Core Natural Resources Inc (CNR) 2002 Q3 法說會逐字稿

Please stand by. We're about to begin. Good day, everyone and welcome to the NCI Building Systems, Incorporated, conference call. Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Burton Rice. Please go ahead, sir.

Thank you, Millicent. Good morning as well, and welcome to this NCI conference call to review the company's results for the third quarter of fiscal 2002. The results were released yesterday afternoon at a press release that has been covered by the financial media.

Let me also note a release has been issued advising that the accessibility of this conference call on a listen only basis over the internet.

As we start let me express some statements made in this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Actual performance of the company may differ from that projected in such statements. Investors should refer to statements filed by the company with the Security Exchange Commission for discussions of those factors that could affect NCI's operation and the forward-looking statements made in this call.

The information being provided today is of this date only, and NCI expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectation.

I'll now turn the call over to A.R. Ginn, chairman. Please go ahead, A.R.

Thank you, Burton, and good morning as well. Johnie Schulte and Bob Medlock are with me to comment on my results for the third quarter of fiscal 2002. Bottom line, we're very encouraged of what our team has produced in a very difficult market.

Although we are up some $16 million in sales for the first nine months there is no reason for to [inaudible] industry that this would indicate that the metal construction industry has been in a recession since late 2000 or early 2001. The MBMA numbers show a 11 percent decline in June of 2002 and a 13 percent drop in shipments through the first six months of 2002.

On a broader scale, McGraw Hill last week reported the decline of 11 percent in nonresidential construction to the first half of 2002. While residential construction remains in the positive column, very few companies focus on servicing the nonresidential side of the building industry have had good numbers to report thus far in 2002. Many, in fact, have dropped into a loss position and are not offering any promises that the near-term picture is going to be much better. In fact, as a direct competitor of NCI announced a plant closing yesterday due to a lack of business.

We've been through periods such as this before, and we know the restrictions on capital investments will eventually lead to a rebound in construction. We're also confident that the metal construction industry is going to extend its long term record of capturing increased market share. In fact, there is no question that NCI's focus has helped us through this period when the emphasis on lowering construction costs is even greater.

Right now the construction market is hard to read, and that makes it difficult to make projections. We made our numbers in the third quarter, and I believe we will achieve our target of showing a gain in the fourth quarter as well.

Our best guidance now is for earnings that will match outside estimates of approximately 58 cents per share in the fourth quarter up from the 39 cents per share a year ago before the restructuring charge. Attaining that possibility would result in earnings for fiscal 2002 of approximately $1.68 per share, also up from a year ago.

My confidence in the future for NCI is affirmed by our performance this year. Admittedly our margins for the third quarter and the nine months are below our historical norms, but we have achieved some improvement in a market where others have seriously faltered. NCI's marketing focus this year has been on expanding our customer base and building a foundation that will support growth in a positive environment. It is periods such as this when we can solidify ties with existing customers and can start working with new customers who have the time to let us fully present the NCI story, that is, we have the broadest product line in the industry, our low-cost operating structure.

As far as pricing, you know, we're no different than anybody else. We've had to sharpen our pencil in some cases, principally on large scale bid jobs, but on balance we've been firm on passing through the increases received thus far on steel.

Another increase for steel has been announced for October the 1st, and the last few days we've all read about the softening in the steel market. We don't know if this increase will stick. If it does in fact become reality, our plans are to pass that one along as well.

NCI stands for value that encompasses fair pricing, but its levels provide a reasonable return on our capital. We built long-standing relationships with some of the largest customers in our industry who recognize in their business that the term value goes far beyond just pricing. Dependable quality assurance, reliable delivery standards, and innovative new products are each important components in the equation for superior customer service. And for NCI to provide superior customer service we have to maintain a strong financial position.

Speaking of innovative new products, NCI will launch a new standard [inaudible] roof panel in the next few weeks that will address the new wind uplift codes. This panel will take the place of existing [inaudible] roof panels and will not create new revenue, but it will help from a cost standpoint. It's just another way that NCI is staying ahead of the game. Our strong loyalty to other businesses in the metal construction industry also reflect the steps we took to reposition our manufacturing resources and obtain higher achievement efficiencies.

We've said at the time that we're not pulling back, you know, in any way, shape, form, or fashion in any of our geographic coverage, and our results this far confirm that the new alignment of our plants and capacity has actually enhanced our customer service. The new Big Rapids, Michigan, facility is doing very well, and we continue to look for other similar opportunities where NCI can further expand by acquiring existing business or developing a green field site.

We're very selective. We're not looking for a fixer-upper. We want a transaction that is great [phonetic] to NCI and we're not going to compromise our standards or our parameters. We also have the advantage of a substantial positive cash flow. In the nine months we've repaid over $74 million in debt while still making ongoing investment and that's there to improve our plant, equipment, and systems.

The NCI team is doing very well this year. They've performed very well. Our results through the first nine months have come through the hard work and commitment of everyone within NCI, and we really want to take this opportunity to thank them for their continued dedication. We move, we have set high objectives in our internal planning, but we are confident that the gains NCI will realize in fiscal 2002 will multiply in the future in terms of an expanded customer base and higher operating efficiency.

Although the near term outlook remains guarded, I believe NCI offers a very positive picture for investments. We welcome the new standards for certification of financial statements as NCI's goal has always been to provide clear, straightforward, and accurate financial statements and guidance.

We are very positive about the prospects for our industry, but more important, NCI is positioned stronger than ever to take advantage not only of the longer term growth in demand but also to pay full advantage of a recovery in nonresidential construction. We stand to benefit both from the rebound and orders from existing customers which we've worked hard to service during these difficult times as well as from the new account who we have started doing business with.

Thank you, and I'll now turn the call over to Bob Medlock.

Thank you, A.R. Sales for the third quarter of $258 million were down $1 million from the $259 that we posted a year ago, and this compares to industry sales which are still down over 10 percent year over year. Our third quarter sales were up 21 percent in the second quarter of this year, reflecting the normal seasonal increase and sales activity.

Gross margins in the third quarter improved to 23.8 percent compared to 22.9 percent in the prior year's third quarter and were up from the 21.3 percent [inaudible] posted in the second quarter of this year. This improvement resulted primarily from the cost savings related to the plant closures earlier in this year, higher production levels, particularly on a coal painting area which carry a higher gross margin and somewhat due to sales mix.

Operating expenses for the third quarter increased by $2.5 million or 11 percent compared to the prior year, increases and selling costs related to the establishment and development of the national accounts program, higher employee benefit cost, insurance and property taxes accounted for the majority of this increase.

Without the impact of good will amortization compared to the prior year of operating income was approximately $500,000 less than the same quarter last year. Interest expense declined from $7.7 million last year to $5.1 million, and the current fiscal quarter as a result of lower buying levels and lower interest rates.

Other income consists primarily of gains from the sale of two facilities and the equipment from these facilities related to the plant closures completed in the first quarter of this year. Earnings per share of 67 cents on a diluted basis compared to 39 cents in the third quarter last year is 28 cents per share increase can be broken down into 10 cents resulting from improved financial results, 15 cents from the elimination of good will, and three cents from the gains associated with the asset sales.

On a segment basis, engineered building systems for the third quarter were $84.7 million, down 2 percent from $84.8 million reported in the prior year's third quarter. Operating income of $7.8 million was down 40 percent from the $12.9 million reported last year. This decline resulted primarily from lower selling prices due to competition, less efficient plant operations, because of lower sales volume, and higher cost of engineering and drafting due to the complexity of jobs and increases in operating expenses as discussed above.

As a percent of sales, operating income was 9.4 percent this year compared to 15.1 percent in the year earlier. Incoming orders for the engineering building systems segment were down 2 percent from the prior year for the nine months and the backlog August 3rd, 2002, is $169 million compared to $160 million a year earlier for the quarter engineering building systems accounted 32 percent of consolidated sales.

Of the component segment of our business sales in the third quarter were $186 million which were up 7 percent from the prior year. Operating income was up sharply to $23 million from $14 million posted in the prior year. The majority of this increase resulted from the elimination of good will amortization in the current year and improving gross margins accounted for the balance. For the nine months sales of $700 million are up 2 percent over the same period last year. This compares to industry performance which is still down approximately 11 percent year over year. NCI's better performance resulted primarily from increasing market share and growth and customer base.

Gross profits for the nine months were 21.8 percent compared to 22.8 percent in the prior year. Although current margins are lower than a year ago, they continue to improve and compare favorably to the year to date six month number of 26.6 percent posted for our quarter ended May 4th. The majority of this improvement again came from improved operating efficiencies related to plant closures and the increase in sales volume.

Operating expenses for the nine months increased $5 million or 5 percent compared to the prior year for the same reasons discussed relative to the three-month period. For the nine months interest expense is down $9.5 million from the prior year resulting from the lower level of buying and lower rates of interest than a year earlier.

Turning to the balance sheet, as we announced, the company has agreed in principle to complete a $250 million senior credit facility which will provide $125 million five-year revolver and a six-year $125 million loan, term loan with 5 percent mandatory repayments for the first five years. We expect that this new facility which will be used to repay the existing senior debt should be completed by September 15th of this year.

Our balance sheet in the press release reflects the new repayment schedule of this proposed facility. As A.R. mentioned, during the third quarter we repaid $35 million in debt claiming our total reduction for the year is $73.6 million. For the nine month period we spent $7.1 million for capital expenditures, including $3 million spent in the third quarter. During the third quarter we also sold approximately $4.5 million in real estate and streamer and equipment related to the plant closures earlier this year. Consolidated working capital decreased by $15 million for the nine-month period, and EBITDA numbers for the [inaudible] 12 months were $100 million.

With that, I'm going to turn it back over to the operator for any questions.

Today's question-and-answer session will be conducted electronically. If you wish to ask a question, please press the star key followed by the digit one on your touch tone telephone on this time. We will come to you in the order that you signal. Once again, that's star one on your touch tone telephone for questions. We'll pause for a moment.

Our first question this morning will come from Robert Marshall with Wachovia Securities.

Good morning, actually it's Greg [inaudible]. Rob is out traveling today. Bob, Maybe you could touch a little bit on the backlog and what kind of margins are embedded on that.

Greg, we do not break down our margins and our backlog.

Okay.

But I think they would be reflective of what the current environment is from a pricing standpoint.

Has that pricing escalated during the quarter or is it pretty much stayed where it was in Q2? I know you guys said it was pretty competitive at that point.

John, do you want to comment?

I think it's pretty much the same with the exception of [inaudible] large jobs or highly competitive but the biggest part is about the same.

And how about the trend in order rates? I know you guys said that was week and that was part of your Q4 guidance but did you see further deterioration; did it continue; was there a weakness; was there some sort of pickup and still below average?

In the buildings, I think that it's pretty much the same. We continue to, like I said, earlier, the large complex jobs and the large warehouse buildings remain to be highly competitive but the small, we call the bread and butter buildings, they tend to be about the same and we expect them to stay about the same. But creating our volume in small work is more difficult when you lose those big orders is what creates the volume, so, you know, that's part of the problem.

Great. Thanks a lot.

Our next question will come from John Diffendahl [phonetic] of BB and T Capital Markets.

Good morning. I wonder if you could give us a little more color on the gross margin improvement. It's actually the best gross margin you've had in seven quarters, and it would seem from what you said that it resides largely in the component side. In the past you've talked about how competitive pricing has been in components. Has that eased up, or just tell us a little bit how you got the improvement down.

Well, John, most of our decline in margin from 2000 to 2001 really when we analyzed it related more to the excess manufacturing capacity that we had, and that was the reason that we at the end of last year decided to close five manufacturing plants, including four component manufacturing plants. And I think the closure of those plants has been the biggest benefit that we've seen in the second and third quarter margins on the component side have been improving.

Probably to a lesser extent the past through price increases tends to be a little more rapidly in the component side since you're not operating with a backlog than it would be in the building side of the business. So I think really more of it, the majority of the improvement that you're seeing has come really through better utilization of our manufacturing facilities.

And I remember you were talking about some of the competitors [inaudible] were a problem. Has any of that eased off at all to sort of help on that side?

The components - the components group has worked extremely hard to get their margins up and they've accomplished this. This goal. Not only has their sales increased year over year but their margins have improved by probably three points. You know, I think that a part of what we did was collect on some add-ons [phonetic] that I call extraordinary add-ons [phonetic] like freight, packaging charges, and so on, so forth like that. The pressure on components is about the same as it was. It may have eased just a little bit.

We seem to have some component competitors that we think we're seeing the signs of something some trouble. This downturn hasn't been hard enough or long enough for people that are operating on really thin margins to get in serious trouble, but it looks like they might be getting in some trouble now.

Bob, you - with the debt restructuring and the new line, can you give us a sense on how that's going to change your sort of embedded interest rate going forward versus what you had before?

Well, we had roughly about $292 million worth of debt, I would say, roughly a little over $170 million in senior debt. Our overall interest costs had a very favorable loan agreement, the one we've had structured from 1998. The interest rate adjustment will cost us probably around $2.5, $3 million but we would expect that to be offset by the fact that we will obviously be continuing to deliver our balance sheet. So year over year, you know, absent an overall increase in the rate that the Fed controls, I don't think the new financing agreement will change overall interest structure that much.

Thank you.

Once again, as a reminder to our audience, if you do wish to ask a question, that's star one on your touch tone phone. We will go next to Jim Klass [phonetic] with Brandy Wine [phonetic] Asset Management.

Yes, hello. We cannot be more pleased with your performance no matter what the stock's been doing. Question for you on the cash flow statement, if you will. Typically the fourth quarter, the October quarter is the largest by far in terms of cash flow from operation due to seasonality. Do you expect that to be the case this year as well?

Jim, I don't think we're going to continue to see much reduction from a balance sheet standpoint in the amount that we can reduce working capital. In fact, now, working capital may increase slightly in the fourth quarter. Again, in the third quarter we had about $4.5 million from the sale of some real estate equipment that we won't duplicate in the fourth quarter.

We obviously will continue to try to get as much out of the balance sheet as we can to try to deliver, but now, the $75 or $74 million that we've reduced debt this year is probably a little in excess of what we had promised when we started this year on the subject of debt reduction. So if we have any further reductions in debt they will probably be more modest than they have been for the nine-month period.

Okay. If you do nothing in terms of free cash flow for the rest of the year, your stock still looks extremely cheap at this price. I'm wondering why you would suggest acquisitions for capital as opposed to buying back your own stock.

I'm sorry. I don't think I understood the question.

I believe I heard you before suggesting that you might to do acquisitions of competitors as an use of capital?

But I don't think we would use them from the standpoint - I don't think we would use our stock.

I would hope not. But even using cash flow, why would an acquisition be superior to simply buying back stock at the current price?

Well, you know, we think our stock is still a good investment, Jim, but the impact that you get from an earnings per share standpoint impact that you get from buying back your stock is a temporary impact that you see for a twelve-month period. We would hope that if we could find acquisitions that are accretive that they would be accretive and continue to grow for much longer time period than just the next twelve months. We have from time to time still purchased a little bit of our stock, not a great deal.

The other thing is, you know, what we really said was we'd looked at acquisitions. If you look at what we spend on Big Rapids, you know, there wasn't much capital involved in Big Rapids, but we believe that our current operating profile, you know, offers, sound potential for the future and we're not - you know, we wouldn't pass up on a good acquisition, but we're not beating the bushes for one knowing there's not one out there right now.

We appreciate the discipline. I guess as a large shareholder, let me just say if you could find an acquisition with 15 or 20 percent free cash flow above what the stock offers now, we'd love to see you do it otherwise we'd love to see the cash put into share repurchase where we could all earn a larger percentage of the company. We'll talk about this further later.

Okay. We understand.

Keep up the good work.

Our next question will come from John [inaudible] with Wachovia Securities.

Good morning, gentlemen. You mentioned in the press release that just from the industrial perspective, typically of increases during a slowdown. I'm wondering from your business perspective what - during the third quarter what component of your overall business came from repair and renovation business and how did the markets in that market compare to new projects?

Most of that comes through the component companies and the way the component orders are received, that's a list of materials that are similar to a way you'd walk into a lumber yard and present them with a bill of material that you wanted. We don't know where the material is going or what it's used for. So it's hard to tell how much of that material went into new construction and how much of it went into retrobids. We can tell you and it is a fact that the component margins are up for the year substantially over the last couple of years.

Okay. And just kind of a second question, your accrued expenses were up during the quarter. I'm wondering what generally you outlook is for the fourth quarter in terms of working capital.

I think, as I mentioned, we probably will see some modest increase in working capital. Most of the $15 million decline that you - that we had through the first nine months was really more in the area of accounts payable and accrued expenses and really represent more timing differences than they do reductions, but we've been able to hold our inventory receivable levels in a, you know, fairly tough economic period at levels equivalent to where they were a year ago. So if figure, I would think we might use a little bit of working capital or we might use a little bit of free cash flow to increase working capital in the fourth quarter.

Okay. Thank you very much.

Once again, as a reminder to our audience, if you do wish to ask a question, please press star one on your touch tone phone at this time. We'll take our next question from Chuck [inaudible] with American Express Financial.

Great. Thank you very much. The first question - I apologize I missed this earlier in the call, on your real estate asset sales, have you fully completed those or are there any left to be done yet?

There are actually two facilities that are still for sale. We've sold three of the five that we closed. One we had a good bit of activity on, I believe we should be able to get that sold within the next three months. The other is in kind of a depressed area where there's an abundance of real estate for sale, so it will be a little more challenging to get rid of and may take us a little longer period of time. We would expect both of those remaining two facilities to be sold at somewhere around their book value.

And what is that book value currently?

I don't have the exact number, but I'd say it's probably less than $3 million.

Is that total or for each of them?

Pardon?

Was that for both facilities?

That's for both facilities.

Okay. Great. And just lastly, on the steel tariff weakening that was announced last week, I was wondering if you were hoping to benefit benefits from the 178 products that were relieved from the tariffs, if that would benefit you.

The products that we use were not included in those exemptions. We don't see there being an influx in foreign steel in the products that we use.

Okay. Great. Thanks very much and an excellent job on manage the balance sheet in this really tough environment.

We will take a follow up question from John Diffendahl [phonetic] with BB and T.

Yes. Can you talk a little bit about the different segments you sell into and where you're seeing the greatest strength and weakness [inaudible], particularly on the business side?

In the systems, you know, it's kind of spotty, John. It's some areas the - I think the larger warehouse buildings they're in a slowdown now, might be built a little bit. A few areas are still okay. The West Coast we have a few and Dallas, I think we had a project here recently. So they're kind of spotty, but our bread and butter, what we call the small day-to-day buildings that come through, they're pretty much alive everywhere. They're pretty much a market for those small buildings pretty much all over. It's not really any one place that a lot comes from. But the large buildings, no question, has been the ones that have the impact on the high volume.

And has that affected Mexico and what you're getting out of Mexico and what you're doing down there?

No, we manufacturer both out of there. The only thing that affects Mexico has a large [inaudible] has been our long base systems, the LBS system. It has affected that some, but as far as the frame capacity out of Mexico, it's the same as it has been.

Just looking at the cash flow, you received again $5.8 million in these fixed assets. I seem to remember you were expecting to get as much as $11 million in cash from those sales. Is that still an operative number?

I think we really said something less than 10, John, I remember 8 to 10. We've gotten about $5.5. The two facilities we've got have a book value of were less than 3. We think we'll be close to book value when we sell those, so that would be, you know, somewhere in the $8.5 to $9 million range. So I don't think we're that far off the numbers that we, you know, thought we were going to get.

And can you update us on your new account activity for the year?

I looked at those the other day, John. I think we're close to on the systems side we're close to 70 new builders and 140 new customers we shipped that haven't signed up. Don't - that number may not be exactly accurate, but it's close. On the component side, they're selling to new customers everyday and if you tracked them for a month, you might have 500 new customers in a month, but those are one-time deals, different than the systems side where what you're hoping for is an ongoing relationship and continued buying from a builder.

I remember you said at one time that X percent of your sales were coming from new customers. You don't have that number?

About 10 percent this year so far.

Thank you.

Our next question will come from Greg Macosco [phonetic] with Lord Abbott.

Yes, thank you. Nice quarter. In the past you've talked about the competitiveness of some of your - of the projects and having walked from certain projects. Have you seen any of that and have you said no to certain projects because of the pricing and the situation?

Johnie, did you hear that question?

No.

Yes, we have. We looked at a job this last week that we walked away from. They priced the bar joist it was in comparison with our Long Bay building. And they were down, you know, to the point that we just wasn't going to meet the price and we walked away from it. Do you recall what size that building was?

It was 400 by 800, something like that, one of the large warehouse buildings. There are some dirty prices when you get into that conditional built up. You know, our bread and butter is our standing theme system. That's not to say that we don't do build up roof, we do the B deck single ply in some cases, but those are the ones that really, really stuck. If the standing theme of our - the sill - [inaudible] and the is going to go on the roof, we're still selling some of those buildings.

Okay. And just to go back to the debt and the debt restructuring there, when all is said and done, are you paying off the entire long-term debt there of the 281, or is there only a portion of that that you're repaying with this facility?

It's the senior debt, Greg. If I remember, we've got $125 million subordinated debt issue which doesn't mature until 20009. We are not paying that off, but we're refinancing is the senior facility which all came due in July 2003. So since we were inside of a year on the maturity of that, we felt that it was prudent to go ahead and complete that refinancing at the current time.

Okay. Good. And then the tax rate, I guess, is going to stay in the 38 to 39 percent range going forward?

Yeah, somewhere in the 38 to 39 percent is a fairly good number to use.

Okay. Very nice. Keep it up.

Jerry Bruney [phonetic] of J.D. Bruney [phonetic] and Company.

Yes, could you tell us a if you've made decisions as to [inaudible] stock options?

Could you repeat that, please.

Yes, have you come to a decision as to how you're going to treat stock options in terms of your accounting?

We have not made a decision. I mean, under the current accounting rules, you know, we're not required to expense those. To be frank, a problem I have always had even with footnote disclosure is the black shows [phonetic] method always anticipates that there's going to be an increase in the value of stock option. We have a substantial number of stock options outstanding right now that are basically under water, but if we were using the black shows [phonetic] method we would be showing an expense relative to those options. The company would have absolutely no problem in adopting the expensing of stock option provided we could come up with a right methodology to really determine what that future impact is.

Okay. Well, I gather that you assume there is some value to them.

And I really don't think from our standpoint it's really material.

What would it be for the most recent quarter?

I'm sorry?

What would it be, typically a corporation footnote this information?

Well, we put it on the - we don't do it on a quarterly basis. We do disclose it on an annual basis in our footnotes. And I'm trying to look. The pro forma impact, let's see, would have been around for last year where we only had earnings of 91 cents it would have been a dime.

10 cents a share?

Right. But if you go back to the year 2000, you know, your impact where we had earnings of over $2, the impact was about 8 cents because you've got a much higher earnings base.

Right. And what rate might you expect for the current year?

I would suspect - well, you know, again, the problem is the methodology used and how do you determine what the future value of options are. And to be honest, I have not looked at that. I would not be able to give you an answer, but I wouldn't suspect it would be any higher than it was in prior years, somewhere between 8 and 10 cents earnings per share.

Okay. One other topic. Response to an earlier question about acquisitions versus purchasing your own stock back. I know I've asked this question in the past. And I guess rather than debate it or whatever I would just ask that you all perhaps think about the issue and come back and let your shareholder base know your reasoning. The explanation that you give that a repurchase of your own shares is only temporary, some of us find difficult to follow. But perhaps you could address that in a way that would be a little bit more revealing, and I think we'd all appreciate that.

Well, let me give you a couple of different reasons. One, you know, the repayment of debt also has a positive impact on earnings per share. If you look at, sure, rates are down, but if you look at virtually $100 million less in debt and what that costs you from an earnings per share standpoint, the continuing deleveraging of balance sheet has a positive impact on earnings per share. Also, obviously we have some restrictions in our current and proposed bank deals that limit the amount of stock that we can repurchase.

Lenders, unlike shareholders, are obviously not proponents of a company using borrowed money to go out and repurchase shares. But my point about it being temporary is after you get beyond the 12-month period where you make that share repurchase, you go back to a year-over-year comparison and you really don't see the benefit of that boost that you get in earnings per share by repurchasing your own stock.

You know, we have repurchased over the last three or four years or two years, three years, over a million shares of stock. We have used the majority of that stock to find our contribution to our 401K plan and have used such stock for stocks necessary to cover the exercise of stock options. So we've taken it in over a period of time, but we've basically have over the last two years funneled it back out either into the market or share exercises are into our 401K plan as a contribution to that plan.

I understand what you're saying. I'm not arguing against pay back of your debt. We're just talking about the comparisons between buying your own shares and buying the shares of some other firm which isn't part of NCI at the moment. Other than for the pricing of what you get for what you pay, there really isn't a difference, and hopefully you're looking at it in that context.

We certainly do. Certainly we - it's something we continue to look at, and we've had this conversation many times and I understand the point you're trying to make.

Thanks.

We would not make a purchase, though, if it didn't have the right approach. We would not go into the acquisition just for a one-shot deal either, but like Bob said, we certainly look at all of that when we do make an acquisition if there are any out there right now, which is pretty slim. Millicent, how many more questions?

At this time, sir we have no further questions standing by. At this time I'd like to turn the conference back to you for additional or closing comments.

Thank you.

As always, we thank you for joining the conference call this morning, and it means a great deal to us the nice comments that you all have passed on about the quarter. We've said that fiscal 2002 would cause momentum for NCI's future recovery, and that appears to be the case and we intend to keep it going that way. Thank you.

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