Apogee Enterprises Inc (APOG) 2003 Q2 法說會逐字稿

Ladies and gentlemen, welcome to your second quarter Apogee Enterprises Inc. earnings conference call. My name is Jean. I will be your conference coordinator today. (Operator Instructions). Now I would like to turn the call over to your host for today's call, Ms. Mary Ann Jackson.

Thank you. Good morning and welcome to the Apogee Enterprises fiscal 2004 second quarter conference call on Thursday, September 18. This call is being webcast live over the Internet from Apogee's corporate Website, www.apog.com, and a replay of the call will be available on the Investor Relations section of our site.

With us on the line today are Russ Huffer, Chairman, President and CEO, and Mike Clauer, CFO and Executive Vice President. Their remarks will focus on the fiscal 2004 second quarter results, the impact of the previously announced plans to sell Harmon AutoGlass, and the outlook for the remainder of the fiscal year.

Before we begin, I would like to remind all of you that our discussion today contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's expectations or beliefs as of the date of this release. Please note that the company undertakes no obligation to publicly update revise any forward-looking statements rather as a result of new information, future events or otherwise. All forward-looking statements are qualified by factors that may affect the operating results of the company including the factors described in our press release. The company wishes to caution investors that other factors may in the future prove to be important in affecting the company's results of operation. These factors emerge from time to time, and it is not possible for management to predict all such factors or can not access the impact of each such factor on the business or the extent to which any factor or a combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. For a more detailed explanation of the foregoing and other risks and uncertainties, see Exhibit 99.1 to the company's report on form 10-K for the fiscal year ended March 1st, 2003. The information in this conference call related to projections or other forward-looking statements may be relied upon subject to the previous Safe Harbor statement as of the date of this call. It may continue to be used while this call remains on the Apogee Website.

Russ will now give you a brief overview of the results, and them Mike will cover the financials. After they conclude, we will open up the call to questions. Russ?

Good morning and welcome to our conference call. As you probably know, we have some significant changes underway at Apogee with the planned sale of Harmon AutoGlass. We announced last week that we are in the process of selling Harmon AutoGlass, and our comments and our release today and our call this morning reflect our retail auto replacement glass business as a discontinued operation. We expect that fiscal 2004 will be a pivotal year in repositioning Apogee for a stronger future.

In addition to the efforts to sell Harmon AutoGlass, we are in the midst of developing strategic growth initiatives aimed at boosting the growth of Apogee. Amidst these changes, we are focused on running our manufacturing businesses efficiently in this down construction market. We earn 9 cents a share in continuing operations in the second quarter, slightly below our guidance of 10 to 12 cents per share adjusted for Harmon AutoGlass. Net results were a loss of 7 cents a share. This includes our loss of 16 cents a share from discontinued operations due to the 18 cents a share non-cash charge we took for reducing the carrying value of Harmon AutoGlass.

Our second quarter revenues from continuing operations declined 8 percent to 135.8 million compared to the prior year. Our cash flow remains solid. Even though we were slightly below our guidance and recorded the discontinued operation charges, we still reduced our debt by more than 10 million from the first quarter, ending the second quarter at 40.4 million.

The Large-Scale Optical segment performed well in the second quarter. Its revenues were slightly ahead of expectations due to stronger than anticipated growth in sales of value-added fixture framing glass and antireflective acrylic products. Architectural revenues for the quarter were generally down with the market. However, margins in our glass installation business were negatively impacted due to some isolated project management issues. We have put processes and systems in place that enable us to better manage all our glass installation projects moving ahead. Architectural results also were impacted by the charge from closing the small finishing facility.

The architectural segment backlog increased more than $30 million from the end of the first quarter to 181.2 million at the end of the second quarter. The majority of the backlog increase is from the installation business with the other architectural businesses holding flat. We are starting to see indications that the decline in some sectors of the commercial construction market may be ending, and market indicators are looking more positive than they have for sometime. Based upon the CB Richard Ellis Office Vacancy Rate Index through the calendar 2003 second quarter, it would appear that vacancy rates may be leveling off. Construction activity has historically resumed when vacancy rates begin to decrease. Office obstruction rates also appear to be trending positively. Based on data from CB Richard Ellis, with new construction currently at a minimum, any office obstruction should convert directly into reduced vacancy leading to rent increases and ultimately new construction.

Apogee continues to outperform its market. Our architectural revenues have been down 6 percent over the last 12 months, while the lag adjusted S. W. Dodge forecast shows the nonresidential market declining 9 percent and the office market down 25 percent over last year. Based upon S. W. Dodge charts adjusted for Apogee's approximately nine-month lag, Apogee appears to have passed through the lowest period of construction activity with the fiscal 2005 lag adjusted forecasted to be neutral and fiscal 2006 expected to grow. Total nonresidential is projected to be up 7 percent in fiscal 2006 and office, 14 percent. Although the improvement in office work looks strong, it is coming off a very low base. Office construction has fallen more than 40 percent since its peak in our fiscal 2001.

Office construction recovery is very important to Apogee's businesses. Their products, quality and service have the greatest value in this market. Other nonresidential markets tend to be more hard bid -- for example, government -- less complex, secondary schools and hospitals, and in general more competitive with lower margins. Although Apogee's businesses are outperforming competition in these markets, a return to normal margins will be difficult until office construction begins its recovery.

The commercial construction market rebound is expected to begin in late in calendar year 2004 based on S. W. Dodge forecast. We had previously expected to see improvement in our architectural revenues in the third quarter but are now anticipating growth in the fourth quarter based on bid activity and inbound order rates in our businesses. We are pleased that our Large-Scale Optical segment continues to grow at anticipated rates, thanks largely to the ongoing success in converting the custom picture framing market to value-added glass products.

Due to the challenging architectural environment, which continues to lead to project delays and the project management issues I mentioned that reduced second quarter revenues and put pressure on our margins, we are lowering full year guidance for continuing operations. We are reducing guidance by 8 cents per share to 38 to 50 cents from 46 to 58 cents per share, adjusted for the treatment of Harmon AutoGlass as a discontinued operation. New full year net earnings guidance including anticipated charges in discontinued operations 4 to 27 cents per share. The anticipated timing of the start of the commercial construction market rebound and the lag in our architectural work are expected to create a trough the first half of fiscal 2005. We expect that implementation of strategic initiatives that we are developing will help offset the market challenges of next year. Our focus will be to competitively and profitably deliver our products and services to underserved markets, while our brands will deliver recognized value. We are focused on opportunities in architectural glass products and services in picture framing glass.

We have made the most progress to date on the framing glass initiative and are focused on growing the current business while finalizing plans for achieving new growth from the international institutional fine art and retail do-it-yourself market. At the same time, we are in the process of identifying and defining growth opportunities for architectural glass products and services. One unserved market for architectural businesses is work that requires two-week lead times. We are spending considerable time analyzing this market and how we could service it profitably. We are excited about our strategically focused initiatives and expect to make announcements related to these efforts during the second half of fiscal 2004.

In addition, during the balance of the year, we use our positive cash flow to strengthen our balance sheet by further reducing our debt and continuing to pay our dividends. We also anticipate focused investments in our growth initiatives. However, we don't expect to repurchase stocked under our current share repurchase program until we have closed on the Auto Glass transaction.

I will now turn to CFO Mike Clauer. Mike?

We are making real progress in reshaping Apogee with the planned sale of Harmon AutoGlass announced last week. In the meantime, the process is somewhat painful as we reclassify our financials to reflect Harmon AutoGlass' discontinued operations. We are trying to provide as much detail as we can to clarify our historical performance and how it looked and will be available to help you understand the changes.

At 9 cents from continuing operations in the quarter, we came in just below our revised guidance range of 10 to 12 cents per share capital. We got to this range starting from our previous guidance of 14 to 18 cents for the second quarter and subtracting 4 to 6 cents per share from the earnings we had expected from Harmon AutoGlass.

The EPS reconciliation to the 25 cents per share from continuing operations in the second quarter of last year underscores the challenges in the architectural segment. Architectural was down 18 cents year-over-year. Auto Glass is down 1 cent, and that would include the PPG Auto Glass reported equity and affiliates. Large-Scale Optical was a 3 cent improvement year-over-year. One-time items of shutting down the small finishing facility cost us about a penny, and we have a 1 cent improvement from our tax rate reductions. Our net results were a loss of 7 cents per share. This included a loss of 16 cents per share in discontinued operations due to the non-cash charge of 18 cents per share resulting from reducing the carrying value of Harmon AutoGlass. Operations at the retail auto replacement glass business were below expectations for the quarter.

Second quarter revenues from continuing operations totaled 135.8 million, down 8 percent compared to the prior year period. The architectural segment revenues continued to decrease as a result of the ongoing construction industry quotes slowdown and were down 11 percent to 103.5 million. Operating income was $900,000 compared to 8.4 million a year ago. This was due in part to margin decreases resulting from isolated project management issues in the glass installation business and lower capacity utilization. We have implemented process improvements to address these issues moving forward.

Architectural results were also impacted by the $500,000 pretax charge for closing a small finishing facility. The architectural backlog increased to 181.2 million compared to 105.9 million at the end of the first quarter. The backlog was 163.2 million in the second quarter of last year. The majority of the backlog increase was from the installation business with the other architectural businesses holding flat. The capacity utilization and architectural manufacturing was on average slightly below 60 percent in the second quarter.

Second quarter Large-Scale Optical segment revenues were up 6 percent to 21.2 million as the result of growth in picture framing glass as the conversion to value-added products continues and increased sales of antireflective acrylic products. The segment had operating income of 1.3 million, up significantly from 400,000 in the same period last year. This was due to the continued impact of operational improvements and conversion to value-added picture framing glass.

Auto Glass segment revenues for the second quarter, which now only reflect manufacturing business, were 11.1 million, down slightly from the prior year period. The segment reported operating income of 1.6 million, down from 2.7 million in the prior year period as a result of manufacturing pricing that declined approximately 15 percent compared to a year ago. The segment's operating income also reflects market-based pricing adjustments related to the PPG Auto Glass joint venture made in fiscal 2002. If you recall, that resulted in higher income for the segment and lower income for the joint venture than prior to those adjustments. The joint venture results are reported in equity and affiliates.

EBITDA, earnings before interest, taxes, depreciation and amortization from continued operations, although down from last year's second quarter, remain solid. It was $8 million versus 16 million in the same period last year. Our cash flow remains solid, even as we are taking charges on Harmon AutoGlass and operating in depressed construction market. Our long-term debt was 40.1 million at the end of the second quarter, down from 51.7 million at the end of the first quarter and 47.3 million at the end of the year. Our debt to total capital ratio was 19 percent at the end of the quarter compared to 21 percent at the end of fiscal 2003. Non-cash working capital, which is current assets excluding cash less current liabilities, decreased to 49.7 million at the end of the quarter from 56.5 million at the end of the first quarter. Capital expenditures for continuing operations were 3 million year-to-date versus 5.1 million in the prior year period. Our tax rate year-to-date is 18 percent due to our constant tax credits on lower earnings. As Russ noted, we did not buy back stock in the quarter and don't intend to until we close on the sale of Harmon AutoGlass.

Shifting to the outlook for the remainder of 2004, I will add some color to the comments Russ has already provided. Our outlook from continuing operations for the remainder of the year has declined due to the ongoing commercial construction industry slowdown. Overall revenues for the year from continuing operations are expected to be down mid single digits. We anticipate a mid single digit declined in third quarter revenues driven by the commercial construction market softness but continue to expect overall growth in the second half. Architectural segment annual revenues are expected to be down high single digit compared to fiscal 2003 with growth in the fourth quarter driven by our installation backlog. Large-Scale Optical revenues for the year are expected to grow in the mid single digit with strong third quarter growth followed by flat fourth-quarter revenues. Auto Glass manufacturing revenues for the year are expected to be slightly lower than fiscal 2003 due to the competitive pricing pressures that we experienced in the first half.

Annual gross margins percentages will improve in the second half with normalized architectural gross margins and improved project management processes. Our expected operating margins per segment are architectural approximately 2 percent, Large-Scale Optical 6 to 7 percent, and Auto Glass 13 to 16 percent. As I noted earlier, the Auto Glass segment operating results include manufacturing as well as market-based pricing adjustments related to the PPG Auto Glass joint venture, hence the higher margin than one might anticipate from a manufacturing operation.

We are estimating EBITDA, earnings before interest, taxes, depreciation and amortization, from continuing operations of 38 to 44 million for fiscal 2004. We estimate net cash provided by continuing operations of 25 to 30 million for the year. We are targeting full year capital expenditures of 16 million from continuing operations this year but will tightly manage this investment as we leverage excess capacity. This does not take into account potential focused investments to support growth initiatives including opportunistic acquisitions startups or investments. This will give us anticipated free cash flow of 9 to 14 million. We will continue to use our positive cash flow to strengthen our balance sheet by further reducing our debt during fiscal 2004 to below 40 million, continuing to pay our dividend, and anticipate buying back some stock after the sale of Harmon AutoGlass.

The forecast includes an expected 3 cent per share positive impact in the third quarter due to anticipated additional deductions from intellectual property donations. Including this, the effective tax rate for the full year is anticipated to be 10 percent at the low end of the guidance of 38 cents and 18 percent at the high-end of 50 cents. The rate reduction is a result of favorable impacts of constant tax credits relative to a declining base of pre-tax income.

Earnings per share from continuing operations are expected to be 11 to 15 cents for the third quarter and 38 to (inaudible) cents for the full year, adjusted for Harmon AutoGlass. Our full year guidance has been reduced from previous guidance by 8 cents per share due to the challenging architectural environment, which continue to lead project delays and the project management issues we mentioned that reduce second quarter revenues and put pressure on margins. Full year discontinued operations will reflect the charge of 25 to 32 cents per share or 7 to 9 million, including the non-cash charge of 18 cents per share or $5 million taken in the second quarter for the transaction transition costs of exiting retail Auto Glass. Harmon AutoGlass' operational performance is expected to be approximately breakeven for the year.

At this time, we do not anticipate any income or loss from resolution of liabilities associated with discontinued operating (inaudible) operations. New full year net earning guidance including anticipated charges of discontinued operations was 4 to 27 cents per share. This range is so wide due to the broad ranges of earnings from continued operations exaggerated by the wide ranges of cost related to the anticipated Harmon AutoGlass. We're doing what we can to make our operations even more efficient in these challenging architectural markets. We are focused on selling Harmon AutoGlass and more importantly on developing and implementing growth strategies for the short and long-term. Russ?

I would like to go ahead and open it up for questions at this time.

(Operator Instructions). Your first question today comes from Eric Martinuzzi of Craig-Hallum.

My question has to do with the project management issues at Harmon, Inc.. Can you give a little more detail there of what happened and what have you done to fix it?

Yes. Probably that accounted, I think there was 18 cents that we have been adjusting for in the -- well, architectural was down 18 cents from prior year. Of that 18 cents down from prior year, probably about 3 cents of that was project management related. Those have to do with some of the changes and the shifts that are going on inside of that business. In making sure that we are working with general contractors on hard bid work and more competitive work, it has to be done differently than when you are working with them on negotiated work or regular general contractors that you do business with every day. So we have tightened up that process after we saw that on those particular three project, and we feel that we have now put controls in place so that will not be part of what is ongoing.

Were the issues, the timing of when the projects began -- (multiple speakers)?

It was the additional work that went on inside the projects. It was changes; it was helping more engineering support. In one case where traditionally a great prior, a great customer, and that is something that under normal conditions would have been managed differently. But in this case, as a hard bid work, it got away from us before we realized what was going on, and we had to make changes in the way we are doing business.

Eric, in a typical call contract, the first part of the contract is more material flow heavy, and the latter part of the contract is more labor heavy. And as Russ has indicated, if you are doing additional work on hard bid jobs but you are not necessarily going forward, projects are taking a little bit longer, you start seeing it toward the end of a job. So one of the process changes put in place is a much tighter and stronger weekly labor tracking, so project management knows at any point in time where labor dollars are relative to what dollars are needed to complete the project.

Okay. So it sounds like you got caught between the project and the lead as far as your labor costs being extended out versus what you thought you were going to --?

Right.

The impact of that, we saw the backlog rise 30 million here. Can you explain, first of all, seasonality in the backlog on the architectural side, and then second of all, what could be our expectations for Q3?

Certainly there is some seasonality to that, and there are a couple of other things going on as well. We have begun to win more contracts in Florida and more blast wall security type contracts which add considerable value to projects. So there is some of the normal seasonality that would account for some of that increase, and then just the value of some of the contracts that are different than what we have historically done because of these changing markets have added to that as well.

What that leads do is generally larger project values compared to the glass, and the systems are more expansive.

It's not a more complex system necessarily; it is just more value within that. So there is a lot of higher material cost things like that.

But as far as the backlog, are there issues with part of the reason being up as much as it is is because of project delays in Q2?

There were some, but that was quite a small part of it.

We saw a really nice increase in the (inaudible) contracts, which we should start seeing in the slowing part of Q4 and Q1.

That is one of the reasons why Q2 is projected to be stronger.

Okay. But it sounds like when you say that the glass section was flat within the backlog and the rise is due more on the installation side --?

Our window business and our overall glass fabrication business stays flat.

How did that compare to a year ago?

Actually a year ago they were declining.

So Q2 last year was down from Q1, and you are saying --? (multiple speakers)

Last year we were declining -- we kind of knew this -- we were calling out the contract piece because it would exaggerate a little bit the increase in the backlog. But we thought it was good we actually saw constant backlog in the other businesses, which would suggest, as Russ indicated earlier, maybe we are at the bottom of the trough here.

Okay. And then one last question. In past quarters, there has been a good amount of short term fill-in work that has helped you make better use of your capacity. Is that up, down or about the same from last quarter?

It is pretty strong. It has continued to be strong, but it comes in all shapes and sizes. If you are really helping out a customer in emergency, you do pretty well. If you are just hard bidding and willing something to come in, then the margins get squeezed. So it is all types.

Is it strong as in consistent with last quarter?

Probably a little better.

That covers it for me. Thanks, gentlemen.

Our next question comes from Cliff Walsh of Sidoti & Co..

Can you give a little bit of info about the pricing pressure that was affecting the manufacturing operation in auto glass? You know what is causing it, and what has to happen before --?

Most of that, the explanation is a year-over-year. Most of that pricing degradation occurred in the second half of last year. We are not seeing any further declines in manufacturing pricing. Really what it was, if you recall, it was really just the competitive pressure of the imports coming into North America. But we have not seen it go down anymore; it is just not recovering.

What has to happen before things start to recover on that front?

You know what? I don't anticipate it ever recovering.

So historically looking back at the numbers you gave for this business when you made the release last week, operating margins could be as high as upper 20 percent?

Exactly.

So you are saying that going forward it is going to be more like the 14 to 15 percent range?

Correct.

Let me see what else I have for you. Eric got some of my questions. In terms of the consultants you have been working for on growth plans for LSO and the architectural business, in the last conference call you did not really give us much information in terms of what you were looking to do. Do you have a better idea now that you have been working with them for awhile?

I think as Russ indicated when he made the comments, I think on the picture framing piece, we are pretty far down the road in driving some pretty significant change and clearly going after some new markets that have been underserved. International is an example of where we really don't sell a lot of UV outside of New Zealand and Australia or our higher end products museum or acrylics. (multiple speakers).

We are really in the final stages of putting together our plans to execute our fine art strategy, which is really focused on the high-end glass and the acrylic products going after museums, galleries and high-end art dealers. We are really excited about that. The do-it-yourselves is a better way to put it. It is kind of like a ready-made market where we think there is a big opportunity, and we are working with some key customers right now in developing a plan to start delivering those products.

On the architectural glass side, we really are excited as Russ indicated a couple of the underserved markets where we think the value of the Viracon brand-name and their customer service reputation, there are some missed opportunities that we have not gone after effectively and are finalizing those thoughts and steps on how we are going to do that, and hopefully we plan on sharing that with you guys the latter part of October.

I think the thing that has been quite revealing with the use of the consultants is to better detail the size and the values in the markets that are unserved or currently by our businesses. So by actually identifying the size and the growth of the growth potential of those markets and what is being valued because it is a different market than we are currently serving, we cannot assume that what customers in current market value would be automatically valued there. There has been a lot of work to put it to make sure we understand what that value proposition is. Now it is our responsibility with this new information, new data, better definition to develop a profitable strategy to go after this potential, and we would certainly utilize assets that we have in place that are underutilized, but we would be willing to make whatever necessary investments were required to fully explore this in a possible manner. So that is a pretty exciting new look at the markets.

Okay. In terms of CapEx, your estimates come down by about $4 million I believe from last quarter. What kind of things have you put on hold?

Pretty much what that represents is we have put on hold pretty much most of the capital spending at Harmon AutoGlass. (technical difficulty) --

Your next question comes from Robert Kirkpatrick of Cardinal Capital.

Could you help us understand a little bit more the cash proceeds, both working capital and other, that you expect to get out of the divestiture of Harmon?

You know what, at the stages we are right now in conversations, I would rather not be discussing that.

(multiple speakers) -- we expect it to be a cash positive.

Okay. Great. Given your comments about the manufacturing auto glass business, you don't see that recovering, but do you see it worsening in the coming years?

I think with our manufacturing and our investment in the joint venture, if you look at the two together, I don't anticipate them getting a whole lot worse in the aggregate. But on the other side, I don't anticipate them to be high-growth vehicles. We will just continue to enjoy real nice cash flow.

These are exceptionally well-run businesses, which is really good but in a very difficult, very tough challenging market, which is why we are where we are at today. So I think that we have got a couple of years here where we think that we are going to see similar results going forward from what we have had. But I think that is the best way to describe it.

Thank you so much for that.

Your next question comes from Mark Bishop of The Boston Company.

A couple of things. First of all, you said your architectural backlog is up from installations and the rest of it is flat. I was wondering what is there besides installations --?

In our architectural group, we have three brands we go to market with. One is the installation, which is Harmon AutoGlass, and they are the actual glazing contractor. On the job, they would do the engineering of the exterior of the building, put the anchors, the metal, the glass, seal it up watertight, make it withstand a blast, hurricanes, water, air infiltration and meet the codes; that is what they do. That is the one that has the highest amount. They are regionally located in about 16 markets --.

With the highest margin or the lowest margin?

They have been to both ends of that. They have been the highest margin in past years; in the last couple of years, they have been the lower margin. The other two parts and the largest of the division is Viracon, which is the glass fabrication, so they sell to window manufactures, glazing contractors, throughout the U.S. and actually the Pacific Rim, the Southern South America as well.

That is manufacturing?

That is manufacturing fabrication of glass into high-performance products that are ready to install in windows and builders. That backlog has been lower. That is also the current primary focus of our consultants to stimulate growth because we feel we have underutilized assets as well as a great value proposition.

The third piece is the actual window manufacturing Wausau Window group, that engineers and designs windows. Primarily part of their strength, their greatest reputation, would be in operating windows for high-end educational health care, very strong on college campuses, as well as commercial buildings, condos and things like that.

And then the other question is, your working capital generated cash in the quarter. I was wondering if that is seasonal or a permanent change?

It is seasonal. If you go back, we actually use working capital as we end Q1 building up for the summer, and we would expect to see strong cash flow in Q2 continue into Q3 Q3 from working capital getting back to a more normalized level.

By the end of the year from where you ended fiscal Q2, by the end of this year, will you have a net use of working capital or generate more working capital from where you are today at the end of the quarter?

Led me pull out my cash flow forecast. We should be down from the Q2 level, not significantly, but we should be.

Meaning you should generate a little more cash?

Yes.

Okay. Thank you.

(Operator Instructions). Your next question comes from Beth Lilly of Woodland Partners.

The question is the consultants you have in, can you give us a sense of how you see -- obviously they will come up with a proposal in terms of what the growth initiatives should be for Apogee, and then does it then go to the board, and then after that the board approves it, and then you present it to shareholders? How is that going to unfold in terms of letting us in on the process?

First of all, from a clarification prospective, the consultants are working with us and our management team to develop these strategies. The process is clearly -- Russ and myself embrace it, understand it, are excited about it, understand the investments and the returns. We plan on then sharing it with our board, just so they understand where we are heading and what it is going to look like. And then honestly I am really anticipating and hoping -- we are planning on some roadshows here at the end of October and November, and I really hope we are in a position then to start sharing it with our investors where we see Apogee going over the next few years.

Okay. Russ said they are focusing in on Viracon?

We have completed the work on picture framing glass and actually are in the stages of starting to implement. And then on Viracon, it is really we are focusing on architectural glass in the next piece, which yes, Viracon and its investments will benefit from those initiatives where we see opportunities.

As you move into different markets, would you say that it is going to be maybe -- the business might be a little bit more lower margin but it will be growing faster?

I think there are two pieces to it. I think within our core today we believe there is an opportunity to grow more than we have, serve more markets than we have previously served, but your comment is right on the second. Part of the strategy might be going after markets that we would not normally be doing business in, which would be a lower margin business but a much faster growing top line for us.

It could also involve a smaller investment than we have traditionally had, too.

Okay.

I think the other thing is we are looking at a lot of other opportunities, too, and clearly we're evaluating more aspects of the value chain for architectural products and services. We are really making sure that we have a fully integrated offering of products and services.

Okay. Great. Thanks so much.

At this time, we have no more questions.

I would like to thank everybody for joining us today and for your questions. We are clearly at a very important point in time in the company, transitioning away from the Harmon AutoGlass retail group, and providing new more important opportunities to our existing businesses, and looking for those other opportunities that can come along in a soft market. So we look forward to getting back to you later on this year with more details in those areas. We assure you that we will continue to operate our company very efficiently and very appropriately.

So thank you for the day.

Ladies and gentlemen, thank you for your participation. You may now disconnect.