Core Natural Resources Inc (CNR) 2013 Q1 法說會逐字稿

Good afternoon, everyone, and welcome to the NCI Building Systems first-quarter 2013 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity for you to ask questions.

(Operator Instructions)

Please note today's event is being recorded. At this time, I'll like to turn the conference call over too Mr. Todd Moore. Sir, please go ahead.

Thank you. Good afternoon and welcome to NCI Building Systems' call to review the Company's results for the first quarter of fiscal 2013. To access a taped replay of this call, please dial 877-344- 7529 and enter the passcode 100 25 274 and the pound sign when prompted. The replay will be available approximately two hours after this call and will remain accessible through March 12. The replay will also be available at the Company's website at ncigroup.com.

The Company's first-quarter results were issued earlier today in a press release that was covered by the financial media. A separate release was also issued advising of the accessibility of this call on a listen-only basis over the internet.

Some statements made on the call may be forward-looking statements within the meaning of applicable securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as potential, expect, should, will, and similar expressions. These statements reflect the Company's current expectations and/or beliefs concerning future events.

The Company has made every reasonable effort to ensure that the information, estimates, forecasts, and assumptions upon which these statements are based are current, reasonable and complete. However, forward-looking statements may be subject to a number of risks and uncertainties that may cause the Company's actual performance to differ materially from that projected in such statements.

Investors should refer to reports filed by the Company with the Securities and Exchange Commission and in today's news release for a discussion of factors that could cause actual results to differ. To the extent any non-GAAP financial measures are discussed, you may also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP in today's press release, which can be located on the Company's website by following the media link.

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, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to NCI's Chairman, President, and Chief Executive Officer, Norm Chambers.

Thank you, Todd. Good evening, everyone and welcome to our first-quarter 2013 conference call. Joining me this evening are Mark Johnson, our Chief Financial Officer; Todd Moore, our General Counsel; and Layne de Alvarez, our Director of Investor Relations. I will provide an overview and review our operations followed by Mark Johnson, who will review our financial results. Then we will be happy to take your questions.

First-quarter results were mixed, which is not unusual given that it is traditionally our seasonally slowest period. On the macro side, the economy and non-residential demand slowed in the last two months of calendar 2012. Still, we were able to record 22% revenue growth over the comparable period last year, thanks to our Metl-Span acquisition and modest organic growth in our Buildings and Components group.

While we expected first-quarter revenue would reflect Hurricane Sandy's negative impact on shipments to the Northeast, in fact, we estimate that we lost about $7.5 million in sales and $1.5 million in gross profit as a result of nine additional weather-related events compared to zero in the same period last year. Still, we believe this was reasonable performance for the period and reflected our continuing ability to outperform in terms of volume and revenue in the low-rise nonresidential construction market, which according to McGraw-Hill data increased in our first quarter by 4.4% in square footage.

Our gross margin, however, was lower than last year, due in part to factors that we anticipated, such as the ramp-up of production in our new coating plant in Middletown, Ohio, the higher portion of low-margin structural projects shipped by our Buildings group, and the likelihood that weather on a year-over-year comparison would be negative. Our margins were also negatively impacted by decisions we took to retain skilled workers in our Buildings group doing our seasonally slower first and second quarter and to invest in production training with an emphasis on welding.

As we move into the seasonally stronger second half of fiscal year, we see the need for multiple plant shifts to accommodate increased production volumes. But demand is not yet strong enough to officially support those shifts during the seasonally weaker quarters. Going forward, as the economy recovers, our first and second quarters will, while remaining our seasonally slowest, will produce greater volumes with better utilization and the impact of this type of investment will be negligible.

We estimate that the additional training that we are doing, combined with the higher volumes that we project, will result in year-over-year gross margin improvements of 100 to 200 basis points in both the third and fourth quarters of this fiscal year. Importantly, we believe this action will result in quality and efficiency improvements, shorter lead times, and increased profitability in the Buildings group over the longer period as well.

Additionally, the Buildings group continues to see more opportunities to bid on design/build projects where we can add value through our sophisticated engineering and drafting capabilities, and we are seeing the benefits of that trend in our current quoting activity.

In the Components group, the addition that Metl-Span has provided NCI with a significant opportunity to take advantage of the growing demand for insulated metal panels in both the well-established cold storage market, as well as the fast-growing commercial industrial and architectural markets. We expect our insulated metal panel product lines to generate over $215 million in revenue for the components group this year, up from $90 million in fiscal 2012. In fact, their current level of open orders is similar to the top of the last non-residential cycle in 2007 reflecting the strong demand for this product.

Additionally, we continue to see traction for the products that serve the roll-up metal doors, agriculture, and retail depot markets, each of which should continue to post profitable growth as we move forward. But we have been challenged by weaker market recovery and excessive pricing pressures in the very fragmented core roofing, sidewall, and secondary structural steel product categories.

Finally, our Coatings group operating income increased on flat sales thanks in part to higher internal revenue that base-loaded their plants. The group is very efficiently ramping up the new Middletown, Ohio light gauge paint line which we expect will be incremental to our profits in the fourth quarter of this fiscal year.

Looking ahead, we expect our second-quarter adjusted EBITDA to show sequential improvement, driven by a more favorable project mix in our Buildings group, and to be in line with the $15.3 million we reported in last year's second quarter, which included a $1.9 million non-recurring benefit from an actuarial reserve adjustment. Indicators are positive. Quoting is good. Our customer sentiment is quite positive across all of our businesses.

Of course, no one knows what sequestration will bring, but our backlog is up 17% year over year. And commercial demand is slowly improving, showing a pick up in retail for the first time in a while. Therefore, our outlook for 2013 remains positive as we see improving market conditions and our operating leverage resulting in second half performance that is significantly ahead of last year. Now, I would like to hand over the call to Mark Johnson, who will review our 2013 first-quarter financial results in more detail.

Thank you, Norm. The Metl-Span acquisition and mid-single digit organic growth in our Components and Buildings groups drove a 22.2% year-over-year increase in first-quarter revenues to $297.6 million up from $243.6 million in last year's first quarter. This was solid performance for a seasonally slower first-quarter when volumes across the Company were down 18% sequentially. But it was below our expectations due to the impact of weather-related delays beyond Hurricane Sandy and the post-election market pause resulting from fiscal uncertainties.

Each of our business segments contributed to a 12% year-over-year increase in tons shipped in the first quarter. But mix issues and the expansion of manufacturing capabilities in our Buildings group, especially in a period of relatively low volume, impacted profitability. The Components group was the strongest revenue performer in the quarter, mainly due to the acquisition of Metl-Span posting a 45.5% increase in sales. On a pro forma basis, the group's tonnage increased 8.6%, however revenue was up only 5.1% due to lower material costs which resulted in a 7% year-over-year decline in unit sales prices.

During the period, we incurred an incremental $1 million for our Mattoon, Illinois, insulated metal panel plant which was temporarily closed to facilitate the conversion of the manufacturing process to the Metl-Span process. Similarly, we will convert our Jackson plant in the second quarter taking advantage of the seasonally slow period to accomplish this important integration step. As we have mentioned before, the group's core components business, which serves the commercial and industrial markets, continues to face pricing pressures in this low-demand environment.

We are working on a number of initiatives here to improve performance in advance of a significant economic recovery. The seasonal pickup in volume in the second half of the year will help as well insulated metal panels becoming an increasing -- an increasingly greater percentage of revenue.

The Coatings group posted a 4.5% year-over-year improvement in operating income on a 1.8% volume increase and flat sales in the first quarter. External sales were 5% lower due to some weather-related processing interruptions and decisions to cut back on certain lower-margin activities. The lower external sales were offset by higher internal sales to the Components and Building segment in support of their volume growth.

The group's solid operating performance was achieved after absorbing an additional $860,000 in start-up costs at the Middletown, Ohio, plant which became operational in the first quarter and is on track to begin contributing to earnings in our fiscal fourth quarter.

The Buildings group's results were mixed. Its 9% increase in volume only resulted in a revenue increase of 5.2% due to a less favorable sales mix and lower material costs which combine to reduce sales prices in the first quarter. Operating income was $4 million, almost half of what we earned in last year's first quarter as a result of three issues. First, our sales mix was less favorable due to a high proportion of low-priced structural work that we shipped in the first quarter.

Second, we had higher manufacturing costs related to the retention and training of skilled workers in order to optimize our performance in the seasonally stronger second half of 2013. Specifically, the volume we expect to achieve in the last half of 2013 will require our buildings plants to operate additional shifts and we are training and retaining the skilled labor to ensure that we will optimize our margins in the third and fourth quarters consistent with our long-term growth plans throughout the economic recovery. Third, we incurred higher marketing and increased our bad debt reserves, which I will speak to in a moment.

We expect to continue the investment in expanding our manufacturing capabilities in the second quarter, but the effect on our results for the period will be reduced as the Buildings group pricing and margins improve next to the more favorable underlying project mix in the backlog. Moving down the P&L, you can see that our consolidated gross margin was 20.5% compared to 22% in last year's first quarter as a result of the items I just noted in the Buildings group, integration costs in the Components group, and the start-up costs at the Middletown Ohio, coating plant.

In the second quarter, we expect to see a significant sequential increase in gross margin, but it will likely be below last year's second quarter due to the lingering impacts of these factors. However, in each of the third and fourth quarter, as Norm mentioned, we expect gross margin to be ahead of 2012 levels.

Engineering, selling, and G&A costs were $60.5 million, compared to $48.9 million in last year's first quarter. As a percentage of revenue, ESG&A remained relatively constant at 20.3% in the first quarter, compared to 20.1% in last year's first quarter. The acquisition of Metl-Span is the primary driver of the increased costs. Our costs also include $1.5 million higher non-cash stock compensation charges as we have now reached the mature annual run rate for our plan.

Also, we took a $1.3 million charge for bad debt expense this quarter compared to $0 million in last year's first quarter. This change relates to increases in our reserves as our customers face working capital constraints now that they are beginning to grow after several years of decline.

Our DSOs increased from 33.7 days last year to 38.2 days in this year's first quarter, partially as a result of including Metl-Span and partially due to incremental aging. And while we have had no increase in actual bad debt write-offs, we have increased our reserves in relation to the aging. We expect ESG&A as a percentage of revenues to remain relatively constant in the second quarter but are projecting it to be significantly lower in the third and fourth quarters of the year.

Operating income was $398,000, compared to $4.3 million in last year's first quarter and we reported a net loss applicable to common shares for the period of $3.6 million or $0.19 per diluted common share, which compares to a net loss applicable to common shares of $10 million in last year's first quarter equivalent to a diluted loss per share of $0.54. Excluding the effect of the prior-year beneficial conversion feature charge of $4 million, the comparable adjusted loss per common share would have been $0.31.

Now a few comments on our balance sheet. We ended the period with cash and cash equivalents of $25.8 million compared to $55.2 million at the end of our 2012 fourth quarter, consistent with working capital needs ahead of our seasonally strong second half. Our ABL credit facility remains undrawn and we have paid down our outstanding term loan by nearly $9 million.

Our inventory balance was $113.8 million, an 11.5% increase over the same period as the prior year due to the inclusion of Metl-Span. Annualized inventory turnover improved to 8.5 turns for the quarter compared to 7.9 turns in last year's first quarter and 10.1 turns in our 2012 fourth quarter. First-quarter capital expenditures were $6.1 million. As previously announced, our 2013 full-year capital expenditures are expected to be between $27 million and $30 million which will include the integration enhancement and expansion of our product line and operations across all three of our business segments.

As you can see from today's release, our outlook for 2013 remains the same. Approximately $6 million of the incremental first quarter expenses that I have discussed including the manufacturing labor investment, bad debt expense, plant integration and start-up costs, et cetera, will continue in the second quarter, but will dissipate in the third and fourth quarter.

Therefore, we expect second-quarter adjusted EBITDA to be similar to what we reported in the comparable year-ago period and second-half performance, which will additionally benefit from improving market conditions, and our strong operating leverage, is expected to be substantially ahead of the comparable 2012 period. With that, I'll now turn the call back over the Norm.

Thank you, Mark. Before opening the call to questions, I just wanted to say a few words about our strategy. This is the foundation of our stated objective, that 2013 will be another solid step along the path to generating over $200 million in EBITDA when the non-residential new construction starts, measured in square feet, return to 1 billion square feet. And that our strategy will propel NCI to even higher levels of performance as the recovery takes hold and volume moves to a more normalized demand levels of 1.2 billion to 1.4 billion square feet.

Our strategy is not only based on capturing our share of an improving non-residential market and leveraging the advantage from all the operation efficiencies we continue to work on in the Buildings group, marketing and sales, engineering and drafting, and manufacturing. It is also based on the growth of new markets, products, and distribution channels in our Coating and Components group. Markets like appliances, enhanced distribution of commercial and industrial insulated metal panels, and high-end architectural panels and new, expanded retail depots for very local markets throughout the US and Canada.

In other words, future potential above and beyond our intermediate goal of $200 million by 1 billion will be driven by a growth strategy in our Coating and Components groups and a leverage strategy for our Buildings group. We are committed and focused on the next five years and we realize that every quarter matters in getting there. Operator, we are ready to take your questions.

(Operator Instructions)

Bob Kelly, Sidoti.

Just a question on the $6 million in incremental expenses. Do those drop to $0 by the time we hit 3Q F '13?

No. They don't drop to $0. When we get to Q3, the only item that would be continuing is the $1.5 million of incremental stock compensation charges. And that is a function of reaching the maturity of that plan and that plan is now at its annual run rate that it should continue at.

So it drops by $4.5 million?

Yes.

Okay. And then as far as -- you called out the 9 days of weather, $7.5 million of revenue shift. Does that come back to you in the second quarter? Is that lost for good?

We think that part of that will come back in our second and third quarters. Part of that will result from insurance monies and government monies going back into the Northeast to actually fund some of the recovery. So that may be in our third and fourth periods.

All right. And then as far as the -- some of the costs weren't a surprise. The hiring of labor, or the retention of labor in engineered buildings, kind of came as a surprise. Does that -- did that in exceed your internal goal because of the way of backlog trended or because of the -- how did that come to pass during 1Q this decision to keep the extra people?

Right, so we continue to analyze our decline in gross profit margins in Q3 and Q4 of last year in our Buildings group. And you may recall that we pointed out that we had some issues with our welding crews then. When we really looked at and started to think about how we were going to make sure that we were able to see the increase in operating leverage and margins, it became clear that we really had to take advantage of these first two quarters to both make sure that we had adequate training across all of our production people and welders in particular and recruited sufficient welders to actually be able to perform the work that we have in Q3 and Q4.

The issue really is that we are on the cusp of needing additional shifts, which will then be part of our leverage in the following years. It is kind of that awkward period that we could have made a decision not to do this and played it long, but once we reviewed it with the Buildings group which was done really in December in particular, it became clear that this was a step that we needed to take, and I backed that step.

So let me just try one more way. Did something transpire during 1Q that gave you more confidence now was the time to ramp people?

Yes, so to be sure, when we really look hard at our quoting activity and look at what has occurred in our backlog -- in fact, Bob, you will recall that when we started to talk in 2011 and 2012, we started to talk about the recovery showing signs that our backlog was much more front-end loaded, which was not typical for us. What we have seen over the last several months is a return to a more normal bell curve and that is a result of fundamentally more projects that are larger and contribute to us being able to look at our shipping schedules out five and six or more months.

So putting together the fact that our backlog is up 17%, putting together how the mix of work is with complexity, it became obvious to us, maybe it should have been more obvious, but it became obvious to us that we were -- that we needed to make the right decision. And the right decision was to spend some extra money now and ensuring that in the period that we normally make most of our money, which is the third and fourth quarters, that we were really prepared for that.

Okay, great. Just as far as the benefits to the second half of the costs and the implementations you've got going on in 1Q and 2Q, that plus 100 to 200 basis points on the gross margin, is that inclusive of the better mix that is now held in backlog or that in addition to?

That is probably inclusive. We -- I think that is reflective of what we see in the work. We can see that our -- that the pricing is improving. We can see that in our backlog and that is a function of the complexity of work. It is also a function of greater opportunities in design build which gives us a chance to differentiate ourselves. It is all a part of that.

Two last ones and then I'll get back in queue. If you could, for the acquisition revenue, $215 million I believe was the number. What is the associated profit contribution you expect there from Metl-Span? And then with -- we've been hearing more reports about stickiness as far as steel price increases. Has the last couple weeks been a little bit better on the price competition front within Components?

Yes, so to be sure, as you know, I can tell you know by the question, we do benefit in the Coating and the Components group in a rising steel price environment. And frankly, rising steel prices in a gradual and a controlled way reflecting improvement in demand in construction activities is a positive thing, not a negative thing. We are happy to have told people what our expectations are for revenue in Metl-Span but we are not going to be breaking out the bottom line numbers because that is part of the Components group and it is so integrated in terms of the amount of sales in addition to the number I mentioned that go in fact into our Buildings group.

Okay, so, all right. As far as --

You know what I said before Bob, that the margins in the Metl-Span group are historically a little better than the margins that we have historically had in the Components group.

Right, but you are carrying some one-time in nature nonrecurring costs with the acquisition related expense. I mean that is going to depress the margin somewhat in parts of '13, am I right?

Yes, yes, just a bit.

That is primarily the first half as we outlined it. It is just the first half that is carrying those additional costs.

The price competition story in metal components, has it been easing with steel pricing getting better?

This steel prices are just getting better. I would say that we would expect that pricing is going to continue to be competitive, but there is no question about the fact that if costs are going up for folks then those costs have to be reflected. I would say that as we see retail demand improve, which we are beginning to see, that is an altogether good thing for the Components group.

All right, thanks.

Lee Jagoda, CJS Securities.

Norm, now that Metl-Span's existing customer base is selling your full suite of -- are getting your full suite of products, what is the reception been and are there additional initiatives underway on the sales side on your side to realize additional cost or revenue synergies?

Okay, so, we have said, and I probably feel more strongly about this than many, that the opportunity to service the customers that Metl-Span has traditionally had within the builder network that was BlueScope's and within the cold storage marketplace, is just a great opportunity. In addition to that, we certainly have been enhancing our linkage between Metl-Span and our Buildings group in terms of coordinating the sales and the activities to make sure that our Buildings group is able to take full advantage of having the Metl-Span group as part of the family. And that is not at the detriment to other customers that Metl-Span has, it is really just to keep par with that. And that is going along well. We are very pleased with that. We are pleased with the opportunity that we see to sell more of our components with Metl-Span as increasing their offerings. That is continuing as well.

I would say that Karl and the team are keenly focused on opportunities to grow and are pursuing those. We have invested in a seventh line which is an architectural line which will be being brought online this year, which will enable them to participate more effectively in the higher-end marketplace. We see that as an altogether good thing to do. And so we are very bullish on the team over there and we are still going through the integration, which is transferring our plants over and changing the chemicals involved there. That, as Mark said, had been a cost in the first quarter and the second quarter but altogether it is an incredibly powerful move in terms of making our manufacturing plants equally as efficient as theirs with lower scrap, better yield, and better products. So, we are pleased with how that entire piece of the business is going.

Okay, great. And then, Mark, that $27 million to $30 million of CapEx this year. Can you break that up between maintenance and growth?

Generally speaking in broad terms, our maintenance capital in any given year would be between $11 million and $12 million at our current business. And so the amount above that in our $27 million to $30 million would be growth oriented capital.

And sitting here today, do you see '14 returning to more of a maintenance level or is there more to do on the growth side?

So, one of the things you heard me say is that we are looking at a growth strategy for our coil coating and our Components group. The investment in the coil coating side is about done with the ramp-up and in the components side, we have as I said the seventh line which is a discontinuous line that is focused on the high-end market which is architectural. We have, as many will recall, equipment that we had planned to put in a Richmond plant of ours. At some point we may decide to deploy that to some location in the United States or elsewhere. And I think that the other real growth opportunities comes from our look at our depots and seeing them as an opportunity to enhance our distribution in very local markets. I don't want to say too much about that at this time, but as we go forward with our plans I will be happy to share it with you then.

Okay, and you have a preliminary view that you have on working capital needs for the balance of the year?

Mark?

We would expect to see a cycle that is very similar to what we've seen in the past where working capital is utilized in the first and second quarter and then working capital or cash flow is generated in the fourth quarter and third quarter. So it would be on a very consistent path to what you've seen in the past.

Okay, great. Thanks very much.

(Operator Instructions)

Trey Grooms, Stephens.

All right, so looking at backlog, up 17% in the quarter, is the mix of projects there -- is that a pretty normal mix or is there still some lower margin projects embedded there?

So the product mix certainly has a different levels of pricing, but we do not have the structural -- that purely structural projects that did have a negative impact on our gross profit levels in Q4 and Q1, even though that project was profitable. It ended up being effectively half of our volume growth in our Buildings group. And, so it was one of those things that we would not run out to replicate.

Got you. Okay. And then on SG&A as a percent of revs, it's been trending pretty flat year-over-year. Should we expect that to continue in the back half as well? I know you mentioned that it could be down sequentially, but on a year-over-year basis as a percent of sales, what should we kind of expect there?

So what we typically will see in our ESG&A and as I alluded to in my comments, we will see the ESG&A be about the same percentage of revenue in our second quarter. And as you may recall, ESG&A, when you look at us historically, generally is a little bit higher in the second quarter than it is in the first quarter and that has to do primarily with some marketing and engineering activities that occur in the Buildings group in the second quarter in anticipation of the higher seasonal work in the last part of the year.

Which is the builder meetings that we have with our brands.

That's right, and engineering and drafting for work that will actually be produced in the third and fourth quarter.

I appreciate that. I am looking more for some color on the second half as we think about -- you mentioned it was going to be down. If I understood your comment right, you mentioned it was going to be down sequentially but as far as a percent of revs, year-over-year for the second half, should we expect some leverage, some improvement there or should it be about flat?

Yes, that is why I started with the way I did, because in the second quarter, what I'm specifically saying is it will be about the same percentage, not down sequentially. Then when you get into the third and fourth quarter, it will be significantly lower sequentially and it will be at a level that is lower on a percentage basis than the prior year.

Great. Okay, that is what I was looking for. Thank you. And then Norm, looking at your expectation for an improving back half, is that mostly going to be seasonally driven or are you expecting your end markets to shift into another gear here in the back half and pick up off the bottom to a larger degree or is it mostly seasonal that we are looking at here?

It is definitely that we are seeing holding activities that are consistent with McGraw Hill's forecast for a strong second half of the year. And we are seeing that now. So we will have seasonality and we feel that we will have growth on top of that seasonality. Right? Now in recent years or in the past couple of years and in fact back in the recovery of 2004 to 2008, or 2007 I should say, what we have seen is that our backlog number at the end of our second quarter will actually produce revenue that is 130% to 150% higher than that backlog number in the second half. Okay?

So how things build in the backlog are important, but in a marketplace that is recovering even modestly, there is a very good opportunity for us to take advantage of that. Our expectations are, and that is one of the reasons why when we look at training our people, that it is critically important that we are able to maintain delivery schedules that are consistent with being able to really advantage ourselves in that period. And then as the market continues to recovery, even if it stumbles and it staggers a bit, if it is not perfect, we will still likely see more activity in the first and second quarter of next year and therefore the staffing levels that we have will be less of a problem for us.

Okay. That is helpful. And then on that point, if you look at your incremental margins, I think they were low to mid-30 range, right in there in 2012. With end markets expected to continue to improve, is that something we can expect to continue going forward or is anything changed that would have impact that one way or the other as we look at those incremental margins on the horizon?

Yes, no, our view of our incremental margins has not changed. We have seen the incremental costs that we discussed in the first half of this year, but that incremental margin should be very evident in the last half of the year.

Okay, perfect. Thanks a lot and good luck.

Jack Kasprzak, BB&T.

The press release talks about your backlog in the Buildings group is up 17% year-over-year and then it says overall booking trends were similar to the levels achieved in last year's first quarter. What is the distinction between those two?

Okay, well the booking activity goes to and adds to whatever the ending backlog was at the end of the fourth quarter less what we shipped plus what we have actually booked. Okay? And so at the end of the day, one of the things that is clear to us is that the improvement in the backlog is a function of also the complexity and the kind of work we have about which is more of a design build case. And frankly from that standpoint, we are very pleased with that backlog. Mark, do you want to add anything to that?

I was just going to say, one of the things in play here is the velocity of the backlog. So what we're finding is that we are returning to a more normalized environment where there are opportunities to add value in the more complex and more interesting projects and those also take a little longer to flow through the backlog.

Got it, okay. That make sense and they are longer. So how should we think about in the quarter, you're booking similar so, essentially you're saying your bookings were basically flat in the quarter?

Yes, we saw a bit of a pickup in January.

Okay. And how would you compare that to the last couple of quarters? Is it -- did it slow a bit or did it slow and now and it's picking back up a little and that is what you kind would have expected? Just some framework there.

Sure, so the last couple of years what we saw for example in the first half of, or the first quarter of 2012, we saw about a 16% growth in booking levels. And then the year before that we saw about a 40% growth in booking levels. So we -- that's an underlying increased volume that is occurring. We didn't see the same rate of growth occur this year but we did see a stabilization of that level of work.

Okay. Great. And switching gears, stock comp expense is up $1.5 million per quarter this year. You don't necessarily have to give any numbers unless you want to, but looking out to fiscal '14, how should we think about the behavior of that number?

Sure, and I will give some numbers. We grant stock once a year and we amortize that or it vests over four years.

I was going to say but that -- those awards will not include myself and the 10 top folks. We gave up those awards for 2012, 2013, and 2014.

Okay. Right.

But where I am going is that we reached the fourth grant this year. The first grant was in 2009, the fourth grant was this year and so we've now reached the mature level of those grants. You won't see anywhere near that level of growth in that cost that we've seen over the last couple of years as each layer was added on. It's a mature plan now.

Okay, that is helpful. Thanks for the color.

And ladies and gentlemen, at this time we will end today's Q&A session. I would like to turn the conference call back over to management for any closing remarks.

Again thank you very much for joining us and thanks for the good questions. And we will continue to work to deliver the results that we believe we can in 2013 and look forward to reporting on that. Thank you.

Ladies and gentlemen, that concludes today's conference call. We do thank you for attending. You may now disconnect your telephone lines.