Good morning and welcome to the 2008 AQHA convention.

I’ve said this before, but it’s so hard to believe that another year has passed, and it brought AQHA a new set of milestones that I’m proud to update you on…and a new set of challenges. While countless economists and politicians want to debate whether we’re in a recession or not, I think it’s fair to say that the challenges we are seeing are unlike any we’ve ever seen before. However, like we do with so many other issues, we will tackle these with energy and enthusiasm to keep AQHA the leader in the equine industry.

Today, I am pleased to report that AQHA remains a healthy and vibrant Association. That is a position we must maintain most especially in these challenging economic times. While I am reporting to you that registrations, transfers and stallion breeding reports tracked down – more than we anticipated last year – membership and activity across the board increased.

AQHA is like nearly every other business out there. We have peaks, and we have valleys. And like other businesses, there are usually several contributing factors to our market ups and downs, and as is the case with this dip, there are several contributing issues.

These are causes that should come as no surprise to anyone in this room. They are affecting nearly all our members both domestically and internationally. From AQHA member Neil Bauman in Blooming Prairie, Minnesota, to AQHA member Kat Moser in Joshua Tree, California, from AQHA member Melissa Justman in Velma, Oklahoma, to AQHA member Dawn Sherman in Lewis Center, Ohio, you have told us what is affecting your activity, and we are taking proactive steps to help.

In January, we asked readers of America’s Horse Weekly, AQHA’s weekly e-newsletter how the economy is affecting their horse involvement. The responses we received outnumbered any other question we’ve ever posed to the membership through the newsletter.

Along with the people I just mentioned, literally hundreds of members took the time to tell us what was affecting their horse activity and it really boils down to five main points.

• Price of fuel – increasing their hauling/trailering
• Price of corn – increasing the cost of feed
• Price of hay – due to drought in some areas and replacement of hay crops to corn in many areas
• Drought and weather
• Slaughter – the removal of the floor price has affected the bottom and middle layer of ownership

Because it is important to keep AQHA healthy, the Executive Committee, Executive Directors and staff have taken many proactive steps to address these times. Primarily they fall into three areas. Those are cutting costs, increasing or generating revenue and stimulating the industry where we can.

When I assumed the position as your Executive Vice President almost 16 years ago, we employed a philosophy to AQHA’s business model that focused on growing membership, and then registrations and transfers would increase.

Essentially, we focused on increasing interest and opportunities for people to enjoy their horse and more programs in which they could participate – that would stimulate the industry to grow because people would look for more horses.

While I still think there is validity to that, there was an interesting phenomenon that took place at AQHA last year that is causing us to re-evaluate our business model. Last year, AQHA increased membership – albeit slight – at the same time, we saw the downturn in registrations and transfers. That’s never happened before as membership has almost always been tied to registrations and transfers. What that begins to tell us is that our members are staying connected and involved. However, because of the market conditions I described earlier they are doing so with the same number – or fewer – horses.

Now our challenge becomes looking at ways to introduce an “equine economic stimulus package” that will boost registration numbers so we don’t have a horse shortage in a few years – one that will supply good quality, usable horses for a membership of around 345,000-350,000. This somewhat changes AQHA’s role in the industry because we have always assumed that we don’t “control” the supplier – in our case that would be breeders. But perhaps there are things the Association can do to encourage people to breed enough good horses to meet today’s demands.

For shows, that means building the best possible events for members at all levels of ability and making sure they know they’re welcome at an AQHA show. Last year, I updated you on AQHA’s five-point plan for shows.

• We introduce the new “Show Up” program for novice youth and amateurs
• We have revamped the skills sets for novice and limited rider
• We’ve put more into the Regional Experiences and are moving them around their respective regions so they are more accessible
• We made significant changes to the World Show
• We are greatly improving and enhancing the Youth World Show
• We are improving the Select World Show
• We have improved judges and developed levels
• And although it occurred in 2008, we held the first Versatility Ranch Horse Championships in Denver

For racing that means reaching out to new race locales, supporting positive legislation in local jurisdictions, reaching the Hispanic market, exploring new simulcasting opportunities, supporting horse racing on television and enhancing our statistical information through strategic alliances.

• We have increased purses to the Bank of America Racing Challenge
• We are bringing the Challenge Championships to Louisiana for the first time
• We have greatly improved the Supplemental Stakes Program – now called the Bonus Stakes Races – thank you John Deere
• We work with racetracks to highlight major American Quarter Horse races
• We have had a significant television presence on TVG
• And we continue to support new markets such as Kentucky

For recreational riders, that means developing programs and events that are affordable, within a reasonable, short distance of their home and providing high-quality educational materials so their experience with the American Quarter Horse is the best it can possibly be.

• We held more rides across the globe than ever before
• We have enhanced America’s Horse magazine to feature more “how-to” articles
• We introduced the industry’s first comprehensive horsemanship program by an Association – AQHA’s Fundamentals of Horsemanship
• We introduced four new entertaining and educational DVDs to the market
• We acquired Trail Trotters – now called STEP or Stewards for Trails, Education and Partnerships
• And we developed a strategic alliance with the Certified Horsemen’s Association

For youth – the group that all of us must do a better job reaching – it means making horses a viable option. We can maintain the wholesome, family values that horses bring, but we also must prove to today’s youth – children, teens and young adults – that horses are fun and “in,” and can provide young people with a way of expressing themselves in ways even they haven’t realized. To youth, horses certainly aren’t mainstream but there’s no reason why they can’t be the alternative activity that more and more young people are looking for.

• We have introduced two books in the Junior Master Horsemen series
• We are exploring the America’s Horse Club For Kids in conjunction with Breyer
• We’ve relaxed the ownership and lease rules as they pertain to showing
• We have strengthened – and continue working on – our relationship with 4-H and Extension.
• We developed a trial membership that debuted in Wal-Mart stores
• And we are greatly enhancing the youth Web site so it is a viable marketing and communications tool to satisfy today’s young people

For our ranchers who provide so many of us with the best American Quarter Horses out there, we are looking at ways to keep fees competitive and market your horses so you can have a profitable breeding operation.

• We have been aggressive in Washington working beside Farm Bureau and National Cattlemen’s Association on several legislative initiatives
• We have addressed our workflow within the Association to ensure you receive timely and efficient service
• We are reducing breeder rates in the Journal and keeping them competitive in America’s Horse so you have places to market your horses to the largest membership available

Last month, I had the privilege of visiting with AQHA member and rancher Stan Weaver of Montana. Stan breeds and sells about 100 weanlings every year, and registers them before the sale. He also transfers them before handing the papers over to the new buyer.

According to Stan, about 10 percent of his buyers are new members and the foals go to 22 states with nearly 80 percent being repeat buyers. Stan has indicated that he is not cutting back on his operation because he breeds good horses, markets his good horses and believes they have a place even as difficult as things might seem.

I believe as we move through this period, we will seriously investigate ways AQHA can help the “Stan Weavers” of the world continue to breed, market and sell good horses.

In addition to what I’ve mentioned, we will continue to modify AQHA’s business model so it is current and addresses today’s economic conditions. We can – and we should – work with breeders and professionals who supply American Quarter Horses to see how AQHA can help them, and above all, we need to make sure there is always a market for good quality horses.

Last month, I was listening to the chairman and CEO of GE Jeff Immelt talk about his business. He was saying that during his 30 years at GE he’s not seen conditions exactly like today’s. 

Some parts doing really well – other parts barely making it. To an extent, we are seeing that across our economy and certainly at AQHA, and hopefully with solid programs aimed at the core of the market, we will weather this storm and come out the other end healthy and strong.

In addition to pursuing some of the new initiatives I mentioned, keeping AQHA healthy also involves good fiscal management. All of you here today play a key role in that. AQHA has a strong financial reserve that contributes $2.5 million every year to operations. The reason we built a reserve was thanks to good fiscal policies in previous years and to help the Association during down times.

That said, we simply cannot continue to add programs, awards and recognition without considering the return on investment or the financial ramifications to the Association. In my opinion, AQHA is a business and needs to operate as a business.

Not only do I feel we have to be more economically prudent and change AQHA’s business model, we have to get a better feel for how we are spending AQHA funds. In other words, we must become more diligent in evaluating programs and services while monitoring expenses.

We expect another decrease in registrations, based on stallion breeding reports submitted, and are planning for that decrease. There were 25,000 fewer mares bred in 2007.

One of the ways we are reducing expenses is in the area of Human Resources. Already we have reduced the number of employees for the Association and Foundation to about 300 people. We are trying to do this without sacrificing our commitment to provide the best, most courteous service possible. In many ways, we are able to do this by utilizing new technology like the new On Base system used in the registration department. We plan to continue reducing the number of employees in 2008 and 2009.