AstroNova Inc (ALOT) 2007 Q4 法說會逐字稿

Welcome to the Astro-Med fourth quarter and annual fiscal year 2008 conference call.

During today's presentation all parties will be in a listen-only mode.

Following the presentation the conference will be open for questions.

(OPERATOR INSTRUCTIONS) I would now like to turn this conference over to Andy Berger from SM Berger and Co.

Please go ahead, sir.

Thank you, Eric.

On behalf of the management of Astro-Med, we are extremely pleased that you have taken the time to participate in our call, and thank you for joining us to discuss the company's fiscal 2008 fourth quarter and full-year financial results and business outlook.

Before I introduce management, I would like to remind everyone that certain statements made during this course of this conference call, especially those that state management's intentions, hopes, beliefs, expectations or predictions for the future are forward-looking statements.

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 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 risks -- these risk factors is included in the company's filings with the Securities and Exchange Commission.

By now you should have received a copy of the news release which was issued this morning before the market opened.

If you have not receive a copy please visit Astro-Med's website at, www.astro-medinc.com and click on investing to obtain a copy of the company's news release.

Hosting the call are: Albert Ondis, Chairman and Chief Executive Officer, Everett Pizzuti, President and Chief Operating Officer, and Joe O'Connell, Senior Vice President, Treasurer and Chief Financial Officer.

At this time I will turn the call over to Mr.

Ondis.

Albert.

Thank you, Andy, and thank you, everybody, for participating.

As Andy Berger just said, with me here today are: Everett Pizzuti, President and Chief Operating Officer, and Joseph O'Connell, Senior Vice President and Chief Financial Officer.

Each of us is going to make a presentation, after which we will take your questions.

As you all know, we reported after the close yesterday on the fourth quarter of our fiscal 2008 as well as on the 12-month period, sales in the fourth quarter were $18.131 million and for the year, $72.371 million.

GAAP earnings in the fourth quarter $1.340 million, equal to $0.18 per diluted share, and for the record the year they were $0.57 per diluted share.

You are going to hear more about the quality of the earnings when Joe O'Connell makes his report.

New orders tell an important story, for the year, they reached $74.393 million an increase of nearly 11.5%, and for the quarter they totaled $17.421 million an increase of slightly less than 6%.

And as you will hear from Everett Pizzuti, when he makes his report, there were some interesting dynamics at work late in the quarter, due to the delays in both the Airbus A380 and Boeing 787 airplane programs, as well as uncertainties about Medicare compensation for home sleep studies, which are now probably close to being settled as a result of the decision announced last Friday by the centers for Medicare and Medicaid.

We have some new contracts for our so-called Ruggedized product, which include our very successful cockpit printers, and they will be formally announced as soon as we get clearance from the company who issued the contracts to us.

The quarter and the year were enhanced by the star performance of our QuickLabel systems product group, which develops and markets color label printers.

And consumables, our QuickLabel group, grew nearly 17% in the quarter and about 23% for the year.

Export sales led by our European branch offices, which did an outstanding job, grew more -- by more than 21%.

The board of Astro-Med decided that with our strong, excuse me, cash position and with an excellent outlook, the time had come to increase the cash dividend by 20% to $0.06 per share, Effective with the dividend that will be paid on April 1st.

At this point I am going ask Everett Pizzuti, President and Chief Operating Officer, to make his report.

Everett, fire away.

Thank you, Albert, and good morning, everyone.

As usual, our QuickLabel product continue to comprise the largest part of Astro-Med sales at 53% and with high double digit growth.

Grass and tested measurement products are nearly equal in size at 24% and 23% of Astro-Med sales respectively.

The fourth quarter was a very successful for us except for our Grass products as I will explain a little later.

The great success of QuickLabel products in the fourth quarter and the year is of course attributable to our color printers and associated consumables.

The Zeo!

ink jet, the Vivo!

laser color printer, and the several thermal transfer type color printers are all strong contributors.

With these various printing technologies, we have a color printing solution for nearly every niche of the marketplace.

We are alone in the color label printer market with this full array of printers.

Our strategy is to produce printers and consumables designed to work together for optimum color label printing, making it difficult pirate brand consumables to take market share from us.

Although long-term prospects for growth are strong, we do see some softening this year as a result of the present U.S.

economy.

The export market, however, was very strong in the fourth quarter and is on track to continue its strength in the new year.

Meanwhile, we are investing in new product development to reach even more markets for color printing.

And this development is not only for new printers, but also new consumables that are engineered for specific applications in combination with our printers.

Now, turning to Grass, as mentioned in our news release, we began to see a postponement in the opening of new sleep labs as well as in the expansion of existing labs during the last several months.

Many of our quotations for sleep monitoring systems for these labs were essentially placed on hold.

And the reason for this was the uncertainty of the impending decision by Medicare to decide whether or not to reimburse for sleep studies to be performed in the patient's home.

Let me quote from a Wachovia report on a survey of its sleep labs published in February of this year, "Sleep lab expansion looks likely to slow.

Sleep labs in our survey report expanding bed capacity by a strong 29% in the past, but plan to expand beds by just 13% in the next 12 months.

And home testing may be to blame.

We think that the sleep labs are limiting their expansion plan given Medicare's proposal to cover home testing for obstructive sleep apnea." So will market calm before the storm of home testing?

The U.S.

market slows sequentially about 150 beds from September to December-quarter.

So it is possible that we are already seeing an impact." So, this decision by Medicare, as Albert mentioned, was issued on last Friday, March 14th, 2008.

And as many suspected, Medicare did indeed approve home sleep testing using certain types of screening devices.

Now, we hasten to point out that Astro-Med had been anticipating the approval of home screening for sleep testing for a couple of years.

And so, we developed new sleep products with portable ambulatory applications in mind.

Two weeks before the March 14 announcement by Medicare, we introduced our new SleepTrek3, a portable screening device specifically designed for home testing.

We have been receiving many inquiries for the SleepTrek3, and we expect it to nicely fulfill the emerging needs of this new market.

But there are still some questions to be answered by Medicare including the amounts to be reimbursed for home testing, as well as which types of physicians can prescribe the service and treatment.

Based on this, we do not see the sleep market growing again until some time in the second quarter.

Now, turning to tested measurement.

Tested measurement orders and sales continue strong and are somewhat unaffected by the economy, especially as we add new products for more applications.

During the last few months, we introduced three new data recorders: the Dash 32HF, the Dash 20HF and the Dash 2EZ+, all three of which are shipping in the first quarter of this year.

Our Ruggedized products which include the cockpit and cabin printers are strong contributors to the new growth of our test and measurement growth.

In addition to military and big commercial jet contracts, we recently announced our entry into the smaller business jet market with a contract for the Bombardier global express business jet from contractor Rockwell Collins.

Our sales and marketing team is now in discussion with several other manufacturers of business jets as we continue to grow the Ruggedized product group.

In summary, our outlook for the new year is somewhat guarded as the new developments in the sleep market emerge, but we are optimistic that our new product introductions, as well as the new cockpit and cabin printer contracts, will help us to maintain steady, solid growth.

And that is my report, Albert.

Thank you, Everett.

Thank you very much.

Now, Joseph O'Connell, our Senior Vice President and Chief Financial Officer, will make his report.

Joe.

Thank you, Albert.

Good morning, everyone.

I'm very pleased to share with you Astro-Med financial results for the fourth quarter and for the 12 months ended January 31st, 2008.

As you have just heard the company achieved record sales in the fourth quarter with billings reaching $18.131 million, representing a 3.2% increase over the prior year's fourth quarter sales of $17.568 million.

For our channel perspective, our domestic sales in the quarter were $12.281 million normally flat with last year's fourth quarter domestic sales.

Whereas as you heard the export shipments were $5.850 million, that's an increase of 12% from the prior year's export sales for the fourth quarter.

Foreign exchange contributed some $455,000 or approximately 2% to the fourth quarter sales.

We profile the fourth quarter sales by product group, as the QuickLabel systems as you heard dominating the sales at $9.648 million, representing an increase in of 16.8% over the prior year QuickLabel system sales in the fourth quarter.

The sales growth was shared both with the hardware printer systems and services which were up 16.7% as well as the consumable sales which were up 16.9% quarter-over-quarter.

Testing and measurement product sales were $4.081 million in the quarter and that's behind last year's fourth quarter by some 7.2%.

Here hardware, recorder and printer systems were down 5.1% from the previous year, primarily due to the soft sales of the Everest product line.

Consumables, sales, although a small portion of the total P&M sales were also down slightly.

Sales of the Grass technology product line in the quarter were $4.401 million.

It is lower than last year's sales by some 10.1%, and as you heard the hardware systems were behind last year by 6.6%, as customers in our clinical markets deferred the sleep system purchases in the quarter until the centers from Medicare and Medicaid services announce their reimbursement decision on home sleeping testing as Everett reported.

The consumable sales although down in the quarter really do not represent a trend, it is more of a recycling order in terms of the distribution.

Gross margins.

Gross profit margins in the quarter were healthy at $8.062 million representing a 10.5% increase over the prior year fourth quarter gross profits and reflecting margin of 44.5% as compared to the prior year's margin of 41.5%.

The improved margins really are an out growth of product mix, better absorption and lower manufacturing costs.

Operating expenses.

The company incurred operating expenses in the quarter of $7.485 million, as compared to the operating expenses in the prior year's fourth quarter of $6.166 million.

Included in this year's operating expense is a restructuring charge of $515,000 relate to go the closing of the company's sales and service offices in Italy and the Netherlands.

If we exclude the restructuring charges, operating expenses in the quarter were $6.970 million, that's a 13% increase in spending from last year.

The year is traceable to selling and G&A expenses where a combination of selling and marketing initiatives and some professional service frees related to the Sarbanes-Oxley 404 compliance project drove the increase.

Operating income.

Income from operations in the quarter was $577,000 as it compared to $1.133 million in operating income reported in the fourth quarter of the prior year.

Excluding the one-time restructuring charges of $515,000, in calculating the nonGAAP operating income of $1.092 million for the fourth quarter, this quarter's income from operations is down some 3.6% from the prior year, but generates an operating margin of 6% on sales against last year's 6.4% operating margin.

Other income in the quarter was $222,000, that's up 14.4% over the prior year's other income of $194,000.

That operating other income includes interest, favorable foreign exchange, as well as some nonoperating income.

Tax provision, the company reported a net benefit of $541,000 in the quarterly federal and state tax income counts.

The result includes a normalized tax provision of $397,000 or roughly an effective tax rate of 30%, as well as adjustments in tax benefits of $739,000 and $199,000 related to the consolidation and the closing of the company's Italian and Netherlands sales and service offices.

The prior year's tax provision was $528,000 reflecting an effective tax rate of approximately 40%.

Net income.

The company's net income in the quarter on a GAAP basis is $1.340 million representing some $0.18 per diluted share.

However on a nonGAAP basis by excluding the one-time restructuring charges and the related benefits from the disposition of the company's Italian subsidiary, net income would be $917,000 equal to $0.12 per diluted share.

This result compares favorably with the prior year's net income of $797,000 or $0.11 per diluted share.

Prior to reviewing the balance sheet account, I will comment on the company's financial results for the fiscal year end.

Annual results.

Astro-Med reached a new threshold in annual sales during fiscal 2008, sales in the 12 months ended 1/31/2008 were $72.371 million, that's a 10.5% increase over the prior year's sales of $65.519 million.

This growth rate matches last year's growth rate of 10.5%, where growth rate for fiscal 2007 over fiscal 2006.

In our domestic channels the company sales volume was $50.479 million representing an increase of 6.3% over the previous year.

Export sales were particularly strong at $21.892 million representing some 30% of our total revenue increased 21.5% over the prior year export sales.

Favorable and foreign exchange did contribute $1.271 million or 2% to our total annual sales.

Looking at the annual sales by product group has QuickLabel systems at $38.131 million representing over 50% of the company's annual sales and increasing 22.6% from the prior year QuickLabel systems sales.

Both hardware, printer systems and service and the related consumable products realized double digit growth rates, printer systems and service grew 35.7% whereas the consumable product lines increased 17.8%.

The test and measurement product group also reported growth in sales during the fiscal year led by the double digit growth rate of the Ruggedized product line of printers and switches together with the continued growth rate of the Dash line of portable recorders.

T&M hardware services and systems improved 6% from last year.

This year's growth rate in hardware systems and service was tempered by a decline in the Everest product line of the recorder workstation.

If we exclude the sales of the Everest product line from the total T&M hardware, systems and services increased 23.8% from the previous year.

Grass technology sales were $17.722 million for the year.

This year's sales volume was lower than the prior year by some 5.2% as you heard.

The lower sales level was confined to the hardware systems and specifically the clinical where sleep labs and hospitals deferred decisions on capital purchases until the reimbursement issue on home sleep testing has been determined by CMS.

Consumable sales especially electrode sales were up year-over-year.

Gross profits.

The company achieved a gross profit for the year of $31.111 million representing a 15.2% increase from the prior year's gross profit and providing a margin of 43% against the prior year's gross profit margin of 41.2%.

The improved margins really are the outgrowth of product mix, factory throughput, increased absorption and normal increases from manufacturing costs.

Operating expenses.

Spending in the selling, G&A and R&D functions rose $14.5 million to $26.912 million for 12 months ended.

However, as mentioned earlier, $515,000 of that increase relates to the restructuring charge mentioned earlier.

Excluding the restructuring charge this year's operating expenses consumed some $0.365 of the sales dollar for the year up from the prior year's $0.358 of the sales dollar.

The increased spending is traceable to personnel commissions, professional service fees including legal and accounting and specifically related to the Sarbanes-Oxley 404 compliance initiative.

Operating income.

Income from operations this fiscal year was $4.199 million which includes the one-time restructuring charge of $515,000.

Again by excluding the one-time restructuring charge, the company's normalized operating income for the year would be $4.714 million with a related operating margin of 6.5%.

The prior year's operating income was $8.741 million which includes the gain of $5.252 million realization on the sale of the company's real estate in Braintree, Massachusetts.

Excluding the real estate gain the prior year's operating income was $3.590 million or an operating margin of 5.5%.

If we exclude these one-time charges and the gain from the respected years the operating income this year is up 35.1% from the previous year.

Other income net.

Other income for the year -- other income net for year was $855,000 which is comparable to the prior year and as mentioned earlier it includes interest income, gains associated with foreign exchange rates, as well as miscellaneous income.

Income taxes.

The company's tax provision for fiscal 2008 was $744,000.

This amount includes the company's normalized tax provision with an effective tax rate of 38%, coupled with the tax benefits realized from the restructuring and disposition of the Italian subsidiary, as well as earlier benefits from favorable resolution of certain tax examinations.

Net income.

Astro-Med earned $4.310 million in -- for fiscal 2008 or $0.57 per diluted share.

However, as profiled in the press release, the company's pro forma net income is $3.441 million or $0.46 per diluted share.

The pro forma net income includes -- excludes rather financial impact from the restructuring in the tax benefit.

In a similar pro forma profile, the prior year's net income would reflect a pro forma net income of $2.703 million or $0.37 per diluted share.

The year-over-year improvement in earnings per share would be 24.3% for the fiscal year 2008.

Quickly moving to the balance sheet.

The company's balance sheet remains healthy at the year end with cash and marketable securities at $17.6 million.

Our accounts receivable rose $5.3 million to $12.8 million, reflecting some 58 days sales outstanding which representing an improvement of six days from the prior year end.

Inventory investment rose 16% to $14.1 million, representing 126 days on hand.

The company added some $4.7 million worth of fixed assets during the year, most of those -- or a lions share of those related to the purchase of real estate of $3.7 million and some more investments in information technology and machinery equipment and tools and dyes.

We received $830,000 in cash from employee exercising stock options during the year.

We also -- during the fourth quarter we purchased in the open market some 55,300 shares of the company's common stock.

The treasury stock now stands at 1.179 million shares.

Dividends for the year were [$1.4] million paid to shareholders during the year at a rate of $0.20 per share.

Lastly, and a couple of other small points of interest, our population declined from 402 to 397 at year end.

Our sales per employee though improved some 12% from $163,000 up to $183,000, and our backlog rose some 16% at year end to $6.9 million.

That concludes my financial review, Albert.

Well, thank you very much, Joe.

And now, I think, ladies and gentlemen, we're ready to take your questions.

Eric, you can assist us in getting questions going, we would appreciate it.

Yes.

Ladies and gentlemen, we will now begin the question and answer session.

(OPERATOR INSTRUCTIONS) Our first question comes from Joe First with First Associates.

Please go ahead.

Good morning, gentlemen.

Could you extend a little bit on the potential market for this new product in the sleep testing area?

Yes, SleepTrek3, Everett.

Yes, SleepTrek3 is a new product that we have just introducing, sales has a list price of just under $4,000.

It is yet to be determined exactly how the market is going to roll out.

But the question is who is going to be able to write and prescribe home sleep testing.

Will it be just the sleep labs that exist now, or will it be opened up to general physicians in other areas: cardiologists, internists and this sort of thing?

And if it does, that will really expand the market even further.

Now, for the first time, physicians will be able to screen a larger portion of the population to find those patients who have some kind of a sleep disorder and then may need to go into a full lab testing, and so it may even bring more business to the existing sleep labs.

It is a little bit up in the air right now, because we are still waiting for Medicare to come out with final decisions on how much reimbursement there will be for each one of these home studies and what categories of physicians will be authorized to prescribe the services.

But, whatever happens, whether Astro-Med is prepared because we are well into the sleep lab market and we have new products there, and we are well prepared for the home studies market with a new SleepTrek and other screeners that we already have in our product portfolio.

Are there other competing products for the home study market now?

Yes, there are other companies that make various kinds of screeners, and there are many different categories of screeners.

And -- but we have priced ours very competitively because unlike most of our competitors we manufacture everything ourselves and we have very good control of our costs, and therefore are able to come out with very competitive products without jeopardizing our profits.

And so we probably have a cost edge, a selling price edge I should say on competitors and yet we have some very novel features as well.

So we think we have well positioned to compete even though there are several other players.

Alright.

Thank you.

Do you have any idea on the timing of when the Medicare might decide this?

Well, it is a little bit difficult.

It is probably going to be three or four months before they issue all of the answers that are needed here.

Yes.

Okay.

I will let somebody else ask their questions.

I have others, but I will let someone else ask.

Thank you, Joe.

(OPERATOR INSTRUCTIONS).

Our next question comes from Robert Hoffman with Princeton Capital Management.

Please go ahead.

Good morning, I -- as you know, Princeton owns a fair amount of the shares and I am a little new to the story.

So pardon my basic questions here.

But can you give me a sense of the price tag on the Ruggedized for the various type of planes, is it a different unit that would go into a 787 versus a Bombardier corporate jet, or is basically the same unit?

Well, I can tell you, the basic printer technology is our standard product, and the modifications that we make for the different aircraft have more to do with the types of connectors, the number of ports, front panel configuration, but the basic printer technology is our standard machine.

But I can tell you that an average selling price is probably between $15,000 and $16,000 per printer.

And as it gets rolled out, is this something that will be, or is mandated or, I mean, in the grand scheme of a 787, $15,000 is nothing.

Is it something that you anticipate will go on every delivery out there, and if not, why not?

Okay.

The printers have traditionally been very options as opposed to mandated.

However, with some of these new larger aircraft, they're pretty much standardizing.

For example, on the A380, which is one of the first commercial contracts that we got, there are two that are designed into the cockpit.

And then in addition to the cockpit printers, there are also printers used in the in-flight entertainment in the cabin.

And on the A380, there's a minimum of two used there.

So, the market then four printers per A380 sold.

In the case of the 787, again, they're beginning with a standardizing on a printer, and in the cockpit there's one and in the cabin there is one.

The 787, which is going to go into production, will be shipping production quantities they say next year, in 2009, Boeing already has over 800 planes on order.

And so there's excellent potential there, as well as the A380.

The business jet market that we're just beginning to get involved with, is also very big between companies like Gulf Stream and Embraer and Brazil as well Bombardier.

The quantities are very, very interesting going forward.

And again, what would -- do you anticipate these will be mandated or will they always be more of an option?

They're typically on the business jets they're more of an option, but the reason why they're selecting these options now, because our technology has brought to the table more capability.

In the past these printers which have been made by other companies, have been mainly textual printers, printing lines of type, but the technology that we've brought to the table offers graphic images with high-quality text printing, so they get more comprehensive reports and there's a better need for them.

For example, they're able now to print airport landing strips, which are constantly changing and weather maps with very little printing gradations that are now achievable by the graphic imagining of our printers.

Now, tell me why, if I am a pilot, I would prefer it to be printed out version of the landing strips versus the one that's popping up on the panel on my dash.

Well, because among other things they want to make notes of things and be able to study these things in advance, because these landing strips are changing even at traditional airports, there are always different characterizations that need to be shown and annotated on the chart.

So although they can see displays and have all kinds of nice color displays in these new cockpits, the need for hard copy is very important and also for legal reasons for the FAA.

And of course the paper is another item that we sale.

It is a consumable and --

Yes.

That was my next question is it -- again, I am sorry this is a basic question.

Is a cockpit printer, is it printing constantly, so that any flight will take up an X amount of consumable or is it an as needed?

Yes.

It is printed on demand and -- but there is probably a certain minimum number of sheets of paper if you will or pages of paper that will be used, consumed on each flight, and we have begun to look at the multipliers here, printers per plane per hour, and the resulting dollars in consumables is -- gets very high as we add more printers and get into production on these new aircraft.

One of the other advantages of the printer is that it allows the planes to take off without hundreds of pounds of documents that are typically carried.

These would be documents that would relate to the performance of all of the systems of an airplane, so that instead of having to open a series of manuals to look for potential trouble spot, you can just pop a CD in a receiver and print out that portion of the manual or the instruction sheet that you might need.

So the printer allows the plane to take off with a greater payload, because all of the documentation can be eliminated, as well as the resulting accuracy of the data is greater since it is easy to keep track of the CDs.

Right.

This is typically called the electronic flight bag.

Years ago you would see a pilot hauling a large bag of documents with him into a plane.

Well, that's gone.

Yes, and does that make this even more compelling for a business jet, I mean where that 300-pounds is meaningful?

Yes.

Absolutely.

Absolutely.

It is weight and space.

Business jets are quite small, and if you were to go into the cockpit of the large plane, like the 380, even though it is a mammoth airplane, we have all been inside these planes, and they're -- the cockpit is very small.

There isn't much room.

So eliminating flight bags and other documentation is a major factor, so that these printers are for all practical purposes they're standard components of the newer airplanes.

They -- I think those that are in the cabins, which are used by flight attendants to print out things like itineraries and menus and flight transfer information, those are still optional but those that are in the cockpit for all practical purposes are really mandatory.

Unfortunately for us the delays in the A380 and the Boeing 787 mean that there has been some deferral of our sales through those delays.

But we will catch up pretty soon.

And in terms of retro fit, is it one of those things that you anticipate that, over the next X number of years, that these printers will be in most commercial airliners?

We think that the retro fit program will go into full swing.

The only fly in the soup with relation to retro fit is the older airplanes which really are doomed to be retro fitted do not have good miles per gallon, and as a result, we may see an earlier replacement of existing fleets by new, more fuel efficient airplanes.

And as you know the efficiency of the plane is only partly due to the efficiencies of the engines, much of it is due to the, to the aircraft design itself and only a new plane can provide the kind of efficiencies that they're looking for, but we are quoting on retro fitting both business jets and commercial airplanes, and we will see how that goes.

What is the determinant for that quote?

Is it a -- are you competing against somebody on price?

Is it the size?

Is it the -- can you just give us a little color on --

Well, typically the retro fitting involves far more than just putting a printer in, it involves a replacement of all the cockpit and all of the flight electronics.

It's a major expense.

And -- but we are doing business with the very contractors who would be doing that work, the same contractors who are outfitting the brand new airplanes, people like Honeywell and Rockwell and others, would be the ones doing the retro fitting.

And those are the people that we are quoting to.

So a retro fit is not normally going to happen unless a plane gets new avionics put in.

Is that it?

That is absolutely right.

Okay.

Great.

Well, I will get in the back of the queue.

Thanks.

Our next question is a follow -up from Joe First.

Please go ahead.

I noticed the administrative expenses and so on were considerably higher in the fourth quarter from last year.

Is a lot of that due to the Sarbanes-Oxley compliance expenses?

Joe, a good piece of it is, in the quarter itself there's almost a couple hundred thousand associated with that itself.

And some of the other expenses we had some incentive programs that really did not get achieved until the fourth quarter.

So in terms of being able to match those kinds of expenses with the accomplishments, it tends to increase the overall spending.

Sarbanes-Oxley was there a sort of one-time expenses?

It is, this -- well this year for the most part we think so.

We think we are from in pretty good shape with respect to being able to attest the internal control for the company.

But it has been an ongoing for the company for the entire fiscal year, but it did pick up steam during the fourth quarter.

And you mentioned in your press release that you expected the continued growth in sales and profitability.

Is the profitability because of the fact you have gotten over this $70 million that we talked about for a couple of years?

At one point you got over this bigger number, then a little bit more would drop to the bottom line.

Is that the basic reason for that?

There's some of that, but also I think that will some of the things that were done in the factory to reduce and cut back on our manufacturing costs, I think that also has been manifested in some of the numbers you saw the fourth quarter.

I think there has been, as you recall in the past we have gone ahead and done a major overhaul of the factory itself in terms of the layout and the operations and the equipment.

But I think we are confident that we have a number of processes that we have in place here which would translate into improved margins going forward.

Well, we moved up in the fourth quarter toward that figure we've been going for with respect to gross profit, getting closer to 45%, and we did have a nice improvement in the fourth quarter and for the year as well.

We hope, we believe as well as hope we can continue to the improving trend.

You mentioned about in the airplane business with the printers you thought you would be catching up shortly.

When you say catching up shortly are you talking about in the next year this business will start picking up?

Yes, we are confident that once the air worthiness of these new planes has been proven, and once they've worked out some of their production problems, that both Boeing and Airbus will scramble very hard to ramp up production of the airplanes.

And we were of course disappointed that there were delays in both the Airbus A380 and in the Boeing 787.

Bombardier airplane appears to be on track.

The Airbus A400M, which was another contract we have had for a while, was also significantly delayed by engine problems, which have since been resolved, and we think they will begin turning those airplanes out pretty well.

So later this year, and certainly as we go forward next year and many years thereafter, we will see a rapid build-up of revenue from the Ruggedized product.

I think you have a very good story to tell, finally, but if you look back you will see your stock price is the same price now as it was four years ago.

I think it is a little lower as a matter of fact.

Yes, right, I was being kind.

Thank you.

But yet your business has improved dramatically.

Are you starting to do more things to get your story out to the street, and get people more aware of your company because most people just never heard of you?

Well, we are.

We are continuing to go into conference windshield the help of Berger Associates, Andy and his father, and we are going into a new conference early in April, the B.

Riley conference in Las Vegas, beginning April 1st.

And we are going to continue to make presentations to select groups of people that we will be visiting and revisiting with the help of the Berger Group, and we just hope as a result of that and plus the continued good performance that results will happen.

We are also planning an investor day and that will be later this year.

I think it will be in May, Joe?

Perhaps maybe closer to June.

June.

We are going to have an investor day here at Astro-Med and we will invite people to come in and walk through the factory and meet more people, and see some of the products that we are developing and have developed and are shipping.

So we are hopeful, Joe, as a result of all of these activities we will gain a little more recognition, but clearly the market -- big caps, and so we have to try to find a way to join the big caps, I guess, become a big cap.

That's option two.

Thank you.

Right.

You're welcome.

Our next question comes from Dennis Scannell with Rutabaga Capital.

Please go ahead.

Yes, good morning, gentlemen.

Morning, Dennis.

I got on the call a little bit, and again, I definitely see the progress that the company has made this year, but maybe this was addressed.

But the quarterly revenue number was a little shy of what you had guided to following the November call.

And I am curious was that predominantly because of Grass or was there other things or is that push outs on the Ruggedized product?

It think it was really a combination of the two things, the push out of the Ruggedized product, probably cost us in the neighbor of $.5 million or more, and the big helper was really the Grass story, which you may not have heard, and that relates to the home sleep studies which Everett, if you want to sculpt that into a few words, perhaps you can help Dennis.

Yes, just briefly, Dennis, what happened was, for the past few months, the sleep industry, the sleep labs in particular have been a little bit hesitant about expanding their labs or opening new labs.

And so the reason why they were reluctant was that is because there was an impending decision by Medicare as to whether or not they were going to reimburse for home studies for the first time.

And so the labs were waiting to find out whether or not that was going to affect their business.

And so finally, on March 14th, last Friday, the CMS, the Medicare folks down in Washington D.C., did issue a directive that, for the first time, reimburses home sleep studies with certain types of medical screening equipment, and we have been anticipating this decision ourselves, and so over the years we developed portable ambulatory sleep screeners that would be useful for this market as well as the lab market.

But because of that delay I would say this we have missed shipping a little over $1 million in Grass sleep systems in the fourth quarter.

And so between that delay of Grass and the delay of the aircraft, our fourth quarter was not as great as we expected it to be and were prepared to have.

Okay.

Okay.

That's fair enough.

That's very helpful, and I had caught some of that before.

And just one last thing, I think, Joe had mentioned that you all did purchase 50,000 shares or so of stock during the quarter.

Is that something that you are looking to step up, or is it more an opportunistic thing when you see the stock drop?

Dennis, it is more an opportunistic situation that we have if -- what we have done is when those opportunities come along we have tried to respond positively.

Okay.

Okay.

Great.

That's it for me.

Thank you.

Thank you.

Our next question is a follow up from Robert Hoffman.

Please go ahead.

Yes, switching gears to the QuickLabel, and again my lack of real knowledge of your business.

Can you just kind of walk me through growth from here, is it same number of customers, putting it on different products, or more products, more customers?

New products, just give me some flavor of how that is growing there?

We think very strongly that the surface for the use of color printers in overall commerce is just been scratched.

We think there's a lot of room for us to grow.

And people frequently ask us who uses these color printers.

And the answer is really everybody.

Can you give me some examples?

Anybody who makes a product which requires labeling, whether it is a consumer product such as lipstick, or food, or cereal, or beverages, or whether it is an industrial product, an electric motor or whether it is a piece of wearing apparel, garment, so on, all of these things have to be labeled.

And increasingly, one thing that is working for us in the retail field is that as in -- as the trend increasingly swings toward do it yourself buying, people are influenced by the appearance of a label, and everybody who makes products that is -- that are offered for sale wants to enhance the appearance of the product, so they're looking to us to find improved ways of making the labels more and more colorful with more information on them.

So we work ceaselessly to develop printers that make more attractive labels and provide a wider range of colors.

And there are many niches that we are serving.

Some of them are very small from the people who make fudge in the kitchen and desire to place an attractive label on it, to large companies that make things like automotive tires that make them by the millions.

And we have a range of products designed to satisfy all of those many applications.

And, and quite recently for example, we have seen an attractive piece of growth in producing labels for the wine industry.

If you go to our are website, we have a very nice video up there, which describes in the words of the winery itself, how important our Vivo!

printer is to their business.

And these are some of the many places where these color labels, label printers are used.

And of course we make the consumables as well.

And we try to provide a level of service that makes it attractive to the people who buy our printers to return to us for the ink, as well as the labels.

So are you you used to be fairly heavily involved in Paxar who is taken out by Avery.

Avery.

Right.

So was that -- is that -- was that a competitive or is that a competitive printer?

It is a competitor.

Okay.

The Paxar printer is one of the competitors printer, and as you know they exclusively service the apparel industry.

We compete with them, with Avery.

Before the acquisition of Paxar by Avery, we were suppliers to Avery, and interestingly we are continuing to sale some of our printers to Avery, because a lot of people prefer our printer to the Paxar.

Now, is it -- in -- especially in the Paxar business, they -- their labels effectively get -- have to get priced down to pennies or --

Yes.

-- or fractions of pennies.

Is that kind of the difference between what your market -- target market is, where, I guess it really depends on the price and the visibility of the label.

So a $20 bottle of wine where people are looking at the label is more important as is on a tire versus on a pair of blue jeans?

Interestingly, the tire labels are quite attractive, they're quite large, and they are printed on a premium medium.

But you are quite right when it comes to the apparel industry where the labels are typically quite small and the emphasis is on cost, that market is of interest to us, and we try to service it, but the more interesting market is the market for premium labels, where the people who are labeling the product realize that they can greatly enhance the value of the market value of that product by putting a high quality label on the product.

In the wine industry for example we have a wide range of label bases including some that that emulate an antique appearance, as well as some that are very glossy and very shiny and relatively costly to apply.

But they are looking for more than just something that says on it, wine -- merlot wine, 1999 vintage.

They realize that the silent selling of the label is important for their success.

Great.

Thank you.

Our next question comes from Charlie Doe, a private investor.

Please go ahead.

Good morning.

I just wondered if you could comment on when you will be releasing earnings projections for this year.

Yes, at the end of the first quarter, when we report the first quarter.

That, Charles, has been our tradition for a number of years.

We will give our estimates of both revenue and earnings for the 12 months when we report the first quarter.

Great.

And one more question, what would you say is the expected annual industry-wide sales for the home sleep monitors, once you get to a full year production in 2009?

That's going be a very difficult question to answer.

We are selling this product for $4,000.

We've had some inquiries that have been for large numbers of these.

We had one inquiry which was for --

2,200.

-- 2,200.

We've had some inquiries, we had -- 2,200 separate monitors.

We've had others with two or three.

And it is still uncertain, as Everett said, we believe it will be two or three months, maybe more, before a pattern emerges, because in part we don't know which physicians will be qualified to prescribe this, whether you have to be a registered sleep doctor or whether an internist, for example, or an ear, nose, neck, and throat man can do it.

We just don't know.

And I think that the Medicare people deliberately left it indefinite.

I thigh they want to hear what the physicians will be saying.

But we are prepared to make large quantities of them or small quantities as the market will demand from us.

Okay.

Thank you very much.

Okay.

(OPERATOR INSTRUCTIONS) And gentlemen, at this time, I am showing no further questions in the queue.

I'd like to turn the call back over to you for any concluding remarks you may have.

Well, I want to thank you one and all for participating today.

I would like to also invite you to visit our annual meeting, which will be on May 13th, at our headquarters in beautiful Rhode Island.

We look forward to seeing you there, or later perhaps in June at our analyst day meeting.

Thank you once again, and we look forward to talk to go you and seeing you soon.

Bye.

Ladies and gentlemen, this does conclude the Astro-Med fourth quarter and annual fiscal year 2008 conference call.

You may now disconnect, and we would like to thank you for your participation.

Have a pleasant day.