Quanex Building Products Corp (NX) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Quanex Building Products fourth quarter and fiscal year-end conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Dave Petratis, Chairman and CEO of Quanex Building Products.

Good morning, and thanks for joining us today for our fourth quarter conference call. Sharing the call with me today are Brent Korb, our Chief Financial Officer, and Jeff Galow, our Vice President of Investor Relations. Today's call will include a review of current end markets, a recap of quarterly and annual results, an update on our progress with Project Nexus, our growth initiative, and our outlook for 2011.

Comments this morning include forward-looking statements about the future prospects of Quanex. Please refer to our SEC Form 10-K filed in December, 2009, for our complete forward-looking disclosure statements. The earnings release is available on our website at Quanex.com.

Demand remained weak in the fourth quarter, and our financial results were lackluster. Our blended end market, which is a weighted combination of our two key market drivers, residential remodeling activity and housing starts, was estimated to be up 9% from the year-ago quarter. Most of that strength came from a reported pick up in R&R activity, because we know annually housing starts actually dropped every month in the fourth quarter.

Sales at Engineered Products were up about 2% over the year-ago quarter, which may indicate a lag between the recovery of the broader R&R market compared to the window component demand. In Harvard University's Joint Housing Study, they continue to point to a positive R&R growth in 2011, and if they're right, at some point that growth will benefit Quanex.

Starting in the first quarter of 2011, we will no longer report our sales performance at Engineered Products compared to the blended end market. Instead, we will be working to compare our performance to the residential window construction, as reported by Ducker Worldwide, a well-respected research and marketing company. Ducker reports historic residential window production, and they have worked with us in breaking down the data on a quarterly basis.

Turning to the operating results at Engineered Products, our three businesses, Homeshield, Mikron, and Truseal reported combined sales growth for 2010 at 12% over 2009. While the blended market was basically flat over the same period, demand flowed midway through the year, as we discussed on our last call. We did not expect a significant pick up in demand in the fourth quarter, and regrettably, we were right. Operating margins for Engineered Products for the year and quarter were 9.4% and 11.1%, respectively.

Even though sales were up a bit compared to the year-ago quarter, operating income was down about 27%, and the reasons were varied. We incurred costs associated with vacating a couple of buildings at our Mikron facility in Kent, and those costs include moving equipment from Kent to other Mikron locations. This consolidation will reduce operating costs from this point forward.

We had higher material costs and product mix issues at Truseal. We use an oil-based butyl compound in our insulating glass sealant systems, and with the rise in oil prices, margins were squeezed. In response, we announced a price increase effective November 15. Our product mix issues centered on the balance of higher margin solar edge tape sales, as a percentage of total sales in the quarter, which were down from the fourth quarter of last year. We believe this was primarily a timing, as our solar sealant sales experienced growth for the full year in 2010 compared to 2009.

We also incurred some significant costs related to the launch of our Nexus growth initiative in the current quarter. While we're on the subject of Nexus, let me give you an update on our progress. You will recall Nexus is our growth initiative, focused on growing profitable sales at Engineered Products, and is comprised of strategic steps to help achieve those sales.

We announced last quarter that Gus Coppola, formerly the President of Truseal, will lead our Nexus initiative. Today, we have all the sales and marketing leadership positions filled. We just have a few positions left to fill in the marketing area, and we will have those staffed soon. Gus and the team are finalizing plans that called for identifying Nexus sales opportunities into regions, assigning team members to those regions, and building the timeline for reaching out to those potential customers.

In the meantime, cross training of the entire team continues on the full complement of fenestration products we offer. I'm very excited about our prospects with Nexus. Important successes with customers like Matthews Brothers in New England, and [Syron] Windows in the Mid-Atlantic, tell me we have the value proposition these regional customers need, but we have to get out there and get in front of all of them.

For those of you that made the trip to the Glass Build show in Las Vegas in September, you saw for the first time a Quanex Building Products trade booth that incorporated all three of our Engineered Products businesses. We made a big splash at the show, and received an award for best booth. More importantly, we had over 300 visitors stop by to learn more about Quanex, and its industry-leading window and door products. We continue to win awards and accolades for our EnergyCore vinyl window system, and it was on the cover of last month's Window and Door Magazine.

Let's turn to review Nichols Aluminum, which reported strong shipments and healthy operating income in the quarter. Certainly the big news continued to be shipments, which at 88 million pounds, meant we were sold out in the quarter, up 12% over the year-ago quarter. For 2010, shipments were up 45% from last year. Comparable industry shipments in 2010 were up 24% according to the Aluminum Association. Capacity reductions in the aluminum industry, and market share gains by Nichols, continue to benefit us.

We generated excellent profits in the quarter, too, reporting $10.5 million in operating income, up 6% from a year ago. For fiscal 2011, Nichols earned $30.2 million compared to a year-ago loss of $6 million. A review of our sales spread, which is the difference between our average sales price and our average material costs, showed the spread was up about 12% year over year. However, our spread was constrained this year due to ongoing tightness in the aluminum scrap market, particularly in the availability of industrial scrap, due to reduced manufacturing.

Nichols is essentially 100% scrap driven, and we use both clean industrial scrap, as well as post-consumer scrap in our mix, which while cheaper to purchase on a per pound basis, requires more processing before it's ready to melt. Fortunately, we did see a slight rise in the availability of post-consumer scrap in the second half of the year, so that helped ease the spread pinch a bit. As we look ahead to 2011, we do not expect a meaningful improvement in this situation.

At this point, I'd like to turn the call over to Brent, who will take you through some additional financial highlights.

Thanks, Dave. And I'd like to add my welcome to those of you listening today. Quanex reported adjusted earnings per share of $0.25 from continuing operations in the quarter, compared to $0.40 in the year-ago quarter. For the year, we earned an adjusted $0.70 per share compared to $0.02 per share in 2009. You will find a reconciliation of adjusted to unadjusted earnings in our current release.

In a very weak year, we were able to grow our cash balance throughout 2010. We ended the year with $187 million, a $64 million increase over 2009. Cash provided by operating activities for the year was a healthy $90 million, and reflected our ongoing discipline with regard to working capital, especially inventory management.

During the fourth quarter, we were active with the purchase of $2.1 million of outstanding stock, at an average price of $16.84. For the year, we repurchased $4.3 million of stock, or 250,000 shares. And you may recall, we didn't launch the buyback program until the third quarter of 2010. The availability of credit under our $270 million revolving credit facility stood at $209 million at year end, and it remains undrawn.

The facility has an EBITDA covenant of 3.25 times. So our earnings impact the amount of available credit. Possible uses for the cash include funding our growth initiatives, funding our common stock dividend, making ongoing purchases of stock, and acquiring acquisitions that fit our fenestration vision.

I'm disappointed that we were not able to announce a sizable acquisition in 2010. It was not for lack of trying, and I can tell you, we remain diligent Our interest in companies that operate in the window and door space, and offer products and services complementary to ours remains high. As always, finding the right companies at fair valuations remains the goal.

With that, I'll turn the call back to Dave.

Thanks, Brent. Moving our discussion to the business outlook, we expect residential building and construction activity to be about flat in 2011 versus 2010. I know this may sound overly conservative to some of you, but when you take an honest look at the macroeconomic data, like unemployment, consumer confidence, homes available for sale, foreclosures, credit and government sponsor's incentives, you simply can't build a case for optimism in the housing market in 2011. We also know economists continue their steady march of declining expectations for housing starts in 2011. And the only potential bright spot appears to be the R&R market, which may or may not see growth in 2011.

With that, we're now ready to answer your questions.

Thank you. (Operator Instructions). Our first question comes from Peter Lisnic with Robert W Baird.

Good morning, gentlemen. First question, Dave, you laid out some of the things that impacted EP's margin in the quarter. Can you maybe give us a ballpark as to how much each of those little components were, in terms of Mikron and the facility move there, and then what the savings there might be, and then the materials cost mix and Nexus growth cost?

The building consolidation at Mikron, which will yield further productivity to costs, was in the range of $800,000. We believe ongoing savings will be between that and $1 million. So it gives us a good payback. We had some severances at Homeshield. The Truseal material costs hit us for about $1.1 million, and we also had some pricing reductions on that same solar product of about the same level. So those would be the big buckets.

Okay. That is very helpful. If I look at the press release, you talked a little bit about the incremental opportunity that you expect I guess Nexus to create several years out, five years out. Can you give us -- and it looks like that's back half weighted, but can you give us a sense as to what sorts of adoptions you're seeing now in terms of some of the new products and new customers you're targeting? You mentioned Matthews and Syron. I'm just wondering, when we think about the longer-term growth of the Company, how we should layer in that incremental $150 million that you have laid out in the press release?

I think you have to back-end load that. As you think about over a three to five year period, it has to be positioned because we're in the first inning of an extra inning game. I would say in 2010, between Mikron and Truseal, we brought in an additional 20 customers, 18 to 20 new accounts for us. So I like what we're seeing, and remember, we really started the traction with the announcement of Gus. So we're in our infancy. We're making the investments in people, in systems that I think will allow us to have a window component capability that goes through a common sales force that will benefit us.

All right. And then last question, if I could, probably impossible to answer, but in terms of tax credit and what that may have done in terms of pulling forward demand, either on the energy efficiency side or the homebuyer tax credit, any way of gauging what that may have done in 2010? I guess there is talk of extending the efficiency tax credit into 2011, what that might do for the demand backdrop relative to how you forecast 2011, would be helpful.

I think as we roll into 2011, my perspective today is, additional incentives don't have a chance in hell. That may come later in the year, but starting off, no chance. The driver in Congress, they're not looking for additional hand-outs, but there is certainly a lot of thought and discussion going around on improving the energy efficiency of the nation's homes, and if a program comes out of that, it will benefit it, but I'm not optimistic at this point.

In terms of estimating what that did for our business, hard to understand, because we're not that connected to the installers. We're at the fabricators. But you have to believe that there was some demand pull forward. You had 24 months of incentives. When we built our 2011 plan, we used a drop in R&R activity to try and gauge that, so we think as we look at 2011, we've conservatively tried to estimate it, but I can't give you a lot of color on how it benefited it.

I understand. Thank you. Thank you for the time. Those answers are very helpful.

Thank you, Pete.

Our next question comes from Jack Kasprzak with BB&T.

Thanks, good morning, everyone.

Good morning, Jack.

First question is, just with regard to the continued build up of cash. Would you guys, and you obviously discussed looking at acquisitions, and you're buying back stock, but would you guys consider -- have you considered a one-time special cash dividend?

I would say it's in the quiver of opportunities. There's not been any heavy discussion or analysis. Historically, I think, when we spun out the deal, that's effectively what we did, right?

Well, I mean, you had the transaction itself. Jack, I would tell you it's clearly something that's on our list. We do talk routinely about what are we going to do as we continue to build up cash, and that is something that gets bantered about.

Great. How about CapEx for fiscal 2011?

For 2011, we gave guidance of $30 million of CapEx, which is a high number, but keep in mind what we didn't make an announcement of is that we are spending some money on an ERP system, so that $30 million includes $9 million or thereabouts, in year one for this ERP roll out.

Okay. The press release mentions costs within EP, costs that are going to hit the operating profit line, as part of the new initiatives you guys are pursuing. Will those be fairly evenly spread over the year, or will they be a little front-end loaded or back-end loaded? How should we think about that?

Those will be fairly evenly spread throughout the year. It's feet on the street. It's sales people, marketing folks. And while we have a couple of holes that we're still filling, it's generally going to be there from the onset, evenly throughout the year.

And I guess lastly, just your commentary on the overall market, I mean, economists' forecasts aside for housing activity, can we assume that conversations with customers are not yielding much in the way of, certainly incremental optimism, but still ongoing murkiness with regard to the outlook? Just kind of speaking of feet on the ground, what are customers telling you guys?

I would say our large OEMs in private, thinking are in line with us. I think the middle market is more in a wait and see. Remember, those large customers typically more exposed to new construction. I went back and looked at the Blue Chip 50, trying to check myself. A year ago, in November, they were at 790,000 starts. That was the average. We'll come in at 589,000. Today they're at 720,000. We're finding that number hard to line up with our fiscal year. I think if there's any kind of rebound in housing, it will probably come in the second half of the calendar year 2011, but I'm not leaving the light on for it.

Got it. Thanks very much, guys.

All right, Jack.

Our next question comes from David Cohen with Midwood.

Hi, guys, just as a comment, first of all, I appreciate your candor and your realism on this whole housing backdrop. It's actually pretty refreshing. I was wondering if, as you look at your forecasts, and say, okay, with respect to at least the things that you can't control -- of the things you can control, what kind of upside is there potentially in terms of revenue and/or profitability in the things that, if you execute on well, that could be another 20% increase in operating profit or something like that? Can you give me a feel for that?

Brent?

I'm going to hesitate giving you additional guidance, but just to tell you that we are looking at everything in light of this continuation of the housing market woes, and we see some opportunities that we will go after, but we also see other situations where we may actually end up reducing some business that we feel at this time isn't profitable to us. So it's kind of hard to give you sort of a top line sense of what it could look like, because we will have some hard decisions in front of us here.

Okay. And then I'm just looking at your, in terms of Nichols, I guess what is sort of your confidence interval around that? Directionally, profitability is expected to be under some pressure. Again, where is sort of the upside potential on Nichols, and is it all going to come from basically lower scrap prices, if at all?

I would say we tried the same conservative demand in 2011 on Nichols. The wildcard in that is, we believe that we benefited from the rebuilding of the supply chain. Remember when we were going through the down elevator in this industry, customers really cut their inventories extremely hard, harder than -- below what maybe actual demand was, and we benefited from that on the way up. We're cautious as we look at that. We've gained share. Our challenge is to keep that share, the most profitable part of that share, and if there's any kind of rebound, Nichols will do well because capacity has been reduced in the space.

Okay. Thank you.

Thank you.

Our next question comes from the line of Torin Eastburn with CJS Securities.

Good morning, just to follow on the previous question, could you talk about what you see for the factors influencing spread in the next couple months or next couple quarters?

Torin, this is Jeff. Let me try that if I can. As most of you on the call understand, when we talk about spread at Nichols, there's what we call a fabrication spread, which is a difference between LME prices and our actual average selling price. That is a very market-driven spread. That has been relatively flat, certainly for the last 12 months. So I guess that speaks well to the discipline in this industry early on.

The second half of the spread is the raw material spread. And as Dave mentioned in his comments, Nichols buys both pre-consumer, what's called industrial or prompt aluminum scrap, which is relatively clean, relatively sorted, so it's something that we can move into the furnaces rapidly. That has been constrained, certainly all this fiscal year, we believe with manufacturing down that will continue to be constrained into 2011.

The post-consumer, as Dave mentioned, we picked up a little bit of help there. There was some improvement in that summer to late part of the year, but that's fairly rational, because post-consumer gets tight in the winter, there's snow on the ground, and the collection falls off. As you think about that for next year, I guess I'd argue that there's more upside on the post-consumer than there is on the industrial, unless you think that there's going to be some resurgence in manufacturing activity. But the outlook, I agree with Dave, it has to be guarded on that raw material spread. I just can't see much upside in either the post- or the pre-consumer scrap market at this point.

Okay, thank you, Jeff. And other question, apart from CapEx spending, what if anything, will affect your free cash flow over and above net income for 2011?

For 2011?

Yes, in a way that might be different from 2010.

I really don't envision much difference over and above 2010, full year share repurchases would be the only thing that jumps to mind.

Okay, thank you.

Our next question comes from Robert Kelly with Sidoti.

Good morning, thanks.

Good morning.

A question on the outlook for F 2011. You talked about tough comps in the first half of 2011. As far as phasing, when you talk about slight to down sales for next year, I mean, are the declines greater in the first half, and then you're expecting growth in the second half? Are you expecting flat throughout the year? Just maybe some help on how it plays out quarter to quarter on a year-over-year basis?

Historically, if you look to us quarter by quarter, our Q1 and Q2 are always the most difficult because the seasonality of the construction cycle. I think that's magnified slightly because of the sluggishness in the Sun Belt states. You typically keep -- hammers would be flying from California to Florida in a normal environment. It's not going to happen.

I think if you look at our last two years and the quarterly behavior, with the exception of the first quarter of 2009, you will get a sense of that seasonality. We certainly are mindful of the window tax credits evaporating, and that could -- we will be watching for any type of behavior around that.

So for the first half of 2011, like the high end of that slight flat to down, or like double digit down? Just trying to get a sense of how bad you think the first half of 2011 is going to be.

We're saying overall for 2011 just slightly down, but when you look at the comparable first half, there's clearly going to be much more noticeably down to the first half of last year, because remember, in 2010, really what occurred is with the housing incentives that expired at the end of April, it really moved the building season earlier in the year. So the building season in 2010 started early, ended early, and now we're saying that we're going to go back to more normal seasonality with, as Dave said, the concern of really the hangover from the $1500 tax credit that expires here at the end of this month.

So that makes for a more significant decrease in the first quarter when you look at first quarter of 2011 versus 2010. It will improve some in the second quarter, assuming R&R gets back to a more seasonal level, and then I think we see growing improvement from a comp standpoint as we progress through the year.

So most of your concern is around 1Q?

Q1, and then to a lesser extent, but still in Q2.

Right, understood. As far as the comment you made on acquisition, could you just help us, where you are? Have you identified potential targets? Have you begun negotiations? You're splitting hairs over the price? You talk about, not for lack of trying. How far are you along on the M&A front? What does your pipeline look like?

We have worked, over the last couple of years to develop a robust pipeline that supports our fenestration strategy, and review that with the Board of Directors quarterly, and that's as much of an update as I will make on that.

Fair enough. As far as free cash flow, another big year here. Is it possible that you duplicate the $89 million in operating cash flow over the next few years that you did in F 2010?

Well, I mean, clearly we will continue to focus on managing our working capital, and that's a big driver of it, as well as earnings now with the incremental expenditures that we're investing in Nexus, to support the Nexus effort, including the ERP, that will have a bit of a hit on free cash flow, but clearly we are focused on maintaining our working capital, and the bulk of that is inventories. If you really look at our inventories, and compare our inventory levels to times when we had these kinds of sales, especially at Nichols, you would see we're at really all-time lows.

Right.

And we're very focused on finding the right balance, and the team has done an excellent job to keep those down.

The team really has done an excellent job of increasing our inventory velocity, a good job on our receivables, and there's a third lever in there. You look at EPG over the last two, three years, we've improved the profitability of that in terms of the margins through price realization and cost take-out, and we think that gets better going forward. Some volume would help us significantly.

I agree. You all have done a fantastic job on the free cash flow front. Thanks again.

Thank you.

Our next question comes from the line of Barry Vogel with Barry Vogel & Associates.

Good morning.

I have a couple of questions. David, you had talked about new product development a few years ago, or at least the Company did, and they put out this booklet, and this is while you were divesting of Max Steel. Could you give some estimate of what was new product sales in fiscal 2009 and 2010, and what you might think they might be based on your projections for fiscal 2011? That's the first question.

Well, I guess, Barry, what we would say is, I remember what you were referring to, and we have not come with any information that we're providing publicly as to how much of our sales is coming from new products. It's clearly something we're focused on internally, but not something that we've disclosed publicly.

All right. And the second question is, obviously you've made progress with new customers in your Nexus endeavor, where you just told us you have about 20 new customers. Have you identified a potential number of regional customers you're going after?

This is a high priority for Gus. I believe that he has, among his 31 feet on the street, assigned territories, accounts, and we have a system that tracks that pipeline. And this is a big step up for us at Quanex, and the EPG groups, having an identifiable pipeline and accountability, what I'd call professional sales force management will give us the opportunity to see and gauge our progress as we go forward.

I would just jump in to also add that we have even added incentives, so based on our ability to secure these customers that we're targeting, we've added incentives to show that our drive for that, our push for that.

Do you have any idea roughly what that number might be approximately?

We've thrown out over the long term, there's $150 million of potential there for growth. Every quarter we'll give you detail on that in terms of Engineered Products, and how we're performing there, but I want to walk before we run.

Okay. A last question is to Brent. Given your balance sheet and your prospective free cash flow for fiscal 2011, despite your being cautious and conservative and realistic about the marketplace. If you look at your stock price, and I know you started buying back some stock gingerly in the last couple of quarters, versus the price of acquisitions that you're looking at, I would think now that you're walking slowly on the stock purchase program, that you'd want to increase it from the current levels, given the fact that you've done an incredible job in depression-like conditions for your industry. So what would it take for you to step up and be more aggressive on your purchase program, considering that fact.

Yes, I think, Barry, clearly what we and many companies will need to do is to really get through the next six months to sort of determine really where is this economy going, how long are we going to be here before we make any real bold moves in that way. So I'd say we at least need to get back into the building season here, and understand where we are, and what that long-term future looks like, because we're not that far removed from a period when we're having a lot of tough conversations with third parties who we weren't sure how supportive they were going to be. So we are maybe a little more conservative with the cash because we're not far removed from that time period. So it would take some, really, confidence in knowing exactly when things are going to get back to whatever the new normal is, that we all feel is coming. We just don't know exactly when.

One of the reasons your stock price is selling in this general area is because of that uncertainty.

Yes.

So to maximize it, you take advantage of that, which you're doing ever so gingerly, so I would think that you have plenty of room to step up your stock buyback program at the kind of average prices you've been doing in the last two quarters without harming the Company financially in any way, shape or form, and further, I would think that's a better plan than a one-time special dividend.

Well, I'll just tell you that I assure you it's something that I look at routinely. So it's top of mind.

I would also say that the executives here are incentivized on return on invested capital, and they feel the full pain in terms of the deployment, or lack of, of that cash.

No, I understand that. What about -- I know you pay a very small dividend. In this depressionary environment, looking at your cash flow and your earnings, certainly it's not out of the question that you might want to incrementally raise your dividend on behalf of the shareholders, and I'm sure your directors look at it, but what's your attitude about slowly increasing the dividend?

Well, I would just say, Barry, we increased it during 2010, and we'll continue to evaluate that in future years, as well. Again, I think we showed that in 2010, that we are looking at how to deploy the cash for the benefit of the shareholders, and we did begin to buy back shares, and we did increase the dividend, and no promises on what the future will be, but those are all quivers, as Dave referred to, that we evaluate routinely.

Keep up the good work. You've done an outstanding job, no question about it.

Thank you. Appreciate that observation.

Our next question comes from Phil Gibbs with KeyBanc Capital.

Dave, Brent, Jeff, good morning.

Good morning.

Sounds like people want you to buy your stock back, but I'm not going to go there. On the acquisition front, Brent, I know there's -- seems like a standstill with the other parties, which is somewhat strange given the economic outlook, because you're being very, very conservative with the recovery expectations. We've seen a lot of M&A across the landscape, not only in your industry, but in many others. Is there a benefit to the seller from a tax perspective to sell before the year end?

Well, I mean, it clearly depends on their structure, right? Depending on the structure, some may benefit. Of course, nobody knows what's going to happen in 2011. We can all speculate what might happen. So there is a big wave of transactions that are occurring in other industries, where people are pushing for closing by 12/31, and that's been, quite honestly, something that we've talked to all of the folks in our pipeline about, of trying to see if that was a need for tax planning purposes, estate planning purposes, and things of that nature. But it really depends on each instance. Some won't be impacted if there is a change in 2011, while others will.

Okay, that's perfect. And Dave, I just have a strategic question. When you go to these regional players, and it sounds like you guys want more critical mass at this point in time, what do they like about what you bring to the table?

I think they're quick adopters on innovation. They tend to be able to go out and sell that innovation through their dealer networks effectively, versus a big battleship. They tend to be more nimble, and like the energy savings and the technology that we're bringing in things like Super Cap SR, Mikron Wood, our EnergyCore products, our leading energy efficient Dura product line from Truseal. We just need to make sure we get those doors open, and share with them the capabilities that we have.

Are you providing them a direct cost savings, or access to greater innovation or both?

We're not out there pitching on cost savings. It's more on that innovation, it's the ability to provide quality products and services. We think we have an outstanding value proposition that we've developed over the years, and that can benefit them.

The other thing is this. The window fabricating base is a bit of a cottage industry, over vertically integrated, so our challenge is developing a value proposition that says why do you make your own divided light, why do you self-extrude, and as codes and standards move up, they have a challenge meeting those technical standards. We want to be right there.

Perfect. Thanks a lot.

Thank you very much.

(Operator Instructions). I'm showing no further questions. I would like to turn it over to Mr. Petratis for any closing remarks.

Thank you. When you compare our 2010 financial results to 2009, you find we had an excellent year in a difficult economic climate. We are proud of the fact that we outperformed the end markets in 2010, and we will be working hard in 2011 to grow our share with both our traditional customers as well as with new regional opportunities.

We have no doubt that 2011 will be a tough year economically for many companies, regardless of the space they operate in, and at Quanex, we know what we have to do. Keep our people safe, watch over the efficient use of our working capital, push our Lean Six Sigma agenda, bring in an acquisition that makes sense, and push hard on our organic growth initiatives for future profit.

This concludes today's call. Thanks for joining us, and have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.