Builders FirstSource Inc (BLDR) 2009 Q1 法說會逐字稿

Good morning and welcome to the Builders FirstSource first quarter 2009 earnings conference call. Your host for today's call is Mr. Floyd Sherman, Chief Executive Officer. (Operator Instructions). Any reproduction of this call in whole or in part is not permitted without prior written authorization of Builders FirstSource. As a reminder, this conference is being recorded today, April 24, 2009. The Company issued a press release after the market closed yesterday. If you don't have a copy, you can find it on our website at bldr.com.

Before we begin, I'd like to remind you that during the course of this conference call management may make statements concerning the Company's future prospects, business strategies and industry trends. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from expectations. Please refer to our most recent Form 10-K filed with the Securities and Exchange Commission and other reports filed with the SEC for more information on those risks. The Company undertakes no obligation to publicly update or revise any forward-looking statements. We provided reconciliations of non-GAAP financial measures to their GAAP equivalents in our press release and detailed explanations of non-GAAP in our Form 8-K filed yesterday both of which are available on our website. At this time, I will turn the call over to Floyd Sherman.

Thank you, and good morning. Welcome to our first quarter 2009 earnings call. Joining me from our management team is Charles Horn, Senior Vice President and Chief Financial Officer. I will start with a recap of the first quarter and then I will turn the call over to Charles who will discuss our first quarter financial results in more detail. After my closing comments regarding our outlook, we'll take your questions.

First quarter of 2009 was very much as we had anticipated. It was an extremely difficult quarter for those in the housing industry. Single family housing starts declined 51.7% from the first quarter of 2008 and fell 24.2% from the fourth quarter of 2008. We felt the impact of these difficult conditions on our first quarter results although we were able to partially mitigate the overall impact to our action plan of conserving cash, growing market share, reducing physical capacity, adjusting staffing levels, implementing cost containment programs and prudently managing credit.

We feel these efforts were successful as our net cash used during the quarter was only $4.3 million. This is consistent with that cash used in the fourth quarter of 2008 but we were able to accomplish this on $37.5 million less sales. We estimate that market share gains reduced our sales decline quarter-over-quarter by an estimated 17%. We were able to achieve these gains by largely holding share with our builder 100 customers, expanding our presence with regional and local custom builders and penetrating further into the multifamily and light commercial segment.

From a capacity standpoint, we closed two facilities during the quarter. As a result of these closures and other staffing reductions, our average FTEs for the quarter dropped to 3169, down 38% from the first quarter of 2008 and down 22% from the fourth quarter. The reductions in payroll costs coupled with other cost reductions allowed us to reduce our selling, general and administrative expenses by 29% or approximately 88% variable with our sales volume decline of 33%.

Excluding facility closure costs, the write off of debt issue costs and the valuation allowance, our loss from continuing operations per diluted shares was $0.46 compared to a loss of $0.43 per diluted share for the first quarter of 2008. We feel our action plan has been successful and cons to be the correct course of action to ensure both the short-term and long-term health of our Company. I will now turn the call over to Charles who will review the first quarter results in more detail.

Good morning, everyone. I will walk you through our first quarter results in more detail. We reported sales of $163.8 million compared to $259.9 million a year ago, a decline of $96.1 million or 37%. Our sales volume dropped an estimated 33% compared to an estimated 50% decline in housing starts within our markets. This indicates a contribution from market share gains of approximately 15% to 17%.

Breaking down our product categories, prefabricated components decline $21.7 million or 42.1% from the first quarter of 2008. Windows and doors were down 39.2%. Lumber and lumber sheet goods declined 34.7% to $40 million. Mill work declined 38.6% and, lastly, other building products and services decreased 30.9%. The categories of prefabricated compounds in lumber and lumber sheet goods continues to be negatively impacted by price deflation as our commodity price index dropped an estimated 15% year-over-year.

Our gross margin percentage was 20.9% for the first quarter of 2009, down from 22.3% last year, a 140 basis point decline. Specifically, our gross margin percentage declined 30 basis points due the lower prices, 60 basis points due to volume, which is due to our fixed cost and cost of goods sold, and 50 basis points due to a shift in sales mix toward lower gross margin products and services. Our selling, general and administrative expenses decreased $21.8 million or 29% to $54.4 million. As a percentage of sales, however, SG&A expense increased from 29.3% in the first quarter of 2008 to 33.2% in the same period of 2009 which is reflective of fixed cost items becoming a larger percentage of our SG&A. Within salaries and SG&A, salaries and benefits expense declined $14.3 million, or 31.3% from the first quarter of 2008. This decline was 95% variable with our sales volume decline of 33%.

Office G&A expense decreased $3.1 million or 34.3% from the same quarter of last year. Occupancy expenses were down $1 million, but up from 2.5% of sales a year ago to 3.4% of sales in the current quarter. This is reflective of the fixed cost nature of this category. Delivery expenses decreased $4.1 million to $10.1 million during the quarter. The 28.9% decline is primarily due to a $2.2 million decrease in fuel costs and a $1.3 million decrease in fleet lease and maintenance expenses. Our bad debt expense was $1.2 million, or 70 basis points of sales compared to $3.3 million or 10 basis points of sales in the year-ago quarter.

We recorded $560,000 of facility closure costs during the quarter primarily related to our remaining lease obligations on the distribution facility in Maryland and administrative offices in South Carolina. Interest expense was $7.5 million, an increase of $1.1 million over the prior year due to write off of $1.2 million debt issue cost related to a capacity reduction and our revolving credit facility from $350 million to $250 million. We recorded tax expense of $2.1 million or a 7.5% effective tax rate during the quarter compared to a tack benefit of $9.5 million or a 38.3% tax benefit rate in the first quarter last year. Our benefit for the quarter was reduced by an after tax non-cash valuation allowance of $12.9 million or $0.36 per diluted share related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 38.1%.

Our loss from continuing operations for the quarter was $30.4 million or $0.85 loss per diluted share compared to $15.3 million or $0.43 per diluted share in the same period last year. Excluding the valuation allowance, facility closure costs and the write off of debt issue cost, our loss from continuing operations was $0.46 per diluted share for the current quarter compared too $0.43 last year. Adjusted EBITDA for the quarter was a loss of $13.7 million compared to a loss of $10.2 million in the same quarter a year ago. EBITDA declined $3.5 million year-over-year on a $96.1 million sales decline which equates to only 3.6% negative flow through from the lost sales.

Our net cash used during the quarter was $4.3 million leaving a cash balance of $102.6 million at March 31, 2009. Our net borrowing availability at March 31, 2009, was essentially zero due to a drop in our eligible borrowing base which is supported by trade receivables and inventory balances. Approximately $19.1 million of cash on hand at March 31, 2009, supported a short fall in the calculation of the $35 million minimum liquidity covenant contained in our credit agreement. This covenant calculates as eligible borrowing base minus outstanding borrowings and the resulting amount must exceed $35 million or the Company is required to meet a fixed charge coverage ratio which we currently could not meet. The calculation of minimum liquidity allows cash on deposit with the agent to be included as eligible borrowing base. Absent the use of cash in this calculation, we would have been forced to repay $19.1 million in borrowings in order to comply with the covenant. Accordingly, our available cash was $83.5 million at March 31, 2009.

A general update on our tax income refunds. We expect to receive a $33 million income tax refund within the next two weeks. In looking forward, both the house and the senate have introduced bills that would allow for a five-year carry back for net operating losses. If that is passed, that could allow us to generate up to $50 million of potential refunds in 2010. Our working capital percentage, excluding cash and income tax receivables, was 12.6% compared to 12.9% last year. However, our cash conversion days worsened from 53 day last year to 60 days this quarter. The increase in our cash conversion days was primarily due to a decrease in our accounts payable days. Our accounts receivable days actually improved slightly, dropping to 41 days from 41.9 days last year.

Our inventory turns essentially remain flat between years. Our accounts payable days decreased due to an increasing amount of outside contract labor and due to slower inventory turns. Our subcontractors generally require us to pay on a daily to weekly basis. We recently have extended these terms by negotiations to a net of about 15 days which should improve our AP days in the second quarter. I will now turn the call back over to Floyd for his closing comments.

Thank you, Charles. First quarter single family housing starts dropped 52% compared to the same quarter a year ago and on a seasonally adjusted annual rate, single family starts dropped almost 50% to 358,000 starts, further indication that 2009 will likely be more challenging than 2008. We believe our action plan has been successful at limiting the impact of the difficult conditions on our results and we will continue to execute our strategy of implementing cost containment programs, prudently managing credit, rationalizing physical capacity and staffing levels, growing market share and conserving cash. This continued strategy execution coupled with $83.5 million in available cash and over $30 million in expected income tax refunds in 2009 should provide the liquidity to withstand these challenging conditions within our industry. Since the housing correction began 36 months ago, we have asked a tremendous amount from our employees. The past three years have not been easy, but I'm very proud of the sacrifices our employees have made and I am also very proud of their willingness to do whatever it takes to get the job done. They've responded admirably and, for this, I owe them an enormous amount of gratitude. I'll now turn the call over to the operator for Q&A.

Thank you. (Operator Instructions). We will go first to Nishu Sood with with Deutsche Bank.

Hi. This is actually Rob Hansen on for Nishu. In the release you mentioned the incremental multifamily and light commercial sales. So just in general, how much of your sales, percentage wise, is in those end markets now and what is kind of your target over the longer term?

Yes, I believe the percentage has grown slightly over 10% of our total revenues. Clearly it is a market we like to continue to expand in to. We have developed the infrastructure, the expertise and we will look to expand over the coming quarters. Obviously, we do not believe that the multifamily market commercial is immune to the correction that is going on. So that in and of itself may limit our ability to increase that percentage, but it is something long term we want to continue to try to penetrate.

And in terms of types of projects are these like the student housing that you mentioned in the past?

It can be military dormitories, student housing, apartment complexes, just any number of things, high rises.

It can even be low rise office buildings.

Okay. That's all I have got. Thank you.

We will go next to David Manthey with Robert W. Baird.

Hi, guys. Good morning. Last call you mentioned that you thought your break even point was something less than $100 million per month, and I don't know if there's any finer point you can put on that this quarter given the actions you've taken since then. Is there a range or something you can give us of where you think your break even point is?

Based on the cost structure we are putting in place right now and the with the adjustments we have made in the efficiency improvements, I think that number is now closer to $80 million to $85 million a month in terms of sales. So somewhere in the $960 million to $1 billion annual sales per year.

Okay. And in terms of the locations that you have open right now, I would imagine it is all over the map, but is it safe to assume there's a number of locations that you have cut down to basically bare minimum costs that the next step for you as you have been doing right along to close the operation?

That is true. While we are reticent, we really don't want to do that. We want to keep our footprint as broad as possible. There are a few that we are looking at that if we cannot get turned around via head count reductions or sales expansion or gross margin expansions that we will look to make a decision on some time during the second quarter.

Okay. And then just to add on to the last question, I think you said 15% to 17% of incremental top line was driven by share gains plus the multifamily and nonres areas. Is there anyway that you can, I don't know if you have this with the last question, could you break that down to some extent for us, give us an idea? I think your share gains had been running kind of upper single digits. Do you think that is still the case today and the rest would be from these other areas?

I think that will be accurate, yes. I think you would probably be seeing the single family in the 10% to 12% range and the multifamily in the 3% to 5% range.

Okay. All right guy, thanks very much.

We will go next to Walter Branson with Regiment Capital.

Hi. Thanks. A couple of things. I apologize if these have been asked because I was off for a minute. Regarding tax refunds, so it sounds like you are getting $33 million in the next two weeks and that's it going forward except for unless the bill is passed that extends the carry backs, is that correct?

That is correct.

Okay. And were there any tax payments or refunds in the first quarter?

No.

Okay. And can you give us a little bit, again if you haven't done it already, overview of our liquidity outlook over the next few quarters. Obviously the tax refund will bolster that. But aside from that, what are you looking at, what do you expect to see in terms of changes in the borrowing base and cash flow over the next few quarters?

We will begin the second quarter once this refund comes in with about $116.5 million of liquidity. At this point I don't know if Floyd would disagree with me, we don't see any increases in sales per day coming in terms of the second quarter. So if we make the assumption that we are going to stay flat at about $350,000 annualized single family starts, then what you would likely see is a slight increase in the cash burn as we are not liquidating as much working capital, but we feel based upon where we stand now with the refund, we feel very good about 2009. We feel good about looking out into 2010. Clearly, we are always looking for ways to get more efficient, save more cash and to make sure that we have a strong cash balance at the end of 2009, but I would expect the cash burn to increase slightly just because we are not monetizing as much working capital as our sales would not be dropping.

We still have room for improving our inventory turns. We have identified some slow moving inventory that we feel we can convert into cash and are already actively involved in doing this. The -- we continue to improve on our labor efficiency and we will be producing some efficiency gains in the payroll area and the cost area. As Charles mentioned earlier in his part of the presentation, that we are anticipating an improvement in payables. That coming from the -- not only the extensions that we have been able to achieve and right now all of our subcontractors have agreed to the extended pay from going from pay now to a 15-day pay schedule. We have also negotiated improvements in our payable terms with a number of our suppliers and we anticipate that also contributing to us in the coming quarters.

Okay. So I think you are saying, tell me if this is right, that you're not expecting the normal second quarter seasonal pick up in sales per day. Is that right?

I can tell you we are not seeing it at this point.

Okay. But it sounds like perhaps inventory and receivables, hence the borrowing base, will be relatively stable. Is that also true?

That would be accurate statement, yes.

Thank you.

We will go next to Ivan Holman with RBC Capital Markets.

Ivan sitting in for Scot Ciccarelli. I guess the first question I just kind of wanted to peruse that you guys had mentioned regarding the labor cost cuts, the 10%. Can you kind of give us an idea as to where those labor cost cuts are going to be coming from, where are the major payroll cuts going to be? Are those going to be those areas that are challenged and is there a lot more room before we really start kind of impacting quality and what whatnot to actually cut more out of your labor expense?

The labor reductions and it will be throughout every phase of our operation, whether it is here in headquarters, whether it is out in field operations, distribution operations, our manufacturing facilities, we continue to look for ways that we can become more efficient and how we do we operate more efficient. We have a weekly labor planning guide that all of our operations follow. We track on a daily and weekly basis our full-time equivalent and we post that against our sales that are occurring during the week and so that we continually are looking for areas that we can improve on efficiency and bring everybody up to a higher standard of operating. These are all ongoing. We have been doing it consistently now over the -- for the past 18 months and I think the results very dramatically speak for themselves. And the -- we don't have any specific area that is overstaffed or is comp heavy. So it is just going to come from a broad base throughout the operations and it is going to come because we are very, very focused on running a more efficient operation and an operation that will really aid us when better times are -- that we're confronted with. With the housing recovery, we should dramatically leverage our results upward.

Okay. Thank you. So if there is no turn around I guess in the near term, are you saying that there is more potential for more kind of head count reduction?

Yes.

You guys are open to that possibility.

We have indicated that I think the 10% FTE count versus first quarter FTE count, average count, there's about a 10% improvement that you will see.

Okay. Great. Thank you. And I guess like my second question is with regards to lumber prices. I was just wondering if you had seen any improvement possibly on the vendor level in terms of firming of lumber prices? I was just kind of tracking the numbers and it looks like obviously figures are much lower on a year-over-year basis are you seeing any tentative maybe stabilization? I know the spring season typically picks up around now. Has there been any pass through from vendors trying to maybe negotiate better terms on lumber prices or is that still very, very soft?

No, lumber pricing has definitely firmed up over the last several weeks. The lumber mills have reacted. Now they have really begun reducing their number of mills, number of units that are producing, number of shifts, and they are very quickly bringing their supply in line with the demand. We've seen a rally in the lumber market pricing over the last several weeks. We think that this probably is going to hold because it is based on the supply and demand. On the other side of the ledger with our sheet goods, especially 7/16 OSB, we still are seeing very soft pricing and the capacity is still exceeding the demand that's out there. So I don't really anticipate seeing major improvements in OSB pricing. The mills on the lumber side, very, very difficult to negotiate price now as compared to what we were able to do a few months ago.

Thank you. That's very helpful. That's it for me. Thanks a lot.

We will next to Brian Taddeo with Broadpoint Capital.

Hi, good morning.

Good morning.

First thing, I want to make sure I heard you correctly. If the cash tax refunds, if the -- go back five years, did you say it would be an addition 50, 5-0, or 15 million that you could receive?

It would be up to 50 but it would depend obviously on our actual losses in 2009 as to how much we could reclaim.

That would be increment to the 33 this year?

That is correct.

Then with regard to working capital, given your comments before, do you think that you could still squeeze out another $10 million, $15 million of additional working capital this year or do you expect something less than that?

Let's look at the balance sheet real quick. I think it is conceivable to squeeze out 10 in a static environment from where we currently stand. Again, much of that will be coming in payables with some of the initiatives we have made. The other point Floyd made on inventories. Receivables will continue to be pressure. I don't know if we can improve the DSO and receivables from 41 days. That's pretty good in today's conditions. CapEx will definitely be dropping in the second part of the year. In fact, our 1.7 I believe it was in the first quarter, that probably pretty well covers us for the year.

Fair. Cover you for the full year?

I believe so.

Thank you for those. With regard to your, the customers. I think in the past you had mentioned that some of the banks have been getting a little tough with the customers, forcing lower liquidations. Are you seeing that pick up more now or has that started to alleviate at all?

I can't say it's alleviate. I think it is just continuing the way it was before. I think beginning in Q4 of last year is where we really saw the increase in activity of builders heading to orderly liquidation and that process just continues.

Got it. Finally, just with regard to liquidity front, are you at this point pursuing any new paths of liquidity or not yet, at this point you are still comfortable with these, at least you mentioned 2009, but are you pursuing anything new at this point?

Like I said, we feel good about our current liquidity position, but they're also very things we are considering. We are looking at the potential divestiture of some non-core assets, but that's very early in the process. There's always things we can look to do to try the to improve liquidity and Floyd and I are very focused on doing that.

On the M&A front is it something you can raise looking at something sizable or single digit-type millions, something in that category?

It would be lower and, of course, it is just unknown whether we will be successful.

All right. Thank you very much.

We will go next to [Michael Plantzy] with Credit Suisse.

Hi, just a couple of questions. First one, is $14 million of savings you referenced with regards to the headcount reduction, is that incremental to what you have already achieved?

That's correct.

Okay. And then on fourth quarter conference call you had mentioned that you had expected to get some availability back on your ABL, it looks like it could actually declined further. What was the major delta there?

Basically our sales sales were lower in Q1 of 2009 than what we anticipated in doing our forecast.

Right. Okay. And then also, was there any change in your percentage of receivables that were 60 days past due?

The 60-day bucket was fairly consistent in terms of the overall greater than 60. It has gone up to about 7% from where it was last year. That's part of the reason why you see the higher bad debt expense, part of the reason why you see the greater allowance as a percentage of total trade receivables.

You said it increased 7% year-over-year.

Yes.

Thank you.

And we will go next to Jay McCanless with Ftn Equity.

Morning everyone.

Morning, Jay.

I wanted to ask the break even question in a different way. Is there a level of single family starts where you believe Builders FirstSource will be break even?

We do look at that. In fact we look at that pretty much everyday. There's so many moving factors. I will just give you the answer, if we keep things static in terms of our current cost structure, current margin rate it is probably in the 480 to 500 --

Penetration.

In our current market penetration, 480,000 to 500,000 single family starts annually.

Okay. Assuming everything stays the same as it is now.

That's correct.

Okay. And then also on the M&A front, wanted to see if stock was still in play and are you all looking at any deals right now potentially merging with them or maybe another company?

In terms of our intel on stock building supplies, it is really no better than anyone else, it's just what we are seeing out in the public. Wolseley has indicated they are looking to divest them. We understand they are running a process but beyond that we don't have too much information. In terms of what we are doing, our focus is primarily on maintaining liquidity and protecting our current company, so we are not in any M&A activity at the moment.

Okay. And then my final question on the credit facility is, and I guess this is more of a procedural question, if you decide to shut down more operations later in the year, means less inventory, less receivables standing, does most of the cash that you might have -- the savings you would get from that have to immediately go to pay that down because it is an asset-based facility and should be carrying less assets? Is that line of thinking logical?

You are correct. But, first, I mean we obviously effective advance rate on inventory of 44% we would expect if we shut down an operation, we are going to get more than that in liquidation value. So net-net it is going to be a positive arbitrage for us, but in terms of will it reduce the borrowing base, yes. Would we then have to put more cash up which would be a greater amount of cash than what we had borrowed, yes, or we could pay down the debt some.

Okay. So it is either put the cash up or pay the debt down, one of the two.

An example, when we shut down New Jersey, we monetized a lot more in real value at receivables and inventory than what our current credit agreement gives us credit for.

Okay.

So definitely it is an advantage if we choose to go that route in terms of a positive cash flow.

Okay. Great. Thank you.

We will go next to Jim Wilson with JMP Securities.

Thanks. Morning, guys.

Hi, Jim.

I was wondering, I know I have asked this question before but maybe just a little updating color in your key markets, how much shrinkage of competitors you have seen, are continuing to see, just trying to get a feeling for how you are postured for the future beyond obviously the share gains you are already getting, but how you're postured for the future, particularly as it relates to how much further shrinkage of competitors has occurred over the last three months?

I think we are in good shape, Jim. There has been a lot of shut downs from everyone in the industry from the top five down to the bottom levels. And so we definitely think we pulled out of some of the major markets, some of the smaller more tertiary markets. That's part of the reason our goal is to try to keep our footprint as broad as possible so we can keep a toe hold in the market and make sure we are there when we see a housing recovery. But capacity has greatly dropped out. I can't sit here and tell you enough has dropped out at this point, it hasn't, but we are definitely seeing the niche of our market's capacity dropping and in some cases it is us dropping the capacity.

Again, I guess for future markets and sort of sales conditions at the moment that seem to be getting better are, at least from what I see, are southwest, Texas -- somewhat I guess maybe Texas, but particularly Arizona, Nevada, California, Colorado. Any thoughts of any opportunistic in even picking up a facility or something in those markets or is it still too early?

Way too early and it will not be happening in the immediate future for us.

Okay. Fair enough. All right. Thanks.

(Operator Instructions). We will go next to [Ted Wagoneck] with DDJ Capital Management.

Good morning. When you guys say -- mention this break-even level. Break even what?

That's a good question. What we are referring to is break even EBITDA.

Break even EBITDA.

Yes.

And you guys have mentioned two facility closures, one in Maryland, one elsewhere. Was that subsequent to the quarter end that's a Q2 event or was that in the quarter?

That was during the quarter and one of them is just a regional office, purely an admin office.

Okay. Can you talk a little bit about what has been happening with stock in 84 and maybe [pro build] in your markets? Is stock effectively winding down?

I don't know if we can make that statement. Again, we do understand the running the process. We don't know how that will ultimately end up. But everyone for the most part is shutting down locations and trying to cut their cash burns and that includes 84 and that includes stock and that includes us. All of us are trying to rationalize capacity in the markets. All of us are trying to get some stable pricing in the markets and all of us are trying to respond with the efficiency improvements.

In terms of the markets in which you operate, what is the overlap with stocks specifically?

We have very good a lot of overlap in the traditional southeast markets. The -- we have overlap with stock in the Texas markets. And so probably pretty much uniform all the way through from the Atlantic coast right on down to Florida and then over to Texas. So, high percentage of market overlap.

Okay. Thank you.

We will go now to Kevin Starke with CRT Capital.

Following on the last question, I know we all hate addressing hypotheticals, but have you given some thought to what might happen if Wolseley doesn't find a buyer for stock has to liquidate it, what that might mean near term and longer term for your markets?

If it were to head that direction, short-term they could put a little pressure on us as they liquidated inventory. Long-term that would obviously benefit to us as we would eliminate one of our key competitors within our markets.

Anything you could do to mitigate the initial liquidation affect?

I think there are ways we could look at it if it were to happen that way. We could even look at maybe even acquiring some of the inventory. We could look at doing some things to try to mitigate it but I think in most scenarios it would still be some downward pressure. What we have seen where companies have shut down in markets where we compete when they get rid of the inventory, they get rid of it fairly aggressively. So short term there is a little bit of an impact but we would try to manage it as best as we could.

You could be a buyer of that inventory, could you not?

That would be an alternative for us, yes.

Looking at the trading of the FRNs, it has been pretty active lately and I am just wondering if any new holders have made offers to you on how to address the use of cash that those FRNs represent?

Well, I talk to many of the major holders on a daily basis. They're interested in the Company and they're interested in their investment. I'm not aware of any new holders or any major sellers, but I do talk with a couple of the biggest holders quite frequently. In fact, one was on the phone earlier, and so we do discuss it with them. But in terms of the Company looking at acquiring them, I wouldn't say we would use any of our liquidity at this point to do so.

And at this time there appear to be no more questions. Mr. Sherman, I will turn the call back to you for closing remarks.

Okay. Thank you for joining us today. If you have any further questions, please feel free to contact Charles Horn.

This does conclude today's conference. Thank you for your participation.