American Woodmark Corp (AMWD) 2008 Q1 法說會逐字稿

Good day and welcome to the American Woodmark Corp. conference call. Today's call is being recorded. The Company has asked us to read the following Safe Harbor statement under the Private Securities Litigation Reform Act of 1995.

All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change, based on factors that may be beyond the Company's control. Accordingly the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include but are not limited to those described in the Company's filings with the Securities and Exchange Commission and the annual report to shareholders. The Company does not undertake the public update or revise its forward-looking statements even if experience or future changes make it clear that any predicted results expressed or implied therein will not be realized.

At this time, I would like to turn the call over to Vice President and Treasurer, Mr. Glenn Eanes, for opening remarks and introductions. Please go ahead, Sir.

Good morning, ladies and gentlemen. Welcome to this morning's American Woodmark conference call to review our fiscal 2008 first quarter results. Thank you for taking time out of your busy schedule to participate.

Participating on the call today from American Woodmark Corp. will be Jake Gosa, Chairman and Chief Executive Officer; Kent Guichard, President and Chief Operating Officer and Jon Wolk, Chief Financial Officer. Jon will begin with a review of the quarter and outlook on the future and after Jon's comments we will open the floor for your questions. Jon?

Thanks, Glenn.

This morning we released the results of our first quarter of fiscal year 2008 that ended July 31st, 2007. In case you've not had the chance to read our earnings release, here are a few highlights.

Net sales for the quarter were $166.1 million, down 25% below the prior year's first quarter; net income for the quarter was $5.1 million, down 62% below the prior year's first quarter net income of $13.4 million; diluted earnings per share of $0.34 for the quarter or 59% lower than the $0.82 we earned in the prior year's first quarter.

As we discussed in our last call in February of this year we completed the transition that had commenced in October of 2005 out of certain low margin products, including the in stock cabinet business at Lowes. As in the recent calls I will continue to provide a separate breakout of the transition impact as our prior year comparative numbers will continue to include sales relating to these products for the next two quarters.

Regarding our first quarter sales performance, our previous sales guidance, anticipated sales of our core products will be down 3 to 7% at fiscal year 2008, below floor sales levels achieved in fiscal year 2007, with sales showing larger decline in the first half of the fiscal year and smaller declines or increases in the second half of the year. Our actual core product sales for the first quarter declined by 19%, a greater decline than we had previously expected.

Total sales were 25% lower than in the first quarter of fiscal 2007, as the impact of the transition's low margin products were eliminated as planned, resulting in a $17 million reduction as compared with the prior year's first quarter.

In new construction, residential housing starts have drifted down to the $1.3 million to $1.4 million annualized level, a decline of approximately 25% below the 2006 levels. Most of our large builder customers continue to report limited to no visibility as to when a significant improvement in order rates will improve; and builder confidence according to the National Association of Home Builders at Wells Fargo Housing Market Index is at its lowest level since 1991.

However on the positive side, 30-year fixed-rate mortgages as recorded by Freddie Mac -- while slightly increased in recent weeks -- continue to hover in the mid 6% range in line with where they were one year ago and remain low by historical standards. The Federal Reserve did lower its discount rate last week which may be indicative of its willingness to cut the Federal funds rate.

A continuation of relatively low order rates caused our first quarter new construction sales to be almost 30% lower than in the comparable period of the prior fiscal year. However our first quarter new construction incoming order rates continued to modestly improve and our new construction sales showed a sequential quarterly increase for the first time in over a year.

Although the new construction market continues to be slow we continue to aggressively bid and win new business. Based on the value of our Timberlake product line, our extensive service reach, and our partnerships with many leading home builders, we believe we are growing our market share in what looks to be a relatively weak new construction sector for the next several quarters.

For the remodeling market, economic fundamentals remain sluggish but healthier than for new construction. Existing home sales, a leading indicator for home improvement spending, are forecasted to be $6 million in 2007 which is within 7% of prior levels. The consumer confidence index as of July stood at a six-year high as consumers continue to feel positively about the job market.

Employment rates, as recorded by the U.S. Department of Labor remains very healthy in the mid 4% range, and new job creation also continues healthy at approximately 100,000 new jobs per month. However, despite these healthy indicators a number of companies whose products are sold at the national home centers have reported sales declines; and our two primary remodeling customers continue to report declines in comparable store sales.

During our first quarter, our core remodeling sales came in lower than we had expected with a decline of approximately 10% driven entirely by reduced market performance in our product category. We expect the remodeling market will continue to be flat to down until credit availability and the associated headlines settle down.

As we remain bullish on the housing market's long-term viability, we continue to invest Company resources to pursue additional share gain initiatives. We believe that our market share gains and our market position as the value provider of goods and services positions us well during this down phase of the housing cycle.

Moving onto gross profit, gross profit for the first quarter was 20.7% of sales, lower than the 22% we generated in the first quarter of last year and slightly lower than the 21.1% we generated in the previous quarter. The primary driver to the reduction from prior year was the Company's decline in core sales which in turn caused direct labor inefficiencies and manufacturing overhead costs to be less fully absorbed than the prior year.

Somewhat offsetting this adverse impact was the positive impact upon the Company sales mix from the completed low margin product transition. The low margin products had higher materials and freight costs in relation to their sales prices. By removing the impact of the low margin products, materials and freight cost have improved as a percentage of sales and are expected to consent continue to show improvement through the balance of the fiscal year.

Total SG&A expense was 16.2% of sales in the first quarter of fiscal 2008 as compared with 12.5% in the prior year. Selling and marketing expenses were 12.2% of sales in the first quarter, up from 8% in the prior year driven by a 13% increase in cost, coupled with the reduced first quarter sales levels. The increased level of sales and marketing costs were driven by the Company's investment to gain additional market share. These investments included cost relating to a new product launch; increased amounts of product displays deployed with new customers in the new construction channel; and higher retail promotional cost.

General and administrative expense was 4.0% of sales in the first quarter of fiscal 2008 as compared with 4.5% of sales in the same period of last year. The reduction from prior year primarily reflected lower costs relating to the Company's paper performance incentive plans.

With regard to our capital growth plans, capital expenditures and promotional displays deployed in the first quarter of fiscal 2008 were $5.6 million, in line with the prior year's first quarter amount. As in the prior year our investment in promotional displays and property, plant and equipment were roughly comparable amounts. Capital expenditures continue to comprise a variety of small- to medium-sized projects and no new plants were constructed. The Company expects to continue to fund is capital spending from a combination of operating cash flow and existing cash on hand. Outlays for fiscal year 2008 are expected to be in line with those of fiscal year 2007.

Regarding the balance sheet, the Company's financial position remains outstanding. Long-term debt to capital on a book value basis was 10.8% as of July 31st, 2007. Cash provided by operating activities in the first quarter of fiscal 2008 was $11.4 million while free cash flow was $5.8 million. The Company repurchased 11.7 million of its common stock in the first quarter of fiscal 2008, encompassing 349,000 shares purchased at an average price of approximately $33 per share. Including these repurchases the Company's weighted average shares have been reduced by 1.2 million shares in the last 12 months or 7.5% of the share base.

Net of this utilization of free cash flow, the Company's cash on hand was $51 million at July 31st, 2007. Including an additional $6.1 million of stock repurchases made during the first week of August the Company has approximately $2.5 million remaining on the $50 million stock repurchase authorization made by its Board nine months ago.

In closing, we believe the Company's continued emphasis upon improving the quality and breadth of its products and services and investing to drive future growth is the right course of action to be pursuing during this market downturn. We continue to manage the business with the objective of creating long-term value for our shareholders. In so doing we are continuing to fill our customer facing jobs and maintain adequate manufacturing and field installation capacity to ensure a timely response when sales orders return to more normal levels.

As we have previously stated, we believe the Company should generate sustainable gross margins in a range of from 21% to 23% of sales. The Company's performance in the first quarter fiscal 2008 was nearly in line with this expectation, despite lower-than-expected remodeling sales.

As we look forward to the remainder of fiscal 2008 we continue to see a housing environment that is underpinned by solid macroeconomic and demographic fundamentals but overshadowed by inventory overhang, falling home prices and, more recently, a credit crunch that have all contributed to negative buyer psychology and reduced ability to obtain mortgage financing. We expect the housing economy to remain uncertain until the credit crunch is resolved.

From a market perspective, we expect the kitchen remodeling market will continue to experience weakness as compared with prior year comps. It is possible that the credit situation may adversely impact the upcoming fall selling season.

Housing starts have trended 25% lower in calendar 2007 than they were in calendar 2006 on a year-to-date basis. Extrapolating this trend for the remainder of the year implies housing starts will be in a range of from 1.3 to 1.4 million units per calendar 2007 or about 10% less than we had originally expected. We had originally expected that both the remodeling and the new construction markets would bottom this winter and improve from there. We now believe that the recovery will be delayed until the current credit situation is resolved.

Because of our strong competitive position and focus on continuing to enhance and differentiate our value from that of competition, we believe that the market share gains our Company achieved during fiscal year 2007 will continue for the foreseeable future. Our partnerships with the big box retailers -- each of whom continue to grow their store count and market coverage -- position the Company to capture a growing share of remodeling activity.

Our market position as a provider of superior products and services at competitive price points is extremely competitive in a more challenging retail sales environment. Most of our new construction customers expect to continue to gain market share. Our partnerships with these national and retail builders position us well to maintain and grow our market share.

The deteriorating credit situation has caused us to update our sales expectations. Where we previously expected our remodeling sales would be flat with prior year we now expect our remodeling sales will decline by mid single digits for the year, with second quarter remodeling sales also declining about 10% below last year and roughly flat remodeling sales in the second half of the fiscal year in line with our expectation for at least some modest improvement in the market. We continue to expect that weak market conditions will persist in the new construction market for the next several quarters. We expect these conditions will continue to elongate our customers' construction timetables, somewhat masking the impact of market share gains we have made.

Our updated expectation is that our fiscal year 2008 new construction sales will decline by about 15% in a market where housing starts are down approximately 25%. As with remodeling sales, we expect our new construction sales will be less than in the prior year during the first half of fiscal 2008, and improve and potentially swing positive in the latter part of the fiscal year when comparable sales levels are less challenging.

Overall, we expect that our total store sales will decline by 8% to 12% as compared with fiscal 2007 levels. During fiscal 2007 the Company achieved approximately $35 million of low margin product sales that will not reoccur in fiscal year 2008. Inclusive of the impact of these transition products, the Company now expect that total sales will decline by 12% to 16% as compared with fiscal year 2007 levels.

Despite the headwind of reduced core sales, the Company expects that it will be able to maintain its gross margin rate at approximately the 20.5% it generated during fiscal year 2007. The Company continues to realize operational improvements, driven by its emphasis on improving overall quality and from the completed low margin product transition. The Company also continues to balance its headcount levels to reflect the expected lower sales levels and to maintain adequate production and installation capability.

Driven by the Company's expectation for reduced sales, coupled with a consistent gross margin rate in fiscal year 2008, our updated expectation is that earnings per diluted share will decline by approximately 17% to 31% through a range of from $1.40 to $1.70 per diluted share. These estimates could be favorably impacted by a resolution of the prevailing credit difficulties.

This concludes my prepared remarks. Now I will turn the call over to Jake Gosa.

(multiple speakers) Sorry about that. Now we will take questions and Jake will conclude at the end of the call.

(OPERATOR INSTRUCTIONS). Eric Bosshard. Cleveland Research.

A couple things if I could. First of all, the expectation for 2Q I understand the guidance. But for the second half can you explain what conviction or insight or signals that you have in the market that suggests that you would see the sequential improvement appearing in the second half, relative to the second quarter?

This is Kent. I'm not quite sure. I mean part of what happened, I think what Jon said was, we expect year-over-year second half to be about flat with second half of last fiscal year. Part of that is -- a big part of that is that you really saw the drop in the market for second half last year. So in essence your comp is getting more on a run rate basis. So it's not so much a huge sequential improvement I would say as I think what Jon was trying to say is that on a year-over-year basis that the comps are more depressed when we get into the second half of the year and we expect to run about that rate.

Now he did also mention there that we are seeing some sequential improvement -- even at these low levels -- starting to see some sequential improvement in the new construction site. I suppose the way that we would term it is we see, at least where we are involved in new construction, we kind of see it bouncing on the bottom. It goes up a little bit, comes back down. You kind of bounce up, you kind of bounce back down.

We expect that kind of behavior to continue. And we expect on the remodel side that we will be even with last year, actually, a little bit above because there were some unique things that happened last fall particularly at one large customer that depressed -- abnormally depressed their sales related to -- they put a new computer system in which made it difficult to process orders for about six to eight weeks.

So what we actually see is we see a second half that's very, very similar to the second half of last year.

Within demand, if you could just expand. I understand the comments on new construction. But within remodel, is there anything that you are seeing in the market, in terms of indications of activity or measurements or anything else that you might look at that would suggest that we are seeing any stabilization and demand?

Yes. My -- our view is that the remodel, the remodel is about two-thirds, maybe more of the industry. And our kind of view is that it's held up better than the new construction market has. People there have -- has continued to the activity and in fact, in certain areas we have seen growth and remodel. So I don't think we're as depressed or have been as depressed. Their promotional activity is good, traffic is good, people are ordering things. Certainly they are not beating down the doors, but we see a relatively good base of remodeling activity.

As Jon mentioned if you are turning over 6 million existing homes in a year, that's telling us that there's a pretty good level of activity out there in just general maintenance of the home and we just see that continuing.

I think, Eric -- this is Jake -- I think that when you see the news stabilize on house prices my guess is that that's a -- that will restart for the remodel psychology. I just, I still think that there's a little bit of psychological impairment in that market but it is not anywhere nearly as devastated as new construction.

Secondly, in terms of your proactive spending, CapEx for the year is expected to be I guess I will ask the question -- is CapEx for there expected to run flat at the levels of a year ago and is the incremental is Q&A spend that you are making in the quarter something that you are going to curtail at all, considering the demand environment?

Certainly on CapEx, yes. We are basically at maintenance. We are keeping our machines up to snuff and those types of things. In terms of the other parts of investing in the marketplace Jon -- go back to Jon's comments -- there are really kind of two pieces of that. One of them, for example, is we spent a lot of money for our fall product launch. That will certainly go away as we get into the second quarter and on into the third quarter just because we won't have another launch.

In terms of the other things -- promotional activity and those types of things -- we are supporting the promotional schedules of our major customers. And we -- to the extent that they've shared those with us we suspect that we will continue to run about the same rate on promotional activity to see if we can not only get consumers into the store, but close the sale once they're in there.

Peter Lisnic. Robert W. Baird.

Good morning, gentlemen. I guess I just want to follow up on Eric's question on the remodel in the second half of the year being flat. Can you, just for reference purposes, can you give us what the comparison was last year for your business and remodel in the second half?

I'm not sure. What do you mean by comparison?

Well, you are forecasting flat for the second half. Was it down?

Sorry. Yes, I'm sorry.

Remodel was up slightly in the second half last year versus the previous year but it was down in the fourth quarter.

Then there were some customer disruptions in there you said from systems-related activity. Is that right? Do YOU have any idea what that may have cost you or how that kind of impacted the numbers?

We haven't quantified that but I would say for about half of the third quarter last year, order rates were certainly impacted. So it was certainly noticeable to us.

All right. And then I guess what I'm wondering is -- I mean, in your current reported quarter, I don't, I would imagine that you haven't seen a whole lot of the -- I don't know -- the subprime contagion if you will. But I would guess that you are probably seeing or hearing about it on the ground right now. So I guess I would be interested in any sort of color that you could provide from a customer perspective in terms of what people are actually thinking about in terms of the credit crunch that is occurring. And then just if you could run through why you have such confidence in the back half of the year, things stabilizing. Because I would think that things I've read and I'm not an expert by any means, but the things that I read suggest that this could go on for quite a bit here. So just some more color on those two aspects, I guess.

Well, I guess we are all looking into the crystal ball and trying to figure this out in terms of what is really happening. There, what's tough, at least from our perspective, to predict is how people react to information. There's the real economic data that you can look at. How people react to what they see is very, very different.

And our view is that, certainly in what we've seen in the last few weeks, is that there's an overreaction to what we see is the real hard economic data. And that -- it's difficult to predict when people overreact. What we are actually hearing on the ground, on the street is not much -- quite frankly -- in terms of its impact on activity. The builders particularly that you would think would be impacted the most we really haven't heard from them anything other than what we had been hearing in terms of the developments they were opening, their build rates. We haven't heard much. That doesn't mean we won't but we haven't really heard a lot.

We have heard out there a little bit in terms of color. You know, I suppose the thing that would concern us the most is that this put a lot more housing stock into the inventory but we are not seeing that. We think a lot of this housing stock that is impacted by the subprime has already been in the inventory. Speculators that bought four, five, six units with a subprime loan and they have been trying to get rid of those things for six, nine, 12 months. So it really hasn't impacted the overhang in terms of the inventory that's in the marketplace. It may put that particular individual on the problem but I'm not sure that that has much of an impact in terms of the month's supply of housing or the price of housing as Jake mentioned on the market.

So up until now -- now we will see how much tougher people get on good credit, borrowers and those types of things -- but up till now, we really haven't heard or seen a lot on the street in terms of the activity of our customers.

That's a good explanation. I know this might be a bit of a tougher question, I'm not even sure you'll have an answer, but that's why I like asking these questions. Have you guys ever done any sorts of studies or any sort of surveys where you would be able to assess or determine how your remodel customers finance their projects? I know there are some things that are published by JCHS and all that. But I am just wondering if you have any better insight into how people finance some of these remodel projects?

Yes. We've done that over years and our information has been very consistent with what you've probably read externally and that is, people generally either do it through refinancing of their home. About 85% the money on home equity refinancing goes back into the house from the data that we have seen. So that they basically are capping into the growth in equity they are tapping out. Obviously housing prices are down recently but if you go back five, 10, 15 years, the wealth generated in terms of the equity in housing has been still significant even at these somewhat a little bit lower pricing level. A lot of people are rolling -- the primary source is they've rolled that equity if you will over into the home improvement.

In terms of the other ones that we have done in the past, the second big one quite frankly is people just write checks. They save enough, they have enough cash, they tap into those funds to do it.

The third is you start to tap into some credit. But the credit is relatively minor in terms of the overall scope of, certainly, remodeling kitchen projects. It's really equity and then it's cash.

So from that perspective if there's a credit kind of reaction out there it doesn't impact that economic piece of the work. It's more likely to impact the psychology of people. The idea of investing in an asset that is declining in value, kind of the bunker mentality of "I feel good about me." Jon mentioned the consumer confidence. People feel good about their personal situation but they are in this negative news cycle and they get hit every night when they turn the TV on about the next latest greatest thing that means the world is coming to an end. And that impacts their mood and they just kind of sit at home and do the cocoon thing until they feel better. Does that help you?

Yes, that's very helpful actually. Thank you very much.

Keith Johnson. Morgan Keegan.

Just a couple of quick questions. And I may have missed that you may have already on your earlier comments but how many shares were repurchased during I guess during the quarter? First quarter?

349,000.

And what was the share count at the end, the shares outstanding at the end of the quarter just for (inaudible)?

I'll give you a rough number. It was roughly 14.6 million.

When I look at the selling expense during the first quarter, I know you guys talk about promotion and new product displays rolling out the product line. When you look at it kind of on a year-over-year basis the first quarter of '07, I guess you would have been doing some fall product rollout and some of those other expenditures. What was the biggest I guess year-over-year change on that line item?

The retail promotional calendar was a little bit more skewed toward gift card expense. So that was a little bit different than it was last year at this time. In addition the product launch that we're doing this fall is more extensive than we did a year ago at this time. And, finally, we are -- as I mentioned in my earlier comments -- we are winning quite a few new developments and new construction and applying a lot of product in model homes, as well as marketing collateral in these model homes as we win these developments.

And although the sales haven't come yet, the investments are being made in advance of the sales as normally happens. And really those are the three reasons why costs are up in relation to sales.

And when I look -- I guess going back over the last three or four fiscal years -- when I look from one first quarter to the second quarter that selling expense line generally doesn't move around a whole lot. And as you guys look through into the second quarter this year going through the rest of the year are you expecting that to kind of pull back in as far as dollars spent, levels that we saw last year or still stay a little bit at a higher run right?

Well it's going to -- as Kent mentioned the promotional activity we don't expect to really to abate. However that moves pretty much as a percentage of sales. The product launch costs, as Kent mentioned, were a little bit of a onetime for this time of the year so the rest of the year you are not really going to have a repeat of those types of costs and the displays being deployed and the marketing collateral associated with that. I think that is going to continue because we believe we are going to continue to gain share.

It's probably been several quarters ago you guys said the housing market was deteriorating and a lot of the builders were not letting any new homes or look to smaller developments. Are you guys targeting some of these new developments? Are they going to be smaller as far as number of homes you previously would have been working in or are they kind of on a similar size development that you historically targeted?

Yes, we haven't seen a whole lot of in terms of when they open up a piece of land and put a community in that they are downsizing the community. But what we're seeing is in existing communities they've obviously slowed the build rate. So it takes longer for them to complete a community and move to the next community. And that while they've done some of the infrastructure work in terms of land preparation, they haven't opened -- they are not opening up new communities as quickly, obviously, because they are trying to build out the old ones.

What we really -- and the way the kind of the builders work is generally speaking when they run competitions and you get a chance to get a piece of business that's generally on the next community, and we have been very, very successful in terms of penetrating market share of the next community. Unfortunately, they are not building a lot of those yet as for what I just mentioned.

We have also begun to target specific areas where we are one of the vendors in the mix and it's a community that is in production and trying to shift share within the community to us and we have had success doing that as well, based on a variety of things. Primarily our service levels.

As you've gone through past cycles remodeling and new construction of -- I've read a little bit so far just a couple of comments where it is either from the home builders and other kind of broader comments suggesting there may be some pent-up demand so to speak with the consumer or the buyer out there. I know there's no perfect answer but is there a way or how quickly can that remodeling market turn from just kind of cycle of psychological change in the consumer's view of the world?

I think in terms of the pent-up demand on their remodel side I think it can turn very, very quickly. Particularly if you buy the line of thinking that says is more psychologically driven and economically driven -- is that can turn very, very quickly because you do have a lot of people sitting on the sidelines and all of a sudden they feel better. The news is better, the price of the house is appreciating again, and they can turn very, very quickly and they have now. We have the law of big numbers.

If you look at the two primary big box retailers, they are approaching 4,000 stores between the two of them. So there's lots of places, there's lots of outlets, there's lots of capacity for a consumer to go to. And if you start running through the math in terms of incremental sales and what that means in terms of business for the cabinet industry, that can turn very, very quickly.

The new construction market, I think while I also believe that we are building pent-up demand because the population is still growing, we are still getting relatively high immigration rates. We still have relatively high live birth rates. Birth rate as a percentage of the population as well as what we are still running at a four plus million live births a year is that we are building we believe -- we are also building pent-up demand in the new construction side.

That I believe will be slower to come back if for no other reason that the major production builders have significantly reduced their organizations. And so when people come back they are not going to have the capacity to build homes at the same rate as they did, say, two years ago. It is going to take them a while to rebuild their infrastructure. So and that may put some pressure on pricing. Who knows?

But I don't think we are going to see a real snapback on the new housing side but I don't know whether we are or not, but it is possible to see a very quick recovery on the remodel side.

Sam Darkatsh. Raymond James.

This is actually Jeff calling in for Sam. Sam was unable to make the call. Good morning, gentlemen. Just have a couple of questions for you. Let's see. First of all inventory as is reported on the balance sheet was down less than sales year-over-year. Could you guys give us a unit shipment versus unit production so we can get the actual per unit growth (inaudible)?

We provide unit data in the 10-Q which will come out in a couple of weeks.

At least qualitatively was there a -- should we expect a big difference between the two or shipments approximately from the production?

We don't tend to give production versus shipment data. We don't go into that level of granularity.

Fair enough. Next just to clarify and I don't want to keep beating this but on the selling and marketing expense, you said you expect kind of the higher level that you are at now to continue. Are you talking then as a percent of sales?

What I said was that some of the reasons that sales and marketing costs had increased will perpetuate and one of them the product launch cost won't. So our expectation is that at these reduced sales levels compared to last year, sales and marketing expense will continue to be higher. If you look back to the last couple of quarters they ran sales and marketing -- well, total SGA costs ran in sort of the 15.5% range and this quarter we just completed, it was 16.2%. I would expect that you are going to be in the 15 to 16% range.

That's perfect. That tells me a lot.

Moving on, as far as industry data goes, what we have is the Kitchen Cabinet Manufacturers Association and their data for May and June combined said that the industry was down about 4%. We don't have July from them yet but does that sound correct to you? Is that consistent with the industry data you use?

Well I mean, industry data is difficult to get to. The case in KCMA numbers I mean if you are doing KCMA numbers compared to KCMA numbers I think you can get a pretty good trend line. It's a data point that we look at. I think that there are some issues with the way we collect data through KCMA in terms of who participates and who doesn't participate and timing and those types of things.

I would say directionally if you are talking about the industry wide being down in the low double digits over the period that you are talking about -- yes. That's probably consistent with what we would see.

So then it sounds like -- it sounds like if you -- you were talking about share gains that you are still gaining share which makes it sound like maybe July was down quite a bit more than that 12%? Or is there another factor on (multiple speakers)

No I think you've got timing considerations here. You don't really know when, what period of time the data was collected for. As with most of these industry sources, there are some inconsistencies in timing especially. If you look over the last 12 months, in our Company for example, we've gone from a period where we had double-digit sales growth in remodeling sales to a period now where we just had a 10% decline and if you just happen to shift three or six months from that data you could get a very different picture. So I don't think I would read too much into that.

And just one final question on the share gains. Listening to Home Depot, they have kind of indicated that they are going to move away from ready-to-assemble, at least in certain locations. I was wondering if that is something you've looked at in terms of do you expect to pick up extra shelf space as a result of that? And if so at what point do you think that transition starts to happen?

That really doesn't impact us. The RTA is cash and carry in the [steel]. Generally they are replacing that as other retailers have, with assembled cash and carry product. We are really special order and so we don't have any product in the steel. We have it all in the showroom and ours is -- it's just a very different purchase. Ours is a special order category not an in stock cash and carry weekend project kind of category. So it really doesn't impact us.

There are no further questions at this time.

All right. Well, we would now like to -- I was going to turn it -- turn this call over to Jake Gosa for some closing comments.

I just wanted to chat with you just for one minute before we sign off. As you all are aware I'm turning over the Chief Executive responsibilities to Kent Guichard, effective with tomorrow's Board meeting. Although I will be staying on as Chairman and I will no longer participate in these conference calls as Kent obviously is going to be running the Company. So you guys are going to have to figure out how to get along without my worldly wisdom here every quarter which ought to take you about a flash of a second. But it really has been enjoyable.

On a more serious note, I do want to thank all of you for your interest in the Company and the investments that you have placed with us. I've really enjoyed the association over the past 11 years working the financial side of this business and have had a chance to get to know many of you on a personal level and would like to say that I am grateful for the benefits of those relationships. I'm very confident about the management team that we have in place in the strategy going forward and I am also very optimistic about the long-term prospects for this industry.

So once again thank you for your support and your counsel and hopefully we will have a chance to run into each other again by and by down the road. So thank you and Glenn?

I would like to thank everyone for participating in this conference call and we appreciate your continued support. Thank you.

This concludes today's conference. Thank you for your participation. You may disconnect at this time.