest vendors and we contacted all our vendors actually eventually. But we went to them and said, "Look, customers we don’t believe can absorb a lot of price increase right now". We think that their economics are already under a lot of pressure. We need to do something different which is how can we change the supply channel between the two of us. We gave a menu of a concrete supply change savings. We gave a menu of marketing opportunities because if one branded manufacture goes up, another one may not and there maybe opportunities to change market share. We gave opportunities to participate to some of our solution programs that attack the efficiency and cash flow of the customer so that they can afford a price increase and if you can help them make money you can raise prices.

And then the other thing is we’re building this select portfolio which when a branded manufacture goes up, before that going up then there’s a big conversion opportunity. So, we’re kind of attacking it across the front and then all that really doesn’t matter for some raw materials and you mentioned latex and vinyl. There’s clearly a supply problem not because there’s less supply but because there’s more demand. What happened is non-healthcare demand for those products have gone through the roof. And there’s also regulation in healthcare where the product specificity has to be much tighter. So manufacturers would rather meet the demand in other markets with latex and vinyl because they don’t have to meet the regulatory requirements of the FDA and healthcare.

And then you've got products like pulp and plastics. You know plastic resin and pulp which goes into a lot of different products. Not just your table paper or things that you would expect– roll towels. But even things like diapers and under pads there’s pulp and plastic in both of those and so those product lines we've seen a lot of pressure and if those manufacturers that were doing the most creative things to try to mitigate as much of the price increase as possible because we want to be able to represent to our customer that the price increases that are coming are the ones that have to come. The rest of it has been taken out through various strategies or here’s the solution that helps generate profitability or cash flow to offset some of these price increase.

So, that is the environment we’re living in. That is the conditions. We do expect pricing to go up but we expect it for us to go up less and differently than it’s going to for other parts of our competitors or markets.

Eric Coldwell – Robert W. Baird

Dave thanks very much. That’s a very fair response. Congrats on a good start to the year.

David Smith

Thanks. Take care.

Operator

Ladies and gentlemen thank you for your question Mr. Coldwell. We’ll now return to the Q&A. We now have the questions on the line of Randall Stanicky, Goldman Sachs. Please, go ahead sir.

Bob Jones – Goldman Sachs

Hi, this is actually Bob Jones on for Randall. I want to talk a little bit about the Athena health changes. I know you recently made a few changes to the Athena health product, how it’s marketed and sold in terms of some of the additional specialists you hired. I think you said it was 13. I was wondering if you could talk about what you’re seeing as far as early results from this product and maybe share some feedback from the field on this.

David Smith

In addition to the 13 Athena Specialists, we retrained 160 of our folks, Bob. And you know, we just didn’t have the right formula of support and connectivity between Athena and PSS. And as a result, a lot of the channel of leads that we have built up just kind of went away. So, I would tell you that we have the same number of leads 6 months or a year ago, it’s just that these leads I believe are going to turn into sales.

Our customers are very receptive. Our customers probably are more receptive in this economic environment to these conversations and they’re a lot easier to have today than they were a year ago when we first started to market the product. And what I would tell you is we have a pretty big pipeline of leads. We have a pretty big pipe line of excitement on the customer and the sales force side. We’re going to continue to train our sales people and you know the retraining process and in one way disappointing that we weren’t able to do this a year ago but in another we’ve learned a lot. I think the two companies have figured out how to market the product and how to effectively service the customer in close transactions and I expect a pretty significant change in the number of closes. And I think our goal is a thousand docs this year. So we did 54 in the quarter so that along just tells you the kind of ramp up that we expect to see just from the expectation we gave you all, not our expectation internally. Does that answer the question?

Bob Jones – Goldman Sachs

No, it does not. It's actually speaking of the ramp up throughout the year, I was thinking about the EPS, obviously the guidance assumes a pretty steady ramp in earnings from here. I was wondering if you could just discuss some of the key risk factors to that earnings trajectory, and then also maybe how we should be thinking about share buybacks for the balance of the fiscal year. Thanks.

David Smith

I’ll let you handle, and then you can add to it –

David Bronson

Okay.

David Smith

– if you want to talk about the risk. I kind of spelled it out in my opening comments what’s on my mind. In the beginning of the year, you got so many moving parts and we have had a lot of head count, we have done a lot of early investments, and you just don not have traction yet on a lot of your initiatives. So, it’s all around execution because everything that I have seen tells me that we had exactly the right plan and place. There is nothing unexpected or unanticipated. There are just some areas that because the economy have to work a little harder at. But to me, I don’t see – I think we are on a stronger position than we were even at the beginning of the year with the economy from how it ties into our programs. I don’t see any holes. What I see is a lot of execution, a lot of work that has to be done. But I feel very good about the goals and the plans, you know, but it’s early. So I’m happy with the results. I’m happy with the solutions and the programs. I think our people have done a hell of a job and I feel good about going forward, and it is all execution risk in my opinion at this point, David.

David Bronson

Yeah, I would go with that and I think the strength that we saw across all of our product lines and with both divisions performing, it kind of gives me comfort that we have got it if not all the cylinders is firing and certainly, most of them are firing and I think we got some pretty momentum. As far as share repurchases, we did buy back a large numbers of shares in the fourth quarter. We wanted to wait and see what our cash flows that we are going to look like for this quarter because we had some accrued, you know, incentive compensation on the balance sheet at the end of the year that we knew we are going to pay out in the first quarter. So, we did not purchase any shares in the first quarter. I think we have said that our goal is to certainly, at least, offset any dilution that we see from either auction grants or exercises, as well as anything that comes from our current convert. So, you should expect us to be active and opportunistically looking for openings to buy some shares.

Bob Jones – Goldman Sachs

Great, thanks. I appreciate the questions.

Operator

Thank you, sir. Continuing on, our next question comes from the line of John Kreger of William Blair. Please go ahead sir. Your line is open.

Rodney Phata – William Blair

Hi, good morning. This is actually Rodney Phata [ph] in for John. I guess given the high cost of gas that we saw relative to last year, to what extent are you able to pass those cost along to your customers in the form of a surcharge.

David Smith

You know, I mentioned that what we actually bought for our own trucks was up about 45%.

Rodney Phata – William Blair

Right.

David Smith

We were spending around $6 million a year. That has jumped up to closer to $9 million a year. Certainly, our first priority, as they said, our customers, it’s hard for them to accept any kind of a price increase whether it’s a bill surcharge or a price increase. So, we are very reluctant to do that and we do that very carefully and cautiously. I would say that the more important is our ability to work with our customers and also work with our operations teams to find additional efficiencies in how we deliver product, how we use the vehicles that we have. And we have lots of creativity in our organization around saving money on gas. And I would also say that certainly, the cost – the increase that we saw in the first quarter was not unanticipated. We had the benefit of having some visibility into that one. We set our plans and expectations for the year. So, I would say that this does not have, at this time; I would characterize this as any kind of a major risk to our EPS goals for the year. But we are certainly watching it very carefully.

Rodney Phata – William Blair

And actually a follow-up to that, are you seeing your competitors implementing a surcharge and if so, has that kind of helped your ability to gain share?

David Smith

I think the whole market is struggling with similar issues. And yes, both our suppliers are giving us and our competitors field surcharges on incoming break and our manufacturers as well as passing them on where it makes sense and where it's feasible to the customer.

David Bronson

I don't think this is a strategic competitive managed from a gaining share. I think the solutions programs, I think all of the things maybe this is one piece of it but there's a lot of other things that go into taking share and our growth has been pretty consistent trough this process. So, if anything I would argue that it hasn't impacted, which is a very positive thing, our relationship with our costumer and we've been able to grow share twice as fast as the market and a lot of competition because of our other programs not necessarily this one.

Rodney Phata – William Blair

Thank you very much.

David Smith

This is strength not a weakness. Thanks.

Operator

Thank you for your question. Ladies and gentlemen, before we move on to the next question, we just want to place a reminder. Your questions and comments are indeed welcome. (Operator instructions) Our next question comes from the line of Lisa Gill from J.P. Morgan. Please go ahead Miss Gill your line is now open.

Arthur Freeman – J.P. Morgan

Hi, thanks. It's actually Arthur Freeman for Lisa. Just a couple of questions on the outlook, as we look out for the next new couple of quarters we'll be into the flu setting season. Could you remind us what's included in you numbers around flu and you know, how are–the orders perhaps look like if possible.

David Smith

Now remember we aren't like the rest of the market. We don't have and we don't want a contract that requires us to buy flu and sell flu. So, we're not going to be like your other comps with other companies. So, you have to just to not even think of flu season as a variable for our numbers. So you won't see revenue really change at all for flu for us but you will see some impact on the margin line. We are an agent to represent a market flu vaccine. It would be very small this year. We'll be much more aggressive next year. We entered the market late from our contracts standpoint. So it really is not something that's going to change your model for us and I think we announced or said that we included a penny or two in our numbers for the flu product and you can just work back to the gross margin line and drop that in.

Arthur Freeman – J.P. Morgan

Alright, any idea on the number of doses [ph] that you're planning to sell through this agent relationship?

David Smith

Yes, I would prefer to just tell you it's early. In our relationship we entered the market late with our contract and we don't have big expectations for this year. It's more next year that we'll give out you know, doses and volumes and expectations and that kind of stuff. It's just not material this year.

Arthur Freeman – J.P. Morgan

Okay, and then on the fuel side there's been a definite increase cost there but any changes to your fleet that's you're making that might reduce expenses?

David Smith

Yes, I don't think we could have cost to deliver go down for the last five years without a lot of changes to our fleet, our automation around, our fleet, our routing system, our costumer relationships, our customer delivery models, our customer ordering cycles. There are 50 things that we're doing and we've been doing for the last couple of years that's caused us to have decreasing cost to deliver in the face of gas prices that evolved from – when I started talking about this it’s a buck fifty to 4 bucks. So, we've been very effective at dropping cost to deliver and continuing to do so. It's not about changing a truck it's about changing a whole bunch of things.

Arthur Freeman – J.P. Morgan

Okay, I guess that's simultaneously [ph].

David Smith

I'm sorry, go ahead.

Arthur Freeman – J.P. Morgan

I'm sorry, I was going to ask if there's any incremental cap ex that we might expect specifically associated with controlling fuel costs?

David Smith

Yes, that's what actually I was going to talk about. Our fleet is leased and that gives us a lot of flexibility when fundamental things in the market change and I think that that's a good way to approach that. So no, I would not expect any large capital expenditures as a result of responding to changes in fuel cost.

Arthur Freeman – J.P. Morgan

Okay, that's great. Thank you.

Operator

Thank you for your question sir. Gentlemen if there are no further questions from our audience, I'll turn it back to you once again to continue or for your concluding remarks.

David Smith

Okay, there's one thing I was surprised we didn't get a question on and we mentioned that equipment was down a little bit. I think the normal connection would be that it was economic or some kind of economy during an event and it was because I asked the same questions when I saw we were off a little bit. It was this, we couldn’t get product from one of our suppliers on hematology and our supplier on laser was reorganizing their sales or so. I didn’t see any weakness in equipment as it related to the economy. In fact, we saw some strengths but we had 2 vendors who we’re having a tough quarter. So in general I would say the economy is interesting, nothing unanticipated. I feel good about our plans and I look forward to reporting next quarter. Thank you very much.

Operator

Thank you gentlemen. Ladies and gentlemen that does conclude the conference call for today. We thank you all for your participation and we ask that you please disconnect. Thank you once again. Have a fabulous day.

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