CACI International Inc (CACI) Q4 2008 Earnings Report, Transcript and Summary

Good day everyone and welcome to today’s CACI International fourth quarter 2008 conference call. (Operator instructions) At this time I would like to turn the conference over to Mr. David Dragics, Senior Vice President of Investor Relations for CACI; please go ahead sir.

Good morning ladies and gentlemen. I'm Dave Dragics, Senior Vice President of Investor Relations of CACI International and we are very pleased that you are able to participate with us today. As is our practice on these calls, we are providing presentation slides and during our presentation we'll also make every effort to keep all of you on the same page as we are. So moving to the next slide before we begin our discussion this morning, I would like to make our customary but important statement regarding our written and oral disclosures and commentary. There will be statements in this call that do not address historical facts and as such constitute forward-looking statements under current law. These statements reflect our views as of today and are subject to important factors that could cause our actual results to differ materially from the anticipated results. Factors that could cause our actual results to differ materially from those we anticipate are listed at the bottom of last evening's earnings release and are described in the company's Securities and Exchange Commission filings and our Safe Harbor statement is included on this exhibit should be incorporated as part of any transcript of this call. And I also would like to point out that our presentation will include discussion on non-GAAP financial measures. Now let’s go to the next slide please, to open our discussion here this morning, here is Paul Cofoni, President of CACI International.

Thank you David, and good morning ladies and gentlemen. I’d like to begin by thanking Bill Fairl, our President of US Operations for his leadership during my recovery from bypass surgery. I’m back, I’m at 100% and I’m more energized then ever about our company’s prospects for significant achievement in profitable growth. I’d also like to thank the entire management team for the way they pulled together during my absence finishing the year with a flourish. I’d like to personally welcome each and every one of you to our call this morning. We appreciate your interest in the company. With me to discuss our results and answer your questions are Tom Mutryn, our Chief Financial Officer; Bill Fairl, President of US Operations; Randy Fuerst, Chief Operating Officer for US Operations; and by phone from the United Kingdom, Greg Bradford, Chief Executive of CACI Limited UK. Let’s move to the next slide please. It gives me great personal satisfaction to report that CACI has completed our fiscal year 2008 with record revenue and operating income for the fourth quarter and for the full fiscal year. We communicated our growth strategy to you throughout the year and today we report that our strategy is working, delivering the results we expected. We have great confidence going forward and positive momentum for year 2009 and beyond. Bill and Tom will be discussing the key drivers that are contributing to our momentum. We are reiterating the guidance we gave you in June which is best on our best professional judgment and we have confidence in those estimates. They are neither conservative nor aggressive. One of the key reasons for our success is our strategic targeting of federal markets that receive high-priority funding. These markets have steady, long-term demand for our valuable and innovative offerings. We…

Thank you Paul and good morning everyone. Please turn to slide number seven. As Paul said, we are very pleased with our full year and fourth quarter results. Our fourth quarter revenue grew year-over-year by 26%, with a strong 12.3% organic growth and acquisition related revenue adding $70 million. Our direct, billable labor grew an impressive 28%, driven by both our hiring activities and our acquisitions. For the full year, our revenue increased $483 million or 25% compared to 2007, driven by our 13.8% organic growth and acquisition activity. Let’s go to the next slide, number eight. Our net income for the quarter was a record $23.5 million, a 13% increase from fourth quarter of last year, with a 14% increase in diluted earnings per share. The full year net income was $83.3 million which was 6.1% greater than last year. Diluted earnings per share for the full year were $2.72, up a solid 8%. As Paul indicated growing our EPS is our highest priority objective. And we expect to deliver double-digit earnings per share growth in fiscal year 2009, pursue opportunities for margin improvement and make progress towards our long-term goals of 8% to 10% organic growth and 15% earnings per share growth. Next slide, number nine please. For the quarter our EBITDA grew 23% year-over-year to $58.5 million, with full year EBITDA up 14% to $210 million. Our EBITDA margin is at a healthy 8.7%. And let me note that EBITDA includes significant non-cash stock compensation expenses. Next slide please. Our UK subsidiary reported record quarterly revenue of $23.6 million and record full year revenue of $92.8 million, up 15% year-over-year. Net income for the year was $6.4 million, an increase of 43% over last year. These increases came from organic growth and the acquisition of three companies…

Thanks Tom and let me add my welcome to everyone on the call. This morning I’ll address highlights from operations during both our fourth quarter as well as our full fiscal year 2008. I’ll also provide a few comments on our fiscal year 2009 focus points and our outlook going forward. Let’s move to slide number 12. Our contract funding orders, funded backlog, and total backlog were all well above fiscal year 2007 levels. For the fourth quarter funding orders came in strong at $639 million. That’s an increase of 30% over the fourth quarter of fiscal year 2007. It’s particularly impressive considering the delayed fiscal year 2008 supplemental. Looking at the full year, fiscal year 2008 was a record year for contract funding orders, $2.5 billion, that’s a 15.9% increase over fiscal year 2007. Turning now to contract awards, we received awards totaling $605 million during our fourth quarter and we won all of our major recompetes. Our strategy of pursuing large, prime business opportunities was again rewarded as we won a prime position on the $453 million contract to support the Joint Improvised Explosive Device Defeat Organization, and we received approximately $142 million in awards under our S3 contract with the US Army. Both of these are areas in which we will continue to aggressively compete for, and win, task order business. Not included in our total of $605 million in new awards, we also announced our fourth quarter win of a prime contract on the Defense Information Systems Agency ENCORE II Program. With a ceiling value of more than $12 billion and a 10 year period of performance, counting option years, ENCORE II is far and away our largest award ever at DISA. For the full year, our contract awards totaled $2.9 billion including both recompetes and…

Thanks Bill and thank you Tom for your comments. Let’s move to slide 16 please. Fiscal year 2008 completes my first full year as CACI’s President and Chief Executive Officer. I’ve enjoyed serving with our outstanding professionals and we’ve recorded many achievements. Most importantly, our performance gives me confidence in our future. In fiscal 2009, CACI will continue to strengthen our offerings for the Intelligence Community, Defense Department, and federal agencies with high-priority funding and a long-term demand for our services. We will leverage and strengthen our eight core competencies in such areas as intelligence and security services and cyber security, to offer more to current customers and to attract new customers. These core competencies are our discriminators in our markets and we continually enhance them. We will be concentrating on new areas of growth, such as military healthcare, where as Bill mentioned, we won significant business in fiscal 2008. We are especially focused on military logistics. With our 30 plus years of logistics experience our logistics core competency is one of our greatest strengths. Just as we have supported our government in moving troops and equipment and supplies abroad, we join the government in envisioning a post-Iraq environment where those troops and the equipment and supplies will be repositioned to other geographies. CACI will be there to help with our logistics capabilities and our prime position on the US ARMY FIRST contract to help with that important reposition. We believe our nation’s highest priority is the long-term challenge of asymmetric global terrorism. Our goal is to continue to place CACI at the center of our clients’ efforts to meet this challenge, providing them with valuable solutions and clear dedicated personnel. We’re also focused on countering global terrorism in our collaboration with the National Defense University. We co-sponsored with the…

(Operator Instructions) Your first question comes from the line of Bill Loomis – Stifel Nicolaus Bill Loomis – Stifel Nicolaus: Looking at the targets, couple of things I noticed wasn’t in your presentation, one a specific margin goal. I think in the past I think you’ve said at least 8%. Can you talk a little about that and then I didn’t see any return on equity targets that you rolled out on your Analyst Meeting. What are your thoughts along those two?

Our Analyst Meeting I think you’re referring to back in February in Boston, we highlighted three long-term metrics. The first was double-digit growth of net income and EPS. The second was organic growth in the high single-digit area. These were two to three type objectives. And the third was to consistently pursue opportunities to expand our margin toward a goal of getting to approximately 8% operating income margin over the two to three year period. Those still are the goals. I did them in the priority that we have them. We continue to believe that EPS and net income growth rate is the number one priority for us and the company. We continuously look for, and organic growth is vital as we’ve talked about. With all the hiring we’re doing, over 800 people last year, this year we expect to hire over 700, 750 people net increase. And of course we continuously look for ways to improve our margin and are still committed to doing that.

Your next question comes from the line of Edward Caso – Wachovia Securities Edward Caso – Wachovia Securities: There was a terrific DSO in the quarter, curious how much of that is seasonality or comp plan related and maybe what’s the normal DSO level we should expect.

We had a very strong cash collection month in June; extraordinary. So that helped our DSO, the way we calculate our DSO and it also helped our cash flow year end cash balance. Last June we guided to DSO in the high 60 day range for fiscal year 2009. We believe the high 60 day range is a long-term and steady sustainable level. We’re pleased with the 60 day that we had in this quarter but we think that’s going to drift north of that. Edward Caso – Wachovia Securities: Can you talk about anything you’ve seen so far on the new rules on task orders being protested, task orders of $10 million or more?

Yes, we’re aware of it. We haven’t seen much in our book of business right now. There hasn’t been much of that going on. Of course we’re all well aware of the protests happening with the big deals and that’s still a part of the landscape here. But down at the task order level not much has bubbled up so far.

Your next question comes from the line of Michael Lewis – BB&T Capital Markets Michael Lewis – BB&T Capital Markets: On the task orders, do you anticipate that we will start to see more protests related to $10 million plus tasks in the future as there’s not much Greenfield money and it’s a market share grab and I think people are going to try to hold onto their territory. What’s your opinion there?

Where we’ve seen high protest activity is on these large multiple award IDIQ vehicles. So if you think about them historically ITEST 2S which protested. I think ARMY FIRST was protested. ENCORE was protested. All of those I think except possibly [Alliance]—all of those I’ve mentioned have come off [process] with the exception of Alliance. We haven’t seen a lot of protest activity at the task order level. There may be some but the big impacts we’ve had where our ability to grow has been impacted was from those large multiple award IDIQ vehicle.

I think one of the reasons; one of the key differences may be on these big deals you’re talking about a big bucket of business with a long performance period on it; in excess of 10 years sometimes. So if you’re locked out of that one, you’re locked out for a very, very long time. The task orders, they can be multiple year but you’re not talking about 10 and 20 year task orders if you will. So this is not to say we won’t see that coming along, but I see it as less likely. Michael Lewis – BB&T Capital Markets: If you could help me reconcile something we’ve heard, in late July we attended a briefing with the associate director over at DNI, where he made what I think was a surprising statement and the statement was that he expected intel budgets to remain “relatively flat” for some period of time. Now are you seeing flat to modestly up growth in the intel business or is your expectation that we’re going to continue to see high single low double-digit growth over the next two to three years? Could you talk about this a little bit?

While the overall intel budget has got modest growth in it as I understand, the areas that we are focused are where the sweet spots of the intel, we are at the mission end for the most part providing not providing so much support type services but really integrated into the mission doing, using our software tools for data collection, management, analysis of the data. We have people that specialize in the actual analysis support analysis role. And in those areas we think, there’s only one direction and that’s north. The requirement there is driven by the threat continues to be persistent, pervasive and global. And so data collection, data analysis, sorting through the data, analyzing the data continues to be the beehive of activity and there is where we’re getting our growth. It’s also where we have our acquisitions have been concentrated. Our acquisitions are concentrated in direct support to these mission areas of intel, counter intel, humint and now more recently in the last year or so, we’ve really focused on the intersection or nexus of intelligence and security services. And that means that the hand-off where we’ve always had a weak spot as a nation is in the collaboration and the interaction between the intelligence community and the local national law enforcement as well as military on foreign soil that has to actually act on the intelligence and we have been focusing on the intersection there. How do we enable that intersection to work more effectively? That is where all, a great deal of energy has been spent since 9/11 by the entire intelligence community and if you look at our acquisitions of Athena and Wexford most especially that is exactly where they are. Wexford on the security services side, on the interdiction or preemption and supporting military with all sorts of training, consulting in the field and here at home and the intel gathering, counter intel, intel, humint, aspects of the Athena operation are having, and I think Bill talked about recent wins that both Wexford and Athena have had that are propelling them in their growth. So the short answer is that the entire intelligence area is growing at a more modest rate but we’re focused in the hot spots.

Your next question comes from the line of Cai von Rumohr – Cowen & Co. Cai von Rumohr – Cowen & Co.: S3 looks like it was 23% of your awards in the fourth quarter, its been 19% for the year, 19% since you won it, should we assume that its currently running about 18% to 19% of revenues and trending up and secondly are the margins still in the 3% area and how are you doing in your plan to increase your DL on that contract?

It’s about 10% of the revenue, more or less, and its actually trending down a little bit as other things are growing. As we’ve talked about, one of our fastest growing profit centers, I think the second fastest growing one we have as a matter of fact is the profit center that runs our S3 program and that’s because over time they’ve been able to convert some of the work that we’ve previously subbed out into newer hires for CACI quite frankly so we’ve grown the direct labor content on S3 and so we would think over time and I’m not going to say over the next six months or so, but over time, that more of that revenue stream would convert to CACI in-house labor which would drive the margin up on that. But that’s a longer term objective as Paul mentioned. Cai von Rumohr – Cowen & Co.: Given your super DSO performance in the fourth quarter could you update us on what your expectations are for operating and free cash flow in fiscal 2009?

After taking a look at, in June’s performance and seeing what’s happening July, August to date, we are not changing our guidance which we provided to in late June. We expect our operating cash flow to be between $130 million and $140 million and we’re still expecting our DSO to be in the high 60 day range. Clearly we’ll monitor that and as necessary we’ll update you but that’s what we think are the best longer term expectations.

Your next question comes from the line of Joe Nadol – JPMorgan Joe Nadol – JPMorgan: Regarding your direct labor versus ODC breakdown for the quarter, I think you may have mentioned during opening remarks that you expect a little bit of slackening in that ratio, just wondering what you’re looking for for the early part of fiscal 2009?

For the quarter our direct labor grew by 28% and our ODCs grew by around 26%. For the full year our direct labor represented around 42% of our total direct costs and ODCs represented the remaining 58%. Joe Nadol – JPMorgan: So in the quarter itself was that 42%-58% mix as well?

For the quarter itself, yes it was.

Your next question comes from the line of Mark Jordan – Noble Financial Mark Jordan – Noble Financial: Can we talk about seasonality and could you recap what your 123R expense was in 2008, what it should be in 2009 and what percent of the 2009 charge should be in the first quarter?

There’s a couple of things driving seasonality, one factor driving seasonality in our business is the fact that a good portion of our profit, the majority of our profit, is associated with direct billable labor during our fiscal first quarter as people take vacations out of state. And that impacts our billable hours in our profitability. That’s one factor. In terms of 123R expense, typically we’ll have a few more dollars of 123R expense in the first quarter versus other quarters. For fiscal year 2008 we had approximately $1 million more stock compensation expense in the first quarter versus other quarters and that trend should be similar in fiscal year 2009. Mark Jordan – Noble Financial: The buyback of $20 million represents probably less than 20% of fiscal 2009’s projected free cash flow, given the M&A values, the values that you were paying for companies here in the last 12 months or so, why would it not make more sense to be more aggressive on buying your own stock back given your discount to general M&A values?

We still see very attractive opportunities in the M&A area. We have a long rich pipeline of prospects. We only do acquisitions that meet the characteristics of having a strong net present value and having a very high IRR that is higher, much higher then our own weighted average cost of capital and that are accretive. So by definition therefore, we believe the better use of our cash as long as we can continue to find companies that are interested in joining us and have those characteristics that that’s the better use of our investment cash. Let me add that we did repurchase $45 million of shares in May of 2007, so we have out of that, we’ve had a recent history so we are judicious as to how we deploy our cash and as Paul articulated the acquisitions we did in the last 15 months are spectacular. We’re very, very pleased with the results. In retrospect, in hindsight, we’re absolutely convinced we made the right decision. Having said that we will continually look at and as we’ve demonstrated both last year and this year $45 million last year, $20 million this year, we’ll continue to look at stock buyback as a balanced approach to our investment strategy.

Your next question comes from the line of Laura Lederman - William Blair & Company Laura Lederman - William Blair & Company: Can you talk a little bit on the acquisition question, what type of pricing you’re seeing and also the sizes you’re looking, what would that sweet spot be and how large would you go? Also can you talk about employee turn as a total basis, what that is including voluntary and involuntary to give us a sense of how that’s trending?

First of all, what prices we pay it varies quite a bit. We haven’t been way out there paying high premiums but we have paid full price in some cases. We pay full price when we see that there is a strong growth prospect for the company with a high margin and other cases we’ve found that there are some companies that we’re able, that are good companies that we’re able to get a bit of a discount to what we see in the market right now. So it’s a mix, it’s a wide range. In terms of the size of acquisitions we have a multiple threaded strategy for acquisition. We are looking for acquisitions that bring us new capabilities, new clients, new geographies so [Brack] for example, there are growing geographies. Ft. Bliss is one where we’re very happy to have made a new entre there at Ft. Bliss. So geographies those are important going forward for growth. Customers, new clients where we don’t have a foothold and looking to get a foothold, and technology and methodologies that we need to fill out our functional core competencies or to build a completely new functional core competency. That drives our M&A program so consequently when you look at the acquisitions they tend to be anywhere from $50 million on up to $200 million. We do look at opportunities for a transformative type of merger type opportunity. We continually look at those and evaluate those and so far we haven’t obviously found one that works both parties but we continue to evaluate those as well. Laura Lederman - William Blair & Company: And then on churn and employee churn, how that’s trending.

We ended up fiscal 2008 exactly where we ended up in terms of voluntary attrition rate at the end of fiscal 2007. we’re in the middle of the pack for our industry here. Would like to be better. Retention is key focus area for myself and for our Chief Operating Officer, Randy Fuerst here. I will say that that’s voluntary attrition. On the involuntary attrition side we were significantly down in fiscal year 2008 and that’s the direct result of having a much better recompete win rate so we were very pleased with our ability to defend our recompetes in 2008 and as was mentioned, there aren’t that many Greenfield opportunities so your ability to defend your existing book of business is one of the key elements if you’re going to grow and we’re very pleased with our track record there.

Your next question comes from the line of Jason Kupferberg – UBS Jason Kupferberg – UBS: I wanted to clarify and confirm that your operating margin guidance for this fiscal year 2009 is also unchanged?

That is correct, we initially guided 6.7% to 7% and it is unchanged. Jason Kupferberg – UBS: On the balance sheet the net debt to EBITDA is around 2.5x now as you pointed out, where are you comfortable taking that ratio potentially obviously it would depend on kind of acquisition opportunities that present themselves, but can you give us a sense of just where your general level of comfort would be?

Its very situation specific. Paul mentioned some transformative or larger transactions. If we decided to embark upon that type of transaction that would have a material impact in our leverage ratios. After we did the [AMS] transaction our leverage got it north of 4x and so in recent past the company was comfortable taking leverage to that level to do a major transaction. I would imagine that we would be comfortable with similar high levels of leverage situation specific. Our more normal run rate activity we’re comfortable in the 2.5x, 3x range perhaps a little north of 3x. The good news is that CACI generates significant positive cash flow. The last two years our operating cash flow was north of $160 million in that positive cash flow and it provides significant capital to redeploy for a large number of these smaller acquisitions that Paul mentioned, the $50 million to $100 million transactions if we find them to meet our internal strategy [inaudible].

Your next question is a follow-up from the line of Joe Nadol – JPMorgan Joe Nadol – JPMorgan: Just wanted to follow-up on as we get into Q1 here, I think you indicated in your guidance conference call that you expected sequential leg down in margin and you gave a bit of a wider range, I’m wondering if since we’re half way through the first quarter you could give us a better sense as to what you’re looking for?

I believe what we mentioned at the last call is that we expect typical sequential reductions in operating margin between our fourth quarter 2008 and first quarter 2009. and we are experiencing that as we see for a couple of the reasons we indicated; the change in direct billable labor due to vacations and 123R expense and at this point in time we feel no need to update the guidance we provided previously. Joe Nadol – JPMorgan: It’s fair to say you still expect margin improvement year-over-year though, right from the 6.3% level?

That’s our goal.

Your next question is a follow-up from the line of Cai von Rumohr – Cowen & Co. Cai von Rumohr – Cowen & Co.: You commented the orders were good given when the [SUP] was passed, could you comment what are you seeing for the current quarter now that the [SUP] is passed? Do you expect good awards in the current quarter?

A crystal ball probably needs a little polishing on it, but typically our first quarter of our fiscal year and therefore the government’s four fiscal quarter is one of our strongest if not our strongest contract funding quarters and contract awards and I expect that trend to continue again this year. I’d be very surprised if it wasn’t like that again this year. Frantic pace as we get towards September 30th. Cai von Rumohr – Cowen & Co.: On mix, you mentioned that since you’ve won S3 its been 19% of your awards and yet its only running 10% of your revenues and trending down, where would you expect that as we look at the full year fiscal 2009, is it likely to be at the current level, lower for the year given that at some point I assume if its 19% it has to true-up and move up as a percent or is that incorrect?

Our S3 revenue right now is less than 10%. You would round it up to 10% but it’s probably closer to 8%, 8.5% or something like that of our revenues. going forward right now if you’re asking me if that percentage is going to increase over time, I really don’t see that. There have been a lot of task order awards on S3 as you mentioned. When we talk about awards and you may recall from my remarks earlier, we don’t include the large IDIQs and I mentioned specifically ENCORE II, that’s a $12 billion award, when I gave you that total of $605 million, that did not have anything in there, it had zero in there for ENCORE II. Our practice there is on those kinds of contracts, is we’ll wait until the actual cash quarter awards start coming through. So we’ll start announcing those assuming their sizable enough. So I think what you’ll begin to see over time here is we’ve had a big ramp up in S3 and we’re now about 8%, 8.5% of our revenue. I expect it’ll stay there. What you may see, or what we’re planning on is to convert more of that revenue stream into CACI direct labor and therefore see if we can’t squeeze a little margin improvement out of that but then you’ll see task quarter awards hopefully start to come through on vehicles like ENCORE II and hopefully one day [Align] will get an award and we’ll see task order awards come out on that as well.

It’s really reclined very rapidly up to the level run rate it’s at now. We don’t expect the slope of that curve to continue. It’s sort of topping off a bit with little, still growth going on there, but it’s not going to go from 8% to 15% of our revenue. Keep in mind we’re trying to grow the whole business over 24% and we have strong growth objectives for this year as well and so it has to keep, to hold its 8.5% it has to grow at that same rate as the rest of the business.

Your next question is a follow-up from the line of Jason Kupferberg – UBS Jason Kupferberg – UBS: On the revenue growth you have the 5% to 9% guidance out there for fiscal 2009, how would you parse that out between direct labor and ODC growth. I know direct labor grew a little faster than ODC in the fourth quarter.

When we provided initial guidance we said that we expected the ratio direct to ODCs to improve to get more direct labor and we’d grow disproportionate to ODCs, that is still what we believe at this point in time. There is a caveat though, ODCs often times are harder to predict given various [inaudible] so we may be positively surprised by getting more ODCs because ODCs provide both revenue and bottom line profit. Jason Kupferberg – UBS: Based on what you know or hearing today what’s your best estimate in terms of how long of a CR we’ll see this year on both the defense and the civil side?

The CR is going to go from October 1st till past the inauguration. We haven’t heard exactly any kind of dates and that’s probably going to take place in the last two weeks of September. There are a lot of things Congress has to do when they get back. The House has only passed one Appropriations Bill, that’s military construction VA and the House is going to adjourn, or Congress is going to adjourn at the end of September so they can campaign and the majority does not intend to come back for a lame duck session. So that’s a TBD but other then the fact that we know or what we’ve heard, its going to be past the inauguration. That’s all we can tell you.

Your next question comes from the line of Brian Kintslinger – Sidoti & Co. Brian Kintslinger – Sidoti & Co.: Haven’t heard anything on the first contract, but just curious what the deal flow is like there, has it slowed substantially? Are they delaying RFPs, give us a sense of what--

We’re actually seeing task order pace on first, we’ve got a couple of bids that are in, that we’re waiting on and we see a couple in the pipeline that we are positioned on right now but we see the pace be pretty normal.

And we had a great win there this year on Army FIRST with the Ft. Bliss logistics work.

I think the beauty of that one is it come out as a $63 million win for us and since we’ve won that job we’ve actually doubled in size and so very, very successful on that task award. Keep in mind FIRST is the logistics contract that the Army is going to use for reset, refurbishment of all the war based equipment and the repositioning of the force over time and so that’s going to be a long, pretty big requirement over the next two or three years. [inaudible] party wins the election for the administration; the ARMY FIRST is going to be critical going forward. Brian Kintslinger – Sidoti & Co.: I guess there was some discussion about log jams having least amount of funding left that’s flowing that RFP process, not seeing that in some of the RFPs you’re looking at?

We don’t have any of that business so it’s hard for us to track trends on that but all we know is we’ve gone from zero to $120 million this year on FIRST so it feels pretty good to us.

Your final question is a follow-up from the line of Michael Lewis – BB&T Capital Markets Michael Lewis – BB&T Capital Markets: It’s our understanding that the DoD bill will be the vehicle for the CR, are you hearing the same thing by chance?

Yes we are hearing that they’ll tack that onto the bill because it’s a Parliamentary maneuver from the standpoint, there’s also rumblings that the Republicans may want to push for a veto of the CR so its political theatre and you just have to stand by and watch and see what happens. But yes, we’ve heard the same thing. Michael Lewis – BB&T Capital Markets: With regard to your two to three year goal on EBIT margin of around 8% can you help us better define around, is it at 8%, above 8%, below 8%? Can you help me out there?

Well the target is 8%. Michael Lewis – BB&T Capital Markets: Eight percent firm.

That’s our goal.

This concludes today’s question-and-answer session. At this time I’d like to turn the call back to our speaker for any additional or closing remarks.

We’d like to thank everyone on the call for your questions and your interest in our company. That’s important to us of course. That concludes our fourth quarter and full fiscal year 2008 earnings conference call and thank you all very, very much.