TransAct Technologies Inc (TACT) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the TransAct Technologies first quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator instructions) As a reminder, today's conference is being recorded. And now I'd like to turn the conference over to Bill Schmitt of ICR. Please go ahead, sir.

Thank you, Keith. Good afternoon and welcome to TransAct's first quarter 2009 results conference call. Joining us today from the Company are Mr. Bart Shuldman, Chairman, President and CEO, and Mr. Steve DeMartino, Executive Vice President and CFO. The format of the call will be a brief business review by Bart, followed by Steve providing details on the financials. We will then have time for questions.

As a reminder, this conference call contains statements about future events and expectations which are forward-looking in nature. Statements on this call may be deemed as forward-looking and actual results may differ materially. For a full list of risk factors inherent to the business and the Company, please refer to the Company's SEC filings, including the Company's most recent report on Form 10-K for the year ended December 31, 2008.

The Company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that happen after the call. At this time I would like to turn the call over to Mr. Bart Shuldman. Please go ahead.

Thanks, Bill. Good afternoon everyone and thank you for joining us on today's call. Before I begin, I'd like to thank my management team and the employees at TransAct who have been fantastic during this significant economic downturn. We are asking you to do much more with much less. And I thank you for your dedication to TransAct Technologies.

Now, onto our results. We were pleased with our first quarter performance given the worldwide economic recession, as we generated earnings per share of $0.01 in what had been originally forecasted to be a near breakeven. In addition, in spite of a 15% decline in revenue, we managed to increase our gross margin by approximately 30 basis points during the quarter, primarily due to our decision to shift more of our manufacturing to China. This shift is almost complete and when we are done, more than 70% of our current products will be manufactured overseas. You can see the positive effects, even with the lower revenue in this quarter compared to our first quarter last year. Revenues were down, but gross margin was up.

We have worked through what we believe at this time to be our toughest quarter in 2009 and now look forward to executing on a building backlog of business for the remainder of the year. While we are not in the business of forecasting the economy, we can say we expect improved results going forward. So, let me take you through some of the highlights of the quarter.

Revenues for the first quarter of 2009 declined 15% to $12.2 million, compared to $14.3 million in the same period a year ago. Net income in the first quarter of 2009 was $100,000 or $0.01 per diluted share, which also includes $120,000 charge for severance. This $0.01 per share compares to adjusted earnings per share of $0.06 in the prior year period, after excluding legal fees related to the lawsuit with FutureLogic. Including those expenses, GAAP loss per share in the first quarter of 2008 was a minus $0.07.

Turning to the details of our results, sales from our casino and gaming market were up slightly by 0.4% for the first quarter, primarily due to the strong performance from our international casino and gaming markets, a function of our diversification strategy of engaging in sales in both the international casino and international off-premise gaming markets around the world. Speaking specifically about our international markets, I'm extremely pleased to report that we experienced a three-fold increase in sales from our international off-premise gaming market. I would also like to point out that this three-fold increase did not include any revenue from our recently launched new printer for this market, the Epic 880.

Just a couple of years ago I introduced to our shareholders the new market that I termed international off-premise gaming. To remind the shareholders, this market needs a printer to print a receipt, not a ticket. It has continued to grow since the launch of our first product, the Epic 430, and then in the first quarter of 2009 sales in just this new international off-premise market was higher than our lottery sales. It is now a growing and meaningful piece to the TransAct sales puzzle.

In addition to the significant growth we experienced in the international gaming sales, we also experienced a 22% increase in sales from our international casino market. These results more than offset the significant downturn in the domestic casino market, which negatively affected our domestic casino printer sales. There is no doubt that the domestic casino market is challenging.

While we believe we have grown our market share, the lack of slot machine replacement sales has finally impacted our domestic casino printer sales. In looking at what is going on, we are now approaching a 20- or 30- or even a 40-year replacement cycle. This only means that there is a significant amount of pent-up demand that will open up once the domestic casinos get healthier. Just think about what this will mean, given the US market now has approximately 950,000 slot machines and turning a 40-year replacement cycle to even a 10-year, which is historically low, will have a much positive effect that will have on TransAct.

Turning to our lottery market, lottery printer revenue fell 69% to $1.1 million from $3.6 million in the prior year quarter, primarily due to the timing of orders. As we have mentioned previously, lottery sales can vary significantly from quarter to quarter due to these timing issues. However, as we mentioned a couple of weeks ago, we are pleased to receive a $3.6 million order for our thermal lottery printers, which we will begin delivering in the middle of the third quarter and expect to complete by the end of the year. We believe we will experience increasing lottery printer sales for the rest of 2009.

Now, turning to our banking and point of sale markets, sales were down 11% for the quarter to $2.4 million. The economic slowdown was the main factor in the decline in revenue, as our regular point-of-sale sales were down in the quarter compared to last year. However, helping to offset the effect of this significant economic slowdown was the solid growth in sales of our new McDonald's coffee and beverage printer. We clearly started to see sales increase throughout the quarter and expect the increase to continue the rest of the year.

I want to remind our shareholders we have won both the coffee printer business with McDonald's, as well as the printers that will go along with their upgrade of their current point-of-sale terminal business. We call that the grill initiative. We still expect 11,000 U.S. franchisees to implement the coffee initiative and that our other printer solution has the potential to go into all 37,000 stores worldwide over the next several years.

As mentioned on our previous call, we expect the coffee initiative will drive sales for TransAct over the next two quarters of this year and then what we call the grill initiative printer will hopefully drive sales growth after that.

In terms of our banking sales, we just want to point out that the first quarter of 2009 included no sales from our $4.9 million order for the BANKjet 1500 to our largest banking customer. Shipments of that printer are beginning in the second quarter and should help alleviate the negative effects the global recession is having on our regular POS and banking sales within TransAct.

I would also like to point out to our shareholders that this very large banking printer order that we announced will not only grow our printer sales in the coming quarters, but will add a significant amount of recurring revenue trends to TransAct for service and inkjet cartridge sales. This bank utilizes two inkjet cartridges per printer as they print their logo in blue and the rest of their receipt in black. This order will add a significant amount of inkjet printers into the market and hence drive more recurring revenue of our inkjet cartridge sales in the years to come. This order brings us to over 40,000 inkjet printers in the market for just this one customer, all using our inkjet cartridges.

So now, let's move onto TSG or TransAct Services Group. We are extremely pleased to report an excellent quarter. In fact, a record breaking sales quarter with a solid 22% growth in the first quarter of 2009, compared with the first quarter of 2008. Our main area of focus, our consumable sales, had a strong quarter and was aided by our growing internet sales from our website, www.TransActsupplies.com, which has now been operating for three full quarters. We are still adding technology to this website to make it world-class, but it continues to drive incremental sales every day. Now, we believe the consumables market in the US was down over 20% in the first quarter due to current recession. This makes us even more pleased with the growth we experienced, as we grew our TSG business in a down market.

In addition, we also continue to see contributions from our preferred partner agreement with NCR Systemedia Division, which we announced back in September 2008. We are very pleased with our progress to date and remain focused on growing this business, with its large product offering, through our website and telemarketing sales. And as we continue to grow, we still plan to add to our product offerings through our new relationships with other transaction supply companies, just as we did with the NCR agreement.

Updating you on the operations side of our business, I want to briefly comment about our Asia manufacturing initiative. We are starting to see the benefits of this move and in the first quarter of this year, even with a 15% revenue decline, we managed to increase our gross margin by approximately 30 basis points from the prior-year quarter. Further, the move increases the quality of our products, while providing the added benefit of reducing our ongoing warranty expense. Our goal remains to have approximately 70% of our products fully assembled in China by the end of the third quarter of 2009. We are on track to finish this on time.

Finally, I just wanted to provide you an update on the outlook we provided during our last earnings release and conference call. As we stated in today's earnings release, we expect improved results for the remainder of 2009, compared to the first quarter of 2009, due to an increasing backlog of orders, such as the BANKjet order and the recent lottery order and forecast of order flow provided by some of our customers. In addition, we continue to expect free cash flow, which we define as cash provided by operations, less capital expenditures, for 2009 to exceed $3 million.

Now, before I turn the call over to Steve to discuss our financial results in detail, I want our shareholders to know once again that we are pleased with our first quarter. In the face of an extremely difficult economy, we managed to deliver a profitable quarter and we are expecting better results for the rest of 2009. While we expect the domestic casino market to remain difficult throughout the year, our focus on diversifying our revenues, as well as our recent orders, should more than offset the continued weakness from that market. We are continuing to work as hard as ever and we plan on being well-positioned in terms of our balance sheet and cash flow once the economy turns around in order to take advantage of the new demand that will be present.

With that, I'd like to turn the call over to Steve DeMartino, our Chief Financial Officer, for our financial summary. Go ahead, Steve.

Thanks, Bart. Let's get right into the numbers for the first quarter of '09. Our diluted EPS for the first quarter was $0.01 on revenue of $12.2 million, down year over year from an adjusted earnings per share of $0.06 in the first quarter '08, excluding legal fees related to the now settled lawsuit with FutureLogic. On a GAAP basis, which includes the legal fees, first quarter '08 loss per share was $0.07.

Now let me discuss the details of the first-quarter financial results. Our net sales for the first quarter of '09 were $12.2 million, down 15% from $14.3 million in the first quarter of '08. Casino and gaming sales were $4.9 million in the first quarter of '09, which was flat compared to the first quarter of '08.

On the positive side, our international gaming and casino printer sales were up $1.1 million or 62%, led by strong casino printer sales in Australia, as well as a three-fold increase in sales of our off-premise gaming printers. If you recall, our off-premise gaming printers are used internationally in various games such as video lottery terminals, amusement with prizes, skills with prizes and fixed-odds betting terminals.

The increase in international sales helped to offset a $1.1 million or a 36% decline in our domestic casino and gaming printer sales, as these sales continue to be impacted by the downturn in the overall domestic casino market.

Lottery printer sales for the quarter declined 69% to $1.1 million from $3.6 million in the same quarter a year ago, due to the timing of orders. On a sequential basis, sales to GTECH were down from $2.6 million in the fourth quarter of '08. We expect sales to GTECH to improve for the remainder of the year, especially during the third and fourth quarters, as we ship the $3.6 million order we received from GTECH last month, as well as other orders.

Banking and POS sales were $2.4 million in the first quarter of '09, down 11% from the first quarter of last year. Our POS business declined by 13%, largely due to the general economic slowdown that we believe is impacting capital spending of our retail and hospitality customers.

However, despite the economic slowdown, we experienced strong sales of our two new printer products for McDonalds, the Ithaca 8000 and Ithaca 8040. as McDonald's rolls out these printers at an increasing rate for use in their front counter and grill program, as well as their new combined beverage initiative. Banking sales for the first quarter of '09 were consistent with the first quarter of '08. Looking forward, we expect our banking printer sales to increase in the second and third quarters, as we ship a $4.9 million order we received for BANKjet 1500s in February, '09 from one of the largest banks in the US.

Sales from our TransAct Services Group increased by 22% to a quarterly record of $3.8 million for the first quarter '09. TSG sales for the first quarter of '09 were led by a 39% year-over-year increase in consumable and transaction supply products, which is our main targeted growth area for TSG. Contributing to this increase were strong sales of inkjet cartridges and growing Internet sales, including paper products, through our e-commerce website, TransActsupplies.com.

Our gross margin in the first quarter of '09 rose to 33.8% from 33.5% in the first quarter of '08, an increase of 30 basis points. Our gross margin rose despite a 15% decline in overall sales, as we benefited from a shift in manufacturing of more of our products to China, which are at a lower cost.

Operating expenses for the first quarter of '09 were $3.9 million, down from $5.8 million in the first quarter of '08. Operating expenses for the first quarter of '09 were lower due to approximately $1.9 million of legal expenses incurred last year, related to the lawsuit with FutureLogic, which we settled in May '08. Excluding these legal fees, our operating expenses for the first quarter of '09 were flat compared to the first quarter of '08.

However, our operating expenses for the first quarter of '09 also included approximately $120,000 of severance charges resulting from the termination of approximately 8% of our employees. This action, while difficult, will result in annualized full year cost savings of approximately $300,000 or $75,000 per quarter, beginning in the second quarter this year. Since most of the terminated employees were part of our manufacturing and service operations, most of the costs savings impact will be reflected on the cost of goods sold line of our income statement.

Our operating income in the first quarter of '09 increased to approximately $180,000, from a loss of $1.1 million in the prior year quarter, which includes FutureLogic lawsuit legal fees. Excluding these legal fees, adjusted first-quarter '08 operating income was approximately $800,000.

We recorded income taxes at an effective rate of 34.2% in the first quarter '09. We expect our effective tax rate for the full year '09 to be between 34% and 35%.

And on the bottom line, diluted EPS for the first quarter of '09 was $0.01, compared to diluted EPS of $0.06 on an adjusted basis, excluding legal fees, in the first quarter of '08.

Now looking at our cash flow. We used approximately $600,000 of cash from operations in the first quarter of '09, largely due to an increase in inventories, somewhat offset by a decrease in receivables, which I'll explain in a bit.

Our capital expenditures were approximately $100,000 for the first quarter of '09, compared to $400,000 for the first quarter of '08. Our cash balance decreased by $700,000 to $1.3 million at the end of the first quarter of '09 from $2 million at the end of the fourth quarter '08. However, we continue to have no debt outstanding under our $20 million revolving credit agreement with TD Bank North.

Our working capital increased to $15.6 million as of March 31st, '09 from $15.1 million at the end of '08. The increase in working capital was due largely to higher inventory levels, as we shift our manufacturing to China in order to prevent delays in shipping. Our current ratio rose to 3.1 to 1 as of March 31st, '09 from 2.9 to 1 at the end of '08.

Our EBITDA for the first quarter of '09 was approximately $800,000. This compares to EBITDA of a negative $400,000 for the first quarter '08 or a positive $1.5 million, excluding the FutureLogic legal fees.

Depreciation and amortization totaled approximately $400,000 for the first quarter of '09, compared to $500,000 for the first quarter of '08. Non-cash compensation expense totaled approximately $200,000 for both the first quarter of '09 and '08.

Now let's take a look at our balance sheet at the end of the quarter. Receivables were $6.9 million as of March 31st, '09, down from $8.7 million at the end of '08. The decrease in our receivables reflects lower sales volume and increased collection of some of our outstanding receivables. Our collection effort in days sales outstanding continued to be strong.

Our net inventory balance rose to $12.1 million at the end of the first quarter '09, up $2.2 million from year-end '08 as we continued to shift more of our manufacturing to China. As we explained on our Q4 call, we're in the process of increasingly moving full production of our printers to a contract manufacturer in China, with a goal of producing 70% of our total unit volume in China by the end of '09. During the first quarter of '09 we continued to make good progress on this initiative and we now expect to reach our 70% goal by the end of the third quarter. During this transition period, we decided to temporarily increase our stocking levels as a cautionary measure to minimize any potential disruption to customers as we make the change. As a result, we experienced an increase in inventories during the first quarter of '09.

Looking forward, we expect our inventories to begin to decline towards more historical levels starting in the second quarter '09, as we complete the transition of production to China and deplete inventory we purchased in advance of the $4.9 million banking order for which we've begun to ship in greater volume in the second quarter.

Overall, looking ahead we remain confident that TransAct is positioned well and will weather the current economic storm. Our prudent and cautious approach to managing our balance sheet continues to be key for us, with $1.3 million in cash, no debt and increasingly strong working capital levels. And we still expect to generate at least $3 million in free cash flow during the year.

We will continue to tightly manage our capital, financial position and spending levels in order to make sure that we're well positioned from a financial standpoint to exploit new opportunities when the market turns around.

And with that, I'll hand it back to Bart.

Thank you, Steve. Before we go to question and answers, let me quickly reiterate that we feel fairly good about the remainder of 2009 when you consider the massive hit the economy has had on our markets. However, we are certainly not overconfident, given the current economic situation, which is why we are and will continue to be prudent stewards of our capital. Our wins this year with McDonald's, our BANKjet printer order, our Epic 950 win with the Creek Nation's Casino, and our recent order for our lottery thermal printers shows that we continue to manufacture the highest quality and in-demand products. But there is still plenty of work left to be done and we will not be satisfied until TransAct is perfectly positioned for the next growth cycle, while we continue to provide long-term value to our shareholders.

At this point I'd like to open the call to questions.

(Operator instructions) We'll go to Justin Sebastiano with Morgan Joseph.

Thanks. Hey, guys. So, do you guys expect similar year-over-year gains in the casino and gaming revenue segment for the balance of the year, kind of that strength that you saw, I guess, in the first quarter?

On the international side --

Right. On the international.

Yes. Yes. Yes. We feel really good about it. The gaming side, the off-premise gaming side continues to offer us a lot of opportunities. And in fact, I'm in leaving for Asia on Monday just to look at another one, to get the full magnitude of the opportunity. So, the international side still looks good to us. It's really the domestic side, as you know, Justin, that's been so weak.

Right. Okay. And then TransAct Services Group had a really nice pop. I mean, is that something we can model in the rest of the year, as well? Kind of 20%, 25% gains? Or was there something, like one large customer, that came in and bought a whole bunch off the website?

No. No. It was a good, solid quarter. The areas that we're focusing on is the consumable side. And we had a real solid quarter of paper sales, cartridge sales. What you're going to see now is once we start shipping the BANKjet, the new BANKjet order, those printers will get installed and eventually they will start generating additional inkjet cartridge sales. The sales team, the telemarketing guys, are on the phone every day. It wasn't anything special in the quarter. It was just a good, solid quarter of delivering results for us. And we expect it to continue.

Okay. And in that same vein, I guess, are you still looking for some tuck-in acquisitions for the services group? Or is that kind of off the table at this point?

No. No. We're constantly looking for the acquisitions. We're looking in two areas. Clearly the TransAct Services Group, we want to dominate that, what we call Tier V through Tier VIII retailer. It's the person that owns three hardware stores or five restaurants. They tend to buy on the Internet. They tend to buy small quantities, but at higher prices. Clearly that's the business that NCR has handed over to us. So, if there's -- we're constantly looking at opportunities and acquisitions there. And then we're also looking for opportunities for printer sales. There is a lot of small, specialty printer companies out there that are having a difficult time due to the market and presenting us opportunities to look at.

And what sort of industries do they sell into? Are they POS, banking?

No. What we're focusing on, Justin, is on the technology side. There is a lot of thermal printer technology printers out there that basically manufacture the same type of printer we do, maybe a little bigger, maybe a little smaller. Mostly they will have a different type of interface because it's going on a different type of system. But we want to stick with our core of understanding thermal printing. What we have been able to do is really understand how to manufacture a high quality, low cost printer. And we think that we can deliver that into other industries, but instead of trying to design our own printers is to buy our way into those markets. But of course it's got to be accretive to earnings. But given the market the way it's going right now, there are opportunities out there that we have looked at.

Okay. And Steve, you had mentioned that CapEx in the quarter was $100,000 and that was less than what I was looking at. And on the last call you had said that you were looking for about $1 million in CapEx for the year. I mean, you're pretty far below that at this point. Do you think you're going to ramp that up for the balance of the year? Or is that $1 million looking high at this point?

No. I think it was just an inordinately low CapEx quarter for us, Justin. It's going to catch up to the $1 million by the end of the year.

Okay. And lastly, if I may, where is the wiggle room, I guess, on your operating expense? I would assume it won't come from R&D or possibly even your selling line. I mean, I guess it's G&A. Is that fair to say? And if so, is there still room to cut there?

No. I think we're done, Justin. We're down to pretty low numbers here. And with the move to China and the cuts we made in the first quarter, due to the lower sales, and being prudent about looking out, I think we're done.

Okay. All right. Thanks.

Most of those expenses are fixed, Justin.

Okay. Thanks for taking all of my questions. I apologize for taking up time for the other callers.

That's okay. Good to hear.

Any time.

Good to hear.

Thanks.

We'll go next to Todd Eilers with Roth Capital Partners.

Hi, guys. How are you? Question on the McDonald's contracts, the McCafe contract. Looks like that was moved forward a little bit quicker than we originally expected. Do you expect to have all the domestic stores, printers shipped to all the domestic stores, complete by the second quarter? Is that a safe assumption? And then for the other contract, the POS system, how should we look at that throughout the rest of the year? Should that -- is that going to start to ramp up here in one particular quarter, or is that more of a kind of steady piece of business for the next couple years?

Yes. The two contracts are going to work kind of differently. What we're seeing is the McCafe really pick up steam. It started in March and there was a major launch inside of McDonald's to the franchisees for the coffee to get it all in, so when they start running their -- it's a $100 million ad campaign coming in the summer -- so that everybody would be ready. So they put a big push on the stores to start getting the systems and the technology in. We believe it's going to run through the third quarter.

So McCafe is going to -- the coffee printers will run Q2, Q3. As we end Q3 we believe that the grill initiative will start kicking in because a lot of the franchisees are putting in the coffee first and then they're going to upgrade the POS systems second. We are getting orders for the grill initiative printer, but what we're starting to see is much more orders for the coffee.

One thing that happened just a couple of weeks ago was McDonald's held kind of a mini trade show in Las Vegas for all of their regions here in the US and international. And at the trade show the Chief Operating Officer of McDonald's stood up and talked about the coffee initiative. And in that person's presentation, they talked about the sticky printer and told everybody -- we had a booth. We were given an area of the trade show. And the COO told everybody to come to our booth and go get the printer and sign up. And since that trade show we've seen a definite -- more increase than we were starting to see in March. We've seen an increase in orders for the coffee printer. So we believe it's going to roll out late Q1, Q2, Q3, and then a steady, steady flow of the grill initiative printer after that.

Okay. Perfect. On the gross margin side, obviously great job there considering the macro environment. Once you finally kind of get everything outsourced to China that you have planned, what do you feel, considering your kind of current outlook or visibility, what do you think gross margins you can get to once that's complete?

I mean, with the volume coming up, Steve, what do you think?

I think we're going to see margin improvement throughout the year, Todd, probably at least another point, if not a bit more. And then as the volume comes up, as you know, that's where we really get the leverage. So when the sales return we'll see even more margin leverage.

Because remember, that overhead is fixed, so that overhead will stay and when the sales come through, all of that less what we call prime costs, which is now material and just a tiny bit of labor, everything else drops to the gross profit line.

Okay. And then, I'm not sure if you guys gave it or not. If you did, I apologize. Just of your casino revenue, how much of that was international on a dollar absolute basis?

International was $2.9 million in the quarter, Todd.

Okay. And then on the severance charges in the quarter, I believe you gave the savings impact going forward, and it's expected to be in the cost of goods line item. Where does the actual charge show up in this quarter? Is it cost of goods or SG&A?

It's $120,000 charge on the G&A line.

G&A? Okay. I think that does it for me. Thanks, guys.

(Operator instructions.) We'll go next to Larry Haverty with GAMCO.

Hi, Bart. I'm just curious. We now have pretty much a go on CityCenter, which is going to be next-gen slot machines according to IGT.

Yes.

What's your role there and what do you think this means, or is it still too early? And (inaudible) --

Well, I still think it's too early, because I don't even know if they've chosen the technology yet. So I mean, I think it's going to be server-based gaming. Whose technology and what technology they choose -- I think everybody was on hold until they got their financing in place. We're told it's early summer before we know. So that's the best that we've heard about how that rolls out.

From a new casino standpoint, it's a nice order. The real issue to us, Larry, in regards to seeing the market come back is to see the replacement cycle come back. That's really what's going to drive anybody's volume in this market today. When you hear somebody like T.J. Matthews say that we're at a 40-year replacement cycle -- so if that's what our domestic casino business is today, just imagine what happens if it goes even to a 20- or a 10-year replacement cycle. So what really has got to drive the industry is a replacement cycle coming back. The new openings are nice to haves, 1,500 1,800 machines. But if you really think about it, we could do that amount in a week versus what T.J. said, they did 1,800 replacement machines in the quarter. So we're really need to see on the domestic side, the replacement cycle come back.

I mean, Steve just gave you the numbers. Our international casino sales and gaming sales was 50% higher than our domestic sales.

Okay. Well, this, if it works, is going to stimulate the replacement cycle.

Larry, a couple weeks ago I took my staff to Las Vegas for a staff meeting. Actually it was cheaper for us to go to Las Vegas and stay there then stay here in Connecticut. And we spent a fair amount of time one night on the floor of the casino where we stayed. And we went to a bank of new machines. I won't tell you the manufacturer, but it was a bank of brand new machines. Every machine was taken and people were waiting on line to play those machines. We counted over 250 of the old machines right around that area, all empty.

So clearly the new technology, the new machines, are definitely driving play. The casinos just have to get healthier. They've got some balance sheet issues that they've got to get through. The economy's got to come back. And then they'll start the replacement cycle again.

Okay, great. Thanks, Bart.

Ladies and gentlemen, this will conclude today's question-and-answer session. For closing remarks, I'd like to turn the conference back over to Management.

Thank you, operator. We appreciate everybody's attention to our call this evening. We also look forward to anybody coming to our annual shareholders' meeting in May, at the end of May, and then look forward to talking to everybody on our second-quarter conference call. Have a good night.

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