Conference Call - Third Quarter
Review of earnings press release.
Professional Equine Group revenue up 24% this quarter, up 47% YTD
Vetrinary instruments Group was down 14% this quarter, up 11% YTD
Animal economics were terrible this winter.
Hog prices were the lowest since the great depression.
On the positive side those economics are now improving. The cattle business is now profitable. Outlook is good as we go into the spring. The equine industry is healthy; in fact the USDA reported this week that the health economy is promoting ownership of expensive horses. I think for the first time since I can remember they have reported an increase in the horse population in USA.
We are progress well in our vaccine business. We are just now starting to ramp up production of the bot tox vaccine in our Tampa facility. This insures of a steady supply of this product and it also cuts are cost of goods for this product in about half. That product is one of over a million dollar a year products.
Food Safety Group revenue were up 37% this quarter, up 21% YTD. For the quarter there was a nice balance in product mix; nice increase in aflotoxin, and as you would expect nice increases in our bacteria tests.
Our international sales in food safety is growing nicely. That's despite soft currencies in Asia and parts of South America. Even despite that our business is growing in both of those continents.
Bacterial contamination in food, I can tell you despite this there has been no real ground swell in testing. The industry is getting mixed signals from the government as well as their legal advisors. As it relates to testing some companies are still saying "their not sure the really want to know". That is changing and I continue to see that this side of our business will grow, but don't expect this double or triple in one quarter. Our products in this area were up 78% percent compared to the prior year.
Lawsuits - settled two lawsuits. We are the plaintiffs in the remaining and expect important decisions over the next couple of months and then to see our legal expense diminish.
Stock buy back - bought 230,000 shares and are authorized up to 500,000. It is our strategy to continue to buy back stock when we see weakness. However we are buying stock as a investment and not to run up the price of the stock.
We are saving our cash. As of this moment we have about $10 million and cash and another $10 million in unused credit to pursue our acquisition strategy.
Operating profits on YTD basis are up 24%, profits up 65% YTD. Cash generation for the first nine months up 83%. We have introduced some new products that are becoming meaningful now. We have a healthy R&D program that has a pipeline of new products. We are in a strong competitive position. But then why are we looking at a $7 stock? Small cap...that is part of the world we live in. We are also suffering from lack of sponsorship, last year at this time we had four good firms that were following us, but now three of those companies have been sold to larger companies and no longer follow us. And the third thing is that we know we have got to get bigger which we know must come from acquisitions. We have discussions under way for four meaningful acquisitions and have two other opportunities that are in very early stages. We certainly probably won't due all six of these and we might not due any, but we are getting good looks at opportunities.
Questions:
Roney & Company - Great Quarter Guys. Darts?
Answer: the Darts and one other shareholder put about 500,000 shares in the market. One shareholder is completely out and the Darts have about 50,000 shares left and are not sellers; they are going to keep what they have left.
Earning? Capitol Markets - Is there a timeframe to buying back the remaining 270,000 shares? Answer: Nope.
Legal fees? Answer: For the first nine months legal fees were $450,000 which is a run rate for the year of about $600,000. We see the trend down as the suits are settled.
Coastal Investors - on the 230,000 bought back is most from the Darts? We purchased one 50,000 share block from the Darts. We went back to them on several occasions and offered to buy back all of their remaining shares but they declined each time and instead they sold their shares in the market.
Thin float? Answer: we know we need to be a hundred million dollar market cap, etc.... Acquisitions, etc...
Call from Canada. What is the impact of the recent foodborne illness? Answer: discussion on the industry and government response.
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