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INDUSTRIAL SERVICES OF AMERICA

Moderator:    Harry Kletter

May 2, 2011

2:00 p.m. ET

Operator:               Good afternoon.  My name is (Debbie), and I will be your conference operator today.

                             At this time, I would like to welcome everyone to the quarterly earnings update.  All lines have been placed on mute to prevent any background noise.  After the speakers’ remarks, there will be a question and answer session.  If you would like to ask a question during this time, simply press star then the number one on your telephone keypad.  If you would like to withdraw your question, press the pound key.

                             As is customary, let me reiterate the Safe Harbor Act statement under the Private Securities Litigation Reform Act of 1995.  The following discussion contains forward-looking statements that are subject to risks and uncertainties, including those risks set forth in Industrial Services of America’s filings with the SEC.  These risks cause actual results from the current period and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the company.

                             We refer you to the Industrial Services of America’s period reports that are filed from time to time with the SEC.  For a more detailed discussion of forward-looking statements and a discussion of the factors that could cause results to differ materially from the discussion today, please refer to the risk factor discussion in Industrial Services of America’s Form 10-K for 2010 which is also available online.

                             In addition, during the course of this conference certain non-GAAP financial measures may be described which should be considered in addition to, and not in lieu of, comparable GAAP financial measures.  The company has provided reconciliations of these non-GAAP measures to what it believes are the most directly comparable GAAP measures in the earnings release.

                             I would now like to turn the call over to Mr. Harry Kletter, chairman and chief executive officer.  Please go ahead, sir.

Harry Kletter:        Good afternoon, everybody.  And thank you for joining our earnings call today.  Of course I wanted to tell you that many of you may have had the chance to read our 10-Q.  It was posted this morning.  And I’ll go on to some conversation that may help you as you go along.

                             I’m pleased to report another record quarter at ISA.  Revenue was up 43 percent to 106 million, the first time ISA has more than 100 million in any quarter since we’ve been reporting on conference calls.  Even though commodity prices were strong, our volume in quarter one were also strong, up over 37 percent compared to the first quarter of last year.  We feel very good about this because quarter one 2011 is a record quarter which exceeded the record quarter we had in Q1 last year.

                             I would say the earnings for the first quarter of 2011 were awesome, as I said, strong.  Our net income for the quarter was 2.2 million, or 23 percent higher than the first quarter of last year.  Earnings per share – and this is after our split that we had – at 31 cents, up 15 percent over 27 cents which was the after split since a year ago.  And this is with 7 percent more shares on a diluted basis.

                             We continue to feel the effects of the higher commodity prices on our purchases which keep our margins tight.  I’ll talk more about that later on.

                             Well we’re looking hard to find ways to improve margins, as everybody would.  The one problem we have, of course, increase sale price will not give you all the margin increases are so we try to make as much as we can on a competitive basis during that period.

                             Every quarter you hear me talk about how pleased I am with the growth.  Well, you have to understand our growth is 60 years, through many transitions, to another public company that I started in the waste business, but we’re still at the same site only now it is 50 acres as opposed to 1 acre when I started.  Just 28 months ago we were 100 million sales for the year in 2008.  Now we are on a pace to three or four times that.  But today I want to discuss our current focus of the company and that is margins.

                             I wanted to tell you we have the Derby this weekend down in Louisville, so I’m going to compare it to a horse race.  Since we are from Kentucky, horse races set a pattern, especially in my case because I’ve been going to them for 57 years.  Race horses pace themselves for the race.  They don’t sprint the whole way.

                             ISA’s doing the same thing.  Rather than running to drive our sales, we want to take stock of where we are and drive profits.  Remember scrap companies should be looked at on a year-to-year date basis because of the order progressions that we have, the selling and the procedures of what we do.  It doesn’t matter which horse is winning in the far turn.  We are a home stretch company.

                             Maybe some of you will ask on the Q&A why I talk about the horse race.  This year our team is focused on finding ways to improve our margins.  Margins are going to be the most important thing for all of us in this industry because we have such expansion of pricing on all commodities.  As you all know, copper’s over $4, ferrous scrap is up almost to $500.

                             We’re seeing today that even with what’s going on, they haven’t been able to drive it down.  It looks like this month prices will not fall as much as people anticipated or may even stay the same.  This may take us the whole year, but we’re running a company to win for the long term.

                             We continue to recruit and build a strong team.  That is a job.  As we buy companies or we consolidate the people or hire them, we have to figure out how to get the best team of people possible.  We are handpicking people who have skills and experience we need.  We are differentiating ourselves with the state of art equipment, processes, and business standards.

                             But most of all, we have completed our expansion of our physical assets and our 50 acres, with an electrical current around it because of the problems you have nowadays.  So we have just recently put that (electric fence) – but it is the state of art, and if any of you want to see it, go to our Web site, www.isa-inc.com.

Sometimes we’re able to buy a large quantity of ingredients at an attractive price.  So we buy these ingredients and mix them in the blends over time.  But we’re watching our inventories all the time to make sure we don’t tie up capital.  Some people question why do we have the 90 day inventory?

                             We make – I also want to tell you about the commodity business.  After we acquired the stainless business, we decided that we’d include it in our inventory and everything else as the Recycling segment.  Because there are so many different metals in all that, we do not differentiate between our different areas because this interplays throughout our whole operation.

                             And that’s why we do not break down volume and revenue amount by commodity.  We have the Recycling segment, and we still have the tail end of our Waste Services segment which has now just about gone away due to our expansion into recycling.

                             The divisions (within Recycling) share resources – so it’s not appropriate to separate them for reporting purposes.  That’s why when we speak of it we have many, many, many different items to talk about.  But they are all the metal commodities, and therefore that’s where we are.

                             One of the things I’d like to do is let Rudy give you the numbers, and then I’ll come back with some comments and then Q&A because it is very, very difficult to explain all the differences because we do have not that many public companies and they all are a little bit different from each other.  So I’m going to come back on after Rudy gives her comments.  Rudy?

(Rudy):                  Thanks, Harry.  As Harry mentioned, the first quarter of 2011 was very strong showing increases over both last year’s first quarter as well as the fourth quarter of 2010.  As Harry mentioned, revenue continued to increase resulting in our largest quarter ever in the history of the company.  Unit volume was up a healthy 37 percent on a year-over-year basis which helped push sales, total sales, 43 percent higher than they were in the first quarter of 2010.

                             Specifically revenue in the first quarter of 2011 was $106.2 million, up 43 percent over $74.2 million in the first quarter of 2010.  Operating income was $4.1 million, up 32 percent over $3.1 million of operating income in the first quarter of 2010.  Net income in the first quarter of 2011 was 2.2 million, up 23 percent over 1.8 million of net income in the first quarter of 2010.  And earnings before interest, taxes, depreciation, and amortization – which we call EBITDA – was 5.2 million in the first quarter of 2011, up 27 percent over the first quarter of 2010 EBITDA of 4.1 million.

                             Earnings per share on both a basic and diluted basis were 31 cents a share in the first quarter of 2011, up 15 percent over the 27 cent per share EPS on both a basic and diluted basis in the first quarter of 2010.  And that, as Harry pointed out, is in spite of a 7 percent increase in our shares outstanding.  So EPS continues to grow at a double digit rate.

                             And as Harry mentioned, higher margins is a focus of management now and going forward, so we hope to maintain this type of earnings growth, if not increase it.

                             On a sequential basis, we also beat our immediately prior quarter.  So in the first quarter of 2011, revenues were 7 percent higher than the $99.5 million of revenue in the fourth quarter of 2010, which prior to this quarter was the company’s highest quarter in its history.

                             Operating income was 45 percent higher at $4.1 million versus $2.8 million of operating income in the fourth quarter of 2010.  Net income of $2.2 million was 7 percent higher than net income of 2.0 million in the fourth quarter of 2010, and EBITDA of 5.2 million was 30 percent higher than EBITDA of 4.0 million in the fourth quarter of 2010.

                             EPS on a basic basis was 31 cents.  As I mentioned before that’s 3 percent higher than the 30 cents we did in the fourth quarter of 2010.  And on a diluted basis earnings per share was 31 cents, up 7 percent over the 29 cents we did in the fourth quarter of 2010.  And that is in spite of a 1 percent increase in both basic and diluted shares.

                             I will take a few moments to talk about our balance sheet.  Every quarter we have noted improvements in the balance sheet, and that is no different this time.  Our balance sheet continued to strengthen.  At March 31, 2011, we had $2.2 million of cash.  Our current ratio increased from 3.6 times at the end of 2010 to 3.8 times at the end of the first quarter of 2011, which is essentially an indication of near-term liquidity, meaning we have current assets which are almost four times the amount of our current liabilities and the current assets can be immediately or relatively quickly converted into cash, so that’s a very strong sign of a strong balance sheet.

                             Total debt at the end of the first quarter of 2011 was 46.0 million, up from 45.4 million at the end of 2010.  But our equity outpaced the increase in the amount of debt.  So our leverage ratios actually went down, further indicating strength of balance sheet.  Our debt to equity was 106 percent at the end of the first quarter versus 111 percent at the end of the fourth quarter of 2010.  And our debt to total capital was 51 percent versus 53 percent at the end of 2010.

                             And finally, I just want to mention that in our Q we talk about an amendment to our credit facility that we finished in mid April.  Fifth Third, which is our current lender, increased our revolving credit facility by $5 million from $40 million to $45 million, so we now have additional liquidity to grow our business.  And in addition to that, they increased the availability with respect to borrowing against inventory from $17 million to $18 million.

                             And finally, rather than have us amortize more quickly our term loan, Fifth Third has allowed us to retain that cash to continue to grow our business.  So we’re pleased with their vote of confidence in us and the additional flexibility to continue to grow our business.

                             And with that, I’ll turn it back to Harry for concluding remarks.

Harry Kletter:        Thank you, (Rudy).  One thing I want to talk before the Q&A, our capacity in our facilities and with the equipment and people we have has a capacity of $600 million at the present prices.  After that, of course, we have to seek the (other roads) to travel.  As we all know, the commodity market has really spiraled, and it’s going through a phase of people using it, as they called it on CNBC, “gold” in the scrap market.

                             True enough, that said, because the earnings that you have seen from the companies have spiraled this year, some at quality and quantities are not readily available as they were many years ago.  And we’re not (only have) to quit all (our) things that we can think of to make this a (good) investment to the investment community because there isn’t a lot of scrap companies that are available to the investment community.

                             I believe that ISA has been a pioneer and it has pioneered the waste business and now is pioneering the scrap business.  We’ve been there a long time, especially myself.

                             I think that more important than us talking, we need questions that make sense to you all to better understand the industry and where it’s going and what opportunities are in it.  So I’m going to open it up for Q&A as it’s easier for me to answer questions than give a speech.

Operator:               As a reminder, to ask a question please press star one on your telephone keypad.  We’ll pause for just a moment to compile our Q&A roster.

Your first question comes from the line of (Matt Spratford) with (Sidoti).

(Matt Spratford):  Hey.  How you doing?  I just want to I was curious about maybe if you could give us a little more color on your margins and just in general kind of give us maybe a little bit more of a guideline on where it’s expected to go in the next 12 to 18 months.

Harry Kletter:        Well, I’ve got to say of course we’re going to try to keep record winning and record results because it’s available to us into the price rises, the seller base and the people.  I do believe as the economy changes and goes farther along than it is now and the need of the commodities – and especially in some of the more specialized ones like the (standard) that has its ups and downs during the period that we’re in.

                             I believe that all of us will probably have a good go forward for the next five years.  And I think that the investment community will see others go into the public market, making available more of an overview.  Does that help you?

(Matt Spratford):  Absolutely.  Thanks for that.

(Rudy):                  Hey, (Matt), I would just add that as we continue to focus on the operations, you always find things that you can do a little differently or a little better than the way you’ve been doing them before.  I think that’s true in life in general when you start doing something over time, as you continue to do it you figure out ways to do it better or more efficiently.

                             So an example would be as our operations guys go through the various facilities and buildings, they see ways to reorganize the material, for instance.  And in doing that, it might allow us to increase inventory turnover or clean up the inventory or what have you, or things like operating the shredder.  We put it in place less than two years ago and every month we get that much better at operating it.  So you don’t solve all the problems right away or figure out the perfect, most efficient solution right away.  But every month or every period you kind of learn some things that allow you to be better operators or more efficient operators.

                             And so there’s nothing in particular we would point to.  We would just say a continued scrutiny of operations to improve processes and squeeze more profit out of our same processes.

(Matt Spratford):  Got you.  Makes sense.  Thanks, (Rudy).  Appreciate it.

Operator:               Your next question comes from the line…

(Sam Haley):         Obviously my first line of questions was sounding like you don’t want to answer which has to do with breaking out per segments a little better on the recycling business.  I think that (issue) would help us understand what’s going on with the margins and how to improve them.

                             So but if you’re not going to do that, my second question with gross margins is we talked – you put a lot of money into the facility with the new Eddy system and the shredder.  And the question is going forward, do these improvements offer you the opportunity to increase your margins by better sorting and thus higher selling price?  Or do they allow you to run the facility more efficiently and thus lowering your process cost per pound?

                             What’s sort of the – what’s the way to get to better margins other than you know paying less per (flow)?

Harry Kletter:        I’m going to answer your first question that you thought I didn’t want to answer first.  The only reason I say we can’t segregate it down to different commodities, there’s so many of them.  We integrate just about all of our operations together.  That’s the secret in this business.  If you can take all your facilities and you have diversification and you will come out much better, and that’s what I learned a long time ago.

                             Now the Eddy system really is something that is diversified because it allows us not only to run the shredder material – which is the most important part of shredding – but it allows us to shred our other material that’s in our other materials and upgrade.  And it’s been a great learning curve in my case – and I’ve had shredders for many years – but with these Eddy current, it’s just unbelievable because the final deal is going to be cogeneration for your electricity which is a high cost.

                             And I believe that you cannot segregate in – at least in our operation, I know others report it but we’re not in that position to do it because we’re integrated.  Does that help you, (Sam)?

(Sam Haley):         It does.  I guess my point is on your – when you file you know on your inventory you break down (stainless parts and non parts).  And so I guess what I would like to know is the revenue of, as you break down (stainless parts and non parts) and the volumes of (stainless parts and non parts) you know you’ve already broken them out in your inventory so just to stick through that with the segment.

Harry Kletter:        OK.  The stainless right now in the era we’re in has not come up to the par that the future holds.  As we all know that stainless is a very different item.  It’s used in the automobile business, in the household business and decorative business and things like that.  So the stainless business hasn’t even seen part of its revival to what it was years ago, plus it has its ups and downs.

                             So therefore in order to be in the stainless business, you have to have integration, and that’s what we’ve done.  We use our equipment, our people, our markets.  We draw out alloys which are higher priced items.  And therefore it’s almost impossible to give you an honest answer to this, we shift gears with it.  And I just noticed this last month, I was driving down the road and I said, I’d like to see the ground.  When you see the ground in our business then you can know if you really made money.

                             And we did this.  And we’re now trying to do it in the stainless because we’ve had 28 months of operating in this facility, making a very good return, but knowing full well we can make more.  So it has to be integrated.  I cannot honestly tell you that I would separate it any different than we’re doing.  Does that help you?

(Sam Haley):         It does.  It does.  I guess just to simplify, how do you see gross margins improving?  Do you see it through more efficiently running the yard?  Or do you see it from higher selling prices because of better sorting cleaner final product, that type of thing?

Harry Kletter:        I think our prices are probably as good as we’ll ever (need) in any lifetime.  I think it’s being more of a person that knows how to integrate these prices and how to get the highlight in the best items.  And that’s what we’ve been able to do since we’ve put together this operation from material that is you know at least a couple hundred dollars up to a couple hundred dollars in size.

                             And when you get these high alloys that come out of your materials and you find them in your scrap yard, too, because a lot of materials is inside the scrap.  But the shredder allows us to make these things.

                             What do I think is going to happen in ours?  I think we’re going to grow, grow, grow.  And the only thing that I think, I don’t think I’ll be here to grow, grow, grow because of where I am.  I honestly believe if there could be more businesses like our scrap businesses, it’s very similar to when I was in the waste business and I said eventually it will be a utility and eventually I think it will be a commodity utility, handling whatever it is to give the least amount out of our material to the highest prices and have the right people and the most equipment used operation to make money.  Does that help?

(Sam Haley):         That does.  And then one more and then I’ll jump back in the queue.  I was very impressed with the volume increase.  That was more than I saw.  I knew prices would be better, and I was hoping margins would return, and they did to some degree.  But the volume increase was terrific.  Is that a function of the (bigger yard) integrated facility?  Or is that a trend in the market?  Is that something that you think can continue through this year?  Do you think you can kind of keep these high volumes of Q1 going for the rest of the year or was it you know something unique to this quarter because 37 percent volume increase is certainly more than I expected.

Harry Kletter:        Well, the reason that it jumped so much, the comparison since the Chinese situation of the 2004 to 2008 when they made its first rise, now what we’ve got is an excessive rise.  We can only get so much out of our margins because of competition, so therefore we have to try to find out (about) the efficiencies and our ability to find more valuable material through all the Eddy system and alloys and things like that.

                             But it would be very hard to get it out the selling price that we sell for because it’s competitive.  But on your grading and your operation and your know how, that’s where you’re going to have to make it because I cannot believe that we can take out of the rising in the prices and get more money made because it uses a lot more money and a lot more interest.

(Sam Haley):         OK.  Thank you.  I’ll jump back in the queue.

Operator:               Your next question comes from the line of (Juan Noble) with Taglich Brothers.

(Juan Noble):         Yes, hi.  Hi, Harry.  Congratulations on the quarter.  I guess my questions are kind of like a rehash of prior ones.  But you know on the question of volume, 37 percent gain, if you relate to the raw tonnage production figures in the U.S. – which you know are not really great, OK, they’ve been almost flat for like the last 9 to 12 months, 9, 10 months, say – and yet here you are, you’re achieving volume gains of 37 percent.

                             And at the same time you know your revenue figures or your sales figure are up at a slightly lower rate than your cost of sales.  I guess you know what should we read into that?  Are you driving you know strong volume gains by restraining yourselves on prices?  That was my first question, OK?  Again, it’s not (from) the pricing dynamic.

                             The second thing is (Rudy) started out with a couple of examples as to how to enhance margins without playing with prices, without pricing flexibility.  Now can you build on that a little bit, give another let’s say two or three programs that you have in mind that actually widen those gross margins without playing with prices?

Harry Kletter:        Well, prices are not governed by us at all.  In fact, I’m quite surprised because the mills wanted to drop the pricing this month.  But they backed off because they don’t have supply.  And it looks like there’s not going to be much of a change.

                             So pricing and – it’s like the gasoline war.  We always think that the gas station is making more money but then we find out they’re only taking a little bit because that’s all they can do in a competitive market.  We’re in the same boat.  We cannot take it out of our selling price anymore.  We’d like to.

                              So we have to reach down into the other levels of operation people and all expenses and get it from there.  You saw that $100 million, and $100 million that would be unfair for me to say that we produced record-breaking out of the shredder stainless business was (soft).  So therefore it still made the goal of what we got here in the overall.

                             Alloys are up and down, and then of course now we don’t know what this next quarter’s going to hold out because of all the disaster in our country and in all these weather deals.  So it’s very, very hard to go by sales alone and revenue.  You have to go by the efficiency and the class of the companies that you’re looking at.  Can they shrink it down to the margin as opposed to just go along and just carry it through.  You need a shrink.  You need to raise your margins.  And you’ve got to raise it through the efficiency and good operation.

(Rudy):                  Hey, (Juan).

(Juan Noble):         Yes.

(Rudy):                  Some of the things, just to build on what Harry was saying just now, is if you look around the yard in ISA’s 50-acre facility, you’ll see things like I already talked about thinking through the material flow and what’s most efficient and making sure the inventory’s clean.

                              But you’ll see things like upgrading the facility.  You know we work with our customers or we’ll listen to what our customers say and take their comments to heart.  And to the extent we can upgrade the facility or reconfigure it to accommodate some of their suggestions, we do that.  We’re absolutely customer focused and customer centric.

                             We are always thinking through our purchasing strategy, what can we do to purchase better or to purchase in a way that accommodates our current business strategy?  What can we do to enhance the shredder productivity?  I talked about that before.  But it could be things like upgrading – and you know this from (Brian Donaghy’s) comments the last call and on other calls – we upgrade the back end sorting system which the more pure a product you provide, the higher dollar value product you’re creating and the higher margin you can get.

                             So to the extent we can sort better or process more cleanly or add additional sorting equipment and do it on a basis where there’s a return on investment that justifies it, we will do that.

                             And then I guess the last thing I would point to is we are always looking for new customers, new outlets for our materials.  We’re always looking for new suppliers.  And to the extent we can either build new relationships or enhance our existing ones, we absolutely do that to make sure we have diversified source of supply and diversified areas where we can sell it, sell the material.

Harry Kletter:        One other point, we just reached this month 15,000 ton out of our shredder.  That comprises almost just about everything except (some) foundry steel that we have to do for a foundry here.  Fifteen thousand ton was never my expectation of what our shredder can do.  Now we’re getting a larger motor.  And that is to get the efficiency of the electricity because I’ve never seen electric bills like I see now.

                             And therefore I’m saying that there’s so many factors.  That’s why I say an organic operation which has total control of all aspects is going to be the real secret like making steel.  We have to make a commodity suitable and acceptable to whatever business needs commodities.  I just wanted to interject that.

(Juan Noble):         All right.  That’s helpful.  You know it’s a very fluid situation.  It’s a lot to understand and you know a lot to try and get our arms around.  So you know we appreciate your comments.  Thank you.

Operator:               Again, to ask a question please press star one.  We have a follow up question from the line of (Sam Haley).

(Sam Haley):         Thanks, guys, for taking this.  I guess I have two.  One, just real quickly for (Rudy).  (The)…

(Rudy):                  …(bumped) up just a tiny amount so part of it’s that.  But it’s also, I would point to more utilization of the line.  I mean, we have enough collateral to justify a higher line balance, if you will.  And the bank has been good at working with us to do that.

                             So the combination of using more of the line and turning our inventory more quickly has caused us to – those are the only things I can think of without doing any kind of in depth analysis on it.

(Sam Haley):         OK.  That’s fine.  I wasn’t…

Harry Kletter:        (Sam)?

(Sam Haley):         …yes.

Harry Kletter:        Our line is based on two things, inventory and also accounts receivable.  And because of the situation of the higher pricing that we have in our commodities, we have used an overall security piece, but we have not really used the money for that.  It is now based on the need of money for these items that I just told you.

(Sam Haley):         OK.  And then how are flows in the yard?  Are they good?  Plenty of scrap available for (parts available for) resale?

Harry Kletter:        We had to turn it off this month because it was too much and I wanted to see the ground.  I wanted to see if the concrete’s still there.

(Sam Haley):         OK.

Harry Kletter:        So it’s not hard to get as long as you’ve got the right facilities to run it and make money.

(Sam Haley):         OK.  And then one more, I’ll play along with this horse race thing just for the fun of it.  I guess my question would be are we running the Preakness here or the Belmont?  And what I mean is that you know for two years we put in a shredder, we’ve put in an Eddy system, we – it would seem to me that unless this is you know the full mile and a half, mile and three quarters, we would be getting towards this home stretch where things really start hitting and also if we can get gross margins back to the you know historical 8, 9 percent.

                             Am I wrong there?  Or do we still have another turn?  Do we still have to really get to that cogeneration investment to really start firing on all cylinders?

Harry Kletter:        Well, one of the biggest answers to that is I’ll have to give you is I want this to be a Triple Crown.  And if we can get a Triple Crown out of it then I’d like to step aside and let someone else manage it.  And a Triple Crown is my goal, and we’re getting mighty close except we want to increase capacity.

                             I honestly believe that the biggest and most important thing of our industry now is where are you going to get the material?  And the second thing is the economy is picking up.  There’s no doubt in my mind.  And the sophistication of being in the investment community is the (star) thing for it.  Capital needs to come from the investment community, not out of your profits alone because the growth cost of operating facilities is very expensive, and we need to do that.

(Sam Haley):         OK.  What drives a recovery for the stainless business?  (You would believe) that you know the people involved in (EIS), (Vertices), and the other (Faris) scrap businesses (stays at terrific).  You know the electrode makers are booked for the full year.  The scrap percent in terms of steel you know in the mix is going up both in the glass.

                             And so you know (Faris Military) seemed like it’s easy to understand the positive future and the continued strength in them.  What drives a strengthening of that stainless business?  Some of us don’t understand that part as well.

Harry Kletter:        OK, I’ve been around stainless a long time and nickel, chrome alloy.  That’s what I’m going to say.  I am quite surprised because there’s not many companies that are in the stainless business in the world because it is a very, very casino type business.  Nickel, chrome, alloy, ferrous, they all play a part, and then they need to have a good economy.

                             And you’ve got a lot of things you have to be looking on when you place your bet on your sales each month.  It is not something that you can count on being stable.  Nickel changes.  Once nickel changes, prices change.  Inventories have to be properly managed.  It is a very sensitive business, but if you’re in it and you know it – and we’ve got a CEO, a president of the company who is now running it for the reason that it takes someone that cares about and understands the inventories and all the things that you have to oversee.

                             I like the business now.  I didn’t like it when we got into a few of the months over the last few years.  But now if you are sensitive to all the things, stainless is a different business.  It is a casino, and you better be smart on how you play your bet.

(Sam Haley):         That’s what I’m trying to understand better because I was surprised when you said it was soft.  If you look at the nickel price, of course nickel’s up I think 20 percent or 14 percent year over year and I think 8 percent quarter over quarter.  So I was surprised to hear that there was softness in the business.  So I’m trying to reconcile you know obviously nickel price is not a fair metric for me to (swallow), so.

Harry Kletter:        No, nickel is one of the components.  It’s volume and sales, warehousing, buying stainless, automobiles, all the things.  I will have to say we were lucky that (Brian), who is our president, walked in there because we did have some people that left – and there was reason for it – but I tell you what, I’ve seen someone walk in it with a business attitude and is doing well.

                             So you’ve got to be a business man.  Stainless is a business you better be not a gambler alone.  I’m a little bit of a gambler so I’m not too good on doing it.  But when I think of my background, I like to make money, and I like to make money the right way.  It’s exciting but it is really something different than the average person can run.

(Sam Haley):         OK.  That’s it for me.  I hope I haven’t taken too much time.  Thank you, guys.

Operator:               Your next question comes from the line of (Louis Mosher) with (Mayfax) Investors.

(Louis Mosher):     Yes, I wanted to ask you if there’s any consolidation or acquisition possible in the industry in terms of your own company acquiring either a private company or do you think there’s…

Harry Kletter:        Well, one thing I’ve always been a believer of the public company because ever since I went to college, I took a course.  That was in 1965.  Sixty-nine I went public in the waste business.  I like the market.  I think it’s currency.  I like currency.

                             Secondly, where I think in the (thing) where is it going, Harry’s 84 years old, so I don’t have to explain that to you.  I mean, I’ve got to go on with my life.  I can have conference calls.  I hope I keep continuity.  But it’s very obvious something has to happen, I guess.  And I’m not the one that chooses that.  But it will happen by whatever.

                             As far as the business, I think it’s a great industry business.  I think it is absolutely something that you give the correct information and you can understand it.  So therefore, all the things there that I’m trying to answer in your question I hope that gives you some of the answers.

(Rudy):                  (Louis), the way that we’ve grown historically and the strategy that we’ve articulated the last few calls is more of an organic strategy rather than an acquisition strategy.  So it isn’t a focus of ours to be an acquirer at the moment.  We’d rather just turn our attention internally, tighten up margins, and grow organically.

(Louis Mosher):     The second question I have is has the company done anything in terms of trying to expand the coverage of analysts on Wall Street?

(Rudy):                  We do.  We attend conferences when we’re invited.  We also make inquiries to see if we can participate in conferences that will open up to companies that are not currently under research coverage.  So we are making attempts to be more visible.

But our market cap, because we’re a micro cap company, it’s harder to find the institutional audience that wants to embrace that.  But we are doing our best to get in front of institutions when possible.

Operator:               At this time there are no further questions.  Do you have any closing remarks?  Would you like to have any closing remarks?

Harry Kletter:        Oh I’m sorry.  I’m sorry.  Well, thank you everybody.  And I hope I’m here for the next one to give you an update.  And sometimes I can get carried away and give grandpa talk.  So thanks for listening, and wish you all a lot of luck and hope that we have a good Derby.

Operator:               This concludes today’s conference call.  You may now disconnect.

END