AT Cross Co. Q4 2007 Earnings Call Transcript

| About: Costa Inc. (ATX)

AT Cross Co. (NASDAQ:ATX)

Q4 2007 Earnings Call

February 20, 2008 4:30 pm ET

Executives

David Griffith - Integrated Corporate Relations

Dave Whalen - President and CEO

Kevin Mahoney - CFO

Analysts

David Leibowitz - Burnham

Eric Marshall - Hodges Capital Management

Patrick Flavin - Flavin Blake & Company

Operator

Good day, everyone, and welcome to the AT Cross Company fourth-quarter 2007 Earnings Call.

It is now my pleasure to turn the floor over to Mr. David Griffith of Integrated Corporate Relations. Please go ahead, sir.

David Griffith

Thanks [Jason]. Before we begin, I'd like to take a moment to read the Safe Harbor Statement. Statements contained on this call that are not historical facts, are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, the success of the company's new writing instruments, products and brand extensions; the continued growth of direct-to-consumer initiatives; the continued impact of the company's shop-in-shop and new display initiatives; the continued growth of Costa Del Mar and the brand's ability to attract new demographics, the success of the company's continuing efforts to reduce costs by optimizing its China facility and tightening the company's supply chain related to that facility.

In addition, words such as "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, consumers' reaction to the company's new and existing products, including those of Costa Del Mar; consumers' reaction to direct-to-consumer and the company's display initiatives; and the ability of Costa Del Mar to continue attracting customers.

Additional discussions of factors that could cause actual results to differ materially from Management's expectations are contained in the company's filings under the Securities Exchange Act of 1934, including, but not limited to, the annual report on 10-K for the year ended December 30th, 2006, and other filings made periodically by the company. The company undertakes no obligation to update this forward-looking information.

And now, I'd like to turn the call over to Dave Whalen, President and CEO. Please go ahead, Dave.

Dave Whalen

Thanks. David. Good afternoon and thank you for joining us. With me on the line today is Kevin Mahoney, our Chief Financial Officer. We had a very good 2007 and we are pleased with our financial results. We believe that the results clearly show that 2007 was a year that proved that AT Cross has moved beyond its transitional period. Importantly, we are now poised to deliver consistent revenue growth, margin improvement and earnings growth for the foreseeable future. Here are some highlights form the past year. Revenue grew 9% to $152 million. Both business segments grew. The Cross Optical Group' lead our performance with 34% growth and the Cross Accessory Division also increased, improving 3%.

Earnings more than doubled from $0.22 a share in 2006 to $0.45 a share. Gross margin on both businesses grew, particularly in the Cross Accessory Division, which saw margin's improve more than four full percentage points to 55.7%. Clearly the move of our quality writing instrument, manufacturing operations in Asia is working well.

Both businesses were also successful in launching a critical mass of new products. The Cross Accessory Division launched $16 million of new Cross branded products, including writing instruments, leather goods and timepieces. The Cross Optical Group generated $3.3 million of revenue from new products in the year, to help build the Costa Del Mar brand.

Finally, we further improved our balance sheet, as our net cash position grew $6.4 million as a result of the timely sale leaseback of our Rhode Island facility last March. We expect to build on this positive momentum in 2008.

We are focused on four strategies that we believe are critical to maximizing shareholder value. They are, grow the Cross brand by continuing to provide the market with strong new product in our core writing instrument category and by developing compelling new Cross brand extensions.

Two, improve our profitability by continuing to lower our quality writing instrument cost structure by fully optimizing the state-of-the-art manufacturing facility we have created in China and the supply chain it anchors.

Three, grow the Costa Del Mar polarized sunglass business by region, gender and demographics and unlock the benefits of scale associated with becoming a larger competitor in the premium performance sunglass market.

And finally, utilize our strong balance sheet and increasing cash flow to make acquisitions that will strength the Cross brand position in the accessories market or grow our Optical Groups position in the premium sunglass market.

In 2007, we made progress in each of these strategies and will build upon that progress as we head into the new fiscal year. First we are growing Cross brand. In 2007, Cross branded revenue grew 3%, as we continued to innovate and extend the brand into new categories. We delivered $16 million of new products to the market and further penetrated new categories, such as leather goods, timepieces and reading glasses.

Product is part of the equation, but so is presentation. To leverage presentation we invested in the brand through better fixtures with our customer retail side, 1,200 were refurbished or replaced last year, and our own shop-in-shop initiative, which now includes 79 Cross shops around the globe. These fixtures helped communicate our brand and built a more direct relationship with consumers.

Finally, this business benefited from a stronger direct relationship with consumers, by our Cross.com website, which now interacts with over 2 million visitors per year and saw a substantial increase in revenues. And also, through our catalog program, which was mailed three times last year to nearly 1 million homes.

These initiatives that raised the profile of the Cross brand, broadened our appeal, helped our new category initiative and gained us incremental market share. We'll continue to use these strategies, to grow our business and we believe that there is a compelling opportunity as we continue on this path in the Cross business.

We also expect to continue to make progress on our second core strategy -- to lower our quality writing instrument cost structure. The move of our quality writing instrument manufacturing operations from Rhode Island to Asia has gone very well. We now assemble most of our Cross writing instrument products in a highly efficient plant outside of Hong Kong.

Our exacting quality standards have been maintained. The cost of assembly has dropped substantially and our quality writing instrument gross margin has significantly improved, approximately 8 percentage points in two years, since the start of the project. The next stage of this successful effort is to qualify local Asian suppliers to provide us the components, with which we assemble our products.

When we made the move to China, our supply chain or the time it takes us to turn raw material into finish products grew, that is, because many components are supplied to the new Asian plant from the US and Europe. The finish goods are then shipped back to the United States and Europe. This is the lengthy process. As we localize component supply or integrate it into the new facility, we expect to see reduced freight costs, lower inventory levels and faster time-to-market. The improvement will result in lower costs, a reduction in working capital and a faster response to customers.

When we made the decision to move our facility we were determined to maintain product quality, improve costs and have no interruption in service. The calculated approach we took gave us the result we desired. Now, we will attack our supply chain with the same precision and the result will be positive.

Next, we are very pleased with the strong ongoing results from our third strategic initiative to grow the Costa Del Mar brand. In 2007, Costa Del Mar once again delivered explosive growth. The combination of exciting new products and expanding customer base and the successful penetration of new geographic markets allowed Costa to grow revenue 34% to $36.6 million while delivering 16% on the operating line.

An important move for Costa in 2007 was to begin to attract freshwater fisherman to the brand with the same enthusiasm that we have pursued saltwater anglers. The freshwater market is larger than the saltwater market and contains customers who are just as passionate.

Our major foray into the freshwater was as the sponsor of the Bass Master Elite 103rd fishing tournaments. These tournaments are high profiled events that draw thousands of spectators and are televised on ESPN. This tournament series is analogous to the PGA tour for golf. Costa Del Mar found strong demand among the tournament contestants, as over 40% of the professional fisherman competing wore Costa. This type of support is noticed by fans of the tour and will convert to sales growth.

Fishing is one of the largest participant sports in the United States. As we move forward, we will make the entirety of this large market aware of the benefit and the pleasure of wearing Costa. We know they will respond.

Sales for Costa continued to grow both demographically and geographically. Sales increased in the western United States by more than 40%. Additionally, sales increased in each major class of trade. Sporting goods, department store, optical, sunglass specialty and export channels all delivered significant growth. Costa Del Mar also increased its distribution in these channels of trade significantly, as 439 new retail outlets were opened in 2007.

Strong sales of the female consumers were also noted, as sales of targeted women's frames grew more than 30%. Younger, college-age consumers continue to migrate to the brand. This sales increase is driven by new frames and frame colors, as well as a strong college marketing program, at the Costa U of Blue Tour, which visited 10 college campuses in the spring of 2007. Costa Del Mar will continue to focus intently on the college-age consumer in 2008, with both targeted sales and marketing program. For example, we'll be hosting eight college events in 2008, four in the spring and four in the fall.

Sales to Costa Del Mar's top 25 accounts increased 30%. As mentioned, the brand continues to expand its market share in its core fishing business through sales increases in both the fresh and saltwater fishing markets. The brand also is finding a new consumer audience in other water sports categories; such as surfing, fly fishing and kayaking. These categories also led consumers who recognize Costa's performance, quality, and values, that (inaudible) brand.

Several years ago, we set a target for the Costa Del Mar brand to generate $50 million in revenue with a 15% return on sales by the end of the decade. We are ahead of that pace. Costa's management team has demonstrated that they know how to win in the sport sunglass market and that is exactly what they are doing.

Finally, we continue to seek out value added acquisitions. Given our improved financial results, the obvious success of the Costa Del Mar acquisition and our strong balance sheet, we continue to believe that a greater emphasis on acquisition is an appropriate strategy for the company.

The Cross Accessory division, we are interested in examining category extension, particularly in the leather goods market. The Cross Optical Group, we would like to diversify our portfolio of brands to gain a greater share of the sport sunglass market. This will be our areas of focus in 2008.

We are encouraged that our strategies need only be extended for us to deliver continued improvements and performance. Our path is clear and compelling. We know that if we focus on execution, we can deliver a powerful level of performance for our shareholders for the foreseeable future.

Now I will turn the call over to Kevin, who will go through our 2007 financial performance in more detail.

Kevin Mahoney

Thanks Dave. Our 2007 financial performance reflects our company's continued progress against the operating strategy that we have reviewed with you throughout the year. We expect this progress to continue in 2008.

Regarding our revenue performance in 2007, our total company revenue grew 5.2% in the fourth quarter, with Costa Del Mar's revenue up 23% and our Cross Accessory division or CAD, as we now refer to, which was up 3%. And for the full year '07, our company grew 9% revenue wise, Costa Del Mar's revenues were up 33.5% and our CAD segment grew 3%.

Our CAD revenue or again our Cross Accessories division, revenue for the full year '07 was favorably impacted by foreign exchange rate movements, which contributed 2.7 percentage points of the 3 percentage point growth in '07 revenues.

Regarding our margins, our gross margins continue to improve. In Q4 2007 they were 55.6% versus 50.7% in the fourth quarter of '06. And it was the CAD segment that continued to contribute significantly to the gross margin improvement. And for the full year '07, our consolidated gross margins were 56.1%, up 340 basis points from '06. Again with our CAD gross margins contributing most of this, as they were 55.7% for the year, up 400 basis points from '06.

The 2007 CAD gross margin improvement was planned for and as Dave discussed, we continue to look for opportunities, on a go forward basis to expand our gross margins with a continued leveraging of our manufacturing plant in China and through reduction in certain supply chain costs. Our 2007 full year CAD gross margin improvement was planned to be 300 basis points over 2006 and we exceeded that goal.

As for selling, general and administrative spending, in the fourth quarter of '07, our selling, general and administrative expenses were $19.1 million or 40% of sales, up from 36.1% in the fourth quarter of last year. And for the full year '07, selling, general and administrative expenses were 44.1% of revenue, up from 42.5% in '06.

Our 2007 SG&A expenses were unfavorably impacted by the additional costs we had to incur to become Sarbanes Oxley 404 compliant by the end of '07. These costs, while not anticipating at the beginning of 2007, were approximately $400,000. In addition, the impacted exchange rates negatively impacted our spending by approximately $1.2 million.

Our final 2007 effective tax rate was 28.2%, which was favorably impacted by a nonrecurring FIN 48 adjustment recorded in Q3, which reduced the rate by approximately 7 percentage points, for a pro forma adjusted 2007 effective tax rate of 35.5%. Our basic earnings per share in the fourth quarter of '07 was $0.22 versus $0.18 last year and for the full year our basic earnings per share was $0.45 compared to $0.22 in '06.

I just mentioned, the 2007 income tax provision for the full year did favorably was favorably affected by the recognition of tax benefits, the realization of which was previously considered uncertain, and these benefits favorably impacted the results for the year by $0.03 per share.

As for balance sheet at the end of '07 our net cash, our cash less debt was $6.4 million higher '07 than it was '06. In addition to earnings from operations our cash was also significantly impacted during the year by following; completed sale leaseback of our Lincoln facility generated (inaudible) in 2007 approximately $2.1 million of taxes against that gain. We paid down $4.2 million of debt during the year, our capital expenditures exclusive of those associated with the sale leaseback were approximately $7.9 million in '07. And our inventory increased $6.9 million from '06.

Excluding the impact of LIFO, of our gross investment inventory was up $5.9 million and this increase was all driven by our CAD division.

Some additional comments on the growth in our inventory during 2007. In our fourth quarter, we made progress in bringing our Cross Accessory Division inventory balances down from the higher positions we had earlier in 2007. But we did not bring the balance down as far as we had hoped. Reducing our investment in our Cross Accessory Division inventory levels is an important goal for us in 2008 as it was in '07.

And our '08 plan calls for a reduction of $3.4 million in our Cross Accessory Division inventory, which we believe we can execute against, while at the same time, supporting that segment's planned sales increase in 2008.

I will turn the call back to David.

Dave Whalen

Thanks Kevin. AT Cross is on a path that will deliver consistent annual improvement in operating results. 2008 will show continued progress down that path. For the year, we expect our revenue to grow at a rate of 6% to 8% and we are targeting earnings per share of $0.47 to $0.50 or 12% to 19% greater than our 2007 recurring EPS of $0.42 per share. As in previous years, our second and fourth quarters will be the greatest contributor to these results.

Thank you for your time and now we'll take questions.

Question-and-Answer Session

Operator

Thank you Sir. The question-and-answer Session will be conducted electronically.

(Operator Instructions).We will go first to David Leibowitz with Burnham.

David Leibowitz - Burnham

Good Morning or afternoon, excuse me.

Dave Whalen

Hi Dave.

David Leibowitz - Burnham

A few unrelated items if I may. Number one, the new product introductions this year will that be a greater number of those or a lesser number than we saw in '07?

Dave Whalen

In the Cross business, the Cross Accessory Division there will be a greater number. Probably, Dave a similar number of quality writing instruments launches and a greater number of extension launches, as we have an increase in our readers business, and an increase in our leather goods line, which are both expected to grow this year, leading the way. But we still have a robust, spring and fall additions to our quality writing instrument line as well.

David Leibowitz - Burnham

Second question, which quarter of the year is going to make the toughest comparison for you vis-à-vis the year just ended?

Kevin Mahoney

Toughest comparison, Yeah, I think, if I am answering it directly, David, but I mean, for me, or for us really, the Costa Del Mar business continues to run, as it always has, with the growth it has been showing. I think for the Cross Accessories Division, '08 will be similar to the past years, which is really the financial performance of that segment is all driven by what happens in the fourth quarter. So, it isn't a quarter-to-quarter comps that we are concerned about. And to say it in a different way, the Cross Accessories division remains driven by the performance in the fourth quarter. And so, the investments that we make in the first few quarters of 2007, again set us up for the fourth quarter of 2008. We have no reason to be concerned about what we have in our plan for the fourth quarter of 2008, but I am not answering you directly, but I don't think there's any particular quarter that we're intimidated by from a comp perspective.

David Leibowitz - Burnham

Excellent, what about the reading glasses are they still growing or have they plateaued?

Dave Whalen

I think in 2007, they plateaued, but I think that was primarily due to fact Dave, that we wanted to get together an entirely new line. The eyewear business, you need new, fresh products and new, fresh styles, and so, what we did was we took the time in 2007 to develop an entirely new Cross reader line that would appeal to a broader range of consumers. That was launched earlier this month. And so, we expect a much larger reader business in 2008, than we had in '07.

David Leibowitz - Burnham

And getting over to leather goods, that has been an item that Cross has tried on and off for over a decade now. Is there something different this time around that makes you feel more confident?

Dave Whalen

Well, the fact that we have now come through a year and half where consumer sell-through on our leather line has been excellent. In fact, I think Dave several years ago accessories represented about 2% of the entire Cross business. Coming through 2007, that number is up to 7% and that's primarily driven by the success of the leather line. So, I think our styling is better. I think our distribution is better and the fact that we have had success here for 18 months or so with both our Autocross and 1846 premium collection says to me, okay, we'll figure it out and now we are ready to expand, that part of the business is expanding and we expect it to continue it to grow.

David Leibowitz - Burnham

Okay. And lastly the shop-within-a-shop concept, how many more units would you hope to be able to open this year, a. And b, it's a two parter, - are they living up to the margins you had hoped for?

Dave Whalen

I have said in the past, Dave, probably that the global capacity is about a 150 units. We have got around 79-80 right now, I want to cross the 100 threshold this year and believe we can do that. And they are absolutely living up to what we expect both, in terms of margin and year one and year two growth. What we had expected was big growth in year one and that growth to slow down a little bit in the year two, for the shops that we've seen open for two years, we are not seeing any deceleration in growth, which is a good sign. So, it gives us a lot of reason to continue to open those shops in our best retail sites.

David Leibowitz - Burnham

Thank you very much.

Dave Whalen

Welcome,

Operator

We will go next to Eric Marshall, Hodges Capital Management

Eric Marshall - Hodges Capital Management

Hi! Good afternoon, gentlemen.

Dave Whalen

Hi, Eric.

Eric Marshall - Hodges Capital Management

Hey, couple of questions on the inventory. What percentage of the increase in inventory is related to components and how much of it is actually finished goods?

Kevin Mahoney

Let me give you a couple pieces of data to help you with that. The increase in the inventory, if you look at percentages from 2006, it's both raw material and finished goods. It wasn't like we were overly invested, so to speak, in raw versus finished or vice-versa. To help you understand a little bit the increase, we've been talking about it throughout the year. I think earlier in 2007 we were up $8 million or $9 million, when we comped the quarters in 2006. And what we were wrestling with was getting control of this expansion of the supply chain that came upon us when we took back the operations in China. And we believe that that expanded the supply chain by a little more than six weeks.

So, that's just natural expansion of the supply chain; when a lot of material in China is still being sourced here in the States. And then coming back and being distributed in our existing markets. That required about a $3 million additional investment. Okay, so if you look at the growth in the inventory, which I sighted in my comments. A little over half of that just comes from the expansions of supply chain. The remaining increase over 2006, partly came from having set ourselves up for revenue growth in the back half of the year, particularly the fourth quarter that we missed by a bit, so we had a little more inventory on hand than we thought from that. And there was some additional growth that wasn't planned for in direct-to-consumer channels that were $700,000 to $800,000. So, the increase over last year and the increase over where planned to be, which we communicated in the third quarter was spread in both raw, as you call it components, as well as finished goods.

Dave Whalen

So, I would say it's about 50 -50 Eric. And importantly all of that, we've been through it, we've been through it all over the last 6 weeks. Its good inventory, its current product. It's just a matter of moving it through the system here, as we move through 2008.

Eric Marshall - Hodges Capital Management

Okay. And could you refresh my memory? If we look back a year ago at this time, what did you guys guide for earnings for 2007?

Dave Whalen

We guided at $0.37 to $0.40 per share.

Eric Marshall - Hodges Capital Management

Okay. And you guys obviously far exceeded that for the year. What was the main reason for it, is it because the margins came in better than expected or?

Dave Whalen

Well, I think, it was the continued outstanding performance of Costa Del Mar, you just don't plan for 35%, 34% growth and that was probably the largest one that we had.

Kevin Mahoney

The other thing is Eric, in the beginning of 2007 was the first time we had provided guidance -- in sometime. And so, there was some natural, probably conservatism, built into the guidance. We wanted to be sure if we put out guidance, that we met it or exceed it, so we wanted be sure as we do for 2008 and that we get that right. So, I think it was a combination of what Dave said and what I said.

Dave Whalen

You know, I think, to answer your margin question. I think, we did, exceed our margin target by a bit. But if you just look at the big picture, I think, Costa Del Mar margins continues to roar ahead and that's a good thing.

Eric Marshall - Hodges Capital Management

Okay. Looking at 2008, how much more incremental margin improvement can we expect to pick up from some of the components being shifted over to China from the US?

Kevin Mahoney

Our '08 financial plan, which drove the earnings guidance that was included and then release, contemplates 100-basis point improvement in our gross margins at the moment for 2008 over 2007.

Eric Marshall - Hodges Capital Management

Okay. And can you guys give us any color on how much of your revenue came from the website and catalog?

Dave Whalen

The, you are talking in the Cross business, right?

Eric Marshall - Hodges Capital Management

Yeah.

Dave Whalen

Our direct-to-consumer business was about 3% of the total, and that is basically the website and catalog.

Eric Marshall - Hodges Capital Management

Okay. You guys alluded to the fact that you thought you had picked up some market share in the Cross writing business, can you give us any idea of what you think that is right now and kind of a ballpark?

Dave Whalen

Hello?

Eric Marshall - Hodges Capital Management

Hello

Operator

Mr. Whalen, go ahead.

Dave Whalen

Yes, okay, there is nothing that is reported on market share for the writing instrument business as a whole. It's a fragmented category. But as we have always said, we are in the top three of the quality writing instrument market and I would say our share is in the 15% to 20% range.

Eric Marshall - Hodges Capital Management

Okay. And how much of the writing instrument business you guys see coming in from international markets versus the US?

Dave Whalen

The total from outside the US this year was about 68% and that includes Canada and Latin America. So outside the US it is about 68% now.

Eric Marshall - Hodges Capital Management

Okay. And so only 32% of your writing business is from the US and how much of that is tied to corporate gift giving type sales versus kind of consumer channel?

Dave Whalen

I think, looking for more specifics in that Eric, I mean in the schedules attached to the press release, it does break our Cross Accessories Division, revenues down by geographic area and in 2007 our revenues in the America’s were $49 million, out of a total of $115 million. And the $49 million is both the US and Canada. But in that $49 million, I believe our revenues from the special markets or corporate gift for the US would be $15 million for the year for 2007.

But them we have got revenues from that channel that we earned outside of the US and the European and Asian markets and so our total corporate gift business is bigger than the $14 million or $15 million I referenced for that US. But the way that we go to market in Asia and in Europe, we drive what we call carriage trade business and our corporate gift business through the same channels, and so we don't break out those revenues. So that's the composition of it in the Americas.

Eric Marshall - Hodges Capital Management

Okay.

Dave Whalen

Is that helpful.

Eric Marshall - Hodges Capital Management

Yes it is and then my last question is if you guys did come across a strategic small acquisition in the eyewear business that you could business that you could acquire and kind of lay on top of the Costa Del Mar model, how. How would you guys feel about financing that?

Kevin Mahoney

Financing it?

Eric Marshall - Hodges Capital Management

Yes.

Kevin Mahoney

Okay. As you know, we got a balance sheet that is not burdened with much leverage at all. We do have a fair amount of cash on hand. You know what our EBITDA was for this year. So obviously a higher EBITDA plan for '08.

So obviously our existing balance sheet and our prospective cash flows from our existing business could support a fair amount of leverage. So we have got a $20 million line of credit with our commercial bank that could be raised quite easily. Just haven't bothered to do that for purposes with saving on the commitment fees. So our balance sheet and our prospective cash flows in our relationships with our banks would support a variety of deals that we come across and continued to look at today.

Eric Marshall - Hodges Capital Management

Okay. And if you guys were to do something, is it likely that it would be accretive within the first year of doing that?

Dave Whalen

That’s our guidelines. We look to do that, we wouldn't pass on something that we thought had long term value, but really one of our important screens is that it's accretive.

Eric Marshall - Hodges Capital Management

Okay. Alright, thanks a lot guys. I appreciate it.

Operator

(Operator Instructions). We will next go to Patrick Flavin with Flavin Blake & Company

Patrick Flavin - Flavin Blake & Company

Congratulations, David and Kevin for a marvelous turnaround in the fortunes of the company.

Dave Whalen

Thanks Patrick.

Patrick Flavin - Flavin Blake & Company

You got to be as old as me to remember when the company was rolling like this. Just a question for you, David, on the extraordinary trading volume in your stock in the last week. In the last four days, something like 4% of your shares have transacted including a huge down dip today before the end of the day. Can you lend any perspective to that?

Dave Whalen

Yes, we can. I think, Pat, there was an investor on our stock, he came into our stock and actually been a pretty good investor and their fund, and I won't get into names, I believe was put into some type of a liquidation exercise and so the shares that they had bought, which were 500,000 or 600,000 shares is part of that liquidation and the funds that were transferred to some other investment group that was mandated with liquidating all of the securities held by the fund. And so, I think the large volume you saw last week, on a particular day as well as today was related to that and I think the best I can tell that those two days took care of most of that overhang.

Patrick Flavin - Flavin Blake & Company

Yeah, well they did a particularly nasty job today, if you --

Dave Whalen

I don't think there was any accountability in terms of price realized. But maybe that's speculation.

Patrick Flavin - Flavin Blake & Company

Right. Which gets to the issue of, do you have a repurchase authorization in effect and I realize you would have been in a blackout period anyway.

Kevin Mahoney

We've a certain number of shares that we could repurchase. There is still some treasury stock that we are allowed to buyback, there was a buyback program approved five or six years ago. Nothing we can do about that in the blackout period. And obviously it's something that we are looking at and talking about, given the last couple of weeks.

Patrick Flavin - Flavin Blake & Company

Okay. Given the progress you made with the company and with its fortunes, you know, looking forward, a market cap of $111 million, strikes me as ridiculously low. So, that's the thought for you in terms of potential utilization -- if the stock stays down.

Kevin Mahoney

It something we are looking at in terms of how we allocate our capital.

Patrick Flavin - Flavin Blake & Company

Good. Okay, congratulations again. Keep up the good work. Thank you.

Dave Whalen

Thank you.

Operator

And there appear to be no further questions. I would like to turn the call back to our speakers for any additional or closing comments.

Dave Whalen

Once again Thank you all for taking the time to join us for our conference call and we look forward to speaking to you in April when we announce our first quarter results.

Operator

And that does conclude today's conference call. We again thank you for your participation. You may now disconnect at this time.

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