SpartanNash Co (SPTN) 2007 Q4 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Spartan Stores Inc. fourth quarter and year-end earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.

Ladies and gentlemen, I must remind you that comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectation, estimates, and projections that involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that might cause such a difference include, among others: Competitive pressures among food, retail, and distribution companies; the uncertainties inherent in implementing strategic plans; and general economic and market conditions. Additional information about risk factors and the uncertainties associated with our forward-looking statements can be found in the Company's earnings announcement, annual report on Form 10-K, and our other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statements.

It is now my pleasure to introduce your host, Mr. Craig Sturken,Chairman of the Board and CEO for Spartan Stores Inc. Thank you. Mr. Sturken, you may now begin.

Good morning. I want to thank you for joining our fiscal 2007 fourth quarter and year-end earnings conference call. With me this morning are members of our team, including: EVP and CFO, Dave Staples; EVP and Chief Operating Officer, Dennis Eidson; our EVP of Retail Operations, Ted Adornato; EVP of Supply Chain, Derek Jones; and EVP and General Counsel, Alex DeYonker. Fiscal 2007 has been another successful year for us, marking our fourth consecutive year of significant financial and operational progress. At the end of fiscal 2006, we set out to further develop our distributions business by adding new accounts and increasing our sales penetration with existing customers through our private label products and expanded perishable product offerings. Additionally, we expected to improve our retail sales growth as we cycled Super Center openings, launched additional fuel centers, improved the performance of certain existing stores, and integrated the operations of the acquired D&W Food Centers. I am pleased to report that we achieved all of these objectives during fiscal 2007.

Fourth quarter net income was $7.2 million and for fiscal 2007 it reached $25.2 million. Including the additional week of sales this year, these are the highest levels of fourth quarter in annual net income we have achieved since becoming a public company. In addition, we crossed the $80 million in EBITDA threshold this year. Excluding the affects of the extra sales week this year, we continued our string of consecutive year-over-year quarterly sales and profit improvements, reporting very solid growth in both sales and net earnings this year. During this past fiscal year, we achieved operational synergies through the successful integration of our acquired D&W retail stores, continued to expand our private label and perishable product sales, opened four additional fuel center, and added 13 stores to our distribution customer network. In addition, we acquired the operations of PrairieStone Pharmacy, began a new store construction project with our first 48,500 square feet prototype, and announced the acquisition of 20 retail stores from G&R Felpausch.

Our excellent performance for the year would not be possible without the dedicated and skilled work of our management team and associates. I am very proud to say that we have an outstanding management team. During fiscal 2007, we further strengthened our management team by appointing Derek Jones as Executive Vice President, Supply Chain, and Alex DeYonker as Executive Vice President, General Counsel, and Corporate Secretary. During the fourth quarter, we continued the integration of our D&W acquisition. These stores are performing better with each quarter as we fine-tune our marketing, merchandising, and other consumer offerings.

We also began a significant remodel of one D&W store and continued the planning of two additional major remodels that will take place in the first quarter of fiscal 2008. In addition, shortly after our fiscal year end, we announced a significant expansion of our supply relationship with South Bend, Indiana-based Martin's Super Markets. This is important strategic implementations for our Company's growth opportunities outside the state of Michigan. I will provide additional details about our business outlook for fiscal 2008 following Dave's review of our fourth quarter financial results. Dave?

Thank you, Craig, and good morning. Consolidated net sales for the fourth quarter increased 23.6% to $559.5 million compared with $452.8 million in the fourth quarter last year. The extra week of sales contributed $42.3 million to the total. Excluding the extra sales week, consolidated net sales improved 14.2%. The increase was due primarily to higher retail sales from the D&W and pharmacy acquisitions and 1.4% comparable store sales growth, which excludes fuel center sales and the extra week of sales this year. Higher fuel center sales and incremental distribution sales to new customers and existing customers, particularly in perishables, also contributed to the increase. Gross margin for the fourth quarter increased 130 basis points to 20.5% compared with 19.2% in the last year's fourth quarter. The improvement was due mainly to a larger percentage of consolidated sales coming from the higher margin retail segment and improved profit rates in both segments. The improved profit rates resulted from a more favorable product mix, but were partially offset of higher sales of lower gross margin, pharmacy product, and fuel.

As a percent of sales, fourth quarter operating expenses increased to 18%, compared with 16.9% in the same period last year. The increase was primarily the result of the higher mix of retail sales, which have a higher expense structure, as well as higher employee compensation costs and nonrecurring items that lowered last year's operating expenses. Last year's fourth quarter operating expenses included favorable insurance reserve adjustments and a contract termination payment received from a vendor that reduced operating expenses by a total of $1.9 million.

Fourth quarter operating earnings increased 34.2% to $14 million compared to $10.4 million in last year's fourth quarter as a result of higher sales, acquisition synergies, and higher profit margins in both business segments. Net earnings increased 36.4% to $7.2 million compared with $5.3 million in the same quarter last year. Fiscal 2007's fourth quarter included a favorable LIFO provision and gain on the sale of nonoperating property totaling $700,000 on an after-tax basis. Last year's net earnings included a net benefit of $1.4 million due to a favorable LIFO inventory provision, favorable workers' compensation and health care reserve adjustments, and a favorable vendor contract settlement. The fourth quarter earnings improvement was partially offset by higher interest expense of $3 million compared with $1.6 million in last year's fourth quarter. The higher interest expense rate relates to additional borrowings used to fund our D&W and PrairieStone Pharmacy acquisitions.

Turning to our business segments, fourth quarter distribution sales increased 12.8% to $293.8 million from $260.5 million in the same period last year. The extra week added $22.9 million to net sales. Excluding the extra week of sales this year, the sales improvement was due to new distribution customers and increased sales to existing customers. Distribution operating earnings improved 19.2% to $9.9 million from $8.3 million in the same period last year. The extra week of sales added $1.2 million to distribution operating earnings in the quarter. The remaining improvement was due primarily to higher sales volumes and better gross margin rates, partially offset by $1 million of nonrecurring benefits reported in last year's fourth quarter related to favorable items from a workers' compensation reserve adjustment and a vendor contract termination settlement.

Fourth quarter retail sales increased 38.2% to $265.7 million from $192.3 million in the same period last year. The extra week added $19.4 million to the quarter's net sales. Excluding the extra sales week, total comparable store sales increased 2.9% while comparable store sales excluding fuel rose 1.4%. We are very pleased with our sales performance considering the current economic climate in our trade area and the performance at our Pharm stores. Fourth quarter retail operating earnings increased 93.9% to $4.1 million from $2.1 million in the same period last year. The extra week of sales added $1.7 million to retail operating earnings in the fourth quarter. Synergies and profit gains from the D&W acquisition, as well as strong sales in our core supermarkets contributed to the remaining improvement. Last year's fourth quarter included a $500,000 pretax favorable insurance reserve adjustment for workers' compensation.

Turning to the balance sheet, long-term debt at March 31, 2007, including the current maturities, declined by $19.2 million to $108.8 million from $128 million at the end of the third quarter. The decline in outstanding borrowings was the result of stronger cash flow from operations resulting from higher earnings and inventory turnover rates.

I will now cover our outlook for the 52-week fiscal 2008. Excluding incremental sales related to our Felpausch acquisition and the expanded distribution agreement with Martin's, we expect comparable stores and distribution sales to increase in the low single digits. Overall profitability should increase as margins stabilize and we better -- and we realize better fixed cost absorption. We expect the additional business from our expanded Martin's relationship to be modestly accretive to earnings during the first year due to the added costs associated with bringing on this new business.

In addition, we expect the Felpausch acquisition to be accretive to earnings in its second full year of operations because of the costs and investments of $5 million to $6 million required in the first 15 months for repositioning, remodeling, training, and other start-up related costs. We are still finalizing details of the business plan for these stores and will be able to provide more insight on our plans by mid-June when we expect the acquisition to close. We expect capital expenditures for fiscal 2008, excluding the acquisition-related expenditures, to range from $35 million to $40 million, and depreciation and amortization expense to range from $20 million to $25 million. In addition, we expect interest expense to approximate $13 million for fiscal 2008.

I will now turn the call back to Craig. Craig?

Thanks, Dave. We are proud of the success we have achieved during the past four years and believe that additional promising growth opportunities remain ahead of us. We spent the last four years stabilizing our business and strengthening our market position. The outcome is that we have become a respected competitor in the grocery industry with what we believe is becoming one of the best retail consumer offerings in our service area. We also believe that we are offering our distribution customers a true value-added distribution proposition. We are currently focusing on the growth phase of our business strategy, which includes expanding our distribution operations to contiguous midwestern states and making selective yet prudent retail acquisitions.

Although early, we have already achieved significant progress with this phase of our business plan. Including the anticipated acquisition of the Felpausch stores, our retail store base will have grown by 43% to 107 stores from the 75 stores we operated at the end of fiscal 2004. We have not just acquired retail stores during this period, but have successfully integrated them into our operations and improved their performance. During fiscal 2008, we will be integrating the Felpausch stores and implementing new marketing, merchandising, and category management practices to improve their performance. In addition, we operated no fuel centers three years ago and we operate ten store -- ten fuel centers with plans to open approximately six more during fiscal 2008.

From a distribution perspective, we have grown our distribution store base by nearly 20% during the last two years, adding more 65 new customer stores. Our near-term priority will be to ensure a smooth operational transition of the additional business related to Martin's Super Markets. As I mentioned earlier, our new distribution relationship with Martin's is a significant strategic step as it represents our first major move outside the state of Michigan and begins to fulfill our stated strategy of expanding our distribution customer base to contiguous midwestern states. This relationship presents outstanding opportunities to share our retail market insights, our marketing, merchandising, and category management practices, as well as expand distribution of our award-winning private label products. We believe that winning this customer further validates our value-added distribution proposition and will further strengthen our favorable service reputation, as Martin's is one of the premier, independent retail operators in the United States.

During the coming year, our priorities will be to integrate the Felpausch acquisition and begin to invest capital where necessary to improve the physical layout and functionality of the stores, smoothly ramp-up our services to Martin's Super Markets, and fine-tune our retail marketing merchandising and category management practices to ensure an optimal performance from each of our retail store formats. During fiscal 2008 we will be working to further enhance our value-added distribution capabilities and retail store offerings to ensure a satisfying end-to-end shopping experience. We will continue to execute a business strategy that places the retail consumer and distribution customer at the heart of our business decisions. We remain optimistic and confident about our future growth prospects and look forward to extending our successful track record in fiscal 2008.

We will now open the call for your questions.

Thank you. (OPERATOR INSTRUCTIONS) Our first question is coming from Chuck Cerankosky with FTN Midwest Securities Corp.

Good morning Craig and everyone. Congratulations on a great year and a great quarter to you guys. First question I have is in looking at the extra week -- I guess this is for you, Dave -- looking at the extra week, it seems to have a much better return on sales than the first 12 weeks and I was wondering if you can explain that?

Yes, Chuck, what you have is extra leverage, right, on your fixed costs. That extra week you bring in your sales and you bring in a number of your variables, but your fixed costs leverage out, such as rent, which is a monthly figure, and items like that.

Okay. So sales -- I got you. So there's not an extra week's rent expense, in other words?

Right.

Okay. Then looking at the guidance, Dave, when you gave the CapEx and depreciation guidance, did that exclude Felpausch?

Yes.

What would you -- what would you put the CapEx range and the depreciation range with Felpausch in there?

Well, aside from the acquisition price, which we've disclosed, we're not fully complete with our rollout plan, Chuck, so we anticipate sometime over that first 15 periods spending $15 million or so million of capital on the stores, so you'd have to fold that in your model. But we're not entirely complete with that rollout. Middle of June I'll have a better feel for how we're going to roll that $15 million or so of capital out.

Okay. Would it be safe to assume it's a little bit front-end loaded?

No, it'll probably be more back end.

Okay.

Chuck, this is Craig. One of the things that we want to be sure of is that we do the right kind of homework and the kind of research necessary to spend this kind of money, so that's really why we're probably taking a conservative approach, but a prudent approach to be sure we make the right call.

Got you, all right. And then the guidance regarding sales and margins was excluding Felpausch and Martin's; correct?

Right.

All right. Can you talk about Pharm results in the fourth quarter and the year and their outlook?

I think the Pharm -- we don't break that out all the way down, but I think we've experienced a couple super center openings. We'll probably see a couple super center openings that will impact it again next year, so I think the top line of the Pharm will continue to be challenged somewhat. But the business from a cash flow perspective continues to throw off contributions to our overhead and it'll continue to do that, we think, going forward. But from a topline perspective, it'll continue to have some challenges.

All right. And we probably shouldn't expect you to open anymore of those?

That would be fair over the course of next year.

Craig, how would you describe the two major D&W models compared to what we've seen so far?

I think that what we've been able to do is really modernize these stores. D&W, the group that owned the business before, probably didn't make any significant capital improvements in most of the stores for about ten years. One store, they had just remodeled that we acquired, which is [GasLite] in East Grand Rapids. The other store in Caledonia, they had remodeled it and put a small addition on the store, including the additional pharmacy. The stores that we are remodeling now --and we just completed Parkview down in Kalamazoo -- we think take the D&W brand and the D&W offering to another level. We've done a lot of work. Our people have traveled around the Midwest and other parts of the United States to look at what's going on today and we think that these completed projects will stand up to any upscale offering that you may find in the U.S.

Thank you very much.

(OPERATOR INSTRUCTIONS) Our next question is coming from Karen Short of Friedman, Billings, Ramsey Group.

Hey, everyone. Congratulations.

Morning.

Hey. Just a couple housekeeping. To clarify, the timing of Martin's rolling into the distribution, when do you expect that?

Well, currently, we distribute to Martin's; health and beauty and general merchandise.

Right.

The first items that we will begin to distribute will be private label, as they feel that's the most important category to transition. We have a lot of work to do with the Martin's program. If you remember, we have to retag every store, we have to cut in all of the unique items or private label items that we distribute. And by the way, we will be distributing, say, 1,500 groc -- center stores private label items and that's probably 25% or 30% greater than the number of private label items they currently get from their current supplier. So there's a lot of work to be doing all the planograms and getting all the tags and getting the stores prepared to handle a full distribution of product that Spartan offers. So this is like a 90-day project.

Just the private label is 90-day?

Oh, no. The private label will be more of the first couple of weeks we'll get full distribution on private label, but then we have to go through the process of resets in every store. But this is a plan that we've been working on with Martin's. This is a very well thought out, very comprehensive plan, and they feel will significantly improve the offering that the consumer sees in Center store.

So 90 days is a good proxy?

I'd say 90 days would be a fair start-to-finish kind of window to get the full distribution into their stores.

Okay, and will they actually be getting the President's Choice private label?

If they choose so. I don't -- okay. Initially, they've chosen not to take President's Choice.

Okay. Then just on capacity overall. Obviously you've had some strong increases in volumes to your facilities. Can you just remind me where you are on capacity in the different categories and also specifically perishables?

Let me start with dry groceries, no capacity problems whatsoever. General merchandise, of course, no capacity problems. Dairy, no problems. Meat, produce, frozen food is probably -- and everybody -- by the way, every retailer in the United States is faced with expanding SKUs in frozen foods, so whatever facility they have, there's always pressure on that. We calculated all of this ahead of time as part of the deal that we set up with Martin's and we are able to accommodate all of their requirements and that's all been planned out.

Okay. Going forward to continue growing the business, you're still, you feel pretty fine on the capacity front?

Sure, we're in good shape.

Switching gears to inflation a little bit, just wondering what you're seeing and if you are seeing -- there seems to be a lot of noise on whether or not inflation will be a positive, neutral, or a negative to food retailers and I guess it's a little different on distribution, so wondering if you could talk a little bit about both aspects of the business?

Karen, whenever there's inflation, there's mix changes. That's one of the hardest things for us to ever calculate is what is the impact on inflation, on true food inflation or inflation to our sales picture when people trade down. For example, if a customer trades from Tide 100 ounce that sells for $12 or $13, to private label that sells for $5 or $6, the impact on the ring value of the product is significant. So we don't know what will happen or how the consumers will react. I think the fuel thing is an issue for everybody. We're looking at -- in Michigan right now, we're looking at fuel pricing today of $3.47 for regular gas.

Right. Are you seeing -- from the manufacturing side, are you seeing higher prices and are you able to pass that on right now in the distribution at least?

I'd like to maybe pass that question on to Dennis Eidson.

Okay.

We are, Karen. Good morning. We are seeing some inflation. In certain categories are moving more rapidly than others. More recently, fresh poultry, we're seeing commodities like eggs, dairy is moving up. On the distribution side, I would say we've been relatively effective at passing those on. On the retail side, it's a little bit of a mixed bag. As you know, we've got significant competition here with super centers and we have a strategy to stay competitive on pricing within a tolerance. That becomes a little bit more challenging for us. But I think on balance we're moving forward.

And are you managing to maintain the gross margin or the gross profit dollars on the distribution side?

I think, as we indicated in the dialogue this morning, our rates improved in the quarter on distribution, so dollars and rates both were positive.

Okay. Then one last thing. Just on the interest expense, Dave. So you had said your interest expense guidance does not reflect some higher debt levels associated with Felpausch?

Correct.

Okay. Okay, thanks very much. Great quarter.

Thanks.

We have a follow-up question comes from Chuck Cerankosky of FTN Midwest Securities Corp.

I've got another question about the guidance. Dave, you talked about Felpausch not being accretive until its second full year. What would you expect its impact to be during the period you own it in fiscal 2008?

Well, we're still working on that, but it will certainly be dilutive. When we talk about the $5 million to $6 million of start-up cost, you would expect that to offset a modest normal profitability level of a company like that. So I think, Chuck, probably a good way to look at it is -- you probably have a fairly good idea of what a company like that runs, profitability. You look at the interest expense we incur and then you put on the $5 million to $6 million and it gives you a sense of where we'll be. I would think -- well, I think you put those numbers together and you'll get into a reasonable range, but it'll be dilutive, certainly, in the first year.

Just to add to what Dave said. One of the things to remind everyone is that on the D&W acquisition, that was new business for us. They were purchasing their product from Super Value. With Felpausch, that's a customer we already supply, so there is no real major upside on the distribution side. So it's really a different picture when you look at the impact on profitability.

Craig, could you comment -- or maybe Dennis -- on the current retail competitive environment in your part of Michigan given the general economic client, the higher gasoline costs? How do you view it?

Well, there is no question but that the state of Michigan has a pretty competitive environment and that we're challenged here by the economic environment with the auto industry, et cetera. Unemployment is -- I think they just announced April is up to 7.1% in the state and we've got some regions that are actually running double digit. As it relates to the competitive environment, it's primarily in our corporate stores Meyer and Super Wal-Mart. And I would say that for the most part, we haven't seen significant deviations from either of those competitors on how they're going to market. Everybody is fighting for every penny, Chuck. As you know, we're a high-low operator and we think vis-a-vis the Wal-Mart offering, that gives us some advantages, frankly. We can turn on the heat a little bit and move the needle. Although we're prudent on how we spend that -- those resources, we feel like it's been effective for us.

Okay, thank you. I'm just curious, how was the weather -- or better said, how would you describe the contribution of your northern tier stores in the final quarter of the financial year?

Chuck, you know how that is sensitive, but you also know that the final quarter of our year in the north is always the toughest. Because even when you have good weather, it's still just that sort of tweener quarter as you move through, where people are getting ready for spring and they want to leave winter behind. So early in the quarter, the weather wasn't very good. In March we got snow; that helped but it's late in the quarter. So it wasn't an unusual quarter for us from a contribution wise, but remember, that's always the lowest quarter we have from our stores for that reason.

All right, thank you.

Our next question is coming from Patrick Stowe of Priority Capital.

Good morning.

Morning.

You just mentioned the competitive environment versus Wal-Mart and Meyer -- and I might have missed this -- I wondered if you gave any clarity as to competitive openings over the next year and what you envision there?

During the past five years -- we were just looking at these numbers -- during the past five years we had 45 Wal-Mart Super Centers and 15 Meyers open against us. For fiscal -- so that's in the whole state. So between the two banners, that's 60 super centers in five years, so an average of 15 super centers a year.

And you said that's statewide?

Right, and that would be the state of Michigan.

Yes.

What we're seeing going forward is probably half that rate. It is -- finally the pipeline is being filled by the super center guys and everybody is aware of Wal-Mart's comp sales situation. I think that there's no question that their comp sales is affected by new stores that they open impacting stores that they currently operate. And so there's about four or five Wal-Mart Super Centers will open this year against us on a direct basis, but the level of openings is, if anything, consistent with what we've seen over the past five years.

Patrick, just want to add on. Against our super market, it's probably only like three and I believe all of those are expansions, Craig. So that typically has a much lower impact than a new store opening. Then the other three impact various Pharms, so it's not a substantial number.

Right, understood. I guess you guys have attributed the leveling off there to some of the strength in your comps along with all of the internal initiatives you've taken. I guess that should continue then since they're opening at a lower pace.

Yes, that's a good analysis.

Okay. And then just a couple of questions on the distribution expansion, if I can. You touched on the goal of expanding into some non-Michigan Midwest states and I guess that's been a stated goal for some time. Should we expect new facilities for that? Are you able to service non-Michigan markets with your Michigan facilities? How should we think about that?

Well, I'll tell you we're doing the work now until we analyze our requirements based on everything that's going on with us right now. And one of the things that we want to be sure is that we don't jump the gun and invest in something that will not be productive, so we're doing the work right now to determine, based on our future forecast, what our requirements are from a facility standpoint. We're very capable of handling the growth that we see over the horizon for the next year or so, and as we look down the road, we will analyze -- and by the way, we have brought in expert consultants to help us with that analysis.

Understood. Just lastly, as the retail footprint has really started to grow pretty significantly, is there any risk of channel conflict there with your existing distribution customers?

Actually, we carefully work on that. We sort of compete with our own distribution customers in several trade areas already and we're able to pull it off, whether you're talking Traverse City or other parts of the northwest Michigan or Kalamazoo where we now compete with our own retailers, with our D&W banner, we sort of are able to work together. Going forward, I don't really see a major problem. One of the things that is very obvious for us -- to us and maybe from an outsider it's not, but the old co-op days of Spartan stores, certain retailers had certain trade areas. And they staked a claim to a trade area, whether it was Lansing or Kalamazoo or whatever. So it's not like retailers compete with each other around the state. So if we were to, say, acquire a retailer in a certain trade area, generally speaking there is not another Spartan competitor heads up against that guy.

It's just like the Felpausch, right?

Felpausch is a great example. Felpausch competes only peripherally with a couple of Harding stores, which is another account that we supply.

Okay.

So we feel okay about that.

All right, well, that's great color. I appreciate the time and good luck to you.

Thank you.

Our next question is coming from Karen Short of Friedman. Billings. Ramsey Group.

Hi. I have a couple of follow ups. First, two housekeeping. What were the comps at the Pharm this quarter?

Karen, we don't break those out separately, but they were negative.

Okay. And I just was wondering, I know you guys have made public statements on your views on Farmer Jack in terms of an acquisition or looking at some of the stores, but there still seems to be press commentary that you are, in fact, looking at some of the Farmer Jack stores. Was just wondering if you could clarify or give us your thoughts on that?

The press doesn't have everything right all the time. Really, we are supporting our retailers over there. We determined the strategy that we -- remember, we have Martin's on our plate, we have Felpausch on our plate. We determined that the best strategy for the Company and the retailers that we supply in that trade area is to assist them in their growth. So what's going on on behalf of Spartan is that many retailers that operate under the Spartan banner have made bids on many of those stores. Our position will be to behave as a distributor, and if and when the acquisition of those stores is completed on behalf of our retailers, we will be able to generate additional distribution sales as a wholesaler.

But you wouldn't help finance your retailers making acquisitions? You would just potentially benefit from the incremental distribution?

I think that's probably the -- yes, that's correct.

Okay. Given that you do have a lot on your plate once you integrate both Felpausch and Martin's, what is your thinking on prioritizing retail growth versus distribution? Because it seems that most are doing very well, but just wondering where you see the higher returns?

We have never prioritized one versus the other. It's an opportunistic strategy for us. We have -- we bounce around a 50/50 sales penetration from one side to the other and we think that'll continue. Who knows? We can't really forecast what's going to happen, particularly on the distribution side down the road. It's a very dynamic world right now when you look at our competitors.

Okay, great. Thanks a lot.

Thank you. Mr. Sturken, there are no further questions at this time.

Well, if there are no more questions, we'll conclude this call. On behalf of Dave Staples, Dennis Eidson, and everyone at the Spartan team, I thank you for listening to our comments. We look forward to discussing our fiscal 2007 first quarter with you during our next conference call. Thank you very much.

This concludes today's conference. Thank you for your participation.