NWPX Infrastructure Inc (NWPX) 2013 Q3 法說會逐字稿

Welcome and thank you for standing by. (Operator Instructions) Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now I would like to turn the conference over to CEO, Scott Montross. Thank you, sir, you may begin.

Thank you, Ashley. Good morning and welcome to Northwest Pipe's conference call. My name is Scott Montross and I am President and CEO of the Company, and I'm joined by Robin Gantt, our Chief Financial Officer.

As we begin I would like to remind everyone that the statements that we make in this call about our expectations for the future are forward-looking statements and actual results could differ materially. Please refer to our most recent SEC filing on Form 10-K for a discussion of risk factors that could cause actual results to differ materially from expectations.

I will now turn to Robin who will discuss our third-quarter results.

Thank you, Scott. Our net income was $1 million, or $0.11 per diluted share, in the third quarter of 2013 compared to $3.4 million, or $0.36 per diluted share, in the third quarter of 2012.

Water transmission sales decreased 26.2% to $46.8 million in the third quarter of 2013 from $63.5 million in the third quarter of 2012. Water transmission gross profit as a percent of sales increased to 16.9% in the third quarter of 2013 from 15.2% in the third quarter of 2012. The decrease in sales was due to a 60% decrease in tons produced, which was partially offset by downstream fabrication services on types produced in prior periods.

The increase in gross profit as a percent of sales was driven by our cost reduction initiatives, reduced man-hours per ton and overhead costs, as well as improved quality. Tubular product sales increased 8.9% to $56.2 million in the third quarter of 2013 from $51.6 million in the third quarter of 2012.

Volume increased 20%, which was offset by a 9% decrease in selling prices per ton. We sold 51,400 tons in the third quarter 2013 compared to 42,900 tons in the third quarter of 2012.

Tubular products gross profit as a percent of sales was 1.6% in the third quarter of 2013 compared to 3.7% in the third quarter of 2012. Gross profit and gross profit as a percent of sales were negatively impacted by increased competition from imports which asserted significant downward pressure on selling prices and volumes and lower our cost [to] market inventory adjustment of approximately $800,000. These were partially offset by operational improvements made at all facilities, particularly at (inaudible) as a result of our capital investment projects.

Selling, general, and administrative costs decreased to $6 million in the third quarter of 2013 compared to $7.6 million in the third quarter of 2012 as we continue our overhead reduction efforts. Interest expense was $1 million in the third quarter of 2013 and $1.3 million in the third quarter of 2012. The decrease was the result of lower average borrowings and lower average interest rates. Our effective tax rates were 42.3% in the third quarter of 2013 and 25.3% in the third quarter of 2012.

In the first nine months of 2013, the Company generated $21.4 million in cash from operations to support the growth of the business, mainly through our net income and depreciation, and a decrease in cost and estimated earnings in excess of billing. These were partially offset by an increase in our trade and other receivables and a decrease in accrued liabilities.

Depreciation was $10.1 million in the first nine months of 2013 and $11.7 million in the first nine months of 2012. Inventories decreased $6 million in the third quarter of 2013 from the second quarter of 2013 due to a decrease in tubular products inventory. We had temporary shutdowns at our Houston and Bossier City, Louisiana, locations at the end of June and the first half of July to help decrease the inventory levels.

Capital expenditures were $22 million in the first nine months of 2013, primarily for planned capacity expansions in our tubular product plants and the expansion project at our Saginaw, Texas, facility. The remainder was for ongoing maintenance capital expenditures.

Now I will turn it over to Scott for an update on our business.

Thanks, Robin. As of September 30, 2013, our backlog in water transmission was approximately $108 million. As of September 30, 2012, our backlog was approximately $241 million.

We expect that the fourth quarter will be a challenging quarter for both sides of the business. Backlog in water transmission has significantly decreased as we have completed much of the drought-related emergency work in Texas. We expect water transmission sales to be comparable to the third-quarter levels with gross margins in the mid-teens.

The following is an outlook on upcoming water transmission projects. There is a 22-mile pipeline project in Wyoming that will likely bid in the next couple of months. We expect the Tarrant County integrated pipeline job, or IPL, will bid the first segment of about 15 miles in the first quarter of 2014. The earliest IPL revenue would be recognized in the second quarter of 2014.

A second segment of IPL is expected to bid in the fourth quarter of 2014. The Odessa Subarea is a 40-mile pipeline project near the Snake River in Washington State that may bid in mid-2014 at the earliest, but we think it could be closer to 2015.

The Red River job in North Dakota is approximately 140 miles that will bid in mid to late 2015. Therefore, as you can see, there is some increase in activity in the projects that are out there, but we still expect that our water transmission order book will remain at low levels for at least the next couple of quarters.

In Tubular Products, we expect compressed margins to continue into the fourth quarter as imports have had a negative impact on both volume and margins, and we expect our customers to continue to closely manage their inventory levels. The trade case filed in July addressing the high imports of oil country tubular goods has not yet had a significant impact on sales prices or volumes. Commerce Department is conducting its investigation and expects to have a preliminary determination by February of 2014.

The Double H line pipe order announced last week is the largest line pipe order in company history. This order is approximately 36,000 tons of line pipe that is being produced in our Atchison, Kansas, plant. We produced approximately 10,000 tons in the third quarter of 2013 and expect to produce the balance through the second quarter of 2014.

While this line pipe order is significant, rising coil costs, stagnant pipe prices, and still depressed demand continue to put pressure on oil country tubular good margins. Therefore, we expect margins in the Tubular Products business will be in the low single digits for the fourth quarter.

We expect between $26 million and $30 million total capital expenditures for 2013, which include some investment projects and normal capital maintenance. The biggest investment projects are the previously announced expansion at our Saginaw facility as well as the continued modernization of our Atchison, Kansas, plant.

The Saginaw project is complete. The Atchison modernization, which includes the installation of the second accumulator which was completed in the first quarter. In addition, we were installing a new hydro tester and replacing the existing front end of our 16-inch mill, and we expect that project will be completed in the first quarter of 2014.

As previously announced, we are in the process of exploring strategic alternatives for our oil country tubular goods business which could include potential acquisitions, divestitures, and joint ventures. No decision has been made at this time to enter into any transaction and there can be no assurance that an exploration of alternatives will result in a transaction or as to the terms, conditions, or timetable of any such transaction. It is our policy not to comment on any specific discussions or any potential corporate transactions unless and until we enter into a definitive agreement with respect to such transaction.

In conclusion, we anticipate a challenging fourth quarter as we have not yet seen a significant benefit from the trade case on oil country tubular goods. We believe volumes and margins in tubular products will remain compressed for the near term. And while there are some larger water transmission projects forecasted to start production in the second half of 2014, our order book is expected to remain at low levels for the near term.

At this time we will be happy to answer any of your questions.

(Operator Instructions) Scott Graham.

Good morning. So could you give us an idea of what the bidding activity, or I should say quoting activity, let's use that word, in water transmission, where does that stand now? Year over year or the past couple quarters you were saying down mid-30%; have you seen any change from that?

I think what we have said in some of the past calls that it is down probably 35% or more we have seen over the last couple of quarters. What we have seen is in November and December timeframe of this year a relative pickup in bidding activity where I think there is probably somewhere on the order of some $120 million or so of projects that are out there for potential bids in the November and December timeframe, which really would be projects that probably late first quarter of next year and go through next year and into the following year.

But we definitely have seen a little bit of an uptick in the activity in the November and December timeframe.

So, Scott, that would be apart from what you laid out for us as known, yes?

Yes, some of those jobs out there -- all of those jobs are still to be bid on. Obviously, the bidding process is never a certain process. And while we are -- after all these jobs or as many of these jobs that we think that fit with our plans are it is never a certain process. So obviously they are out there and we will be bidding and we will be hard after those jobs.

Sure. And a lot of that is break-and-fix plus, I will call it?

Say that again, Scott.

In other words, there is break-and-fix business out there and then there is something that would be larger than that. Is that kind of how you would characterize that stuff?

I think a lot of those are break-and-fix jobs and there may be a little bit of speculative in there. But when you look at some of the larger things that we see going on in the market, they are along the lines of what we had in obviously the script.

We talked about the Red River project, which is a project in South Dakota that is potentially a 140-mile project. The Odessa Subarea project, the project near the Snake River in Washington, 40-mile or so project. Those are the over and above projects that -- obviously we are hoping some of those projects come to fruition as we go into 2014, which obviously helps our order book significantly.

Understood. Now over the summer we had a fairly significant shakedown in some of the bond markets, certainly affecting some of your customers I would think. I was just kind of wondering what you are hearing on that and funding issues and has there been any change in the thinking there. Is this truly bidding that is -- or I should say, quoting activity that is going to turn to bid, or is it potentially that the issues over the summer pushed the actual -- put the bid out further?

I think the issues over the summer obviously make the financing of the project a little more difficult. But I think some of the things that are going on in some of these projects are really there is some circumstances where large crops can be affected in certain areas and really have pretty substantial effects on local and state economies, as far as crops are concerned. So I think some of these jobs that we have just talked about are getting a little bit more attention than maybe just speculative.

So we are hoping that the issues over the summer with the bonds don't have that impact. But I think the critical nature of some of those projects, they tilt the likelihood of those projects happening more toward the happening side.

Interesting, okay. Two other questions, both on tubular. Is it possible, Robin, to tell us what the tubular volumes were excluding Double H?

Excluding Double H; well, we said they were about 10,000 in the quarter so that would be about --.

Yes, you did, I'm sorry, I apologize. You did give us that number. So then the last question is more for you, Scott.

Give us any kind of -- I know you said you are kind of loathe to comment on it, but we are no longer in the first inning on the strategic alternatives. Could you at least give us kind of where -- if nothing specific that is fine, but where on the progression of that curve we are right now?

I don't think that we want to make any comments on that, Scott, at this point in time.

No problem. Okay, thank you both.

Brent Thielman.

Good morning. The water side sales down 26%, but gross margin is nicely above last year. Any help from mix or steel prices this quarter, or are you feeling more confident that this sort of run rate of sales you can kind of generate these sorts of margins?

I think one thing on the steel price is -- and a lot of people are concerned -- steel prices are actually just slowly, have been slowly moving up from about the second quarter of this year. Early second quarter, maybe the late first quarter, so we are really not getting any help on the steel prices.

And I think some of the things that we have done on the cost side on the water transmission business really starting to show up. The reduction in in-field claims and in-house claims that we have talked about in the recent past; the deleveraging of our buying of raw materials and the efficiency of using the raw materials; and then simply the really hard focus on driving down man-hours per ton in each one of our water transmission facilities. I think those are really the things, Brent, that you are starting to see show up in these margins at this point.

Okay. Then, on the tubular side, is there any qualitative comments you can provide around the operating performance of the OCTG asset versus Kansas? The OCTG assets, were they negative this quarter versus Kansas? Any help there.

We don't break those assets out obviously. We have said in the past that the Kansas facility has always been a very strong performer for us and that really hasn't changed in the third quarter. And I think that is probably as much as we want to say in that.

I think that the conditions that are going on related to the imports and really a little bit of a perfect storm on OCTG with steel prices moving up and you still have a relatively depressed pipe price, as well as demand on the OCTG side really starts to become maybe a little bit more of a drag on the entire tubular product business there. That kind of, in a roundabout way, answers that question.

Got it. Then on the tubular side, just looking at Q4, are you anticipating sort of that typical seasonal decline in sales versus Q3?

There is the ad valorem tax in Houston in the fourth quarter, which generally really slows things down in the fourth quarter. The one thing we have seen; you have heard us talk about the line pipe order, the Double H order. Obviously we will have a little bit about in the fourth quarter.

The majority of that will likely be shipping in the first quarter and into the second quarter of the year. We have also seen a little bit more of a pickup in maybe some of the other line pipe orders. So we are cautiously optimistic right now on what we are seeing in the line pipe backlog.

Okay. Then just on that last part, as far as your bid pipeline in tubular, are you tracking similar opportunities like the Double H you announced last week?

Yes, and I think that really is -- one of the things, Brent, about the announcement was really, hey, we have arrived at being able to do these kind of projects now out of their Atchison facility. It's a large project and those are the type of things that you focus on going forward to be able to put those kind of large projects on the mill to drive not only the efficiencies of the mill and to really enhance what kind of income you can generate out of those facilities.

And really with the expansion that we are doing at the Atchison facility, it really puts us in more of that mode where we really want to be going out and finding those kind of projects and really using that as a strong baseload facility. I think really with a lot of the cost work we have done, because obviously we have focused very hard on driving costs out of that in all of our facilities, that that kind of work will really start to show up in the margins at the Atchison facility going forward.

Okay, great. Thank you.

Barry Vogel.

Good afternoon, ladies and gentlemen. I have a couple of questions. I want to go back to the review of the strategic options for a moment, and I know you don't want to comment but I have a question.

If you were to make acquisitions what kind of products would there be, other than pipe, if you had to list three or four or five product areas?

It is our policy really not to talk about anything with the M&A process, Barry, so I don't really want to speculate on that. I think the one thing I can say, though, that we have talked about in the past on these calls is that -- and obviously you all know -- is that we are working to move up the value chain in our tubular products business. And that really is by working more into the heat-treat side of the business.

A much larger percentage of the total demand on OCTG products is heat-treated, and you have heard us say in the past that we now have a heat-treating arrangement that is very favorable to us as we move forward where we are not giving away the biggest part of the heat-treat margin to third party heat-treaters. And it is actually a cost level that is very beneficial to us moving into the heat-treat market as we move forward.

I think that is the one thing that I would say. That our focus on OCTG products is really more toward driving more to the heat-treat market where the market is, as well as things that you have heard us talk about before, driving costs out of our business. That is uptime and yield and the guys in the tubular products side have done a very good job at focusing on those two areas and driving costs out of the business. But we need that next piece, which is heat treat, really to be stronger in the OCTG side of the business.

How would you get more involved with heat treat versus what you are doing now?

We have that heat treat arrangement that we have talked about where we actually have the capacity to heat treat available to us that we didn't have before. So we may have only been able to do 30% of our OCTG projects as heat treated before, just a number I'm pulling out. Now that percentage available to us increases significantly, and really that is where the sweet spot of that market is.

Okay. Now as far as the comment you made about you have arrived with that largest project in the history of your company, the Double H project, what do you mean by arrived? In other words, what is the long-term significance of you being able to pull off this major project?

I think it makes us a viable option for large projects like that going forward. You always have to start with the first one and you have to perform on the first one. I think that we are set up with the management on tubular products and the management of that facility to have very, very strong performance on that and really to show that we should be in that game with doing those larger projects going forward. That is the significance of it.

Now going back to the ITC, US Steel, on their conference call last week, suggested -- and it's out of character because they usually don't talk about ITC cases -- that there is going to be a vote on December 20, 2013. And they remarked that if that vote is affirmative and they said that the original -- the initial vote was six to zero to go forward, which is a pretty strong subtle hint that they are going to do something positive for the industry.

What do think -- if they do vote on December 20, when do you think you will see an improvement in tubular orders because of the tariffs?

There is really two pieces of this vote, Barry. The December vote is really on the countervailing duty piece, and that is only against two countries is the way that we understand it. It is against Turkey and India, I believe, and the [CBRD] on the case. So that is relatively limited.

The bigger vote that is out there is really the Department of Commerce's vote on making the preliminary determination on anti-dumping duties that happens right around, I want to say it is February 13 or 14. I can't remember exactly what date. That is against all the countries involved.

So those two pieces are really -- what can happen is that is really the first piece of where we can start getting some relief against imports coming into the port. Because it is an affirmative preliminary determination by the Department of Commerce that means that whatever the preliminary margin is set out to be our understanding is anything coming into the ports at that point in time would have those margins, whether they are countervailing duty margins or anti-dumping margins placed against it.

So once those happen, and obviously we are viewing the February 14 date, I will call it, as the more serious date simply because it is against all the countries. Once that happens and it becomes real and based on whatever the amount of the margin is placed on cargoes coming, that is when likely you start to see maybe the move up in the pricing and maybe a step-wise reduction in imports coming into the country. But we think that February 14 is the more pinnacle date in this whole thing.

They didn't mention February 14 on their call; they mentioned December 20. Thank you for the elaboration. That is helpful.

Thank you very much. Keep up the terrific work that you guys are doing. I'm looking, finally, for this cycle both of your segments to blowout on the upside.

So are we. Thank you, Barry.

Gerry Sweeney.

Good morning, Scott. Good morning, Robin. Water transmission group, I wanted to start there. I think in the past you have mentioned that in, we will say, quote-unquote, normal operating margins you were looking at gross margins of 14% to 17%. And today's or yesterday's announcement of 16.9%; it is clear you have taken a step up in the gross margin category.

I mean is it safe to assume that you are moving into a new round going forward?

Yes, we like to think that the cost work that we are doing on all sides of the water transmission business will take us into the next level or on to the next level of gross profit margins across the water transmission business. Now obviously that assumes a relatively normal market condition and you are seeing the market conditions that we are seeing right now where there is really low bidding activities and you see what the margin levels are with the low bidding activities. So we think that normal market conditions actually move us to the next plateau of margins.

Yes, I would characterize this third quarter as not normal operating.

Right. We would also.

Okay. Now you listed off several jobs, potential large project bids -- (inaudible) Odessa, the Wyoming project. Looking back at the history of Northwest Pipe and large projects like this, is this an abnormally large amount of large projects that are sitting out there on the horizon or is this -- have we seen this in the past?

I think that we have seen this at different times during the past and obviously not all of them happen. Some of the things that we are looking at now there are some critical circumstances involved with some of those jobs. Again, that is why we think that some of those circumstances -- like I said, one of those projects is a -- could have a potential detrimental effect on crops in a specific area and state and local economies. So we think that those kind of things start to tilt that more toward the idea that those are more likely to happen.

Now that could all go away and none of them could happen, but that is what happens with speculative projects like this. We make sure that we are keeping track of them. And our guys on the water transmission side do a fabulous job of making sure that they are talking to the people about these projects and making sure that we are on the doorstep of every one of these projects. So if these happen we will make sure that we are there to have our best swing at it.

Okay. There was one, Mary Rhodes in Corpus Christi, that you didn't mention. Any thoughts on that? It looked like that was getting a little bit of a push as well?

Yes, I think Mary Rhodes is a project down near Corpus Christie, a 42-inch project that we will probably bid in the next several weeks or couple weeks. I can't remember exact timing. But it is 42 inches in diameter and we are after part of that project.

The only problem is the diameter and product may not completely favor what we are doing or what we are looking to do in the fourth quarter. And remember, there is a significant amount of other projects out there. We want to make sure that we are getting our piece of all of those projects.

But Mary Rhodes is one we are watching but we are not certain on it at this point. That is why we didn't mention it.

Okay, got it. Then just real quick on the tubular side. I mean you have spoken about Atchison making a lot of improvements, the front end, they accumulated a hydro tester and Double H project win. That definitely highlights that investment.

You have mentioned in the past that doing all this CapEx was going to broaden your market. Is there any way you can quantify some of the opportunities you are seeing out there? Are there multiple Double H projects out there?

Obviously the shale plays getting oil to market is a big issue. Would you be able to give any more granularity on that front?

I don't really want to comment too much on the projects that are out there that are being looked at at this point in time, simply for competitive reasons.

Fair enough. Okay, I thought I would ask. I appreciate it. That is all from my front.

Thomas Van Buskirk.

Good morning. I wanted to actually start on the competitive situation and whether the landscape has changed for you at all, particularly on the water transmission side. I am trying to understand how we can think about what makes you win a project versus not win a project. Like KWA, which sounded promising, but for whatever reason, I guess whether it was price or something else, didn't happen.

How should we think about that and how you guys are positioned going forward; how that is changing?

I think the biggest thing with the competitive landscape is the small amount of bids that has been out there. That small amount of bids that are out there you are really dealing with every potential competitor bidding on jobs, so the competitive landscape becomes a little bit less well-defined versus when you are, what I will call, in market conditions where demand is a little bit better and people are being filled up. You know where jobs are and have a better view of who you are competing with on specific jobs.

At this point in time, we are competing with everybody up to and including some smaller people on smaller jobs that may not even make their own pipe. They buy pipe out, have it coated, lined, fabricated outside, and are really nipping at the heels of smaller jobs in this market. So it really -- a lot depends on the strength of the market itself.

But in this landscape right now when you are seeing a relatively low bidding activity that we have seen over the last couple quarters everybody is a competitor and it is very much less well-defined. As things pick up and people have larger jobs and their plants are operating at higher capacity utilizations, the bidding becomes a little bit more predictable. But at this point it is a little bit difficult to predict because everybody is a competitor that is in the market at this point.

Got it. The other piece in water transmission that I am a little curious about is you kind of suggested that steel is becoming a little bit more of a pressure on the margin in water transmission. I am guessing it is a little tougher to recoup the steel cost increases on some of your business.

This kind of, sort of baseline maintenance business that you have going on right now, not the big orders but the kind of thing that is sort of generally in your backlog from quarter to quarter, what ability do you have to recoup increases in steel prices on that business?

Steel prices on the water transmission side are a little bit less of the total cost than they are, say, on the tubular side, but steel pricing moving up does have an impact. I mean how you bid jobs, your competitiveness with bidding jobs. Right now I would say the increase in steel price are, I would characterize as, a little bit more difficult to completely recoup versus when the market is stronger.

Okay, thanks. I will get back in queue.

Matthew Sherwood.

Good quarter in a difficult environment. Just had a quick question. First off, in terms of the tubular business, you referred to the investments you are making in Q1 and also, assuming you are still in the OCTG business, the heat-treating capacity that will come online for you sort of around Q2 of next year.

Is there any way we can dimensionalize this, the sort of profitability enhancement that could bring for 2014 given the amount that you have spent on Atchison and just the desire to understand returns on investment?

I think, as we have seen it before in calls, our drive is to get toward the double-digit margins on this. And I think that the investments that we have made, Matt, on the Atchison site, the market that it opens up to us -- we have talked about it before; it basically doubles the available market on line pipe to us. As well as having that heat treating that we do now where we will now have access to going forward in the second quarter, along with the cost work the guys are doing at the tubular products level on implementing lean manufacturing and just generally driving costs out of conversion, making sure that they are implementing the maintenance programs to drive uptime and better yields.

I think those things as we go into 2014, if there is a normalized market situation that is not stressed by the amount of imports, that we get toward those double-digit margins.

Now, again, and I have said this in the past, we cannot count on trade cases for the long-term viability of this business. So that is why we have made the investments in things and we are working on driving costs out of this business that market in and market out, whether there is imports or not imports, that our focus is on getting toward double-digit -- getting to double-digit margins in the tubular products group.

Just to sort of follow up on that theme, I know that the trade case would probably affect the supply/demand balance in the OCTG market, but there is really no reason to believe it will affect the supply/demand balance in the line pipe market off the bat. And you said that in general you want to be sort of agnostic to the market environment. Does a double-digit level in line pipe is that sort of -- that should be -- that doesn't really matter what the market environment looks like?

I think we have a plant in the Atchison facility which is why we chose to invest the additional capital in Atchison. It has got a platform to really compete in any market. We have got a good location, a strong infrastructure, a strong management group, and I think the Atchison facility competes market in and market out.

As you look at your blended margin, though, in the current quarter now, and I understand that the accumulator will help the market position of the line pipe facility, but it sort of doesn't appear like you are on track for double-digit margins given that you are in the low single digits. Is it just because this new project is going to bring you there, or is it that there is some other stuff that is masking it, given the high levels of import?

I think we have danced around maybe a little bit at the beginning; the Atchison facility has always been a fairly strong performer for Northwest Pipe. And that hasn't changed in the second quarter or the third quarter.

I think what we are seeing on the OCTG side is, like I said before, the increase in coil prices along with the continued depressed pipe prices on the OCTG side and the depressed demand that we are still seeing continues to be maybe even a greater drag on that at this point. I think once we get to the point where we have heat treating that is basically captive heat treating that allows us to keep a much larger percent of the margin which is now going out as costs versus what we are doing now with the outside third-party heat treating.

So with Atchison doing what they are doing and improving on what they are doing based on the modernization project -- and we fully expect that the modernization project to have stepwise improvements in their margins -- we think that what we are doing cost wise on OCTG ends specifically the availability of devoted heat treating to our facilities now. Really puts us in that mode to get toward those double-digit margins.

We haven't had that kind of heat treating, and when you can look -- when you figure you can look at double-digit margins on heat treating product -- if heat treat is at $1,500 or $1,600 a ton and you realize that all of that heat treat cost is going to a third-party processor and there is no advantage from us from that third-party processor, what we are going to do or be able to do going forward in heat treating -- we don't have nearly as much cost, so we keep significantly more of that cost as margin going forward.

So I think those are the things that get us toward the double-digit margins and things that you can't on the surface see at this point.

Just one last one here. If you look at what you just said here, where you have visibility to materially higher margins on both the tubular and the OCTG side based on things you can point to that are structural in nature, does that reduce the sort of way that potential participants in the strategic alternative process for OCTG will look at your business with or without the trade case? Or is the trade case still an important determinant in how the strategic alternatives progress there?

No, I think the trade case is more of -- it is happening; it is an anomaly over a period of time. Like I said, we cannot run the future of our business on any product based on the trade case. We have got to make sure that we are controlling our costs.

And the main thing that we are doing besides all the work on uptime and yields in these plants, especially on the OCTG side is having that advantageous heat treating agreement. It really doesn't have anything to do with the imports. The import is a temporary relief, a temporary item.

Really it is getting more control over the costs. And we think that that heat treating arrangement allows us to do that in a significant way on the OCTG side.

Great. We are looking forward to better earnings in the tubular side in 2014. Thank you.

(Operator Instructions) I am showing no further questions at this time.

I guess we would like to thank everybody for attending our call. I think the next time we get together is March, Robin?

Yes, the year-end results in March.

So until then, thanks, everybody, and see you later. Thank you.

Thank you.

Thank you for participating in today's conference call. You may disconnect at this time.