Trinity Biotech PLC (TRIB) 2011 Q3 法說會逐字稿

Hello and welcome to the Trinity Biotech third-quarter 2011 financial results. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please note this conference is being recorded.

Now I would like to turn the conference over to Mr. Joe Diaz. Please go ahead, sir.

Thank you, Denise, and thank all of you for joining us today to review the financial results of Trinity Biotech for the third quarter of fiscal year 2011, which ended September 30, 2011. As the conference call operator indicated, my name is Joe Diaz. I am with Lytham Partners. We are the financial relations consulting firm for Trinity Biotech.

With us on the call representing the Company today are Ronan O'Caoimh, Chief Executive Officer; Rory Nealon, Chief Operating Officer; and Kevin Tansley, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today's call does not have a full text copy of the release, you can retrieve it off the Company's website at TrinityBiotech.com, or numerous financial websites on the Internet.

Before we begin with today's prepared remarks, we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties.

The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks, uncertainties, and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements included herein.

Investors are cautioned that such forward-looking statements involve risks and uncertainties including but not limited to the results of research and development efforts; the effect of regulation by the United States Food and Drug Administration, and other agencies; the impact of competitive products, product development commercialization and technological difficulties; and other risks detailed in the Company's periodic reports filed with the Securities and Exchange Commission.

Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

With that said, let me turn the call over to Ronan O'Caoimh, Chief Executive Officer of Trinity Biotech. Ronan?

Thanks, Joe. Good afternoon and thank you very much for joining the call. Kevin Tansley, our Chief Financial Officer, is going to bring you through the results for the quarter, after which I will talk about business development and revenues for the quarter before opening the call to a question-and-answer session.

So I will just hand over to Kevin now.

Thanks, Ronan. Today I will take you through the results for quarter three including a review of the income statements, balance sheet, cash flow movement for the quarter.

Before I get into the detail of the income statement, we will point out that this is the first quarter when we have a comparative period that totally excludes coagulation. As a result, you will be able to clearly see what we have achieved in the relatively short period since that divestiture. Total revenues for the quarter were $19.8 million. This compares to $18.7 million in quarter three of 2010 and hence represents a growth rate of 6%. Ronan will take you through the makeup of this revenue growth later on in the call.

Moving on to gross margin next, this quarter we've seen a further improvement in our gross margin with an increase to 51.7%. This compares very favorably to the 50.6% in the comparative period last year. Also when we look at the three most recent quarters, we've seen a steady improvement also.

Starting in quarter four of last year, the gross margin has gone from 50.8% to 51.2% and then to 51.4% last quarter and now 51.7% this quarter. This improvement has been achieved through a combination of improved operating efficiencies and increased leverage of our manufacturing cost base as revenues have continued to rise.

Taking our indirect expenses next, our R&D expenses this quarter have increased from $758,000 to $857,000 and this represents an increase of approximately 13% reflecting the increased level of R&D activity being undertaken by the Company. At the same time, our SG&A expenses have decreased from $5.7 million to $5.2 million, which is a decrease of 8.5%.

As you will have seen from the press release, the principal reason for this decrease was that certain costs were retained during the initial transition period following the coagulation divestiture. These costs have now been eliminated, hence the reduction.

On the flipside, we did earn additional income during that period on transitional services provided to Stago, and this is reflected in the higher other operating income in the comparative period.

Moving on to our net financial income next, this quarter our net financial income was $546,000, which is a 23% increase over the $445,000 earned in quarter three of last year. This increase is mainly attributable to lower interest paid in relation to some smaller elements of financing mainly associated with equipment financing, which has since been significantly paid down or paid off entirely.

We have also benefited from an interest income perspective from the higher levels of cash as the Company continues to generate cash surpluses.

The tax charge for quarter three was $711,000, which represents an effective rate of 15.3%. This compares to a tax charge of $206,000 in the comparator period. At an effective rate of only 6.5%, this was unusually low due to tax losses forward being utilized and also the impact of some R&D tax credits which were received.

Our operating profit for the quarter at $4.1 million was very strong and this represents an increase of over 25% compared to the equivalent period last year. Our operating margin is now 20.7% and ahead of the target of 20% that we had set ourselves and this is something we're obviously very pleased with.

Meanwhile, our profit before tax for the quarter increased from $3.7 million before nonrecurring items to $4.6 million, again an increase of over 25%. In terms of profit after tax, we've seen growth of over 12% to $3.9 million and similarly, our EPS has also grown by over 12% increasing from $0.165 to $0.185.

I would like to point out that whilst 12% growth is impressive given the impact of the higher tax rate which is a factor effectively outside of our control, a better reflection of underlying profitability growth is the over 25% growth we achieved in both operating profit and profit before tax. We are now close to achieving profit after tax of $4 million per quarter. To put this into context, this represents a tripling of profits in the last three years.

I would like to move onto our balance sheet next, where I will explain the significant movement since the end of June 2011. Property plant and equipment increased by approximately $300,000 during the quarter. This increase included additions of $600,000, which in turn were partially offset by a depreciation charge of almost $300,000. During the same period, our intangible assets increased by $1.7 million. This is attributable to additions of $2.1 million mainly on development projects and has been partly offset by an amortization charge of almost $400,000. ]

The additions this quarter were slightly higher than in previous quarters due to the costs associated with our new A1c instrument, Premier, and increased activity on the development of our new Point-of-Care tests.

Moving onto inventory next, you will see that our inventory has increased by just over $0.5 million this quarter. As was the case last quarter, this is attributable to the ramping up of inventory levels in advance of full-scale production of Premier.

Meanwhile, trade and other receivables have fallen by approximately $500,000 in the last three months. This fall is merely due to a reduction in trade receivables with debtor days having improved from 54 days at the end of June to 49 days at this quarter end. Within this caption is also the deferred consideration of $11.25 million in cash which will be received from Stago next April.

Finally in relation to working capital, our trade and other payables have decreased by just over $700,000 this quarter. This is due to two factors, deferred consideration of $333,000 that was paid to the former shareholders of Phoenix Biotech and a reduction of approximately $400,000 in trade creditors.

I will move on to discuss our cash flows for the quarter. The cash balance has remained broadly level during the quarter moving from $71.4 million to $71.1 million. This consists of $4.7 million of cash generated from operations plus a further $400,000 of interest income received. These positive cash movements have been partially offset by capital expenditure of $2.1 million, thus giving free cash flow for the quarter of just over $3 million.

The level of free cash flow this quarter has been impacted by increased working capital which had been anticipated in the run up to the launch of Premier. However, this has been offset by further improvements in our receivables position. The net result is that we achieved our target of $1 million of free cash flow per month and so far we have generated just under $10 million of free cash flow in the first nine months of the year.

You may notice that the quarter three free cash flows appear to be down when compared to the comparator period last year; however, last year's number is not a meaningful comparison as it includes the benefits of unwinding the working capital associated with the coagulation business, which at that stage had just been divested.

The other movements this quarter were the $3 million paid in relation to the repurchase of over 291,000 ADRs and secondly, deferred consideration payments of $333,000 made in relation to the Phoenix Biotech acquisition. So overall from a financial perspective, it was a very strong quarter with an excellent underlying profit growth and cash generation.

I will now hand back to Ronan, who will give you more information on revenues and our development activities.

Thanks, Kevin. During the quarter, we grew our revenues by 6% when compared with quarter three of 2010. Our HIV revenues were down 6%. Fitzgerald was down 6% but infectious disease is up 12% and diabetes is up 14%.

Our HIV Point-of-Care revenues were $3.9 million compared to $4.2 million, a drop of 6%. US HIV revenues grew 3% from $1.8 million to $1.9 million with African HIV revenues decreased 12% from $2.4 million to $2.1 million. As we have seen in the past, African HIV revenues can fluctuate significantly quarter by quarter. The fluctuation this quarter is a timing issue and we will see a strong quarter four to compensate. Our business development pipeline in Africa is strong and augurs well for the future.

Moving on to our Clinical Laboratory business which comprises Fitzgerald, infectious disease, and diabetes, it generated sales of a total of $15.9 million compared to the $14.5 million last year, which is an increase of 9%. Fitzgerald had another weak quarter, with its sales down 6% compared with last year due entirely to collapse in flu antibody sales as a result of overstocking during the H1N1 swine flu pandemic and to a low incidence of flu last winter. Excluding this issue, Fitzgerald is showing reasonable growth.

Our core business comprising infectious disease and diabetes have had an excellent quarter and have grown 13% over quarter three 2010. Dealing first with infectious disease, this business has grown 12% since last year.

The US has performed really well with strong instrument placements arising from the launch of our new vitamin D test, which has been received with real excitement in the market. In addition, our new syphilis range is helping to reinvigorate the entire product line. In essence, the vitamin D and syphilis tests are enabling us to achieve instrument placements and sell more of all of our other tests.

Growth prospects in China look strong and we anticipate receiving regulatory approval for an (inaudible) virus, Legionella, and autoimmunes over the coming months.

Moving onto our diabetes business, this performed really strongly during the quarter achieving 14% organic growth when compared with last year through ultra and PDQ instrument placements.

As an example, this week we won the New York State contract for the hemoglobin variant testing of all newborn babies in the State on our Ultra-instrument and this contract is worth $5 million over the next five years.

During the quarter, we made our first Premier shipments. We sold six instruments into Turkey with sales of just over $100,000, so the 14% organic growth in diabetes that I talked about has been achieved effectively without Premier. As you know, we signed an exclusive European deal with Menarini who have 40% European market share and we got CE Mark European approval in May of this year.

Since then, Menarini have been finalizing labeling, packaging, and launch materials and conducting their own in-house trials. And these -- that is all now complete and this week we received our first order from Menarini for 20 Premier instruments for immediate delivery.

Registration of the Premier instrument has commenced in China and also in Brazil. As you know, we filed for a US FDA approval of the Premier instrument in June and hope to have approval by the year-end. I can now announce that we have signed a distribution agreement with Fisher for the US and they will be selling our product only, so exclusive for them.

Fisher has an existing strong position in hemoglobin. In addition, we will of course sell through our own salesforce. We believe that the combination of Fisher with our existing placements and our own sales force will enable us to build a big US market share and in combination with Menarini in Europe and our distributors around the world particularly in China and Brazil, will lead to explosive growth in our diabetes business in the coming year.

Meanwhile moving on, we have further expanded our new Point-of-Care R&D team in San Diego. We are making excellent progress with the eight new Point-of-Care products that are in development and are confident that the first of these will be submitted to the FDA in November and expect that the first products will be available on the market by March or April of next year. Clearly the launch of these new products will further enhance our organic growth.

If I could now at this stage open the call to a question-and-answer session. Thank you.

(Operator Instructions). Matt Dolan, ROTH Capital Partners.

Good morning. First question is on this new agreement with Fisher, a couple parts. How do you play between their sales channel and your direct group? Maybe give us a little more detail on the agreement and then how do the terms of that agreement compare to the Menarini deal?

Well, if you were to be simplistic about it, Fisher would have half the hospitals in the United States and Cardinal was the other half, so you might say that Fisher will take care of their hospitals and we'll take care of the Cardinal ones. But it wouldn't be quite as simple as that because obviously while Fisher have an expert instrument placement group, we -- our guys will be helping them in terms of placements also.

I think an important point to point out is that Fisher already has over 1000 hemoglobin A1c instruments in the market and obviously we would be hoping to -- sorry, as those instruments mature, we will be hoping to place ours instead. Does that answer your question, Matt?

Yes, so are there minimums like the Menarini agreement or what are the terms?

You can just imagine, I really, really can't go into that on the airwaves.

Okay, and then in terms of the Point-of-Care business, you said you expected to tick up but we thought it would tick up in Q3 as well, so maybe you can give us an order of magnitude. Is this -- does that mean it should be a number that exceeds $5 million in Q4 to help kind of average out the second half of the year?

I wouldn't have enough visibility on the sales at this moment in time to estimate if it's going to be $4.5 million or $5 million, but the pipeline for Africa is strong at the moment, so it would certainly be stronger than last quarter, but I am really not in a position to guess, kick estimate right now on that one.

As I've said all along, orders fluctuate. They come in at the last minute. We have unfortunately very little visibility on future sales here given that's it's all donor-based, you know?

Okay. Then, sorry, back on Premier, now that you've got a little more predictability, what's your latest in terms of expectations for placements in the first 12 months of launch, both in Europe and the US?

Well, with that, I'm really not in a position to divulge the detail of our Menarini agreement other than to say that there are minimums that Menarini must buy from us and they are reasonably substantial. Really I think I've been asked this question every conference call and every time I say look, I'm not really in a position to divulge to Menarini's business and also to divulge stuff to their competitors.

But simply put, Menarini have 40% of the market and if all goes well, we should inherit most of that progressively over the next five years as the instruments mature, and that will end up being a very substantial number. But I'm not really in a position to say what their minimums are or exactly what their European placements are. I think that would be crossing the line.

Just talking about Fisher for a moment, Fisher have a very substantial body of plates instruments at the moment. They have parted company with the firm, with a company whose instruments they used to place. So they would be a very, very useful partner moving forward.

And if you were to add our own efforts and their efforts, Menarini is a very strong position in Europe, our existing strong position in China, the extent of explosive growth that is expected in China with hemoglobin A1c, and you throw in Brazil on top of that, an excellent distributor in Turkey who I just mentioned has taken six instruments already. You add all of that together and we are very confident about this next instrument and what we could do with it.

The very fact that Fisher will have turned to us and also Menarini I think provides its own endorsement of the quality of the instrument.

Yes, that's great. If I can sneak one more in maybe for Kevin on the gross margin, a nice improvement year-over-year even though Point-of-Care came in a little light. Can you give us your thoughts in the next year as you roll out new products on where we should be thinking gross margin tracks from here?

Yes, as we launch our Point-of-Care products, they will tend to have higher gross margin and will also be impacted by Premier, which overall have good margins but in the initial period as instruments get placed, we will tend to have lower margins which will improve over the lifetime of those instruments. The two opposing forces then, we are hoping to keep it in the low 50s.

Great, thank you.

Mike Jolin, Heartland.

Congratulations on a great quarter. I guess we've touched on quite a few of my questions already. I guess I will move to cash. You are generating a lot of free cash flow. You've got over $70 million in cash on the balance sheet. Could you just touch on your priorities there? You've been very generous in returning cash to shareholders. I just wanted to get your take going forward.

I suppose, as Kevin mentioned, we bought back $3 million of shares this quarter and we made a genuine attempt to buy as much as we could in the market. We are constrained at the moment by almost alarmingly small volumes. I'm sure everybody mostly even noticed that and of course, we can only buy 25% of the daily volumes, the rolling averages. Indeed we can't uptick so you don't even get to 25%.

But we are endeavoring to buy as much as we can and I think we -- as I say, we spent $3 million this quarter, the past quarter, and we will continue to do so. Beyond that, we will all recollect that two years ago this Company went to $1.10 [p] per share and a lot of the reason was because people were really, really concerned that our debt could strangle us. And having come through that experience, we are -- we believe in a strong balance sheet in the new economic environment in which we operate. And so I think a strong cash balance makes sense for this Company and will enable it to take advantage of strategic opportunities whatever they may be from time to time.

As I say, we have initiated a dividend policy. You mentioned that. And the combination of the dividend policy we believe and the buyback we think is the right approach in making a strong balance sheet. While we have no -- while we are not genuinely looking for any acquisitions at this time, I think a strong balance sheet will enable us to take advantage of whatever strategic opportunities, whether they be of technology investments or whatever as we move forward. Does that answer the question?

It sure does. We really appreciate it. Thanks, Ronan.

(Operator Instructions). Joe Munda, Sidoti & Company.

Good afternoon, guys. Just real quick, I had a few quick questions. Congrats again on the quarter. In regards to a little bit out of the realm, but I'm sure you guys saw the OPKO acquisition of Claros Diagnostics and I just want to get your take on their technology that they acquired from them. And if that was on your radar as well?

We haven't seen it. We don't know what you are talking about there, Joe.

They had a blood testing cassette system that they used to test for infectious diseases. One drop of blood would be able to run like 20 tests, instantaneously give you results. They also had --

We haven't seen it but we have certainly looked at multiplexing technologies and we are quite interested in it. Multiplexing, just for all the people, is basically where one drop, one basic test will -- one test will test for 20 different conditions are multiple different positions. We are certainly looking at those possibilities, but I can't really comment when I don't know the particular technology.

Yes, the test -- one of the tests was run that they can do diabetes as well as tests for pancreatic irregularities that may lead to pancreatic cancer. I was just wondering if you guys knew about it?

No. I don't know, but we have looked at multiplexing technologies and we spend quite a lot of time looking at them. For example, we run infectious disease for Toxoplasma, rubella, cytomegalovirus and for example, you could have a torch panel, it could be a multiplexing torch panel or actually (inaudible) multi-disease panel kind of thing. And they are becoming popular and we are certainly very, very aware of looking at those opportunities. maybe we could talk off-line on this one, Joe.

Sure, and my -- you guys made a comment about the op margin target of 20%. This quarter you were at almost 21%. Are you guys looking to possibly revise that target going forward?

So we are very happy that we've achieved the target, we actually achieved it ahead of schedule and now we've beaten it this quarter and we're looking to continue to grow that going forward.

Fair.

Clearly a lot of Premier instruments placements could drag it down so much.

And you guys also talked about a little bit of a decline due to -- in HIV due to Africa. You had mentioned there is a timing issue. Could you give us a little bit more color on what exactly the timing issue was?

Is nothing particularly exotic. All I simply mean by that is that if a particular order had come in three days earlier, we would have had a very good quarter three and so instead, we're are going to have a very good quarter four.

And just go back to Matt Dolan's question a moment ago, he asked me would we get to $5 million. And I don't think we would probably get to $5 million but I kind of think we would get to $4.5 million. You know? But simply just what I'm saying really is in Africa, it's so unlike the rest of our business. The rest of our business we place an instrument, we sign up a five-year deal and we have very reasonable -- we have a reasonably accurate sight of what our revenues would be as we go forward.

In Africa, literally orders come and arrive really sort of out of the blue basically because everything is being paid for by typically the US taxpayer, but the individual countries have a say in what happens as well. And although we do have people on the ground, the system doesn't operate in the normal way, so basically orders arrive with various warning.

So a substantial order arrived sort of on September 30, we didn't get the chance to get it out in time type of thing. That's what I mean by timing.

Yes, I just had two other quick questions. You guys had said you are not commenting on the Menarini, what impacts to revenue but you guys also had said that you hoped to capture what share they have in their market and I think when you guys announced the deal they had 40% of the market, roughly $250 million. Are you guys looking to capture that over five years?

Yes, but look, I think the $250 million you're talking about is that's the world market although people say it might be $300 million. But -- so we would estimate the European market at about $120 million, so 40% of $120 million. That's what we'd be looking at.

But bear in mind that Menarini would be placing an instruments as well, so that's all in that so obviously they're doing the sales and marketing, which includes placing instruments and servicing the instruments, so our share would be proportionately less. (multiple speakers)

Could we assume northwards of $100 million then over five years?

Over five years? Well, if it was [billed] but what we're saying is if you think about it for a moment, you have $140 million -- you have $120 million and they have 40% of that, so they have 48 (multiple speakers)

$120 million, okay.

But that would include instrumentation. But so then you have to work out what percentage of the sales would they get because they have to carry the cost of the instrument and also the servicing of the instrument and the cost of a direct sales force in each country.

But as a rule of thumb, you could say that 50% of it could accrue to us, so if we were to be -- if we were to have complete success basically in replacing that entire market, so i.e., [if 25% of], with 40% of the European market, it would be worth probably just south of about $25 billion annually at the end of the period of time. It would grow gradually to that. That would be -- that would include a certain amount of capital equipment and then a lot of reagents.

Okay, and my last question with what's going on in Europe, the fluctuating euro, can you give us some perspective on possible impact on your business?

Well, to be honest, the currency fluctuations are not a great impact on us at present. Previously in our existence a couple of years ago when we had the coag business, we were much more exposed to US dollar-euro movement but at the moment we're largely naturally hedged through the P&L. That is to say that the level of expenses we have in euro are broadly matched by the level of revenues.

So from that point of view the fact that the exchange rate, which as you can see has hopped around a bit at the moment, doesn't really affect our profits hugely. It's slight mismatch but once the revenues to Menarini, which are euro denominated kick in, that will illuminate that.

Okay, so relatively no impact?

Yes, from a profitability point of view, yes.

Okay. Thanks, guys. I appreciate it.

David Cohen, Midwood Capital.

I was wondering if you could just put some context around the order you mentioned receiving from Menarini for 20 units, whether or not that is more along the lines of demo equipment for field sales or if there are end-user orders around that?

David, Ronan here. No, no, they have already had their demos. By the way, there is a lot of demos around the world. Probably 15 of them all different places around the world. I don't kind of count them as sales, you know? So no, we've done all that stuff. These are going straight out.

This is Rory here. They've been lining up customers for some time that have been on all systems, some of which have been sort of out of contract even for a number of quarters at this stage, a number of months and they are waiting ready for this instrument to go. So once they push the button, which they now have, there's obviously a lot of pent up demand there waiting for it. Okay?

Okay, great. And I think you announced the Menarini relationship in mid-February. I think you got the CE Mark in early May. Here we are in -- I guess what have some of the gating items been and has that been Menarini's own extensive vetting of this equipment and are we likely to see similar efforts by Fisher? Or is the equipment -- is the instrument now in such a place thanks to Menarini's efforts that you could really hit the ground running once you get an FDA approval?

It's Rory here again. You are right, it would have been extensive vetting on Menarini's part. The difference I suppose between Menarini and Fisher is Fisher have done some sales of our older generation instruments in the past so they understand our chemistry. They understand our boronate affinity technology. That would all have been new to Menarini so obviously took a little bit longer on their part.

And there would have been various independent clinical trials going on. To your point, everybody (inaudible) on. So (inaudible) there, okay?

Okay. I guess my last question is I might mischaracterize it but I think you talked when I visited the KC facility, there's sort of a next -- I'll call it next-generation but the next phase in the Premier development and tell me just what is sort of the R&D roadmap for that instrument from this point?

We only ever talked on this call to Premier in the context of the A1c market. The reality is there is a second stage which relates to the hemoglobin variant markets, which we haven't spoken to, which is about a $50 million market which is on top of the $300 million just for clarity. And that market is today -- has two players in it, Bio-Rad and Trinity. And the objective, the Phase II if you like of the Premier is to put the hemoglobin variant markets onto that same hardware.

So it would be basically the same Premier instrument with a different pump, slightly high-pressure pump and obviously very different software. So that's Phase II of the project and that would involve both a European version, a US version, and also a neonatal version down the road but that's 2013 and that will replace ultimately the hardware which Ronan touched on earlier on, which we have just sold into the state of New York.

So there are other projects in line for Premier, not just hemoglobin A1c.

So the hemoglobin barrier, is that something where it's -- there's potential to commercialize in 2012 or is it longer dated than that?

The neonatal version will be 2013. The other version will be 2012.

Okay, all right. Great, guys. Thanks.

Dan Mendoza, Prospect Capital Partners.

Many of the questions have already been answered. Could you just update us on the buyback activity thus far in the fourth quarter?

So far we have continued to remain active in the market. We had a 10b5 plan in place that does enable us to trade during quarter four and we have acquired approximately 75,000 shares thus far excluding today.

Okay, so does that -- you have been active in the market pretty much every day or --?

We have been, yes. During the closed period, we had a plan in place which was active.

Dan, Ronan here. Clearly the price was weak during that closed period and so absolutely we were buying as much as we possibly could. And we are very frustrated by the volumes. So in reality we didn't -- all we have done so far is 75 and that was basically -- if you look at it, the volume was much more than four times that because you can't uptick as well. You don't quite get the 25%.

Right, although you could do block trades but there just haven't been any. I guess what just -- I know I've said it before but would continue to encourage the Board to strongly consider doing a Dutch tender. The cash flow of the Company, with the current volumes, the cash flow you are generating in a quarter is equal to or greater than the amount of stock you are able to buy back. And I for one think the stock is very inexpensive and undervalued and that is not likely to be the case for the next two or three years.

So why not take $20 million or $30 million of cash now and buy the stock at these levels and with the cash flow you are generating, you will be replenishing your billed ample cash balances pretty quickly?

Dan, you've made that point to us before and we hear you. Thank you and we have responded to you.

Well hope you will consider it, continue to consider it.

As I say, we have discussed it before and the Board -- you made a representation and we discussed it and we responded. The Board has decided that it would initiate a dividend policy and a buyback policy.

Very good, thanks.

(Operator Instructions). A follow-up from David Cohen, Midwood Capital.

I was going to also make a comment about the balance sheet but it was just addressed.

Very good, sir. Thank you.

Do we have any more questions?

At this time, sir, I'm showing no further questions in the queue. I would like to turn it back over to Ronan for any final closing comments.

Thank you very much. Just to say thank you very much indeed for your support and to all our shareholders. So thanks very much and I look forward to speaking to you soon. I am actually going out to Chicago, Milwaukee direction so I will be seeing some of you next week, Monday, Tuesday, Wednesday for that.

So talk to you soon again and thank you so much. Goodbye.

Ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.