AstroNova Inc (ALOT) 2006 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Astro-Med Inc. fiscal 2007 second-quarter results conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Tuesday, the 15th of August, 2006. I would now like to turn the conference over to Albert W. Ondis, Chairman and CEO. Please go ahead.

Thank you very much, Michael, and good afternoon, everyone, and I thank you all for participating in today's teleconference. With me today as usual are Everett Pizzuti, President and Chief Operating Officer, and Joseph O'Connell, Vice President and Chief Financial Officer. Each of us is going to make a brief presentation, and then we will take your questions.

As you know, we reported today on the second quarter of fiscal year 2007. That is the period which ended July 29, just 17 days ago. We are pleased that in the second quarter we set a new sales record for a quarter at $16,267,000. Net income was $740,000, equal to $0.10 per diluted share, and that is after a non-cash expense of $86,000, equal to $0.01 per diluted share related to SFAS 123R, which requires that stock-based compensation be expensed.

For the six-month period, sales amounted to $31,980,000, and net income was $1,283,000, equal to $0.17 per diluted share. Net income in the second month of the six-month period included a non-cash expense of $173,000, equal to $0.02 per diluted share or a stock-based compensation. In the second quarter, we received $17,426,000 in new orders. That is an increase of 14% over the corresponding quarter of the prior year. All signs, in fact, are pointing upward. Sales are up 11%, net income is up 19% and operating income is up 12%. And, as you will hear from Everett Pizzuti when he makes his report shortly, products which were introduced over the past year or so are receiving excellent market acceptance, and some additional new products are going to be introduced later this year. And, as you will hear from Joseph O'Connell when he makes his report in a few minutes, we are continuing to maintain our traditional strong financial conditions while funding strong R&D activities, as well as a growing international sales organization.

At this point I am asking Everett Pizzuti to provide some additional information about our performance during the quarter. Everett?

Thank you, Albert, and good afternoon, everyone. In the second quarter, we continued the momentum of our record fourth quarter with double-digit increases from prior year second quarter in both new orders as well as in sales. As in the previous two quarters, we enjoyed strong contributions from all of our major products and from international as well as domestic markets.

Additionally, as Albert mentioned, the sales for the second quarter set a new all-time record. During the quarter, our ruggedized product business, which includes cockpit printers, was quite robust in sales and new orders. During the last teleconference, we mentioned that we expected to receive a new contract in July. That contract to supply printers for the Airbus A400M was, in fact, awarded to Astro-Med as we announced in a press release on July 17.

A few weeks later earlier in late June we announced the new contract for our ruggedized ethernet switches for a new ground-based military application. We currently have contracts and pending negotiations valued at in excess of 1 million over the next 10 years. 100 million, I'm sorry. We have additional quotations and negotiations of over another 100 million covering ruggedized products for a variety of applications in commercial, as well as military, airborne and ground vehicles.

By way of summary, some of the major contracts that we have for ruggedized products include the Airbus A380 and A400M, the Boeing C-17, C-130, 777 and 787, as well as a number of classified ground-based vehicles. The next requirements will be for airplanes such as the 747-8, the A350, and a number of different business jets. And incidentally the delay in the A380 has only minor rescheduling impact on us. Business is going well with our other Test and Measurement products. The Dash products in the Everest are doing well as a result of more new airplane development, increased DOD spending and rebounding applications in industry that includes steel and aluminum mills, automotive and general research.

In the third quarter, we will begin shipments of our new Dash 8HF, which brings the powerful feature of very high sample rate reporting for demanding applications in Aerospace and industry.

In the area of color printers, we are continuing to make progress with the Vivo!. We have come close to meeting our objectives, and we have a large backlog of unfilled orders as of the end of the second quarter. Vivo! sales are developing in a measured way due to a number of factors. One is that our plan calls for gradual geographical rollout, and so we are not yet selling in all of the areas.

Secondly, the Vivo! represents a new technology that we continue to develop. And third, some of our customers are taking a wait-and-see approach as we add more and more satisfied users for reference. And by the way, we have many satisfied customers, and a success story about one of them is featured in an excellent article in the current issue of a major trade publication, Packaging Digest. We have also some videos taken at customer sites, and we are distributing these through companies who have made inquiries about the Vivo!. We believe these will be powerful stimulants to our sales program. Meanwhile, the 4100 Xe continues to be the product of choice for rugged factory environments.

As mentioned in the last teleconference, we did, indeed, make the first international shipments of Vivo! to Canada and Germany as we continued our plan of selective introductions. In the third quarter, we will roll out the Vivo! through our direct branches in the UK and France, and later in the year we will add more major countries to our worldwide dealer network. We do expect to see improvements in the third quarter.

Our products for sleep EEG and other neurology applications are quite strong. As we stated previously, the sleep market is continuing to grow at around 20% per year, and we are taking advantage of this with leading-edge new products. One of those is the new AURA PSG wireless system, which we introduced in the spring. We did, in fact, make our very first shipments of this exciting new product in July. Our plan is to continue to spend approximately 7% of revenues on research and development of new products. Later this year we will be introducing two new products for sleep in neurology markets and new products with Test and Measurements, as well as color printing applications.

Every one of the products we sell requires a consumable. Our consumable business is nearly 45% of our total revenues, and it will continue to grow as we place more and more consumable generating printers and instruments in the field. Included in consumables are labels, thermal transfer ribbon, ink, [chalk] paper, electrodes and the electrode gel.

And that is my report, Albert.

Well, thank you, Everett. And now Joseph O'Connell, our CFO, will give the CFO report. Joe?

Thank you very much, Albert. It is always nice to be able to share good news. Well, good afternoon, everyone. I'm pleased to review the financial results for the Company's second quarter ended July 29, 2006.

As you heard, our new bookings for the second quarter were $17.4 million. It is an increase of 14% over the prior year and matches our strong fourth-quarter level of bookings. Particularly strong, of course, was our domestic orders where they are up almost 21% year-over-year, so a very strong performance.

As a consequence, our backlog increased significantly in the quarter as well. It is up 14% to 7.5 million at the end of the second quarter. Actually that is a 35% increase from year-end, so a very strong performance in terms of orders in the backlog.

Moving to the net sales, our revenues in the second quarter, as you heard, were 16.3 million. That represents an 11% increase year-over-year. Sales through our domestic channels were 11.8 million. That is our growth rate of 15% over the prior year, while international shipments at 4.5 million which represent 28% of our total volume increased 1% year-over-year. Profiling the second-quarter revenues by product group, we had QuickLabel Systems up 3% over prior year at 7.9 million. The Grass Technologies suite of neurology products including our SLEEP diagnostic systems rose 7% to 4.7 million, and lastly, the Company's Test and Measurement product group, including our ruggedized airborne printers, rose 43% to 3.7 million.

Our gross profit in the quarter was $7 million. That represented the 11% increase over the prior year and reflecting a gross profit margin of 43%, approximately flat with the prior year's gross profit margin of 43.2%. Operating expenses including selling, marketing, G&A and R&D during the quarter rose 10% to $6 million or $0.37 on the sale dollar. The increase is traceable to stock-based compensation, commissions, benefits and sales and marketing-related initiatives.

As a result, our operating income in the quarter rose 12% from the prior year and provided an operating margin of 6.3, up nominally from the previous year's operating margin of 6.2%. Other income in the quarter was also strong at $190,000, approximately double the prior year and represents additional interest income, as well as gains associated with the foreign exchange.

Our income tax provision in the second quarter was 468,000. That represents a 25% increase in the provision from the prior year and represents an effective tax rate of 39%. The bottom line, net income, as you heard, for the quarter was 740,000, a 19% improvement over the prior year's net income and reflects an after-tax margin of 4.5% as opposed to the prior year's 4.2%. And also, as you heard on an earnings per share basis, on a per diluted basis, we earned $0.10 per share as compared to the prior year's earnings per diluted share of $0.09. Again, these outstanding shares have been restated to reflect the five for four stock split granted by the Board of Directors in May of the current fiscal year.

Prior to review of the balance sheet detail, a quick look at the six-month results would be appropriate at this time. Again, orders received for customer orders for the year have been very strong, reaching 34.3 million at the halfway, representing an increment of 13% year-over-year. Orders received on our domestic channels were 24.8 million. That is an increase of 16% over the prior year, while our international orders at 9.5 are up 7% year-over-year.

Net sales for the six-month period of 31.9 million is an 11% increase over the prior year. Our domestic channels had sales of 22.8 million. That is up 14% over last year, whereas international shipments at 9.1 million rose 3%.

Relative to the product group, QuickLabel Systems is the largest at 15.1 million, up 3% over the prior year. Our Grass Technologies product group at 9.3 is up 5% from last year, and the Test and Measurement product group for their organized product group is 7.4 million, up 42% year-over-year.

Our gross profit for the six-month period rose 10% to 13.3 million, representing a margin of 41.6 comparable to last year's 41.7%. Operating expenses for the first six months rose 9% to 11.5 and represent increases relative to marketing initiatives, stock-based compensation, benefits, commissions and outside services. The operating result was that our operating income increased by 22% from the previous year to 1. -- 1.7 million, representing an operating margin of 5.4, an improvement of approximately 50 basis points from last year's 4.9%.

Other income for the six months also very strong at 340,000, representing an increase of 71% year-over-year and again reflective of additional interest income, as well as gains related to foreign currency translations. Our tax provisions for the six-month period is 787,000, representing a 38% effective tax rate, slightly higher than last year's effective tax rate of 37% for the same timeframe.

Net income for the first six months at 1.3 million represents a 26% improvement over last year and provides a return on sales of 4%, a slight improvement over the last year's return on sales of 3.5%. Again, translating it on an earnings per share basis, this year's results translates into $0.17 per diluted share against last year's $0.14 per diluted share. Again, prior year's figures restated to reflect the five for four stock split granted by the Board in May of this current fiscal year.

Just to quickly go through the balance sheet, the Company's cash and marketable securities declined 8% in the quarter to approximately 15 million. The primary decline was associated with some major capital expenditures made -- disbursements, rather, made during the quarter relative to our stock buyback approximately 600,000, tax payments of just under 500,000 and reductions in our Accounts Payable, as well as our capital expenditures of just under $500,000.

Accounts Receivable balances rose 6% to 10.8 million at the end of the quarter, and the Company's DSO rose slightly from 59 days at the end of the first quarter to 60 days at the end of the second quarter. But that is flat with our year-end level of 60 days. Our domestic DSOs were 56 days, whereas our international DSO stands at 79 days.

Inventory dollars were flat from the first quarter -- excuse me, to the first-quarter levels at 10.4 million; however, we made a slight improvement in our turns moving from 3.5 turns to 3.6 turns. Capital expenditures, as I mentioned before, were just under $.5 million, primarily related to building improvements, machinery and equipment tools, dies and information technology. Our Accounts Payable, as I also mentioned earlier, was reduced by a third to 2.1 million at the end of the quarter.

Dividends paid during the quarter were $335,000, representing a $0.05 per share payment. The stock buyback program during the second quarter we purchased some 50,000 shares of Astro-Med stock in the open market. Now that leaves us Board authorized approval to purchase an additional 497,589 shares of Astro-Med stock in the market as part of our repurchase program. And our sales per employee improved also during the second quarter to 162,000. That is a 4% increase from the prior year level.

That concludes the review of the financials, Albert.

Well, thank you, Joe. Before we take questions, I want to provide some guidance for the balance of the year. Our revenues for the 12 months will range between 65 and 67 million, and our earnings per share will range between $0.36 per share and $0.42 per share. We will refine it a little more at the end of the third quarter.

And now, Michael, I believe we are ready for questions.

(OPERATOR INSTRUCTIONS). [Arby Sheffron].

Congratulations on the quarter. I would like to ask, what is the status of the sale of the property?

This is Albert Ondis speaking. The status of the property sale is that it will go forward definitely, and we will -- we are projecting the closing with certainty before the end of this calendar year.

Wonderful, wonderful. Okay. Looking for the end of the year. Thank you very much, Albert.

(OPERATOR INSTRUCTIONS). Greg Weaver, Kern Capital.

I was wondering if you could talk a little bit about the change in guidance here? It looks like you upped the revenue a couple of million but cut earnings a couple of pennies.

No, actually the earnings provided in the first quarter did not reflect the five for four stock split. So actually -- if you restate and divide it by 1.25, you will see that actually it is an improvement in terms of even the low-end. $0.44 would have been $0.35. It is now actually $0.36, and the upside now as Albert points out is actually $0.42.

Right, okay. I missed that. Thank you. And on your Test and Measurement business, how much of the growth that we have seen there is attributable to the cockpit printers?

We typically don't write those details out, but I would have to say a major portion of that growth is, indeed, attributable to the ruggedized products, which includes the cockpit printers.

I guess I mean another way of asking it, the traditional instrumentation type business, is that stable at this point?

No, that is up also, both the traditional and the ruggedized. (multiple speakers)

Both strong. We were very pleased with the overall performance of all the product lines within the T&M group.

Okay. And maybe just a little more color on the Vivo! ramp-up here. You had mentioned it was moving a little slower. I guess could you give us a little more color in terms of the geographic rollout that you had referenced that you were kind of limiting it to certain areas?

Right. We began the program initially rolling it out just in the Northeast. And then we began -- and then we proceeded to expand the distribution across the entire United States using our direct field sales force. From that point, we began late this spring with the initial introduction outside of the US first in Canada and in Germany. In both of those countries, we have our own direct field sales and serve offices, so that was for those two offices.

Right now we are in the midst of a planned rollout for the UK and France where again we have factory direct sales and service offices. So the introduction in the UK, for example, will be at a major tradeshow in September in Birmingham, England, and then there will be a similar major tradeshow in France later on. So that will take care of our branch offices. And then later in the year, we will begin rolling it out to other countries and using where we have independent dealers who sell our products.

So, as we said, it is a planned selective rollout because it is a new technology, and we are just being careful about it. So far this plan has proved successful because we are able to deliver good quality printers to satisfied customers.

If I could just also interject, Everett, without interrupting the flow of your thought, that has we introduced the products in other geographic areas where we have our own people, a considerable amount of training of the people involved has to take place both for the salespeople and the servicepeople because maintaining excellent connection with our customers after a product is delivered is a hallmark of the way Astro-Med does business. So we have to set up the proper support activities, providing the supplies that are particular, the medias and other supplies that are peculiar to the Vivo! and train the technical support people as well as the salesman. So it is an involved process and one that must be done with great care.

Are there particular verticals or geographies maybe that are showing more interest than others?

In terms of application, you mean?

Sure, yes, of the Vivo! relative to your other products.

The Vivo!, of course, is sold through a wide range of customers that range from people who manufacture food supplies and to customers and to beverages. The customer whose success is written up rather lavishly in the current issue of Packaging Digest magazine happens to be a manufacturer of cleaning supplies, custom cleaning supplies, that they distribute geographically all around the country. So it is hard to say that there is one particular application that is more attractive to the Vivo! than another.

Okay.

But the applications are not geographic, so the same applications that we find here in the US we then leverage in the other countries of the world. So you will find these very same applications in virtually every country.

Okay. And I guess just to wrap up on that thought, is your thermal transfer business declining then? Just given the QuickLabel category is up 3% year-over-year, right, I'm assuming there is some level of growth in there of the Vivo!, right?

Yes. Well, we do have a situation where people are pausing trying to decide on whether they should buy thermal transfer or the new Vivo! technology because there are peculiarities to each of them. For example, the thermal transfer printers are more appropriate for ruggedized -- I won't say ruggedized -- but for factory type installations, whereas the Vivo!, because it requires a relatively stable environment in terms of temperature and humidity, it is best suited for office applications. But the applications -- I mean the machines can be moved anywhere where they will do the job best so that what might be an industrial application could be converted into an office application by the simple movement relocation of the machine to an office within the factory. So there are people who are trying to decide which way to go, and we are trying to provide everyone with the necessary information and demonstrations and cost studies and so on so they can decide.

There are other issues as well related to the stability of the label in terms of color, stability, its ease of being applied to the product. In many cases rather involved studies are made by customers before they make the decision.

Brian Kowalchyk, Westpark Capital.

Congratulations on the record quarter and evidently continued success with the bookings numbers. As a long-term holder, this appears to be the quarter that I have been waiting for.

Can you help me understand, Everett, and go over those contract values that you talked about -- I think you broke up a little bit there -- in terms of the dollar amounts and the time period in which you expect to realize those contracts in hand and then help me again understand the quotations that are out there?

Right, I said that in the existing contracts and the pending negotiations we are to expect to happen shortly we have over 100 million. And then I went on to say that we have another 100 million in other negotiations and quotations that we are involved with for a variety of ruggedized products, both printers and switches and some other types.

Did you quantify that other category?

Well, we have made, for example, specialized power supplies for use on the aircraft --

In terms of quantifying it in terms of dollar potential?

Well, I said all of those that are pending in that category is over $100 million.

So you have got 100 million in hand plus closely to be delivered, as well as what we will call a pipeline of another 100 million?

That is exactly correct.

Very good. And the expected timeframe when those dollars could be realized?

The second 100?

Either. Actually both.

Well, we currently (technical difficulty)-- contracts to cover a year -- a period of about 10 years or a little more, around 10 years. Those contracts are in process now. The other contracts, some of them we would expect to begin rolling out in 2007.

Would it be fair to put another 10-year kind of life cycle on those?

Most of these contracts are 10 or 15-year lifecycles. (multiple speakers) -- or even 20. For example, the 787 contract is 20 years.

Okay. Very good, very helpful. Following up on another caller's question, you mentioned that some of the growth that we are seeing right now has been attributable to some of these ruggedized printers. However, is it fair to say that we are relatively early in the projected ramp from that product?

Well, we are beginning to shift production quantities on a gradual basis.

Pretty much on schedule.

I guess I'm saying in terms of the dollars that you have recognized so far relative to the potential total scope of the entire contract, it just seems like we are early in that ramp?

(technical difficulty) (multiple speakers). You know, for example, the 787, is designed to go into production the year after next. So we won't get into production quantities with that kind of (indiscernible) until sometime late next year.

Sure. I guess what I'm driving at is, it just seems like theirs were kind of at the forefront of fairly significant growth drivers from a variety of sources at this point.

That is right. The foundation is there and the templates, and you're going to see it sprout as those years come forth.

Very good.

We should footnote the question was asked earlier about the other Test and Measurement products, and as Everett pointed out, they are also very strong by themselves. Actually almost 20% growth rate in all the non-ruggedized products that make up part of the Test and Measurement product group. So I think we were very pleased with the overall performance of all the lines within the Test and Measurement group.

Sounds good. It's sounds like the core business is doing well, as well as new products coming online, which hopefully based upon the contracts you have announced, this could be the beginning of a new growth trajectory in that division for the company as a whole.

That is true.

Can you remind us when the ground-based vehicle ToughSwitch contract begins shipping?

It will be next year. We will ship some small quantities later this year in November, November-ish, but the production quantities will be next year probably in the spring, beginning in the spring.

Spring of '07?

Yes.

Very good. Great quarter, guys. I appreciate your taking my questions and look forward to hearing from you next quarter.

Gary Silverstein, Elliot Rose Asset Management.

Congratulations on a very solid quarter. Just following up with the last questioner left off, on the 100 million that we have already won that is going to ship over 10 years plus and the earlier questioner mentioned we are in the early beginning of the ramp on that, can you just give us a little more color to what that means? In other words, I guess what I'm saying is this current fiscal year that we're in, for example, on that 100 million that we have already won, will we perhaps ship 2 million in that space and then next year three and then the next year five and then seven? How is that going to ramp up, and at what time as the various products ramp up, what do you think would be the biggest annual piece of business we would get from that 100 million batch?

We are required to be unspecific by our customers. Specifically we do not want details of their contracts released because they are competitive. But I think I can say this without violating the letter or the spirit contracts. This year we will ship somewhere between 2 and 5 million in ruggedized products, and next year I would say we will probably ship between five and eight, something like that.

Okay, that is what I was looking for. Thank you. And at what point do you think -- I mean will that -- will it peak at a 10 million annual clip on that first 100 million? Will it get up to 10 million and say, 10, 10, 10, 10, or is it something based on the starting start and completion of the various contracts or it could bounce around a bit?

Well, as you can understand with that traditional 100 million in other possible contracts, those can be layered on at some point in time. So that will change the numbers by the layering of those contracts as they come in.

We should be seeing some significant annual sales over the next few years, and we believe that this business for us will be several hundred million dollars over some 10 to 16 years.

The way these things work is you get a contract from an airplane manufacturer, and it is really for the life of the airplane. What the actual purchase of the items, the printers that will take place on a scheduled basis, they will simply order them based on their production schedule. With each order, each individual order will come a release, and the orders typically run for, what would you say, a period like a quarter?

About three to four months at a time.

Yes (multiple speakers). We will get a release order. We will get a forecast and a release order.

Okay. So what you're saying is, well, first of all, you said several hundred million. My definition of several is at least four with a few being three and a couple two. So are you saying if we are successful in the second hundred million negotiation and win most of them, then we will effectively have contracts for 200 million over a 10 to 20 year period. But that could result in ultimately 400 million in business as these go into service and as there is replacement parts and so forth and so on?

I think that is probably a pretty fair way to look at it. Absolutely.

And then just one last question -- (multiple speakers)

-- of course, use consumables, which we are going to be providing as well.

Do we have an exclusive on the consumables for those?

Well, we believe we will. The consumables are designed by us and manufactured by us. They are not -- the airlines will be buying the supplies. We will be free to look around I'm sure, but we are going to work very hard to hold onto the consumables business for these printers just as we have always been able to hold on to the majority of the consumables business that go with our other printers. We think we will be successful in maintaining the bulk of it. How much it will be, we really don't know. We're in some new territory when it comes to the consumables, consumable being the paper on which the printer images, the maps or the messages and some of the other consumables components.

Again, I imagine some of the consumables that we manufacture for our own printers might have something slightly proprietary (multiple speakers) where we would be in a favored position.

That is absolutely true.

And just following up on the second hundred million that is under negotiation, in terms of not a timeline to ship but a timeline to finalize the RFPs and the contracts, I believe up until now we have won everything we have bid for in this space or 90%, something like that? Is that correct?

Most of the ones -- we have gotten all of the major contracts from the airlines for cockpit and cabin printers. I don't think we have missed any since we got our very first one for the Airbus A380. So some of things that are in that 100 million, the second 100 million, are cockpit printers, and others are variations of the other ruggedized products that we make, including the ethernet switches. But it is true that we have been 100% successful so far at all of the major contracts for cockpit printers and cabin printers.

Okay. So if we assume that continues and/or we get 80 or 90%, whatever it is, when are those going to be awarded, the 100 million? Will they be awarded over the next --?

Some of those are still in the early stages, so we have not even given final detailed proposals yet. We have just given budgetary proposals, and that is how we have the value of those. As I mentioned a little while ago, some of them for sure will begin to become contracts early next year. How many, it is too soon to say.

Okay. So you believe over the next six months, some of them will be awarded, and then over the next 12 months, most of them will be, whether it is to us or anyone else, but the decisions will be made --

I would say within the next year or so most of those well have been decided.

Super. Okay. And then one last observation. Going sequentially this year revenues went from 15.6 million to 16.2, about a $600,000 increase, and operating income sequentially went from a little over 700,000 to 1 million. So you had on a 600,000 increase sequentially in sales about a 50% increase in operating income, which obviously was better than the gross margin percentage on the overall mix.

Does that indicate perhaps that we are at or approaching the flashpoint where as we grow through this level, even though the long-term target on gross margin is 45%, but as we go through this level, we are finally at the point where more and more is going to drop to the bottom line?

You know I think, Gary, it depends. As we have always kind of qualified this by saying that depending on the mix of products and as we continue to ramp up the new products, there is always some incremental costs that you will incur as part of that process. So I'm not sure you can necessarily anticipate that you will see that same kind of a profile going forward. I think you will long-term, but I don't think it is as immediate as I think you would like to -- that I think you have identified.

Okay. But, Joe, you did say the gross margin was 43% this quarter?

That is correct. That is correct.

And the target is 45.

That is right. We have had --

Is that a moving target? I mean can we do better than 45 as we get into some of these larger programs? You know (multiple speakers) are these lines going to be running longer?

Yes, I think as we continue to improve the platform in terms of how we are continuing to make the products, there is always the opportunities to go ahead and improve on the 45. We have set the 45, as you know, as a goal to be able to achieve that on a consistent basis, but I think once that has been attained, the expectation is that we would move off of that.

Okay. So if you guys can show some discipline on the SG&A and R&D line, both as a percentage of sales -- in other words, they will continue to grow, but you cap them at a certain level percentage of sales -- then as we become a bigger business and have larger contracts to ship as the gross margin -- as we hit that first target and then shoot for more, that is when we can finally see some of the bigger leverage we have all been hoping for and looking for?

That is right. Exactly right. Exactly right.

Okay, guys. Thanks so much, and thanks for the improved guidance on both revenues and earnings.

(OPERATOR INSTRUCTIONS). Joe First, First Associates.

Congratulations on the good quarter, gentlemen. What is the status on the real estate sale of -- I think it was supposed to be finalized sometime in the fall I believe?

Yes, we said a little while ago -- you might have missed it -- the property sale will definitely take place, and it will be closed before the end of this calendar year.

Good. And my other question had to do with expanding rather on the second hundred million dollar potential sale, and that has already been answered. The Vivo! product, I mean do you still have the same kind of optimism that you had before that this product will be significant and we will be able to --?

Absolutely.

Increase the volume there.

Absolutely.

Good. I guess that is about it for me. Again, congratulations on a good quarter. Keep up the good work.

Brian Kowalchyk.

On the real estate transaction, can you remind us of the expected gain from that sale?

We publicly announced that we will sell the property for $6.1 million, and we think the order of magnitude probably on a BT basis perhaps maybe 4 to 5 million is what we will realize.

And if I understand right, there is some significant other real estate that the Company also owns underneath its main operating facilities. Is that correct?

The facility here -- the only other facility we have of major size is really in West Warwick, our corporate (multiple speakers) manufacturing facility.

Sure. Care to take a stab at market value of that real estate versus your current book value?

Well, I think in the past we have stated that it is worth -- probably worth somewhere between 13 and 15 million.

And you are carrying it on the books for something substantially less than that I assume?

Yes, we are a significant investment in terms of the costs sufficient for the -- (multiple speakers)

Sure. So if I look at this correctly on kind of a enterprise value basis, the stock is traded at $10, you have got $2 in cash, and conservatively saying another $2 in real estate value, it gets me down to an enterprise value of 6. You have given guidance at the midpoint of $0.39, and you're on the beginning of a growth trajectory, and by the way, you are giving us a $0.02 dividend yield. Is that a fair statement?

Very good. Thanks, guys.

Management, there are no further questions at this time. Please continue with any closing comments.

Well, thank you very much one and all for participating in this. We will be talking to you again in November. Meanwhile Joe O'Connell has a few parting words for you.

Thank you, Albert. Just to remind everybody of our Safe Harbor statement, that during this conference call we may have made forward-looking statements within the meaning of the Securities & Exchange Act of 1934. These statements are based on the Company's present expectations and beliefs concerning the future events and are necessarily based on certain assumptions which are subject to risks and uncertainties. Actual results may differ materially from those discussed here. More information on these risk factors is included in the Company's filings with the Securities and Exchange Commission. Thank you.

Ladies and gentlemen, this does conclude the Astro-Med Inc. fiscal 2007 second-quarter results conference call. You may now disconnect. Thank you for using AT&T Teleconferencing and have a very pleasant afternoon.