Quanex Building Products Corp (NX) 2003 Q3 法說會逐字稿

Good morning and welcome to the Quanex Corporations fiscal 2003 third quarter earnings conference call. At this time, all participants have been placed in a listen-only mode. Following the presentation, the call will be open for your questions. I would now like to turn the floor over to your host, Mr. Raymond Jean, Quanex's Chairman and Chief Executive Officer. Sir, the floor is yours.

Good morning and welcome to the Quanex third quarter conference call. Thank you for joining us. With me this morning are Terry Murphy, our Chief Financial Officer and Geoffrey Galow, our Vice President of Investor Relations. We will be available after my remarks to take any of your questions. Today's call will include a review of our third quarter results, the current state of our key market drivers and what that means for us and our expectations for the fourth quarter. The comments I'm making today include forward-looking statements about the future prospects of Quanex. Please refer to the company's latest 10K report filed December 20, 2002. For our complete forward-looking disclosure statement. The company's third quarter earnings release dated August 27, 2003, is available on our web site.

During the quarter, demand for our products was mixed. At our vehicular product segment, North American light vehicle builds were down, which reduced volumes and lowered profits at MACSTEEL. Overall customer activity at the building product segment was good and our resulted engineered products certainly reflect that as they posted record quarterly sales and operating income. Housing starts were robust during the quarter and consumer remodeling activities remained high as indicated by the recent results of the big box home improvement merchandisers. At our Nichols Aluminum business, building product sheet demand was strong, however, demand from our secondary markets, which constitute some 30% of our sales, was slow and scrap pricing remained high relative to London metal exchanged inuit prices. Our consolidated diluted earnings per share for the quarter were .84 cents, down from the $1.42 we reported a year ago. Coincidentally, both of these diluted earnings figures include an executive life insurance benefit of .13 cents and .54 cents respectively. Excluding these gains, diluted earnings for the quarter were .71 cents per share versus .88 cents per share a year ago.

Let me move on to our two operating segments, where I will talk first about the results of vehicular products, which includes MACSTEEL, Piper Impact and Temroc. The two primary drivers for this segment are North American light vehicle builds and to a lesser extent, heavy-duty truck production. MACSTEEL, by far the largest business within vehicular products, reported lower shipments and operating income compared to last year. North American light vehicle builds for the quarter were off about 7% from a year ago while builds of the big three were off about 10%. MACSTEEL's automotive VAR sales are closely tied to big three production. Although we were off less than they were, we must continue to grow share with the automotive transplants, often referred to as the New American Manufacturers or NAM's, if we are to consistently outperform the overall market. MAC was approved this quarter on a difficult to produce NAM drive train component and we have many other trials under way. We will take advantage of opportunities with the NAMs as they continue to source more power train components domestically. MAC continues to do a great job with conversion costs at the two plants and thanks to the completion of phase six outside processing costs have been significantly reduced. As we outlined in the earnings release, Piper Impact continues to struggle against the ongoing loss of its traditional product line, air bag components.

While the business has undergone significant head count reductions and other aggressive cost-cutting measures, they continue to post unacceptable results. Piper continues to have meaningful successes with their high pressure cylinder business, but this product is not for the automotive market. Automotive application opportunities exist, but the time is takes to get new products to market is painfully slow. Over time, we believe their market niche will move further from automotive. It is the diminishing presence in the automotive market that causes us to revisit our strategic options for the business. We expect piper to again post a loss for the fourth quarter. Let me comment on the building product segment which includes engineer products in Nichols Aluminum. The two primary drivers for this segment are housing starts and remodeling expenditures.

In just one quarter, engineered products, which serves our major door and window customers and whose second quarter results I had labeled disappointing in my last conference call, went on to post best-ever sales in operating income this quarter. It was a great turnaround given the slow start they experienced from the weather delayed building season. Continued strong housing start numbers, robust remodeling activity, a quick response to a surge in customer demand and some productivity gains were the keys to a successful quarter. New products continue to play an important role in the success of engineered products. For instance, at imperial products, our door threshold business, we recently landed two programs that provide thresholds to support our OEM customers' door sales with one of the large big box home improvement merchandisers. We also announced the opening of a west coast facility to more effectively serve our customers who are locating there.

Our initial presence will be modest, however it's important to note that the new facility will allow us to expand business with existing customers while allowing us to secure new business, as well. Nichols Aluminum, which produces mill-finished and painted aluminum sheet, primarily for the building and construction market, experienced somewhat slower demand during the quarter, which, in turn, reduced shipments versus a year ago. Shipments to our traditional building and construction customers remained at strong levels, although we did see some inventory bleed down with some accounts. The biggest negative, however, was slower activity in our secondary markets. Consequently, Nichols took some unplanned outages during the quarter to keep inventory in check, which, in turn, increased fixed costs for unit of volume. Repair and maintenance costs were also up versus last year. As expected, Nichols did record higher painted sales for the quarter versus a year ago, boosting results. However, income was negatively impacted, as customer returns, particularly for painted sheet, were higher than anticipated. These higher returns were the result of a production process problem at our Alabama facility which was corrected during the second quarter. However, some below-standard material was still in the hands of our customers at the end of the quarter. We expect returns for the fourth quarter to be in line with historic levels.

Now, I'll comment on the current state of our key market drivers, namely North American light vehicle builds, housing stocks and remodeling expenditures and how we see these drivers impacting our major businesses. Light vehicles -- vehicle builds for the calendar year are expected to be between 15.5 to 16 million units, which would be down about 3 to 4% from last year. Important to this discussion is the build rate for the big three, where we're more closely linked. For that group, we expect builds to be off more like 7% for the year and down 10% for our fiscal fourth quarter. Consequently, near-term demand at MACSTEEL looks a bit sluggish but healthy cost sales over -- over the last few months, including an excellent July, have reduced bloated inventories. This is certainly a promising development for those of us on the production side of the business. Furthermore, heavy-duty truck reduction rates are expected to pick up by the end of the calendar year. Housing starts are expected to remain strong through the remainder of our year.

For calendar 2003, stocks are expected to top 1.7 million units and during our third quarter they were 1.8 seasonally adjusted. Customer activity remains strong in our key market regions and that strength will directly benefit our engineered product business. Strong housing starts will also benefit Nichols Aluminum, where we expect demand for their sheet products to remain at good levels. More of a concern lies with our non-building and construction markets. The economic turnaround needs to continue gaining traction in order to drive the common alloy sheet supply and demand equation in better balance. Antidotally, market data has recently been favorable, but it has yet to manifest itself in a significant increase in backlog. As example, one area that appears to be turning the corner is the truck trailer body sheet market. Switching to our balance sheet, we continue to pay down debt and at the end of the third quarter, our total debt to capital ratio was under 14%. The majority of our debt is associated with our revolving credit facility where we are currently borrowing at interest rates less than 2%.

In addition, we continue to concentrate on improving our working capital position by reducing inventory and collecting receivables more rapidly. Before I comment on our financial outlook, let me share my thoughts with you on our stock buy back program. Quanex's board of directors believes an excellent method for driving shareholder value is through the purchase of its common stock. The board expressed this result when they approved a $1 million common share buy back program early this fiscal year. Management will purchase shares when it is appropriate for us to do so and, in fact, we purchased some 435,000 shares during the first half of the year. We did not, however, make any share purchases during the third quarter as management deemed it was not an appropriate time to do so. You should expect us to re-enter the market in the future.

Moving on to the financial outlook for the fourth quarter, look for MACSTEEL to report lower earnings versus a year ago due to reduced shipments. While lean initiatives and new programs will continue to benefit them, they will be challenged to keep overall shipments up in the face of slower business conditions, particularly with big three production expected to be off some 10%. With an economic expansion under way, we expect light vehicle sales to remain at healthy levels, with exciting new products in the pipeline and inventory in better balance, we expect big three production numbers to begin to rise toward calendar year-end. High scrap prices will remain an issue in the fourth quarter as they have for the year. On our second quarter conference call, we suggested that MAC might catch a break from rising scrap costs during the third quarter but it didn't work out that way. Scrap was up about 10 -- $10 per ton over the second quarter and up some $25 over a year ago. Predicting the movement of scrap prices is fought with peril, but at this point, we're not looking for scrap to change significantly during the fourth quarter. Our scrap surcharges will relieve some of this pressure but there is -- there is a time lag inherent in their application.

At Nichols, we looked for fourth quarter earnings to be down compared to a year ago due to lower volumes. They need to see a pickup in their secondary markets Nichols will benefit from higher painted sales and reduced conversion costs during the quarter. Also benefiting the business will be lower customer returns which were higher than normal in the third quarter. Nichols' fourth quarter results will also be impacted by high scrap prices. Engineered products outlook for the fourth quarter is excellent. We expect them to report earnings comparable to the strong results they experienced last year. New products, along with strong sales through our door and window customers, should continue throughout the quarter. Therefore, taking all of those factors into account, we expect our diluted earnings per share will be in the range of .70 to .85 cents. I know the range is a bit broad at this point, but given the ongoing uncertainty of the vehicular build rate and the volatility of scrap markets this range represents our current thinking. As we did in the last quarter we expect to narrow the range when we release our 4th quarter update in October. Let me emphasize that all of our operating units are short cycled business. That concludes my formal remarks this morning. We will now answer your questions.

Thank you, the call is now open for questions. If you have a question, please press the number 1 followed by the 4 on your touch-tone phone. Management requests that you limit yourself to one initial question and one follow-up question before returning into the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Questions will be taken in the order that they are received. We do ask that while you pose your question, that you pick up your handset to provide optimum sound quality. Once again, that's 1 followed by 4 on your touch-tone phone at this time. Your first question is coming from John (inaudible) of Robert W. Baird. Please state your question.

Guys, just want to comment -- a couple of questions on the quarter right now. You guys had mentioned before that you're looking at selling the service centers for MACSTEEL. Are you still planning on doing that?

John, I'm not sure if I understand your question, you're saying service? We would close our service centers?

No, you'd sell MACSTEEL because the automotive production was going down, you were looking at -- you said you'd make a decision in July to sell the service centers or not because of lower production in autos?

Are you asking John if we were going to sell to the service centers, like Jorgenson, et cetera.

Yeah.

We are, on an ongoing basis, selling to the service centers. As a percentage of overall MAC sales, it's not, you know, a huge percentage, but we continue to move product through the service centers, absolutely.

Okay. And can you give me capacity utilization for both MACSTEEL and Nichols for the quarter?

We were running at less than capacity. MAC typically runs 17 turns and we ran at 16 -- 15, 16 turns it varied during the -- during the quarter, frankly, but definitely less than capacity and Nichols runs the castores, really the big constraint, for Nichols Aluminum and typically runs, you know, around the clock, 7 days a week. And we took 4 days down during the quarter, for example. So, it was -- you know, slightly less than capacity.

Okay. And then finally... With your efforts to go into the new American manufacturers, as you call them, what's the timeline on that in terms of being able to replace the big three?

Well, I don't see them, you know, ever replacing the big three! It's -- it's -- you know, it's a slow process, but we -- we continue to make solid gains, we were pleased with the break through that we made over the last month with a major manufacturer on a very difficult part, which we believe will accelerate our penetration with that particular OEM. And, you know, our content will steadily rise with them and we're optimistic that in the future our share will continue to grow with them.

Okay. That's it. Thanks.

Once again, if you do have a question, please press 1 followed by 4 on your touch-tone telephone at this time. Your next question is coming from Bob Dutch of Lord Abbott. Please state your question.

Good morning.

Good morning, Bob.

Just revisiting piper last quarter, you talked about potential increment on new business of about $10 million, what time frame were you looking at? And then can you more closely describe where the business is coming from and the nature of it?

The -- yeah, the $10 million, I think there's still, you know, on track to do that and it's, you know, that's an annual -- annualized rate number and we would come close to realizing that next year, during our fiscal year, in other words, some of this is coming up as we speak. The -- the wins there are being made with high pressure cylinders that service the medical industry, for example, that service the beverage industry. The sports industry. The paintball guns, for example, you know, interesting end markets that have strong growth drivers, actually. And we find that there's, you know, the margins are respectable and that's where our guys are focused. The wins on -- on the automotive side have been far slower than we had expected. We did get some disappointing news on one that, you know, didn't come through for us as expected. So, you know, on balance, we expect the business results to improve at piper, but, you know, looking forward, the returns are not meeting our expectations.

Where are you, then, quite frankly, Ray, in terms of how you view the business strategically? I know it's an issue that, you know, goes back -- even a year or possibly more, where you felt that if you didn't get this thing moving in the right direction and clearly you didn't think it was going to bleed this long and even last quarter you thought it would be closer to break even in the fourth quarter and now you're suggesting that's not going to be the case, as well.

That's right. And clearly we've been disappointed by -- by the results and thus the need to review our strategic options as we've indicated in the earnings release and that is under way.

Okay. Can you update us on Temroc.

Temroc?

Yeah, with the snowmobile business had been down, but were inventories cleaned out and or is the order book looking better?

Slightly better. I have to congratulate them. They have won a lot of new business. They have back filled for a very slow snowmobile season, you know, it's the third year running where there hasn't been enough snow in key areas of the country. So, they're back filling for that. The unit is profitable but, you know, there's room for improvement in terms of recurrence there.

Okay. Thank you.

Thank you. Your next question is coming from Greg McCosko of Lord Abbott. Please state your question.

Hi. Just a --

Hi, Greg.

Hi. Just a follow-up, in terms of last quarter, I remember you talked about MAC I think produced some product for inventory and I wonder how that stands this quarter?

Greg, I don't recall that exactly -- that statement, but let me say that we did reduce inventories during the third quarter. I think when production rates started slowing in the second quarter, you know, we -- we did -- it did result in a buildup for us. But we have -- we did reduce them in the third.

And those are in good shape, then, you're feeling at this point?

Yes. The ratios are not out of line, at all.

Okay. And I know that -- obviously the last quarter had the problems with Nichols and some bad products, et cetera, just, could you update us on how things are going there? If I missed it if you talked about it before, I'm not sure.

Yes, well, our production was back to normal in the third quarter. There was good output from our Alabama facility. It was good tonnage it was good product. We did suffer, however, from some returns during the quarter which was, you know, not totally unexpected, I guess, but a little bit of a surprise in terms of the magnitude. And so that did impact our earnings.

And did you have any -- is there anything with regard to the backlog there? How does that stand?

The backlog remains below -- total backlog is what I'm talking about here, remains below what it was last year. I did point out that, you know, this -- there's some signs of life in their secondary markets, which is what needs to come back to -- to really give that -- a boost to -- to the demand side for that business. The building and product side is good and we just need the truck trailer, the cargo area, the capital equipment makers, the buy-through distribution, those are the end markets that need to come back to bolster the demand.

And I know you have a heat treat business there about 30 million or so, it's small, I know, but how is the business doing?

The -- I think you're referring to the induction-hardening heat treat business that we have, which is really part of MACSTEEL and that business is -- is doing well. They have excellent returns.

Okay. Thanks very much.

Thank you. Your next question is coming from Mason Stark of Ranius Capital. Please state your question.

Hi, good morning. I was just wondering if you could state, you know, you could quantify the level that piper and Nichols are impacting your overall business right now?

We don't, you know, breakdown, you know, financial results by business unit but, you know, as we indicated it was negative and is it was more than three digits.

Okay. Okay. I guess the other question I really just had was I noticed you didn't buy back any stock in this last quarter, significantly, and something you didn't do the previous quarter, but, you know, you have been still generating some decent cash flow. Do you think you'd be looking to do that in the future? Or what do you think you will be looking to do with your cash flow, instead?

We would be looking to purchase more shares in the future. As indicated. However, we deemed it to be inappropriate to do so in the third and we just have to wait and see on that one. I really don't care to explore that in a lot of detail.

Okay, alright, thank you.

Thank you. Your next question is coming from Bill Baldwin of Baldwin Anthony. Please state your question.

Good morning.

Good morning, Bill.

Ray, on the -- on the piper performance in the -- in the quarter, can you kind of give us an indication on their loss as to what percent, without, you know, I know you don't want to put dollars out, but what percent might it be, so-called operating loss and what percent might be kind of a one-time asset write downs, say to that nature-type, you know, type loss? -- or did you have any of the latter in that quarter?

Bill, actually most of it t was -- was operating.

Okay. And you kind of indicated on the MACSTEEL side how much your -- your scrap was up third quarter versus second. Can you give us a similar feel on the Nichols aluminum side as to how much their scrap was up --

Bill, this is --

Third quarter versus second, and whether you had any price relief at all to help you out on that.

Bill, this is Jeff. Let me answer that for you. At Nichols Aluminum, scrap is up for the third quarter, was up about 2 1/2 cents a pound versus a year ago third quarter.

Versus a year ago? Okay.

And then offsetting some of that would be two things, one, we actually did get a little pricing in the industry, not much, but a little and second, our mix was better in that we had higher painted sales and if you can envision painted sales, of course, don't really require any different type of scrap. So, using any scrap with a much higher margin product obviously helps me on spread there a bit.

Okay. And on Nichols and Jeff, can you indicate at all as to what the impact was as a return product in the quarter? How much it impacted -- how much it impacted your top line?

Bill it was -- to Nichols, I will tell you it was important. The thing that caught us a little unaware is it was higher than we expected and through the course of business, we get returns by both mill-finished and painted product, but it was significantly higher and it was an important impact to Nichols, but no, we have not broken that number out.

Okay. Thank you.

If there are any further questions, you may press 1 followed by 4 on your touch-tone phone. Your next question is a follow-up coming from Bob Dutch of Lord Abbott. Please state your question.

In regards to the balance sheet that the cap is pretty low and even indicated nearly a year ago it could be almost a zero if you just continued to pay it down rather than use it for other sources. Do you have any thoughts about being somewhat more aggressive with your payout policy on dividends in light of the fact that at least based on the relative growth in the businesses right now, you probably can't reinvest all the money internally and acquisitions have -- have been occasional but not significant?

Yeah, Bob, just a reminder, we raised the dividend in February so -- but -- you know, looking into the future, you're absolutely right, we are generating a lot of cash and, you know, the board will -- will consider, you know, all the means to -- to spend that cash wisely. Certainly we're looking at acquisitions as a -- as a possibility for -- for using some of that cash. We've -- as I indicated, we did raise the dividend, stock buy back remains in the future as -- as I've indicated today. So, you know, depending on timing, we'll do all of the above.

Are any acquisitions highly likely in the next six months?

Always hate to speculate on acquisitions, Bob, but let me tell you that we continue to -- to look for the right opportunities.

Okay. In regards to some of the expansion programs at MACSTEEL , is phase VII complete?

Not quite, we have one more element to do and that will not be done until July of next year, but most of the -- it was about a $10 million program. Most of it has been spent, is in operation, and in fact, was I there yesterday and saw what they've done to -- actually, it's a means of increasing capacity of our small diameter product and it is in operation.

Okay. And in regards to the prior phase VI that was supposedly significantly increasing capacity for MACPLUS.

Correct.

Have you been able to sell out that additional premium-priced capacity?

Yes, we're pretty much at the 270,000 tons of MACPLUS capacity. The good news is that through our lien initiatives at MAC, that the guys have figured out how to increase capacity and that number now will be more like 285 to 290. So, we're -- we're out to -- to sell more of our capacity. Newly-found capacity, that we have achieved through creativity as opposed to capital investment.

Okay. And -- and when you look at the full year now for MACSTEEL, income ought to be down, correct?

For the whole year?

Yeah.

Yes.

And that's the first year in how many?

We were certainly up last year from 2001.

You know, the reason I ask you is you -- you've been in a situation where you've been able through some of your expansion programs continued to grow your volumes and whether we've been in slow periods or not, the business has largely been relatively unaffected and clearly you make more money in that operation through thick and thin than anybody else out there. When you evaluate the markets that you're most exposed to there, which, clearly, automotive, have you reached some point where you haven't been able to as easily -- how should I put it? You've become more sensitive to, I guess some of the cyclical production levels of your key customers. Does that suggest it's tougher to penetrate them further and is now requiring you to expand that customer base in a bigger, quicker way than might have historically been the case?

Well, certainly, you know, the dynamics in the industry have changed a little bit, with you know, the big three having lost, you know, significant share over the last few years. And the opportunity for the NAMs, with the NAMs, for -- you know, power train components, which is really where we play, you know, did not come alive until the 2000/2001 period. That's really when they started, you know, producing engines and building transmissions here and so forth. So, you know we are beyond that curve a little bit but uh, you know, I'll tell you that you know we feel we are making solid progress and -- and we're -- we're going to offset, if you will, the loss of share by the big three. Having said that, you know, I'm not prepared to give up on the big three. Meaning that I think they've got, you know, a barrage of new products in the pipeline that, you know, I think will stem the share erosion they've suffered, if not gain some of it back.

So, you know, I think we're at a little bit a transition, if you will, you know, I think we -- we need to get that NAM penetration, there is no question. We need to keep increasing content with the big three and we're doing that. We're not ignoring these guys. We just need to, you know, gain more programs and our guys are focused on doing just that. You know, when the strongest player in this market area, or this space that we play in, if you will, were financially strong, we've got staying power, we've got a unique process and we're going to continue outperforming the market and competition as we go forward.

In that regards, on the transplant issue, then, if they largely only begun to produce the products you sell into, going back three to four years ago and knowing there's some sales cycle involved there, are we in a situation where to a degree that you are trying to gain some of that business that it ought to be around the corner after many years of effort? Or are we still at the point where you really need to provide that much more in terms of sales and marketing resources?

Well, we certainly have added, actually, resources to -- to the penetration effort to our -- you know, to our sales marking effort, is really what I should call it. And, you know, I feel good about what we've been able to achieve so far. As I look at the number of trials that our under way with NAM tier I people, NAM OEMs, we've got -- we've got a lot in our pipeline and I think over the next year or two years we're going to see some -- some meaningful volumes.

Okay. And then lastly, I know, you know, return on capital has been significant issue for you folks and -- and -- and objective and you -- you had been running at about a 7, 8% rate and you felt that you really needed to get that up another 3%. With some of the issues affecting the business, can you provide us any insight as to how you're going to get there?

Well, I think disposing of perhaps, some underperforming units, would -- would do wonders for us. Improving the returns on some that, you know, are below an acceptable threshold now, are clearly the way to do it because I think our core businesses are doing very well, have excellent returns and we continue -- we expect that to continue.

Thanks.

Thank you. Your next question is a follow-up coming from Mason Stark of Ranius Capital. Please state your question.

Hi, I just wanted to go back to the issue of scrap. Because, you know, there is some view that this might be more than just a short-term, you know, intermediate term issue. And I was wondering if you had been looking at dealing with the possibility of, you know, sourcing new -- having new sources of, you know, obtaining scrap for your mills.

You talking about on the aluminum side or steel side or both?

Both.

Both. Well, I can tell you that on the aluminum side we are -- we are definitely exploring new opportunities and that is under way as we speak. The -- on the steel side, we did revisit that -- that issue last year and did make some changes to our practices and -- and that continues to this day. Scrap is just a volatile commodity and we need to -- to constantly challenge ourselves to be -- to be more innovative in how we purchase it and we'll do that.

Okay. And I mean -- I guess I was just -- maybe you could clarify for me, my perception, particularly on the MACSTEEL side was that you had, because of your niche quality of your business, you had an easier time of passing on these increases in scrap costs through to the, you know, the final end cost of the product? Is that the case, do you think there's just some fluctuation of this? Or should we, you know, if scrap continues to climb, will we, you know, start to see some of that erode?

We have -- we are now above the threshold for our scrap costs. The threshold that is, when -- where customers begin to pay surcharges for their steel.

Gotcha.

And, you know, unfortunately in applying that, however, there is a time lag. And, you know, it takes some five to six months before we fully recover shop increases in the price of steel. So, you know, by the end of the year, you know, we'll start getting some meaningful recovery through our scrap surcharges. We are getting some today, but it just takes a while for the new purchases to work through the system and for us to bill customers at the much higher prices. So, we'll gain as we move forward.

It's also true, Mason that those scrap surcharges start at a certain level, so, as scrap continues to go up or goes up in price, the -- at least the initial increases would affect margin and then over a certain level, the scrap surcharge kicks in but the scrap surcharge kicks in in a quarter following the period in which the -- the scrap price exceeds the -- exceeds the level at which the surcharge would kick in. So, there could be some margin deterioration, we don't get 100% recovery on the increase in scrap.

I gotcha. I guess then just on the follow-up of that is, you know, theoretically, if scrap prices were finally to start to decline, would you cash in on the other side --

Absolutely.

Okay, good. All right, thank you.

Thank you, your next question is coming from Bill Baldwin of Baldwin Anthony. Please state your question.

Yeah, just a follow-up here, Ray, in the third quarter you indicated that MAC was down a little bit in its production volumes. What -- were you producing pretty much 100% on your MACPLUS in the quarter? Was it pretty well sold out in the quarter? And most of your decline was over in just the regular bar?

Bill it was very close on the MACPLUS.

Right, so most of the decline was in the regular bar-type product, then?

To be fair, you know, both were down some.

Right.

But I think a little less so in the MACPLUS.

Okay, thank you.

Mr. Jean, there appears to be no further questions, I will turn the call back over to you.

Our long-term business strategy directs us to protect, nurture and grow our core businesses. MACSTEEL and engineered products and we will do just that. Both businesses are earned in excess in cost of capital during the quarter and we see nothing on the horizon to change this. Our long-term strategy also calls for us to fix or sell the businesses that are underperforming and we will do so. We continue to actively look for acquisitions and we certainly have the resources to support these efforts. This concludes our third quarter conference call. Thank you.

Thank you. This concludes the Quanex Corporation third quarter conference call. Thank you and have a wonderful day.