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Conference Calls

Wednesday, November 3, 2010

3Q10 Earnings Conf Call Transcript
Dated 11-3-10 PAGE 1

Bill Kuser
Welcome everyone to American Vangaurds third quarter and nine months quarter earnings review.  Our chief presentors today will be Eric Wintemute our President and Chief Executive Officer and David Johnson, the company’s Chief Financial Officer.  Before we begin I would like to take a moment to make a cautionary reminder that in today’s call the Company may make discuss forward looking information, such information is made based on estimates and assumptions by the Company’s management and are subject to various risks and uncertainties that could cause actual results to differ from managements current expectations.  Such factors include weather conditions, changes in regulatory policy, competitive pressures and various other risks as detailed in the Company’s SEC reports and filings.  While all forward looking statements represent the Company’s best understanding as to the date of this call, such information will not necessarily be updated by the Company.

Eric Wintemute
Good morning and afternoon to everyone and thank you for joining us for this review of American Vanguard’s third quarter and nine-month results. As we indicated in our press release this morning, we are pleased to report performance for the third quarter and year-to-date 2010 that reflects improved market conditions and our own continuing focus on financial discipline. 

Compared to a very challenging 2009, we are seeing a number of positive trends in the markets that we serve.  In Cotton, a rising commodity price has driven a nearly 20% increase in U.S. cotton acreage, which benefits American Vanguard’s strong market position in cotton insecticides and harvest aid products. In Corn, a strong commodity price, along with reports of less than optimal GMO yields, and continuing development of resistance to glyphosate herbicides all encourage us to believe that our soil insecticides and post-emergent herbicide Impact® will see improved demand during the next several quarters as growers prepare to plant their 2011 crop and seek to optimize their yields.  At the distributor level of the marketing channel, working capital management objectives continue to shift purchases back toward the time when they will be applied in the field, a “just-in-time” approach.  Never-the-less, replenishment of 2009’s severely depleted distributor inventories is helping to fuel the recent demand for our products. 

With that general market overview, I will now let David take you through the financials and then I will return to discuss our Business Development efforts and our address of recent regulatory issues.

David Johnson
Thank you, Eric.
As mentioned above, and as you will have read in our earnings announcement, net sales increased by approximately 3% to $68 million for the quarter ended September 30, 2010 as compared to the same period in 2009.  Within this number, our crop sales were up 9% to $62 million while our non-crop sales were down 37% to $6 million, largely as a result of the regulatory “Stop-Sale” order on our fungicide product line PCNB.

As Eric mentioned, in the crop sector, while the conservative approach toward procurement, reducing inventories and ordering products on an “as-needed” basis continues, distributors and growers have worked through their inventories and restocking of the distribution channel is occurring.  Additionally, credit availability for growers, rising crop commodity prices, increased cotton and peanuts plantings all contributed to favorable conditions for placement of several of our product lines. 

In our 10-Q filing with the SEC, which will be issued later today, you will see a detailed discussion of sales performance by product lines.  In brief:
Net sales of our insecticides in the third quarter were down by approximately 16%, to $17 million.  Within this segment, net sales of our cotton insecticide Bidrin® were up approximately 46% on the reported 20% acreage increase this year.  Sales of Thimet® were up nearly 22% due to the need for nematicidal pest control in sugar cane.  These gains were offset by a 25% decline in quarterly sales of our granular soil insecticides, as distribution continue to focus on managing their working capital levels. Furthermore, we made a conscious decision in the quarter, to reduce our promotion of several lower margin products that face significant generic competition and as a result, our sales of these products declined by almost 40% from their prior year levels.

Within the product group of herbicides/fungicides/fumigants, net sales in the third quarter were down about 6% to $28 million.  Net sales of our herbicides were down approximately 18%, largely as a result of the deferral of purchases of our corn product Impact®, offset somewhat by increased purchases of Dacthal in the Western United States for the cultivation of vegetables.

Within the product group of other products, quarterly net sales increased two and one-half times to $17 million.  This arose primarily as a result of sales of our cotton defoliant Folex.  These sales benefited from a shift in demand from second quarter to third; from the acquisition of a defoliant product line from Bayer CropScience and from the increase in cotton acreage that I mentioned earlier.  

In our non-crop business, we saw a decline in sales of our mosquito adulticide product Dibrom®, due to hot temperatures and comparatively dry conditions in the South and Western United States. during the summer and the resulting reduction in pest pressure.  Furthermore, net sales of our fungicides were down sharply as a result of the Stop Sale order on our PCNB products.  Eric will discuss our efforts to address that issue in a few moments.
Cost of sales for the quarter ended at $43 million or about 63% of net sales as compared to 68% in the same period last year. Consequently, our gross margin in the quarter overall improved to 37% from 32%. Our crop products generated a gross margin for the period of 37%, as compared to the 32% recorded in the same period of 2009.  Our non-crop products had a gross margin of about 39% for the third quarter of 2010, significantly better than the 33% recorded in the same quarter of 2009.
While these product margins would have generated roughly 42% on a standard cost basis, unabsorbed overhead costs in our (Axis) manufacturing facility reduced overall reported gross margins by 5%. 

Operating expenses for the third quarter of 2010 increased by $1.5 million, ending at $19 million, as compared to last year’s expense of $17.5 million. Each category of cost increased slightly with the most significant being an $800,000 increase in freight and warehousing costs driven primarily by increased freight rates.  

The Company’s overall debt ended the quarter at $55 million, approximately $27 million lower than last year. Our average debt performance for the quarter reflects an even more pleasing performance ending approximately $40 million lower than last year. During the period we have continued to make all scheduled debt repayments and placed a lot of focus on controlling take up of revolver debt. This has been achieved as a result of our continued focus on working capital levels including inventory, receivables, programs and payables. Our receivables have increased in the period, however this is a seasonal flow and the underlying collection performance remains strong.  

Our effective interest rate during the period was 4.9% as compared to 3.3% for 2009. The increase is partly as a result of the change in interest rate levels following the First Amendment to the Company’s senior credit facility agreement dated March 5, 2010. It is also affected by movements in the LIBOR rate.

The “bottom line” is that our overall net income for this year’s third quarter increased to $3.6 million (or 13 cents per share) as compared to $2.1 million (or 8 cents per share) for the same period of 2009.

Year to date, you will also read in our earnings announcement, we have recorded sales up 5% to $167 million, gross margin improved from 36% to 38%, operating expenses held flat interest expense reduced slightly with the increased interest rate offset by much reduced average borrowings, all resulting in net income of $7.1 million or 26 cents per share, as compared to $2.8 million or 10 cents per share this time last year.

On the balance sheet, our inventory control year-to-date has surpassed our internal targets. YTD our average performance is $77 million approximately 30% lower than our levels last year.

Our average debt performance is a key metric we track and for the first nine months we have achieved an average of $65 million which is $36 million or 36% lower than last year’s $102 million.  Based on the covenants to our credit facility, we have the capacity to borrow an additional $46 million at the balance sheet date.

Underlying this performance, the Company has much improved its cash performance in 2010. EBITDA is up 42%, at $25.2m year to date as compared to $17.8m last year.
I would characterize our nine-month financial performance as a continuing improving trend after the difficult 2009 trading year.

Now back to Eric:

Eric Wintemute
Thank you, David.
Business Development Efforts:
During the third quarter we have continued to pursue several potential product acquisitions – and we were able to announce two meaningful additions to our portfolio. First, the successful purchase of a cotton defoliant “Def®” from Bayer CropScience on July 21st and second, the distribution agreement that we reached to market and sell the granular soil fumigant Basamid® in the United States.

The acquisition of Def complements Amvac’s existing cotton defoliant product Folex®, which we have marketed since 2002.  This acquisition strengthens Amvac’s broad product offering for cotton growers, which includes our leading cotton insecticides Bidrin®, Discipline® and Orthene® and allows us to capitalize on the 2010 expansion of cotton acreage in the United States.  Our strength in the U.S. cotton market and the expertise of our southern regional sales force positions us well to promote this new addition to Amvac’s product line.

With Basamid we gain the opportunity to strengthen our existing market-leading position in soil fumigants with a granular product that may complement our liquid metam sodium and metam potassium product lines.  We expect that this product will be useful in a variety of fruit and vegetable crops including tomatoes, spinach, strawberries, and lettuce.  We are impletment all the necessary field trials and data submissions to secure registration for these crops and expect to begin participating in these applications over the next few years.

We are currently finding the market for acquisitions has improved and we are currently pursuing a few promising opportunities involving branded products.  We will of course keep you apprised of developments in this area as they come to pass.

During the last six months, we have highlighted our internal, new product development program, which we believe will generate significant new revenue potential in coming years. 

Our potato sprout inhibitor SmartBlock® is a superior replacement for methods currently in use for this application.  It is a “green” biopesticide, a naturally-occurring molecule that has an environmentally friendly toxic profile; it can provide superior protection with fewer applications, and requires no additional capital equipment investment on the part of customers.   In short, it is a safe, highly-effective product by which potato storage operators can safeguard their inventory and preserve its premium quality.  The registration filing for this product has been submitted as a joint-registration package in the United States and Canada, and approval is expected by the second quarter of 2011.   Additional registrations will be sought in other key markets including Japan and the European Union.  We expect to commercialize this product during the first half of 2011.

We are getting increased market recognition and sales traction with our aggressive strategy for ramping-up our entire line of Nuvan® professional pest management products for residential, commercial and bed-bug application.  Year-to-date our pest strip products are $1 million higher than the level achieved in the first nine months of 2009.
We continue to seek additional product registrations for aerosol formulations of this product which will facilitate even greater penetration of the bed-bug market, which as recent news articles have highlighted has become a major health concern and an economic and public relations nightmare for affected hotels, retail outlets, and dormitories nationwide. Compared to the current bed-bug eradication methods,- which can cost as much as $1,000 per room to implement, our approach can provide a fully effective solution in as little as 4 hours and for as little as $50 per room.  We believe that we will achieve considerable additional commercial success with this product.

As we announced on August 27th, the U.S. Environmental Protection Agency issued a “stop sale” order on our PCNB product line.  PCNB is a fungicide for use primarily to prevent snow mold on non-crop turf applications with the bulk of sales occurring seasonally in the autumn. 

This order was issued without warning because, in the Agency’s view, our company did not identify trace impurities in a submission to the agency called a confidential statement of formula. They took this action despite the fact that the Agency was made aware of these impurities nearly 20 years ago and that the Agency never determined that these “parts-per-billion” impurities needed to be listed in the periodic re-submissions of the formulation statement. 
It is important to note that the order does not allege that the presence of these minor “impurities” creates any risk to human health or the environment.

We immediately sought legal relief asserting that the law does not permit the Agency to stop sales of an approved product before giving the registrant due process.  Although our initial request for a grant of “temporary relief” was declined, we have pursued our legal recourse by seeking a preliminary injunction with a hearing date to be scheduled shortly. 

This unwarranted action has put our domestic PCNB business at a standstill has cost us third quarter sales - and may cost us fourth quarter sales as well.  Our customers have been very supportive of our position and have indicated that they are very anxious to have availability of this safe, economical, and highly effective product restored.
We have continued to work expeditiously with USEPA to get the Stop Sale order lifted as soon as possible and in fact, I am meeting with the Agency in Washington DC tomorrow to try to move this process along.  We will keep you apprised of developments in this very important matter.

Our organization is focusing its full attention on continuing improved performance for the balance of 2010.  We are encouraged by our progress thus far through three quarters.  The demand of the cotton sector have allowed us to experience strong sales of our insecticide Bidrin® and defoliant Folex®.    We see many signs that our participation in the corn sector will be strong in the spring and summer of 2011.  With our strong emphasis on manufacturing efficiency, operating expense control and working capital management, we expect that our progress will continue. 
We recently held a company-wide business meeting that brought together all of our key functions to focus our collective efforts on the important initiatives that will allow us to grow our business in future years.  All of our programs in sales and marketing, new business development, manufacturing productivity, human resource development and financial control were reviewed.  Let me say that with the experienced personnel that we have attracted to American Vanguard in recent years; with the information technology and financial control systems that we have installed; with the product introduction and market penetration strategies that we have laid out I can tell you that I have never been more excited about the prospects for American Vanguard than I am today.  While it is premature for us to predict fourth quarter performance, we are well on our way to delivering far better operating and financial performance in 2010 compared to 2009 and our future looks brighter than ever.  Thank you and with that, I turn the call over to the operator Claudia for questions.   

Jay Harris (Goldman & Harris)
<Q – Jay>:  PCNB revenues were down in the third quarter, mosquito applications were down, agguritely if there were other products that were also off, how much revenue did you loose in those categories?

<Eric>:   You are talking about PCNB and Dibrom?

<Q – Jay>:  Yes, those are the two I recall in your remarks that were down.

<Eric>:   The generic compounds that we deemphasized in the quarter were also down, but within PCNB and Dibrom we were down $4.5 - $5 million in sales for those two.

<Q – Jay>:  Second question, what is the budget and principal projects for capital expenditures this year?

<Eric>:   The budget was $7 million; we did have the product Tribufos, Def that we set up to manufacture in this year.  We wound up not doing it, because Bayer elected to supply us with the finished product, but we will be manufacturing it next year.  To date I think we are right about seven million dollars and will probably end up a couple million over our original budget.

<Q – Jay>:  All of that went into Tribufos manufacturing equipment?

<Eric>:   Not all, but Tribufos was approximately half of it.
Matt Haggerty (Pennant Capital Management)

<Q – Matt>:  Good afternoon, thank you for taking my question.  I wanted to first ask if you have what PCNB revenues were in Q4 of 2009, I want to see the expense of the drop off you could be facing next quarter.

<Eric>:   This is a domestic issue.  We don’t really sell much in crop in Q4 and if we do not have the Stop Sale removed prior to the end of the year we probably will experience the drop of another $3 million.  The total market that is affected under this Stop Sale is about $6 million. 

<Q – Matt>:  On your last caller I missed a little bit of what the $7 million reference was.  Was the year to date sales of Def?

<Eric>:   No that was capital expenditures.

<Q – Matt>:  What is the contribution of acquired products in this quarter?

<Eric>:   Folex contributed about $10 million in the quarter, some of that is attributed to sales that occurred in Q2 2009, but $10 million was the increase from Q3 2009 vs. Q3 2010.

<Q – Matt>:  Are you estimating that was in large part due to this deal with Bayer.

<Eric>:   Yes, that’s correct.
Jim Bartlett (Bartlett Investors)

<Q – Jim>:  You mentioned that IMPACT is down as a result of the deferral can you explain what is happening with IMPACT and why the deferral?

<Eric>:   We have typically sold IMPACT in the third quarter and we elected not to do that in this third quarter.  As we mentioned earlier, distribution over the last two years have been more reluctant and not as willing to position products in the marketplace earlier.  With regard to our customers we simply are matching up with their needs and demands.

<Q – Jim>:  In all of the sales that you expect in the third quarter would they go into the fourth quarter?  Is that correct?

<Eric>:   The IMPACT sales that we had in third quarter would go into fourth quarter and first quarter and second quarter, for that matter.

<Q – Jim>:  How would you characterize the IMPACT for this coming season versus last season?

<Eric>:   IMPACT looks strong, the fact corn commodity prices are really strong, and frankly my belief is that commodity prices overall are going to continue to increase as we get further into the season.  All that bodes well, because farmers that are already doing reasonably well look at the potential of making even more money if they can protect their crop and enhance their yield.  Things that might be discretionary, such has having a clean corn field of weeds, now you look at the true return on investment with money readily available and focus on the highest yields you can obtain.

<Q – Jim>:  Do you feel you gained market share this past season with IMPACT?

<Eric>:   We do feel that we gained market share this last year; however we have not seen the final report.  It will be a function of how strong the market was in 2010 to see what kind of market share we did gain.  IMPACT is the safest product out there.  It is extremely efficacious and it is a very good return on investment for our growers and our customers.

Adam Peck (Heartland Funds)

<Q – Adam>:  Good morning.  Did I hear that gross margin would have been 5% higher due to unabsorbed capacity?

<Eric>:   That’s correct.  Again the rational there the team has done an excellent job on being able to focus on any unabsorbed capacity.  As we talked about before we shifted from taking unabsorbed into inventory and expensing it in the period, which we think was the prudent thing to do as we manage our inventories and make sure that going forward we are not jeopardizing the profitability of margin.  With that focus we did expect absorption of overhead to occur mostly in the third quarter from the production of our newly acquired product, Tribufos, from Bayer.  We did build a facility, it is operational, and we do expect to be producing Tribufos in 2011.  We are also looking at new products that we believe will fit in the Axis facility as well.  If you look at the unabsorbed, it is primarily an issue at Axis.  We did not produce Tribufos as we expected this year, but will next year and will absorb that overhead then.  In addition, with the demand for the product that we are doing at Axis, our forecast has increased for this next year.

<Q – Adam>:   We might not see it next quarter, but by the end of 2011 that capacity will be absorbed.

<Eric>:   Correct.

<Q – Adam>:  Were there any one time items in festinated quarter?

<David>:    No, not of any significance. 

<Q – Adam>:  So that year over year increase was mainly due to the sales force increase?

<Eric>:   You’re talking about the Sales Department?  G & A was down.  What were you referring to as far as increase?

<Q – Adam>:  On a year over year basis it was up roughly up $1.5 million.

<David>:  In SGA, there were small differences in each category you will see in the 10Q.  The biggest single difference of $800,000 freight and warehouse expenses was primarily freight rate, which we have seen increase particularly in the last quarter and has affected us on some of the large volume shipments we make.

<Q – Adam>:  Pest Strip sales were up $1 million, what was the absolute number?

<Eric>:   3.5 from 2.5

<Q – Adam>:  What do you expect the timing to be for the aerosol formulation?

<Eric>:   That’s a good question.  We had expected a couple of the aerosols approved this quarter; the Agency has not indicated that they are approving them.  We are going to be talking further to the Agency about this and any concerns that they have, but we are encouraged by the efficacious results we have seen with these products that we have.  The pest strips are certainly registered for bed bud control and can certainly do the job, however the timing of them is such that with the application we are looking at approximately 10 days to have complete control.  What the aerosols afford us to do is we are combining them with a couple of our other products, permethrin and bifentrhin, which provide residual for egg.  When we talk about an aerosol release in a room within two hours you control the existing bed bugs you ventilate for a couple hours and then you can open up the room.  That would dramatically change the current treatment.   Current treatments are extremely expensive about a $1,000 a room.  In addition, since you are moving the mattress from one room to another, if they have the ability to move through the vents and the timing of the heat, you have to chemically treat all the surrounding room in order to keep the movement from going.  It is an incredible nightmare right now and is something that is getting worse everyday.  We are urging the Agency to accept what is already on our label and allow these registrations to go through.  I believe we have the best treatment available today.

<Q – Adam>:  Do you expect some approval this quarter?

<Eric>:   No, we are not expecting it; however we are working to accomplish that.  The Agency has issued some concerns with the label and we will be addressing those shortly and have called for a meeting in the next couple of weeks for that to occur. 

<Q – Adam>:  There is no other chemical aerosol on the market today?

<Eric>:   There are other aerosols that are being used, but they are not efficacious like DDVP.  They do not provide the level of control that DDVP does and there was a push to bring a product called Propoxur back into the market, which was denied by the Agency.  The state of Ohio led a push, with what is called a Section 18 to allow emergency use, but the Agency did not allow.  Right now as far as we can see there is not any solution of any substance in the immediate future.

<Q – Adam>:  What do you think the total market would be?

<Eric>:   It is a brand new world.  If you talk about the number of universities, hospitals, hotels apartment complexes, and houses that are infested it is a staggering number.  I think part of this is the economics and right now there are very few facilities that can afford $1,000 a room treatment.  Again with this we are looking at a $25-$30 application, plus whatever the trained professional would charge to do that.  This would make it economically feasible to control this problem, but without some change I think it is just going to get worse.
Brad Evans (Heartland Funds)

<Q – Brad>:  Good morning, we are going to double team you.   Do publics know the mosaic for 2011 at this point?  You have potentially easy comparisons with Dibrom, hopefully we get some movement with the aerosol version of permethrin, the corn market is looking pretty good, so that should be good for IMPACT and Counter, the cotton market looks pretty strong, so at this point Bidrin and Orthene look like they are well positioned and you might have some easy comparisons with PCNB if the EPA moves in a favorable direction.  If you include that with some of the recent acquisitions you made, what prevents 2011 for the company from being a record year from a sales and earning perspective?

<Eric>:   You are asking what prevents?  First, on the PCNB with EPA, in addition to our legal pursuit we did go ahead and issue an amended confidential statement of formula as EPA asked.  It has a timeline of 4 months, we would expect as you pointed out to be in a different position for next year.  Taking off all your highlights, this is why I believe we are in the best position we have ever been in.  In addition, we have a very good outlook on acquisitions.  As you know in 2008 – 2009, or certainly as we saw even in 2006 – 2007 with the acquisitions of phorate and Counter (which are poised to do extremely well – they did well this year and will be even better next year we believe), we saw the acquisition costs increasing and started focusing a little bit more on development of new products.  That being said the outlook for acquisitions today seems to go back more towards our sweet spot.  We did well with our acquisition of Tribufos and the other acquisitions we are looking at today look very favorable.  Even without acquisitions, you pointed out the crop prices.  You can have one crop increase and have other goes down, but we are looking at an extremely strong demand for crop.  All of that was there in 2008 and we saw speculation of that move beyond reasonable levels.  However, there is a finite amount of land and cotton holding where it is, there will be a real competition for crop acreage this year.  Farmers are going to have a very nice choice to make and will look at strong treatments on the crops they go into.  There are always sideline things that can happen, but as I said right now I am optimistic on how 2011 looks.

<Q – Brad>:  Based on that mosaic and a lower debt level I might add, and lower interest rates, there is every reason to expect that at this point from what we know now that 2011 could be a much improved year from 2010 and we might have a shot at the performance we had in 2007 and 2008?  Is that a fair mosaic to build at this point?

<Eric>:   Yes.
Jay Harris (Goldman & Harris)

<Q – Jay>:  I’d like to hear a little about what can be done and what you have decided about participating or not participating in early order sales in the fourth quarter.

<Eric>:   Again we decided in 2009 that we were not going to be in a position, as we mentioned we had competition that had sold in second quarter with year terms to position product for 2011.  There are a couple of factors.  If you don’t position your product earlier, there is a concept of loaded is loyal and whatever gets positioned early is going to be the first product out the door.  If it is a strong season you are fine, if demand for that particular area of chemistry is not as strong you face the potential to miss out on the market.  Distribution, given what they experienced in the write downs in inventories, particularly glyphosate and fertilizer, are looking at watching our inventory.  As such, we have moved our focus away from trying to position our products early and our distribution in 2010 have certainly seemed to appreciate that.  We are helping with our EDI tracking to help them and help us understand the inventory positions and what is reasonable for them to take.  Obviously, there will be some positioning in fourth quarter, but our emphasis will be less on stuffing the market as opposed to letting it play out in season.

<Q – Jay>:  Given the prospects of farmer trying to maximize yield, whether it is cotton or corn, it seems to me that you would be inclined to take your risks in the marketplace in the first and second quarter, rather than moving a lot of product into distribution channels in the fourth quarter.  Do you think you have enough new products that your preseason sales in the fourth quarter will be comparable, slightly lower, or higher than they were in the fourth quarter of last year?

<Eric>:   Inventories in the channel are not in a strong position, although they were not strong going into 2010 either.  We let fourth quarter of 2009 play out and coming from our international and domestic meeting we will see how this trend comes in.  Certainly there are farmers out there that will be long on cash that will be looking to acquire product.  It really becomes a function of what our customers decide to purchase.  In the past we have offered early pay incentives and tried to push to improve the balance sheet, but we are not in that position today, but it results in discounts and we are not as inclined to do that today as we were in the last year.

<Q – Jay>:   When do you make these decisions? Later this month?

<Eric>:   We will see.  Our sales team has really been accurate on forecast needs at this point.  We are basically having companies take product if they would like to take product.

<Q – Jay>:  Does the plan give you roughly the same quarter magnitude as early order sales as you did last year?

<Eric>:   It is similar to last year, in regard to early order.
Brad Evans (Heartland Funds)

<Q –Brad>:  I was curious if you could give us your thoughts on international sales preliminarily if you see growth in internationals sales in 2010 and what your outlook is for the next year?

<Eric>:   On the international side, we did pull back a little based on credit concerns – those seem to be address and we are not looking for any huge increases in 2010.  2011 is probably more a function of acquisitions.  Again, the acquisitions we are looking at have some strong international aspects to them, so if those were to come to play that would certainly make a difference.

<Q –Brad>:  I’m sorry, so you think that 2011 could show an improvement versus 2010?

<Eric>:   Right.

<Q –Brad>:  Lastly, given your comments, Eric, I appreciate your enthusiasm of your comments.  Do you think the Board might have any appetite for implementing that share repurchase program at these levels?  Does it make sense to try to reduce the denominator in the earnings per share calculation, given your relatively strong outlook?

<Eric>:   It is a discussion at each of the board meetings.  There is basically a concept, the one time we did this was back in 1999 at a time when we were trading below book value and I think there is appetite there.  I guess the counter to this is if we were to purchase at this level is that the best use of our capital.  As you know we have worked hard to reduce our debt levels, in 2009 I think nobody knew if we had seen the worst of it or not.  I feel optimistic at this point as I think a number of economic advisors do that although we may not have seen the absolute worse, collapse of the levels we saw in 2009 are probably unlikely.  It is an ongoing discussion; we will see how the current levels of acquisition play out.

<Q –Brad>:  Bottom line is you feel the acquisitions can be created either immediately or in a short period of time versus the certainty of driving per share creation on a share buy back?

<Eric>:   That’s correct.

Eric Wintemute
Thank you to everyone for going us.  We will certainly update you and if we have something more newsworthy to discuss we may hold a conference call before our next year end conference call.  I look forward discussing further with you and thank you for your support and your questions.