UFP Industries Inc (UFPI) 2007 Q3 法說會逐字稿

Good day ladies and gentlemen. Welcome to the Universal Forest Products conference call. My name is Dan and I will be your operator for today. At this time, all participants are in listen-only mode. We'll conduct a question and answer session toward the end of this conference. [OPERATOR INSTRUCTIONS]. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Lynn Afendoulis, Director of Communications. Please proceed.

Good morning and welcome to Universal Forest Products third quarter 2007 conference call. On the call today are William Currie, Executive Chairman and CEO, and President Michael B. Glenn, and CFO Michael Cole.

Please be aware that any statements included in this call that are not historical are forward-looking statements within the meaning of Section 21e of the Securities and Exchange Act of 1934 as amended. Such forward looking statements are based on the belief that the company's management as relied on information currently available to the company at the time such statements were made. The company does not undertake to update forward-looking statements or reflect bad circumstances, assumptions or events that occur after the date the forward-looking statements are made. Actual results can differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risk and uncertainties. Among the factors that could cause results to differ materially are the following: adverse lumber market trends, competitive activity, negative economic trends, government relations and weather. These risk factors and additional information are included in the company's reports on Forms 10K and 10Q on file with the Securities and Exchange Commission. This call is the property of Universal Forest Products. Any redistribution, retransmission or rebroadcast of the call without the expressed written consent of Universal is strictly prohibited.

At this time, I'd like to turn the call to Bill Currie.

Good morning, and thanks a lot for joining us on our third quarter conference call.

Today we'll talk about our performance under some of the toughest markets and conditions we've ever faced. We'll tell you about our successes despite the challenges and what we're doing to turn in stronger results in the coming quarters and years. From my perspective there are four takeaways from this quarter: First, Mike Glenn and his sales and management team have done a great job. They turned in double digit sales growths in three of the four business areas and grew market share in all four in a time when the market cut no slack. Their years of experience, their knowledge and relationships equipped them to make good things happen in hard times.

Second, we're focused on improving margins and profitability. We haven't yet seen the impact of our ongoing efforts to rightsize our organizations to our opportunities. We also haven't seen the impact of efficiencies we're achieving as a result of our focus on CI as we get better at manufacturing new products we have sold.

Third, the problem in the housing markets are here to stay, at least for a good while. We've done a good job stabilizing our business by diversifying into light commercial and multifamily construction which currently are stronger opportunities than single-family.

And fourth, we think Universal is the best investment we can make; so we'll keep an underleveraged balance sheet, healthy liquidity and allow us to step up our buy back program in the very near future.

Like I said, these are some of the toughest markets and times we've seen. I'm pleased with results even though I look forward to better days ahead. Mike Glenn will talk to you about our performance and strategy for the remainder of the year into 2008. But first I'll turn it to Mike Cole for a review of our numbers, Mike?

Thanks, Bill, and good morning everyone.

I'll start by reviewing income statement for the quarter. As you noticed in the press release, our total sales for the quarter increased by 1%. We estimate this was comprised of a 4% increase in unit sales offset by a 3% decline overall in selling prices due to a soft lumber market and pricing pressure on the (site-built) market.

Reviewing by market, our sales for the DIY market increased 11% compared to the third quarter last year, primarily due to unit sales growth as a result of acquisitions. Sales out of existing facilities were flat with last year despite challenging market conditions as a result of significant market share gains we realized with big box retailers. Our sales to big boxes increased 19% during the quarter, while sales to other retailers whose business is more closely correlated with housing starts was off 7%.

Our sales to the manufactured housing market increased 18% for the quarter due to a 20% increase in unit sales, partially offset by a 2% decline in selling prices. Our acquisition of Banks Lumber provided unit sales growth of 29% this quarter and made up for soft market conditions which resulted in a 9% decline in unit sales out of existing facilities, which was in line with the decline in modular and HUDCO industry production.

Our sales to the site-built construction market decreased 24% this quarter, due to 8% decrease in unit sales in existing plants, 4% decline due to our decision to exit the Las Vegas framing market and a 12% decrease in our average selling prices due to soft lumber market and intense pricing pressure.

Finally our sales to the industrial market increased by 10% to the quarter primarily due to an increase in unit sales. Unit sales increase this quarter was a result of acquisitions and continuing to add new customers including concrete forming which helped offset the effect the decline in sales for certain of our customers that supply the housing market.

Moving down the income statement, our third-quarter gross margin to 12.1% from 14.7% last year, and our gross profit dollars decreased almost 17%. These declines were primarily due to a combination of lower unit sales out of existing plants and fixed manufacturing costs, greater pricing pressure on the site-built market, sales incentives offered to gain market share and a decline in our value added sales ratio from 62% last year to 59% this year.

Selling general and administrative expenses decreased over $7 million or almost 11% for the quarter. Acquired operations cost our SG&A to increase by almost $4 million but this was offset by decrease of SG&A expenses of existing operations and operations we closed this year of almost $11 million. Our operating income was off approximately $9.5 million for the third quarter due to our site-built operations.

Moving onto our cash flow statement: Our cash flow from operations totaled $80 million in the first nine months of 2007 despite difficult market conditions due in part to sale of receivables program which provided an additional $25 million of cash flow in 2007 compared to 2006.

Our year-to-date capital expenditures totalled almost $27 million. We're planning on capital expenditures for the year of up to $40 million, which include real estate purchases of approximately $6.5 million.

A few points I'd like to make about the balance sheet. Including long-term debt, there was $47 million outstanding on our five year credit facility, which has a remaining availability of $219 million. Leverage ratio was 26.5% compared to 25.5% a year ago and trailing 12 month average debt to EBITDA was 1.8 times versus 1.1 times a year ago.

I'll conclude with a review of our revised 2007 targets. We continue to gain market share in the third quarter and as a result, we've increased annual sales target to a range of $2.48 billion to $2.52 billion, which implies a fourth quarter sales target of $480 million to $520 million, compared to $499 million a year ago. Unfortunately pricing pressure in the site-built market worsened, so we lowered our annual net earnings target to a range of $32 million to $35 million. This implies a fourth quarter range of break even to $3 million, compared to $5.8 million last year certain, which excludes certain non-recurring tax adjustments.

That completes my comments on the financial statements.

Thank you, Mike, now we'll turn the call to Mike Glenn for business review and for an outlook into the markets, Mike?

Good morning everyone.

I think it's fair to say that this quarter was a disappointment for us. We had our share of disappointment, but we also had our share of encouragement. While we encouraged by our sales in three or four markets, we were disappointed in our earnings and the housing market is, the only way to put it, as a train wreck. It severely impacted our earnings.

In the third quarter we picked up share in all our markets and increased our sales to three markets by adding new customers, products and opportunities. And we continue to ensure our size appropriately for our business. We are committed to our new and continuous improvement initiative which has helped us to eliminate waste, increase our efficiencies and help us focus on our long-term strength. What I like about continuous improvement is that it empowers our people to make change. It gives them the tools and encouragement they need to make a difference to help improve our company. Our people know we're in a tough market, now they know they have the power to create change.

In the past six months I've visited at least 30 of our plants and the proof of continuous improvement in lean manufacturing practices are there on the plant floor. Our plants look, run, and feel better than ever and our people are energized and enthused about their role in the company and their future.

Now I'd like to review our performance in our market s and to talk about what we're doing to grow our success.

Let me start out with site-built. Like I stated earlier, this market is, is nothing but a train wreck. In August the housing starts were down more than 24% from 2006; single family housing starts were down 27% and the seasonally adjusted rate of starts in August was $988,000. Last week we were with the CEO of one of the major production builders and his comment to us was "Don't be surprised if you see housing starts drop as low as 800,000 next year." Markets like Florida, Southern California and Colorado are at a virtual standstill. We don't think this market will turn around until 2009.

So we're focusing on growing our business with multifamily and commercial builders. While the starts of multifamily housing was down 11% for the quarter, it's trending up, and the annual rate of starts is up 18% of the year. The truth of the matter is that we have a small percent of this market. Like a lot of other folks, we fell in love with production builders, but we forgot about maintaining balance in our business like we have in all our other markets. We're going to go back and concentrate on these commercial builders and multifamily.

The outlook is, we don't expect much improvement of single family until 2009. Most industry analysts have lowered their forecast based on existing inventories, the impact of foreclosures and more stringent lending standards. When the market does return, it'll be at a more modest pace than the highs of 2004 and 2005. But we believe it'll be at a sustainable pace, and we look forward to being one of the strong survivors as a player in the market.

And the reason I think that because there's a number of factors that favor Universal. First: We have other markets that deploy our resources during a downturn. The reality is is that many players can't afford to stay in the market much longer. As they exit, we're certain to pick up share and see relief in the price pressure we're facing. No matter what markets they serve or the size of the business, builders need the stability of a reliable, financially sound supplier that can take care of their building needs in one stop, and there's not a lot of companies fit that bill.

Now let's talk about our DIY business.

We continue to pick up share with the big box and independent retailers in many product categories, including outdoor living accessories like post caps and ballasters. Homeowners who have significant equity in their homes can't afford large projects anymore like additions and new decks and fences, and we're starting to feel the impact. So we've had to work hard to get new business with existing customers and to add new customers and we've done that.

Our DIY sales in the third quarter were enhanced by the Aljoma Lumber. And even though the foreign market is as bad as it's been in years, Aljoma is opening the door to export sales in the Bahamas and the Caribbean. Maybe a side note -- we just picked up a large order for Jamaica to take care of recovery for the hurricane that hit there this summer; and while spending and -- when spending and housing improvements in Florida returns, we have the only treating plant in south Florida. That puts us in a solid position for growth. In addition, we're getting into industrial business in that market with all our manufacturers and exporters near the port of Miami; we're excited about our industrial craning and packaging opportunities and also concrete forming opportunities.

Our composite business remains strong. We continue to take market share and continue to increase our penetration overseas. In addition, our people have come up with innovative ways to gain efficiencies in our extruding operations that others find difficult to achieve. And we've also created a solid, industrial business by creating profitable products from the waste generated from our composite operations.

The outlook for DIY, analysts expect little, if any growth, in DIY markets in 2008. But mostly a healthy gain in 2009 and beyond as home ownership and turnover begin to increase again. We're going into negotiations for the 2008 season and we're confident we'll continue to grow our share with new and existing retailers thanks to our strong portfolio of products.

Now let's look at manufactured housing.

While this market remains soft compared to a few years ago, we're seeing signs of health in some areas of the country. In the third quarter, our HUDCO business increased by 10%. This was fueled by acquisition of Banks Lumber, and although the August HUD Co shipments were 23% lower than 2006, we're seeing a pick-up in our business, most notably in Texas, Indiana, and North Carolina. And the seasonally adjusted rate of shipments August topped $100,000 for the first time in a year. So we believe there is reason for optimism. The outlook, we're seeing evidence of a move of subprime buyers from low end site-built to lower end manufactured homes and given our market share, we're well positioned for this growth.

We continue to look for opportunities to move deeper into the home with products like interior doors and mill work. This provides opportunity for growth as we maintain a commanding share with the products we've traditionally offered to this market.

Let's talk about industrial. You know, I know every time we chat I say the same thing over and over again, but this market is just a terrific place to be. It remains a bright spot for our business and on the horizon, and I'm glad we made the decision seven years to go after this business in a very organized manner. We continue to add new customers, but we're also starting to see new sales, see sales with existing customers grow, into multiplant deals. It's something we anticipated and worked toward and after seven years, it's starting to pay off. National manufacturers are learning how we can cut costs and improve their packaging at one plant and they are asking us to expand our work to other locations. The outlook: Looking ahead, we continue to see great promise and opportunity for strong growth in this market. We're adding capacity in many plants and we're increasing our sales fire power because the opportunity is abundant.

We're expanding into the new market of concrete forming. This market has huge opportunities. We believe this is much, this market is much larger than we initially predicted and some actually estimate that this is a $4 billion market and our early success is giving us reason for optimism. We have a dedicated sales force that spent the last half of the year organizing and learning the markets in the product.

Concrete forming is a lot like industrial, it's fragmented with maybe one or two national players. The customers are looking for a low cost provider and national partner that will benefit from our knowledge, capacity and purchasing leverage. Just last week I was with a buyer from one of the major concrete companies and I asked them what were one of the obstacles and one of the problems they had with their current supplier-base, and his comment to me was kind of surprising. It wasn't centered around, it wasn't centered around price or quality, but it was centered around service and innovation. And that really fits right into our wheel house. We've already achieved over $30 million in concrete forming sales in 2007. It's an exciting opportunity that is already contributing to our bottom line.

So in summary, single family housing is terrible and we don't see that changing in the near future, so we're growing around it in multifamily and commercial construction. We're gaining share in each of our markets and we grew our DIY and manufacturing and industrial. We're benefiting from new business with big box and independent retail customers, and we're confident that 2008 will provide new opportunities in DIY. Our composite decking and railing products and accessories are helping to lead our growth in that market.

The wild cards in DIY are the consumer spending and as always, weather. Our manufacturing and housing business has picked up in a few areas in the country and we're positioned for growth in the market as it returns. We just need to focus on profitability.

Industrial is a bright spot. We're continuing to enjoy our increasing growth of existing customers who are asking us to work with their multiple manufacturing locations. And we believe that concrete forming holds significant opportunity.

We're putting a lot of effort into our continuous improvement initiative and its paying off in efficiencies in the spirit of enthusiasm and collaboration in plants nationwide. I visit our plants on almost a weekly basis. Let me assure you, the people in this company are rolling up their sleeves from Riverside, California to Belchertown, Massachusetts to create success in these tough times. I feel confident we'll do just that.

Bill?

Thank you, Mike.

As I told you, we're a little disappointed in the profitability, but we're very pleased with the quarter, our company, and the results, and especially our management team.

I thank all of you for your interest and now we'll open it up for questions.

(OPERATOR INSTRUCTIONS).

Your first question comes from the line of Robert Kelly from Sidoti & Company. Please proceed.

Good morning, gentlemen.

Morning, Robert.

Just had a question, pricing pressure you're seeing. Is that confined now to the site-built market?

Well, certainly uh, that's where most of our pressure's coming from. The hard part about it is we've had the site-built builders, the production builders have a new tactic. That is, you kind of quote their business and then you get it and design it and then you get ready to build the product for them and if the lumber market moved down like it did in the third quarter, they ask you to requote it. So any margin that you thought you had in there because the market moved or you took advantage and did some things, they're taking it away from you. So it's a very, very difficult situation for us right now. The other markets are holding up just, quite well.

Okay, great so it's kind of a moving target on the site-built side for the near-term?

Yes.

And the cost improvement initiatives undergoing, any timeframe for when that starts to kick in?

Well, you know, there's a couple things. Some of it already has kicked in in small pieces, but it's, it's really predicated on driving volume to your plants. The whole premise with this initiative is we're going to be able to produce as much product, twice as much product next year with the same amount of people that we have. That's where our efficiencies are going to start to come. It's not so much as we're going to see big efficiencies in December, it's we're able to drive more volume through our plants with the same amount of people.

And just quickly on the balance sheet, do you guys have a target as far as where you want debt to cap to be?

In the normal environment we've used about 45% debt to cap, debt to EBITDA, 2 to 2.25.

Great, thank you.

Okay.

Your next question comes from the line of Greg Halter from Great Lakes Review. Please proceed.

Good morning, Greg.

Good morning. Can you bring us up to speed on where you stand in terms of plant count and where you see that going over the next year or so?

Well, I can't give you a plant count. What I can tell you is that we're, we're rightsizing our company right now for the business environment that we're in. We have, and I'll give you an example, in the case of Texas, we were manufacturing trusses and distributing lumber in Dallas and we're also manufacturing trusses in a little suburb called Burleson. We consolidated that and took the truss production that was done in Dallas and moved it all to Burleson because it was a more efficient plant. So that's the kind of moves we're making right now. We're just right sizing our company. We have maybe a half a dozen plants we've mothballed at the present time.

Okay. And also on your capital spending record, you mentioned as much as $40 million for 2007; can you give your thoughts or expectations for 2008 and 2009, 2010 and so forth on what you see going forward given the challenging markets?

2008 will be considerably lower than 2007. We're not prepared to give a specific target yet. We'll do that with year-end numbers, but it'll be considerably lower.

Okay, and looking forward beyond that even, are there any new, large projects which would keep that number at 40, or do you expect it to remain at a lower level?

Beyond 2008?

Correct.

We, I, we don't have any specific projects at this time. That's pretty far time horizon to look out for CapEx for 2009 and 2010. I'm just comfortable right now saying for 2008 it will just be considerably lower.

Okay.

Greg, I think it's important to note that we don't use CapEx when we, when we want to do acquisitions. That's something that's done internally for our existing plants, but we still are actively pursuing acquisitions that make sense for us.

All right, and then relative to the share repurchase, I believe there was a comment made about possibly being more aggressive in this current quarter. And, I guess the question is, at least for the third quarter, it appeared there wasn't much done in the way of repurchase and just wondering why that is and why you're changing your tone going into the fourth quarter.

During the third quarter we started the buy back shares; I think we bought back 80,000 or 90,000 shares. We had a couple of opportunities that we were investigating that caused you know, inside information to stop, we were counseled to stop buying back our shares, so we did. Those have passed, the quiet time is over tomorrow morning, and as Mike said, we'll be aggressively acquiring back our shares.

Okay, great, thank you.

Okay.

Your next question comes from the line of Jay McCanless of FTN Midwest, please proceed.

Good morning, everyone. First question I have on the site-built side -- starting to hear more rumors and some news stories about some of the smaller builders getting their lines pulled from the bank et cetera. Just want to get your views from credit risk from some of your smaller customers for the rest of this year and into 08.

Jay, we, that whole industry is a little bit of a credit risk right now to be honest with you. We have weekly phone calls right now where we, where we see if anybody steps outside of their of their payment terms. If they do, then we get on the call, we either, we either put a lien in or we stop shipment. Our take is something will happen here in the next six months.

And should we expect a large reserve on your part or just expect...?

It's a reserve that we, we've been more conservative with this year considering the credit environment we're in.

Okay and then wanted to swipe over to manufactured housing real quick. I know you converted some of the Banks plants over to industrial, how many dedicated manufactured housing plants do you have right now?

Hold on a second, we're counting them up.

Okay.

Somewhere between 10 and, 10 and, 10 and 12.

Okay.

No plan is 100% manufactured housing, but some are in the majority of that. Others we have multiple lines in the same plant.

Is the geographic concentration in the three states you were talking about earlier, Texas, North Carolina, and Indiana or are there other areas of the country where you have significant manufacturing presence?

We have other ones in Southern California...

Georgia, Alabama, Florida, we have such a high market share, Jay, we're pretty much everywhere.

Every plant in the United States.

That's what I was wondering, just, because you all mentioned Texas, North Carolina, and Indiana which we had heard about before, but I was surprised you didn't mention that Georgia and Alabama corridor. Can you give me some insight on what's going on there?

It's picking up there also.

The reason we mentioned those three, those are the hottest markets right now. Those are where we seem to have backlogs that will take us into December. And then we'll go through their normal seasonal shut downs. That's the first time in a couple years that these plants have been out for four to six, eight weeks.

Thank you, guys. Appreciate it.

Thanks, Jay.

Your next question is from the line of Christopher Bannon from Wachovia. Please proceed.

Morning, Chris.

How's it going guys?

Good.

Excellent. I had a couple questions here. Mike, you talked about year-over-year decline in gross margin, and mentioned maybe four or five reasons for that. I was wondering if you could weight those toward which reason was the biggest driver. And when you also talk about the SG&A, the savings in existing plants, if you could possibly talk about how they broke out by sales, general and such?

With regard to the first question, the biggest item by far was the site-built pricing structure on the margins there and then I'd put unit sales volumes being off and then the sales incentives.

Okay. And then when you guys look, two to three, maybe five years out, what do you guys see the concrete forming business being, I think you mentioned about $30 million in 07 so far. What do you see that being as a contributor to your top line?

The reason we talked about industrial being a seven year initiative is that it really kind of surprisingly took us seven years to get where we're at. We don't think it's going to take us that long with concrete forming. We learned a lot through that process, but we think that within, within those four years, we're certainly going to have somewhere around a 25 to 30% market share. .

Great, thanks, guys.

Okay.

Your next question comes from the line of David Liebowitz from Burnham.

Good morning. A few unrelated items -- first what percentage of total revenue were Home Depot and Lowe's in the most recent quarter?

Let's see here David... Depot I believe is about 27% of sales this quarter.

Okay, and Lowe's?

I don't have Lowe's, I'm sorry.

Okay, that's all right.

The single digit numbers, much smaller.

Understood. Second question, what is the total cost of the rightsizing of the business as we look at 08 calendar year?

What is the, in other words, what is the cost savings?

What will your expenses be to accomplish it first and coming out the other side, what might that add to the income statement in terms of earnings?

In terms of cost to accomplishment, I think those are fairly minor. In terms of the cost savings for 08, um--

Yeah, that's a hard one to quantify, David. We do feel, we're not enamored about 08, but we feel pretty positive that we'll do substantially better than we did in 07 due to our rightsizing and due to our CI initiative.

It's going be several million dollars in terms of cost benefits for next year.

Okay, you said just now that you feel you can out earn 07 in 08 because of rightsizing and other items. To accomplish that, what's your estimate on housing? The single family housing market for 08 vis-a-vis 07?

I think Mike gave you a good answer. I wouldn't be a bit surprised to see it at 800,000 or 850,000; but understand as he said, we're making huge strides in turnkey, light commercial and multifamily packages and we don't anticipate whatever the housing market does to have a hell of a lot of impact on any kind of growth we have in the site-built market.

And the last question, we are now, I guess, entering year three of the five-year plan or year two of the five-year plan? Correct me on that if, for starters--

Year two.

Okay, that's being said and given the dramatic decline in single family home building, do you still stand by the projections for the five-year program or are you going to have to push out the results by a year?

Well, David, we're only into year two and we're not quitters. You know, if housing comes back, even at a modest rate of 1500 to 1800 and some other initiatives and if the lumber market moves up a little bit, it's not unreasonable to think that we'll hit our goals. And certainly we evaluate all that every year when we have our annual budget and planning meetings.

Okay, and the last thing, if 08 can out earn 07, do you expect to be able to do that in each of the four quarters or is that going to be back end loaded?

I think it's too early to say, David. We'll come out with targets for 08 when we release our December numbers.

Thank you, very much.

You're welcome.

Your next question comes from the line of John Emerich from Iron Works Capital. Please proceed.

Hi, John.

Hi, how are you? Can you give me a ballpark of what the organic growth rate was like in each of the four segments as you break them out?

Sure. Organic growth overall was actually down 6%. So it wasn't growth. Manufacturing housing organic was down 9%, which was industry production. DIY was flat even though the market was down. Site-built was off 12%, but before that was because of exiting the Las Vegas framing market and industrial was flat.

Okay, versus a market that was flat or up slightly.

Probably also off.

Okay, and do you have organic growth. I know it's too early to provide specific 08 guidance, but would you expect in a flat, for instance, DIY market that analysts are projecting for 08 that you'd actually be able to grow because you're gaining share?

Yes.

So you have organic growth there. And industrial, would you expect organic growth next year?

Yes.

It sounds like in manufactured housing, you're especially optimistic.

Yes.

That's great. Thank you very much.

Thanks, John.

Your next question is from Greg Halter from Great Lake Review. Please proceed.

Hi, Greg.

Hi thank you again. Within your release you talk about the targets based on following assumptions, with one of those including no events occurred that result in impairment charges, and I'm just wondering, what type of events would cause that or dollar amounts that you may be looking at there that could be at risk?

We don't, we don't, we're not afraid to talk about dollar amounts at risk, but if we permanently closed the plant and sold it, many times in a situation like that a plant can't be sold for what we have into it. Those are the types of things that could happen that could cause an impairment. If we permanently close it and made a decision exit that market and sold the plant.

Okay, all right, thank you.

Your next question comes from the line of Jay McCanless of FTN Midwest. Please proceed.

One more question I had in looking at the lumber markets. The government data has been telling us that the wholesale inventories of lumber have been declining for the last roughly five to six months. I wanted to get historical perspective on when, how we should expect lumber prices to turn. Are there any signs we can look for out there? Just get a little historical read from you guys.

Hey Jay, I would say almost categorically that all the lumber and wafer board manufacturers are operating at a loss. Now what normally happens in a lumber cycle like that, it's going to cause, it's going to cause some shut downs and it's going to cause permanent closures. That's on the supply side. The other side of the equation that you have to look at is that the wood baskets are expanding. 100% of our wood used to come out of Canada or the United States. Now there's a wood basket we bring in from Chile, from Brazil, from China, from Eastern Europe and now there's expanding wood baskets. So it's all going to be a matter of how much pain can the manufacturers stand before the prices go up. But obviously they have to move up in order for there to be any profitability in any of the primary, in any of the primary wafer board or lumber manufacturers. We do look for price help, a little price help next year.

Okay, and has there historically been any tie in between what we see on the wholesale side relative to how it comes out? I mean, how do I relate the wholesale lumber decreases that we've seen so far back to how you all can go out and price it to your customers? How does that relationship work?

Are you saying there's an increase in wholesale number of inventories or a decrease?

Decrease.

The reason that there's a decrease is that there's no market opportunity for them to make any money.

Right.

You always see the wholesale inventories increase in a rising market and you see them shrink in a falling market. That's what keeps more pressure on the downward pricing.

Okay, so at this point we haven't reached a level where the decrease in the supply is going to cause a rise in the price?

That's correct.

Okay, great, thank you.

At this time, there are no further questions in the queue. I'd like to turn the call back to management for closing remarks.

Okay, thanks a lot. Once again, Mike Glenn, thanks again for great performance in tough times. Thank you all very much for your interest in the company. We, we'll work hard to outperform the market and we'll be very active in buying back our own shares. We think it's the very best investment we can put our money in. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.