Tandy Leather Factory Inc (TLF) 2003 Q3 法說會逐字稿

Good afternoon. Welcome to Leather Factory third-quarter conference call. (OPERATOR INSTRUCTIONS). After the speakers' remarks, there will be a question and answer period. (OPERATOR INSTRUCTIONS).

Before I turn the call over to Mr. Thompson, I want to call your attention to the fact that these conversations will contain forward-looking statements. To that extent, the Leather Factory management speaks today of any future events, or makes other forward-looking statements, you are reminded of the inherent uncertainties of looking into the future that they are risks to the Leather Factory they could prevent these events from occurring in the manner foreseen. Please see the Leather Factory's Form 10-K for 2002 and their subsequent Form 10-Q for a discussion of some of these risks. Copies of these documents are available through the SEC's Edgar system or from Company's investor relations office. Also, statements made today by management of the Leather Factory are made as of this moment. And the Leather Factory and its management disclaim any duty to the update of those statements. I would now like to turn the call over to our host, Mr. Wray Thompson. Thank you. Mr. Thompson, you may begin your conference.

Thank you. Thanks for joining us today. I'm Wray Thompson, CEO; Shannon Greene, our CFO and Ron Morgan, our President, are also in attendance today.

For those of you that are new to our company, I'd like to summarize the Company's history. The Leather Factory was founded in 1980. We've grown from the original six locations to 27 in the U.S. and three in Canada, warehouse distribution centers for a total of 30. Tandy Leather was acquired at the end of 2000. At that time, Tandy was operated strictly as a centralized mail-order house in Fort Worth. Beginning in January of '02, we began opening Tandy Leather retail stores with the intention of re-establishing Tandy Leather Company as the prominent leathercraft specialty retail store chain in North America. As of today, we have 26 Tandy stores located throughout the U.S.

I won't take the time today to explain Tandy's prior history or story at the time we bought it. If you're not familiar with it, and are interested in hearing it, I'll be glad to visit with you individually, as I believe knowledge of Tandy's history is instrumental in understanding why we believe we will continue to be successful expanding the Tandy retail store chain.

Now let's move to our operational structure and what our expectations are regarding our future. The Leather Factory operation is wholesale-focused, selling to independent dealers, national accounts and small manufactures. While the Leather Factory does sell to the retail customers, its sales mix runs approximately 80 percent wholesale and 20 percent retail. Generally speaking, Leather Factory sales are all handled through the Leather Factory distribution centers, regardless of whether the customers order method is phone, mail-order, Internet, or walk-in. The Leather Factory currently contributes approximately 75 percent of our consolidated sales. The Leather Factory sells to 15,000 customers in any given month, including resellers, saddle makers, makers, (indiscernible) shops, prisons and prisoners, national accounts and small manufactures. The Leather Factory sales are not generally seasonal in nature.

Going forward, we expect the Leather Factory sales to maintain the gross rate of from 2 to to 4 percent annually. Renewed interest in some customer groups, the western industry for example, could boost sales at a higher annual rate. But we don't rely on these type of things to happen in order to be successful. With the exception of possibly adding another location or two in Canada, at some point in the future, we currently have no plans to open more Leather Factory distribution centers.

Tandy Leather operation is retail focused, selling to the consumer or end user. Tandy's customer base is comprised largely of individual hobbyists, although Tandy sells to youth camp schools and some wholesale leaders (ph). At the end of the third quarter, sales from Tandy's retail stores contributed approximately 20 percent of our consolidated sales. As the Tandy Leather operation continues to expand, its sales will become a larger contributor of the total sales of the company.

We began opening Tandy stores in January of '02. Over the 22 months since then, we've opened a total of 26 stores. Our current plans are to open approximately a dozen stores per year for the next five to eight years to a maximum of 100 stores. Our determination of Tandy store locations is based in part on our knowledge of prior Tandy markets that were profitable. In conjunction with the store openings, we closed the centralized mail-order operation in the third quarter of '02. Going forward from the current third quarter, the revenue comparisons for Tandy should be easier to analyze because the information will compare stores to stores rather than stores to mail-order.

Following the Tandy acquisition, we have not only focused our efforts on the reintroduction of the Tandy store chain over the past two years, but we have worked diligently to consolidate costs and position our cost platform for the growth. Major initiatives were in our central support system, specifically the inventory management and IT operations at our Fort Worth headquarters to meet the anticipated capacity requirement of the store expansion. Specifically, we have expanded our computer system to support up to 100 remote locations, and we consolidated our warehouse and manufacturing facilities to more efficiently provide product to our growing network of stores. Not only does this provide our operating platform with the necessary infrastructure for the foreseeable future, it establishes the framework for future margin improvement.

I will now turn the meeting over to Shannon Greene, our Chief Financial Officer.

Thank you, Wray. I'm assuming you've all had time to review the earnings release that went out this morning. I will go through it quickly then try to get into more of the details. First of all, you've probably noticed that although there is a table detailing Tandy's comp sales, we didn't provide that information on a consolidated basis or for the Leather Factory and Cushman individually. We've (ph) spent a lot of time trying to determine the relevance of that information, and have come to the conclusion, right or wrong, that there really isn't any as it applies to Cushman and Leather Factory. Cushman is a manufacturer. Same store versus new store info really doesn't apply. Leather Factory, although it does some retail business, is really a wholesaler; and once again, I don't feel like comp sales are very meaningful. However, given that we have provided that information in the past for those of you who want it, I do have the figures for this quarter and can provide them to you if you request them on this call.

For the quarter, consolidated sales were up 6.69 percent from $9.48 million to $10.12 million; Leather Factory sales were $7.38 million compared to last year's third quarter of $7.24 million, an increase of 1.76 percent. Tandy sales were $2.33 million, compared to last year's third quarter of $1.73 million, an increase of 35.1 percent. Cushman sales were 413,000 compared to 512,000 a year ago, a decrease of 19.4 percent.

As Cushman is not material to our results and does not fit our specialty of retail business model long-term, we have undertaken a study to determine the proper initiatives for Cushman on a long-term basis. Consolidated gross profit for the quarter was 55.24 percent, an improvement over last year of 1.6 percentage points. Leather Factory's gross profit for the quarter was 54.2 percent versus 53.1 percent last year. Tandy's gross gross profit was 63.2 percent versus 59.4 percent last year.

Consolidated operating expenses for the quarter were $4.67 million, up 426,000 or 10 percent over last year. $375,000 of this increase is in the Tandy operations attributable to the costs associated with 26 stores as compared with the ten in existence last year. The Leather Factory's operating expenses were up $35,000 for the quarter, and Cushman's operating expenses were up 16,000 for the quarter. Income from operations was $917,000 for the quarter, up 9 percent over last year.

For the nine months ended September 30th, '03, consolidated sales were up 4.7 percent from $29.74 million to $31.14 million. Leather Factory's 23.4 million compared to last year of 22.77 million, an increase of 2.66 percent. Tandy's sales were $6.31 million compared to last year of 5.42 million, an increase of 16.46 percent.

Cushman's sales were $1.4 million compared to $1.5 million a year ago, a decrease of 6.35 percent. Consolidated gross profit for the nine months was 54.45 percent, an improvement over last year of one percentage point. Leather Factory's gross profit was 53.4 percent, the same as last year. Tandy's gross profit was 63.1 percent versus 58.7 percent last year.

Consolidated operating expenses for the nine months were $13.77 million, up $1.1 million or 8.9 percent over last year. 654,000 of the increase is in the Tandy operations. Leather Factory's operating expenses were up 365,000 for the year, and Cushman's operating expenses are up 103,000.

Health-care costs for employees increased advertising efforts throughout the Company, and expenses associated with the new Tandy stores are resulting in the overall increase. Income from operations was $3.2 million for the year, down 1.8 percent over last year.

Turning to the balance sheet at September 30th, remember the comparison here is to the year-end 2002, not to September 30th of last year. Total assets are slightly more than $19 million. Accounts receivables is up 400,000. Inventory was down a little more than a million. And finally, what I think is the most positive item to note is that our debt balance is down $1.5 million from December of '02.

Real quick, let me expand on the debt situation just a little bit, as I believe you'll understand the significance of it a little later in the call. At the end of '99, our bank debt was a total of $5.8 million. During 2000, we bought Tandy for approximately 3 million. At the end of 2000, our debt balance was 5.6 million. If you do the math, you will see that we reduced our debt overall that year by $200,000, even thought we borrowed the 3 million for Tandy. On December 31st, 2001, the debt balance was 4.5 million, a further reduction of $1.1 million. During 2002, we opened 14 Tandy retail stores. At the end of that year, the debt balance was 4.2 million, a reduction of $300,000. Once again, notice that we reduced debt while expanding the Tandy to store chain. Beginning in 2003, our debt balance started going up, mainly due to the backlog of inventory arriving as a result of the longshoremen strike on the West Coast last fall. The debt balance peaked in April at $6 million. In the five months since then, we've reduced that balance by 3.4 million. And again, I'll emphasize that we were able to accomplish that and still open 12 new Tandy stores this year.

At this point, we have no long-term debt, and our short-term date to equity ratio is under 0.2. And our current ratio is 3.06. EBITDA, over the last several quarters, is running 950,000 to 103 million, for an annual total of 4.5 million or so. Free cash flow, which is EBITDA less capital expenditures, is running 940,000 to 1.2 million on a quarterly basis, for an annual total of 3.5 to $4 million.

While we're talking about the new Tandy stores, this is probably a good time to discuss the cost of opening stores. Tandy stores are typically located in small, older retail strip centers located at easily identified intersections. Tandy stores are generally 1500 to 1800 square feet in size, and we lease all of our locations. Our average rent per square foot at Tandy is right at $11. The cost to set up a Tandy store runs about $70,000. We put $45,000 to $50,000 of inventory into the store, and approximately $15,000 for computer equipment and signage, and another 5 to $8000 on what I refer to as "supplies," -- peg board hooks, store fixtures, displays, that type of thing. Typically, the computer equipment and the store sign are classified as capital expenditures. The supplies are expensed in the first month the store is actually open.

A Tandy store model looks something like this. Sales will average roughly $30,000 a month. Gross profit percentage -- gross profit margin, 60 percent. Operating expenses run about 50 percent for a pretax profit of 10 percent.

The actual results of the Tandy stores as of September 30th -- sales are averaging $32,000 month; gross profit margins are running 53 (ph) percent on average; operating expenses are 52 percent, excluding the stores that are less than six months old for a pretax profit of 11 percent. That's for the stores themselves. Once you add Tandy's corporate administration in, pretax profit is 7.5 percent. All 26 Tandy stores were profitable for the month of September, including the four that were opened in August. On a year-to-date basis, there are eight Tandy stores that still have an operating loss. Of those eight, six were opened during the last six months. The other two were opened in the first quarter of '03.

Based on all the information I've just provided regarding opening costs and profitability, obvious question is, why aren't we opening stores at a faster rate? And this is our answer. We have two criteria to apply to our Tandy store growth plan. No. 1, the growth should be financed with internally generated cash flow, not debt. I would even take that a step further and say not only do we want to avoid increasing our debt, but we want our debt to decrease even while we are opening stores. Secondly, the stores were opening must generate "profits" quickly. I would define quickly as sixth to nine months, worst-case a year. We've decided that opening approximately a dozen stores a year can be achieved and still meet the criteria we've set of less debt and more profit. If we reach the point that we are not meeting those goals, I suspect you will see us slow the growth plan down.

I will make two last points and then we'll take questions. As the Tandy stores mature into their second and third, plus years, we believe they can contribute pretax profits of a half to 1 cent per share, depending on the size of the store. Our oldest store is on pace this year for slightly more than a penny a share. And that store is 22 months old. And because we believe we are internally structured to support the store growth for a while, we should see the stores' incremental growth drop to the bottom line. In conjunction with that, we should see profit margins improve just because Tandy becomes a large contributor between the three operating companies. For example, I mentioned earlier that Tandy's gross profit margin is running better than 60 percent. Leather Factory's gross profit margin runs in the 51 to 53 percent range. So mathematically, it makes sense that as Tandy accounts for more of our total sales at a 60 percent margin or better, while Leather Factory is selling at a say 52 percent margin, the consolidated gross profit margin has to increase.

And by continuing to open profitable stores, without having to add administrative support costs, we should begin to see some improvement in our operating efficiencies as well. In summary, this is why our internal targets are to grow earnings per share at 20 percent per year or better. I think that is all I have.

Operator, we are now ready to take questions.

Thank you, Ms. Greene. (OPERATOR INSTRUCTIONS). Your first question comes from Max Bowser from The Bowser Report.

I want to tell you that we're still very happy that we recommended you and you are one of our stars.

We hope we continue doing exactly what we told you we would do.

Right, right. Particularly, I was impressed in the way that you handled that sale of 500,000 shares that you and Mrs. Thompson own, and the way you revealed all the details and so forth. And we wrote about that in the last issue. But that forthrightness was very impressive, and is very much in contrast to one of our other companies that we recommended. And the CEO so happens sold half of his holdings and never told anyone. So the next issue, we'll discuss that. And you'll certainly look very good in comparison.

Max, thanks for the comments, but I think probably, I should give you a little background on that. As you well know, I'm 71 years old. My decision to start reducing my takes, at age 71 -- my wife told me if I didn't, she was going to kill me. It really wasn't a big problem.

Yes. That is in contrast to this other guy, who is under 50 years of age, and is using the same reasoning that you are, that he wanted to diversify, and was hoping the shares would land in the right hands. But you know who bought your shares. There's no question about that.

Certainly.

Anyhow, I just wanted to make those comments, Wray. Congratulations to you all.

Max, I hope you keep following us, and thank you, very much.

You bet. Bye-bye.

Your next question comes from Robert Davis with AM Detton (ph).

Hi. Congratulations on your quarter.

Thank you, Robert.

Looking at the craft segment, it's been growing quite strongly over the last several years. Some evidence that this growth may be slowing. Within the craft segment, Leathercrafting is really not a major portion of it. Given the fact Leather Factory and Tandy Leather are the strongest marketing entity within the leathercrafting segment, what are you guys doing to expand interest in leathercrafting itself -- to create more ultimate customers?

Well, I think, for one thing, just go back to the old tried-and-true method. We are running, of course, classes in every Tandy Leather store. In fact, I saw a report the other day that in the last 60 days, the Fort Worth store had run 46 students through their classes in Fort Worth. So, even though we are continually soliciting and running classes in the store for customers, we are also offering to go out to various institutions, particularly youth groups, to teach leathercraft where you can get a larger group together.

Okay. And wanted to clarify one point from this morning's press release. You cited Company's guidance of 2 percent to 4 percent growth annually. I am presuming that this is revenue growth, and this is revenue growth from Leather Factory's warehouse distribution centers?

You are correct.

Okay. Thank you.

Thank you.

Your next question comes from Jim Theechee (ph). He is a self contractor.

Congratulations again, ditto on your quarter. I appreciate what all you've done over there. We've got one down here in southern Arizona, and it's doing a great job. I'd just like to know -- I've got two questions -- I'd like to know how I can get in a good deal like you got -- like the folks that you sold to -- 500,000. I'd like to get 500,000 for 350.

Well, Him, let me talk to my wife. You notice I'm laying a lot of this off on my wife. (indiscernible) she would probably really kill me. I'm leaving my options open, Jim. I have not made any concrete plans as to what to do going forward. But, certainly, it's going to be part of my plan. I'm sure that I will move out of a little more of it over a year or two. So, maybe we should meet over a game of golf in Tucson and discuss it.

Yeah. I don't break 100 very often.

Good. I want a bet, then.

Jim Theechee We will do all right. And then I had another question, I'll just kind of disappear and you can answer this. You know, sometimes it's better -- I don't know how you're looking at this -- but sometimes it's better to raise a little money for your debt. And you don't have that much of it, you could probably get rid of it. I've seen some companies reverse split, and go ahead and sell shares to their existing shareholders at a good price and get enough funds to take their debt out. You could one-for-two pretty easy -- put your stock up in the 8 to 10 category. And I think you'd see more people looking at it too.

Jim, I'm going to let Shannon reply to that.

Jim, we've talked about a lot of different scenarios. Hang on just a second. We've talked about a lot of different scenarios. I know there is some advantage to, on the street, to have your stock price over $5 -- it fits more people's radar screens. In all reality, we think, based on what we've been able to accomplish in the last two years so far, the debt problem, such as it is, which isn't really much, is going to be gone by the end of '04 anyway. The other thing with raising money issuing -- if we issued more stock, one of the things you'll find as you get to know us is Wray and Ron, as the two largest stockholders, are very sensitive to the impact to the existing shareholders. Diluting the outstanding shares doesn't do -- isn't what we feel at this point is the stockholders that are in. So they are very sensitive to the impact to the current stockholders. That is part of why you see -- you see what you're seeing as far as Wray and even selling his stock. We don't want to do anything that is going to negatively impact the stockholders that are currently invested.

As far as paying off the debt, we're going to do that fairly quickly, say over the next 12 months, anyway, we think, all things held equal, of course. We talked about a two-for-one split, issuing new shares, all sorts of things. At this point, we don't feel like that's really necessary, and not in the best interests of where we are trying to get to just yet. Something we talk about all the time, though.

Good comments, Shannon, and God bless you.

Our next question comes from Mike Neary with Neary Asset Management.

Below. Excellent quarter and excellent disclosure. I had several questions and you answered pretty much all of them. I think you gave a great overview of the company for people that might not understand your story yet. I did have one question for Shannon. The tax rate -- when do you see that going back up to kind of the 35 percent statutory rate?

Mike, that's a good question. We tend to -- historically, I probably tend to over-accrue a little bit. We're doing a few things with the states that are helping us reduce our tax rates, our vested (ph) rates in the states just a little bit, which is having an impact on us right now as we're making some adjustments and that kind of thing. Depending on how close I got -- I get my accrual for '03, based on what we're actually going to end up paying in the spring of '04, I'm doing some work with our tax people right now to, going forward, for my tax estimates on a monthly and quarterly basis, to be more in line with tax returns are actually done, to make them a little more in line. Part of what you have right now is, my income tax expense for '02 was a tad bit higher than what the actual liability was when it was all said and done. We're seeing part of that -- a little bit of impact in '03, because it wasn't significant enough to go back and restate anything, obviously. But I am working with the tax people to get my estimates on a quarterly basis and an annual basis a lot truer to the actual liability so we don't see any impact with regards to my overestimating what I think taxes are going to be. So I think we will be a little cleaner in '04.

Okay. This year, you get a little bit of a benefit from '02. But next year you, think it would be pretty close to that statutory rate?

Right, right.

And CapEx -- overall, what are you seeing for this year? Then assuming 12 stores for next year, what does that work out to? Total CapEx?

Let me answer that question in two parts. First of all, we are limited with our capital expenditure, with our current banking debt relationship to $0.5 million a year. At the end of September, we are at, I believe, $307,000, for the nine months ended. We don't have a lot of capital expenditure requirements, maintenance type things; this business is not capital intensive. We will -- take $15,000 times 12 stores, and that's roughly what your CapEx for the new Tandy stores on an annual basis is going to be. Any additional capital expenditures are generally -- most of it is in computer equipment, and it's workstation by workstation upgrades. Occasionally, we may buy a forklift if we need it. I think we are buying a new delivery van in the next couple of weeks for here in Fort Worth. So, I'm guessing several hundred thousand dollars a year, is probably on average, probably a pretty good number. It's been higher than that, if you're looking at the history. It's been a little higher than that. We did some pretty intense remodeling here at corporate headquarters, particularly with the warehouse and the factory in '02. So we spent about $600,000 on lease-hold (ph) improvement types, which kind of skewed our CapEx a little bit, if you look at the last several years. Right now, we're at $300,000 for the year. We've got three months left. You know, if we hit 400,000, I'll be really surprised.

Okay. Thanks.

(OPERATOR INSTRUCTIONS). Our next question comes from Patrick Nae (ph). He is a private investor.

Hello, Mr. Thompson and Ms. Greene. This Patrick Nae from San Antonio. First question is, when is your next annual meeting going to be?

Patrick, it will be May. We normally hold them in May -- mid to late May, 2004, here in Arlington, Fort Worth.

Okay. Next question, am I to understand that you're going to try to do about 12 stores in the next 12 months?

That is correct. We opened 14 Tandy stores in 2002. We opened 12 in 2003. We're working on several to open in the first quarter of '04. And the plan right now is to open -- we're saying approximately a dozen; it could be anywhere from 10 to 15. But our target number is 12.

And is there any specific area in the country that you're concentrating on? Or are you at liberty to say areas where these stores might be?

Patrick, let me try to answer that. And I won't be very specific. Ron Morgan could probably -- who is in charge of operations -- could probably be a lot more specific. But all we've done is to take the cities where we knew Tandy Leather Company had very profitable stores -- the ones that we've already opened in, obviously, we won't double up on them and go back into them. But there are still probably 75 to 100 locations where we knew Tandy Leather was very profitable with their Tandy leather stores. That's about (ph) really all we're going on -- history.

Have you found that any of your old leather wholesale accounts and customers are getting a little disturbed here that you guys are in the retail business now and maybe competing with them a little more directly? How has that been received?

I'm not sure I understand, because we have never competed with our customers. And we've not changed our methods. The Tandy stores will be competing with maybe a local hobby shop. But we should be smart enough to convince that hobby shop to become a Tandy dealer, or become a Tandy Leather store. In the cases where we've run into that, where they said, oh, we don't want you up here, we're a dealer. Well, we negotiated a buyout on several of them and went that route. We're not trying to go in and wreck our dealer chain.

Okay. Well, you guys are doing great. And I think there's another question earlier about the stock, you know, doing something with the stock. I think you're right on, right where you should be on that, in my opinion.

Thank you.

The very much.

Your final question comes from Will Lyons of Westminster Securities.

Congratulations on another nice quarter. I have a couple of quick questions; it'll just require a yes or no. And then I will need a little discussion from you. First of all, back on the new store openings. Is it still your policy not to open any stores during the fourth quarter?

I'm going to let Ron answer that.

It's not against our policy. It is just that we prefer to open our stores mid-year. Because they produce a little better. We've tried it both ways, and it is just more profitable for them. We really have no hard and fast rule when we're going to open and when we're not. We just know when it's the best time.

I see. Secondly, a very easy question, just for Shannon. Shannon, what are your actual shares outstanding right now?

10,470,461.

You knew that, didn't you?

She just happened to have that number.

That's frighteningly quick. Now the more discussion I'd like to hear from you is the improvement on your gross margins. How did you do that? Can we expect to see more of that in the future? Where is that all heading?

Will, are you talking gross profit margin or operating margin?

Gross profit.

Well, you understand the mathematics of why gross profit -- if we absolutely nothing but continue for Tandy to sell more, the gross profit margin has got to go up, right?

Sure.

Okay. So that's part of it. From a mathematical standpoint, we shop hard, we negotiate prices on products pretty aggressively. We are, as large as we are, we have a little bit of pull with vendors, and getting the best price we can get.

But on the 1.6 percent improvement year on year, you pretty much attribute that to the fact your sales are increasingly coming from the new Tandy stores?

A percentage of it is. But a lot of it is in the fact, our buyers travel the world, and are in shows all over. And we are constantly sourcing for product. The existing product we're buying, we're looking at that product made by different manufactures on a continuous basis. And there is some products where our volume is increasing, therefore, our buying power of that product and the price is decreasing on it as well. But our margins, as long as our volume continues to grow and as long as these Tandy stores are continuing to grow, our margin should stay good and improve slightly.

Okay. Thank you.

Bob, are you still there?

Bob Davis?

Mr. Davis, if you are on the line, could you please press star and then the number one?

I've pressed star and one.

Your line is open.

Bob?

Yes.

This is Ron Morgan. I wanted to answer your question a little better. The craft industry is probably -- leathercraft will never fit 100 percent because it's not as faddish as most crafts. I recently read a study that leathercraft -- for every 100 customers that will walk into a Michael's or a Hobby Lobby or whatever, you can depend on four of them being interested in leathercraft. This survey was done by the industry. I really think that's probably high.

I do too.

But that's what the industry says. Where we will continue to make efforts in the craft industry and selling to that industry is, we will diversify a little bit. Currently, this week as a matter of fact, we are at the International Quilters Show and Market. And we're meeting with five different -- we've already met with five different distributors to get our product in different forms to different ends in the craft industry. These are mostly quilters that use panels of leather to put on quilts. Needlepoint people, crocheters, etc., that will use this to apply. In that same end, we're working on developing our -- this week, we will ship to one of the first orders we've ever shipped to farm (ph) stores. We are pursuing that industry. And strangely enough, some of the related craft-type items that we might sell to a Michael's or to a Wal-Mart or whoever, can be repackaged in a different form, and we are presenting it to the farm store. One of the first changes will say we will ship this week, but we are developing product and looking for product to sell to that group. So we're not (ph) going to explode that line for growth in the future. I'm going to say the old TLF distribution centers' business has never been easy and it's not going to be easy in the future. But I do believe that as long as we keep looking for product and innovative ways to sell our product to the different customers within that group, we will keep growing it.

Does that help you?

Yes, that helps me quite a bit. Did you hear me?

Yes, sir. I wasn't 100 percent sure that we answered your question well enough. So I just wanted to throw some tidbits in there.

This takes this a step further, and I think that's good. I have nothing else.

Thanks, Bob.

(OPERATOR INSTRUCTIONS). There are no further questions. Do you have any closing remarks?

No. We just appreciate everybody setting in with us, and just hope they come back the next quarter and see what the results are then.

Thank you for participating in today's call. You may disconnect at this time.