Quanex Building Products Corp (NX) 2006 Q4 法說會逐字稿

Good afternoon. My name is Mary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quanex fiscal fourth quarter and 2006 annual earnings call. [OPERATOR INSTRUCTIONS]

Thank you. It is now my pleasure to turn the floor over to your host, Raymond Jean, Chairman and CEO of Quanex. Sir, you may begin.

Good afternoon, and welcome to the Quanex fiscal fourth quarter conference call. Thank you for joining us. With me today is Thomas Walker, our Chief Financial Officer, and Jeff Galow, our Vice President of investor relations. We'll be available after my remarks to take your questions. Today's call will include a brief overview of fiscal fourth quarter results, the present state of our key market drivers and financial metrics, and an outlook for 2007. Today's comments include forward-looking statements about the future prospects of Quanex. Please refer to the Company's latest 10-K report filed December 21, 2005, for our complete forward-looking disclosure statement. Our fourth-quarter earnings release is available on our website at quanex.com. And the first release was done at about 11:58 this morning. Just before this conference call, we announced the $0.06 per share correction from our earlier earnings release, basically having to do with a misstep with a number of outstanding shares used to calculate earnings per share for the full year. There was no change in reported sales, net income or other financial results for the year, nor a change to the fourth quarter outcome.

Our business conditions in the fourth quarter could be described as generally favorable from an output standpoint, but weak from an order entry level in that our backlog weakened across all the businesses. MACSTEEL and Nichols Aluminum each had relatively strong quarterly strong shipments compared to the fourth quarter last year, but we continued to experience weak conditions at our window and door component business units. Fiscal 2006 earnings, or 409, represent our second best year in terms of financial performance, and that includes a $0.21 per share LIFO charge.

We have faced severe headwinds in our end markets, particularly in the second half of the year, but our businesses have fared better than the metrics would suggest. Customer demand in 2006 began to slow in the second quarter in our engineered products business after a relatively strong first quarter. And, of course, we continue to see weakness in our two primary end markets, and I'll discuss this in more detail later in the call. Of special note we further segmented our operating results. By way of overview the Vehicular Products segment reflects the results of MACSTEEL and its value-added business units and our Building Products operations have been further segmented into engineered products, representing the operating performance of our window and door components businesses, and Aluminum Sheet Products representing the operating results of Nickols Aluminum.

Moving to the Vehicular Products segment, despite reschedules and cancellations from many of our automotive customers, shipments for the quarter held up relatively well. Out total bar tons shipped were up 5% over the year ago quarter while North American light vehicle builds were down 11% through the same period. The three steel mills ran at a combined capacity utilization rate of about 90% in the quarter. MACSTEEL made excellent inroads in 2006 with both the big three and the transplant. We expect to win some 100,000 tons of new annualized automotive business in calendar 2006, with 75% of those tons servicing the big three and the remaining 25% serving the transplants.

While we're on the subject of transplants, our 2006 bar shipments to them approached 20% of all light vehicle tons shipped by MACSTEEL, while only a few years ago these shipments were less than 10%. Our growth with the transplants cuts across all powertrain components, engines, drive lines and transmissions. To be more specific, we are participating with them in areas such as wheel hub assemblies, crankshafts, wheel bearings, half shaft and gears. Turning to the segment's operating income, we posted a 10% increase over the fourth quarter of 2005. Spreads at MACSTEEL remained strong, up 10% from a year ago.

Switching to Class A truck demand, builds have been strong, with 2006 calendar year estimates of some 335,000 units. Recall that builds in 2005 were about 330,000. The OEMs continue to aggressively build ahead of new 2007 EPA engine emission requirements. We do expect this number to fall next year, with consensus estimates coming in at some 225,000 units. Fortunately, we expect our secondary markets to remain relatively strong through 2007.

The first half of 2007 will be a challenge for MACSTEEL, as North American automotive builds are forecasted to be down some 13%. The good news is we expect builds to rise in the second half of the year, and I'll discuss this issue further in the outlook portion of the call. Our $38 million Phase 9 value-add project at MACSTEEL Monroe went operational in August, and we did receive a small financial benefit from that investment in the fourth quarter. The project added 50,000 tons of value-added capacity to Monroe where, until now, they had those services performed by outside firms. With the completion of Phase 9, some 75% of our total bar shipments will have some form of in-house value-added processing, which takes cost out of the value chain and enables us to deliver a consistent quality product to our customers, while enhancing our value proposition.

Turn to go Engineered Products, we continued to face strong headwinds in the quarter, as demand for our window and door components fell in the face of a significant slowdown in housing starts. Other than in our first quarter, starts declined through the year from low single-digits to as much as 22% in our fourth quarter, compared to the year ago quarter. While we take a little solace in the fact that our fourth quarter sales were only off 12% over the same period last year, we expect the business outlook to remain unfavorable for at least a couple more quarters. Quarterly operating earnings for the group were down 35% compared to the fourth quarter 2005 due to lower operating rates, relatively high labor costs, and productivity issues, particularly at Mikron.

We continue to work down our manufacturing costs in response to the fall-off in business but, frankly, we need to do more, and we are. We also had productivity issues at Mikron, primarily the result of a union drive at our largest facility in Seattle. While the employees voted down the union attempts by a significant margin, all the activity surrounding that action took both our management's and the hourly employees eye off the ball. The good news is that things are getting back to normal.

We remain confident in our ability to out perform the market because we are well positioned with the best brands in the window and door industry, many of whom continue to take share from smaller competitors. In other words, we are working closely with the who's who of the [femostration] space on product innovations to improve the thermal efficiencies of our customer's windows, to make more win -- to make doors and windows more architecturally and structurally desirable, and to make door entry systems more effective. This commitment to engineering excellence and support, along with world-class delivery and logistics capability, is a differentiator for us.

Our aluminum sheet business had a solid fourth quarter, given the significant slowdown in the residential building market. Nichols Aluminum shipments in pounds in the fourth quarter were up 3% over the year ago period, while net sales and operating income were each up 25% due principally to high LME pricing and strong material spreads. Spreads increased 11% compared to last year's quarter, the result of higher selling prices and relatively low scrap costs. Backlogs dropped at Nichols during the quarter, the result of seasonality and customers longing for a correction to LME inget prices while also looking to lower year end inventories.

At this point I'd like the turn the call over to Tom, who will take you through some of the Company's financial highlights.

Thanks, Ray, and good afternoon to everybody on the phone. I am pleased to report to you that Quanex continued to generate excellent returns and posted a 12-month return on invested capital of 19.4%. Cash flow was again outstanding, and for the fiscal year, cash from operations was a very robust $189 million. Our cash balance at the end of the year was $106 million, more than double the balance of a year ago. You may recall that during the year we spent some $58 million buying back our common stock, we made $16 million in pension fund contributions, and we also invested $74 million in capital projects. We expect to see continued strong cash flow in 2007 based on continued healthy earnings and lower capital expenditures, as we wind down our Phase 8 capital project at the end of the month. Our strong balance sheet and excellent cash generation positions us to continue funding our organic growth opportunities and to pursue strategic acquisition targets in this weaker market environment.

Looking at the capitalization ratio, our total debt less cash was 3% compared to 11% a year ago. We clearly have financial strength, which means when the right opportunity comes along, we will have the wherewithall, as well as the inclination, to accommodate them. Maintaining a strong balance sheet is critical to our long-term health, and managing our working capital is part of that. For the fourth quarter our conversion cycle, which is a measure of how long it takes us to convert customer orders to cash, came in at 43 days, a very competitive number for manufacturing. And according to CFO Magazine, we hold the top spot amongst North American steel companies.

During the quarter we entered into a new $350 million revolving credit agreement that runs for five years. This replaces a $310 million facility that was scheduled to expire in February 2007. We have no outstanding borrowings at this time, and the facility will be used to fund our acquisition growth. Over the last 18 months acquisition multiples have been too rich for us, and we've fallen short of prices paid. But I believe there is some pricing correction under way, particularly in the engineered products space. In keeping with our strategic principle to build on our strengths, an acquisition today must protect and grow MACSTEEL or build upon our competencies to extend our reach with fabricated components within engineered products.

With that I will turn it back to Ray.

Thanks, Tom. Moving the discussion to the market outlook, we expect North American light vehicle builds for calendar 2007 to be up slightly compared to 2006. We believe builds in the first half will be down about 5% compared to the first half of last year, then post a 5% gain in the second half of the year. The expected reduction in auto builds will fall primarily on the big three, as transplant builds are expected to be up in 2007. We expect first quarter shipments at MACSTEEL to be down about 10% compared to first quarter 2000 ship -- '06 shipments. As we said previously, MACSTEEL's response to a fall off in light vehicle builds is to continue to increase its content per vehicle with all its automotive customers and, indeed, new programs continue to kick in. Recently new programs have included products of steering yokes and alternator shafts, and upcoming programs in 2007 call for bar product going into constant velocity joints, wheel bearing hugs and gears for continuously variable transmissions.

From a building products standpoint we believe that housing starts are currently at or near bottom, with an annualized start rate of about 1.4 million units. We expect new home construction to remain under pressure through the first half of 2007, then begin to rebound in the second half, with the full year coming in at some 1.6 million starts, 10% to 15% higher than we are experiencing today. Thanks to the relative strength in remodeling, the window and door industry is forecasting total window unit demand to only be off single-digits in 2007, which bodes well for Engineered Products. This factoid, along with our battery of new programs with existing customers and is what is about to become much larger customers, like Therma-Tru, should allow us to continue to out perform the market.

The outlook for Nichols Aluminum remains favorable, and buying scrap at low prices and increasing the value-added mix remain priorities. Supply and demand market fundamentals have improved significantly over the last couple of years, as the industry has rationalized capacity and demand has risen in this healthy economy. Furthermore, high energy costs have enhanced Nichols competitive position as a recycler of aluminum scrap from which to produce sheet. Specifically, for every dollar of energy a smelter spins in the production of aluminum, we spend about a nickel. In summary, considering the external market realities we face, and our current positioning within those markets, we expect to report diluted earnings per share from continuing operations for the first quarter in a range of $0.35 to $0.45 and for the year $3.10 to $3.60.

That concludes my formal remarks, and we are now ready to answer your questions.

[OPERATOR INSTRUCTIONS] Our first question is from Peter Lisnic from Robert W. Baird. Please go ahead.

Good afternoon, guys.

Good afternoon.

Thanks for the Nichols disclosure. I am sure that we all feel like kids in a candy store with the new info. On the residential side, Ray, it sounds like you're a bit more optimistic that the second half will at least bottom or maybe start to trend back up, and we've heard commentary from some of the big home builders that at least some of the regions are bottoming. Is it safe to say that on a new home construction side that you're also seeing the same thing in specific regions?

It does vary by region. There's certainly a regional factor at play. Can I really say that it has bottomed or exactly where is it? We're just not that good. Certainly, in listening to our customers, and I know some of our guys were at one of our larger customers this week and the feedback that I've received, that that is the way they read things. But they also punched up the regionality of it all, and -- so it's really -- it's a tough call. I mean, as I said we think we're knocking on bottom right now, and the consensus seems to be, amongst economists and the industry pondents, that it's going to come back towards the second half, so that's the way we're calling it.

Okay. And that's only a portion of the Engineered Products business. Can you maybe give us some insight into what your thoughts are for the remodeling side of the business? I know it's captured by that little factoid you mentioned that window and doors, talking about down single-digits or something like that for '07, but just wondering what your take is on the remodel side of the equation for Engineered Products?

I can't really add much color to that. It is difficult to get exact data. Even our customers, who are dealing directly on a day-by-day basis with the big boxes, for example, don't have precise data. At least if they do they're not sharing it with us, but I really don't think they have a lot more. So we're just at the mercy of what the industry associations are saying, and that's the best we have.

Okay. And then just the last follow-up, I guess, is part of your advantage in that business the fact that you're relatively aligned with companies that are gaining market share? I mean, the recent announcement of Therma-Tru and Fortune Brands, I guess they've been out in the press saying that they've been gaining share. So to the extent that you're aligned with customers, should we think about your business as being able to gain market share, not only because you're able to execute but because of your alignment with those types of customers?

Precisely, Peter. I've used the term before. I feel we're hitched to stars, and I really believe that. I think the list of customers that we have, they are definitely the who's who of the window and door space, and I think over the long-term that bodes well for us.

Our next question comes from James Gentile, BB&T Capital Markets. Please go ahead.

Good afternoon, gentlemen, how are you doing?

Good afternoon.

Hi, James.

Wondering if you can kind of give us -- thank you very much for the increased disclosure, by the way. Wondering if you can give us insight into the Engineered Products business as it exists with the window and door components, and I guess the margin volatility within that business? We're up again -- we approached or slightly exceeded double-digit operating margins in the Q4 period. Obviously, somewhat down from year-over-year comparatives, but we're in that double -- we're just in that sweet spot of the 10%. How much lower can it go with regard to incremental manufacturing efficiencies and the sensitivity to your model there?

Well, I am not going to get into specifics there, but let me say that, particularly with Engineered Products, we do have the ability to flex labor. It isn't -- they don't have the big fixed nut that our process businesses do, so we can flex, but there is certainly some semi variable cost elements. There is some fixed element that we can't really touch, and frankly, I think in some ways I look at this as a time to pool Engineering Resources behind some of these businesses because that's when the really strong people can make good inroads and be ready for the return of the market. So we're not going to cut ourselves to -- we're not going to cut into muscle, I guess is what I'm saying, but we are certainly going to vary our labor to hold up as well as we can.

So there already is levers that you can pull?

There are some, but there are limits is what I am suggesting, as well.

Okay. So would you argue, then, within your -- the three segments now that the volatility in the event of say the fed starts raising rates in the back half of next year instead of the expectation that they're lowering rates, would you still suggest that the volatility existent in those three businesses would be concentrated in the Nichols business?

Well, you said three businesses. Maybe I --

Well, I'm looking at your three segments now in my --.

Okay.

-- built, so is the expectation of volatility still mostly concentrated in the Nichols business versus the other two?

Well, I would suggest to you that I think there's a less volatility of margin rates at engineered products than there is at Nichols. I think there you do have more -- it is just inherently more volatile, given the raw material factor.

Our next question comes from Barry Vogel from Barry Vogel & Associates. Please go ahead.

Good afternoon, gentlemen.

Hi, Barry.

Good afternoon, Barry.

First question, Ray, I guess you can handle this. Can you give us an idea what your capital expenditures would be this year and your D&A?

Our D&A will be close to $75 million, and we expect our capital expenditures to be about half.

About $37 million, $38 million?

Raw numbers.

Okay,. Now, with those kind of capital expenditures and D&A numbers and the fact that if we just calculate the cash against your debt position, just that exercise, even though almost all of your debt is $125 million of 2.5% coupons, you have the best leverage situation or the lowest leverage probably in 20 years. So my question is ,given that fact, why did you stop buying shares in the fourth quarter?

Well, I think you and I've had this discussion before. Sometimes there are internal reasons. Sometimes there are internal blackout periods that are created when there are other activities going on, and I suggest to you that that indeed is what was going on.

This is Tom. I'd only add that we did acquire 58 million of shares this last year, and we have a similar amount of shares authorized to acquire going forward if the timing is right, so it's not as though we've stopped the program. It clearly is the timing.

Well, let me ask this question another way. If, in fact, whatever was going on that prevented you from buying shares -- and I obviously do not know what was going on -- if nothing's going on right now, because we haven't seen any announcement of any deal, why would you not buy shares in this general 30 to 35 area, let's say, if nothing is going on, given your tremendous financial strength and your terrific acumen running your business?

Well, it's -- as we've indicated before, Barry, it's something we're always looking at. It's in the mix, if you will. It's one of the options we have, along with acquisitions, and it's something that will certainly get consideration by the board, no question about it.

All right, thank you. I will get back in the line.

Our next question comes from David Gagliano from Credit Suisse. Please go ahead.

Hi. Thanks very much and I appreciate the extra disclosure, as well, on the Nichols side. Just one question on the Vehicular Products side. You gave us some good information with regards to shipment expectation for the first quarter. I was wondering if you could talk a little bit about pricing? What are you seeing there? What are your expectations for pricing directionally, if nothing else, and hopefully a bit more for the Vehicular Products side?

David, we are currently in the throes of negotiations. I have to admit that a lot of it has been done, but we're not done -- we're not complete, is what I should say. So I just hesitate to go there any more than that. Just suffice it to say that it's a work in progress.

Okay. Does your -- do your assumptions for the earnings projections for the first quarter, $0.35 to $0.45 and for the full year of $3.10 to $3.60, do those -- what's the assumption there with regards to pricing on the Vehicular Products side, and also for aluminum prices, especially for the full year or so?

Well, again, you try and trap me here into giving that --

I'm sorry. Trying figure out what the assumption is in your -- Right.

Well, obviously we're giving it our best shot. We're obviously factoring in what -- directionally which way this thing is going. We're given that -- we've given that some thought. As I said, it isn't all done, so we're obviously crystal balling a little bit. But we're doing it the best we can. The second part of your question, David, was on the building -- just the Building Products side, what do we see on pricing? Nichols specifically. There -- that is not -- not a lot of it is done on a yearly basis. Most of it is done on a monthly, some quarterly basis, and so there hasn't been a big change there. It's heavily influenced by the LME.

Our next question is from Fritz von Carp from Sage Asset Management. Please go ahead.

Hi, good afternoon.

Good afternoon.

In MACSTEEL in the quarter you guys did a good job of out-performing the market. As you point out, tons were up 5% year-over-year despite this 11% drop in the big three's or North American production. But then in the guide -- so that -- let's say there's a certain gap there between what you guys did and what the market did in your favor. In the forward guidance you have the market down 10% and also your sales down 10% in MACSTEEL, so why the out-performance of Q4 is not repeated in Q1?

Well, I think it 's -- might just be a little bit of a short-term aberration. I don't have a real good answer to that. I just don't.

Okay. Fair enough. That was my question. Is it safe -- maybe is it -- should we average the two quarters together and say that's kind of how you can -- the extent to which you can out perform the market or it should be three, four, five percentage points, something like that?

It might be safer to do it that way, and I would suggest once the second quarter -- we have a better sense of the second quarter, you know, you average those, the first and the second, and that could be a better indicator, as well. Obviously, if you go over a longer time frame you can reach better conclusions.

Great. Thank you.

Our next question comes from Robert Kelly from Sidoti and Company. Please go ahead.

Good afternoon.

Hi, Bob.

A question on the weakness you're seeing on the remodeling and new home construction side. Do you foresee the -- it accelerating, the consolidation on the window and supply supply side of your business? Do you see acquisition multiples starting to trend down a little bit or do you see more opportunities to gain share?

I think I will take the last one there first, opportunity to gain share. I think the stronger will -- the strongest will do better in a tough period has been my experience. In terms of the remodeling, you know, where are we, I guess that is just -- it's difficult for us to sort the dorter -- the data between remodeling and new. Going forward I do expect to see a pricing multiple soften some. Anecdotally, there is some evidence to that effect, and I would think that there will be some good opportunities that will come along this year in this space. So that's my take of it.

Fair enough. Just some housekeeping. On the CapEx expectations for '07, should we still be looking at that down about half from what we saw in '06?

Correct, approximately.

Approximately.

And how much of that is just -- is growth versus maintenance capital spending?

About a third is growth and cost reduction.

Okay. Thank you.

Our next question is a follow-up question from Peter Lisnic from Robert W. Baird.

All right, I'm back and I don't think you'll get off that easy this time. Jeff, I'm just wondering -- if I can address a question to you -- are you going to give out historical numbers for Nichols say back another cycle or so, so we can have an idea what profitability's been like and whether or not we can assess this thesis or theory that the industry or the paradigm in the industry has changed relative to three, four, five years ago?

Yes, Pete, I'm having discussions with the controller at this point. We have determined that we would have to do that in a material fashion, meaning I can't do it over the phone individually. So we've had those discussions. I don't have a conclusion for you yet, but I promise you that I'll be taking your concerns to both Tom and Brent Korb and we'll see what we can't get done there.

Okay. Excellent. And then, Ray, you talked about Mikron, or you mentioned the disruptions you had there, is there any way of -- I would assume that you can't really quantify it, but was it just an instance where you had to deal with that unionization issue and you -- maybe some of the sales force may have lost their customer focus and then operations may have been impacted, too? Just kind of how do we think about what the impact from that was?

Yes, certainly there was just a great deal of turbulence going on. I mean we had, as we indicated, beginning in the second quarter the market started softening on us, and our customers, with the best intentions, give us forecasts were just, you know, I think overly optimistic looking back. They really thought that, yes, we had a bad month but things will correct. So we had our labor force on a just-in-case basis is the term I've used. And so it was -- some of it was a question of not just shrinking down the way we should have shrunk, given the permanent decline that the market was in. It was just not recognizing that early enough, and again, it was not -- I think not that our customers were misleading us, they were just misreading the tea leaves.

So we had that going on, and then on top of that, of course, we had the disruption caused by the union, and I can't really break that up. I just feel that, as we look at our numbers on a pounds produced per man hour or some of the metrics that we use to gauge shop floor performance, were not good, and we know they can be improved. And the guys are already showing some good improvement, so I'm confident that we're going to rebound.

Our next question is a follow-up from Barry Vogel from Barry Vogel and Associates. Please go ahead.

Ray, we know that Nucor is taking a Memphis facility, and they will be on-stream in 2008, and one of the markets they're going after are auto-related bar -- engineered bar markets. You mentioned that secondary markets should offset some of the decline in the Class A truck builds. Are you making a concerted effort to expand into what you call secondary markets, meaning non -- I guess meaning non-light vehicles, because it looked to me like you're going to have much more competition? And if you are making a concerted effort and you have some time, which markets do you think make sense for you, as far as non-light vehicle?

Yes. When you say non-light vehicles, of course I guess I'd say non-vehicular, because certainly anything that's on wheels or on tracks, I mean we consider to be our primary market. But certainly oil patches is one area that we know we can move more product in our size range. Seamless pipe is hot right now, and they can't seem to produce enough of it, so we know we have some opportunities there. Defense is always, again, a secondary market for us, but there are opportunities there, So those are two where we're going to be looking at with some intent of gaining some shares -- share.

All right. So what you're saying -- I just want to make sure I understand this. In 2008, all things being equal, under be expanding in the markets that you just mentioned?

We expect to continue doing well in our primary markets, absolutely.

Okay. Thank you very much.

You're next question is a follow-up from David Gagliano from Credit Suisse. Please go ahead.

I just want to clarify the last question I was trying to ask, which was the aluminum -- what is the aluminum price assumption embedded in the $310 million to $360 million forecast for 2007? Is it basically flat versus current market dynamics?

Again, aluminum sheet. It will vary with the price of the LME, of course. I don't think we're assuming much change in our tolling charges, if that's what you're going after, David.

Yes. Since it varies with LME, I'm wondering what your LME price assumption is basically?

We expect to see some softening in the LME. But, again, the key for us is the tolling charge, right, so -- or it's what we add to the LME price for value delivered, if you will.

Okay. Fair enough. Just a quick follow-up. Any share buyback assumptions in your target data for Q1-- in your EPS targets for Q1 or for full year 2007, i.e. the denominator in that?

No, there is not.

Okay, perfect. Thanks.

[OPERATOR INSTRUCTIONS[] Our next question is a follow-up question from Peter Lisnic, Robert W. Baird. Mr. Lisnic, your line is live.

Can you hear me?

We can hear you now.

We got you.

Okay, sorry. I just wanted to follow up on one of Fritz's questions, and that was, I guess, Ray, this year you talked about the 100,000 tons that you added at MAC. Just wondering what your expectation is for next year?

I don't have a number off the top, Pete. We'll have to work that out.

But suffice it to say there are some new programs in the mix in that you will -- presumably there's going to be some new business that you're getting there, and that's where you're going to get the above-market performance?

That's right, and we -- some of the programs that we initiated in '06, of course we have yet to see the full complete year of that, right, so there's some of that going on, as well.

Okay. Okay. Thanks a lot.

Our next question is a follow-up question from Barry Vogel from Barry Vogel & Associates.

Ray, you mentioned problems at Mikron. Is it suffice to say that Mikron is your weakest link in your Building Products operation?

Well, I don't know if I'd categorize it as a weak link. I think last year's performance at Mikron was disappointing, so from that standpoint there's perhaps more room for improvement.

Okay. So what you're saying is you think that all things being equal, Mikron will have a better year than this past year?

We are hoping to have a better year at Mikron, yes.

Thank you.

And gentlemen, there appear to be no more questions.

During the second half of 2006 demand for our products began to fall, as our customers found themselves with too much inventory given the deterioration of their end markets. We believe our team's managed their businesses through this slowdown skillfully, but it was done at some cost. For 2007 we are confident that quarterly demand will improve sequentially, but we must remain vigilent to further unexpected changes. Our markets are both cyclical and seasonal, and our businesses are short cycle, so our ability to quickly adjust is a key success factor for us.

Overall we are encouraged by the healthy state of the economy and by the recent trend of some metrics that have a strong influence on our markets, such as interest rates, wage and job growth, and lower gasoline prices. Keep in mind that the long-term prospects of the consumer-driven markets that heavily influence our performance are excellent, and we are well positioned to out-perform them. That concludes our fourth quarter call. Thank you for joining us today.

This concludes today's conference call. You may now disconnect, and please have a wonderful day.