Orion Energy Systems Inc (OESX) 2010 Q3 法說會逐字稿

Good afternoon and thank you for standing by. Welcome to Orion Energy Systems Third Quarter Fiscal 2010 Earnings Conference Call. Your lines have been placed in a listen only mode until the question and answer segment of today's call. This call is being recorded. If you have any objections you may disconnect at this time.

I will now turn the call over to [Victoria Paris, FD]. Victoria, you may begin.

Thank you, Cynthia, and thank you for joining us for Orion Energy Systems' fiscal 2010 third quarter conference call. With me on the call today are Neal Verfuerth, Chairman and CEO, Jim Kackley, President and COO and Scott Jensen, CFO.

Before we begin I will read the Safe Harbor Statement. Our remarks that follow, including answers to your questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified as such because the context of such statements will include words such as believe, anticipate, expect or words of similar import.

Similarly, statements that describe future plans, objectives or goals are also forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to materially be different. Those risks include, among others, matters that we have described in our Press Release issued this afternoon and in our filings with Securities and Exchange Commission. Except as described in these filings, we disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call, if at all.

Now I'd like to turn the call over to Neal.

Thank you, Victoria. Welcome everybody to the Orion Energy Systems' fiscal 2010 third quarter conference call. As you saw in the Press Release we issued this afternoon, we exceeded both our top and bottom line guidance with revenues of $19.3 million and earnings per share of $0.04 and generated positive operating cash flow for our fiscal third quarter.

Our third quarter bookings, which we began providing last quarter as a key metric for our business, were $21.4 million. This included $3.4 million in financing deals, both on the demand side which includes our OVPP contracts, and the supply side, which include our financing agreements for our photovoltaic or PV solution.

During the quarter we completed our first solar purchase power agreement or supply-side contract, which accounted for $1.7 million of our total bookings. These deals, similar to our OVPP contracts, create additional recurring revenues streams for Orion. Scott will go into further detail on how these supply-side financing deals are structured in his comments.

As Jim discussed last quarter, we continue to focus on building out our renewal technology offering, which includes our PP solution. Today some PV integrators are actually paying for just the option to have access to a customer's roof. With the installed base we've built up through our integrated lightening solution, we already have that access and the trust as an energy expert for our customers.

After completing a few tests sites in the second quarter our first supply side finance agreement, as well as our first sizeable cash PV deal with Coca-Cola Enterprises in the third quarter, are further validating the emerging opportunity for our renewable energy supply solutions created through Orion.

Revenues in the quarter were driven by increasing order volume as we ramped up our wholesale and partner driven side of the business. In the third quarter we saw our mix between retail and wholesale near the 50-50 mark. We continue to dedicate resources to building our wholesale network, providing our partners with the tools necessary to drive growth within our businesses. These investments continue to pay off as we secured some sizable deals with industry leading customers that have substantial facility footprints creating a beachhead into even a broader opportunity.

We have historically experienced a level of seasonality or saturation following a very successful quarter in our wholesale channel, as our partners and resellers look to complete projects that were closed in the previous quarter. As the revenue contribution of this channel grows, we will expect to see some of that seasonality continue on a quarter-to-quarter basis.

That said, this channel brings significant value to our business in terms of favorable margin contribution as well as its ability to allow Orion to broaden its geographical footprint more economically and efficiently. We will continue to enhance the effectiveness of our partners and resellers through training programs at [Orion University] and teaching them to sell and integrate the technology the Orion way.

On the national account side we continue to make headway completing sizable projects for new and existing customers. During the third quarter we added a number of new national accounts that maintain leading market positions across industries, which included a major retailer with stores throughout much of the United States and Western Canada. Again, these initial projects represent a significant opportunity for potential revenue in the future.

The customer wins we saw in the third quarter continue to demonstrate our market leadership as an energy expert. In addition, they validate the compelling value proposition of our solutions by saving our customers significant dollars in energy costs and helping them achieve their sustainability goals.

As we noted last quarter, Orion's superior technology delivered to our customers energy cost savings of $0.38 per square foot translating into a reduction of more than 6.5 pounds of carbon from being delivered into the atmosphere and a reduction of electricity consumption of 4.9 kilowatt hours per square foot annually.

During the quarter we retrofitted nearly 43.7 million square feet in Q3, bringing our total area covered to more than 850 million square feet in 5,374 facilities. Also in the third quarter we captured business from well respected, nationally known medical practice that installed our parking lot technology in a market estimated to have nearly 20 million out-dated HID parking lots nationwide. This project exemplifies the growing opportunity of our parking lot technology, not only in the commercial-industrial sector but also at office complexes, opening a new channel of business prospects for Orion.

In addition to the exterior lightening technology market, we have the potential to capitalize on an enormous opportunity as we build out our renewal offering, which includes our PV technology. We have seen increasing customer demand for new ways to manage energy consumption and reduce costs. Our renewable technology offering, which includes PV, is a logical extension of our core business positioning us as a complete energy management Company from energy generation to permanent load reduction creating a comprehensive solution that can truly take our customers off the grid.

Despite a difficult start to our fiscal 2010, the improvement we have seen over the last two quarters gives us renewed sense of optimism as we look to close out the fiscal year. However, despite initial signs of recovery in the economy, we remain cautious as there is still a lot of uncertainty in the market today.

Our guidance for the fourth quarter has taken into account two trends that we have seen emerge over the last several years in terms of seasonality. First, given our customer base has historically been focused on commercial and industrial sector, our results tend to mimic CapEx budgeting, which leads to an increase in committed projects being pushed through at a calendar year end.

Secondarily, as I mentioned earlier, historically we have seen a level of saturation following very successful quarter for our partners and resellers as they look to complete projects closed in the previous quarter. That said, Orion is in an excellent position to build upon the momentum we have started to experience in the second and third quarters of fiscal 2010 and expect calendar 2010 to exceed results we saw in calendar 2009.

Before I turn the call over to Jim, I want to briefly touch on an exciting milestone we surpassed in the third quarter. Since 2001 we have displaced 500 megawatts of capacity, which is the equivalent to the amount of electricity produced by a traditional fossil fuel power plant. This metric is significant to our core business as we market Orion as an energy management Company that offers reductions in peak and base load electricity solutions to utilities.

The end result is that our customers have reduced their energy costs by a collective $782 million, money they can carry through to their bottom lines. We continue to capitalize on trends relating to concerns around securing low-cost energy, electric grid reliability, reduction of harmful emissions and environmental sustainability. The HID retrofit opportunity alone represents 20.6 billion square feet above and below the roof of commercial and industrial space.

We will continue to use our integrated lighting solution to further expand our customer base while leveraging opportunities for further penetration through the sale of our next generation products, such as our wireless controls, Apollo Light Pipe's extra lighting fixtures and other renewable technologies.

Orion is in an excellent position to drive growth in our business and we look forward to updating you as you move through the remainder of calendar 2010.

With that, I'll turn the call over to Jim Kackley. Jim?

Thanks, Neal. During our second quarter earnings call I mentioned one of my goals in my new position was to strengthen an already solid organization. We moved aggressively during the third quarter to identify opportunities and made strategic decisions that will reinforce the structure that has supported Orion's expansion over the last several years.

We continue to build our third-party sales channel throughout the Country helping them strengthening their ability to sell and install our technology, while continuing to develop our internal sales capacity.

One of our competitive advantages is our sales engine. Our continued reinforcement of our sales force is a vital component to capitalize on significant opportunities within our diverse product group. To that end, in the third quarter we recruited a talented and well-known industry seasoned sales associate, who will be charged with helping to further drive our national account sales.

From a process standpoint, we have nearly completed installation of our Microsoft Navision software including the robust product configurator, a bolt on solution to Navision designed to streamline sales process both internally and externally. Importantly, this highly flexible sales tool will be an integral component to broadening our geographical footprint through our partner network enabling them to efficiently execute a sale from first point of contact through delivery.

There are two specific areas of operations I'd like to comment on. First, our product margin for the quarter was 38.2%. This compares to a product margin of 34.0% for the third quarter of fiscal 2009.

Despite the fact that product revenues were down 16.8% versus the prior year third quarter, we've been able to raise our product gross margin by more than 400 basis points. This significant improvement was achieved through the execution of our cost reduction efforts, including reducing production head counts, streamlining plant operations to improve efficiencies, and working hard to minimize discretionary spending and premium costs like overtime. It also underscores the ingenuity and determination of our operations team in helping us to remain cost competitive in these challenging economic times. Our margins are also supported by our ability to maintain prices as we are selling an energy saving solution rather than cheap lights.

Second, our inventory balance at December 31, 2009 was $24.5 million. The increase in inventory from our most recent quarter was in response to concerns over ballast availability due to production shuttering in Asia and lengthening lead times of aluminum suppliers. With our promise to deliver our technology within two weeks of receiving an order, it's imperative that we have the necessary inventory to make the product. Orion sells energy savings and, for our customers, time truly is money.

As an Orion Board Member since the early days and now with two quarters behind me as President and Chief Operating Officer, I see Orion diligently executing on our plan. I'm pleased with the operating results, a much higher run-rate in sales, strong gross margins, movement towards sustained profitability and much stronger operating cash flow. While there is still much work to be done in an unpredictable economy, I am very optimistic about the future at Orion.

With that, I'll turn the call over to Scott to elaborate on the quarter's numbers. Scott?

Thank you, Jim. Our reported revenues for the third quarter of fiscal 2010 were $19.3 million compared to $22.4 million for the third quarter of fiscal 2009, which represents a decrease of 14%. Included in our quarterly product revenue is $200,000 related to a cash sale of our PV solar technology.

Partner revenues for the quarter were 50% of total revenues, up from 43% of total revenues in our most recent second quarter. For fiscal 2010 year-to-date our partner revenues have contributed 43% of our total revenue.

During the third quarter of fiscal 2010 we secured 27 new Orion virtual power plant megawatt supply contracts representing gross income streams of $1.7 million. Revenue for these customer projects will be recognized across the 24 to 60-month term of the agreements. If these projects had been structured as cash transactions Orion would have recognized an additional $1.1 million of revenue in the quarter, and increased income per share by approximately $0.02.

Bookings for the quarter were $21.4 million, including $1.7 million for OVPP supply agreements and $1.7 million for solar purchase power agreements, versus $23.3 million in the same period last year. For the nine months ended December 31st, bookings were $57.2 million including $6.4 million of OVPP supply agreements compared to $57.1 million including $800,000 of OVPP supply agreements during the first nine months of fiscal 2009.

As a reminder of how we define bookings, let me briefly review. Our reported bookings have three components. First, our cash bookings are based upon customer purchase orders received in hand. Second, our OVPP bookings are based upon the gross future revenue streams over the expected live of the agreement. We consider an OVPP booked business upon the customer's execution of the contract.

As Neal mentioned, we completed our first solar PPA in the quarter. Since the deal terms are generally in excess of 10 years, we have defined PPA bookings as the discounted value of revenues from energy generation over the life of the agreement along with the discounted value of revenues anticipated for renewable energy credits for as long as the programs are currently defined to be in existence with the governing body.

Our service revenues accounted for 10.5% of our total revenues for the third quarter. As Jim mentioned, our blended gross margin for the third quarter was 36.8%, up from 33.2% in the comparable prior year period.

Our gross profit dollars decreased $300,000 to $7.1 million for the third quarter fiscal 2010 compared to $7.4 million in the third quarter of fiscal 2009.

Our service margins for the third quarter were 25% and we're within the normal expected range.

G&A expenses for the third quarter were $3.1 million, or 15.8% of revenue, versus $2.4 million in the third quarter of fiscal 2009, or 10.9% of revenues.

Year-over-year increases in G&A costs included legal expenses of $150,000, building occupancy costs for our corporate technology center of approximately $300,000 and the elimination of bonus reversals, which reduced prior year Q3 spending by $150,000.

Sales and marketing expenses for the third quarter of fiscal 2010 were $3.1 million, or 15.9% of revenues, compared to $2.7 million, or 12.3% of revenues, in the prior year period.

As we've discussed on prior calls, we've continued to invest in revenue generating opportunities. The increase in expenses from the prior year was due to compensation costs resulting from head count additions focused on opportunities in the utility, governmental, outdoor lightening markets and technical resources to support our controls product offerings.

R&D expenses for the third quarter were $404,000, or 2.1% of revenues, up from $347,000, or 1.6% of revenues, in the third quarter of fiscal 2009.

Income from operations for the third quarter of fiscal 2010 was $576,000, decreasing from income from operations of $1.9 million in the prior year period.

Net interest expense for the third quarter was $18,000 versus net interest income of $292,000 for the third quarter of fiscal 2009. This reduction in interest income was due to declines in market rates and also due to the change in cash balances over the last 12 months resulting from the execution of our share repurchase program and the construction of our technology center.

Our income tax benefit for the third quarter of fiscal 2010 was $249,000 versus income tax expense of $1 million in the prior year third quarter. Our annualized effective tax benefit rate at quarter end increased to 24.2%. This increase in benefit rate contributed $0.02 to the third quarter earnings per share and resulted from a decrease in non-deductible stock option expense, which was driven by reduced head counts from our cost reduction initiatives and a change to estimate to the annualized pre-tax income.

Our fully diluted income per share for the third quarter of fiscal 2010 was $0.04 on weighted average fully diluted shares outstanding of 22.6 million shares. That compares to fully diluted income per share for the third quarter of fiscal 2009 of $0.04 on a weighted average fully diluted shares outstanding of 26.4 million shares.

As of December 31st we had 22 million common shares outstanding. In addition, we have warrants and options totaling 3.9 million shares outstanding.

Turning to the balance sheet, we finished the quarter with $32.9 million in cash and equivalents and short-term investments on hand compared to $34.4 million at September 30th, 2009. We continue to maintain our investments in short-term highly liquid vehicles to provide for maximum liquidity.

Related to our cash flows, we generated cash flow from operations of $3.7 million during the quarter. We remain committed to continuing to invest in the growth of our OVPP and OTV equipment finance programs.

Turing to our outlook for the fourth quarter, we are anticipating revenues to be between $18 million and $21 million. Earnings per share for the fourth quarter of fiscal 2010 are estimated to be between a loss of $0.01 and earnings of $0.04 per diluted share.

With that, I would like to turn the call over to the operator for Q and A.

(Operator Instructions). We will take our first question from [Glen Wortman] with Sidoti & Company.

Can you just go over again your expectations for the fourth quarter between the national accounts and then your wholesale channels? It sounded like you expect the wholesale channels maybe to be down a little bit and the national accounts to be up a little bit?

Yes, Glen, this is Scott. As we talked about, we had a good quarter. Q3 the mix was approximately 50% and typically what we've experienced, as our wholesale channel has grown, is that our partners are focused on completing those projects that they've been working on so we tend to see a little bit of a drop off in the mix. Having said that, we continue to add partners. I believe we're up to about 98 partners at the end of December now and we're just continuing to invest in that wholesale channel.

Okay you guys put up a pretty high gross margin relative to the past quarters. Can you just give us a sense of how high you think that number can go on a given revenue, say for example on $25 million during a quarter? Do you guys have any numbers you can provide?

We haven't gotten that granular, Glen. Needless to say, for anybody who has seen our facility you've see the excess capacity that we have and certainly we have a great opportunity to leverage the benefit in our gross margins by driving more volume through our plan.

Okay and then finally, just on the expense side, how should we think about all of your various operating expenses going forward here?

I think we've kind of normalized a little bit in terms of run rate, G&A and both selling expenses have been about $3 million a quarter. R&D has been a little over $400,000. That moves maybe between $400,000 and $500,000. I think certainly we're going to continue to invest in human capital as we see opportunities and talent present itself but right now I think what you've seen out of the third quarter is what I would expect to see carrying forward.

Okay thank you very much.

(Operator Instructions). Brian Kramer, Roth Capital Partners.

Yes a couple questions here, on going back to the gross margins, could you -- I'd assume that's partly due to the mix as well this quarter. Is this something -- I mean, is this sustainable? I mean the volume wasn't up that much so I am assuming it was more related to a mix of product versus volume necessarily or is it just as Jim was referring to, getting some of this cost out, that you're going to see continuing going forward, that savings?

That's certainly our expectation, Brian. We didn't experience any significant mix shift. Now, having said that, I would certainly say that some of our new product offerings, Wireless Light Pipes carry higher gross margins on them so, as that volume tends to increase, we might get a mix benefit but really our gross margins benefit in the quarter was just a function of the cost reductions in place and executing on the plan.

Okay and then in what looks based on numbers out there was a strong quarter. I look at bookings if I am going to try to find something here, you know, 21.4 versus 20.3, obviously it's up so that's a positive. It's not -- I guess maybe it's just consistent with what we're seeing in the industrial sector, manufacturing. It's the slow growth. It's not a rebound and you guys certainly haven't had a spring back. You guys have never talked that way either. It's just optimism and so I guess that 21.4 versus the 23, is it a sign of that?

Yes I think we feel like the marketplace is improving. Having said that, it's not where it was two years ago and we're still engaging customers and trying to anticipate behavior and execute on our sales process and getting in front of customers. As it related to the quarter, our cash booking were up a little bit versus the prior quarter. Some of our finance, OVPP deals, were down a little bit and it's just really a function of customers working through the financials and making decisions and the best thing we can do is stay in front of them.

Okay and then it's obviously a work in progress, pilots out there, the outdoor lighting, when -- is it six months away? Where do you think you are really going to start seeing large orders, some traction there? Or is it still just too hard to say?

This is Neal. I think it's still hard to say. We have certainly seen larger orders, individual orders, but it takes time. It's a new concept and it's -- I liken it here internally to kind of seeding the clouds, getting people exposed to the technology, putting together a proposal, let them get comfortable with it, let their people drive, literally driving in and out of the parking lot accessing the building and it's just part of the process introducing a new product and really a new concept into the market. But we're very optimistic. What we've seen so far we've had a couple of good strategic wins against the LED players out there and some significant in kind of marquee accounts and we see that just building and building over the course of time.

Okay great, appreciate it.

[J.J. Abadeli] with Paragon Investment Management.

I've got a question about bookings. I think you've said previously that you recognized 50% of revenue when the order is placed and that would be in the bookings number and then 50% when it's installed. Is that correct?

So, J.J., from a bookings' standpoint when on a cash deal when we have that customer purchase in hand the entire value of the bookings is recorded in our numbers. From a revenue generating perspective, or call it our financial GAAP revenue, we record the revenue on the product shipments when we ship the products and then on the installation or services when the project is completed.

So the revenue recognition is on -- it's entirely on shipping or is that 50% shipment, 50% like completion of the installation?

The mix on a job that has services included tends to be about 70% related to materials, so the product portion at about 30% on average to installation, so we make the product. We ship it; we record the revenue on the product. And then an installation project can take anywhere from two weeks to several months, depending upon complexity, size. When the project is installed and the customer is satisfied and we recognize the service component of the revenue.

Okay and then all also on the gross margins a couple of people hit on it. You know, I think we're probably trying to get a sense for what that gross margin can be at some given level, whether that's the midpoint of your revenue guidance or at some fixed level. I think someone had mentioned $25 million. Do you have an idea what you're working towards, what your target is or what you're capable of?

We're certainly looking at that number and one of the things that we wanted to see was to have a few quarters under our belts of just actually executing on the plan and recognizing that we could support $19 million, $20 million without needing to increase headcount or premium cost. So we're working through that. We've -- very pleased with the performance of our operations group and maintaining our customer service requirements and doing it in a very cost effective manner that impacts our gross margins in a positive way, as we've seen in our number for the most recent two quarters.

We're still very optimistic that we have some run rates ahead of us in terms of improving that as we can put more and more volume through the plant.

This is Jim. As I commented, we have obviously there are two sides of this equation and the revenue side has got to stay up and that's something that we concentrate on and we do that by emphasizing that we are selling energy management or energy savings and but that's a dimension that we have to keep our eye on as well.

Right and then prior to the credit crunch I think you guys were sort of saying that about 40% of the deals you were seeing were closing in 60 days or less and then kind of things were slowing down in the spring, winter and spring. That number dropped to 10% I think you had mentioned. Where do you see things today? Are things still taking longer or how do they compare to February, for example?

This is Neal. I would say today is probably a good example of what likely you'll see to come. We had a large customer in here that we have done quite a bit of work for in earlier years and probably not much, if anything, in the last year or year and a half whenever it's just kind of hold and now they sent a contingent here today to visit the technology center and talk about where we see things from a -- you know, what's the next opportunity for them to finish out what we started and then what are the next technologies, you know, the Apollo Light Pipe, the Wireless PB etcetera.

And I think that's a pretty good representation of what we are seeing with all of our customers. They were in the last several quarters kind of on their just holding pattern, not doing anything. Then, of course, they had cash to let at the end of the year that they let loose, just for probably tax planning more than anything else and then now they're starting to look at reloading and cautiously optimistic is probably the best way to describe them and we of course mirror that same feeling based on what we're seeing from our customers. But they're coming to visit. They're letting them travel, letting these folks travel again, and they're talking about reloading budgets, so all moving in the right direction.

So the biggest opportunity is taking kind of the existing light fixture customers and moving them down to that phase two with the wireless controls and the Light Pipes?

Well yes, just given the fact that one of the things about when you're selling a technology and really a whole new business opportunity, the customer acquisition costs are significant investments, so our pipeline has tremendous value, not only from the ones that we've got proposals and SFVs in the facilities but also our existing customer base. They know us. They trust us. We've saved them hundreds of thousands or millions of dollars and now it's a much easier conversation to go back as Orion as opposed to somebody out there greenfielding as a competitor. They don't know anything about them and they don't know if they can deliver.

Sure and lastly, I wonder if you could comment, Neal, on the sort of what you see happening in Washington and I think there was a retrofit portion of that Clean Energy and Security Act that was focused on retrofitting. Can you comment on what you see happening there?

The only thing that's absolute to date is something that's been around for some time and that's basically all the [EPAC], you know, the accelerated depreciation components. As far as a lot of stimulus dollars we're all hearing about but not seeing a lot of cash flowing into the market. The utilities are still out there very active and many of them are re-upping and even increasing their demand side management budget spends but, as far as coming from the Federal Government, I think it's municipally driven and it's a lot of more loan guarantees and whatnot than outright cash grants or something.

And the utility rebates are on a prefecture basis? Is that right?

They vary. They can be what they call a -- you know, the prescriptive or custom. It really depends on the utility and the complexity of the project and sometimes quite frankly we try to go for either one wherever we can maximize the incentive for our customers.

Sure. Okay thank you very much.

Sean Boyd, Westcliff Capital Management.

Congrats on the quarter. Neal, you just mentioned the pipeline there and I want to think about this for a second in terms of the bookings that we've just shown at $21.4 million. The customers are reloading budgets, are cautiously optimistic, are traveling again. Do you get a sense from just seeing the activity in that pipeline right now that we might be, with this being the last quarter of the year, I would imagine guys are incentivized to get business done within the Company. Do you think that we get a -- we might see another stair step up here in the final quarter for the Company?

Of course, I can't say with absolute certainty but I'd like to think so just based on the activity and the attitude. You know, just a few quarters ago it was pretty much doom and gloom. Nobody was traveling. Nobody even wanted to return phone calls. They were -- people were all in a survival mode and I think we've gotten beyond that but yet there's still as you see everyday represented in the media, that's still -- it's still volatile and, again, people are stepping out a little bit but it's certainly nothing, as Scott pointed out, like it was a couple of years ago.

Okay, okay that's helpful. And also kind of within this question you've got to think about national accounts and one of the things that I am struggling with and it's probably just my newness to the Company, but the national accounts would be how much of revenues today? How can we quantify that and maybe talk just for a minute about the opportunity as to how many national accounts you think you could have or also maybe the penetration you have? So, in other words, average revenue in a national account and how far penetrated you are within that customers.

We continue to update our technology to give us more visibility into that. As we've been saying, we're getting more and more business through the partners, so much of the visibility we had historically because we were the retailer essentially, we don't have as much with some of the partners, so we continue to try to build up our databases so we can give the Street a better understanding into where our penetration is. We're putting a lot more focus now on geography and penetration in a geographic footprint regardless of whose name is on the door because the efficiencies gained by just being more efficient deploying sales resources on an end market basis and going literally from door to door to door in an industry park regardless whose name is on the door.

Got it, got it. So, at this point, you've got 98 different partners out there?

98 what I would describe, Sean, as partner locations, so some of our partners might have more than one location in a geography.

Got it. Okay, all right and just last question, jumping over to tax rate, Scott, can you help us a little bit on what we should expect if that tax rate to go back into the 15%, 20% level or what we see on that for the last quarter of the year?

That tax rate for the last quarter of the year should stay in that 24% or 25% range. Certainly, as we get closer to the end of the year, there's a little less variability around the effective tax rate. It can't move around so much with two, three remaining quarters, so for this year we've got that I think pretty dialed in where it may move a point or two but it shouldn't move significantly.

Okay and any thought on fiscal 2011 on the tax rate issue?

Not yet.

Good enough thank you.

And, at this time, there are no further questions. Ladies and gentlemen, this will conclude today's conference call. We thank you for your participation.