Core Natural Resources Inc (CNR) 2009 Q2 法說會逐字稿

Hello. This is the Chorus Call conference specialist. Welcome to the NCI Building Systems second quarter 2009 earnings conference call. As a reminder, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions) The conference is now being recorded.

At this time, I would like to turn the conference over to Mr. Todd Moore, Executive Vice President and General Counsel. Please proceed, Mr. Moore.

Thank you, and good afternoon. Welcome to NCI Building Systems conference call to review the Company's results for the second quarter of fiscal 2009. The call is being recorded. To access the taped replay, please dial 1-412-317-0088, and then the pass code 419727 and the pound sign when prompted. The webcast archive and taped replay will both be available approximately two hours after the call and continue through June 16, 2009. The replay will also be available at the Company's website, which is www.NCILT.com. The Company's second quarter results were issued earlier today in a press release that was covered by the financial media. A release has also been issued advising the accessibility of this conference call on a listen-only basis over the Internet.

Some statements on this conference call may be forward-looking statements as defined by 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 Securities and Exchange Commission and in today's news release for a discussion of factors that could affect NCI's operations, as well as any forward-looking statements made on this call.

To the extent any non-GAAP financial measures are discussed on today's call, you may also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP on the Company's website by following the news link to see today's news release. Information being provided today is as 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 expectations.

At this time, I will turn the call over to NCI's Chairman, President and Chief Executive Officer, Mr. Norman C. Chambers.

Thank you, Todd. Good evening, everyone, and welcome to our second quarter 2009 conference call. Joining me this evening are Mark Johnson, our Chief Financial Officer, Mark Dobbins, our Chief Operating Officer, and Todd Moore, our General Counsel. I will provide an overview and Mark Johnson will review our financial results followed by Mark Dobbins who will review our operations. Then I will return with closing comments before we take your questions.

Our markets continue to be very weak in the second quarter. We faced similar conditions to those of the first quarter, namely depressed levels of non-residential construction activity and the continued collapse of steel prices. Within this very difficult operating environment, we made marked progress in several areas to build our competitive position, expand our markets, and maximize our financial performance. Notably, we reported net cash from operating activities of $10 million, achieved a sequential increase in adjusted gross margin that was driven by an 11% sequential decline in nonmaterial component of our cost of goods sold resulting from our cost cutting programs and reasonable pricing at lower cost of steel. And both our Components and Buildings Group posted adjusted operating profits exclusive of special charges.

We also made significant progress in our announced plans to restructure our balance sheet, which I will comment on a little later. With respect to the macro environment, non-residential construction activity, measured in square feet, continued to worsen during most of our fiscal second quarter. McGraw Hill reported that new construction activity was down 50% for the period January through April compared to the same period last year. Our traditional strong commercial industrial markets were off approximately 60%. The dual effect of an extraordinary weak economy and extremely cautious lending posture of regional banks significantly reduced demand for our products. There is some anecdotal news of a bottoming of the market, but really there is no support by discernible trends at this point.

The AIA building and inquiry survey that was recently published was stabilized to some degree. While the inquiries survey is reflecting some expansion, building it is still negative. McGraw Hill numbers showed some improvement in the month of April, but it is difficult to determine whether the slightly less bad conditions we are seeing are resulting from improved economic conditions or just the construction industry as seasonality.

As a result of the major falloff in commercial industrial business activity, the institutional part of our business, which includes the government-funded work, was one of our more important end markets in the second quarter. In our core Components and Buildings business, we shipped 5% fewer tons sequentially and 52% fewer tons on a year on year basis. These deteriorating market conditions made it clear that we needed to aggressively implement Phase III of our cost reduction plan. You will recall that we completed Phase I and Phase II in late February and early March, with a combined annualized savings of approximately $60 million. Approximately 90% of Phase III is now complete, which we expect will result in an additional annualized savings of $60 million, bringing the total cost savings to approximately $120 million. This means that we will go into 2010 with approximately 25% fewer plants and approximately 40% fewer employees.

While no one feels good about the reduction in employees, there is no doubt that we will be well positioned to both sustain a continued depressed non-residential market and benefit from even a modest market improvement in 2010 or 2011. Mark Dobbins will provide more color on our sales activities and operational improvements.

Steel prices continued to fall during our fiscal second quarter, reaching levels that we have not seen in four years. Over the longer term, we believe that lower steel prices will positively impact demand for our products. However, in the short-term lower steel prices will negatively affect our revenue and backlog. Steel constitutes approximately 53% of our sales. So the 54% fall in steel prices, combined with depressed levels of non-residential construction activity, will weigh heavily on our revenue for our third and fourth quarters. Our Buildings Group backlog at the end of Q2 was $286 million, which on a steel price adjusted basis was approximately flat with the $302 million reported at the end of the first quarter.

Finally, we are making progress on a comprehensive restructuring of our balance sheet. As previously disclosed, we have analyzed the execution of several capital structures that would address not only the likely put of the convertible notes in November, but also our revolver in term loan B, which matured in June of 2009 and 2010, respectively. With the help of JPMorgan, we ran a process which led to a highly regarded private equity firm emerging as a potential partner. They have completed months of in-depth due diligence, which has included evaluating our integrated business model, our growth strategy, manufacturing plants, and management team. We believe that they would be an outstanding partner for our future.

As reported on May 21, their investment is conditioned on achieving a capital structure that ensures that we can withstand an extended economic downturn. This transaction will require considerable cooperation from our lenders and our note holders. We have made solid progress on a new working capital facility and have commenced discussions with our term loan debt holders. Additionally, several of our convertible bond holders have offered constructive approaches and solutions to facilitate our refinance. While there still remains much to accomplish, Green Hill and Company, along with Wachovia and our lead banks are working diligently with us to structure a successful outcome over the next few months.

There is not much more that I can say about the progress at this time, except that I am confident we can finalize a transaction, that while the private equity firms investment will be a very dilutive one to our current shareholders at the onset, it will give us the financial structure we need to grow our business as the economy improves.

With that, I'll hand it over to Mark Johnson to review our financial results, followed by Mark Dobbins and then I'll return to sum up and take your questions.

Thank you, Norm. This was another very difficult quarter for us. Consolidated revenues were down 46% from last year's second quarter and 14% sequentially, and special charges drove our net loss for the period to $120 million or $6.17 per diluted share. Volumes for our core components and buildings businesses, measured in tons shipped, were down 52% from last year's second quarter and down 5% sequentially.

On a positive note, second quarter year-over-year revenue did not decline at the same rate as our volume, which speaks to our continued ability to achieve a reasonable price spread over material costs, even in these very tough times. Also on the positive side, gross profit margin exclusive of special charges showed sequential improvement, increasing to 21% from 18% in the first quarter of this year. This improvement results from our continuing ability to maintain a reasonable price spread over the lowered material costs and the effects of our cost reductions. Excluding special charges, the non-material portion of our cost of goods sold decreased 36% from the same quarter of last year and was down approximately 11% sequentially. Our utilization rate moved up sequentially from 35% in this year's first quarter to nearly 40%, which reflected reduced capacity resulting from plant closings, although there is still some lag time in taking capacity out of the system.

The sequential increase in gross profit margin achieved in the second quarter reflects both announced cost reduction programs, as well as ongoing efficiencies that Mark Dobbins will discuss a little later. And as anticipated, declining steel prices and activity levels reduced our working capital requirements and enabled NCI to report positive cash flow from operating activities of approximately $10 million for the quarter. Gross profit was down 70% from last year's second quarter, due first to the significantly lower volumes and the resulting lower fixed cost absorption, and secondly to the special inventory and impairment charges. The inventory charge directly resulted from the combination of both a continued sequential decline in steel prices and significantly slower sales volume in both our components and building segments. The charge affected all of our business segments, with approximately half the amount attributable to our Buildings Group and the other half attributable about equally to Components and Coatings.

The amount of the charge is an estimate based on our projection of the volume and price levels we will achieve in subsequent quarters and the required normal profit. Based on those projections, we believe that most of the higher priced inventory will be depleted by the end of the third quarter. If our estimates in volume in price prove to be incorrect, there could be a corresponding affect, either positive or negative, on gross margins in subsequent periods as the inventory is depleted.

Selling, general and administrative expenses for the quarter were down 26% year-over-year to $54.7 million, which reflects both our cost reduction initiatives and lower activity levels. Sequential reductions in SG&A costs of $3 million were offset by higher costs related to our annual sales meeting, as well as higher healthcare costs and professional fees. Including the inventory charge I just mentioned, NCI incurred a total of $124.6 million in special pretax charges in the second quarter, the largest component by far was a noncash goodwill and intangible asset impairment charge of $104.9 million. Low volume levels in our second quarter, combined with a worsened outlook for 2009 non-residential construction starts, again presented an impairment indicator requiring a goodwill impairment test as of the end of our second quarter. As you know, a part of the impairment test requires the Company to reconcile the fair value of the individual reporting unit to the Company's publicly quoted market cap, including a reasonable control premium. Our stock price near the end of our second fiscal quarter was lower than at the end of our first fiscal quarter. We have now written off virtually all of our goodwill.

Restructuring and asset impairment charges for the period were $9.1 million, which is higher than we had anticipated primarily due to the implementation of the third phase to our cost cutting program, which involves additional plant closures. We recorded a $5.3 million asset impairment charge related primarily to assets within our Buildings Group and the restructuring charge of $3.8 million related to severance costs and plant closings associated with Phase II and Phase III of our cost reduction program. Respectively, we expect to take approximately $2.2 million in additional charges, mostly in our third quarter relating to severance costs and other costs for the remainder of Phase III of our cost reduction.

On an adjusted basis excluding all the special charges incurred in the second quarter, the company had EBITDA of $2.5 million and operating loss of $7.5 million, and a net loss of $7.2 million, or $0.37 per diluted share. However, it should be noted that for purposes of calculating EBITDA under our credit facility, as presented in our financial release, the lower of cost or market inventory reserves are initially added back to earnings, but are later deducted from earnings in the period in which the inventory is disposed and only the noncash portion of the restructuring charges is added back to the earnings.

Turning to the balance sheet, post charge inventory levels were at $97 million, down almost $100 million from fiscal year end levels and $46 million below this year's first quarter. We estimate that the inventory on hand at the end of our second quarter measured in tons is approximately 23% lower than the end of our prior fiscal year. Our annualized inventory turnover for the quarter was 5.9 turns compared to 4.8 turns last quarter, and 8 turns for the 2008 second quarter.

Receivables at the end of 2009 second quarter were more than cut in half to $72 million from $163 million at the end of fiscal 2008, and down about 15% from the end of this year's first quarter. Our day sales outstanding calculated on a trailing three-month basis was 34.5 days compared to 35.8 days in the previous quarter and 32.9 days in the last year's second quarter. Despite this very tough business environment, we continue to see only a moderate increase in our past due account levels, with a corresponding increase in our bad debt reserves. Finally, post charge, there was only $5.2 million in goodwill remaining on our balance sheet.

During the second quarter, we invested $7.2 million in our property and equipment. In the first half of this fiscal year, we have trimmed our capital investments to $14.2 million without sacrificing our key strategic plans. We expect capital spending in our second half of fiscal 2009 to be approximately $6 million, which would bring full year CapEx to about $20.2 million and a reduction of 18% from last year's levels.

With respect to our capital structure, we have the following debt obligations in order of maturity. Our revolver, which has no balance outstanding, matures in June of 2009. Our $180 million convertible notes have a put feature in 2009 and are now carried as short-term debt. Our $293 million term loan matures in June of 2010, but is also carried as short-term debt. As of May 3, 2009, we were not in compliance with all of our debt covenants, but we have obtained waivers from our senior credit facility lenders which we believe will provide us enough time to address our comprehensive capital structure plan.

Each of our segments was negatively impacted by the worsening economic conditions for our end markets and the sharp decline in steel prices. As you can see from the tables included in our release, the Coater Group experienced a 55% year-over-year third party sales decline. The Components Group sales were down 38% and the Buildings Group sales were down 50%. Utilization rates ranged from 35% to 44%, significantly below year-ago levels. Adjusted for special charges and corporate expense, the combined direct operating income contribution of our business segment was $5.7 million in the quarter.

Now I would like to turn the call over to Mark Dobbins to review our operations.

Thank you, Mark. As norm mentioned earlier, the non-residential market conditions have been extremely challenging. Specifically, the commercial industrial market being off approximately 60% impacts our Buildings Group significantly, as this market produces a lot of our design build type work, which is an area that a typical builder excels in. The weakness in this design build work is forcing many builders to explore the planning spec bid market. Our Buildings Group is refining its skills internally and working closely with customers to more effectively compete in this arena. While overall quoting activity in the building segment has remained relatively stable in this environment, we believe it is partially supported by this increase in planning spec work, which leads to multiple bid sourcing for the same projects. The small lower complexity building market has experienced upticks in volume, only to be followed by declines, reflecting the positive impact of lower steel prices on one hand and the negative influence of general economic conditions on the other.

On a more positive note, we have seen areas of relative strength in mining, heavy industrial, government, and military projects. During the Q1 conference call, we noted the positive impact of having all of NCI's resources available to Garco, the small acquisition we made in 2007, which allowed them to book and deliver a large mining project in Colorado. Prior to the acquisition, Garco would not have been able to take on this size of project without the use of our hub and spoke manufacturing and distribution model. We continue to develop this potential as Garco recently booked a large military facility of approximately $6.4 million and two additional significant mining projects totaling $5.6 million. Utilizing our hub and spoke manufacturing and delivery model, Garco will be able to service these large projects without sacrifice to their builders or projects currently in their backlog.

These larger heavy industrial projects, which are typically much longer in the planning phase and are generally well capitalized, continue to provide excellent opportunities for us on a revenue and tons basis. The part of the market that we classify as government administration, which includes spending on military bases, continues to move up the ranking chart based on dollar volume. This market was ranked number six in fiscal 2007, number five in 2008, and thus far in fiscal 2009, it is ranked number three. Both our building and component segments are adding additional focus to these projects and positioning themselves and their respective customers to be more effective in capturing these opportunities.

We also have recently uncovered pockets of international business opportunities, which have resulted in projects shipping currently with additional opportunities into the future. Now, these are in areas of the world in which pre-engineered metal construction has not been historically utilized as a preferred method of construction. Our ability to efficiently move a project from concept to delivery, combined with shortened construction times, has created significant interest in these countries. Our coater segment is closely aligned with the metal construction industry and has been similarly impacted with reduced volumes. They have been negatively impacted by the migration of packaged sales to toll processing, which is typical in a falling steel cost environment, and the reduction of family tons, which helped to cover their hour fixed cost basis.

However, there are areas outside the metal construction business where the coaters group are finding additional opportunities, such as HVAC, lighting fixtures, electronics boxes, as well as coating aluminum products. Additionally, the core coating industry is flush with capacity and we've seen a number of operations taken offline, which is allowing us to gain market share. Volume in the component segment was off considerably, but not to the same magnitude as evidenced in the building segment, due in part to the fact that in addition to new construction, the components division serves a large repair and retro fit segment of the industry. This group is also targeting the increased government military opportunities, along with school project work.

In support of this effort, we are developing tools to enhance our acceptance in the architectural community through webex supported continuing education classes and individual presentations with these architectural firms. Each of our three segments has taken steps to flatten the organizational structure of their sales force, bringing senior levels of management closer to the customer and allowing them to manage market share and improve margin spreads in a very difficult and competitive environment.

Turning to our manufacturing operations, as Norm mentioned earlier, we are wrapping up our Phase III cost reductions. The actions taken have resulted in the closure of four additional manufacturing locations and the temporary suspension of manufacturing activities in certain of our other facilities. In the aggregate, our cost reduction efforts, which began in early November 2008, have resulted in the migration from 43 manufacturing facilities to 32 manufacturing facilities, and approximately 40% reduction in personnel ultimately driving $120 million in total annualized cost savings. Year to date in fiscal 2009, we have rationalized our manufacturing facilities, reduced overlapping operations, and eliminated less efficient ones, while utilizing more automation and lean manufacturing tools such as 5S. The continued integration of building manufacturing operations, in addition to the increased utilization of the components operations via our hub and spoke operating model, has allowed us to reduce inventory levels by an estimated 38% year-over-year on a tons basis. All of these actions have been taken without sacrifice to safety, quality, or service levels.

It is important to note that during this rationalization and integration of our manufacturing plant, we have not changed our marketing, sales, or delivery footprint. We continue to support all of our building brands and their respective builders. In areas where we have closed or consolidated manufacturing operations, the customer touch points such as sales, engineering and customer service have been maintained and we are continuing to build relationships and mine opportunities, along with our customers. Importantly, through efficiency improvements, alignment of resources, and continued expansion of our hub and spoke processes, we are now positioned to expand our operations back to previous year tonnage volumes, with minimal addition to fixed costs.

Now I would like to turn the call back to Norm. Thank you.

Thanks, Mark. To sum up, business conditions remain very tough and we do not see a recovery on the horizon. Therefore, as you just heard from Mark, we are moving forward with a broad range of initiatives to support our customers and leverage our position as a market leader across our existing and new markets and geographies. Importantly today, we are a leaner, more efficient and better integrated organization that is positioned from an operating standpoint to both weather the continued economic downturn and capitalize on improving market conditions.

I think we're now ready to take your questions. Operator?

(Operator Instructions) Our first question comes from Arnie Ursaner from CJS Securities. Please go ahead.

Hi, good afternoon. Want to focus a little bit on your capacity utilization as we think about the balance of the year. You mentioned you were around 40% now in total or on average. I assume that reflects the plant closings you've already taken, is that correct?

Yes, that's correct.

So as I think about your back of the year, traditionally you needed 60%, 65% utilization to show some pretty decent margin improvement, but we've also talked about with the capacity reductions that number might be lower, more in the 50% to 55% range. Given the order backlog you have and your view of the balance of the year, and the capacity reductions, are you likely to achieve a 50%, 55% utilization in the back half of the year? And if you can, what sort of margin might we be looking at?

We're not giving guidance, but I will say that we expect to see some level of seasonality, but it is very difficult to determine what level of seasonality that we'll see. This is a very unusual year. It's unlike any period that's been recorded by McGraw Hill Dodge in terms of forecasts. And we simply, for the reasons I stated earlier, we haven't seen any clear evidence of much level of seasonality. But in what we have in our backlog, we do expect to see increase in utilization in our Q3 and Q4 as a result of our cost reductions in our plants, in our rationalization of our plants.

And in that 40% utilization factor, that does not include the Phase III plant reductions. That only includes Phase I and II plant reductions because most of those plants operated in the second quarter.

With the steel price decline we've seen, I know you had orders from various customers. Have you had to make price concessions on existing contracts you have given the prices you've seen declining in steel?

Well, as you know, Arnie, the components business and the coating business are pretty quick turns. So they are having to deal with pricing, on a day by day basis. Historically, our Buildings Group has had little, stickier prices because of the backlog, but to be sure, with the rapid decline, there has been a need to renegotiate in some instances.

Norm, my final question and it may be one you choose not to answer, but you obviously are now implementing a Phase III and we've not heard any resolution on your debt. Were the Phase III actions dictated by either your bank or the private equity firm as a condition of moving forward on the deal?

No, they weren't. It was strictly management decision. And again, our whole view is that we have to do the things that are in our care, custody and control. And while no one likes to layoff folks, the hell of it is that we really have to, to be organized to sustain ourselves and that's the best steps we can take, Arnie.

Okay. Good luck, thank you.

Thank you. Our next question comes from David Yuschak from SMH Capital. Please go ahead.

Looking at your working capital expectations here for the rest of the fiscal year, Norm, looking at receivables inventory, it's going to be tough to squeeze in much more in the way of cash out of there right now unless you get some kind of recovery in the way of good cash flow from profits, which would mean then you have to go back and depend upon your revolver potentially. What's your thoughts here as you look at the various components of working capital, how they may interplay here for the rest of the year to potentially give you some incremental cash by the end of the fiscal year, or that you may need the revolver, looking at both kind of scenarios where one can come in and may need to come in versus where you can extract cash right now?

With respect to our working capital, specifically receivables and inventory, those numbers will basically depend upon the level of seasonality that we see in 2009, particularly the third quarter where if we do begin to see more signs of seasonality than we are currently seeing, it could drive to us make a little bit more investment in our working capital. With respect to receivables specifically, there could be an uptick in receivables relative to seasonality, but we should see continued moderate declines in our inventory levels.

But you know, Dave, that's within the context of us working on our holistic approach and we've made, as I said in my remarks, made some good progress on a working capital facility as part of the comprehensive solution.

We're very mindful of the need for the appropriate level of liquidity, especially in this environment, this economic cycle that we're seeing. We have, as you know, $92 million of cash on our balance sheet, which we would utilize to maintain our working capital as needed.

Now, when you put this third phase in, where does that take your breakeven? Any kind of idea where breakeven may end up being then?

Well, it brings it down and it brings it down very nicely, and it means that an extra 10,000 tons of steel can add a lot of profits, probably somewhere around $7 million in profits or contribution. So, we've brought it down and that's the place to be.

Okay, so that won't have any impact, though, until next fiscal year probably?

No, it has impact right now. I mean those costs--

I mean on the third phase, that will have an impact also right now?

The third phase is 90% complete.

90% complete.

We're wrapped up with most of the activities. We're just not seeing all of the, I guess you would say all of the benefits of Phase III just yet and it will be a little noisy through the third quarter. Into the fourth quarter we should see it start to clean up and really recognize the impacts.

Okay. So the fourth quarter will really be the first clean quarter where the outside investor can get a look at what all those efforts have come to?

Yes, people should have a pretty good look at what our run rates are and breakeven and where we are by the fourth quarter, Dave.

Okay, thanks.

Our next question comes from Dan Goldberg from RBC Capital Markets. Please go ahead.

Hi, guys. Thanks for taking my call. Has there been any discussion contemplated as far as the management structure going forward, assuming you were going to have this private equity investment recap? And that management structure, is that contemplated to be the same as it is currently, or will there be some changes?

I think it remains to be seen at what level. Clearly with an equity investment, you would expect that there would be some chasing with the board level, but the whole evaluation that's been taking place during the due diligence and the involvement we've had has certainly reinforced the view that the management team is the management team that they want, which is us.

And would it be unreasonable for us to expect that management will have to participate in the transaction as far as investing in the contemplated transaction?

There's been no discussions on that front at all, and as you know, we're all shareholders, so we have a vested interest in seeing the existence in the continued health of the company.

Sure, and in total, how much does the management and board own of the current stock?

Less than 5%.

Got it. Thank you.

You're welcome.

(Operator Instructions) Our next question comes from Paul Luther from UBS. Please go ahead.

Hi, thanks, guys. I'm standing in for Timna Tanners today. Wonder if you can make some comments on what competitive pressures you're seeing. Seeing anybody undercut pricing? You aid you've seen some competitors take out some capacity and show some discipline, but can you talk more about pricing competitiveness?

As Mark had mentioned, when you move from design build to plan spec, there are more bidders, and that has clearly increased the attentions in terms of competitiveness. But I'll say that the builder network that we have is very solid and the customer group that our components and coatings group have are very good, indeed. So it is clearly very competitive with the steel prices that have decreased. And effectively we've seen steel prices come back to really take back all of the steel price increases of 2008 and most of the steel price increases in 2004. So in that environment, it is really competitive, but that's just the environment we're in. Mark, do you want to add anything to that?

Yes. Norm's dead on. It's a tough environment, very competitive. But really and truly this plays into our hand in a lot of regards. One of the things that sets us apart from all of our competition is our service levels to the customer ongoing and long-term relationships with these customers. At the end of the day, even though it is a tougher environment, we're pretty well positioned with the group that we typically deal with.

Okay. Thank you. Then can you talk about where you wrote down inventory values relative to where spot is? Are you pretty close to where spot steel prices are today and so if steel prices are flat or moderately rising from here, inventory devaluation could be over for you?

We're certainly very close. It's within 10% of spot pricing.

Okay, thanks. And then last question, are you seeing any kick-in yet from federal stimulus dollars in terms of projects, any pickup in public infrastructure bidding?

We are beginning to see the early signs of it. It certainly wasn't as quick as we had anticipated, but there are specific jobs and projects that are associated with some of that spend.

Okay, great. Thanks, guys.

You're welcome.

Our next question is a follow-up from Dan Goldberg from RBC. Please go ahead.

Hi, thanks again. The previous 8-K said, I believe, that you have to complete due diligence and announce some sort of transaction. Forgive me, I'm paraphrasing by, what is it, July 15 and then you have a waiver until something like September 15 by the London group. Is that my understanding?

Yes, yes, that's correct.

Okay. So at this point in time, we are hopefully anticipating some sort of transaction to be announced between now and July 15 or else can one assume that the waiver would be extended? What are your thoughts?

I'm not going to get into a hypothetical, but we are working to a timetable that you mentioned and we're just continuing along that path.

Okay. Thank you.

(Operator Instructions) There are no more questions at this time. I will now turn the conference back over to Mr. Norman Chambers, Chairman, President and CEO.

Thank you very much for your questions. The script and the comments were detailed, so I'm sure you'll have a lot to go through and the earnings release was, as well. And we appreciate your interest and look forward to reporting more positive results in the future. Thank you.

Thank you, very much, for participating in the NCI Building Systems second quarter 2009 earnings conference call. This concludes today's event.