Encore Wire Corp (WIRE) 2008 Q1 法說會逐字稿

Hello and welcome to the Encore Wire first-quarter earnings conference call. As a reminder, all lines will be on listen-only mode and we will conduct a Q&A session at the end of the call. (OPERATOR INSTRUCTIONS). At this time, I would like to turn the call over to Mr. Daniel Jones so that we can begin.

Thanks, Russ. Good morning, ladies and gentlemen and welcome to the Encore Wire Corporation quarterly earnings conference call. I am Daniel Jones, the CEO of Encore Wire. With me this morning is Frank Bilban, our Chief Financial Officer.

As our first-quarter results clearly demonstrate, our consistently low cost structure gives us strong leverage on the upside as we improve from a net loss per share of $0.05 in the fourth quarter of 2007 to a net profit per share of $0.58 in the first quarter of 2008.

The spread in the first quarter increased $0.365 per pound versus the fourth quarter of 2007. Margins were enhanced due to our efforts to increase prices to more realistic levels as the industry introduced at least seven new price sheets during the quarter. We supported the market; more importantly, supported our customers. At these COMEX prices, we firmly believe we should produce better results.

We'd like to thank our employees and associates for their tremendous efforts and our shareholders for their continued support during these challenging times. Frank Bilban, our Chief Financial Officer, will now discuss our financial results. Frank?

Thank you, Daniel. In a minute, we will review Encore's financial results for the quarter. After the financial review, we will take any questions you may have. Each of you should have received a copy of Encore's press release covering Encore's financial results. This release is available on the Internet or you can call [Denise List] or me at 800-962-9473 and we will get you a copy.

Before we review the financials, let me indicate that in our initial comments and in the question-and-answer period that follows, we may make certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation and instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve risks and uncertainties that could cause actual results to differ materially from those discussed today. I refer each of you to the Company's SEC reports and news releases for a more detailed discussion of these risks and uncertainty.

Now the financial results. Net sales for the quarter ended March 31, 2008 increased to $281.8 million compared to $260.7 million during the first quarter of 2007. Net income for the first quarter of 2008 increased 112% to $13.6 million versus $6.4 million in the first quarter of 2007.

Fully diluted net earnings per common share were $0.58 per share in the first quarter of 2008 versus $0.27 in the first quarter of 2007. On a sequential quarter comparison, net sales for the first quarter of 2008 were $281.8 million versus $281.9 million during the fourth quarter of 2007. Net income for the first quarter of 2008 increased to $13.6 million versus a loss of $1.1 million in the fourth quarter of 2007. Fully diluted net earnings per common share were $0.58 in the first quarter of 2008 versus a loss of $0.05 in the fourth quarter of 2007.

Our balance sheet continues to remain strong. The only long-term debt we have as of March 31, 2008 is $100 million in long-term notes due in 2011 with our $200 million revolving line of credit at a zero balance. In addition, we had $101.7 million in cash as of March 31, 2008.

Pursuant to the stock repurchase plan we announced in November of 2007, we repurchased 257,300 shares of our common stock through March; 132,900 of those shares in the first quarter. We also declared our sixth consecutive quarterly cash dividend during the first quarter of 2008.

We want everyone to know that this conference call will be available for replay after the conclusion of this session. If you wish to hear this taped replay, please call 866-439-4729 and enter the reference number 360853 and the pound sign. I will now turn the floor back over to Daniel Jones, our President and CEO. Daniel?

Thank you. As Frank highlighted, Encore performed about as well as could be expected in the past quarter. We believe we are well-positioned for future growth and Russ, we will now take questions from our listeners.

(OPERATOR INSTRUCTIONS). Michael Coleman, Sterne Agee.

Daniel, in your prepared remarks, you mentioned that you had supported the market and supported your customers. I was wondering if you could maybe expand on your comments regarding supporting the market relative to the environment and relative to the fourth quarter.

There was quite a bit of volatility obviously with COMEX. I believe copper was up on the magnitude of about 25% in the first quarter. So we were doing the best that we could to keep up with price increases to try to stay not necessarily ahead of those increases in COMEX, but at least equal to. It did cost us possibly a little bit of volume, but we were very selective with who we sold and did the best we could to provide them with a different means of maybe lower costs rather than just cutting the sale price.

So in a volatile copper environment, your service offering is perhaps more valuable or valued more by customers?

We think so. We think so. We think that fits into our model a little bit and we did the best we could to try to maximize that without actually chasing some of the volume after a price increase.

Does the other side of it work against you as well in terms of less volatile or stability in COMEX leading to more price competition?

Not necessarily. We have to change our approach a little bit. We are as lean as we can be in inventory and still have that service level. We are still providing the customers that we have selected with the great service level that we are proud of and we promote. So it does cut both ways, but, again, we are able to be as flexible as we need to be and change with the market. I think that is the key.

Okay. And your balance sheet is in great shape. Any thought to increasing the dividend?

We haven't yet discussed that. We will take a look at it probably going forward if we continue the earnings growth and get back to you on that one.

Okay, great. Nice job. Thanks.

Good to hear from you.

Forrest Tempel, FlyLine Partners.

Hi, guys. I am a little bit new to the story, so if you'll bear with me. I am trying to understand the connection that you all have to the commodity prices and so when I look at last quarter versus this quarter and sales roughly flat, cost of goods sold was down $20 million sequentially versus copper was up, I don't know, like $0.70. How does that work? How does that flow through? I would have thought it would have been up.

You would have thought cost of sales were up, but if you looked at our press release, units were down by 9% and so the units being down pretty much accounted for the decrease in the cost of sales.

So when units go down, the fewer that you guys make your cost of goods sold lowers --?

Well, cost of --.

Oh, I see what you're saying. I see what you're saying.

The units sold.

On the units that are down, how much of that was you all walking away from business that you thought wasn't at the margin that you wanted versus just a slower economy?

It is a mix of both, Forrest. What we saw was, as we indicated, there were several attempts at price increases in the industry and what we were seeing was copper on a trend basis over a week or 10 days time was going up and we were seeing competition actually go back to the old price sheet from which we left. So it is all about timing I guess, but we've really tried to be as disciplined as we could be, yet support the folks that we selected to support. I know that is kind of a vague answer to your question, but I don't have a percentage number to give you other than tell you that we saw some business go elsewhere simply because the price was too low.

When you look at inventory and this kind of all ties in -- when I look at the inventory, the inventory is down by $6 million roughly. Is that a -- when I look at the margin that you guys got, it seems to me that you all were able to, during the month, not buy and replenish inventory and bring it down and manage it well while selling stuff that you all have I guess LIFO-wise, especially when copper moves, could be $0.50 below and that is how you kind of compete with the rest of the group?

LIFO will adjust that back to the current prices, so you lose that "FIFO advantage".

Yes, but I am not sure what group you are talking about. We don't have public peers.

I don't mean public peers. You guys have -- I don't know what they are doing, but I know -- I am trying to understand with the spreads in the market and with what we have had kind of preliminary conversations with you all trying to understand it, I'm trying to understand -- I think you guys did a great job on inventory. Inventory is down $5 million. That is great for me. Is that sustainable? Is this what I should believe where inventory levels should be going forward?

It depends on demand. Again, our service level is something that we are not going to allow to suffer, so we try to keep a very close watch on demand. We are not going to continue to try to set some production record and not have it go into the market profitably.

Sure, sure, sure. And that is a great lead-in to my next question, which is trying to understand if we hold copper constant here, whatever copper is today, $3.90, whatever it might be, if it is constant through this quarter, these margins -- the margins that we have right now that you all showed in the quarter -- are those sustainable? That is what I should look for?

They could be sustainable. Again, it depends on how the demand is running in the market and what our competition feels they deserve for their product.

Okay. So we are just ticking down my list; it's good. The current spreads in the market and the competition that you're seeing now, is it rational?

Are you talking about Q1 or April?

No, now. I know that Q1 was great.

Yes, it's okay. It's not fantastic, but it's okay.

Okay. And then just on receivables' days sales outstanding, ticked up a little bit. Was there anything going on in that -- I focus on the balance sheet a lot obviously.

No, the receivables will go up and down primarily with the timing of the sales within any given quarter and so to the extent that we, on average, have over 60 days, if February and March were stronger than January, then you will have a little uptick in receivables toward the end of the quarter, which is exactly what we saw.

Okay. And then in kind of finalizing this up, if I see copper come back down, are you able to lag that basically in the market?

There has been times when that happens depending on demand and there are times when it is not great. We have had discounting ahead of decreasing COMEX and we have had times when COMEX went down a little bit and we were able to hold onto some margin. So it really depends on demand at that point.

I just actually got off a Black & Decker call and they were talking about things slowing at least for them a little bit more at the end of February and then through March a bit. What are you all seeing in demand currently for April?

It is okay. It is not great, but it is okay.

Okay. Thanks very much, guys. Great quarter.

Jeff Vutan, Perennial.

Good morning. Okay, I have got a question on the margins again. I see that sequentially revenues were about flat and I saw copper prices went up on average about 8% in the quarter, if you take an average in Q4 and an average in Q1. Volumes went down 9%, so that makes sense to me. But on the COGS line, I see a large decrease and I kind of expect the same thing. Can you talk about that?

Well, again, I think the earlier question came to that point and if you see that the COGS is actually less down than 9%, I am doing it right now. If you take 246 divided by the 266, the COGS was down 8.2% and so on a 9% unit decrease, we have decreased COGS 8%. A little bit of that is due to the spike-up in copper. So it is falling in line with what our expectations would be.

I guess I am not understanding how you are able to keep your COGS down so much given the spike in copper.

Part of it is overhead, part of it is the fact that we reduced our inventory a little bit and that helped us a little bit on the LIFO line, not a lot, but we just mostly controlled costs very tightly in the manufacturing plants.

Okay, got it. Thanks.

[Joe Nathan], Restoration Capital.

It's Gil Nathan. Frank, I'm a little curious. You guys talked about the inventory has shrunk. Can you give us in terms of size maybe? I know the dollar amount obviously is on the balance sheet, maybe in pounds or any other metric we could look at it on, just to get a better feel for how big the inventory is given the run-up in copper.

The inventory variation really was pretty small. It was on the order of three million pounds down for the quarter.

Okay.

That is kind of a blip. That is not any big --.

Right, that is not that material. Did you guys -- I am just curious. It looks like you guys did a fantastic job of buying copper early in the year when it trended down a bit. Is that kind of the case, maybe you bought a lot in January and sold some of that in March with copper running up?

No, Gil, this is Daniel. We bought a month-to-date average as it is and we don't speculate on a pound.

Okay. All right. That's very, very fair. Guys, if copper -- I know you have been asked this a little bit -- if copper is flat, where do you think spreads are given where the market is today? I'm a little confused because you said if it trended down -- if copper prices went down, it depends where demand is. I thought demand might be a little weak for the product and it looks like it was with sales down 9% because I assume if demand was high, you guys would have sold a lot more at this margin. But I'm just a little curious what happens in a flat copper environment here.

We have had both. We have had times when copper was flat; we made good money. At times when copper was flat, we didn't do so well. Again, our position in the marketplace is not to try to secure a predetermined volume by cutting prices. We don't run this place like a trading desk. We do have competitors on the other hand that, on occasion, for whatever reason, feel like they need more volume or less volume or what have you and they monitor that or control that I believe with sale price. Again, when I say it depends on demand, I can't make that any more clear, other than to tell you that I might add to it, when demand is strong with copper flat -- if copper is flat at $4.00 and demand is strong, we do very well. If copper is flat at $2.00, we do half as well. When copper is 75% to 80% of your cost of goods sold and you get a situation where it is trending up, down or even flat, then you are driven again by the demand in the marketplace.

And have you seen -- you talk about your competitors. Obviously they are selling wire at breakeven costs it seems. With that trend continuing, if it continues, how do you guys manage around that? You talked about offering a little bit different to your customers. I am a little -- I would like a little explanation on that. I am just confused as to what you can do that makes it better. Is it just in time or --?

Well, all of the above. Certainly I wouldn't sit here and explain to you all the things that we do because I can see on the screen that we have got a couple of competitors on the call, but to be as clear as I can with you, we fight and scrap for every order and we predetermined who we are going to sell to before we go into the fight and again, when you go into the process of winning an opportunity in the market on a job or stock business with a partner-type distributor, there is things you can do other than cut the price to get that order and that is the kind of things that we do on a daily basis. We stay close to those folks. We help them to manage their inventory in a manner that fits with our model and we do it very well.

But to lay out seven or eight key points, it could be the product offering that we have, it could be the specific products that we are shipping. It could be a type of shipment. It could be a packaging situation. It could be a delivery situation. It could be the type of equipment used to deliver. It could be the print on the wire itself, on and on and on.

Okay, great. Can you break down a little bit of residential versus nonresidential for us? That wasn't in the press release and you have historically kind of given us an indication.

Yes, really no big news there. Again, in the first quarter, residential was 29%. Almost exactly in the first quarter -- it was 27% in the first quarter of '08 and 29% in the first quarter of '07.

Is that a trend you see continuing throughout the year or just a first-quarter issue more so?

It is hard to say. Some of the larger residential customers that we deal with on the distribution side, they are not really setting any records as far as volume goes or whatever, but a lot of the folks that we sell the residential wire to, Gil, are doing well and seeing some signs. They are still very cautious in giving any credit to an uptick, but at the same time, a lot of those folks are pretty optimistic going forward.

Is the margin much better on the non-res side though?

It is not a whole lot better relatively speaking. As you can see, the margins are not that great based on historical, but the commercial side today is a little bit better than residential, yes.

And last question, guys, in the market today, is there profitability selling wire, not just from you guys in the industry overall? Is the spread there?

It's hard -- yes, I think yes.

Okay. I appreciate it. Great quarter, guys.

Thank you very much.

(OPERATOR INSTRUCTIONS). Eric Marshall, Hodges Capital Management.

Yes, guys, can you hear me?

Yes.

Okay. Hey, great quarter, guys. Forgive me if you have already addressed this, but what was the LIFO impact in the quarter?

We took a charge of $13.1 million in the quarter against earnings for LIFO, but, again, we try to focus people on the fact that that is just part of the cost of materials.

Okay, so without the LIFO impact, we would have saw much better earnings than $0.58?

We are pretty happy with the $0.58 today.

Thanks a lot, guys.

You are welcome, Eric.

[Lewis Corrigan], Kingsford Capital.

Hi, I am kind of new to the story as well. I guess when you talk about pricing rationality and yet your volume is down, obviously you made some good decisions on who you sold to, but it seemed like if volume is weak and the pricing can't be that rational in a sense and so I guess my question is given your comment about April being not great, but okay, how sustainable do you think it is for you to be able to pick and choose your businesses and maintain price?

How sustainable? Well, we have been picking and choosing our customers and the orders that we take forever. As far as sustainable, again, it is demand-driven. I don't want it to go into details on April. Again, this is the first-quarter conference call, not the second-quarter, but having said that, there is still activity going on in the markets. Folks are still going to need electricity. We are still going to be providing product the way that we have always provided the product. We will continue to manage the side of the equation that is manageable. The unknown portion in the market is, again, the demand side, but, again, it is not -- it is not going to go away. There will still be demand for the product, there is still going to be competition. Forever, for our 20 years, there is always somebody out there that wants to cut prices to get an order. That is the environment that we live in. What we try to do is provide things of value to our selected customers on a predetermined basis so that we can do things to where we don't have to operate at the lowest possible sale price. How long we can sustain that, we will do it as long as we can do it.

Let me ask it a different way then. Can you talk about what the difference is between a customer who will take the price increase versus one who will go to a competitor based on price? You mentioned service offerings and things like that. What would be an example of a customer who would find the added value from your offering?

Folks that like to -- they sell. We are a good match. They sell based on the same types of values that we sell on. You match up in the market. They give you -- the relationship is there to where you may have created a packaging situation that is unique to them for one of their customers. There are things that you do in the market together. I am not sure I understand what you are asking me, I guess.

Okay, that sort of answers it. Another kind of basic question, just because I am trying to understand how the business works, is you began the quarter with higher inventory than you ended the quarter. Copper prices went up. I know you have talked about this, but if, at this point, whatever the inventory is you have got on the balance sheet, I have to assume is at closer to the higher average cost. If copper prices now go down, how does that work through in terms of the impact on margins and the allowance for inventory?

Well, from a mechanical standpoint just like this quarter where prices went up and we took a LIFO charge, the opposite would be true if copper declined. You would be eating, as in your example, some of this higher cost copper on a FIFO basis and LIFO would adjust it down to the latest monthly average and we do that on a monthly basis. The more important question really and we keep focusing people away from that, that is simple mechanics, it has happened the same way every year and every quarter forever.

The real question is what happens in the marketplace and how do our competitors respond and if they drop the prices quicker than the copper drops, obviously you have margin compression. They choose to drag the price decreases a little. You might, as Daniel explained earlier, actually increase your margins or hold them steady. So this -- I think the key thing for some of you who are new to this product or new to our company is to realize that every day we price the product potentially.

We have price sheets that are out there, but the target is moving. The discounts move on a daily basis and I think that with our one location and Daniel's incredible hands-on focus on the pricing, he does as good a job as anyone in this industry of monitoring, understanding and controlling where we will sell and where we won't. And that is the key to this equation.

Okay. And I know that you don't want to talk too much about April, but you did make some comments about April. How does April compare to the first quarter at this point? Is it about the same?

April is okay. It is not great, but it is okay.

Thank you.

[Brian Gerber], Echelon Investment Advisors.

Hi, some really good pricing there that quarter and to follow up on kind of some of the previous questions and let me summarize, do you think that a lot of the price increase you had was mostly catch-up from Q4 or do you think it also captured the price increases and copper commodity prices during the first quarter? And the reason I ask that is, based on we know that the volume was down, if we divide your revenues and costs by per pound, I kind of get the impression that your cost of goods sold per pound was flat and that almost all of your price increases fell to the bottom line. So my next question would be, well, will you be able to continue that as copper prices go up in the second quarter?

Brian, you through a lot at me there. Let me make take it a little bit at a time. The price increases in the quarter we felt certainly were deserved in the fourth quarter obviously and we continue to push in the first quarter as the industry did. I am not singling anyone out here. We lost $0.05 in Q4, which kind of answers that question.

The constant struggle, if you will, to get prices up in the first quarter -- let me go into that for just a second, be patient. When COMEX closes up $0.10 or $0.12 and you have got a price increase announced, you look like you knew something. The next day it goes down $0.07 or $0.08, you obviously look like you know nothing. So the industry is very willing to accept price increases as copper trends upward. But with the volatility, one day it is up, the next day it is down, those kind of things, that type of volatility, as frequently as it is happening, is the tough thing to manage.

You need the price increase because the month-to-date average is trending up for you. The intra-week or intra-day trading of the up and the down, your customers can see that in the newspaper on the Internet, but it doesn't happen the way they feel it does in the market itself. However, it does lead to a slowdown in demand to where the volatility folks want to make sure that they are buying at the bottom to the point where sometimes they like to buy after the bottom has already been identified. In an upward trending COMEX market, that is where the challenge is, is the timing of those price sheets.

The discipline to sit on a sheet that is dated on a Monday and go through Thursday or Friday and not write the business that you would like to write, that is where the volume slips a little bit. But you can sacrifice a little bit of volume for those price increases and that is what we try to do.

Okay, and I appreciate that. That was a thorough answer. So in the press release, where you say the spread between price of wire and the cost went up $0.365, can you tell us what the average price went up and what the average cost went up to create the spread between the two?

And again, I was quoting sequential quarters there in the press release. You can look at fourth-quarter price versus first-quarter price, it went up about 9.5%.

Okay. And that created the $0.365 spread per pound?

Right, because as you clearly deduced earlier, the cost of sales on a per pound basis was very close to static.

Okay, I got it. Okay, thank you very much.

Good questions. Thank you.

Forrest Tempel, FlyLine Partners.

Hi, guys. Just a quick follow-up. On the $13 million LIFO adjustment, how does that flow through on the balance sheet?

To the extent that it is a debit or a charge to the income statement, it is a credit to the balance sheet inventory balance.

So it raises the balance?

No, it lowers the balance on the balance sheet.

It lowers the inventory balance on the balance sheet?

Net inventory, net of LIFO is down, yes, sir.

Okay, I got it. Thank you.

Kerry Rigdon, Mayberry Partners.

Good morning, gentlemen. I know you got, on the LIFO, that thing gets addressed and kind of mulled around every quarter, but when you look at that -- when we look at actually the sales for the quarter, we are really talking about -- are we talking about an earnings number that is actually north of $1.00?

Well, the answer to that is yes, but before we get carried away, you have got to realize that that LIFO thing is there, good times and bad times, but the answer to your question is pretax, LIFO costs us about $0.60 a share.

Fair enough. But I realize that cuts both ways and so forth, but I am just trying to get an understanding of the quarter. The second question is could you -- Daniel, could you talk, at least a comment or two, about just the state of how you -- the revenue mix on commercial and residential space has been fairly constant, but could you talk a little bit about what you see on the commercial side right now?

There is a lot of activity around the country. The cranes are in the air. What we are seeing is the commercial project activity on the quote side is still very active. There is a lot of quoting going on. The actual cutting loose of the purchase order for delivery from the bid to award process has shortened. It is pretty common to receive an order on a Wednesday or a Thursday with demands of delivery by Monday or Tuesday. The volatility, Kerry, is in building wire prices not just in COMEX, but in building wire prices, that volatility -- pricing is what is leading to this quick hairtrigger-type decisions on getting product to the job site. They wait until the last minute to have it delivered. The distribution channel is somewhat empty, so it is a real, real quick manufacturer to job site-type leadtime right now.

And because of your -- the quality and the accuracy of the deliveries that that actually kind of plays into your hand a little bit, this just-in-time inventory -- or not just-in-time inventory, but just-in-time orders. That kind of really feeds into your all's service element, does it not?

That is what we think, yes.

Okay. I appreciate it and congratulations on a great quarter.

Thank you.

Chris Brown, Aristides Capital.

Good morning, gentlemen.

Hey, Chris. I am sorry. What was the company?

It is Aristides Capital. Got kind of a softball for you. How much of your product goes internationally right now and given that U.S. labor is pretty cheap compared to copper, is there any opportunity to grow that?

We are looking at a couple of opportunities, but currently it is a very small percentage of our product that would leave the United States. That would be through a distributor partner on a border. We don't do any business outside the U.S. direct.

Thank you.

Mark Garfinkel, Perimeter Capital Management.

Thank you, good morning, gentlemen. A couple of questions for you. In past calls, you all have broken down the unit volume increases year-over-year and sequentially between commercial and residential. Do you have those figures this time?

Sure. Sequentially, again, we talked in the press release that it was down 9% and residential was down 10% and commercial was down about 8%, 7% to 8%. So very close to the total. On a year-over-year basis for Q1 of '07, Q1 of '08, our units were down 12%. That is 17% on the commercial side and a little less than 10% on the -- excuse me -- 17% on the residential side and a little less than 10% on the commercial side.

Okay. And can you talk about the performance of your armored cable product, unit volume increases, that kind of stuff? And just any other side comments on how it is being received in the market?

We think it is going along pretty well. There were obviously, as there was with the other two product categories that we shipped, there were some pricing pressure without a doubt, but it is going along about what we would expect. I don't necessarily want to give you exact numbers. I will tell you that the volume was down a little bit, but it is still heading in the right direction as far as we are concerned.

Unit volumes were down sequentially?

No.

No. Go ahead.

Sequentially, we were up just -- we were up 15% plus, but, again, as Daniel said, we are not setting a specific budget for that, but that continues to gain acceptance in the marketplace.

Okay. And I couldn't understand though, you said that unit volumes were up sequentially or were not or you are not giving numbers?

Up sequentially, yes.

I would assume they would have to be up year-over-year though, right? Big time, right?

I don't know what --.

Yes, they were up slightly.

Okay. All right. Let's see. What about upcoming near future CapEx spending plans?

For the quarter, we spent $4 million and currently, we are projecting somewhere in the neighborhood of $12 million to $15 million for the year.

Okay. And one last question, it is really kind of a follow-on of a prior question. In kind of just adding a little bit more color to the state of the commercial markets, a couple of quarters ago, you actually -- I had written down in quotations, you used the term fantastic to describe the demand of the commercial end markets. In this most recent quarter, how would you term the demand?

I think it is okay. It is not great, but it is okay.

All right, guys. Thanks a lot. I appreciate it.

Forrest Tempel.

Sorry, guys. Just one more clean-up question. One of the things that Frank had talked to us about was the real advantage of having a singular manufacturing area and I am hoping to get over there. You are only 25, 30 miles away from me, so I may hop over in the next couple of weeks and see it, but transportation costs -- I know you all do business around the nation. The factor with gasoline going up, how does that pinch maybe both ways because I don't know if you don't get to take advantage of it in some ways also? How do you see that when you are bidding stuff that is going to, I don't know, Vermont or Minnesota or Florida or where ever it might go, is that just a straight pass-through to your customers?

It is in the cost of the product, Forrest, and what we try to do is -- obviously one of the contributing factors to our success on the low-cost side is the no backorder situation. You want to ship that invoice, you want to ship it one time. I don't want to go into too much detail there and bore you, but it is built into the price of the product itself and we do take that into consideration each time that we publish or author a price sheet or a price increase.

Let me ask the question differently. Will it matter to me at all, as we as shareholders, if a guy in Minnesota wants to have 40,000 pounds of cable or however you sell it by the foot or however it is sold, whether when you bid it and somebody else bids it from Chicago or bids it from Minneapolis or where ever they might have it, is the transportation cost -- is it material enough to matter to this end user on the order form? I don't know what a truckload is. It is 40,000 pounds or whatever it is.

I will answer the question this way. When we had public competitors, which has been a few years now, our transportation costs on average were half or less of theirs. The reason is they have multiple warehouses from which they will make multiple shipments, in your example, to complete that 40,000 pound order where we will load one truck one time and get it there in one efficient delivery.

I got it. So you guys are able to, by having it all together and organizing it better, you are able to ship it more efficiently than the guys that have multiple different warehouses --?

That is our goal. That is correct.

Okay. I got it. Thank you.

At this time, there are no further questions.

Super. Thanks, Russ and I appreciate the participation and we enjoy the questions. Look forward to seeing you next quarter.

Thank you. This call has been concluded.