Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Richard Linhart - Opus Capital.
Richard Linhart - Opus Capital
Could you Haig just run through the EBITDA numbers again, the run rate and then any other adjustments we should be looking at?
Haig S. Bagerdjian
I will start at the gross profit line and then I’ll work through it to give you a little better understanding. Our run rate pre-last three quarters was roughly $2.3 million. We have increased our gross profit close to $4 million. So for example in the fourth quarter of 2008 it was $3.8 million and all of the last three quarters, the second, third and fourth quarter, was around that range between $3.7 million if I’m not mistaken or was as high as $3.99 million, almost $4 million. We believe that that level of gross profit is what we can predict to be achievable without much of a stretch. That combined with our SG&A being roughly 31% or 32% gives us an EBITDA of roughly close to $2 million mark, between $1.2 million and $1.5 million. That’s what the range has been for the last three quarters. So the combination of that gives us a run rate of between $5 million to $6 million for 2008. In other words, if you discount or take away the first quarter after the transaction and we had a lot of unusual items, we are running between $1.2 million to $1.5 million run rate on the EBITDA. That gives the range of $5 million to $6 million.
Richard Linhart - Opus Capital
And the real estate transactions, what does that do to it?
Haig S. Bagerdjian
Real estate transactions should add an additional $200,000 to the free cash flow because our principal and interest payment is less than what the rent would have been, even if we didn’t have any increase in the rent; the rent would have been greater than what we are paying for principal and interest. Now how does that translate to EBITDA? That will result in roughly $700,000 additional EBITDA over and above that run rate.
Alan R. Steel
That’s because the lease costs were treated as a reduction of EBITDA and free cash flow as Haig said is the important item. EBITDA will increase because principal and interest payments are not considered deductions in a traditional EBITDA computation.
Haig S. Bagerdjian
So we’ll have a $700,000 EBITDA improvement over and above the run rate and net $200,000 of free cash flow to the bottom line.
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