Griffon Corp (GFF) 2007 Q4 法說會逐字稿

Good morning. My name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the Griffon Corporation fourth-quarter 2007 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) It is now my pleasure to turn the floor over to your host, Mr. Harvey Blau, Chairman and Chief Executive Officer.

Good morning and welcome to a financial overview of our fourth quarter and year ended September 30, 2007. I am Harvey Blau, Chairman of Griffon Corporation, and with me is Griffon's Executive Vice President and Chief Financial Officer, Eric Edelstein, and Frank Smith, Chief Financial Officer of our Clopay subsidiary. In addition, Pat Alesia, Vice President of the Company, is also present.

On slide eight, Griffon Corporation announced changes in its senior management and Board of Directors. Frank Smith is being promoted to the position of Executive Vice President of Griffon Corporation effective November 30, 2007. Pat Alesia, who presently serves as Vice President, Treasurer, and Secretary of Griffon, is being promoted to the position of Chief Financial Officer effective November 30, 2007. Eric Edelstein is retiring, also effective November 30, 2007.

Griffon Corporation also announced the appointment of two new members to its Board of Directors effective on Friday, Lieutenant General Gordon E. Fornell, U.S. Air Force (Retired), and James A. Mitarotonda, also effective on Friday. Lester Wolff has retired from the Board and will be a Director Emeritus.

I will now discuss the overall results of the quarter and full year, and then Eric will answer questions with respect to operations and financial results. First, I should like to point out to the extent that matters to be discussed in this call include forward-looking statements, they involve certain risks and uncertainties that could cause the Company's actual results to differ materially from those in the forward-looking statements.

By way of introduction, I want to note that we are pleased with the outstanding performance of our Telephonics subsidiary and the improvement in our Specialty Plastic Films segment. We continue to be concerned about market conditions in residential housing and the impact on our building products segments.

Consolidated net sales for the quarter were $396 million, compared to $483 million in last year's fourth quarter. Pretax income was $9.2 million, compared to $29 million last year. Net income was $9 million for the quarter, compared to $18 million, resulted in diluted earnings per share of $0.29, compared to $0.60 last year.

For the full year, net sales were $1.6 billion and the pretax income was $31.6 million, compared to $78.7 million in the prior year. Diluted earnings per share were $0.71, compared to $1.65.

As you can see, the housing market has affected our building products and installation businesses very severely and has offset the great growth that we had in Telephonics during the year. Telephonics, our electronics, information, and communication systems segment, had sales in the quarter of $98 million, compared to $152 million last year. Telephonics' operating income was $10.6 million, compared to $19.2 million last year. Telephonics sales for the year were $473 million, compared to $387 million last year. Operating income was $45.9 million, compared to $39.6 million in the prior year.

The decline in sales in the fourth quarter was primarily attributable to the wind-down of the SRC contract, with revenue in the quarter approximating $19 million compared to $74 million in the prior-year fourth quarter. The revenue increase for the year of $86 million was primarily from an SRC contract revenue increase of $47 million and MH-60 helicopter revenue increase of $31 million. We did announce in early October an additional $11 million contract with SRC and opportunities exist for additional related work for fiscal 2008.

The MH-60 program and Telephonics' other programs continue to expand. As previously noted, the MH-60 program is expected to ramp up to $100 million per year run rate this year, with the opportunity to increase an additional 20%. We recently announced additional contracts for this program totaling $360 million. Our funded backlog at September 30 was approximately $309 million.

Sales in Garage Doors for the quarter were $128 million, compared to $146 million last year. Operating income was $2.9 million, compared to $13.6 million in the prior year. The decline in sales for the quarter was primarily caused by a volume decline in sales to dealers. The decline in operating income for the quarter was primarily caused by the sales volume decline, restructuring charges associated with closing one of our manufacturing facilities, and increased marketing and advertising costs for our retail distribution business.

For the year, Garage Doors' sales were $480 million, compared to $550 million last year, and operating income was $7 million, compared to $41 million last year. The decrease in sales and operating income was primarily attributable to sales volume declines to dealers and retailers, somewhat offset by a favorable product mix.

Consistent with our forecast of a year ago, steel costs in fiscal 2007 were relatively stable compared to 2006. At this point, we are expecting similar stability for fiscal 2008. This stability could be negatively impacted if the relatively low demand level for steel was to strengthen.

During the year we made excellent progress in bringing our new facility in Troy, Ohio online. As you may recall, it is a large facility with much potential. Two of our important product lines are now being produced in Troy. Also, the product offerings previously made in our closed facility are being made in Troy. By the end of 2008, we expect to be producing two additional insulated door product lines in Troy. The lines, in general, are designed with more automation and we anticipate they will achieve greater efficiencies.

With respect to the overall 2008 outlook for Garage Doors, we continue to be concerned about trends in the market conditions. Key statistics are poor and in some cases seem to be getting worse. The latest data through August compared to prior years show new home starts down 34%, new home sales down 25%, and an 8.2-month supply of new homes versus 6.1 months in September of 2006. Existing home sales were down 15% and the inventory of existing homes is up 33% and now stands at a 10-month supply versus 6.5 months in 2006.

Just this past week [Macgoyle] issued a projection for 2008. They see new construction down 6% in units and 3% in dollars versus 2007. While it is difficult to project the repair/remodel market, an October Home Improvement Research Institute study showed 31% of respondents not engage in a project versus 20% in 2005. The drop in existing home prices and the extensive media coverage of the housing decline are cited as reasons for the curtailment of remodeling activity.

Needless to say, we're doing everything we can to retain our customer base and, where possible, take market share to offset the shrinking market. We believe that when the market does turn around, we will be in a good position to take advantage of the hopeful backlog boom that will come, but we do not know when this is going to be.

Our service and installation operation had sales in the quarter of $69 million, compared to $89 million last year, and an operating loss of $1.9 million, compared to operating income of $3 million last year. For the year Installation Services had sales of 260 -- $276 million, compared to $339 million in the prior year, and operating loss of $10 million, compared to operating income of $9 million in the prior year.

The decrease in revenue for the quarter and the year was primarily attributed to decreased sales in our Las Vegas and Atlanta markets. In those markets, flooring, fireplace, garage door, and appliance installation sales have declined. There is also a marked competition in pricing.

New home construction activity in our major markets continues to deteriorate and single-family permits are projected for 2007 to be levels equal to 35% to 55% of the peak levels reached in 2004 in 2005, and in absolute levels, equal to pre-2001 activity.

In response to all of this in the building market, we have reduced our costs with personnel cuts and in the last quarter, approximately $2.5 million and the consolidation showroom, warehouse, and facilities, with savings of approximately $1.8 million. We continue marketing and selling activities to gain share, including establishing a national brand identity and national marketing materials and rebate programs. These programs have been started by recently-hired President of our Installation Services business, Ray [Lippin]. Ray has over 30 years of experience in home building other related fields. With the changes made in 2007 includes cost-cutting and fixing key operational issues, along with the experience and leadership brought by Ray, assuming no further deterioration of market conditions, our goal is for the installation business to at least break even in 2008.

In Specialty Plastic Films, sales for the quarter were $106 million compared to $102 million last year and operating income was $5.1 million compared to $39,000 last year. For the year, film sales were $407 million, an increase of $25 million over the prior year, and operating profits increased to $17.3 million from $15.5 million in 2006.

The increase in revenue for the year was primarily attributable to increased unit volume in Europe and North America, increased sales of new products, and the effect of a weaker U.S. dollar on translated foreign sales, somewhat offset by price declines to our largest customer. The increase in operating profits for the quarter is primarily attributable to the impact of production efficiencies and reduced administrative and operating expenses, partially offset by the impact of unfavorable resin price fluctuations. The increase in operating profits yield is primarily attributable to higher unit sales volumes and the impact of resin price and cost fluctuations, the weaker U.S. dollar and its impact on foreign sales.

This year we started shipping commercial quantities of our important new product, elastic laminates, for the hygiene products market. In previous quarters we noted that this product had not ramped up as we had anticipated. Progress has been made and we are presently optimistic that sales for these new products will ramp up significantly in fiscal 2008.

In previous quarters we spoke of startup inefficiencies resulting from bringing on new businesses and the trend towards thinner films. We're pleased in the fourth quarter overall efficiency levels have achieved targeted levels. We continue to study ways to achieve additional operational efficiencies and are planning some capital investments to achieve them.

Resin price increase had an unfavorable impact on operating income of approximately $1 million to $2 million for the quarter, and a favorable impact of approximately $6 million to $7 million for the year. Most recently, resin prices have been increasing and we are concerned with the impact it could have on 2008 results. While oil at 90 some odd dollars a barrel and natural gas seems to be going up now, this is something that we are keeping our eye on.

We continue to make strides in diversifying our product line and customer base. Over the past four years we have significantly reduced the concentration of our business on one customer and we are satisfied with the progress we're making to build a more balanced product portfolio. While we expect to be challenged in our plastics business with resin prices and the new product roll-ons, we are optimistic that work we're doing on the cost structure and product mix side of the business will result in improved performance for 2008.

Consolidated operating cash flow for the year was $66 million and we continue to support the growth of our business with capital expenditures for the year of $30 million and $17 million to fund acquisitions. Our balance sheet at September 30 remains strong, with working capital of $343 million and total indebtedness representing 33% of capital.

We continue to fund our common stock purchase program, using $1.1 million in the quarter to acquire approximately 66,000 shares, and for fiscal 2007 we have acquired approximately 208,000 shares of stock for $4.4 million. We have paid down approximately $20 million of bank debt this year out of cash flow generated by Telephonics.

At this time, we would like to take questions.

(OPERATOR INSTRUCTIONS) Bob Labick, CJS Securities.

First question I wanted to ask was with regards to the Doors division. You mentioned some restructuring charges. Could you quantify that?

The restructuring charges were about $2.5 million. They break down three ways. One piece of it is estimated costs associated with closing and cleaning up the facility we were in. One part of it is a fairly significant cost associated with moving the production line from Tempe to the new facility in Troy. Then finally, severance for key personnel that are on in the intervening months as the business transitions.

Okay, great. Then, excluding the restructuring, I am trying to back into the math a little bit. It looks like operating margins were probably down slightly or flat versus the prior quarter, even with a little bit of a pickup in sales seasonally, so what has the trend in gross margin been?

When you said prior quarter, you mean --?

I mean the June quarter, when you did lower sales. You picked up in sales a little bit, so I would expect gross margin to maybe pick up, but I just want to get a sense of --

I do not think there is an actual trend there. I think any difference that you would see from Q3 to Q4 would be more rounding.

Okay, so gross margins have been stable. It was more the transition cost that caused the decline in operating profit in the quarter?

I believe that is correct.

Okay, great. And where does that division stand in terms of its cost-cutting goals overall?

Well, it is an ongoing process. You probably recall that we spoke of a number of initiatives mid-year that we were planning on doing. Those have all been completed except for one, which is something that is ongoing. We need to take a look at as the year unfolds as to what happens with market conditions, as Harvey has referenced, and if -- our sense is we do not believe it is going to strengthen dramatically in the coming months, and so we have to see how we do in that market and the possibility exists that we might need to take other steps in the course of the year to reduce the overall cost.

Great. And then you also mentioned higher I guess retail marketing. Could you quantify that?

Probably about $1.5 million of special programs to further support the retail part of the business, which actually has held up a little bit better, quite a bit better actually than the dealer side.

Is that an expected ongoing new level of spending for next year or was it a peak period that you tried it and you will see what you do with it next year, or how should we think about it?

I think it is more of the latter.

Great. Then moving on to films, you mentioned the rollout of the elastic product. Can you give us the expectations now where you are, a range of expectations for 2008 and then beyond, or maybe even just three years out, what you might expect that opportunity to be?

Yes, actually, although admittedly, we have had some delay in the timing of the rollout of the product, the expectations really have not changed. You know, we've spoken in the past about initially trying to get it up to about a $50 million-a-year product and that is still very much achievable in the foreseeable future, next 12 to 18 months or so. As you would guess, a lot has to happen, but we think there is a good chance it can. Then finally, over a longer period of time it has got the potential to easily double from there.

Great. And then just the last question and I will get back in queue. Obviously you had the $2.5 million roughly in restructuring in Doors. Was there any other restructuring charges in the quarter in any other division?

There are probably some small amounts in service and installation.

Okay, great. I will get back in queue. Thank you very much.

Marty Pollack, NWQ Investment Management.

Just a couple questions. Looking at the progress from second quarter to third quarter, just trying to gauge that progress, I know -- can you sort of describe the seasonal impacts that would color that progress in a positive or negative way? If you could just go through the divisions, and clearly there's pickup --

Just for the others on the line, when you said Q2 to Q3, I assume -- you were referencing (multiple speakers) you mean our three to four, correct?

Right, I meant Q3 to Q4, correct.

Taking the easiest one first, or the most obvious, traditionally our Telephonics segment has a very substantial fourth quarter. It always -- it has to do with our and our customers' and our customers' customers' year end being 9/30, including the federal government. Consistent with the past, they had an excellent fourth quarter bump in both revenue and margin. Of course, I say that at a -- when you factoring in -- you have to factor out the significant impact of our one contract, SRC, which actually came to an end.

The Garage Door business, we experience a strong jump typically from our second to third quarter, and then on average three to four tends to jump a little bit more and we did experience that same jump this year from Q3 to Q4, but, admittedly, at those lower volume levels or lower base that we've been at for this past nine to ten months or so. Service and installation, probably similar observations. Then finally, in the film business, really, no impact based on seasonality.

I see. Would you just describe, then, in a sense -- can you sort of put some rough numbers on the costs, the nominal costs taken out, or any other way that you can describe the progress on cost reductions and the restructuring? In a sense, if you could just put a little bit more granularity by those segments, even if you can't put the numbers out, but I mean, where you have been targeting, where are you comfortable that you're achieving some of those goals? I know you did mention that, clearly, you were comfortable with Specialty Plastic's improved inefficiencies there, but can you go through the other segments as well?

Okay. First on Telephonics, we have not focused at all on cost-cutting, which I do not think would be a surprise. It has been more developing the base of talent to serve as the increased number of contracts and the increasing revenue.

In the service and installation business and in the Garage Door business, the focus on cost has been consistent over time. In the case of the Garage Door business, it has been a heavy focus for about, as I just said a little earlier, nine or ten months. In the case of the service and installation business, we've probably been looking at it closely for about 16 months.

The way we have approached the cuts, the method of executing, going through the process, I think we have done a good job. The question, which we had from the start and continue to have today, is how much to cut, how much is necessary, for instance, in the case of the installation business, to achieve the goal that Harvey spoke of of at least breaking even in this year, but at the same time, not putting ourselves in a position where when things turn that we are at a disadvantage compared to the competition, keeping in mind in the garage door business, we continue to believe we are the number-one supplier to the country and we want to be strong at the time that things do turn.

That is kind of where we are on general terms. As I said for the garage door business, in particular, we need to look as the year goes by as to what additional cuts we might need to make.

I think one other line item -- was it unallocated expenses? I think I saw that the numbers were up. Are there some costs there that -- yes, unallocated accounts expense about $4.7 million versus $4.1 million last year. Again, is that an area that we can expect -- what would you be targeting on a quarterly basis? Clearly that has been an area of -- a number of investors have thought that there is a lot of room to perhaps cut those costs down. Where do you think those numbers can go to?

Those numbers -- the variable part of those numbers tend to be event-driven. The increase that you're noting in the current quarter for the most part comes out of an increase in our professional, legal, and consulting, which I think you would recognize would be event-driven. To the extent that we do not have events, being as we do not need to respond to things, those numbers ought to be able to come down. As a matter of course, we are always looking at those pool of expenses to see what we can do better and more efficiently.

On an annualized basis, how much cost -- what would be the normalized cost without those other items?

Looking at the -- if we're talking about the whole pool of unallocated, I always think of a normalized quarter to be about $4 million.

All right. Thank you very much.

Marty, I just want to point out to you that it is our interest and our desire to watch the marketplace very carefully in Building Products. That is the whole -- both parts of the business, and to make further steps to make the Company more profitable depending on where the market is going. If the market continues to deteriorate, we're going to watch that very carefully and take as many steps as we can to try to increase or maintain our gross profit margins and not just suffer like this.

But unfortunately, nobody really knows where it is going and I think in the installation business, more than any of them, there is a lot of competition by smaller companies that may be under pressure and this may have an effect going forward on that part of the business, giving us opportunities to make up some space.

I'm sorry, let me just mention one thing, because I think the call does reflect a sense of urgency, but a certain balance on understanding that these markets -- some of these markets are cyclical, and so I think you guys are approaching it very much correctly, making sure that your finances are in good shape and able to sustain a recovery. Clearly you'll be in the game for that. So I certainly applaud you for the efforts and articulation of that.

Thank you.

We will miss you of course, Eric. Take care. All the best.

Thanks.

Todd Vencil, Davenport.

I got cut off earlier, so I'm going to apologize because I am probably going to ask a repeat question, but it should be easy. Can you tell me why the tax rate was so low in the quarter?

It is actually not a repeat question, has not come up yet. There's really two things that are impacting it. First, as you probably recall, we have significant operations in Germany and the tax law changed there and as a result, a fairly substantial amount of deferred tax liabilities we had on the books, as a result of that tax law change, got revalued at lower amounts, or to say it another way, the projected amount we ultimately will pay will be something less than under the current tax law and proper accounting is to make that adjustment.

The second thing is the continuing shift in our operating income. That is the amount that comes from outside the United States versus in the United States. That shifting created an additional favorable impact.

Then finally, in the quarter, we did have several items that were of a subjective nature that came to resolution relative -- with the taxing authorities in a favorable way and that further reduced the rate.

Okay. What should we look for on the tax rate going forward given some of those things are one-time and some, it sounds like, probably are not?

Well, we ended up the year at about 30%. You probably saw that. I would say sticking with something in the 35% area is probably a good starting point.

Okay. And secondly, you talked about some of the additional contracts you had gotten under the MH-60 program in the Telephonics division. Just to be clear, were those -- do those change your sort of anticipated $100 million run rate or does that just sort of feed into that run rate as anticipated?

It feeds in. That is the actual definitive win you're seeing.

Right, okay.

Basically that is a funding of the program over the next three to four years, so that you have in your numbers security to make a prediction of $100 million a year, because you've got it already funded into the program.

Got it, that makes sense. Just finally, on the SRC contract, how much is remaining under that? You had a bit this quarter.

It basically has gone away in the fourth quarter, except that we have gotten an award for $11 million on a go-forward basis and we will see what else happens in that program on a go-forward basis as the Army needs additional crew materials. But we have no knowledge of where they are going to go with this program and we expect that there will be continual add-ons, either for spare parts or for new equipment, as they build new vehicles.

Okay. And what is sort of the time frame on delivering on that $11 million?

It's over the next three, four, five months.

Okay, great. Thanks a lot.

(OPERATOR INSTRUCTIONS) Charles LaPorta, [Arc Pause] Partners.

I just had I guess several naive questions. Looking at your Installation Services during the quarter, it looks like year-over-year you did a $20 million decline in topline and roughly, I guess, $4 million to $5 million decline in operating income. That business kind of suggests to me that the cost should be fairly variable in nature. Do you have existing fixed contracts with subcontractors or union labor that mandates you have to keep a certain headcount? Could you just describe to me the nature of that business?

Frank Smith?

Sure.

Are you able -- do you want to answer that question?

Sure. We do not have union employees, but it is not quite as flexible as you may think in terms of the overall pool of costs. What Harvey and Eric talked about earlier, the need to balance the skills, because this is a service level, a service business, is paramount in trying to make the decisions. And so we are continuing to study that, but it is not just a business that flexes up and down the way you might think with the volume decrease that you saw.

Okay. Another question is in terms of your Telephonics business, could you give any sort of indication in terms of what RFPs you're currently responding to or what sort of kind of contracts in terms of just an aggregate -- on an aggregate basis the level or volume of contracts that you're currently bidding on?

I guess generally the most important thing to note is that the SRC contract, which was a wonderful opportunity and it contributed immensely to our performance, you pull that out of the last two years and what you have if you look at the last ten years is a steady, consistent growth in revenue and profitability, obviously, therefore, supported by an increase in the number of programs and the size of the programs that we are dealing with. The management at Telephonics would tell you that at this point in time, they are as optimistic as ever about the continuing growth of Telephonics in the future. In the marine radar area, we continue to be a leader and have any number of opportunities, either with ongoing programs that are expanded or being retrofit or new programs. In the communications area, similarly, the number of programs we're looking at and the size of them continue to increase.

We do not -- the heart of your question or the specifics of your question were the actual number of RFPs and it is not an indicator we actually track. Certainly we are tracking potential dollars and growth of programs, but we cannot answer it as simply as 400 this year versus 200 last year.

All right, okay.

We have a large number of programs that we are bidding on. The marine programs are going to be very hot in the years to come, with the development of the Chinese of a blue-water navy and of submarines, which they are building a high rate, which is going to require the Navy to step up its anti-submarine warfare and detection, of which the LAMPS helicopter is a primary vehicle. There will be other systems going on it and we expect there to be continuing growth in that field and we think that notwithstanding the fact that the IED program, the Syracuse Research program, has been built and delivered and has gone away, that you will still see on a 2005 to 2008 comparison without the IED programs, in other words, in 2006 and '07, substantial growth in Telephonics and it will continue to grow.

Okay. With the SRC program rolling off and these other programs, MH-60 I think it's called, right, ramping up, would we still see a sequential decline in topline?

We will see a sequential decline in topline of 2007 to 2008 because the amount of dollars in the SRC program that we generated in the two years, 2006 and 2007, is approximately $450 million on that one program.

$350 million.

$350 million, excuse me, on that one program.

In '06 and '07?

Yes, so we are probably -- we cannot make up the $150 million or so -- I think it was $190 million in 2007. We cannot make up the $190 million of sales, but we will definitely have an improvement. If you took out the sales of 2007 for the SRC program and you take a look at where we're going in 2008 without it, there will be a substantial growth in the sales. We think by 2009 and '10 we'll be back up to where we were.

Will you have equivalent operating margins ex that program?

Yes.

Okay. And last question, what's your current revolver availability?

Well, we paid down revolver and we now owe approximately 70 some odd million dollars to the banks, so we really do not have any issue with respect to monies. We have probably --

About $95 million.

-- available? We have about $100 million available under our existing bank line and we're talking to the banks now about expanding the availability. But we are not constrained by money or a need for money, because the cash flow has been fine and the amount of debt in the Company of our size, of bank debt of between $1.6 billion, is approximately $75 million, $80 million. I think we have run it in such a way that, to tell you the truth, we always predicted internally that someday, somewhat there was going to be a change in the economy and we did not want to be squeezed when it happened.

Okay. Thank you.

(OPERATOR INSTRUCTIONS) Debra Fine, Fine Capital Partners.

I am wondering if you could talk a little bit about what prompted the Board changes.

The Board changes were prompted by the fact that two of our stockholders, one was Barrington and one was Clinton Group, have -- we have been talking to them for some time. They have made substantial investments into the Company and they felt that -- they made a recommendation that there should be some modification of the Board and get new people in. And so Lester Wolff, who is a former congressman, who served the Company for over 20 years, retired and the Clinton Group recommended a number of people and we picked one of the people that they recommended, which is Lieutenant General Fornell. He was approved by the Board. He has got a long history in the businesses that we are in and we think he can be very, very helpful. Jim Mitarotonda from Barrington felt that he could be helpful with acquisitions and things of that nature and wanted to have a role. We thought he could be helpful and bring another perspective to the Company. So we put them on.

Great. We applaud the changes.

Thank you. When is the market going to turn around in housing? I know you are an expert.

I will pass to the next questioner.

There appear to be no question at this time. I would now like to turn the floor back over to Harvey Blau for any additional or closing remarks.

I want to thank you for taking the time and I know a lot of you have been stockholders for a long time. I certainly have been a stockholder for a long time and we're trying to do everything we can in the face of what seems to be a very difficult situation with the housing industry. And every day you read the newspapers, more negative information.

I can only say to you that we are in a position where we have strong financials. We can withstand all these different kind of hits. We have cleaned up a lot of issues in our installation business and we think a lot of them are historic. And so we think that we should be making a lot of progress and reduce the amount of indebtedness, the amount of losses, and hopefully we'll get down to a zero basis, which would be a $10 million turnaround. If we can keep the other businesses going while Garage Doors improves or at least stabilizes, I think we will have a better 2008 and hopefully in 2009 and '10, we're going to be in great shape.

We're doing everything we can in the Company to prepare ourselves for the ultimate turnaround in the housing industry by making ourselves more and more efficient. We will have more consolidations of our operations into Troy. Troy gives us an opportunity to really consolidate our operations under one roof and in a very central distributing area so that we can really, I think, be more efficient and we look forward to better times coming.

I want to thank you again and I will speak to you sometime in February. Goodbye.

Thank you. This concludes today's Griffon Corporation fourth-quarter 2007 earnings conference call. You may now disconnect.