Universal Stainless & Alloy Products Inc (USAP) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Universal Stainless fourth-quarter 2012 conference call and webcast. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to hand the conference over to Ms. June Filingeri. Ma'am, you may begin.

Thank you, Sayed. Good morning. This is June Filingeri of Comm-Partners, and I also would like to welcome you to the Universal conference call.

We are here to discuss the Company's fourth-quarter 2012 results reported this morning. With us from management are Denny Oates, Chairman, President, and Chief Executive Officer; Paul McGrath, Vice President of Administration and General Counsel; Doug McSorley, Vice President of Finance and Chief Financial Officer; and Chris Zimmer, Vice President of Sales and Marketing.

Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks we will take your questions. The conference operator will instruct you on procedures at that time.

Also, please note that in this morning's call management will make forward-looking statements under the Private Securities Litigation Reform Act of 1995. I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the Company's filings with the Securities and Exchange Commission.

With the formalities out of the way, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin.

Thanks, June. Morning, everyone. Thanks for joining us today.

As expected, sales for the fourth quarter of 2012 were $47.2 million as customers in our major markets stayed on the sidelines. Fiscal and economic uncertainty caused an unusually strong focus on inventory control and reduction. Short mill lead times also had a depressing effect on buying patterns.

As a result, the expected pickup in order entry in the fourth quarter did materialize. Our shipments in the quarter were essentially limited to those previously scheduled, with virtually no quick-turn business.

Backlog at quarter end was $52 million, which is down $14 million from the third quarter. We were able to reload some, but certainly not all, of our backlog during the fourth quarter.

We and our customers, whether forgers, service centers, or rerollers, continue to be optimistic about the long-term growth dynamics in aerospace, petrochemical, and power-generation markets. However, short-term concerns about inventory levels in the various supply channels have sharply lowered activity rates at the mill level.

2013 has begun with mixed signals. We expect January bookings to finish in the $13 million to $14 million range. That is a 40% improvement over the fourth-quarter (technical difficulty) [monthly] average, but about 50% below the record orders received in January of 2012. Right now our expectation is that demand recovery will build in the first half of 2013 and pick up more momentum in the second half of the year.

Despite the challenging conditions in the fourth quarter, further operational progress was achieved companywide. New remelting equipment, support equipment for our new vacuum induction melting operation, heat-treating equipment, and support systems were commissioned during the quarter. We continued to work our plan to achieve industry certifications with Nadcap laboratory testing accreditation for Bridgeville lab being the latest example. All of these certifications are critical as we move into more technologically advanced products.

The 25% decrease in our shipment volume, along with continued investment in the ramp-up of North Jackson resulted in a consolidated operating margin of 3.7% of sales. Before including North Jackson, the operating margin was 6.8% in the fourth quarter of 2012, versus 8.9% in the 2012 third quarter and 12.8% in the fourth quarter of 2011.

After $0.12 per share of North Jackson related expense in the fourth quarter and a $0.04 tax adjustment benefit, our net income totaled $1.1 million or $0.16 per diluted share. That brought full-year diluted earnings per share to $2.02, including $0.20 of North Jackson expense.

Full-year sales of $251 million were in line with $252.6 million in sales in 2011. Cash flow from operations for the fourth quarter was positive at $12.7 million, even after continued investment in capital equipment and working capital to support North Jackson.

Total inventory of $95.7 million was reduced $6 million during the quarter. Of the $96 million in inventory, approximately $10 million is for VIM-produced product.

Total operating spending was reduced 21% in the fourth quarter versus the third quarter to align with lower activity levels. Capital spending for the fourth quarter was $4.3 million, of which $3 million was for North Jackson.

The ramp-up of North Jackson is reaching its final stages. Our progress in the past year has been considerable.

Our vacuum-induction melting furnace melted its first heat in December 2011. Over the course of 2012, we melted another 144 heats consisting of over 15 alloys.

Crews were trained, and auxiliary equipment like crucible preheating and mold-cleaning equipment were added as the year progressed. Today we have a state-of-the-art melt shop in North Jackson, and we're in the process of obtaining approval by industry-leading OEMs in our major markets.

We also have four new vacuum-arc remelt furnaces in North Jackson that are fully operational, commissioned, and already produced over 800 heats in 2012. We now have 11 vaccum-arc remelt furnaces Company-wide.

That is a 40% increase in capacity over the past 15 months. In addition to relieving the capacity constraint we experienced during 2012, these furnaces are fully capable of supporting the requirements for VIM/VAR products in the future.

Our hydraulic radial forge was the first major asset that became operational following our acquisition of Patriot Metals in August of 2011. The forge processed almost 40 million pounds across its dies during 2012, including grades in the stainless, nickel alloy, tool steel, and titanium families.

Forge production increased every quarter since startup through the third quarter of 2012. Activity was down in the fourth quarter.

We completed installation of our fourth clam heat-treat furnace in the fourth quarter, and it is now operational as scheduled. In addition, we expect to earn Nadcap heat-treat certification this quarter.

Over the past year we also achieved most of the critical industry certifications necessary for North Jackson, including AS9100 for the forge, vacuum-induction melting, and vacuum-arc remelting, and both ISO 17025 and Nadcap accreditation for the chem lab. The final phase of the North Jackson ramp-up is underway; that is the various customer approvals we have been working on.

Although this can be a slow, tedious process, we expect to see approvals by midyear. Going forward, you can expect North Jackson to make an increasingly positive contribution to our results.

A quick update on the Dunkirk union contract that was in negotiation at the time of our last call. As we announced on November 12, we did reach an agreement on a new five-year contract that maintains the flexible work rules and profit-sharing incentives contained in prior agreements.

Let me take a moment and talk about our end markets. Aerospace remained our largest market in the fourth quarter. Represented 54% of our sales; that compares with 53% of sales in the third quarter of 2012 and 46% of sales in the fourth quarter of 2011. Our sales to aerospace decreased 21% sequentially and 10% from the fourth quarter of 2011, although there was a favorable shift towards higher-value aerospace products in our fourth-quarter 2012 sales mix.

Aircraft build rates and backlogs continue to represent a substantial chew-up rate for our metals. However, the supply channel inventory issues I mentioned earlier and also on our last call continued to play out during the balance of the fourth quarter. Despite these inventory issues, our sales to aerospace increased 21% for the full-year 2012.

Recent aerospace headlines have been dominated by Boeing's Dreamliner battery issues. To date, there has not been an impact on the 787 production schedule or on our business.

In addition, Boeing recently reported that the production ramp-ups for both the 737 and 777 remain on track. Production of the 737 has been successfully increased to 35 planes per month, and Boeing said they are making investments to make that rate 38 in the 2013 second quarter and 42 per month in the first half of 2014.

Production of the 777 also has increased to 8.3 per month or 100 airplanes per year. Meanwhile, Airbus confirmed that they plan to ramp up production of the A330 to 10 aircraft per month in the second quarter this year.

To accelerate our future growth trajectory in aerospace we are fully focused on obtaining customer approvals for North Jackson, including from leading prime and first-year aerospace manufacturers. These customers want us to succeed as quickly as possible, in line with their multisource strategies, as do our service center and forger customers, who also supply these OEMs.

Petrochemical market sales, which are mainly oil and gas related, represented 16% of our fourth-quarter sales, compared with 19% of sales in the 2012 third quarter and 21% in the fourth quarter of 2011. Our petrochemical sales were down 36% sequentially and 42% from the fourth quarter of 2011.

In addition to supply chain inventory management, a drop-off in the land rig count in North America created some specific headwinds in the fourth quarter. However, offshore drilling in the Gulf of Mexico has rebounded. Schlumberger, Baker Hughes, and Halliburton all saw growth in their international operations in the quarter, and E&P spending is forecast to increase in 2013, all of which point to eventual recovery in demand this year.

Power generation represented 12% of fourth-quarter sales, compared with 14% of sales in the 2012 third quarter and 18% in the 2011 fourth quarter. Power-generation market sales were down 29% sequentially and 49% from the fourth quarter of 2011.

Quick-turn maintenance business was mainly sidelined in the quarter, and there were no signs of pickup in the new gas turbine demand. In fact, GE reported that their orders for new gas turbines were down in the fourth quarter.

In total, GE had orders for 108 gas turbines in 2012 versus 134 in 2011. Even this lower level will create opportunities in 2013, but maintenance and overhaul will likely be the main driver of demand and also of our power-gen sales in 2013.

Service center plate sales increased to 10% of our fourth-quarter sales compared with 8% in both the 2012 third quarter and fourth quarter of 2011. Sales dollars were essentially level with both prior periods.

News from the automakers continued to be positive, as it has been all year. For example, Ford reported that its US sales in December were the best since 2006. Likewise, GM reported that their US sales in December were the highest in five years.

However, in the off-road market Caterpillar reported lower fourth-quarter results and lower production levels, as their dealers worked to reduce their inventories in the quarter. We expect 2013 to be on a par with 2012, subject to the normal quarterly fluctuations in this market.

Let me turn the call over to Doug for his financial report.

Thank you, Denny. As Denny said, our fourth-quarter sales were $47.2 million. That is a decrease of $15 million or 24.2% from the fourth quarter of 2011 on a 24.9% decrease in shipments. Sequentially, sales decreased by $14.2 million or 23.2% on a 23.6% decrease in shipments.

Our gross margin in the fourth quarter was $6 million, a decrease of $5.9 million from the same quarter of 2011. Sequentially, it was lower by $3.4 million or 36.1% than the gross margin recorded in the third quarter of 2012.

As a percentage of sales, the gross margin was 12.7%, compared with 19.1% in the fourth quarter of 2011 and 15.2% in the 2012 third quarter. The drop in gross margin is primarily due to reduced volume and lower production levels. Costs directly associated with the North Jackson operation and reduced operating rates reflect increased expense of $800,000 in the fourth quarter of 2012.

Selling, general, and administrative expense for the fourth quarter was $4.2 million, a decrease of $676,000 or 13.8% from the fourth quarter of 2011 and $470,000 or 10% below the 2012 third quarter. The decreased costs are primarily due to reduced compensation and employee-related costs. As a percentage of sales, SG&A expense was 8.9% in the 2012 fourth quarter, versus 7.9% in the same quarter last year and 7.6% in the third quarter of 2012.

Operating income was $1.8 million in the fourth quarter of 2012, a decrease of $5.3 million from the fourth quarter of 2011 and down $2.9 million from the 2012 third quarter. The operating margin was 3.7% in the 2012 fourth quarter, compared with 11.3% in the 2011 fourth quarter and 7.6% in the third quarter of 2012.

Operating income in the 2012 fourth quarter included $1.3 million of expense for North Jackson. Before including North Jackson related expenses in income from each period, our operating margin was 6.8% of sales in the fourth quarter of 2012, compared with 12.8% in the fourth quarter of 2011 and 8.9% in the third quarter of 2012.

Our effective tax rate in the fourth quarter of 2012 was 4.8% after discrete tax benefits, as compared to 32.7% in the third quarter. The benefit to our tax rate was due to reduced state tax rates and a receipt of a Pennsylvania R&D tax credit. Based on our current tax position, we expect the effective rate next year to be 34.2%.

Our net income for the fourth quarter of 2012 was $1.1 million or $0.16 per diluted share. This included operating expense for the North Jackson operation of $0.12 per diluted share and the benefit of reduced state tax rates of $0.04 per diluted share.

In the fourth quarter of 2011, net income was $4.3 million or $0.59 per diluted share, including $0.07 per diluted share of initial operating ramp-up expenses for North Jackson. In the third quarter of 2012, net income was $2.7 million or $0.38 per diluted share, including a total of $0.06 per share of operating income related to North Jackson.

Turning to the balance sheet, our managed working capital as of the end of 2012 fourth quarter, which includes receivables in inventory, less accounts payables, was 58.1% of annualized sales compared with 35.3% in the fourth quarter of 2011 and 48% in the third quarter of 2012. The balance of $109.6 million was reduced $8.1 million or 6.8% from the third quarter 2012 levels. Capital expenditures for the fourth quarter were $4.3 million, including $3 million for the North Jackson operation.

At the end of the quarter, our total debt was $106.7 million, and our debt to total capitalization was 35%. Denny, I'll turn the call back to you for your final remarks.

Thanks, Doug. In summary then, a drop in industry activity levels directly impacted our results in the fourth-quarter 2012. While end-market headwinds were a factor, market demand was also sidelined by heightened customer cautiousness in the face of fiscal and economic uncertainty.

That led most of our customers, whether forgers, service centers, or rerollers, to carefully manage and in most cases reduce their inventories. Thus far in 2013, they are remaining cautious.

While we have seen some pickup in order entry since the beginning of the year, with considerable improvement thus far in comparison to the fourth quarter, order entry is still well below first quarter of last year. Remember that 2012 first quarter was an especially strong quarter for us.

Until we see some stronger confirmation about inventories coming into balance in the supply chains, we think it is prudent to expect sequential recovery in our sales to progress slowly as we move through the first half of 2013 and then pick up momentum in the second half of the year. In the meantime, we are pressing hard and moving forward in executing our plan to fully realize the new capabilities we have added in North Jackson.

That plan includes fully leveraging the strengths and capabilities of our Bridgeville, Titusville, and Dunkirk facilities in combination with North Jackson to drive additional profitable growth. It also includes increasing our market share through best-in-class customer service and through expanding the range of new products we can offer. With our progress in North Jackson we are already moving up the value chain with more technically advanced alloys.

Completion of the customer approval process is a critical next step in our plan for unlocking the potential at North Jackson to transform our business. Our focus on that objective remains relentless. Achieving that objective, combined with a return to more normal business conditions, will put us firmly on track to accelerate our growth and build substantial shareholder value in line with our plan since the beginning.

That ends our formal remarks. I will now look forward to answering some of your questions.

(Operator Instructions) Michael Gallo, C. L. King.

Morning. Hey, Denny. A couple questions just around what you see in terms of inventory in the supply chain. Obviously, GE had some fairly cautious comments on power gen and the turbine market.

I was wondering what you see in terms of inventory in power gen. Is there still some destocking you think has to occur this year based on the falloff in turbine orders?

Then also, are we at the point where aerospace has destocked enough that we should just track demand going forward? Or are customers starting to restock? Or is there still further destocking to go? Thank you.

Generally speaking, our customers are telling us they need the first quarter to get back into balance. So most of them that I have talked to in the last two or three weeks have said give us -- in March you will start to see some pickup. That is generally speaking.

As you look at it market by market, Mike, I think aerospace is closer to being in balance. When I look at our bookings that have picked up, most of those are aerospace.

I would say power gen still has some liquidation of inventories to go, and they would be number two. And then oil and gas, to break it down by market.

So overall I think there is still some room to go to reduce, but I think aerospace is closer than any of the other markets to being in balance, based upon our customer base. And that is somewhat confirmed by our order entry.

Right, okay; great. Second question I have is just on Patriot. As that continues to move along, obviously the number of pounds came down a little bit on the forge in the fourth quarter. But I was wondering where you stand in terms of starting to see measurable increases in VIM and VAR shipments.

Is a lot of that still off to the second half? Is it still gradual customer approvals and small lots and going through that process? When do you expect that to really kick in, in a meaningful way, in terms of VIM and VAR shipments?

Well, if you look at VIM shipments, what we have said consistently is as we move through the -- quarter by quarter in 2012, you would start to see some revenues in the third and fourth quarters. If you look at the fourth quarter, vacuum-induction melted product shipments totaled about $3.2 million in the fourth quarter. Not a big number, but that is pretty much where we said we would be.

As you look at 2013, we would expect that to accelerate rapidly as we get customer approvals. We expect those customer approvals to start rolling in here as we exit the first quarter, get into the second quarter, and by midyear have some meaningful approvals that we can sell from in the second half of the year. So you will see acceleration in that in the second half.

All right, okay. Then final question. I don't know if you can break it down, but how much of the revenue in the fourth quarter was at Patriot? And what was the backlog related to -- how much of the backlog was related to Patriot at the end of the year?

We really can't back that out because essentially we are using that facility; it has become part and parcel of our manufacturing system. As many of you know, we disclosed in our SEC documents our intention to go to a single segment reporting because it is so intertwined.

So business that Bridgeville used to get, which used to go to a third-party forger, now stays in-house and goes to North Jackson. So what happens to that, as I try to answer your question? Does that become a North Jackson sale or is that a Bridgeville sale? It is business we would have had --

Right.

-- through a third party, but it is a cost reduction. So we really have no --

I'm just trying to get a feel for where Patriot is on the revenue side relative to where you thought it would be at this point.

I think on the VIM side it is tracking along just about where we thought it would be. We would start to see some revenues come in as we exited 2012; we would see a buildup each quarter of 2013 as we got these approvals.

And we are working very hard on the approvals. There isn't a week that goes by that there isn't a customer in North Jackson it seems, doing audit work. And also in Bridgeville and Dunkirk for that matter, because many of them are using products that are going to touch North Jackson but be started in Bridgeville and finished up in Dunkirk.

So there is a tremendous amount of activity right now, working with our customers to get those approvals.

Right, okay. Okay, thank you.

Dan Whalen, Topeka Capital Markets.

Morning, everybody. I may have missed this, but just in terms of ramp-up costs for the first quarter, are those pretty much out of the way now? Or should we factor some more into the first quarter for North Jackson?

Based on the current order activity, Dan, we would expect those ramp-up costs to diminish as our production rates improves.

Okay. So for the first quarter, should it be half of what it was for the first? Just order of magnitude here. We saw $0.12 in the fourth quarter; should we cut that in half for the first quarter?

It would be in that range, Dan.

Okay. Great. Then a bit longer-term out in terms of -- as we work towards getting those average selling price per pounds up to the 20% of the portfolio, so to speak, when do we think we can reach those levels? Is that 2014, 2015? When should we be targeting that?

Well, 2012 was the year basically to build, to get everything commissioned, operational, prove out the technology, get the employees trained. That is behind us.

2013 is really the year to start getting these approvals, getting out in the market, working with the various customers that the OEMs will direct us to, various forgers and so forth that will actually be our customers. So to see the real meaningful numbers from that vacuum-induction melting produced product you're talking 2014 and '15.

Okay. So probably starting second half of 2014, first-half 2015 is maybe a fair way to look at it?

I would like to say it is faster than that. We should see some meaningful improvement in the second half of 2013 as we get approvals.

Great, great.

Many of these approvals will require -- you will start to see the sales from these approvals begin in January of 2014.

Great. So that is kind of --

It takes a while for companies to transition supply and so forth.

All right, so that is your inflection year, then, so to speak.

Yes.

All right, great. Thank you.

Lloyd O'Carroll, Davenport & Company.

What was your average monthly order rate in Q4?

Sales or bookings you are talking about, Lloyd?

Bookings. Bookings, orders.

It was like $9 million. We're up 40% in the first quarter. So it was about $9 million or $10 million per month on average in the fourth quarter.

Okay. So January was $13 million, $14 million; so we are up meaningfully, but way below where you were last year this time.

Yes. Last year in the month of January our bookings were in the range of $25 million, $26 million.

Okay. So the worst is over, we hope. Fingers crossed?

That is the way we're looking at it, based upon what we are seeing. All right? It's very hard to sit here after three and a half weeks, basically, maybe a little more than that in the month of January, and say that's a trend; right?

But clearly activity level in the first three or four weeks of 2013 are better in terms of incoming business as compared to the fourth quarter.

Okay. You said that your customers are telling you that March might be where things begin to meaningfully improve from here?

Yes. Generally speaking, the conversations go something like -- we still have some things to do on inventory; we feel we will be okay by March; but that doesn't mean we're not going to be buying anything in the first quarter. Which tells me they are starting to see some holes in their inventory, which indicates that they have got to be getting close to being in balance.

Okay. Your reroller customer, what end markets in your -- end use by customer matrix, where is -- how does that get allocated to end-use markets? What do they do with it?

Well, we look at the end-use market basically by the grade of metal that we are supplying. So I would split that probably three-quarters aerospace and 25% oil and gas.

Okay.

We have got more than one -- I think you said one reroller customer. We have more than one reroller customer.

Yes, yes.

Okay.

Sure. Yes. One big one and then some others.

Well, the others think they are just as big as the other one, so I will leave that up to them to talk about.

Okay. Orders, how about bookings in pounds in Q4 in January; do you have that handy?

We are trending towards 11 million.

Hang on one second.

Versus -- so we were about 7.7, and now we are tracking towards 11 so far (inaudible)

Average in the fourth quarter was 7.7 million pounds a month, and we are trending towards 11 in January.

Okay. Thank you. That's it for now. Thank you.

That's pounds now, Lloyd, right? Okay?

Yes, pounds. Not tons.

Phil Gibbs, KeyBanc Capital.

My question is fairly general. I'm just curious why -- what type of concerns your customers may have in this market. I know that there are some clear inventory management issues, but I guess I am just surprised in a market like aerospace that even the declines in that business have been so marked, given the growth that we are seeing right now.

So anything else that you can point to as far as why they may be cautious? Again I guess I am just surprised that they're trying to manage inventories aggressively right now in the aerospace channel.

The general view -- a lot of people have long memories and they remember 2009 very clearly, when things dropped off the cliff so to speak in late '08, and we had a year-plus of very tough times because everybody had to liquidate an awful lot of inventory.

The concern the customers generally voice to me is that as they look at 2013 they think things are going to get better; certainly the dynamics in the markets would suggest they are getting better; but they are very concerned about things going on in Washington and whether that can have a depressing effect. And they don't want to get stuck with a lot of inventory.

They're comforted by the fact that lead times at the mill level have become very short. So there is really no need to place a lot of orders if you can get something in four weeks, eight weeks, 12 weeks, whereas a year ago it might have been double that amount of time. So that is the general psyche as I see it.

No one has said to me in the market they see -- if you want to talk about aerospace, aerospace declining. The only issue out there right now that is a question mark is this whole Dreamliner thing, which there is a lot of chatter about, but there has been no impact from it at this point.

Okay. That's all I have. Thanks, guys.

(Operator Instructions) Jon Evans, Edmunds White Partners.

Can you just -- you alluded to the Dreamliner. I know you don't have a tremendous amount of insight into the end-use of the product. But is the 787 potentially -- if it was grounded or anything, would that have any major negative ramifications for you? Or -- I assume that you are not that big on that program; is that fair?

We can't give you an exact number. Certainly, the grades of metal that we make are used on the Dreamliner. They are used on all the commercial airliners. So I just can't tell you X number of pounds of our product goes to this plane versus that plane, because of the channels our product goes through.

That said, generally speaking, in the metals business the view is that Boeing has an issue; they need to resolve it. If they resolve it in the next six to eight weeks it should have no effect whatsoever on the metal supply chain. If there becomes a major issue and production gets slowed or stopped, that could have a depressing effect across the board in the metals supply chain.

Okay. Then may I just ask you -- so if you kept this $13 million, $14 million a quarter, that gets you to basically an order intake of about $42 million to $45 million in the quarter. Your backlog was $51 million.

So should revenues for the first quarter be where they are in the fourth quarter and then they ramp from there? Or how should we think about Q1?

Yes, I think Q1, you can look at the third quarter and get an idea of what the first quarter is going to be like. It is not going to be a significant rise.

I would emphasize on the bookings numbers, remember we also surcharge product. So that is not -- they are not equivalent numbers when you look at our sales and bookings. We don't know what the surcharge is going to be.

Okay, got it.

Okay? All right.

Great. Thank you.

Gregory Macosko, Lord Abbett.

With your conversation regarding the ramp-up and the approvals that you are working on, if you were just to look out into the marketplace how many potential approvals could you get for the VIM in North Jackson? And how many are you talking to? Just as to give us a feeling of where we are in that arena.

We are talking about -- I'm doing some quick arithmetic in my head -- about seven or eight specific customers.

That are -- is -- the reasonable total potential customers that are out there that you could serve ultimately?

No, there is more than that. But these are customers who deal in the products that we want to begin manufacturing. So I am not saying that is the entire universe, no.

And I am also -- don't interpret that as they are they are the only customers we would be selling product to. There's other opportunities out there as well. But these would be the folks that would be the meat and potatoes of what we want to sell, products we want to sell, and the markets we want to serve, and the customers within those markets.

Okay. Are you talking -- are you in approvals with all of them? Or how many are you in approval with?

Seven or eight of them.

Okay, so you are in discussions for approval with all of the meat and potatoes of this market?

Of what we want. There are some customers who are not potential customers three or four years down the road that we are not talking to. But you can't deal with everybody at the same time.

So we have looked at this very carefully about what products we feel there's opportunities in. We want to pursue those products, and who are the folks that are big in those products? And that is to who we are dealing with.

Good, Denny. Thank you.

(Operator Instructions) I'm showing no one in queue at this time. I would like to hand the conference over to Mr. Oates for concluding remarks.

Okay. Thanks again for joining us today, everyone. The second half of 2012 was the most challenging period we've had really since 2009.

However, we moved forward in the continued ramp-up of North Jackson and in executing our plan to achieve future growth and build shareholder value. We are looking forward to updating you on our further progress on our next call. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.