Miller Industries Inc (MLR) 2007 Q4 法說會逐字稿

Good morning. My name is Monica, and I will be your conference operator today. I would like to welcome everyone to the Miller Industries fourth quarter '07 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer session. (OPERATOR INSTRUCTIONS) Thank you.

I would now like to turn the call over to Ms. Alex Tramont with FD. Ma'am, you may begin.

Thank you and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the Company's 2007 fourth quarter and full year results, which were released after the close of market yesterday.

With us from management today are Bill Miller, Chairman of the Board and Co-CEO, Jeff Badgley, President and Co-CEO, Vince Mish, CFO, Frank Madonia, General Counsel, Debbie Whitmire, Corporate Controller, and Alison Haughton, Director of Finance. Today's call will begin with formal remarks from management followed by a question and answer period.

Please note that in this morning's call management may make forward-looking statements. In accordance with the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995, we would like to call your attention to the risks related to these statements, which are more fully described in the Company's Annual Report filed on Form 10-K, and other filings with the Securities and Exchange Commission.

With these formalities out of the way, I would like to turn the call over to Jeff Badgley. Jeff, please go ahead.

Good morning, and thank you, Alex.

The 2007 fourth quarter saw a weakening U.S. economic environment that began to weigh-in on our customers, as well as continued price pressure across a wide range of product, including aluminum, steel, and all petroleum-based materials.

Net sales for the 2007 fourth quarter were $84.5 million, compared with $116.7 million the fourth quarter of 2006. Reflecting softer demand from our customers as a result of a number of factors, including the impact of higher fuel costs, a tightening credit market, and a declining economic environment. During the quarter we took the necessary steps to more closely align our operating structure with current demand levels, by reducing cost base and our production levels.

The decline also reflects the completion of several major municipal and military orders in the second quarter of 2007, which have been contributing to our performance during 2006 and the early part of 2007. While we completed the two small government orders in the fourth quarter, we did not receive any additional orders in the period. That said, we continue to diligently pursue the municipal and military markets for new and follow-on orders, and are hopeful for long-term success in this area, but obviously we cannot predict the timing of any such success.

Now I will turn the call over to Vince, who will review fourth quarter and full-year 2007 financials in greater detail. After that, I will be back to add some comments, following which we will take your questions. Vince.

Thanks, Jeff, and good morning, everyone. As Jeff mentioned net sales in the fourth quarter 2007 were $84.5 million, versus 116.7 million, which is a decrease of 27.6%. Operations also decreased by 26.6% to $73.4 million in the 2007 fourth quarter, compared to $100.1 million in the fourth quarter 2006.

This resulted in gross profit of $11.1 million, or 13.1% of net sales in the 2007 fourth quarter, compared to $16.6 million, which was 14.3% of net sales in the fourth quarter of 2006. While the lower sales levels year-over-year did drive a decline in gross margins, the impact of this volume decline was somewhat offset by our cost reduction efforts, and the steps we have taken to bring production rates more in-line with demand levels.

In the fourth quarter of 2007, SG&A expenses decreased 10.9% to $6.4 million, compared to $7.2 million for the same period a year ago. However, as a percentage of sales, SG&A was 7.6%, compared to 6.2% in the fourth quarter 2006, reflecting lower sales levels in 2007. Total interest expense in the 2007 fourth quarter was $780,000, compared to $865,000 in the fourth quarter of last year, reflecting both the reduction in bank debt levels and lower interest rates.

Income from continuing operations before taxes was $3.9 million, compared with $8.6 million in the fourth quarter of 2006. During the 2007 period the Company's effective tax rate was a more normalized 36.8% resulting in income tax expense of $1.4 million, as compared to a net tax benefit of $307,000 in the prior year period, which resulted from the reversal of a deferred tax asset valuation allowance.

Before the fourth quarter 2006, the Company had reported a full valuation allowance against net deferred tax assets from continuing and discontinued operations. As previously announced during the fourth quarter 2006, the Company concluded that the valuation allowance on the deferred tax asset was no longer necessary, given the Company's sustained income and future outlook.

With the higher effective tax rate for the fourth quarter 2007, net income was $2.5 million, or $0.21 per diluted share, this compares to $27.2 million, or $2.34 per diluted share for the fourth quarter last year, which also included income from discontinued operations of $18.4 million, or $1.58 per diluted share. The income from discontinued operations was as a result of a one-time income tax benefit of $18.2 million from the recognition of a deferred tax asset, related to deductible losses from excess tax bases of advances to and investments in certain of the Company's previously discontinued operations, as well as income from discontinued operations of $126,000, which is $0.01 per diluted share in the quarter. The Company generated cash flow from operating activities of continuing operations in the fourth quarter of 2007, compared to 11.6 million in the fourth quarter 2006.

Now let me briefly review our results for the full year ended December 31st, 2007. Net sales for 2007 were $400.0 million, compared to $409.4 million in the prior year. Gross profit was $56.1 million, or 14.0% of sales in 2007, compared to $59.8 million, or $14.6 million, -- percent of sales for 2006. Operating income was $29.0 million, or 7.3% of net sales for 2007 compared to $32.9 million, or 8% of net sales in '06. Income from continuing operations before income taxes was $25.7 million, compared to $29.4 million in 2006.

In 2007, the Company reported net income of $16.3 million, or $1.40 per diluted share, compared to net income for 2006 of $45.3 million, or $3.91 per diluted share, which included the gain from discontinued operations of $18.4 million, [inaudible-background noise] $1.54 per diluted share, in the fourth quarter as I previously mentioned. The reported effective tax rate was 36.3% for 2007 versus 8.[x]% [inaudible-background noise] in 2006. Again, the return to a normalized effective tax rate in 2007 is the result of the reversal of the valuation allowance that had been against the deferred tax asset in the fourth quarter of 2006.

Let's now review some balance sheet highlights. Accounts Receivable at December 31st, 2007 were $67 million, compared to $76.6 million at September 30, 2007, and $84.2 million at December 31st, 2006. Accounts Payable at 12/31/07 were $39.9 million, compared to $37.5 million at September 30th, 2007, and $58.6 million at December 31st, 2006.

Inventories were $39.3 million at December 31st, 2007, compared to $36.4 million at September 30, 2007, and $43.2 million at the end of last year. Total senior debt at December 31st, 2007, was $3.5 million, which is down from $3.9 million at September 30th, down from $9.9 million of senior and junior debt at December 31st, 2006. The only remaining senior debt continues to be the term loan on the Property, Plant, & Equipment. All remaining junior debt was paid off in the second quarter 2007.

Now I will turn it back to you, Jeff, for further remarks.

Thanks, Vince. Despite some challenges in our markets, we believe we are in a stronger position to weather economic difficulties, and take advantage of the eventual rebound we will see in our industry. We generated strong cash flow in the fourth quarter, further improving our cash position, and strengthening our balance sheet.

We continue to utilize these resources to reinvest in our business. This included continuing work on the modernization of our heavy-duty wrecker facility in Ooltewah, and completion of the modernization of our car carrier facility in Hermitage, Pennsylvania. We have made significant progress on the heavy-duty wrecker fleet. We expect to complete this project shortly.

While we do not expect all of our facilities to operate at 100% utilization until economic conditions improve, these initiatives are creating more efficient operations that are enhancing our customer service levels and product quality, as well as improving our competitive position in the global market. Overall, the U.S. economy is clearly going through a difficult period, and the softening conditions are impacting a number of industries, including ours. We expect that these tough economic conditions will continue in the near term, and we remain extremely cautious regarding the effects of the economy on our customer base in the coming quarters.

As a result, we are currently expecting a sequential decline in sales in the first quarter of 2008 in the range of 20%, and this soft demand could continue, as long as current economic conditions exist. We hope to see a gradual rebound in demand in the second half of 2008, should U.S. economic conditions improve. But we of course, don't claim to be able to predict where this economy is going.

On the cost side, volatility and pricing of commodities are at historic levels. Working in conjunction with our suppliers, we will do everything in our power, to mitigate the effects of rising commodity costs in the coming months. This softening demand will also have a substantial adverse effect on our net income for the first quarter of 2008, that could continue as long as current economic conditions exist. We have made cost and production adjustments to address this softening demand, and will continue to assess further such adjustments with the goal of protecting our profitability.

With that said, we want to again remind you that we have talked in the past about our commitment to expanding the market of our products beyond the traditional U.S. commercial customer. Namely, to international, military, and governmental customers. We continue to actively pursue this business. These efforts have been successful in the recent past, and we are hopeful for positive results from these efforts in 2008, but we cannot predict the timing or degree of any such success.

In addition, we have made a great deal of effort over the past few years to improve our financial position. This has included paying off the remainder of our Company's junior debt in May of 2007, and refinancing and extending our revolving credit facility and term loan at lower rates in July. These actions have been enhanced our financial flexibility, and created a solid financial position, that is benefiting the Company, and will help support Miller Industries in all economic conditions.

We continue to believe that we have the highest quality people, products, and facilities, and distribution in the industry. This will allow us to continue to provide excellent products to our customers in a cost-effective manner. In closing, I would like to thank our employees, shareholders, suppliers, and customers, for their continued support of our Company.

We are now ready to take your questions.

(OPERATOR INSTRUCTIONS) And we will pause for just a moment to compile the Q&A roster. And your first question comes from the line of Rick [D'Auteuil] with Columbia Management.

It is Rick D'Auteuil. Couple of questions. Did the raw material impact on gross margins, can you quantify that?

This is Vince. In percentages over the course of the year, it had some small impact, but not a real major one. Maybe it was up a little bit.

Jeff, I think you the are looking more at the future, aren't you?

This is Rick. I am looking more at what you are seeing as we are getting into Q1, and whatever price increases have been disclosed by the suppliers to date?

Jeff?

We are getting notifications of intent to increase price from suppliers. We are fighting, currently fighting increases, in terms of amounts that qualify the gross margin impact on a go-forward basis. At this point in time, might be a little premature.

Okay. Let's try to tackle it another way. What percentage of your cost of goods are involved in the commodities that are increasing, steel, aluminum, et cetera?

Rick this is Vince again. We haven't really disclosed that, and it is kind of difficult to --

Oh, Vince, when you say it is petroleum, aluminum, steel --

That is pretty much it.

That is pretty much everything.

Yes. That is pretty much it.

Almost every part we have, either has some kind of petroleum product in it, some kind of petroleum by-product, or some kind of aluminum, or some kind of steel.

You have labor in there, too.

Labor is separate. I'm just saying, if you ask what percentage are being impacted by the commodities, Rick, I mean, pretty much every one of our vendors is creating something out of one of those three items.

Right.

And so, of course, they are trying to pass through what they are beginning to feel. We obviously are saying, well, we are a high-volume customer, go to somebody else, or let's talk about what and when, and obviously, we are going to have to take a look at a price increase ourselves, that we are going to have to pass through, to try and offset these rising costs. Does that help you understand, I mean, I am just trying to --

I mean, direction, yes, but it doesn't help me get to impact. So maybe if we looked at it, what is labor versus materials in cost of goods?

We never disclose that, but when you have things like chassis, it is not nearly as big a percentage as materials are.

Okay.

I think if you are looking at your question, I mean, we are going to do everything in our power, Rick this is Bill Miller, and I am sure Jeff can respond to how he feels, we are going to do everything we can to, #1, try to control the costs, and #2 two is, unfortunately, we are going try to protect our margins by passing the costs on.

Okay. Then the second question is, you talked about reacting to --

But that doesn't mean our margin is not going to be impacted. I am not saying, hey, we are going to increase our margin. We are going to protect it, but it is a battle.

Right. You talked about in the current economic environment being pretty difficult, you guys are making cost and production adjustments. How about, can I get some sort of quantification of what you are planning on taking out on the cost side sequentially, or since the end of the year?

This is Vince again. We have actually, and you can see this in the K with the numbers to some extent, but we have actually reduced our staffing by more than 130 people, which had an impact. We have cut expenses in a lot of other areas.

We have reduced direct labor substantially to match up to what we think the production levels are. But there are certain parts of our business, when you look at our manufacturing overhead, that are fixed versus variable, and we can't reduce them, they are kind of step function. But we have taken care of all the variable sides, just to give you an idea.

All of the senior staff, including myself and Jeff, which includes 18 people, took a 10% salary cut for the next year. We froze the salaries for the rest of the salaried people, and our labor increase is 1%. That is how aggressive we have been at this point.

Okay. That's helpful. But the 130 people that you mentioned, Vince, if I recall, you were cutting people last year, because of the lack of municipal and military orders. Now we are seeing the commercial, the everyday commercial business drop off. How much of that is incremental, and when, if we are kind of starting with an uglier demand picture as we start this year, how many people have been reduced in the last two or three months?

In the last two or three months, we have had a series of layoffs at the various plants. The first pass was about 50 in the second quarter, but we have had some 80 since that. So in the fourth quarter --

Most of that has been since Thanksgiving, hasn't it?

Yes.

And the salaried people have all been, most of it has happened in the fourth quarter, as we began to see this issue.

And early first quarter, yes.

Are you down to muscle at this point, or is there any more room if the demand picture doesn't pick up? We are concerned about cutting into muscle, particularly as Jeff had mentioned with the resources we have engaged, to try to improve our business in military, governmental, and international stuff. We have got a great team, and we don't want to lose what we have spent to get the opportunities that we have had, and hope to continue to have.

Obviously we can, this is Bill. We can adjust direct labor. It is a variable.

Right.

The manufacturing staff, the GS&A kind of stuff, the customer service, we went through and took about 10% of it out on, what was that January 3rd, Jeff?

Yes, I believe so, yes. Right there the first week of January, might have been the 4th or whatever. So we have been about as aggressive, what would you say about that Jeff? We have had that discussion before. As far as other than direct labor, I would just like to add some color to Bill's comment about senior staff, and cutting into muscle. From a strategy standpoint, the senior staff, it was not a mandatory cut. It was a voluntary cut.

And the cut was made by senior staff members because they didn't want to cut into their personnel, and lay more people off, or fire more people, because it would affect the long-term viability of our Company.

Okay.

So if you're asking, can we cut into some muscle more, I mean, can we cut more? Yes. We would be cutting into muscle. Our goal is going to be to protect profitability, but we are not, at least in Bill and my's estimation, going to affect long term possibilities for the Company by doing that.

I got one more question. As you obviously have been around a log time, and ridden the cycles before, when you get into a tough economic cycle, obviously your customers can defer purchases, but they are still running their equipment every day. What typically do you see, as far as duration before they have to come back to the well and buy new?

I have been around a long time, probably about 25 or 26 years in the industry. This is kind of a strange situation, but historically, the equipment, the customer's mindset is closely tied to the cash in his pocket. And when cash comes back, purchases take place. It is not really a mindset of how long will the equipment last. It is more a mind-set of, when I feel comfortable, a little bit of consumer confidence, I would expect, when I feel comfortable, I will start buying again.

And we are fearful when we look at diesel fuel prices, I think today they are approaching $4.00, and obviously they trend higher than gas prices. Haven't figured that out, but they do. So historically, in a downturn, the business comes back when the customer feels comfortable. I don't know if that answers your question or not.

So consumer confidence, they are not seeing their business decline, I wouldn't think.

I think what they are seeing is their business --

Rising costs.

Yes, they are seeing rising costs. I know they are seeing rising costs. I talk to towers every day. If you take a tower, this is a little colloquial, if you take a tower in the state of Florida that has a contract with the state of Florida, and that contract is a year old, the state of Florida will not allow a fuel surcharge to that contract. So that guy is trying to manage his business, squeeze, look at other areas he is spending, so it's a little bit, now that varies from state to state, but does it have an impact.

Okay. That is helpful. I appreciate it. Thanks.

And your next question comes from the line of Quinton Maynard with Moorehead Capital.

How are you doing today?

Good.

A few of my questions got answered there. But kind of touching on the last thing he just asked, when you think about replacement rates, trucks that are on the road, and kind of an expectation of a really grim cycle right now, not wanting to count on having gotten any municipal or international business, even though we are hopeful that shows up, but if you really want to get down to the bare bones and say, what is going to actually have to get purchased for my customers to continue doing business, are we talking about an $80 million revenue line, or could that be a 50 million in the quarter, because people really do say, hey, we are going to defer purchases until we feel more comfortable?

Well, we could answer that a couple ways. This is Bill. One, we have indicated, as we are well into the first quarter that we believe our revenues sequentially will be down about 20%, in the range of 20% this quarter.

Just so I get this right. That then puts you at a $64-ish million expectation, 66 somewhere in there?

Pretty close.

Pretty close. We try not to do any forecasting of what might happen with our Company, but that is a pretty close estimate of what we think.

Got you.

First quarter is almost over, so --

Right.

We have still got to get it out the door.

We should be able to make a pretty good guess.

All right. But do you see that as something that, if the customer wanted to be really pulling it in, that they could keep that level of revenue for a while, or is that something that all of a sudden that is going to backdate some demand, and now you get into the third and fourth quarter this year, and the customer doesn't have any choice but to be increasing his order level?

Well, I think Jeff has read in his statement that we're looking at that level now, and we hope that although we cannot predict, we hope that we will see it be gradually increased starting in the second half. Did you not say that Jeff?

Yes, I did.

As far as the stimulus package --

That is assuming the economic conditions don't worsen out there. And everybody goes to the bunkers.

The stimulus package, go ahead, yes.

I was going to ask if you guys have heard from your customers, about wanting to take advantage of any of the tax treatment around capital expenditures for small business?

Actually, we do a publication, a magazine about our company. It is called 24/7. And we are pushing that stimulus package quite heavily in that publication.

I mean, it would have a pretty material cash flow impact for your customer, right?

Absolutely.

And they appreciate the accelerated depreciation. These guys are mostly all, almost all are private companies. There is one or two, well, I guess they are all private.

No, they are all private.

All private right now.

So, yes, that certainly helps them. Cash flow drives them a lot harder than net income.

As far as the AR, first of all, kudos on getting that down in this quarter, when you look at risk in that, I have read about your, you have a relationship where people can push back a certain portion of that on you if they want, in product, is that correct?

No, that is not.

Not exactly, that is not correct.

Not correct, okay. You don't feel like there's any risk other than a small guy going out of business, but outside of something like that, you think most of that AR is pretty solid?

We pretty much, just as you look at our distributors, we really don't have any of the small guys, but what we do, we have to repurchase on floor planning with Sovereign Bank in our floor planner, and if they recover the product at some point, let's say there is some problem with a distributor, and they get the product back, and they deliver to us in, I think it's original condition, isn't it, Vince, or like new condition?

Yes, like new.

Then what we will do is we will credit them for that, and we will move it, basically another distributor will be looking for that product. So we have really never had that as an issue, and this is not our first rodeo. We have been through these kind of times before.

What is important to us, is we have great financially strong distributors, and that has always been really helpful to us.

Sure, yes, absolutely. Even that dollar amount, that is what I was readying about on your floor plan financing, that is limited to like $20 million or something, correct?

And even that, they have to recover product, we get the product back, another distributor that is in good standing can then take the product--

Bill, we --

Go ahead, Vince. It is a contingent liability.

You have to disclose it. The main thing is we haven't, there were no repurchases in '06, '07. We haven't had to repurchase, I can't remember one.

That is what I was saying.

If we physically had one, it was small, so it is something that we have to disclose. The inventory is there.

Got it. I appreciate the clarification. Following up on floor planning, you will to have excuse me for not having as much expertise in this, as I am sure some other folks on the call do, but I was hoping you could just walk through interest expense as it relates to floor planning?

Obviously we can back out from debt you carry, that the majority of your interest is being tied to that, and yet we have not gotten a real clear understanding of how we can calculate it, and so therefore projecting it becomes pretty tough? How should we think about the calculation on floor planning interest?

Think about it very carefully.

(laughter) Okay.

What we have got in our interest expense, which for the year was $3.4 million, we got about 800 of that at all the bank debt and the sub debt that we had, the junior facility during the year. We have got floor planning that we had on what we were just discussing, which is somewhere in the $1.8 million range, and we have also had chassis that we, after a certain time we have to pay interest on that, and that is something in the $1.6 million range for the year.

And the chassis number will come down this year because of the engine prebuy, right?

Yes, it probably will. It depends on what we buy. The economy, what terms we get. There are a lot of factors. But then we also make interest income, so that was some $900,000. So that is kind of the breakout of that.

That interest income comes from our distributors. And, in other words, we are basically paying interest to the chassis manufacturer, and then they pay us, some portion of that.

Okay. So you are making some interest on--

We have basically got four parts in our interest.

Yes, it also includes the cash we have got, too. You have got interest and cash.

Which is a new thing. We haven't had that before. That is a new thing. But it is a good thing to have.

Oh, yes, especially right now. Definitely a good thing to have now.

Absolutely. As far as being able to get an idea on rate, like if I wanted to tie that 1.6 million in chassis interest, back to a number on the balance sheet, would that be the chassis proportion of your inventory or --?

No, you really couldn't do anything directly. That had to do with chassis that are out there, that we haven't been paid for.

Once we purchase the chassis, and it goes on our balance sheet, then there is no interest on it.

Got you. So is there any way to get a feeling on the level of commitment for the floor planning and chassis that you guys have have?

What we might have out there? Some of those are sold, the customers are holding them. We get terms and we give them terms.

I see.

We have not disclosed for a number of reasons, the amount of actual chassis sales but we get --

And we try not to disclose here our terms with our various people, because we believe we have the best terms in the industry, and we believe that is a competitive advantage and proprietary information, and we really don't want to give that information out.

That answers my question right there then. I don't want you giving it out, either.

We won't, I promise you.

Any feel for that?

I am sorry? We didn't catch that.

2008 CapEx guidance. Got a feel for where you are looking?

Well, we still have got a few things left, as mentioned in the K, that we haven't paid for yet. A couple million dollars of commitments. What we have generally done, we're kind of wrapping up with that, the modernizations we have done, but we are generally below depreciation expense in our CapEx.

You would be safe if you threw depreciation plus 2 million probably.

Great. That is very helpful. As far as the impact of a weak dollar, you guys, I know you have got the two European operations, and you are trying to get something going on in Asia. Is that netting out to be a positive, negative, doesn't really impact you at all?

As Jeff mentioned this is Vince, again, we are trying to expand our international sales. We have got some great folks in Europe that sell not only in Europe but all around the world, and we are trying to pick that business up, dedicating resources to that as well.

Vince, I think that the benefit, and Jeff might go to this, is with the weaker dollar, we have had some real success. We are getting a lot of activity on purchases, because we have an international group here in the U.S. that sells our product internationally. And Jeff the dollar benefit has --

Certainly our quote activity internationally is up.

But that in the fourth quarter didn't turn into materialized contracts, right?

When we say quote activity internationally, that could mean, our agent in Taiwan quoting five small wreckers. And we have distributors in a variety of places across the world. Their quote activity is up of our equipment, based on the weak dollar.

Okay. Just couple other last things. One, you have always kind of said total fleet miles driven is the best way to think about a long-term driver for sales for you guys, in your core business. Is there any direct impact of gas prices I think you addressed this when you were talking about your Florida guys not being able to put a surcharge, but do you feel like with most of your customers, gas prices actually drive their willingness to reorder?

No, I think what we are talking about with fleet miles, so you understand, and the long-term driver, is if you take the total fleet in U.S., including mom and dad's van and passenger cars.

Trucks.

Yes, that total mileage goes up, there is going to be more towing activity. And obviously fuel prices historically, would have an impact on the total miles driven in the U.S. When gas hits $4.00 a gallon, my assumption, and since I have never been there, but I will make the assumption, I know aim going to tell my wife to drive less, so my assumption is that other people will be telling people to drive less. Teenagers won't be able to drive as much. It will have an impact.

Sure. Well, let's hope for some $2.00 gas. Last question for you. I know you have talked about what happened in the fourth quarter last year, with the valuation allowance as far as tax numbers. Do I understand this right, though that you guys still have net operating losses, so even though you are not having to take any kind of GAAP impact, that you are reporting paying normalized tax rate, and yet from a cash impact you are not having to pay that rate yet? Is that correct, or are you actually now having to pay more cash taxes, as well as reporting them as GAAP?

That is correct. That is correct. In the K, you will see we still have something over 24 million of federal NOLs.

So as far as actually on a cash perspective, even though you're showing paying GAAP taxes, you are getting a benefit from a cash flow perspective for a good long while, relative to the NOLs on your balance sheet?

We would hope it would not last too long.

I would like you to get rid of it next quarter, I just wanted to make sure I was thinking about that correctly.

But we still do have alternative minimums, we do have state taxes, and we do have foreign taxes, just so you don,t, that we actually do have to pay.

From a cash rate, what kind of expectation do you have there?

Well, Quinton, if you look on the cash flow statement with the tax expense that we showed, it was actually 7.7 million on the cash flow statement of deferred tax that was noncash.

Perfect. Thank you so much. All right, guys, good luck.

Thank you.

(OPERATOR INSTRUCTIONS) And your next question, you have a follow-up from the line of Rick with Columbia Management.

Yes, just to drill down a little bit on, I know you continue to pursue some of these non-everyday kind of business, the bigger municipal orders, and military orders. Is there a pipeline out there? Is there business that you are tracking, or is that business pretty dead right now, too?

We certainly would not, we have several tenders out throughout the world. So the business itself is not dead, and that is on the military side. The international, and we act like international, we don't mean to mislead you. The international business, towers in Taiwan are similar to towers in the U.S. They buy our product. We report it as international sales. We see an increase in quote activity internationally of our everyday products. Does that answer your question?

Sure. I mean, but do you look at this to be experiencing headwinds in 2008, or could this be some of these non-everyday markets be, contribute in a positive way to '08 versus '07?

I think obviously we can't predict the timing of military orders, nor the funding. We would hope that we would get some positive impact in 2008.

Okay.

How is that?

That is fine. Thanks.

Good.

And you do after follow-up from the line of Quinton Maynard with Moorehead Capital.

Yes, sir, Quinton.

Guys, you there? You hear me?

Now we can, yes.

Sorry about that. I was looking over the press release again, and noticed the balance sheet numbers weren't on that. I was just hoping you could repeat a couple quick ones. Cash balance at the end of year?

23. The K was filed last night too, so it is all there.

Oh, the K is out? I haven't seen that. Then I will just pick it up. I won't bother you on the call. Thanks so much.

No problem.

There are no further questions at this time. I would now like the turn the call back over to our host for any closing remarks.

Well, we would like to thank you for joining us on our conference call, and we will look forward to updating you in the very near future on our Quarter One conference call shortly. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.