Central Garden & Pet Co (CENT) 2003 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Central Garden & Pets third quarter earnings conference call.

At this time, all participants have been placed on a listen-only mode.

Later, we will conduct a question-and-answer session and instructions will follow at that time. (CALLER INSTRUCTIONS) As a reminder ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host for today's conference, Mr. Drew Tammen, Director of Capital Markets and Investor Relations for Central Garden & Pets.

Please go ahead sir.

Thank you operator.

Good afternoon everyone and thank you for joining us today to discuss Central's financial results for the third fiscal quarter of 2003, ended June 28, 2003.

I expect that you have all seen our press release which we put out earlier today.

With me on the call today are Glenn Novotny, Central's President and Chief Executive Officer;

Stu Booth, our Chief Financial Officer;

Michael Reed, Executive Vice President of Pet Brands; and Neil Pincus, President of Garden Products.

Before I review the fiscal third quarter 2003 results, and turn the call over to Glen, I would like to remind you of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

Statements made during this conference call which are not historical facts including future earnings guidance, are forward-looking statements their subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements.

These risks are described in the Company's Form 10-K for the fiscal year ended September 28, 2002, and other Securities and Exchange Commission filings.

Turning now to our results, today we reported net sales for the third quarter of $345 million an 3 percent increase from $336 million in the comparable fiscal 2002 period.

Income from operations increased 24 percent of $32.6 million from $26.3 million in the year-ago period.

Net income for the quarter was $17.2 million or 86 cents per diluted share.

Compared with net income of $18.4 million or 84 cents per diluted share in the comparable year-ago period.

The 2002 quarter included $6 million of non-taxable life insurance proceeds partially offset by a $2.8 million write-down of an equity investment.

Excluding these items, net income for the third quarter of fiscal 2002 would have been $14 million or 65 cents per diluted share.

On the call today, Glen will provide an overview, Stu will discuss the details of the financial results, Mike and Neil will report on the pet and garden operations, and then we will open the call to take your questions.

Now, here is Glenn Novotny.

Thank you, Drew.

Ladies and gentlemen, thank you for joining our call today.

First of all, as you noticed we moved our call up an hour earlier today in response to many of your requests for an earlier call especially those of you who were on the East Coast.

Hopefully you'll find this more to your liking.

Turning to our results, we are pleased with the third quarter performance in spite of the wet spring weather and it's dampening of our garden sales.

Sales of our branded Garden Products grew four percent in a tough weather quarter across a large part of the United States.

This performance is a testament to our strong brands and diversification across the garden supplies industry in the entire U.S. market.

Our pets segment turned in another strong quarter with a 7 percent increase in sales.

We are also pleased that in May and we completed our debt recapitalization by replacing the existing asset based revolvers with a new $200 million cash flow based senior credit facility.

We now have a solid capital structure in place to invest in growth opportunities and potential acquisitions.

In addition, as we announced two weeks ago after the end of the third quarter, we acquired a 49 percent equity interest in the E.M.

Matson Lawn and Garden Business.

E.M.

Matson is a leading lawn and garden manufacturer in the western united states which markets and sells slug and snail products, moss controls, animal repellents under the Corry's, Deadline and Moss-B-Ware names.

This investment provides us with additional premium brands to add to our stable of winning brands and brings in additional management talent.

Looking at the remainder of this year, we expect our full year earnings to be in the $1.70 to $1.75 per diluted share range.

This guidance takes into consideration the impact of the higher interest expense and charges associated with our debt recapitalization program which amounts to approximately $1.8 million or 5 cents per share.

I will provide more color on the fourth quarter at the end of our prepared remarks.

We continue to be pleased with the improving sales and profitability in both our garden and pet businesses.

We are blessed to have a business model with two strong legs into be a leader in both garden and pet brands.

I believe that we have demonstrated with our last quarter's performance that our business can weather through a bad economy or raining cats and dogs on the East Coast in our prime gardening months.

Now Stu Booth, our Chief Financial Officer will take you through the financials in more detail.

Thanks Glenn.

Net sales for the third quarter of fiscal 2003 were $345 million a $9 million or three percent increase from last year.

This was the result of a $12.8 million or five percent increase in our branded product sales partially offset by a decrease in sales of other manufacturer products.

All branded products sales growth was organic.

Gross profit for the quarter increased by $1.2 million and as a percentage of net sales was 29.6 percent compared to 30.1 percent last year.

Our gross margins continued to be impacted by higher than normal grain prices caused by last year's drought in the plain states.

We are now seeing wild bird seed margins recover to more normal levels as we cycle through our higher priced grain inventories purchased earlier this season and see the results of improved pricing at retailers which were fully implemented in mid-March.

Selling, general administrative expenses decreased by $5.1 million, or 6.8 percent to $69.6 million.

In terms of the SG&A components, selling and delivery expenses increased in line with our increased sales and higher advertising expenses.

Where else in administrative costs were lower due primarily to significantly reduced legal and litigation expenses and other administrative costs.

The increased sales of lower expenses produced operating income for the third quarter of 2003 of $32.6 million, compared with $26.3 million in the year-ago period.

That is a 24 percent improvement.

Net interest expense for the quarter was $5.4 million, a $1.7 million increase from the last year period.

Of which about $400 million were fees and expenses associated with the refinancing of our senior credit facility.

The remainder is due primarily to higher interest expense associated with the placement in January of our $150 million of 9.18 percent Senior Subordinated Notes due in 2013.

Other income was $1.6 million compared to $4.4 million in the third quarter of 2002.

Last year's quarter included $6 million of non-taxable life insurance proceeds, partially offset by a $2.8 million charge to write-down an equity investment.

The Company's effective tax rate for the 2003 quarter was 40 percent compared with 31.9 percent for the 2002 quarter.

Net income for the quarter was $17.2 million or 86 cents per diluted share, versus net income of $18.4 million or 84 cents per diluted share in the comparable year-ago period, which including the previously mentioned other income items.

Excluding these items, net income for the third quarter of fiscal 2002 would have been $14 million or 65 cents per David share.

Depreciation and amortization for the most recent quarter totaled $4.5 million compared to $4.3 million in the prior year.

Unusual expenses consisting primarily of litigation expenses were $1.2 million, and $3.7 million in the third fiscal quarters of 2003 and 2002 respectively.

Net sales for the nine months of fiscal 2003 were $888 million, a $51 million or six percent increase from last year.

Net income for the first nine months of fiscal 2003 was $30 million, or $1.49 per diluted share, compared with $27.8 million or $1.36 per diluted share in the comparable last year period, before the effect of adopting SFAS-142 on September 30, 201.

In the nine months of 2002, including the effect of non-cash SFAS-142 accounting charge of $146.7 million, or $112.2 million after-tax and the company reported a net loss of $84.4 million or $3.55 per diluted share.

Turning to the balance sheet, compared to the June 28, 2003 balances, to the June 29, 2002 balances, accounts receivable increased by $10 million or six percent year-over-year and accounts payable increased by $6.3 million or six percent.

Inventories increased $26.3 million, or 14 percent due primarily to the softness in our garden segment in May and June, staging insect control products for an expected strong demand this summer, and new Mini Bowl (ph) aquarium product launches for a large retailer.

As Glen mentioned, in May we closed our new $200 million senior secured credit facility which replaced our existing $175 million asset-based credit facility.

The new credit facility consists of a five-year $100 million revolving credit facility and a six-year $100 million term B loan.

We undertook this refinancing to increase our financial flexibility by putting in place a layer of medium-term capital and to give us access to additional lenders.

We believe that this increased flexibility will allow us to more effectively pursue growth opportunities and potential acquisitions.

As a result of this refinancing, total debt increased to $262 million, compared to $234 million last year.

However, including cash and equivalence, total net debt actually decreased to $187 million, compared to $224 million a year-ago.

Mike Reed will now review the operational results for the Pet Product segment followed by Neil Pincus, who will review the results for the Garden Products segment.

Thank you Stu.

Our Pet Products segment turned in another strong quarter.

Our leading Pet brands include Kaytee, TFH, Nylabone, Four Paws, Wellmark, Zodiac, Pre-Strike, Altosid, All-Glass, Oceanic Aquariums, and Island Aquariums.

This segment reported third-quarter sales of $130 million an increase of $9 million or 7.3 percent compared to last year all of which was organic.

Our branded product sales increased by $6.7 million, or 7.2 percent in sales of other manufacturer's products were up $2.2 million or 7.8 percent all compared to last year.

Operating income for the third quarter was $16.6 million, compared to $14.6 million last year an increase of 13.7 percent.

This improvement was due to increased sales of higher margin branded products, particularly our professional and consumer mosquito control products, and aquariums and continued cost reductions at TFH.

I will now review the highlights of the pets brands.

As the saying goes, every cloud has a silver lining.

The wet weather across most of the U.S. produced a bumper crop of mosquitoes and other insects.

Our Wellmark business, a leading marketer and producer of flea, tick, mosquito, and other insect control products for professionals and consumers under the brand names Zodiac, Altosid, Extinguish, and Pre-Strike had a great quarter.

Due to the continued concerns regarding the West Nile virus, we experienced significant sales growth in these very effective birth control for bugs products, to professional applicators, mosquito abatement districts and consumers.

We are fortunate that more and more public health agencies are recommending and using our unique larvicide products as the most proactive and safest approach to mosquito control.

In addition, our introduction this year of Pre-Strike, a mosquito control product for the consumer market has gained significant listings in major Garden and Pet retailers.

We recently launched an advertising campaign for Pre-Strike that includes inserts in the USA Today magazine and Sunday newspapers, along with radio spots in numerous markets.

The total reach of the campaign is expected to exceed 40 million households.

Kaytee, the market leader of innovation and bird and small animal food and treats, continues to perform very well.

As highlighted last quarter, price increases and decreased costs of grains favorably affected operating profits this quarter versus last quarter.

During the quarter, Kaytee introduced several new items and line extensions which have been favorably accepted in the trade.

The consolidation of Kaytee's Wisconsin manufacturing facilities is on track for completion in the fall.

The new facility will feature state-of-the-art automation in grain cleaning, mixing and packaging.

This should substantially reduce Kaytee's operating costs and increase its manufacturing capacity.

The aquarium companies All-Glass, Oceanic and Island had a good quarter.

The Mini Bowl aquariums and the new Geneva series of furniture as well as new listings have had a positive affect.

The Mini Bowl productline including 7, 5, and 2.5 gallon sizes is a reasonably priced, brightly colored line of aquariums that are moving off the shelf at a record pace.

Last month, we shipped 40,000 Mini Bowl aquariums to customers all over the country.

The Geneva line of aquarium stands offers contemporary, high-end styling at reasonable prices.

The level of interest in the hobby has been raised significantly by these exciting and innovative products and by the hit movie, Finding Nemo.

We think this movie will continue to stimulate our business since kids don't see a movie just once and there will be future DVD releases.

Our Nylabone brand of premium dog chews and edible bones, continues to sell well and gain additional listings with retailers.

Our TFH book business which outsourced its printing and binding operations to improve quality and reduced cost, has made a dramatic improvement in customer acceptance and profitability.

Four Paws, a leading provider of dog, cat and small animal products introduced a new line of magic coat mattresses for dogs.

Our pets sales and logistics network which strategically supports our pet brands increased sales of our branded products by 9.2 percent in the quarter.

The sales and logistics group also significantly improved its working capital management and profitability.

Neil Pincus will now review the results for the Garden Products segment.

Neil.

Thanks Mike.

Our Garden Products segment includes the following brands.

Pennington, AMDRO, Grants, Lilly Miller, Norcal Pottery Products and Matthew Four Seasons.

While weather during the quarter has affected overall consumer purchases at retail, our garden group reported third-quarter sales of $215 million, the same as the comparable quarter last year.

Sales of our branded products were up $6.1 million, or four percent, all organic.

While sales of other manufacturer's products were down, $5.5 million, or nine percent.

Garden Products reported income from operations for the quarter of $19.8 million compared to $20.1 million in the same period last year.

This slight decrease in operating income was primarily the result of our decision to increase media advertising and AMDRO and the continued pressure on wild bird food margins at Pennington.

However, we are now seeing wild bird feed margins returned to normal levels as we one, run through the higher price grain inventories purchased earlier in the season, and two, benefit from the improved pricing to retailers which as Stu mentioned was fully implemented in mid-March.

Pennington reported an overall increase in sales with grass seed leading the way.

Pennington grass seed continues to be the innovation and quality leader in the category.

Our new 2003 product introductions under MasterTurf (ph), Tournament Quality and Penning ton Select are all doing extremely well this season.

Penning ton also has been successful launching a new innovative seed sod program with leading retailers.

This unique program provides our retail customers with a source for sod grown exclusively from Penning ton grass seed.

For the first time, consumers can now purchase the exact same seat from the retailer to match their existing sod for overseeding and restoration products.

Garden chemicals sales were up over last year with strong Eliminator private sales to Wal-Mart.

Our recently introduced Eliminator weed and grass killer products performed exceptionally well.

Our new innovative reusable pump and spray system on the Eliminator weed and grass killer is an easy-to-use product for consumers to kill unwanted vegetation.

We are particularly pleased to see several of the new Eliminator SKUs introduced this year outperforming other national brands at retail.

AMDRO, the leading fire ant bait brand experienced strong increases in sales.

We are pleased with the sales of our new AMDRO yard treatment which is a granular bait broadcast that kills fire ants throughout the entire yard and is easily applied with any broadcast spreader.

The new yard treatment has also been supported by an increase in targeted advertising campaigns.

Norcal Pottery products increased excellent sales growth for the quarter and continued its focus on strengthening and extending the Norcal Pottery brand.

We're expecting increased listings of our branded products at leading retailers for 2004.

Our garden sales and logistics business which strategically supports our garden brands has increased the sales of Central's branded products by six percent on a year-to-date basis.

We continue to benefit from cost control and efficiencies in this business.

Now I will turn it back over to Glenn to wrap things up.

Glenn.

Thanks Neil and Mike.

Looking into the future we believe our garden and pet brands are well-positioned for a strong finish to the year and beyond.

Our pipeline of new products coupled with strong retail relationships and consumer demographics, should continue to drive sales and profits.

We now have nine months of solid progress behind us with sales up by six percent and an operating income increase of 27 percent above last year.

As I said earlier, we expect to achieve $1.70 to $1.75 per diluted share for fiscal 2003.

This is despite the higher grain cost for bird feed, the wet weather, increased interest expense, and the $1.8 million or five cents per share of fees and expenses associated with our debt recapitalization program.

Looking forward to our fourth quarter, we are in the dog days of summer.

The weather is conducive to growing grass, weeds, and grains for wild bird feed, and as Mike said we're experiencing a bumper crop of fleas, ticks, ants and mosquitoes.

All of these consumer needs hit our sweet spot.

We're also enjoying strong sales of our successful Mini Bowls and other exciting new aquarium products.

On the cost front we are reducing litigation, yes we like that, and administrative costs in driving productivity improvements across the board.

We have positioned the company for future growth.

We will continue to execute against our five key strategies.

They are; growing and extending our brands in Garden and Pet, developing and launching new innovative products, leveraging our cost structure, positioning our company to support control growth, and pursuing and completing acquisitions in our industries.

We are fortunate to be an industry leader in our two core businesses, pet supplies, and lawn and garden supplies.

Both of these industries are growing, recession resistant industries with favorable demographics.

They provide two strong legs for future growth, both organically and acquisition oriented.

Thank you for your attention and participation in this call.

Now operator we will take questions from the audience.

The floor is now open for questions. (CALLER INSTRUCTIONS) Ron Phillips (ph) of Banc of America Securities.

I wasn't able to translate the $1.70 to $1.75 into the old sales and EBITDA guidance yields.

My notes here show that the old sales guidance was from four to six and EBITDA of 87 to 93.

How does that translate today?

Pretty close to what we said, pretty much in the ballpark Ron, top-line sales doesn't drive as much as the bottom line for most companies because we have a big mix.

But, our operating income guidance was 70 to 76, right in there.

Okay.

That is really it.

Great job.

George Talub of Deutsche Bank.

Hi.

Obviously the gross margin was lower as expected because of higher grain prices.

Can you talk a little bit on the order of magnitude how much was that a factor in the gross margin in the quarter?

Also, as a follow-up to that as you cycle through the old inventory, when do you see that basically working itself through the system and starting to get some gross margin improvement down the line?

As we communicated earlier, the increased grain prices for wild bird feed cost us several million dollars over the first nine months of the year.

We have now cycled through basically all of that old inventory and we're now into new inventory and we will see our margin going up, we are seeing our margins going up.

Starting fiscal fourth quarter we should see that competing positively year-over-year?

It will be the back to more of our normal pricing in grain and gross margins we normally experience.

I think the SG&A option here as a potential of sales is permanent given the lower legal expenses and administrative expenses going forward?

Yes.

Last question, what was the revolver availability in CAPEX for the quarter please?

What was the first part of your question?

The availability on a revolver.

Revolver was undrawn so it was $100 million of availability there.

We had cash of 75 and CAPEX for the quarter was $4.7 million versus $1.6 million last year for the same period.

Great.

Thank you.

Bill Chapelle of Sun Trust Robinson Humphrey.

A couple of things.

First, just trying to understand the model of your forecasts.

When you say 70 to $76 million for operating income for the year, what is the full year diluted share count that you're using for the EPS number?

We are using for our estimate and it for good planning purposes $20.1 million, sorry, 20.1 million shares for the full fiscal year.

Okay.

20.1 Bill.

20.1 so that is not including the higher share count of the first quarter?

That is for the whole year.

Second question, just trying to understand also a year ago I guess from the June to September quarter the Pet products business was down sequentially.

Do you expected that to continue, is there something in the cycle why it would go down going into the holiday season sales?

That was driven last year Mike, was more of the grain prices.

Grain prices were starting to go up on us and we were starting to ship more of the wild bird product in that quarter.

Other than that, I think we're looking for rebounds in that area this year.

We also had a few, not quite a couple million dollars, but we had some unusual expenses in fourth quarter last year. -- that we do not anticipate recurring.

Can you comment the overall sales of Methoprene based products and the outlook you see for the fourth quarter on that?

We look for continued strength in the Methoprene S based products.

A quick comment, I saw in the news this week that in the state of Illinois the first West Nile virus case was not reported until the eighth of August last year.

So we're really just entering the season when mosquitoes are a major problem.

So, replenishment sales look like they could be strong in this quarter.

Great.

Thank you.

Joe Altobella (ph) of CIBC World Markets.

Good afternoon.

Just a couple questions.

First if you could quantify if this is possible the impact from on a top-line from the increased birdseed prices and the Finding Nemo impact, if you call it that?

If you could also give us some color on what the acquisition market looks like at this point?

I will talk on the acquisition first, Joe.

We have as usual several discussions going both large and small, and we will continue to mature those as we move forward.

As far as the Finding Nemo, Mike, we have seen a nice increase in our sales.

We think a large part of that is because of our innovative new products primarily and I think Finding Nemo is kind of an added benefit.

You really can tie how much Finding Nemo really drives it.

We will take whatever it brings us but, I think we're driven more by just our cool new products we have, they are flying off the shelves.

Your third question was?

The birdseed price increases, if you could quantify that on a top-line?

(multiple speakers) Nice trend.

Joe.

One more question if I could squeeze it in on inventories, where do you expect to end the year at?

I really haven't looked at it that way because we are continuing to build inventory for some of our new product launches.

But inventories are up this quarter for three reasons.

We build up inventories in anticipation of insect control sales, and we had some new product launches, particularly some of the Mini Bowl aquariums for a major retailer.

Then we did have some hangover from third-quarter garden sales, so it is really a combination of all that.

Still down sequentially, though.

Yes.

Okay, great.

Thanks.

Bill Brady of Presido (ph) Management.

Can you kind of lay out the potential scenarios from your TFH lawsuit, what this is going to cost you over the next year and what possible recovery could be?

Does the guy you're suing have the means to pay it?

Those are good questions.

I have Bill Brown sitting here just for this purpose.

That litigation has been running for a number of years.

The suit involves monies that we think that we were defrauded out of at the time that we made the acquisition, and we have claims in for that.

The amount of money is in the tens of millions of dollars.

It is now scheduled to go to trial in January of next year.

That has been rescheduled three or four times, and it is in the process of being assigned to another judge, so I think it is going to be a while.

As far as cost, it could be a couple of million dollars to wrap that suit up.

It may be less than that.

But we think that the prospects of recovery for us are quite good.

The individual clearly has the money, has represented to the courts that he has the money.

That is not a guarantee, but we think it is worth pursuing.

We would expect to win at the minimum at least the $10 million note plus interest that he owes us, and then any damages on fraud above that.

The 2 million legal expenses have been reserved or have not been reserved?

Those expenses are recorded as they are incurred, and as they were in this year's guidance, I would suspect that Glenn and the team will provide in the guidance next year some estimate of litigation costs.

Have you just launched Methoprene as a consumer product as opposed to the professional product it was before?

Yes.

Mike, why don't you get in on that?

This calendar year we introduced the Pre-Strike brand name for the Methoprene-based products that are now essentially hitting the consumer market for the first time.

Can you kind of speculate with us -- how big a product could this be?

Could it be a $10 million product or a $50 million product?

It's a several million dollar product line potential.

But not 10?

We don't know, it could be.

We like the way it started.

It is brand-new out the door.

It follows the same technology with our Altosid, which is the strong professional brand.

We won't plan for that much.

We'll hope for that much; we won't plan for that much.

Okay.

Thanks.

Alexis Gold of CIBC World Markets.

Good afternoon.

Just to stay on legal expenses for a second, I know the 10 million for Scotts has been reserved, but when do you expect to see the cash out?

And additionally, you may have given this number and I missed it, but what were the legal expenses during the quarter?

I heard you say 2 million for the year associated with TFH?

We don't have a definitive date on when we are going to pay the cash out to Scotts.

Again, we have another trial coming up in October and it is kind of a global arrangement if you will.

In terms of litigation expense, for the quarter, third quarter of '03 it was $1.2 million versus 3.1 for the last-year period, and year-to-date we are at 3.5.

Great.

You talked about marketing Pre-Strike and these ads in USA Today.

Should we assume increased marketing costs for the remainder of the year?

Is this during the second quarter or was that actually during the third quarter?

I'm sorry, the third quarter or the fourth quarter?

Much of the increased marketing costs have been incurred.

We did a substantial public relations program in our fiscal third quarter that is behind us.

There will be some continued marketing costs, but really the heavier part would have been what was incurred in the last quarter.

That was true for both our Pre-Strike and AMDRO; is that correct, Neil?

That's correct.

So we front-loaded some of the advertising just to drive the sales, we think, in what we expect to be a very strong insect control market in this existing quarter we're in right now.

Great.

Thank you.

Jan Lobe (ph) of Jefferies & Co.

Good afternoon.

I have three questions.

Firstly, in your new Wisconsin facility, can you tell us number one, and maybe in dollar terms or some data point on how much year-over-year next year over this year you think you can save by consolidating the three plants into one and having much more efficient equipment?

And the (indiscernible) to that is do you need the excess capacity today?

That is question number one, question number two is, you have worked your range of guidance down by a nickel.

What is it that caused you to do that?

Start with those two.

The Wisconsin facility, I think I mentioned to you before, Jan, from a financial office perspective it's a very good investment, that additional $8 million has a very reasonable pay back.

We will expect to see the results of that starting next year when the construction is completed.

So we will see it in 2004.

How much we see in 2004 we will let you know.

Do you need the excess capacity?

The excess capacity is very opportunistic at this moment.

We have some things that we expect we will be manufacturing.

We will add new capability we didn't have before.

We will add capabilities, the other comment I would make is in peak demand programs we will be able to keep up better, so it is not a smooth demand year-round but seasonally, from time to time we will absolutely get out of trouble by having that capacity.

Okay.

As far as your next question Jan, we have been saying $1.70 to $1.80.

We tightened the range from $1.00 to $1.75, that is after we absorbed the nickel that you're aware of for the refinancing of the company.

Really we're looking at quarter right now we did experience a little damper sales in the garden in the third quarter.

But, we still were able to hit our numbers, which I think is good.

And it took us a little longer to get the grain price for the wild birdseed pass-through.

We had hoped to get it through before the end of March.

Those are kind of the three big components that had us -- and it is just time for a little more precision I think.

Just lastly on the Methoprene S, could you just tell us on the institutional side, third quarter by the end of the third quarter this year versus the end of the third quarter last year, could you say sales are flat or up?

What I'm trying to get at is the increased potential that people expect because of the wet weather.

Does that hit us in the fourth quarter or have we are ready benefited in part in the third quarter because of that?

We certainly did benefit in the third quarter because of it.

Sales in that market channel were strong in the third quarter compared to prior years.

We hope to to see some residual strength in the fourth-quarter.

We got a lot of it in the third quarter.

Thank you very much.

We think the continuing mosquitoes buzzing around will drive it even more.

(CALLER INSTRUCTIONS) Gentlemen there appear to no further questions at this time.

Do you have any closing comments?

Yes.

Thank you operator, thank you everybody.

We would like to know we move the conference call up an hour earlier than normal.

We would like any feedback from anybody on the call either now or later on as to whether this works better for you.

We are always flexible on the timing of this call.

And then we would also like to thank everybody for their call into today.

We have already had a pretty good start off on our first nine months of the year.

We are now into our fourth quarter and we are looking forward to finishing this quarter and talking to you in about three more months about our fiscal year.

Thank you and good bye.

Thank you for your participation.

That does conclude this afternoon's teleconference.

You may disconnect your lines at this time.

Have a great day.

Thank you. (CONFERENCE CALL CONCLUDED)