Acme United Corp (ACU) 2007 Q4 法說會逐字稿

Good day, everyone. And welcome to the Acme United fourth quarter 2007 earnings conference call. As a reminder, this call is being recorded.

At this time, I'd like to turn this conference over to your host, Mr. Walter Johnsen, Chairman and Chief Financial Officer. Please go ahead, sir.

Good morning. Welcome to the fourth 2007 and year end conference call for Acme United Corporation. I'm Walter C. Johnson, Chairman an CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read a Safe Harbor Statement. Paul.

Forward-looking statements in this conference call including without limitation statements related to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risk and uncertainties including, without limitation, the following: One, the Company's plans, strategies, objectives, expectations, and intentions are subject to change at any time at the discretion of the Company. Two, the Company's plans and results of operation will be affected by the Company's ability to manage its growth. And three, other risks and uncertainties indicated from time-to-time in the Company's filings with the Securities and Exchange Commission. Now I'll turn the call back to Walter.

Thank you, Paul. Acme United had a strong performance during the fourth quarter of 2007 and a record sales and earnings year. For the fourth quarter, sales were $14.9 million, an increase of 23% over last year. Our net income of $546,000 in the fourth quarter of 2007, represented a 38% increase over the comparable period last year. Full year sales in 2007 increased 11%, to a record $63.2 million. Our earnings exceeded $4 million after tax for the first time.

Our fourth quarter performance was particularly gratifying, given the slowdown in consumer spending and a general malaise in the office products industry. Our sales growth was due to increases in our cutting category, market shares in both North America and Europe, expansion of our distribution in the sewing and industrial tools market and strong performance of the iPoint pencil sharpeners. The fastest growing segment was our business in Europe, which increased 23% during the quarter and 21% for the year. This was due to strong market share growth with independent dealers, new distribution agreements with office buying groups, and additional sales at the major office superstores. Our manicure business also performed well with strong growth at one of the largest pharmacy chains in Western Europe.

Our gross margins were under pressure during the fourth quarter and declined from 41% to 39%. Part of this was product mix, but we also felt the impact of the weakened buying power of the U.S. currency, higher material costs and the reduction in China of the export tax credit. Our new increased prices went into effect on January 1st, 2008, and are expected to help recover increased costs. However, the pressures on our costs are continuing, and we expect to manage them carefully in 2008. The losses in Europe declined during the quarter from $550,000 to $345,000 due to strong sales growth, improved margins and comparable costs. We have a number of excellent new business prospects in Europe and the momentum in revenues to continue to drive toward profitability. We expect to see continued improvement there in 2008.

We have built up our sales model for 2008, and continue to see internal growth of about $9 million. This consists of new iPoint pencil sharpener sales and expected strong back-to-school reception of the Microban anti-microbial product line and increased European and Asian sales. An upside in the potential of revenues for the year is the market reception of the SpeedPak utility knife, which has just begun shipping. At this stage, we feel comfortable giving guidance of $70 million to $72 million in revenues in 2008, with margins about comparable to 2007. This would provide net income of about $4.5 million, which would be about $1.23 per share. Having said that, our markets are soft and we continue to expect additional cost pressures. I hope, however, that we can surprise you later as the year develops. I will now turn the call to Paul Driscoll.

Acme's net sales for the fourth quarter were $14.9 million, compared to $12.1 million in 2006, an increase of 23%. Net sales for the year 2007 were $63.2 million, compared to $56.9 million in 2006, an increase of 11% or 10% at constant currency. Net sales in the U.S. segment increased by 23% in the quarter and 10% for the year, mainly due to new product sales including the iPoint electric pencil sharpener and market share gains. We also expanded our product line including rotary paper trimmers with a major office superstore. Net sales for Canada increased by 19% or 2% in local currency in the quarter, and 11% or 5% in local currency for the year. The increased sales in Canada were mainly due to higher sales of the iPoint electric pencil sharpener and further penetration into the Canadian retail segment. Net sales for Europe increased by 23% or 10% in local currency in the quarter, and 21% or 11% in local currency for the year. The sales increase in Europe was mainly due to higher sales in manicure items to a major European retailer and expansion in the office trade channel.

Gross margins were 39% in the fourth quarter of 2007, versus 41% in the comparable period last year. For the year ended December 31, 2007, gross margins were 42%, compared to 43% in 2006. The gross margin decline in 2007 was due to product mix, increased raw material and labor costs of China and higher costs as a result of the appreciation of the Chinese currency against the U.S. dollar. Costs also increased due to the reduction of an export tax credit in China.

SG&A expenses for the fourth quarter of 2007 were $4.9 million, or 33% of sales, compared with $4.1 million or 34% of sales for the same period of 2006. SG&A expenses for the year 2007 were $19.7 million, or 31% of sales, compared with $17.9 million, or 31% of sales for the same period of 2006. The majority of the increase was due to higher sales commissions and freight costs associated with the higher sales, costs associated with the addition of sales and marketing and logistic personnel, and consulting costs associated with compliance with section 404 of the Sarbanes-Oxley Act. Additionally in 2006 there was a one-time benefit related to the settlement of a lawsuit.

Operating profit was $880,000 in the fourth quarter of 2007, compared with $870,000 in the fourth quarter of 2006. Operating profit for the year ended December 31, 2007 was $6.8 million, compared to $6.7 million in the same period of 2006. Operating profit for the U.S. segment decreased by $400,000 in the quarter, and $500,000 for the year. The decline in operating income in the U.S. segment was mainly due to higher personnel related costs, increased consulting costs associated with section 404 of Sarbanes-Oxley which amounted to approximately $200,000. And the one-time benefit related to settlement of a lawsuit in 2006 which amounted to approximately $200,000. The one-time lawsuit benefit occurred in the fourth quarter of 2006. Operating profit in Canada increased by $170,000 in the quarter and $150,000 for the year, due to the sales growth.

The European operating loss was $335,000 in the fourth quarter of 2007, compared to a loss of $600,000 in the same quarter last year. The European operating loss was $730,000 for the full year of 2007, compared to a loss of $1.1 million in 2006. The decreased operating loss in Europe of approximately $400,000 was mainly due to sales growth and improved gross margins as a result of lower packaging and air freight expenses.

Now I'd like to explain the pretax and after tax figures. Pretax income decreased by $46,000 in 2007, compared to 2006. Lower pretax income in the U.S. was mostly offset by reduced losses in Europe. Income tax expense was $182,000 less in 2007, compared to 2006. The lower pretax income in the U.S. resulted in lower taxes. The reduced losses in Europe are not tax affected. Consequently, net income increased by $136,000 for the year. This had an impact on the effective tax rate which improved from 39% in 2006, to 36% in 2007.

Net income for the fourth quarter of 2007 was $546,000, or $0.15 per diluted share, compared to a net income of $396,000 or $0.11 per diluted share for the same period of 2006. Net income for the year ended December 31, 2007 was $4.0 million or $1.09 per diluted share, compared to $3.9 million or $1.05 per diluted share in the comparable period last year.

For the balance sheet, accounts receivables were up 18%, which is consistent with the sales growth. And inventory has increased by 20%, which is also consistent with the sales growth. Bank debt less cash on December 31, 2007, was $5.2 million compared to $6.4 million on December 31, 2006, a decrease of $1.2 million. This change primarily resulted from the payments of $600,000 for acquisitions and $500,000 for shareholder dividends which are offset by strong cash flow from operations of $2.7 million.

Thank you, Paul. I will now open the call to questions.

Thank you. (OPERATOR INSTRUCTIONS). We'll take our first question with Gary Holdsworth with Singular Research. Please go ahead.

Hi, Walt and Paul.

Hi, Gary.

Hello, Gary.

Great top line growth this quarter. Obviously, those new products are really contributing. Besides the new products, if you looked at your kind of base business, besides the new products, are you holding your own there? I mean, I know you mentioned a slowing consumer, but just wondered about your thoughts on that.

The answer to that is we're more than holding our own because in the cutting category, we're gaining market shares and we continue to be adding frankly new customers. But if you take a look at some of the major superstores, their traffic is down. And the supply line is fairly tight. I mean, because we ship at 99% on time all the time, it's almost like a just in time delivery. So when their stores are slow, we're slow. And those are basically representative of lost sales. On an individual product line basis, however, we're almost across the board showing growth. And I will tell you that the January and February are coming in very solidly with growth for us. And it's kind of across the board, by product. However, as I said, the individual stores are clearly showing slowness.

Okay. Can I just get into the mix impact just a little? As far as, why -- what do you-- how do you view the mix shift or what was it in the mix shift that led to the decline in gross margin and is it primary steel, your primary commodity or what are some of the other components of that mix shift, if you mind going into it?

Well, I'll talk in general terms. In our safety area, some of the medications that we sell, like Tylenol and Advil, there've been cost increases that we absorbed that we haven't yet passed on to our customers and because we set up catalogs a year in advance and some of those costs came rolling in because they decided to raise costs, raise our costs. The new products like iPoint have good margins for us but they're comparable to other products that we have, so they're not raising margins, all they're doing is making us more money. The currency is a very tough thing which we have no control over, other than new price increase which went in in the first of the year. You may remember back in August when we announced to the world that we were raising prices and we led the market category. What we were seeing was the expectation of additional cost and we saw some of it in the fourth quarter.

Okay. Very good. Thank you. And I have one more question and then I'll open up for some others. As far as the new products are going, could you comment on the Razor, which would be the popularly priced version of the iPoint, as well as the SpeedPak and just how things are going thus far?

The Razor is a less expensive and smaller iPoint pencil sharpener. And you will be seeing those products in most of the mass market retailers this year, companies like Wal-Mart and Target. You'll see them in places like Office Depot and number of the superstores. They're going as well as we can make them and that's -- so they're doing very well. Internationally, they're also being accepted because they're battery operated and so there aren't issues with different power supplies. Regarding SpeedPak, that's the utility knife with the interchangeable cartridge of 10 Titanium blades. It's had a great deal of interest. It's placed at one major superstore now and we began shipping that in January. It's also placed at a regional mass market chain that reported very, very good sales in January. The big upside with SpeedPak is if we begin to sell into the major hardware and industrial chains, companies like Granger and [Master Car] and Home Depot and Lowe's and we haven't begun doing that and we don't have them as customers yet.

But you think you will get them as part of that marketing plan?

Well it would do our upside in our current $9 million forecasted growth and we're optimistic.

Okay. Very good. Thank you.

Thank you.

[(OPERATOR INSTRUCTIONS). We'll take our next question with Jeff Matthews with Ram Partners. Please go ahead, sir.

Thank you. Hi Walter, hi, Paul.

Hi, Jeff.

Three questions. One is could you discuss how -- where you stand with Target and Wal-Mart these days? Secondly, Europe and how that -- you think that's going to play out in 2008? And then third, what are the big components of the $9 million sales -- incremental sales you're looking at in terms of organic growth, new products, new markets? Thanks.

Okay. First, let me talk about Target and Wal-Mart. These are obviously the largest mass market retailers in North -- in at least the United States and probably in North America. We are increasingly doing more business with them. We have taken on additional category leadership in the selling area at Wal-Mart. We've added new back-to-school items with Microban in both retailers. And that's all incremental. We continue to be working very hard with a number of the different buyers, whether that be in stationery or in kitchen or in back-to-school, as well as sporting goods and hardware. We've opened, as you probably know, an office in Bentonville to service Wal-Mart and that's been very successful for us. Both accounts are among our fastest growing and of course the good news there is that they have a lot of legs to be able to grow. And I would characterize our relationships with them as very positive and with a lot of potential.

With Europe, we expect Europe to continue to be showing substantial growth on the top line. We're expecting the margins to continue to improve over last year and we're seeing that in the first two months of this year. And the costs are pretty much in line with last year. So we expect to see continued operating improvement. There are a number of accounts that we don't have right now that represent major accounts, that if we were able to land them, it would accelerate the growth and drive us faster to break even. But I can tell you that under the current scenario, we're clearly making monthly and quarterly progress and I'm happy with our performance. Regarding the major new components of the $9 million of growth, I'll turn that one over to Paul and then if there's any further questions regarding that, I'll answer them. Paul?

Breaking down the $9 million, obviously the iPoint pencil sharpener will continue to be successful and that's an important part of our growth expectations. Our hardware business, especially the SpeedPak, is an important factor. Additional business at Wal-Mart including the sewing, scissors, titanium sewing scissors. And of course in Europe, there's just so much opportunity there, that we're at such an infancy state at the moment that we expect a lot of opportunity and growth in Europe. So I think those are the four key factors.

Also, there's the Microban anti-microbial scissors for the kids and those will be in multiple million dollars this year.

Okay. Thanks. And just to follow up, Walter, on Europe, it sounds, then, like you're comfortable with it, you're glad you're there and you're maybe a little more (inaudible) than a year or two ago about an alternate payoff from that investment.

I think where we are with Europe right now, is we not only see the light, but we see the opportunities. And having the global format to date is a strength for us. I would say a few years ago, some of our customers weren't quite as global as they are today, but the integration with our Asian operation and our logistics, it's really starting to pull together for us.

Terrific. Good luck in '08.

Thank you.

And we'll take our next question with Gary Holdsworth with Singular Research.

Hey, you've got a short queue. Let's go into, when do you-- just to remind us, when do you anniversary the iPoint launch? Has that already happened? Is that over a year old now?

It's over a year old.

Okay. So you're really growing on top of growth, then?

What we're doing is we're adding a page of new accounts and so we don't even see the anniversarying because the new ones keep coming on top of it.

Right, and then you've got the Razor on top later this year.

Right.

Okay.

Although the Razor really has been shipping but it's a back-to-school item in particular.

Right. Okay. Onto the new Executives you've just hired, were they just-- I didn't-- I just mostly looked at the headline there. Were they incremental or are these promotions and what do you see their contribution this year?

Both of them have been with us and contributing in a very real way. Mike Peterson was our, Vice President of Marketing, and we expanded the title to, Vice President of Global Marketing, because the roles today are clearly on a more macro level than they were several years ago. Mike used to work at Unilever, MBA from NYU years ago, very, very talented marketing executive. David Farnworth is from England, used to work at Duracell in marketing, joined us, worked on things like the iPoint pencil sharpener and the Razor and has been a -- and Microban and has been a terrific, terrific partner as we have grown. So both of them have demonstrated performance and are really contributing and solid members of our Management team.

Okay. Just to follow up on your last comment on Europe. I don't want to put words in your mouth. When you said you're not only seeing the light, but the opportunities as well, so you're fully intended Europe to be break even at some point and even beyond?

Yeah, it's eventually going to break even and the key issue here is the rate that we grow the top line. And there's some accounts that can help us get there pretty quickly. I will tell you that in our plan, we don't have it breaking even. But there's an opportunity that we could do that if we're successful with our continued new product efforts. You shouldn't model break even. We haven't. It's quite possible. I think you can clearly model improved performance every quarter that is quite substantial.

Okay. That's very good. Last thing, on the Microban, just could you walk us through the development of that product or that relationship, was that something that your customers requested? Is this something that you thought that they would like? Or just your -- just how that came together? I think it's instructive on how you guys develop new products.

Well, in this particular case, it's responding to something that's very real in the school market. Methicillin resistant staph infections mean that it's very difficult to treat with antibiotics, and so you don't want to really get one of those infections. You may have read about the school in Illinois that shut down for several days because some of the students had MRSA infections on their feet. And when they shut down, cleaning and basically drenching athletic facilities and various areas with chlorine based products, is about the way you can seem to get rid of the stuff. It's a pretty big headline there. It's a pretty big factor in Europe where in many ways the Europeans tend to be a step ahead of Americans in sterility and cleanliness aspects.

So we're taking that feedback in and we're looking at our-- the product line and decided with some research that yeah, this might be an area to introduce. So the leading company in the industry as a company called Microban and we licensed the exclusive for our product families from them in the U.S. and Europe, and then proceeded to get them placed in major retailers and in school distributors to North America and Europe. So it was a project that started about a year ago, maybe a little bit more than that, and we put it into place.

Now the actual Microban coating or whatever, I don't know exactly how they're doing this, but are they doing it just to the handles of the-- like for example it's a pair of scissors, or is it actually the blade as well?

Microban is a carbon-based product with some chlorine attached to the carbons. And what it does is when it's wet, it provides the equivalent of a bleached surface and so the bacteria generally die. That material is blended into the plastic that goes into the handle and so when we're doing injection molding of scissors handles, or we're doing the injection molding of complete plastic rulers the Microban is disbursed throughout the materials. Of course the blades themselves aren't treated with Microban. But generally where the transmission of microbes occur are on the handles or the parts that you touch.

Okay. That's helpful. Thank you very much.

Sure.

And we'll take our next question with Tom Spiro with Spiro Capital Management. Please go ahead, sir.

Good afternoon,.

Hi, Tom.

Hello. A couple of questions, first on the China front, it seems like one of the sources of pressure on our gross margin is the loss of the tax and the weakness of the dollar versus the R&D. Walter, generally speaking, are our competitors facing similar issues or do we have some kind of advantage or disadvantage, given our exposure to China?

I will tell you that we're very, very confident that we're on top of the cost and I don't believe any of our competitors are in a better situation than us. And I say that because of the volume of the product that we produce and the customers that we sell to. We believe we're the lowest cost producers in the world and of, particularly cutting items, and we also believe we have most of the major domestic -- North American customers and we would know if we're not competitive. So the issue with the loss of the tax credit for exports in China or the reduction, substantial reduction in it, was across the board on thousands of items. And all the mass retailers, globally, know about that. It's-- and everybody's got it applied in a similar way. The RMV, the currency, again, that's the -- that's something we all face. Our challenge is to increase the productivity in the factory, increase our production runs, think through our packaging and be smarter. And we've been good at that in the past and we just have to keep relentlessly looking at it. But I would say that all of our competitors are facing the same cost pressures.

Have you seen any of our competitors look to other countries besides China or are we considering that?

There are a lot of reasons why China makes terrific sense for us to manufacture. The ability to put together tooling quickly and inexpensively, the shipping and logistics, the trained work forces, highly educated people working there, the training we've done in our factories and also with our staff and support, so it's still a very good place for us to be. I've seen places to go in other countries and I'm sure there's some competitors listening so I won't tell them where. But China is one really, really good place for us to be and I don't see a major move into Latin America or South America. I don't see moves into India. It's not so easy to make that kind of move.

Thanks. Could you give us an update, Walter, on Camillus and the TigerSharp, how they're going to play out in 2008?

Camillus and TigerSharp both have started to generate some sales for us. We've merged the product, depending on who we're selling to in the market. But in general, I would expect to see some of those folding knives from both of them and some six blade knives in do-it-yourself and hardware chains and you'll be seeing them fairly soon.

And lastly-

They're selling now too.

Yes, and lastly could you just update us on the stock repurchase initiative?

Well we announced that we would repurchase our stock and we think that's a good use of some of our cash but we haven't purchased too many shares because we were in the midst of a quiet period so we didn't buy much. But we would like to.

Thanks, much and good luck.

Okay.

And we'll take our next question with Tamara Monuchin with Greenwood Investments. Please go ahead, Ma'am.

Hi, it's Tamara Monuchin. I-- most of my questions have been answered. Just I have a follow-up question about China's effect on gross margin. Could you quantify, what was the foreign exchange effect on the gross margin? And also what are you try-- what are you doing to offset that effect in the future?

Well I will try to answer that, but it's complicated. And the reason it's complicated is because we haven't calculated the effect where the Euro has gained against the dollar, so in some areas we've had a positive effect with some of our purchasing relative to the sales in Europe. On the other hand, in the U.S. we've gotten quite a bit of productivity improvements, so even though we're-- we've got a foreign exchange issue on the margin, we're also just making our products smarter. But as you probably know, the Chinese currency over the past two years has appreciated against the U.S. dollar about 12%. And so that's a pretty big number. We haven't done those kinds of increases to our customers, but if we hadn't driven for productivity, we would have had those kind of cost increases and clearly that would have been a big issue in our margins. But I think it's fair to say that the foreign exchange effect is hitting all of our competitors. And again, our major way to combat that is just to keep pushing on productivity and pushing on being smart and where we have to, we pass through some price increases.

And in terms of share repurchase, could you remind me of what -- how many shares are authorized, currently, under the share repurchase authorization?

I'll turn that to Paul.

There's currently 185,000 shares authorized for purchase.

Okay.

My -- this is Walter. My thought is that we would be opportunistic and sometimes these repurchase programs run for more than a year and I'm in no rush to repurchase stock. I just think we should have it available because the markets are a little bit sloppy and we think perhaps the price right now is pretty good.

Okay. And on your guidance of $70 million to $72 million in revenue, are you factoring in any deterioration with current -- I mean with traffic as you mentioned with some of your current channels?

Yeah, yes, we are factoring that in as we see it right now.

Could you quantify how much of that are you factoring in?

We built it up, customer by customer and product by product and we didn't do it by saying store traffic is off 3.5% at one superstore or another one just reported flat sales. We did it based on number of stores and the sell-through that we have per store in each chain right now. So we built it bottoms up, based on current levels. And so it's reflective of what we think the current volumes are at these stores. But I didn't look at it the other way, which is suppose it was optimal or what it had been a year ago.

Okay. Okay. Thank you very much.

Thank you.

We'll take our next question with Rick Fetterman with Fetterman Investments. Please go ahead, sir.

Good afternoon, Walter. I missed, excuse me, the number, what you said the revenue was in Europe for '07.

Well we didn't -- I don't think we covered it.

The revenue for Europe in '07 was $6.3 million.

And what -- given the current product mix, what -- where do you need to get in order to break even, more or less?

You can always add a couple million bucks.

Okay. Should we think in terms of the SG&A remaining around 31% or is there some -- little surprised there wasn't a little leverage, given the dramatic increase in revenues last year.

Well let me just talk about this SG&A for a second. Last year, Paul mentioned that the SG&A was reduced by about $200,000 due to a lawsuit settlement. And that was when St. Paul Insurance refused to honor their commitment to defend us if we were sued and we were. And so after we won the lawsuit we went back to St. Paul and we wanted to get repaid and we won. I thought you should know that. The expenses this year in SG&A, Paul also mentioned were about $200,000 higher for getting the Sarb 404 consultants and that's just a cost of doing business but it was higher than last year, so that was about a $400,000 swing. Going forward into this year, we're continuing to spend a lot on development. We've modeled to improve the SG&A a little bit. And I think we should get some leverage. But what drives our business, as you know, is just keep innovating products, keep doing the market research, and don't stop. So I think you'll see a little bit of leverage.

Okay. And I'm sorry, when you gave your forecast, I missed the expected net in '08.

The net income?

Yes.

$4.5 million.

$4.5 million. Okay.

$1.23 per share. What I also said, Rick, was that we think there's some upside with the iPoint pencil sharpeners in the back half of the year. We hope that's the case. And I'd like to be able to say guys, we surprised you.

If the-- I think everybody would like that.

Okay.

The estimate for net as well as -- well, is pretty much in line or equal to the estimate for -- estimate range for revenues. Is the lack of, well, leverage where you might get more out of the net line primarily a result of currency unknowns or it just seems like there should be a little more on the net line?

You've got a firm grasp of our economic model. We are trying to be a little conservative because there are a lot of cost pressures and I think -- I think sometimes when the interest rates keep dropping in the U.S., and the dollar keeps weakening, I think sometimes the dollar is falling apart and that's -- of course it isn't, but that's the part that we really can't control. And we're trying very hard to maintain our costs. We do have some opportunities to buffer any increases. One of them is we maintain substantial inventories, not for managing currency risk but to have high delivery levels to our customers. And there's a long supply chain. So-- but it does have the benefit of giving you a buffer against quick currency changes. And gives you time to readjust pricing.

Okay. Thank you very much. Good luck.

Thank you, Rick.

We'll take our next question with [Chris Dussett] with [Dussett Asset Management].

Good afternoon, gentlemen. Congratulations on the progress in the quarter.

Thank you.

Previous callers asked most of my questions, but I just had a couple more questions. Paul, did you mention how much we lost in Europe in 2007?

Yes, it was $730,000 compared to $1.13 thousand last year.

So that's roughly $100,000 loss in the fourth quarter?

The fourth quarter -- no, I said $730,000 for the year and the fourth quarter was $350,000.

$350,000 in the fourth quarter. Okay. And you mentioned in your guidance number of positive EPS, $1.23, that you actually modeled in a loss for 2007, 2008, to get that number. Is that correct?

Yes.

Okay. Can you give us an idea of about how much of a loss you guys modeled in for 2008 in Europe?

No, and I'm going to tell you why. Because the Europeans don't think they have one modeled in.

Okay.

And they're listening to the call I'm sure.

The next question I have is in regards to first aid kits, Walter.

Yes.

I know that we've seen other companies actually have some success in this recently. Are we seeing driving an increase in first aid kits?

Yeah. That whole category is growing. Paul, do you have an offhand number to give him for the year?

Approximately 10%.

Okay.

First aid kits.

And Walter you may have mentioned this but, and I missed your comments about this, the SpeedPak, can I go to any store right now and buy it? I know you mentioned I can't buy it in Home Depot yet, but --

You can buy it at Staples, you can buy it at Fred Meyer and it's going to be rolling out during the late spring into some other places. So the early shipments went to those two stores.

Okay. Well, thank you, gentlemen. Good luck with 2008.

Thank you.

Thanks.

And we have no further questions at this time. I'd like to turn it back over to Management for any additional or closing remarks.

There are no further questions then this call is concluded. I'd like to thank you for joining us. Good-bye.

Once again ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may now disconnect.