Question-and-Answer Session
Unidentified Participant
(inaudible).
Bob Dykes
The question is how much of our revenues is into distributors?
Unidentified Participant
(inaudible).
Bob Dykes
Well, okay, so the first question was how much of our inventory -- of our revenue goes to distributors. Just going back to the slide -- the slide here, slide nine, for people on the phone, the bulk of our revenue, virtually all of that above that bottom line. So, down the bottom where you have integrated systems, we sell directly to the retailers and to the petro business. While everything else goes through distribution in one form or other. Some direct in the UK, but the bulk of it is distribution. They take various forms. In the US for example, distributors like Phoenix, which pay distributors just like you would normally think of them. Internationally distribution is through banks. For example, so internationally the banks tend to hold pretty low inventories, and we refresh when they order another product, be kept another one in 3 to 5 days. So that continually turning over pretty low inventory. In North America, small traditional distributors where they may have 60 days of inventory on hand, and that figures out to the (inaudible) and other such people. So it is just in North America, where I indicated that distribution -- where still contraction of distribution inventory is a real possibility.
So then your second question was --
Unidentified Participant
(inaudible).
Bob Dykes
Yes, that is right. So, that is unrelated to this question, because it is really this one where you could face, it is really just about what is down in inventory. What is revenue? We took a reserve -- 5 points of gross margin. So, it is always around a bit of a $10 million.
Unidentified Participant
(inaudible).
Bob Dykes
The products weren’t -- the extra reserves that we talk -- that I am talking about the $10 million was of an material that was obsolete, such that you are going to crush it and throw it out. It was material, but because we have a pretty long process cycles, and so you can sell it, but some of it hadn’t, you know, they have been purchased many months ago and haven't been sold. Salespeople have kind of objectives to sell it and hadn't done that. If the economy weakens, I took a judgment and along with the other management, and said we should reserve some of this because it may not sell. We may decide that rather than forcing into the market at low margin, we may be better off just disposing of that inventory for example. While the economy might rebound and we might get to use it, but if the economy, particular we were reporting together our first quarter results, for those of you who have memories longer than a couple of weeks, you will remember the stock market was particularly crashing back then.
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