Quanex Building Products Corp (NX) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the Quanex fiscal 2005 year end and fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.

OPERATOR INSTRUCTIONS) It is now my pleasure to turn the floor over to your host, Mr. Raymond Jean. Sir, you may begin your conference.

Good morning and welcome to the Quanex fiscal fourth quarter conference call. Thank you for joining us. With me today are Terry Murphy, our Chief Financial Officer, and Jeff Galeau (ph), our Vice President of Investor Relations. We will be available after my remarks to take your questions.

Today's call will include a brief overview of fourth quarter and annual results, a discussion of the current scrap market, the present state of our key market drivers and an outlook for 2006. The comments I am making today include forward-looking statements about the future prospects of Quanex. Please refer to the Company's latest 10-K report filed December 21st, 2004, for our complete forward-looking disclosure statement. Our fiscal fourth quarter and 2005 earnings release is available on our website at Quanex.com.

2005 was a breakout year for us in many respects. Net sales of nearly 2 billion up 37% from 2004. Record earnings per share from continuing operations of $6.75 compared to $2.29 last year. Record cash provided by operating activities of 251 million versus 124 million last year. A return on invested capital of 21% compared to 9% in 2004.

And a total return to shareholders for 2005 of 73%, which included having raised the dividend 37%.

Turning to general business activity in the fourth quarter, order entry rates in our building products segment were slower than expected, given the robustness of the housing and remodeling markets while demand at our Vehicular Products group lagged the very high activity we experienced a year ago. As you may recall overall demand at this time last year was unusually high. And as a result our Building Products and Vehicular Products process businesses were in allocation mode and running at unsustainably high operating rates.

The upshot of this unfortunate situation is that it caused many of our customers to double-book orders with us and others in the hopes of assuring availability when needed. For instance, in our Vehicular Products segment, many of our steel bar customers found themselves in just this situation. And when light vehicle production slowed some 10% at the Big Three this summer in order to reduce vehicle stocks, our customers were caught with much higher than normal parts inventories. MACSTEEL in turn experienced a 10% plus drop in bar shipments in the fourth quarter, compared to a year ago.

The widespread supply chain inventory reductions also apply to the heavy-duty truck market. Class A truck builds (ph) were up 22% over the year ago quarter and they are tracking at some 345,000 units annualized by our -- but our orders were a bit soft as component inventories were reduced early in our fourth quarter.

Our penetration with the transplants remains on track. In 2005 almost 15% of our light vehicle tons went to supply them. And that tonnage figure will continue to grow.

Today MACSTEEL bars can be found on most transplant power train applications that are available to domestic suppliers like constant velocity joints, front and rear wheel bearing hubs, transmission gear parts, torsion stabilizer bars and differential gears. We anticipate significant opportunities in the areas of transmissions and chassis components and this additional current will come from more domestic sourcing of the parts as well as by gaining additional share. We will continue to make solid progress on all fronts.

Margins in the segment remain strong and we're up substantially over the year ago, the result of higher selling prices, improved scrap cost recovery and a richer mix of value-added sales. These value-added bar sales continue to be an important part of our long-term marketing strategy; and during the quarter they represented some 70% of all bar shipments. Our high margin Mac Plus turned and polished product alone accounted for some 30% of all bar shipments in the fourth quarter.

Consistent with this value-added strategy, last March we announced a Phase 9 project for MACSTEEL which is a $38 million capital project, scheduled for completion next December. Phase 9 will add some 50,000 tons of value-added capabilities to our MACSTEEL Monroe facility which, today, has the services performed by outside vendors.

Within the building products segment this quarter we experienced similar inventory overhang issues related to last year's tight market supply. Many of our aluminum sheet customers were regrettably forced to buy product offshore, where terms and conditions -- including price in many cases -- were out of line with the domestic producers but to assure availability they went ahead and made commitments. This overhang clearly impacted our fourth quarter aluminum shipments, which were off some 15% from a year ago.

Aluminum spreads actually improved in the quarter compared to the year ago period, the result of higher selling prices and a better mix of value-added products.

Excluding results from MIKRON INDUSTRIES, sales at our window and dual components business were up compared to the year ago quarter. Earnings, however, were down due to higher raw material costs across the board.

Let me comment about our progress at MIKRON. We remain very pleased with the integration process. We acquired MIKRON last December; and we continue to be excited by the opportunities we see, both for internal improvements and external growth. Our internal initiatives have been focused primarily on improving the efficiencies of the operations, with process capability issues, throughput times. And (indiscernible) past yields consuming much of our attention we have made and continue to make good progress.

External growth opportunities from new programs in both PVC and composite material window profiles are prolific. Vinyl windows represent the fastest-growing segment of the window business; and we believe the overall value proposition of vinyl windows for price, performance, and product aesthetics is hard to beat. Demand continues at robust levels and during 2006, we will be expanding our capacity to produce additional profiles at our Kentucky facility.

Should demand hold up as expected will be adding a fourth location in the Southwest to better serve our expanding customer base.

MIKRON's fourth quarter results came in at $0.18 per diluted share after interest expense. For the fiscal year they earned $0.40 within our guidance of $0.35 to $0.45.

A big challenge that MIKRON and TruSeal had to face in the quarter was the availability and high cost of raw materials -- resin in MIKRON's case and butyl compound in TruSeal's case. As a result of the damage caused by Hurricane Katrina and Rita, many of their regular suppliers were unable to deliver the required raw materials due to extensive planned outages.

Both businesses had to scramble to find raw materials when and where they could and found themselves paying much higher prices to secure them. Both businesses are aggressively moving forward to recover these higher costs and to this point have been relatively successful in doing so.

Moving this discussion of raw materials to steel scrap, the roller coaster ride experienced over the last two years continues. While our scrap costs were down some $50 per ton in the fourth quarter compared to this time last year, they are up some $60 per ton in November versus October. As we have noted in the past we recover our scrap costs, but there is a lag.

Turning to some financial highlights, I'm pleased to report that Quanex posted record-setting cash flow during the year of 249 million, which will allow us to continue to grow our core businesses -- both organically and through our strategic acquisitions. We are constantly working to more effectively manage our working capital; and by way of example, a review of our conversion cycle -- which is a measure of how long it takes us to convert customer orders to cash -- remained at about 40 days.

Viewed a bit differently, our 2005 net sales increased 37% over 2004, while working capital actually decreased by 4%.

We ended fiscal 2005 with a total debt less cash to capitalization ratio of 11%, which compares favorably to 2004's ratio of 14%. To put an even more favorable light on this, consider that we both borrowed and paid back the 200 million acquisition costs of MIKRON in the space of one year.

We just announced the sale of Temroc Metals this quarter. Temroc, which produces aluminum extrusions and fabricated products, no longer fits within our target markets. While they still have some presence in the off-road recreational vehicle market, it is no longer a key driver for them.

Moving the discussion to our target markets outlook for 2006, we expect North American light vehicle builds for the calendar year to be about 15.5 million units, down slightly from 2005's estimated 15.7 million units. Digging a bit deeper, Big Three light vehicle builds are expected to be down roughly offset by an increase in builds at the transplant companies.

Our market response to a falloff in builds as they continue to increase our content for vehicles with the both the Big Three and the transplants.

One major area of content growth lies within the conversion of automotive crank shafts from a cast iron product to a steel application which represents a 200,000 ton opportunity. And we want a big piece of it. In 2005 we produced some 10,000 tons of bars for crank shaft applications and for 2006 we expect that tonnage to reach 35,000 tons.

We expect the production of heavy-duty trucks to remain quite strong in 2006 with builds stopping 325,000 as manufacturers attempt to beat the 2007 deadline for new EPA emission mandates for class A engines.

For fiscal 2006, we believe the bulk of the industry-wide steel inventory drawdowns are behind us. The significant production cutbacks we experienced over the last couple of quarters seem to be over which should result in our bar production being more in line with normalized demands. Looking at our first quarter, we have seen a recent uptick in customer activity at MACSTEEL. And the plants today are collectively running at about 90% capacity and we will be picking up the pace after the holidays, based on the backlog.

In the Building Products segment we expect both housing starts and remodeling activity to remain at historically high levels. For 2005, housing starts hovered around two million units which will make it the best year ever. For 2006 we are expecting a modest slowdown but look for starts to stay around 1.8 million, a great year by any standard, while remodeling activity is expected to remain at high levels.

The segment will also benefit this year from both lower costs and higher sales associated with our relatively new Hood River and Dubuque finestration facilities. Expectations for our MIKRON business in the vinyl window market they serve appear excellent. We expect the vinyl window market to experience growth approaching 5% for the new construction market and closer to 10% for the remodeling market.

Given these sound fundamentals, an end to the sharp spike in raw material costs experienced this year, some catch up in pricing and the growth we expect to see from our vinyl window profiles sales, we believe 2006 will be a better year for our finestration business.

In fact, we expect to substantially outperform the market with growth exceeding 15%.

The outlook for Nichols Aluminum remains favorable as well. Supply and demand fundamentals have shifted considerably over the last year as the industry experienced mergers, downsizing and price increases. And we will continue to benefit from that transition. Near-term we do expect shipments to trail the year ago figures as customers continue to work off high inventories.

Combining the anticipated operating results of the two operating segments, we expect to report diluted earnings per share from continuing operations for the first quarter in a range of $0.70 to $0.80.

For the first quarter of 2005 both MACSTEEL and Nichols Aluminum were running at unsustainably high operating rates. They were aggressively raising prices. Their customers were on allocation. And their backlogs were at record levels. Adding to these positive factors was that MACSTEEL was experiencing a significant over-recovery on their actual scrap costs in the first quarter of 2005 as well.

These factors combined to give us a huge first quarter in 2005, with earnings over four times higher than the first quarter of 2004, along with record net sales and record income from continuing operations. Unfortunately these earnings cannot reasonably be duplicated in what looks to be a much more normal first quarter of 2006.

Let me comment on our absence of annual guidance for 2006. At this time we just don't feel comfortable providing an earnings range. We are still finalizing contract talks with our customers at MACSTEEL. The volatility of steel scrap continues; and we want to experience the volume rebound for aluminum sheet we expect to see after the holidays. For these reasons we will give 2006 guidance when we announce first quarter results on February 23rd.

In the meantime what you do not want to do is take our first quarter guidance and multiply it by four. Remember, there is considerable seasonality to our earnings. In fact, first quarter earnings in recent years has typically been at some 15% of our annual earnings per share. That concludes my formal remarks and we will now take your questions.

+++ q-and-a.

(OPERATOR INSTRUCTIONS) Peter Lisnic with Robert W. Baird.

Question if you guys can answer -- Nichols the last comment you made there, it sounded like at least your expectation is that volume is going to rebound somewhat. Are you saying on a year-over-year basis or are you just meaning sequentially?

I'm really talking sequentially, Peter. Right now, it is a tough read in some ways. We've talked about the inventory situation. The other factor is that the LME has spiked in the last several weeks and I think people are just waiting to build up inventories at all for next year in hopes that the LME pricing might drop.

Is there a way or is there some insight that you can give us into how big the inventory correction may be? Or how much more inventory is out there? Just to give us a sense as to how much we need to work through here.

That's tough to do. I really don't have that off the top. Sorry.

James Gentile with Sidoti & Co.

I was wondering with regard to your first quarter in fiscal 2006 guidance if you can help us out on the revenue and profit contribution from Nichols Aluminum that are factored into that guidance?

We don't go there.

Can you give us any sort of revenue guidance? Because it's tough to look at it from a sequential or year-over-year perspective given the steel surcharges that have lagged last year. And then you know, you had that price increase spread -- I think if I recall correctly, it was 10% on MAC across the board. So was just wondering if you could give us a little bit more revenue guidance?

As we have indicated in the fourth quarter, we were down some 15%

At Nichols.

At Nichols exactly. This is in tons or in volumes, is what I should say, in pounds. And we would expect a return to more normal levels.

Which is what? Because usually Nichols is -- a buck or so a ton.

A pound.

A pound, sorry, 300 million. So if the volume is down 15% is there any seasonality any seasonal behavior with Nichols through the year? Is it pretty even?

There is some seasonality. It typically slows up at this time of the year and then rebounds in January somewhat and gradually accelerates through spring and into summer.

Barry Vogel of Barry Vogel and Associates.

Congratulations; you guys did a hell of a job last year. Ray, given the tremendous cash -- cash flow this year and given your current positions in your core businesses, does that change the dynamic of your acquisition program?

In other words, the fact that financially you couldn't -- a year ago you could not have projected your enormous generation this year in cash flow and earnings and now you have banked it. You've clocked it. You probably will generate a specific amount of cash this year.

So at the end of fiscal '06, you'll be loaded with money. Has that changed your acquisition philosophy? If it does at all? And where is that philosophy today? That is my first question.

From our standpoint it is a great position to be in. And has it changed our acquisition philosophy? I would say it has not. We remain committed to building on the strength that we have, i.e., our core businesses. We are certainly looking at acquisitions in that space and I'm determined to keep us disciplined. That is, we don't want to make acquisitions that will not return their cost of capital over a reasonable period of time.

Can you tell us your estimated capital expenditures in D&A for this year?

Estimated CapEx is about 90 million this year which is a little higher than it is been the last couple of years. D&A will be about 75 million.

Mark Parr with KeyBank Capital.

I have a couple questions, Ray. First of all could you talk a little bit about your view of the availability of aluminum scrap out over the next couple of quarters?

I'm not sure if my horizon goes out that far. But scrap has been available and if anything, from what the guys are saying, that we do expect to see more scrap from the Gulf Coast and Florida in the upcoming months. So, generally, it's a pretty positive forecast on scrap availability and scrap pricing has been favorable as well.

Just kind of a follow on, just on secondary aluminum pricing. We have seen some consolidation moves recently. Wondering if you are seeing any indications that customers are viewing perhaps a bit tighter supply and demand environment? May be giving you a little more pricing power in the market, hitting in the next year?

I don't have a good sense of that. I am not aware of another inflection point they may be coming near.

If I could ask just another question, just kind of a housekeeping issue? We were looking at the nonallocated corporate expenses for the quarter. There was a significant reduction in those expenses, relative to the third quarter. I was wondering if there were any -- if you can help us, help give us some color on -- I think it was almost a $10 million sequential change. If you could help us understand what the sources of that were.

What are you looking at, Mark?

The corporate charges in the quarter. Over $1 million.

And in the July quarter, they were 14.5 million.

We will have to get back to you on that.

All right. I had one other question that just related to MACSTEEL. Could you give us some color on -- I know you're not through with the contract season yet but some of your competitors say to be fairly well through. I'd just be curious A., what would be a reasonable range of expectation for base pricing momentums heading into '06? A., B., are you try to put through a natural gas surcharge? Are you seeing any success with that?

And I guess, what's your sense -- what does your crystal ball say as far as the willingness of the Big Three to rebuild inventory? Given the reduction inventory A., but B., we've had some weak sales in the last couple of months.

In terms of the pricing moving forward, I guess until we're done I really don't want to be discussing that. I can tell you that we are working at making some adjustments to our surcharge mechanism going forward but I think, overall, the environment is favorable to negotiating successful contracts, ones that we will be very comfortable with.

And your second question was what? One of them had to do the pricing and the other one was -- Mark you still there?

He is back in the queue.

Okay; fine. I missed the second part of his question.

Dan Wayland (ph) with Bear Stearns.

Quick question and I apologize if you have covered this, I decided to hop off for a second but believe when you were talking about Nichols Aluminum you had mentioned some of the customers purchasing some foreign product. Do you have a sense if they are now tied up in a three- or six- or nine-month contract for those purchases?

In some cases that is exactly what happens. They have to commit on a forward basis by several months and as you say three, six, nine months and once you are into that you need to execute and that is what has been going on.

Do you know how far along for most of those contracts about to expire? Do you have a sense?

I don't have a precise end date. Our sense of things is we are seeing less coming in and fewer commitments outstanding. That is our sense of things.

(OPERATOR INSTRUCTIONS) Peter Lisnic with Robert W. Baird.

Ray, if I heard you correctly the finestration business, growth over 15%. Is that right?

Correct.

Can you maybe run through what the -- I guess what the margin expectations or implications of that kind of growth are? I mean, I assume you get some leverage in the model but -- you are also -- it sounds like you're going to be expanding as well. So should we factor in market degradation, increase in profitability? How do we think about that?

Yes we don't typically talk margins by business segment but -- or business within a segment. But generally I would say we wouldn't expect degradation.

Robert Fitch with Lord Abbett.

Bob, this is Terry Murphy. Before I let you ask your question I wanted to address Mark Parr's question on that swing in corporate.

Last year, we had a $12 million hit in the fourth quarter for LIFO; and this year, we had a $6 million benefit from LIFO. So there was an $18 million swing year-to-year and that is the difference between that 1.2 million this year and the 18 5 for the most part.

Okay. Go ahead.

Seemed like it was quite an unusual year in terms of utilization at MACSTEEL in terms of probably shipping beyond capacity in the first half and a bit below as your customers were dealing with their unusual set sales and production patterns themselves. When you look at full year, how different -- if much it all -- was the utilization for the full period, relative to some of the recent previous years?

Total '05 shipments versus total '04, Bob. Is that what you are --?

That and also to the extent some people are sensitive to quarters. You've probably had some higher than almost ability to produce quarters in terms of shipments and subsequent reporter (ph) revenues probably in the first half of the year. And if things were a little more smooth you probably actually, you probably would have had higher shipments and higher revenue in the just recently reported quarter.

Yes. Correct. I mean, first and second quarters were -- as you pointed out in the first quarter, we couldn't deliver what people wanted. We had people want allocation. So whenever you put people on allocation, customers on allocation there is a price to pay down the road.

The inventory situation has to be corrected and it was during the third and four quarters which dropped to below capacity, as we pointed out, for some roughly 90%, I think, is the percentage we've highlighted. So and but, as we pointed out last quarter because we were experiencing it then, we expected a rebound some in the fourth quarter.

And that is indeed what has been happening. Our orders have picked up; backlog has picked up and we do expect to be going to more turns after the holidays. Right now in December it is always a tough call, given the slowdown in the automotive world. But we were pleased with November output. And we expect, as I said, to have to pick up our turns based on the backlog come January 1st.

I think in previous discussions generally MACSTEEL has been pretty much running at high levels for an extended period of time. Just because of the nature of the product and the demand for it and it has probably most likely been at 95% or better. Is that what we actually saw on an annual basis again this year? Whether -- however you want to calculate it whether it is on (indiscernible) produce relative to rate of capacity, etc.?

Yes between 90 and 95 is what I would say off the top.

Secondly as far as the organic growth opportunities, can you list a number of them both on the automotive and the progress you are making in areas like with some of the transplants? I know you talked about Hyundai in the past and on the Windows side, either with MIKRON and the penetration of the vinyl market or the existing important customers and some of their retail or wholesale customers?

Yes I think on the MAC's side as we've pointed out that we are now shipping about 15% of our volume is now going to the transplants, which is certainly a nice pickup from where we have been. And I highlighted a few of the programs we are on with the transplants and it is, I think it is impressive in terms of the gains we've made and the outlook is indeed promising.

On the Building Products side, we recently were reviewing a study on the window and door industry -- not commissioned by us, just an independent study -- and it does indeeb confirm the growth of vinyl and its strong value proposition.

And for us, that was indeed a timely acquisition. I think we are in the process I think of becoming just a very valuable supplier to the big guys. The guys that are really growing their share of the total market because of some significant programs that they have with the big boxes.

So we just have the right customer base to really outperform that whole market. So we are looking at some real growth rates that are just very positive. And as I said, for us right now, it is a capacity issue where we're going at it slowly, where there's always internal debate on how fast we ought to be moving on that.

But right now we are expanding our facility in Kentucky to accommodate some growth that a couple of our large customers expect and are looking. In fact we have already purchased some land in the Southwest for a of fourth plant that we expect we will have to put up in the next, whatever, 12 to 18 months.

So if you are expecting 15% plus growth out of the Building Products you spoke about earlier. I guess part of that is the -- that you'll have MIKRON for a full year as well as just the order rates coming in from your customer base, generally?

Yes when I said 15% I was really addressing the finestration business, Bob. It wasn't for the entire segment. But yes, clearly, MIKRON is fueling, if you will, that real growth rate that I cited.

James Gentile. Sidoti & Co..

I was just wondering if you could comment on your penchant for share repurchases given the cash position of the firm here?

We have said that we -- No. 1 is acquisitions and organic growth and right now, we are in a good strong position and we will be revisiting that. It is always a topic on the Board of Directors' agenda and we have made some dividend increases in the last 18 months. Not share purchases. But it is certainly something that we will be considering.

Just curious. Then I was surprised to hear Terry give the CapEx of '06 guidance of 90 million which is probably more than double -- slightly less than double what you've been running over the past couple of years. What will that be spent on?

The biggest piece is going to MACSTEEL. In fact it's the remainder, if you will, of the capital monies that we need to complete Phases 8 and 9 at Mac so some 50% of that.

Another big chunk is going to MIKRON to increase capacity to support the organic growth that we see coming there. And those are the pieces that really are big.

The 90 million right now is in the plan. We typically don't spend that all but is in the plan -- that is the way it has worked out in prior years. I think that the number Terry gave you is a planned number. It is a number that the Board feels comfortable with; but we will revaluate that on a going forward basis. The real big ones we have to justify and go to the Board for approval. So we will take it a quarter at a time.

Mark Parr with KeyBank capital.

What I was trying to get into was on the automotive situation and you had said that you thought that selling rates would be about 15.5 for '06 or was that production rates? Was that your assumption?

It was builds.

Builds. I'm sorry then. You answered that question for me already. Thank you.

Bill Baldwin with Baldwin Anthony Securities.

Can you offer any color as to what kind of cost pressures that MACSTEEL is seeing at this point in time, particularly in the electrical area? We are seeing electrical rates here in North Texas up 24, 25% here just recently with some rate increases. Are you seeing the same kind of pressure showing up there in Michigan and Arkansas and so forth?

Most certainly. But power and energy, I mean, and gas. On the gas side, we did lock in at some very favorable rates last year. So our cost is not going up nearly what the market index would indicate but it is certainly a double-digit number.

Gas is primarily applicable to Nichols is it -- I mean are they more gas-sensitive and Mac is more electrical-sensitive?

It is; we use a considerable amount of gas in our thermal treatment so we are -- we've got a big gas bill as well.

And Mac has locked that in you say, Ray?

We are locked in for some 65,70% at single digit rates $6.00 and $7.00 for a million cubic feet.

What's it look like on the electoral front? Those are basically (MULTIPLE SPEAKERS) -- is not spot market purchases there, isn't it?

It is. It is. We ride the curve and that's -- those are monthly bills.

Do you care at all, Ray, to indicate what kind of a price adjustment you might need just to offset your higher cost particularly your higher energy cost?

We always take our cost into consideration when negotiating with customers, I can assure you.

We don't have an energy surcharge.

I know you don't. That's why I was asking. I know it's got to be in the base price.

Certainly a part of the discussion's in the contracts for January 1.

I did read I believe on the aluminum side where there are some gas surcharges being experimented with by the industry. Have you all decided to sit back and watch that? Or are you going along with it? What's going on there?

It depends on the business. In some cases we are pushing that more aggressively than in other businesses.

I see, as there is a pay on the customer and so forth?

Excuse me? (MULTIPLE SPEAKERS)

Nichols Aluminum. If Nichols Aluminum in the aluminum coil business I was reading somewhere where some of your competitors have been experimenting with surcharges for natural gas, I think beginning maybe it's already begun and maybe it is going to be January 1. I can't remember when the start date was.

I just wondered if you all are watching that or planning to do that? Or in fact are doing surcharges with some of your aluminum coil customers with Nichols?

I'm not aware of where we are doing that on a customer by customer basis.

Robert Fitch with Lord Abbett.

In regards to the Phase 9 at Monroe. When that is complete will the product being produced be 100% finished?

No. We still will need to subcontract some of that.

In regards to the question about cash uses and attractive acquisitions, the math is right with the EBITDA that you reported just this past year. And even maybe allowing for the fact that you did have a number of things come together. May get a particularly great year. You are probably just a little more than a four multiple on EBITDA for fiscal of 5. How many businesses out there can you find where you are not paying much more than that? Relative to your own share attraction?

What you are suggesting is that we ought to be buying ourselves, right?

It's hard to find compelling stocks priced anywhere near that today.

We are a bargain.

(OPERATOR INSTRUCTIONS). Gentlemen, it appears we have no further questions.

Last year we benefited from a favorable turn in scrap cost which we don't expect to repeat this year but we do expect a great year, nonetheless. We are optimistic that our consumer-durable driven markets will remain relatively strong in 2006 and that our secondary capital-equivalent markets will continue to be healthy. Our underleveraged balance sheet and great cash generation capability gives us the ability to fund the growth of our core businesses and to make selective acquisitions.

We like the hand we are holding. That concludes our fourth quarter conference call. Thank you.

Thank you. This concludes today's conference call.