Griffon Corp (GFF) 2009 Q4 法說會逐字稿

Greetings and welcome to the Griffon Corporation fourth quarter, 2009, financial results conference call.

(Operator Instructions).

It is now my pleasure to introduce your host, Doug Wetmore, Chief Financial Officer.

Thank you, Joe.

Good afternoon everybody.

With me on the call is Ron Kramer our Chief Executive Officer.

Our call is being recorded and will be available for play back and information regarding the play back is detailed in the press release issued earlier today.

Please keep in mind in this call we may make forward-looking statements about the Company's performance.

These statements are based on how we see things today and may contain elements of uncertainty.

For additional information concerning factors that could cause the actual results to differ materially from our forward-looking statements, I ask you to refer to the cautionary statement and risk factors contained in today's press release, and in Griffon's filings with the SEC.

Some of today's prepared remarks will exclude those items that affect comparability.

These items are laid out in our non-GAAP reconciliation which is included in the press release.

With that let me turn the call over to Ron.

Good afternoon.

Thanks for joining us.

Today I would like to give you a sense of our accomplishments this year with respect to our operational and financial position, both of which are much stronger than they have been in quite some time.

As you will see from the commentary, this is true of each of our business units as well as for Griffon overall.

While Doug will go through our financial results for the quarter, and the year in some detail in a few moments, I would like to draw your attention to a couple of the financial highlights for the fourth quarter.

Our earnings per diluted share were $0.21.

This reflects a significant improvement in our core profitability and was ahead of last year's level even excluding charges.

We achieved this earnings growth even though revenues in the quarter were $328 million a decline of 7% versus the year ago level of $354 million.

Strong growth at telephonics was offset by declines in our plastics and building products segments both of which continue to be affected by the general business environment.

Each of our segments saw year-over-year improvement in operating income for the fourth quarter.

We are confident that each business is now positioned to operate well even if conditions remain challenging.

The year ahead we believe that each business will generate significant growth in operating profits and continue to generate cash.

We have worked very hard to improve each of our businesses over the course of the last year.

This improvement has not come easily and required some hard choices and renewed level of operating discipline.

Our Management philosophy at its simplest level boils down to a couple of key initiatives.

One, maximize the profitability and growth opportunity of each segment we operate.

Two, create an Executive Management Team that has risk management and acquisition-related skill sets, as core competencies.

Three, insure that the Company's balance sheet is strong enough to support the organic growth of the existing businesses, and to give us the capability to accelerate our growth through acquisitions.

We have made great progress on these core initiatives and I would like to address each of them briefly in the context of the fiscal 2009 results.

First maximizing profitability and growth in opportunities.

Telephonics is doing a great job and the team led by Joe Battaglia is executing well.

We saw our 6% top line growth for the full year, and finished the year with 12% revenue growth in the fourth quarter.

We held the operating margin for the year steady but increased our research and development expenses in order to maintain our competitive advantage and to diversify our product mix.

We pride ourselves on exceeding customer requirements for our products and are dedicated to continuing to do so.

As a result, we have leading technology in a variety of radar and communication categories, and some excellent opportunities for growth in both the military and commercial markets.

With respect to our defense business, we do not see the level of direct budgetary pressure that is affecting many defense contractors.

In fact, the shift away from new platform development toward the maintenance and upgrade of existing platform tends to reinforce our opportunities the incumbent provider for a number of mission critical systems.

With respect to our commercial market opportunities, we are very excited about a number of international opportunities which we believe are very significant.

This business is positioned well for fiscal 2010 and we expect its growth trajectory to continue.

Building products was our toughest business this year, but we are very proud of the work we have done to improve it.

I think we all know what has happened in the housing market, new housing starts for the year were down 28%.

Additionally tighter lending standards have impacted housing in general and remodels which is a key driver to our business.

We recognize some of the operational problems in this business and took decisive action.

As you know we finished exiting the installation business in the second quarter, which eliminated a major source of risk in our business.

We then employed assets as appropriate and streamlined our infrastructure undertaking plans to consolidate our manufacturing operations and to close two manufacturing plants.

These actions are on schedule to be completed early in calendar 2011 but the benefits of these initiatives are already becoming dramatically apparent in our financial results.

While revenues were down $42 million this year versus fiscal 2008, and we incurred losses in the first half of this year, we drove significant sequential improvement in our operating profit.

In the fourth quarter, building products had an operating profit of $4.3 million on a 14% sales decline.

On the surface, this may not look particularly exciting, and we are clearly not satisfied with the margin but we are very pleased with the turnaround we have made in this business.

It is now well positioned and efficient and we expect to see strong financial benefits from even a modest rebound in volume.

Our plastic business has had a tough year from a volume perspective with revenues down from 55, about $55 million or 12% for the year.

While our domestic business has continued to be stable, we have some significant challenges.

Particularly as a result of lower resin pricing and the adoption of thinner specialty films which ultimately translate into lower volumes for us.

Combined with some weakness that we are still addressing in our European business this made for a challenging fiscal 2009.

Even so our efforts at cost containment and improving our product mix were effective and generated significant margin improvement.

For the full year, despite the revenue decline, our plastics business saw both operating margin and dollar growth.

We continue to seek to diversify our customer base as well as seek new product and geographic opportunities.

We are committed to making further progress in the year ahead.

I think it is clear that in each of our businesses we have successfully implemented our first core initiative of improving profitability and positioning ourselves for growth.

We also made progress on our second core initiative to build the Management Team that could effectively manage risks and can execute strategic transactions.

This is an increasingly strong Management Team.

I think it is appropriate to call attention to the transition between Pat Alesia, 35 year veteran of the Company and Doug Wetmore our new chief financial officer who recently joined us from International Flavors and Fragrances.

Doug brings a strong operational skill set and a great deal of experience in terms of executing strategic transactions.

This transition is proceeding exceptionally smoothly.

I also want to mention we have made several key hires that have enhanced our management capabilities, including a new chief accounting officer, Brian Harris who joins us from Dover Corp and a new vice president of tax, [Glenn Foald] who joined us from Citigroup.

Our third core initiative is to keep our balance sheet strong to support the organic growth and to give us the flexibility to do acquisitions to enhance shareholder value.

Our balance sheet is in excellent shape.

We have substantially more cash than debt with $321 million in cash and only $180 million of debt including $79 million of convertible debentures which are putable in July of 2010.

This year, we generated $84 million in operating cash flow.

We believe that given the right deal, we could potentially fund a substantial acquisition.

Given my background and experience and this Management Team's skill set, I am confident that we will identify and execute strategic transactions exceptionally well.

There's still a substantial gap between our value objectives and the prices sought by sellers and as a result, I think we have passed on a number of opportunities this year.

We are going to do the right deals with careful consideration for how they expand or further diversify our existing business with discipline in regard to the return we expect to see in our invested capital.

We have a strong base of business, true operating discipline, talented team, and a superb financial resources.

I am confident that if we continue to execute these three core initiatives, we will demonstrate that rare ability to create superior value for our shareholders.

I will reserve some additional comments for the closing but I would now like to turn the call back to Doug.

Thanks, Ron.

For the fourth quarter ending September 30th of 2009, net sales were $328 million.

A decline of 7% versus a year ago level of $354 million.

And on a full year basis, revenues for fiscal 2009 were $1.194 billion a decline of 6% from that, the revenues reported in 2008.

Consolidated gross profit margin in the fourth quarter increased to 23.7%, from 21.9% in the prior year quarter.

An increase of 180 basis points.

The margin improvement resulted from a combination of favorable product mix and excellent cost control efforts throughout Griffon.

For the full year, our gross margin remains stable versus the 2008 level at 21.5% notwithstanding the decline in revenue.

Operating expenses for the fourth quarter were $61.5 million or 18.7% of sales and that compares to the year ago total of $76.7 million.

I should point out that the year ago operating expense line included a goodwill impairment charge of $12.9 million, and excluding that charge, the 2008 fourth quarter SG&A was $63.8 million, or 18% of sales.

The deleveraging on the sale and general and admin expense line the margin was directly related to the revenue decline.

For the full year, operating expenses were $232 million, including $1.2 million of restructuring charges versus the 2008 total of $261 million, which included $15.5 million of charges including the goodwill charge.

Excluding the charges from both periods, SG&A as a percent of revenue for both years was 19.3%.

Income from operations in the fourth quarter 2009 was $16.4 million compared to the year ago quarter's level of only $679,000.

Excluding charges from both periods shows our core fourth quarter operating margin rose to 5.4% in the current year compared to 3.9% in the fourth quarter of 2008.

Income from operations for the 2009 full year was $25.1 million compared to $12 million last year.

Again excluding restructuring charges or charges, total charges for both years, and the 2008 goodwill impairment our core operating margin was steady at 2.2% of sales.

Net interest expense during the fourth quarter was $1.2 million down significantly compared to the $2.9 million in the fourth quarter of 2008.

The improvement relates primarily to our extinguishment of approximately $51 million of convertible debt as well as lower overall interest rates on borrowings.

For the full year, net interest expense dropped to $8 million from $10.4 million last year for the same reasons.

Income from continuing operations for the fourth quarter of 2009 was $12.3 million or $0.21 per diluted share.

This compares to the year ago net loss from continuing operations of $6.7 million or $0.20 per share.

Bear in mind that excluding charges from both periods, income from continuing operations per diluted share was $0.22 in fourth quarter of fiscal 2009 versus $0.19 per share in fourth quarter of 2008.

With the 2009 diluted share count increasing 78% due to our rights offering at the end of 2008.

I would like to also turn to some details on our individual segments, first telephonics.

Telephonics revenue rose to $116 million in the fourth quarter up 12% from the year ago level.

This increase was primarily due to growth in communications products, telephonics full year revenue was $388 million, up 6% versus 2008 and that growth was driven primarily by higher sales for radar systems for the full year.

Telephonics operating profit for the fourth quarter was $11.3 million, an increase of 3% versus the prior year with gains from a more favorable product mix partially offset by increased R&D expense, and additional administrative expenses to support expected sales growth.

Telephonics operating profit for the year increased 6% to $34.9 million, and segment operating margin remained at 9%.

Building products produced revenue for the fourth quarter of $107 million, down 14% versus the prior year.

And full year 2009 revenue was $393 million, down 10% from the 2008 figure.

Both the quarter and the year's revenue decline are due to the continuing effects of the weak housing markets with lower unit volume offset partially by a change in product mix to higher priced items.

For the fourth quarter, building products operating profit improved to $4.3 million compared to a loss of $9.4 million in the 2008 quarter.

The 2008 result included the goodwill impairment charge of $12.9 million.

Excluding this charge the 2000 operating results would have been a $3.5 million profit.

Excluding the goodwill impairment charge for the 2008 comparative.

The improvement in segment operating profit in the 2009 quarter was enabled by the Company's cost cutting and facility rationalization initiatives.

As Ron mentioned these efforts have been very successful and operating profit improved sequentially during 2009 reaching $600,000 and $4.3 million in the third and fourth quarters respectively.

Plastics generated fourth quarter revenues of $105 million down 16% from the fourth quarter of 2008 and full year revenue in plastics were $413 million down 12% versus the year ago level.

Lower volumes and plastics European business, foreign exchange translation, and the pass through of lower resin costs and customer selling prices are the leading causes for reduction in revenue for both the quarter and the year.

Plastics operating profit for the quarter was $7.2 million, an increase of 51% compared to the fourth quarter of 2008.

Full year operating profit increased 17% to $24.1 million compared to the fiscal 2008 level of $20.6 million.

The increase in profitability despite volume and pricing pressure was a direct result of cost containment efforts and improved product mix.

I will touch briefly upon the balance sheet before turning the call back over to Ron.

At September 30th, 2009 we had $321 million of cash with outstanding debt of $180 million which is a strong net cash position that insures we have plenty of liquidity for the year to come.

We also have undrawn borrowing capacity of close to $90 million at our subsidiaries.

The most notable change in the balance sheet from last year is in the notes payable and current portion of long-term debt.

At the close of this year, we have $79 million outstanding of our 4% convertible subordinated notes.

Which is -- this is now-- these have now been classified as current.

As there's a put option attached to the convertible debenture and that we anticipate will be exercised in July of 2010.

We have ample cash if necessary to finance the retirement of these notes and do not expect this to affect our ability to continue to grow the business or to execute our acquisition strategy.

Finally I would like to make some brief comments about our expectations for fiscal 2010.

At present we believe that telephonics will continue to grow at a high single to low double digit rate or better and should show stable to slightly better operating margins.

Conservatively we expect both building products and plastics to show flat revenues, but with improving profitability compared to fiscal 2009.

With that I will say thank you and I will turn the call back over to Ron for some closing comments.

Thanks, Doug.

Before we take your questions, I would just like to make a comment on the value we see in our business.

Look, it is more than the sum of the parts.

We think we bring a strong operating discipline, a shared pool, strong financial resources, to a group of fundamentally well positioned businesses.

Interesting I think if you (inaudible) with some of the parts valuation that it is clear that at least for the moment investors seem to think that Griffon is worth something decidedly less than what we believe the business is to be worth.

We appreciate, we share the concerns our investors have with respect to each of the individual businesses.

However, we shared these concerns and I believe we are doing an excellent job of addressing them, and building a much stronger organization in the process.

For the year, I think, we accomplished a great deal going forward into 2010.

We'll continue to execute on our operating plan, the improvements, the enhancements, the refinements that we've been able to do on the existing businesses and when the time is right, to make the decisive steps forward through our acquisition strategy.

With that I'll be happy to take your calls.

Operator?

Thank you.

(Operator Instructions).

First question is from Robert Labick with CJS Securities.

Please go ahead with your question.

Good afternoon.

Congratulations on the strong quarter.

Thanks

A couple of questions.

I want to start with doors.

Obviously you showed very strong profits despite the revenue decline, and particularly, even at the same -- roughly the same sales level at Q1 materially higher profits, is this a sustainable level of profits at this level of sales or is anything else going on there and how should we think about the profitability for doors on a go forward basis?

As we mentioned on call, I think we did have some favorable mix, and also we're getting some of the early on benefits from the cost saving initiatives, and plant rationalization initiatives that we undertook earlier this year.

So it will continue to give benefits as the Company projected for those cost initiatives, cost cutting initiatives as the fiscal 2010 unfolds and really into fiscal 2011 as well.

So I think it is pretty certain that it is going to be sustaining for at least a period of time.

Look I will make one additional comment to that.

October was the best month we've had in building products business operationally in the last two years.

Wow.

That's great.

Okay.

I mean because there's almost $8 million, $9 million improvement in profits on the same level of sales versus Q1, so not that long ago.

So it looks like, obviously you have pulled out a lot of costs is the conclusion that you are saying we should come to there.

Yes

Great.

Moving down to films.

Again here you showed some good margin improvement.

And is this -- and it sounds, if I heard you correctly, from here you believe you can continue to grow this next year.

Can you just tell us what was done in films in 2000 -- in fiscal 2009?

Any additional steps that are needed to be taken, and elaborate a little bit more on your outlook, please?

Again I think it -- it's,-- the biggest initiative certainly we are going to continue to focus on the top line growth.

But again, plastics did a very good job of taking costs out of the business, and that's a challenging environment and I think the Management of the Company knew early on it was going to be a challenging environment.

And credit is due to them for taking early on actions that would take costs out and sustain profitability during a challenging economic year.

Okay.

Great.

And then just quickly over to telephonics, recently you announced follow on contract for counter IED jamming product, I guess with Sierra Nevada Corporation.

Can you discuss this contract a little and how the funding for this works?

Should we expect follow-ons like this and how is this different from the Syracuse research contracts you had in the past?

It is somewhat different that the -- this was a contract that will allow us to continue the IED business.

The Syracuse research contracts were one-time events.

This was an additional contract that we received and we expect it to be in production this fiscal year.

I will also, tell you that telephonics ended this year with its largest backlog in the Company's history.

Great.

And then you also --

And this contract happened subsequent to the end of the fiscal year.

Okay.

Terrific.

So we continue to win new business that will go into the pipeline.

You mentioned also some potential large international opportunities, could you elaborate on that at all yet or when we would expect to learn about those?

That's really related to the air traffic business that we have previously talked about.

Our ability to compete for air traffic management business.

In particular there's an RFP that's expected to happen in Hong Kong, and we intend to participate in that along with others.

And this is a technology that has been built on our military innovation.

But also, telephonics has installed 20 air traffic management systems throughout China over the last 20 years.

So there is including the [Macau] Tower, which was done recently, so the Hong Kong air traffic management proposal is coming up.

We see it as a continued commercial diversification for the technology we have in that business.

It is something that we are intending to put resources to try to build that division

Great.

Thank you very much.

I will get back in queue.

The next question is from Zahid Siddique with Gabelli & Co.

Please go ahead with your question.

Good afternoon.

A couple of questions.

The first is on resin prices.

Could you comment on what the prices are and how they have been trending.

It seems like they have been lowered, but what day last year or six months ago anything you could add color to.

Recently they have been trending lower and you'll -- we were the beneficiary of that to a certain extent in terms of the margin improvement.

But there's always at the end of the day a pass through in the customer selling price.

So you don't have any long term sustained benefit by having the lower resin price.

Similarly when the resin prices go up, there's also a pass through to the customer.

And what is the average price, roughly, on a per pound basis?

That is a very good question, quite frankly I will admit I don't have the answer to that right now.

Okay.

That's fine.

And in terms of acquisitions, when do you think you will actually be able to make one -- do you think it is going to be in fiscal 2010, or 2011, or is it -- difficult to predict?

It is difficult to predict.

I will tell you that I think the best deals in 2009 were the ones we didn't do.

And preserving our balance sheet and being able to take the long term view on the existing businesses and spend the time building the corporate office has been the foundation.

We look at transactions all the time.

It is our fourth business.

The three operating businesses are, we have -- closed plants.

We have done sized work forces.

They are on their respective plans.

We are very confident about where they're tracking for 2010 and there's a significant effort put at corporate to identify, evaluate and to invest our substantial liquidity.

If you look at the operating businesses, with $90 odd million of EBITDA, you will, if you look at it at any level of modest debt to cash flow, you would take the position as we do that there is a substantial amount of balance sheet liquidity that Griffon has that is capable of making significant acquisitions or investments.

And the timing of those are impossible to predict.

But it is a priority of this Management Team to look to put that balance sheet to work.

If I can just add on the cost cutting side of things, I think it has been done in a very thoughtful manner that has not disrupted customer service.

And I think in many cases, customer service has actually improved.

So it has been done in a-- in a very effective manner and is positioning us well to respond to increased demand from our customers.

With a very good operating leverage which should come with that.

Look.

We clearly have significant operating leverage for an upturn in the general economy.

And any stability let alone a recovery in the housing markets.

Okay.

Just one last question.

What was the volume decline for the European resin business?

The plastics business?

I'm sorry.

The plastics business, right.

Let me flip through.

I should have that information handy, and I am still learning the business.

So I don't have every answer at my fingertips just yet.

Sure.

I will just get on queue or wait for the answer.

I will go ahead.

Next question?

(Operator Instructions).

The next question is from Marty Pollock with NWQ Investment Management.

Please state your question.

Excellent quarter.

Very nice recovery.

Certainly the building products especially.

Hey let me ask a question regarding the IED business, as you're essentially getting a second leg with 3.1.

The order you announced a few weeks ago was a $45 million order.

And just from, from the actual announcement it seems to suggest that delivery through March 2010.

Is that in fact -- is that expectation this is $45 million of business that essentially is delivering into next year's fiscal, or is it, do you think just clarify that if you would?

I am sorry.

It goes into the pipeline of funded backlog.

It will not all be delivered in the fiscal year of 2010.

So it is over a period of at least two years.

And as far as the product.

12 to 18 months.

Yes, 12 to 18 months.

As far as the product itself, is there a, -- from what I understand that there is a shoulder based product here that could actually in terms of units be [affordable], available to not only the vehicles but clearly to a number of the people on the ground, soldiers on the ground.

Is this the product itself you are referring to?

Just wonder if you can clarify the nature of this product itself.

This is a backpack unit not on the mobile vehicle.

And is there anyone else developing this particular product?

Or is that essentially the next generation for everybody?

There are a couple of other backpack applications that we're-- we are aware of.

I think that the armed services overall are looking at a number of different alternatives.

But regardless, this is actually in field tests and is working well, so.

If I may just overall to the comments about growth for telephonics, at least high single digits, just wondering with some of the other program that have been in the news like the C-17 orders.

I mean that program is in theory in jeopardy for essentially elimination as far as new funding, but this is more a maintenance type product?

Or is this particular order in jeopardy in theory or not?

I'm sorry.

Is which?

(multiple speakers)

We have taken into account the potential for the C-17, being discontinued long term and it probably will scale back a little bit in fiscal 2010.

But it will not be, at least at present, discontinued in 2010 and even then -- (multiple speakers).

You never know.

The ongoing maintenance will go on for a number of years.

So while it is a declining product, it is not the C-17 is not going away, and in our ability to fill the pipeline and add other things is part of the ongoing management of the growth of telephonics.

So, again we are very comfortable with our 2010 stability in the telephonics business and even into 2011 and beyond.

And we have got growth initiatives and there's going to be budgetary issues.

We think this Company is very well positioned.

Marty, you have known-- you have followed us for a number of years.

If you look at it over a period of time, top line has grown very, very nicely over the last five years, and we see ourselves being positioned with technology and on both legacy programs and new initiatives that give us the confidence that this is a business that we think has substantial long term value.

And if I may just one last question for you, Ron.

Clearly, we applaud your comments about discipline on acquisitions; the right deal has to be priced right for good return.

Yes.

We passed on a lot of things this year.

If I may, are we essentially the acquisition opportunity of a larger opportunity, is it in a fourth leg to the stool of the Company or is it essentially more of a tuck in and bolt on opportunities to build up at least certainly the telephonics and maybe the plastics area?

We've looked at both and will continue to look at both.

We have been able to take the existing businesses, look at bolt-ons, look at competitive, and things price wise, didn't line up to something that we thought could enhance book value, shareholder value.

So the best again the best transactions this year were the ones we didn't do.

Looking forward, the ability to diversify the Company further is only a question of the opportunity

If we see something we think we can put our balance sheet to work, scale the size of Griffon by adding, an additional business to it, we will do it.

But there is an ongoing process of identifying and evaluating opportunities both within the existing companies by building their corporate development capability as the add-on to what we have done from an operational perspective and then separately for what has gotten created at corporate to be able to go out and proactively try to put our balance sheet to work.

Thank you very much.

Thank you.

While the next question is in queue, to answer the plastics question that was raised earlier.

It is in the effect carving out of currency.

And carving out the resin pricing effect, the volume effect in Europe was in the low double digits.

So along the lines of 11 to 13%.

Our next question is from [Steve Renari with Franklin Pendleton Investments.] Please go ahead with your question.

Good afternoon, guys.

Hi, Steve.

Hey.

Just following up on the resin or sorry the plastics business, can you give us a sense of what capacity utilization was running at?

At the end of the quarter, so we took a picture at that point in time, the US plants were running at somewhere around 90%.

And similarly, the European plant was running at-- the European plants were running at close to 90%.

The Brazilian plant was probably running a little lower than that.

Even with the drop off in sales you are saying it is still that high?

Yes.

That was running close to 100% before.

Well, I said -- no I said around 90%.

Before the drop?

Yes.

That would be very accurate, yes before the drop.

All right.

The telephonics backlog, Ron, you said was a record.

Do you know that number?

Just under $400 million.

I want to say $392 million.

It will be in the 10-K which we will be filing early next week.

Great.

Thank you.

Okay.

Overall CapEx, you have this restructuring program indoors and that's going to cost you a bunch of money this year.

Can you give me a sense of what you think the total year for entire Company shakes out to be?

We ended up -- we were pretty low on capital spending this year.

For the full year fiscal 2009 we were just over $32 million.

CapEx can fluctuate a little bit based on timing of expenditures but it is probably going to be somewhere between $40 million and $50 million next year, if we follow through on it.

With what we have previously announced on mega plan, that's no addition, but that's a good ball park.

We are proceeding apace with mega plan but we are going to continue to challenge every other capital investment and shepherd our resources.

Okay.

How are we going to offset that increase in CapEx?

Via either the balance sheet or improved earnings, how do you think that's going to shake out?

As we mentioned, we think we are positioned to drive further earnings growth in each of the business units and we are going to continue to focus on working capital and every other aspect that enables us to invest cash in the business.

I saw your inventories were down compared to this time last year.

How much more room do you think we have to reduce inventories?

We're not going to push them down until we run out because we never want to disrupt customer service, but we still think and the business unit leaders think there's additional margin for improvement.

But it will be done judiciously, so we do not in any case disrupt customer service.

Okay.

But, overall do you think working capital will be a contributor to cash flow this year?

If you are modeling something right now I wouldn't model anything more than-- and exclude the refinancing because obviously if we refinance the debt that'll move back down to long term.

Let's carve that out and just say any model right now you should probably say neutral to maybe just slightly favorable.

But I don't think you should model a windfall improvement in cash flows from working capital.

Okay.

That's fair.

We had a bunch of new hires, so I would imagine the corporate overhead should go up a little bit.

We have managed corporate overhead very well.

We've had people come, we've had people go.

And I think you can look at corporate overhead at levels consistent year over year.

We've been very careful about how we have been handling it.

So about $21 million or $22 million is about --?

That works right.

That works right?

Okay, finally the last one.

Garage doors.

Do you guys have any data on what a new garage door could do to overall energy efficiency?

It depends on the nature of the door you put in place.

If you put in a wood door or a polyurethane door that doesn't have heavy insulation, you don't get that much benefit.

But if you put in a steel door with foam insulation, there's a very high energy benefit, and correspondingly there's also a tax credit that can go up to $1,500 per investment.

So it is an opportune time for home owners to invest in a more energy efficient garage door.

I know there is cash for [calkers] I guess they're calling it now?

I think that's gone already.

No.

Something that was just, that's being talked about right now.

Any, -- it is clear, any tax benefits any-- anything that stimulates the broader housing market, we have exposure and are a beneficiary of.

And in that case the tax credit probably would lean more toward the remodel and house renovation which would be very good for us as well.

Thanks a lot guys, I really appreciate it.

Okay, thank you.

There are no further questions in queue.

I would like to turn the call back over to Management for closing remarks.

Thanks for joining us.

This has been a year of accomplishment and we look forward to continuing our process, and being able to report to you next year.

Thank you.

This concludes today's teleconference.

You may disconnect your lines.

Thank you for your participation.