Worthington Enterprises Inc (WOR) 2005 Q3 法說會逐字稿

Good afternoon and welcome to Worthington Industries third quarter 2005 earnings results conference call. All participants will be able to listen only until the question-and-answer session. This conference is being recorded, if there are any objections you may disconnect at this time.

I would like to introduce your first speaker for today's call, Allison Sanders, Director of Investor Relations. You may begin.

Thank you, Jennifer, and good afternoon, everyone. Welcome to our quarterly earnings conference call.

Before we begin our presentation, I want to remind everyone that certain statements made in this conference call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties which could cause actual results to differ from those suggested.

Please refer to the press release for more detail on factors that could cause actual results to differ materially. For those who are interested and listening to this conference call again, a replay will be available on the homepage of our website at www.WorthingtonIndustries,.com.

With me in the room are John McConnell, Chairman and CEO, John Christie, President and Chief Financial Officer, Richard Welch, Controller, and Randall Rombero, Treasurer.

John Christie will open today's call with a review of financial and operating performance. The session will then be open to questions from the audience, followed by concluding remarks from John McConnell.

Thank you Allison. Good afternoon everyone. We're pleased to be able to give you the fact on what we think was a very good quarter for Worthington industries.

For our third quarter of fiscal 2005, which ended on February 28th, 2005, we reported earnings per share of $0.37, well above last year's third quarter earnings of $0.28 per share, which included a $0.03 one-time gain from the sale of certain metal framing assets. Earnings for the current quarter were reduced by 4 million, or approximately $0.05 per share as a result of a one-time adjustment for the state of Ohio's tax credit program based on a January 2005 decision by the 6th circuit Court of Appeals. Excluding the one-time items in each quarter, earnings per share for the third quarter were $0.42 compared to $0.25 last year, a 68 percent increase. We believe this was an excellent quarter, especially given the normal seasonal weakness of the third quarter.

Let's look at our consolidated results in more detail. Record third quarter sales of 747 million exceeded last year's sales of 558 million by 34 percent. And reflected higher revenues in all three business segments. All of that sales increase is due to higher pricing, as the volume decline at metal framing, and flat volumes at process steel, offset the increase in volume at cylinders, and reflects higher prices of the current quarter compared to the year-ago quarter. Our gross profit remained fairly constant at 14.6 percent from 14.7 percent last third quarter excluding the $4 million gain on the asset sales. SG&A expense rose in absolute dollars but as a percentage of sales, went from -- went from 8.8 percent to 7.2 percent. The increase of $5 million was primarily due to nearly $2 million of Sarbanes-Oxley related costs, and to higher profit sharing expense, which is up significantly due to record earnings.

We anticipate that Sarbanes-Oxley expense will total $4 million for this year. Bad debt expense was essentially unchanged despite the bankruptcy filing of Tower Automotive, one of our largest customers. As we wait to see how the Bankruptcy Court resolves the situation, we believe we have adequately reserved for the bankruptcy. In addition, we have offsetting payables for more than the amount that is owed to us. An amount that we believe, by the way, is significantly less than the $20 million that was disclosed in the court documents.

Quarterly operating income on a reported basis increased 47 percent from 37 million to 55 million, or 7.3 percent of sales. Excluding prior period gain, operating income was up 67 percent. Equity income from our 7 unconsolidated joint ventures was up significantly again this quarter, increasing 78 percent to $15 million. 5 of the 5 had strong double-digit-plus percentage increases in earnings. Collectively, the unconsolidated joint ventures generated $192 million in sales during the three months corresponding to our third quarter.

The reduction in miscellaneous expense partially offsets the $1 million increase in interest expense. When we issued new debt in December, we discontinued usage of our trade receivables securitization facility, although facility remains available to us. Receivable securitization facilities have fees as opposed to interest expense, and these fees have appeared historically in the miscellaneous expense area.

Now let's move on to the balance sheet. Net total debt was $373 million, and includes the newly $100 million ten-year notes, and is net of $16 million in cash and short-term investments. This was only $16 million more than the net total debt and trade receivable securitization outstandings, as they were in February of 2004, despite the significantly greater working capital demands caused by higher steel prices. Our debt to capitalization ratio was 32.8 percent compared to 35.8 last year, including the $70 million that was then outstanding on the securitization facility.

For the quarter, CapEx was $12 million, and depreciation was $14 million. 4 million of the 12 million is associated with our ongoing ERP project. We expect that CapEx, excluding any acquisitions, will be nearly the level of depreciation in the $50 million range for the year.

Now let's talk about the operating performance of each of our three business segments beginning with processed steel, which represents 58 percent of our revenue this quarter. Processed steel sales rose 34 percent to 436 million from 326 million in last year's third quarter. The year-over-year sales increase is due to higher pricing, up 47 percent, offset somewhat by a volume decline of 9 percent, due entirely to the sale of our Decatur assets. Excluding Decatur volume was flat.

This segment continues to benefit from decent demand across a variety of consumer groups. Automotive represents the largest customer base, typically ranging from approximately 50 percent to 60 percent of processed steel sales. During the third quarter our automotive related business on a tons basis was nearly even with the prior year quarter, while Big 3 production was down 3 percent. Tons in inventory as of 2/28/05, the end of the quarter, were down 3 percent from the year-ago period. Operating income for processed steel rose $13 million, and as a result, the operating margin rose to 7.1 percent, from 5.5 percent for the prior year quarter. The increase was primarily due to a wider spread between selling prices and material costs, and lower expenses due to the sales of the Decatur coal mill.

Now turning to the metal framing segment which represents 26 percent of our revenue this quarter. Third quarter sales were 195 million. They were up 32 percent from last year's February quarter. Year-over-year shipments were down 17 percent, as Dietrich's distributor customers worked through elevated inventories, and weather conditions caused delays in several construction projects. Shipments were up more than 5 percent, however, from the last quarter. Current customer feedback looks promising for the upcoming building season. Dietrich units, or pounds in inventory, were flat from the year-ago period, if you exclude the material related to the new Canadian joint venture.

Current inventory levels are attributable to the weaker volumes relative to forecast and a stubborn winter season. Despite volume decline in the quarter pricing remains strong and as a result, operating income rose to $14 million from $9 million last year, excluding the gain from the sale of the asset in the prior year. Operating margin rose to 7.2 percent from 6.2 percent, in what has been a challenging environment from the demand perspective. Despite commercial construction indices, although little changed from last quarter they have generally trended higher from the year-ago period, increasing demand and falling customer inventories point to a better selling environment in the coming months. As most of you know, commercial construction activity, especially in our largest market segment, the office buildings, has been depressed for over 3 years. We feel any increase in demand will be very beneficial to this business segment.

Finally in our pressure cylinder segment sales for the quarter were up 38 percent, or $31 million from last year. 16 million of the increase was due to the September 17th acquisition of the cylinder assets of Western Industries. And 2 million was due to the relative weakness of the dollar to foreign currencies, in Europe, and Canada, where we have operations. Total unit volumes were up 9 percent. That's excluding the units from the acquired Western assets. Strength in virtually all of our products, offset some weakness in the North American 20# propane tank market. As a result, operating income for this segment rose over $2 million, or 31 percent to $10 million from 8 in the year-ago period.

In summary, we feel we had another very good quarter. John, would you like to make some closing comments?

Absolutely, John. Thank you. As John said we had an excellent third quarter.

I am very proud of everyone here for their efforts in producing the results, and each of the businesses on doing a very good job of balancing market share against margins. I especially want to thank all those who work here, and there here, and there are actually a awful lot of them, who have been involved with meeting the guidelines of the established Sarbanes-Oxley legislation, and the implementation of our ERP systems. Both of these require an enormous amount of time and personal sacrifice, and I thank everyone who has been involved in this effort. While both of these items require a lot of additional work and expense, both will contribute to our future earnings, as expenses recede, and as the ERP begins to deliver benefits.

Overall, I'm not only pleased with the quarter, I'm very pleased with our current position in the industries we serve, and our future outlook. I do believe that while there will be ups and downs to the movements in the domestic and world economies, that the overall trend for the economic growth on a global basis for the next 3 to 5 years will be up. And, just in case it turns out that I'm wrong, I believe that we are positioned to continue to grow, perhaps a little less robust, but continue to grow, in all but the most dire of forward economic scenarios.

We've put in place a number of different avenues to expand the sphere of our business. In cylinders we successfully launched an expansion in the air tank business. We have been successful producing this product for several months now, and believe further penetration into this market is likely. Recently, we expanded our presence in the scuba tank market, which we really produced almost none of before. We have expanded through acquisition into small cylinder arena, that uses both propane and acetylene gas. We've put additional marketing emphasis and expanded into Europe our helium products, and on a year-to-date basis, have nearly doubled the volume of this product line.

Last season we launched Flame Saver. It addressed the #1 concern of the grilling public, and that's running out of gas at the wrong time. In partnership with a major retailer last year, this product demonstrated its appeal. And we are optimistic that we will expand its sales this season.

We also formed a marketing alliance with a manufacturer of larger cylinders than we make, expanding each of the companies' product offerings, and resulting in additional sales of roughly a million dollars to each company. We continue to develop potential new products which will require little modification to our existing equipment in the cylinder business.

Steel processing, we have modified with little capital expenditures and expanded our capabilities into dry lubricant and acrylic coating applications, and we are very focused on future geographic expansion, which would work in concert with our other businesses and products.

In metal framing, we have expanded into Canada through a joint venture. We have formed a joint venture involved in panelizing called Pacific Steel, which is focused exclusively on the rebuild of military housing throughout the world, trying to transform barracks into what would be a typical suburban development setting. We currently have 2 contracts of which we'll ramp up through the rest of this calendar year. This kind of work is also going to provide us the opportunity to increase the speed of erection of metal-framed homes, which is essential for a deeper penetration into broader residential applications.

We've also gained excellent traction in China with our mid-rise product, the 3 to 8-story product. With the support, full support of the Chinese government to build mid-rise construction projects in China. We are currently in the design phase with this product, and construction will begin throughout the calendar year. Invested in patent rights and manufacturing equipment, which will introduce a new concept in the steel studs, which come through focus groups that we ran this summer, received a very enthusiastic reception. We think our capability and marketing of this product will take place over the next 3 years, and will be introduced on a regional basis. This product will provide us a distinct marketing advantage over other products on this commodity market.

We also began to focus on developing regions of the world that are looking for low-cost, easily constructed housing for their citizens. This is an effort that's just begun, that we believe holds great promise. There are many additional initiatives underway in metal framing, and we continue to run each one of them to ground.

Lastly I want to mention Steel [Pack] which continues to make inroads into specialty shipping and product movement applications, where we have been very successful in eliminating or greatly reducing product damage. We also believe we are closing in on applications on the commodity side of the pallet and container industries. Our work with large volume users continues of this product, and we are encouraged by the results and the overall direction of this start-up company.

Those are just some of the reasons that I'm very confident in our ability to continue to grow Worthington Industries over the next 5 years. All of these efforts stick within our core competencies, and in many cases can increase the utilization of existing equipment throughout the Company. At this point we'll be happy to take any questions that you have.

Certainly. [OPERATOR INSTRUCTIONS] Our first question comes from David Taylor with David P. Taylor and company. You may ask your question.

Thank you. I'm very pleased with the quarter, and keep up the good work. I'm particularly interested in this program you're calling ERP. It sounds to me like it's a supply chain rationalization. Could you talk -- could you flesh that a little and talk about broadly what the costs are in the current fiscal year, and what kind of benefits might be attained by the Company in fiscal '06, fiscal '07?

Yeah, I apologize, I always talk to our people when we're talking to our Board or outsiders, not to use acronyms like that. That stands for Enterprise Resource Planning System. It's simply, in simple terms, gets in place for us a fully integrated system across the company, and in particular the focus here is on steel, but several of our corporate staff functions are involved in touching all of our other businesses. So it's a significant implementation for us. We're working with Oracle on that implementation, and it's going very well. Costs. To date, John, I'm going to turn that over to you, and benefits where we are. In a short pause I will apologize for my inability to annunciate words well sometimes during that, but I am just getting over the flu and the crud that's been going around. So hang with me. I'll try to speak clearly.

For year to date through February '05, we've spent approximately $14 million of which about 4 million of that has been expensed, and about 10 million of that has been capitalized. Our total project costs estimated over a -- two-year period will be approximately $50 million.

Two years meaning fiscal '05 and '06?

We started some of that in '04. We have continued it through '05, and it will continue really through '06 and the first part of '07.

Okay. And what kind of benefits will you expect?

Well, we are -- our board of directors has been very specific with management as to tracking benefits. We hope for people elimination, for more refined inventory control, much better customer relationships, and logistics with our movement of steel from the mill to the customer. So we would expect great benefits out of this, but they will not start and we will not see the benefits, probably until later 2006, early 2007.

Okay. Understood. However, when the benefits are fully blossomed, fully developed, and the expenses are behind you, whenever that point is, in '07, maybe even fiscal '08, what kind of benefit can we expect? I'd say, on a pretax basis, an operating basis.

We absolutely have that. We have a book that details on a line item basis, the expenses we expect to eliminate and the benefits we expect to gain from them in a book which unfortunately we didn't bring here with us, and I think everybody in here is a little afraid to venture what that number is, but we can get before it this call is off.

One of the benefits of the program which is impossible to quantify sitting here today in defined terms is that, the reduction in inventory that is -- will be achieved as a result of having this system implemented, will allow us to run this business with a lower level of ambient working capital, and reduce the forward volatility in our margins, created by higher inventory levels that are directly attributed to a lack of visibility of the inventory in the system.

Well, you should give me a consulting contract. I could quantify it for you.

Well, a lot of that David, depends on your forward view for the volatility of fuel prices.

I can give you a whole range.

David, a lot of the savings on people are going to come out of various departments, the biggest hunk is in abandoning the current methods which we operate, which is a mainframe system that's 30 years old that requires a whole bunch of people writing programs on a regular basis, just to get information back out of it that we need.

So it just comes from -- again, each one of these is detailed out and Richard just left the room to get the book, and we can give you the number on a dollars basis, that we have given the board, and we intend to deliver on from a benefits basis.

Okay. Thank you.

You're welcome.

Thank you. Again that is star 1 if you would like to ask a question. And our next question comes from Robert LaGaipa with CIBC World Markets.

Thank you. Hi, John and John.

Hello.

Had a few questions. One on processed steel side. Wanted to get beater sense for the trends you're seeing currently in the marketplace. Obviously it performed very well so far. Given this is a fairly challenging environment especially with the announcement from GM, just trying to get a better sense from you, in terms of the volumes moving forward. Obviously the volumes were down a bit in the third quarter here, certainly year-over-year, and I know a lot of that has to do with Decatur, certainly on a year-over-year basis, but for the fourth quarter, what type of volume expectations are you building in here, I recognize the Big 3 are 10 percent or less of your business, but you're also sending product out to a number of parts suppliers as well.

It is clearly very important part of the business to us, an area that we focus on heavily, and continue to make inroads into automotive across the board, not just the Big 3. We are anticipating volumes to be probably lower than they were from the fourth quarter last year, though I don't have the exact numbers here. We're going to continue to, again, balance where we think we need to be between market share and tons versus margins.

So we're going to be very selective about where we do business and how we do it, but certainly on the automotive side those related to the Big 3, apparently there is going to be some slowness on a year-over-year basis. We are continuing to move to internal consumption for our construction product segments, if you looked at steel processing you'd see a very large increase.

Some of that larger portion of it, is due to internal consumption as we move downstream to turn it into metal studs, so we're making a lot of traction in our own supply chain inside, and things that we wanted to do to help keep the steel divisions full. John, any other information on steel and what they see for the fourth quarter?

We have seen most of the areas of appliance, lawn and garden, as you know, we have no one customer that is any more than 3.5 percent of our revenue so we have great diversity, but we've seen lawn and garden, appliance, hardware, et cetera, stay pretty status quo. We have not seen the drop that we are starting -- we have experienced in the last quarter in auto production, even though our volume stayed the same. So from a volume standpoint, we don't see any one sector other than the auto industry, that is going to change a great difference in the next quarter.

It is historically our seasonally strongest quarter. I do think that there's some general slowness from where the economy has been which has been very robust, and you start lacking at year-over-year comparisons at this point, I think things are going to take a little breather. I don't think they're going to decline sharply.

But again, I think that is just part of an exercise as we ramp back up and reach newer highs in the year ahead as we go forward. So --.

That was just -- really, we're talking about the steel division. In our cylinders division spring usually is the ramp-up for the 20-Pounders even though that market has changed on us, more from going to the retailers and the exchangers, rather than this OEMs, but this is our ramp-up period. In fact, we've been stronger in the winter than we thought we would be. In Dietrich metal framing, we are anticipating an office pickup and some of the projects that were delayed from the heavy rains in the west coast, and some of the problems in the southeast, and that relates into more front-end loading of our galvanized operations, which a lot of that goes into the construction area.

Just for a follow-up pricing perspective on the steel side, and an inventory perspective, a lot of press obviously, in terms of this inventory overhang, a lot of the mills have also talked about inventory overhang possibly lasting longer than some had originally anticipated, certainly steel dynamics, based on their announcement today. What are you seeing on the pricing side and also from an inventory perspective in steel?

Pricing as we said, I think two quarters ago has drifted down on a very gradual basis to where it is today. Where it goes from here, you know, will just rely on the kind of things that you all write, and you all seem to have kind of a feeling that things will continue to drift down on a relatively slow basis, and gradual over the next six months. I guess that remains to be seen. And if that scenario holds out that you all have put forth for the most part, I think that's an excellent scenario, for not only our side of business, but for the steel industry in general.

But like I said, we'll have to see where things remain. There's no question there's a lot of inventory out there that has -- if volume slows at all it obviously gets harder to move. There was a lot of speculation buying on people's parts, whatever they could get. That inventory will move through nicely.

I think over the fourth quarter, we'll see how the mills react to production, which I think is going to be a critical part of how pricing goes in the future. None of those things we have any control over here and we're just going to have to wait and see how they play it out.

How much are the mills charging currently for hot-roll pricing, if you were to buy something today, and what's the lead time you're looking at?

Lead times have probably shortened somewhat and as far as pricing goes I would only regurgitate the numbers that you all write about.

Two other quick questions. On the metal framing side you've talked about the inventory being drawn down, shrinking, you're entering into a seasonally stronger period. Construction spending looks like it's been a little bit stronger. How far along would you say the customers at Dietrich are, in terms of that de-stocking that's occurring in the marketplace?

I think it's down the road somewhat. I think it's going to require month or two of the construction industry pick up, then it will bleed itself out.

Last question. Just in terms of the initiatives that you have that are ongoing from a company-wide perspective, you know, the initiatives in processed steel, metal framing, the traction in China, et cetera, just trying to get a better sense for the long-term strategy for the Company. Where are you directing most of your efforts, or where are you expecting the most growth? Just trying to put some parameters on these initiatives, how large, what the potential might be for each of them?

We are directing growth really toward end product as much as anything else. The steel division we'll start there, we're very focused on using an internal supply chain to make sure that it stays as full as possible with things we can control all the time, and moving value down the chain into products. With steel we're going to be looking again at geographic expansions, where we have established presence in other sides of our business and profits, as well as potential for growth, with both metal framing and in cylinders, I'd say we have equal emphasis on finding new markets and other ways to keep expanding those businesses.

The list of things that are going on in both those companies is long. I didn't touch on everything there, that we're focused on. But we're certainly focused on both of those, and looking for complimentary acquisitions to continue that strategy of downstream product need.

Has that environment gotten better from an acquisition standpoint? Is it worse? What type environment are you experiencing right now for that?

Well, I think right now the environment is a fairly high priced one. But, you know, ultimately, and everybody's got different views, when you find what you want you want to pay the best price you can pay, but if it's a great value to you, then you pay it. I remember when we acquired Dietrich, and we entered a construction slump shortly thereafter. We were certainly roundly criticized for the prices paid, and I think that has since proven to be a very good acquisition for the Company. So the market is rich.

We're going to be very selective right now about what we pursue. But, you know, if we find the things that fit our strategy and fit what we're trying to do here really well, then we're going to go ahead and get them done.

Terrific. I'll pass the baton. Good quarter.

Once again to ask your question you may press star 1 and to cancel or withdraw, you may press star 2. Our next question comes from David Taylor with David P. Taylor & Company.

J P, as you know, my memory on Worthington goes back a great long time.

Yes, sir.

And I have fond memories of the years in which dividends were increased every nine months, and then after that every year. And so I was quite pleased by the recent dividend increase, which has come after, I don't know how many years, five years or so of flat dividends, in a difficult market for you. As you see things going forward, is it reasonable to expect an annual dividend increase being reinstituted?

Well, David, I think what is reasonable to expect, is as we are successful in growing our business and increasing our earnings, we will continue to look for ways to share that with our shareholders. That is our tradition and our history, and one that I think you can continue to count on us continuing to do, whether it be, -- in a variety of different ways. Dividends is certainly one of those options that is very high on the list every time we get into one of those situations. So as we feel confident in what we have earned and where we are going, I think it is likely you will see us use those kinds of things, including dividends to return value to the shareholder.

Thank you.

David, while you're on the line, your first question about -- the ERP system, which I should have said earlier, that was done with the idea of a hurdle rate of 12 percent after-tax, and the major emphasis is on order management and demand planning, and forecast and scheduling, and in inventory management, and over a period of time, we would expect, based on the growth estimates we made, et cetera, to starting -- I'll just give you the starting, in 2007, we would hope that cost reductions would be in the high teens, millions of high teens, continuing down --.

pretax?

-- at a very good volume, and a lot of that comes from our purchasing, commodity purchasing, and the way we are buying our commodity items, and our steel inventory management program.

High teens, is this a pretax number or an after-tax number?

Pre.

Pre. Okay. Thank you.

Thank you. Our next question comes from Dick Henderson with Pershing LLC.

John, I'd like to ask your thoughts on the penetration of steel in the new residential construction markets, in light of the rapid increase in steel prices?

I think that steel pricing has certainly been an impediment, particularly on the residential side, but more, there again, is really getting experience on speed and direction. That is one of the things that you put on a very high value list to a developer. They want to get that property up, and they want those houses built and sold and move on to another one.

So that's an area that we have to continue to work on, and I think we're going to garner a lot of experience as we go through these, essentially residential construction under a military hat projects, where we have gotten contracts, and we are going to be building a number of houses, and we will continue to learn through the panelizing process, and working on those projects, how to increase the speed of erection and let us penetrate more deeply into the commercial residential markets.

So steel pricing has been an issue. It's probably been as much of an issue on the mid-rise product, which has still garnered a number of jobs, it has either under contract or pending, if you took all those categories together approaching $57 million at the moment, $60 million, and that's probably where pricing is the issue of it that stands alone, is pricing.

And again I think as we move into the spring we look at projects that have been postponed, whether they're office, hotel, motel, commercial buildings of any sort, that they're going to start to pick up here as we go forward, and steel pricing, as you know, has come down, which I think will also benefit from movement of that product.

Along those lines, John, given the harsh hurricane season that we had last year, did that generate a lot of enthusiasm toward steel or inquiries and so forth?

We --.

south-southeast markets.

I think down in the south you see a number of things going on. I think interior wall construction using metal framing is expanding out in central Florida and into other parts of Florida fairly rapidly. There has been an additional interest in a different kind of exterior construction. What's that called, John? ICF? Insulated concrete foam construction which is a very, very strong exterior wall which works well in concert with interior metal framing, and I believe that will also start accelerating the presence of metal framing in Florida. We took the opportunity to go down to Panama City, Pensacola, to build a community center down there, one that had been knocked down. That area was very hard hit.

And also ran some programs for builders on metal framing, the strength of it, what benefits it brings, particularly in those high volatile areas where you're subject to high winds and damage. Marketing efforts are also being centered around those thoughts and ideas combined with termite problems in the south.

So all those things we're trying to wrap together, and really push where the market wants it to be. And I think the ultimate answer, after some of that rambling, is that, yeah, people have a higher interest in metal framing and strength of homes where they have seen the devastation of a hurricane recently.

Last question. Could you provide us with your best estimate on capital expenditures for this year, and perhaps in 2006, and where you might use those funds?

Well, excluding acquisitions, we are going to run just about equal to depreciation, which this year will be approximately $50 million of CapEx, approximately 40 percent of that will be related to what we call project 1, or the systems program, then we would plan on really reinvesting in the business, at least depreciation of the next year outside of acquisitions.

Thank you.

Thank you. At this time I show no further questions. I'd like to turn the conference back over to our host for any closing comments.

Again, thank you all for joining us. We had a very good third quarter. We're very pleased with our results, and we're pleased with our forward outlook. There are a number of different things going on, particularly when you look at metal framing, the last question that we had, that I think, as well as our Steel pack systems that when you look at wood versus steel, there are a lot of things we can continue to push on, and we are looking at ways to gear up marketing and awareness efforts of the products, and the benefits that it brings to both of those markets.

So our outlook is very good. And regardless of what happens in the short term from a demand standpoint, or a steel pricing standpoint, which we believe both, if they continue down, will continue down very gradually, giving us the opportunity to manage through those well, as we have demonstrated so far, as pricing has drifted down slowly.

That we are in the midst of a longer term economic cycle that is very positive for us and for the steel industry and for manufacturing in general.

Thank you for joining us, and we will see you next quarter.

That concludes our teleconference for today. Thank you all for attending, and you may now disconnect.