Aaon Inc (AAON) 2007 Q3 法說會逐字稿

Good day and welcome to today's AAON Incorporated third quarter 2007 earnings conference call. Just a reminder, this call is being recorded and at this time I'd like to turn the call over to Mr. Norman Asbjornson. Please go ahead, sir.

Good afternoon, thank you. Before I go any further I'd like to read the disclaimer, forward-looking disclaimer. To the extent any statement presented here in deals with information that is not historical including outlook for the remainder of the year, such statement is necessarily forward-looking and made pursuant to the Safe Harbor Provisions of the Security Litigation REform Act of 1995. As such it is subject to the occurrence of many events outside AAON's control that could cause AAON's results to differ materially from those anticipated. Please see the risk factors contained in our most recent SEC filings including the annual report on Form 10-K and the quarterly report on Form 10-Q. Thank you. I'd like to introduce Kathy Sheffield, our Vice President and CFO and turn it over to her. Thank you. Kathy?

Good afternoon. Welcome to our conference call. We appreciate your attendance today. I'd like to begin by discussing the results of the three months ended September 30, 2007, compared to September 30, 2006. Our revenues were up 11% to 70.9 million from 64.2 million. Our gross profit remained constant at 13.6 million for both periods and was 19.2% of sales for 2007 compared to 21.2% for 2006.

Selling general, administrative expenses decreased for the third quarter by 7.9% to 5.5 million or 7.7% of sales from 6 million or 9.3% of sales for the same time last year. Operating income increased 6.8% to 8.2 million or 11.5% of sales from 7.6 million or 11.9% of sales. Net income went to 5.4 million or 7.6% of sales compared to 8.4% of sales last year. The diluted EPS for both quarters of 2007 and 2006 were $0.28 per share.

Now for the nine months ended September 30, revenues were up 13.3% to 200.4 million from 176.9 million. Gross profit increased 31.9% to 45 million or 22.4% of sales from 34.1 million or 9.3% of sales. Our SG&A increased for the first nine months by 7.3% to 16.5 million or 8.2% of sales from 15.4 million or 8% of sales for 2006. Operating income increased 52% to 28.5 million or 14.2% of sales from 18.7 million or 10.6% of sales. Net income increased 47.5% to 18.6 million or 9.3% of sales from 12.6 million or 7.1% of sales. Diluted EPS for the nine months was $0.98 per share versus $0.66 per share a year ago. Earnings per share for the three months and nine months of both years were based on approximately 19 million shares and are reflective of the Company's three for two stock split that occurred August 21.

Moving to the balance sheet now, the current asset ratio increased to 2 to 5 from 1 to 7 for the same period last year due primarily to higher accrued liabilities both based on our higher sales that are related to both warranty and commissions payable. Capital expenditures for the nine months end of September 30, were 8.7 million. Expenditures were related to new equipment, to increased production efficiencies and also to some renovations to our Tulsa facility. Shareholders equity per share as of September 30, was $5.69 compared to $4.85 for the same period a year ago. Also, the company paid cash dividends of 5 million in 2007 and also bought back stock from certain retirement incentive plans in the amount of 7.1 million.

I'd now like to turn the call back over to Norm who will discuss our results in further detail along with new product information and the outlook for the remainder of the year. Norm?

Thank you. There are a number of things which need to be discussed here relative to what's happening in the economy and also in our Canadian facility. To the economy first, in the month of July we found that there was some sort of a happening occurring. We don't know what in the marketplace and we had an unexpectedly low booking month in July, went down substantially from our June booking. We were talking to our representatives who said they had plenty of jobs they were sure they were getting, but for whatever reasons the contractors weren't placing the orders as fast as it was anticipated. It caused us some concern and we started not replacing workers in our facilities thinking that we were on the edge of a downturn and so we started letting attrition slow the work force down. We got into August, however, and all of a sudden the situation reversed itself and these anticipated orders started coming in and we were moving forward at a brisker pace. August continued into September and the same thing and into October the same thing. So what happened to give you some percentages that showed -- reflect what happened, over the four month period starting at the end of July or let's see, the end of August -- or end of June, in the first of July through the end of October our total input of orders was up 12.9% even with that weak month of July. If we just take the three months and discount the July numbers altogether, the last three months are orders compared to 2006 were up 44.5%. So you can see there's been a remarkable switch. Whatever was occurring in July didn't follow through. In fact, everything got much healthier than what we had anticipated. So as that was occurring we had already started letting our work force go down, so, of course, we had a little drop off in what we were anticipating in the way of revenue. We thought and should have gotten up somewhere around 15% revenue growth. Instead we got about 11% revenue growth. Some of that was we couldn't u turn around because since the orders didn't come in in July, we couldn't ship them. We wouldn't have shipped-- hardly any of them in August, but we would have shipped a fair number of them in September if we had had the manpower set up to do so. So that had a revenue effect upon our P&L statement and it also, of course, had a bottom line effect on the same period of time. So there is portion of the problem.

Another -- as I say right now, if I take a look at October so that we give you a sense of how much it's changing, I've already told you that if I took the four months, it was up 12.9 compared to '06 and I told you that if I only took the last three months, it's up 44.5% if I took the last three months one year to the other, if I just take October by itself, it's up 57.2% compared to a year ago. So it's throwing a lot of difficulty in forecasting, I guess, is what I could say. It does do one thing, though, which we said in our release this morning. We're quite -- we're anticipating and we have gone back into the hiring mode and into building up our work force again and we expect to have a good fourth quarter for this reason as far as orders coming in the door.

However, on the other side of the situation, a problem which we mentioned in the release this morning has to do with the exchange rate between the Canadian dollar and the U.S. dollar plus the operation of the Canadian facility. The operation of the Canadian facility continued to be less than anticipated and not making money during the three months. This was magnified by the majority of the problem didn't turn out to be the operating part of it. The majority of the problem turned out to be the exchange rate and how does the exchange rate affect us? It's like this. Most of the sales that we do out of the Canadian facility are done in the United States. So if we take an order in the United States for $1 when we took it we thought we were going to exchange it for $1.20 or something in Canadian and in reality by the time we ship it and we collect the money we get something like 80-- I mean $0.97 or $0.98 instead of getting the $1.20. So, of course, that exchange rate change is a very significant thing.

Now then we were booking business in the Canadian facility very well in the first part of the year anticipating we were going to speed the facility up. We've had a great deal of difficulty trying to speed the facility up, so it became obvious that we weren't going to meet the revenue numbers we were trying for and so we started slowing the order input down at the end of March and we did that by increasing pricing. The net result; however, is that the orders that we took before that time period had to be shipped and are still being shipped out of that facility today, so the exchange rate that we're looking at is not just between what we collect for today, but what we anticipated in the first part of the year. So there in is a problem which will continue into the fourth quarter with us. It will be somewhat about the same effect on us as it did in the third quarter we think. The exchange rate for those of you who aren't watching it would be anticipated based upon trend lines and based upon various people's comments in the newspaper and whatever in Canada that the Canadian dollar could be worth as much as $1.10 or $1.05 by the end of the year. So that negative on us.

Summing up of what I'm seeing right now, our Long View facility is doing very well. The orders for the air handler that we started building down there haven't grown as fast as we thought as early as we thought. They are now growing the way we thought they would, but we go ahead and delayed reaction in how fast that started happening and it's picking up speed.

In the Tulsa operation as I mentioned with the numbers I've given you here, we have an input of orders that tells us we're picking up speed again in the Tulsa facility. So those two which equate to over 90% of our business are looking very good and we got something less than 10% out of the Canadian facility which is looking bad. It's kind of like having a spec of something in your eye. It bothers you very much, but it's not a big deal to clean it out. It just sometimes takes a little bit of time and that's what we anticipate here. We're looking at several alternative actions, but we're not going to continue to have these losses for very long. That kind of in a very quick summary summarizes what's going on.

Now from an operational standpoint, a couple of questions sometimes asked, what about your bad debts? Our bad debt reserve and our bad debt experience has been trend lining down for a number of years. It is continuing to trend down. Our warranty expense is trending down, has been trending down for a number of years. We expect to hold that.

Now let's talk a little bit about the expectations for next year, what we see and what we're reading. There are various things that are out there that are making predictions about trend lines and I would say that from my experience right now the trend of the industry, not talking about AAON but just talking about the industry, would tell me that commercial construction's probably going to slow down somewhere maybe to little or no growth and even possibly going a little bit negative. A lot of people would say well, what about what the residential situation is happening? The general tenor of everything I read is it's had a substantial reduction this year, but that the reduction is moderating and doesn't expect to continue too much into next year and there are talk of it being somewhere around no reduction by-- for the year 2008. So there has been a little slowdown.

How how does all of that affect my perception of what AAON has capabilities of doing? We aren't going to be introducing a lot of new products, but we have already introduced a number of new products that are anywhere from five years into their life history to just a couple months into their life history and so we anticipate those to pick up momentum and the growth and they are things which in many cases like I say, some are very recent, weren't in our [bayonet] before. If I go down through all of our product lines one by one by one and look at growth from year to year to year to year, it's obvious that one of our big growth factors are units which we did introduce four or five years ago, namely our larger tonnage equipment which includes large tonnage rooftop units, water chiller and larger tonnage condensing units.

Those have grown at a much faster rate and show every sign of continuing that growth. We are very small part of that portion of the commercial market and so even a flat market I don't think is going to have much effect upon our growth. I think we're going to continue our growth because we have some very marketable things that are not copies of other people's. It's niche marketing and we're filling a niche that is in our opinion wanting to be filled and so we anticipate that to grow as fast as we can tell our story and get people to listen and realize the value we've got available.

In the smaller tonnage rooftops like wise we're experiencing substantial growth on a year-to-year basis and much of that as far as we can see is going to continue. We have as those of you who have been listening to us for quite some time know moved from being a very limited customer-based company over the years to being a much broader based one and through that cycle we went through a lot of national accounts in big time and as we've grown and had to choose sometimes between our customers because of our limitations on production capability, we've tended to go toward the general market a little bit away from the national account.

So for a number of reasons, less reliance on fewer customers, et cetera, et cetera and a little more profitable part of the business world and we now pretty well are stabilized with a good national account business as well as a good general business other than national accounts which are school houses, hospitals and a lot of other facilities which sometimes run counter to the general market condition because many of those are governmental supported facilities and they will sometimes spend money to get the marketplace going a little faster. So it's in our opinion it's still a good viable market for us to continue our growth pattern, but the nature of it is changing apparently and could be, but as I said, if we're just to look at recent trends of the last three months and even if we go back and pick up that very weak month of July, we're still up 12.9 and if we just look at the last three, we're up 44.5 and if I look at last month, I'm up 57.2. So the trend line is obviously not down.

That being said, I think I'll turn it over to you people to ask questions. Hello?

Yes, sir. Are you ready for questions?

Yes, I am.

Thank you. (OPERATOR INSTRUCTIONS) . And we'll take our first question from Frank Magdlen with the Robins Group. Please go ahead, sir.

Good afternoon, Norm.

Hi, Frank, how are you?

Good.

Good.

I guess I'm more encouraged from your talking about the order rate, but could you help quantify a little bit where the backlog stands now or say at the end of the quarter?

I sure can. One moment. Backlog at the end of the quarter was 55.4 million.

All right. And what do you think you could reasonably ship in the 4th quarter? And I say that because you brought your work force down a little bit and now you've ramped it back up a bit and if I heard you right, you would have shipped about 73 million or 74 million in the quarter, but you missed by about 3 or 4 million missed sales or missed shipments because you just didn't have the labor to put it through the factory . Is that correct?

That is pretty much correct and we were a little hesitant. We didn't want to throw a lot of overtime on it. That July scared us and so we were starting to ramp it back up but more on standard regular time and throwing a lot of overtime at it. So we could put overtime into the equation if we get to thinking that this continuation of the order input goes up, that will happen.

Okay. And then what is your CapEx for '08?

It's going to be approximately where it is this year and we've told you all along about 10 million right now we're at 8.7 million roughly and we will probably depending upon the arrival of a couple pieces of equipment for our coil facility we'll be in the $10 million range plus or minus a little bit perhaps this year and next year I don't see it succeeding that.

Okay. I'll jump in queue and I'll come back with some more questions.

The net result to answer you a little bit further, Frank, that's roughly what our depreciation is. So on a cash flow basis the depreciation and the CapEx are going to be about the same area and so profitability will go toward paying dividends plus buying back stock and the dividends are somewhere in the $6 million area and the profitabilities, is going to be over 20. So we're going to have some excess money around.

Great. And I'll jump back in queue and come back to you with a couple more questions.

Thank you.

Thank you and we'll now take our next question from David Woodyatt with Keeley Asset Management.

Yes. What was the backlog a year ago?

A year ago the same period was 59.3 million. It's roughly $4 million down.

Okay. I also wanted to ask you about in the press release where you're talking about buying back stock you're quoted as saying that if you make purchases at current levels, it's going to enhance book value and earnings per share. It may enhance earnings per share, but it won't enhance book value either absolutely or per share. I wouldn't want to challenge you on your knowledge of your business, but I think that's an erroneous --

Where did you see that I was quoted on something like what you mentioned? I don't remember making those statements.

There's a paragraph where you mention that you're going to repurchase up to 10% of the outstanding shares was approved by the board.

Correct.

The following paragraph.

Okay. We talk about that it will substantially under valued. Okay, the book value and earnings per share remaining on the outstanding shares. If we lower the outstanding shares, that will have an effect upon the things relative to the outstanding shares.

Well, I think what what you're missing is if you, for instance, bought $10 million worth of your own stock, you have to subtract $10 million from shareholders' equity.

That's out of earnings.

Shareholders equity for the remaining shares actually goes down. You have to pay less than book value per share to increase the book value per share on the remaining shares and you're still well above book value per share, the stock is. Just wanted to --

All right.

In any event, sounds like business is going very well and I greatly appreciated your visiting with us up in Chicago.

Thank you.

And we'll now take our next question from Graham [Rane] from Bears Capital Market.

Could you provide a few more details on what products you might be rolling out in the near future.

Well, as I said I wouldn't depend upon them for bottom line, but I will tell you what we're doing. We're working on continuing what we began a few years ago of updating all of our present product line and we've done that on the two larger sizes of our rooftop units and we are now going to do the next size down, probably get during the next year we're probably get two sizes down. We may still get the third one which would mean our entire rooftop product line will have been redesigned and updated and the updating is very significant. We're going from one inch of fiberglass insulation with one piece of sheet metal to two pieces of sheet metal and two inches of foam insulation. We're upping the energy or the R-Value, the energy saving part of the cabinetry by about two to three times better, 2 to 300% better cabinet and we're improving the air moving efficiency, the way we're going to move the air will take less horsepower as well as while the cooling of the air take less horse power. So it's a significant upgrade of the product line.

We have as we've been telling you been bringing you new air handling unit online and we have got it online and are just beginning to experience the sales and so that's going to have a definite impact on our volume and bottom line because I think we've got an excellent product. It's competitively priced for what it offers and we will get growth out of that. We're also into but just playing with and we're not really going seriously after the residential part which we have been talking about for some time since that is a depressed market, everybody who is in it is fighting pretty heavily for market share and it's not a place for us to spend a lot of our effort while that is going on. That's basically the two big things and then the other one, I'll give you a feel for one of the other issues. Some of the other large things that we've introduced and the kind of growth we've gotten out of them, it would appear that on an order booking case the water chiller which we introduced a few years back are going to our bookings. They're going to be about 100% growth on bookings this year over last year. On the large tonnage rooftop which we've introduced several years ago now it looks like it's somewhere in the 15 or 20% growth from last year to this year. So those things which are growing rapidly right now have only been out there for a little while and we would expect continued heavy growth in those bigger tonnage products. Does that answer your question?

Yes. It's very helpful. Can you provide a little bit more detail on you were talking about how initially when you guys got off the ground I think Wal-Mart was a big national account you had and that kind of put you on the map and it sounds like kind of moved away from that to go into the more general market and establish your customer base there. Are you now putting more of a renewed focus on going back and getting some of these big national accounts? Is that what you were trying to say?

Yes. To a degree. What happened is we had a slowdown in the general commercial market in the early 2000s and during that slowdown, of course, what business was out there was being fought over pretty strongly and we because of pricing levels that were occurring and some of that national account, we chose not to take the orders at the price level that they were taken at and we instead were pursuing broadening our product or customer base and we got into more of the general market and therefore, we had a slowdown in our national account business offset, more than offset by the other part. The market now is stronger and we have the capability now of building more product. We bought a lot of -- made a lot of capital investments which have given us the ability to build more than what we're getting in orders right now and so we're more seriously going after it and I spoke just a few minutes ago about the fact that we're introducing a whole new line of small tonnage products and that's where a lot of the national account business is in those size of -- those kinds of products which goes up to about 30-tons in a unit size and that's where, for instance, you mention Wal-Mart. Wal-Mart is within that scope of product line and we think as we introduce these new products we're going to have a much better chance to enhance our national account business.

And then the last question, any thoughts of hedging that exchange rate or taking out some sort of derivative to kind of mitigate that risk?

I haven't gotten into that yet, probably should, but I haven't at this point in time. I'm getting a lot of conflicting advice as to what's likely to happen and the one which we're obviously really concerned about is the Canadian dollar. At this point, no, I have not done anything on it.

Okay. Thanks a lot.

And we'll now go back to Frank Magdlen with the Robins Group.

Norm?

Yes, Frank.

What were the revenue in Canada and I understood your right we should look for about another $ 0.5 million loss from Canada in the fourth quarter. Is that correct?

Probably somewhere in that vicinity, Frank. It's like I say going to be dependent to a large degree on what happens to the exchange ratio. As I explained, a lot of that business comes back in the U.S. and when we change the U.S. dollar back to Canada, Canadian dollar, we get less than we anticipate, it will have an effect on the bottom line. What has happened on the Canadian orders, just let me tell you in a moment here, I've got them right now. We were growing the orders between '05 and '06 we grew them about 15% and because of the problems we're having this year to last year it's diminishing. Well, we raised the price. Since March we raised the price close to 30% to try and offset the exchange rate. The problem with it is that because we have that large backlog which we're still working out of the new dollar or the new orders at the improved pricing as we've raised the price during this since March have not flown through to the bottom line. They will start flowing through and it gives us an indication by what we've gotten from our month that we just closed or are closing on October which we don't have the final numbers on yet, but where we are at this point looks like it might have -- be having some of that impact.

So it's also done one other thing. It's slowed down the order input which was a norm that we're going to do that. It's designed to not take orders that shouldn't be profitable and so we're either going to get it profitable or we're going take some other action. The profitability is going to be diminished without any question. It's going to go down. It will go down it this year. If I had to to guess I'd say we're going to be down somewhere around 40, 40% on orders from what we were last year. So it's going to reduce the size of the operation because we have to depend upon one of two things, either Canadian orders which aren't affected by the exchange rate or those orders which we can get at the higher price in the U.S., and that is unknown to us because it's changing so fast or has changed so fast that we don't have a real good fix on it. We know it's impacted our ability to get orders, though.

But can you just quantify a little bit as to Canada's going do maybe 10 million or 12 million revenue or --

Oh, in revenue? Just one moment. Yes. I was talking orders a moment ago and just a moment. We're going to be probably at 15 million in shipments.

For '07?

For '07.

All right.

But we're not going to be taking orders at that rate because of the problems we're having with the exchange rate.

Okay.

We were well on our way to getting what business we were getting, we were well on our way to getting that started to be correct and making a profitable company and then we've gotten hit by this other problem.

Okay. Could you help us out a little bit in looking at your markets, what percent of your revenues now are replacement versus new construction?

Well, let's talk about what replacement is and then we'll get into new construction. There are two types of replacement business. There's unexpected replacement business which in the middle of the summer some unit fails and they say it's not worth fixing, buy a new one, which is the unexpected type of replacement that demands that you have a product available right away because the people need the cooling right away and then there's the replacement market where somebody knows something's getting old and they decide when it's not so hot out that they're going to change those units out and put new units on the roof. The replacement market unexpected replacement market, is best served by those people who have distributors as a source of marketing of their product. The positive effect there is that they have a very good shot at that unexpected replacement market. The bad thing is the distributor costs more than a direct sales force. So they have chosen to go that way and a couple of major manufacturers are that way. Other major manufacturers including ourselves have gone direct route which is either a factory owned sales force or independent agency direct sales force. So on the unexpected replacement we're not strong. We're strong on the expected replacement. The market in general is a little more replacement market than it is new construction. So one portion of the replacement market we're strong in, one portion we're not. We are, however, more strong in the new construction than the people who decided to go with distribution or with distributors as their sales force out there. So there's three companies, three major companies, that are direct sales force I would say and two who are primarily -- they are distributor oriented and so what does that do to us? Instead of being a little more than 50% new -- I mean replacement like the market is, we're a little less than 50%. How much less? I'm going to guess right now we're somewhere around 45% replacement and 55% new construction.

All right. And then just a couple other questions. When looking at your revenue, is about 2/3 of the revenue growth from price and 1/3 from volume as you've worked through price increases over the last several years?

Well, it's varied immensely. This year probably -- we're probably getting about 1/3 of it through price increase and 2/3 of it through actual growth. In past years it's been the reverse or something in that vicinity, but this year we're probably going to get of actual dollar increases we're probably going to get somewhere around 5% and we're probably going to be what, right now so far this year total nine months growth revenue. I got to check my numbers to make sure I'm telling you the truth here. We're 13.3% so far and I think we're going to hold or increase that a little bit. So that would kind of give you a ratio.

Run that by me again. You said how much again?

We're probably -- total change is 13.3% for the nine months and that we're probably going to hold in that percent, somewhere around that percent and possibly increase it and of that probably 5% of it is price related, although we've had more price increases. Some of them aren't falling through the backlog as fast, fast enough to change that.

Okay. Just a couple more simpler questions. Kathy, how many shares have you repurchased this year and about the average price? And then another thought is any major changes in tax rates?

On the shares that we repurchased --

Give him the dollar value, first of all.

Yes. Keep wanting to share that from the beginning.

That's all inclusive.

Yes. That's the original plan. Bear with me just a second on the shares here.

Or another way of looking at it going forward, Norm, is the plan you announced today, is that a new plan and there's nothing left in the old plan or is that --

Left in the old plan when we went to dividend on the basis of the new quantity of stock there's 100,704 shares yet authorized but not done and the previous authorization based upon the new share quantity was 1.9875 million. We still have 100,704 shares left to buy on that and we've announced another stock buyback which we intend to start implementing after the blackout period which means we can start on Friday of this month -- of this week.

Okay.

Frank, the numbers I have are available at my fingertips here have to do more with not just in 2007, but overall and reflects the stock split.

We'll take those.

On our original stock buyback, it's reflective of the stock split, the average price was $11.86. With that we spent $22 million as Norm said, there's on that original buyback there's 100,704 shares left to repurchase on the original plan. We also in 2005 started a buyback on 401K investments from their employees if they would like to diversify. We have repurchased through that program 467,637 shares for an aggregate price of about 7.1 million an average price of $15.14 a share and then we also have repurchased some stock back from directors. That began in November of '06. We have repurchased 260,625 shares for an aggregate price of 5.2 million that averaged at $20.08 per share so we really have three type programs that we have purchased stock back. For the quarter we purchased back 199,943 for an average price of $20.98 of all three programs.

Okay. All right. Well, thank you very much and we look forward to your continued success.

Thank you, Frank.

Thank you.

And we'll now go to Tony Pollack with Maxim Group.

Good afternoon.

Hi, Tony.

On Canada can you give us an idea of what the gross margins are without Canada in your business and at what point do you fold it up?

If we pulled Canada out of there just the way it is right now, our gross margins would have been in the low 20s, somewhere in the 21 area on our other portion of the business. Folding it up is one of the alternatives and we've raised the price enough that one or the other we're either going have it profitable or else we're going to do something else with it and folding it is up one of the possibilities.

Okay. When do you plan on retiring?

You ask me when I'm planning on dying. I don't plan on retiring. I worked my whole life to get this job and I love this business. I love what I'm doing as long as my mind functioning and my body prevails, I'm going stay at it.

Okay.

I'm in very good health, by the way, probably never been in real good mental shape, but that hasn't changed.

Sounds good. Thank you.

And we'll now go to Anthony Rab with Perimeter Capital.

How are you doing?

Just fine. Yourself, sir?

What percent of your mix could you consider countercyclical in nature?

Good question. All of the replacement business is countercyclical I think and it probably goes up because what takes place in our business, if I understand your question correctly, is as new construction falls off, the contractors and the consulting engineers and everybody who is in business then redirects their effort toward trying to get more of the replacement business to happen and so it probably runs counter to the building construction cycle because I think more replacement market happens during those times and so that would be in our 45% or so of countercyclical for sure and then certain other portions for other peculiar reasons probably kick in and probably gets you up to 50% or slightly better.

Okay. Thanks.

Does that answer your question?

Yes, it does. Thank you. The next question is on the buybacks and I guess just to ask Frank's question another way is looking at your history of buybacks it looks to be running at around 1 to 2% of the outstanding over the last couple of years and I guess what I'm trying to figure out is should we expect a similar clip going forward or is this more of an accelerated program?

No. If you remember back when you check back in our announcements before when we announced a dividend we also announced a cessation of stock buyback on the open market. What Kathy is talking about is stock buyback that we didn't cease doing which was buying back if the employees wanted to sell their money out of their 401 and reinvest it in others and it was also that because some directors, myself included, had pretty big stock option plans that were coming due, it was decided rather than have those hit the market that we would sell them at market price to the company if we chose to and so those were the kinds of things which she was referencing. There was no buyback of that authorized 100,000 shares since -- do you have the date handy, Kathy?

February 14 of 2006.

February 14 of 2006 we ceased buying back on that other 100,000 shares. So this new plan is definitely going to be a much faster plan. To look and see what that might be, you'd have to go back. We've had two stock buybacks, one where we were discussing here we bought back all out of essentially 2 million shares we bought back all but 100,000 shares. Look at that up until February of '06 and see the rate we were buying it back and prior to that we had another buyback where we bought back 10% of our shares. I can't give you the quantities off the top of my head, but it was 12% that we just as we finished that we implemented the one we're talking about and you can go back essentially through the past 20, almost 22% buyback that we had prior to that time and that would tell you how fast it happened. I can tell you that that 22% was bought back -- just a minute. Kathy is pointing it out to me here something.

This total is for both of these same programs but just at two different times. That's the total number of shares.

Okay. She correct me here a little bit that the 2 million shares was for the two programs that we had before and they started on October 17 of 1999 and went till February 14 of 2006. So we bought back 2 million shares during that time at the prevailing price then and we've had stock splits during that time period. We've had 3 - or 3 for 2 stock splits during that time period.

Okay, thank you. Have a good night.

And I'd like to give everyone a final opportunity. So if there are any additional questions, please press star 1 at this time and again we'll pause for just a moment. It appears there are no further questions. So Mr. Asbjornson, I'd like to turn it back to you.

Okay. I thank all of you for participating in our call, appreciate your support. I want to thank you and in summary leave you with the idea that yes, we got an issue to be addressed to get the Canadian operation corrected in some fashion. We are very much aware of it. We are working toward getting that correction accomplished. The rest of the company has continued to work beautifully and as far as we can see, it looks that way for the future. Thank you.

And thank you very much. That does conclude our conference for today.