Worthington Enterprises Inc (WOR) 2007 Q3 法說會逐字稿

Good afternoon and welcome to the Worthington Industries third-quarters earnings results conference call. All participants are able to listen only until the question-and-answer session of the conference.

This call is being recorded at the request of Worthington Industries. If there are any objections, you may disconnect at this time.

I would like to introduce our first speaker, Ms. Allison Sanders, Director of Investor Relations. Ms. Sanders, you may begin.

Thank you, 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 in listening to this conference call again, a replay will be available on the home page of our website at www.worthingtonindustries.com.

With me in the room are John McConnell, Chairman and Chief Executive Officer; John Christie, President and Chief Financial Officer; George Stoe, Executive Vice President and Chief Operating Officer; and Richard Welch, Controller. John McConnell will begin. John?

Allison, thank you, and good afternoon, everyone. Our results for the third quarter were as expected and in line with analysts' updated consensus after hearing our comments in last quarter's conference call.

Now, in this case, we are not proud of being right and we're not proud of our results. But, as we expected, December, the opening month of our third quarter, produced a deep hole to dig out from an earnings standpoint. Losses that month in both steel and metal framing companies produced a significant obstacle to delivering results in this quarter.

Both experienced problems related to decreased volumes, high-priced inventories and a falling market price environment. The emphasis of each company was different, and you'll hear more on that in comments from John Christie and George Stoe.

The most important issue we want you to take away from this call this afternoon, either from listening or actively asking us questions when we are done, is that the inventory price to market table has been reset in both companies -- not without pain, as is obvious, but we are in a position to have a much improved fourth quarter.

So let's get started with John Christie to walk through the quarter from a financial perspective, and George Stoe will follow from an operating perspective. John?

Thank you, John. Good afternoon, everyone. For our third quarter of fiscal 2007, which ended on February 28, 2007, we reported earnings per share of $0.06. Earnings were down significantly from $0.21 per share we reported last year.

Third quarter, which for us spans the months of December through February, is typically the weakest quarter in all three business segments due to holiday- and weather-related shutdowns. And as John said, December 2006 was our worst December on record.

In addition, last quarter, we warned that results in two of our business segments, Steel Processing and Metal Framing, would be very weak due to pressure on both volumes and spreads between selling prices and material costs. This quarter results bear that out.

My comments today will address the performance of those two segments, as well as the record performance of our Pressure Cylinders segment and our WAVE joint venture.

Third-quarter sales of $677 million were in line with $682 million for the same period last year. Higher selling prices in the three business segments provided some offset to volume declines in Steel and Metal Framing. The gross profit margin fell to 8.3% from 11.6% last year due to a significant reduction in the average spread between selling prices and material costs, primarily in the Metal Framing segment.

SG&A expense increased by less than $1 million and rose slightly as a percentage of sales from 7.8% to 8%. The increase in SG&A expense is due to almost $1 million in quarterly stock option expense, which is new in this fiscal 2007, as well as SG&A associated with the PSM acquisition.

Quarterly operating income declined from $26 million in the year-ago quarter to $2 million this quarter. Operating income does not include equity income from six unconsolidated joint ventures, the most significant of which, WAVE, had record third-quarter earnings.

Collectively, equity income rose to $13 million from $8 million last year. The prior-year period was negatively impacted by a $6 million income tax adjustment at Acerex, our Mexican steel processing joint venture, which was subsequently sold.

WAVE continued to do very well, partially offset by weaker results in our automotive-related joint ventures, TWB, Worthington Specialty Processing, and Viking & Worthington Steel Enterprise, and ongoing expenses in the ramp-up of our Metal Framing joint venture with NOVA Chemicals.

WAVE's continued success allowed us to build significant cash balances, a portion of which was distributed to the partners. We received $50 million in dividends from WAVE and $4 million from the other joint ventures in the quarter just ended.

Income tax expense decline $5 million due to reduce earnings. The effective rate for the current quarter, 32%, is lower than the 35% statutory corporate tax rate due to a greater mix of foreign earnings, which are taxed at lower rates. We expect an effective tax rate of 33% for the next quarter.

Turning to the balance sheet, net total debt of $326 million, down $100 million from the November quarter and up $52 million from the year-ago time period. At quarter end, our total debt to capitalization ratio was 28.9%.

Operating cash flow was over $140 million this quarter due to the joint venture dividends and working capital generation, which included a reduction in inventories.

Although weaker demand resulted in inventories that were too high early in the quarter, we exited the quarter at near-target levels. Days in inventory for the Company as a whole were 68 at quarter end, down from 77 days at the end of our November quarter.

For the quarter, capital spending was $11 million compared to depreciation of $15 million. We still expect CapEx for the year, excluding acquisitions, will be approximately $65 million, in line with annual depreciation.

Early in the quarter, we spent $14 million to repurchase 831,600 shares of our common stock at average price of $16.97. This brings our total number of shares repurchased in the current fiscal year to 4.4 million shares.

Now let's talk more specifically about third-quarter results by business segment, beginning with Steel Processing, which represents 48% of our revenues this quarter. Steel Processing's quarterly sales fell $28 million or 8% to $324 million from $352 million in last year's third quarter.

Our acquisition of PSM contributed $14 million in sales in this segment and was a factor in higher average pricing compared to last year. Pricing was up 7%, but was more than offset by lower volumes, which were down 14%. Virtually all of the end markets served by this segment were weak compared to the prior year, including the two largest, automotive and construction.

Operating income for Steel Processing fell to $2 million from $11 million last year as a result of the weaker volumes. Normal demand cycles have resulted in a pickup in both automotive and construction sectors, which will benefit our fourth quarter relative to the third quarter, but we do not expect fourth-quarter Steel Processing demand to be as strong as it was in the year-ago quarter.

Now turning to Metal Framing segment, which represents 26% of the revenues this quarter, third-quarter sales for this segment were $174 million, down $6 million or 3% from last year -- last year's February quarter, when sales were $180. A 5% improvement in selling prices from the year-ago period partially offset the volume decline of 8%.

Demand was down due to, one, the turndown in residential building activity, which historically represents approximately 20% of sales and 30% of profitability; two, reduced commercial construction demand for light-gauge steel framing, given the current price differential between steel and alternative building materials such as wood; three, delays in commercial construction as builders and developers look to rebid projects seeking lower overall material costs, particularly chips and wallboard; and last, increase in the number of small competitors.

Weaker demand made it difficult to increase selling prices enough to cover the 32% increase in material costs which were flowing through inventory on a FIFO basis. Material costs were unusually high, reflecting material purchased in the fall, when galvanized steel prices were coming off near records. In addition, our inventory mix included less secondary, which is lower-priced material.

The combination of weak demand, pricing pressure and the flow-through effect of higher-priced steel in inventory resulted in much narrower spreads between selling prices and material costs and an operating loss.

Operating income declined from $6 million in the year-ago period to an operating loss of $22 million.

Our near-term outlook for this business is much improved. Demand and pricing are stronger, and most importantly, the higher-priced inventory has been depleted. We expect that Metal Framing will return to profitability in our fourth quarter.

Finally, our Pressure Cylinders segment, which represents 20% of total Company revenues, set a third-quarter record for sales and an all-time record for operating income. Sales for the quarter were up 21% or $23 million from last year to $134 million. Operating income more than doubled from $10 million or 8.9% of sales to $22 million or 16.3% of sales.

The improvement in what has always been a good business for us is not accidental. Strong performance in North America and Europe is a result of a series of well-executed plans over the past several years to cut costs, exit unprofitable product lines, introduce new product lines, consolidate facilities and grow profitable business lines through capacity and geographic expansion.

This quarter, we initiated a 20% capacity expansion at our highly successful Austrian facility, and next month we will begin producing air brake tanks for the U.S. commercial truck market at one of our existing facilities that has been expanded to handle this new business. We believe the current operating performance in Pressure Cylinders is sustainable for the foreseeable future.

In conclusion, our outlook for the coming quarter, our fourth quarter, is much better than this quarter's results for several reasons. First, Steel Processing is expected to improve significantly based on seasonal strength and firming prices. Second, Metal Framing is expected to return to profitability as higher-priced inventory has been depleted, and demand and selling prices are improving. Third, the positive trends at Pressure Cylinders and WAVE are expected to continue. And last, seasonal strength typically benefits all of our business segments and joint ventures at this time.

George Stoe?

Thanks, John. I appreciate it. I would like to focus most of my comments today on Dietrich Metal Framing, where we had very weak results, and Pressure Cylinders, where we had record results.

On the Metal Framing side, we experienced a significant and unexpected reduction in Metal Framing volumes in the last half of calendar 2006. The reasons for the decline were varied, and John Christie articulated most of them. In the face of this abrupt decline in demand, we couldn't cut our inventory buying fast enough, so inventories were too high and we moved quickly to reduce them.

Secondary steel purchases are easily curtailed, and because the spread between prime and secondary was very narrow at that time, we cut back on our secondary steel buys. As a result, the normal 70/30 mix of prime and secondary inventory became almost entirely prime.

This mix imbalance would normally have been a minor factor; however, during the third quarter, the pricing spreads between prime and secondary steel were well above normal.

Because of the higher price of galvanized steel in inventory purchased near the peak, and an unfavorable or more expensive mix of inventory, we ended up with very high material costs while trying to compete in a soft market.

Further compounding the problem, because we were not a buyer of secondary material in this period, this lower-priced secondary material ended up at some of our competitors and allowed them to undercut pricing.

While this describes what happened, it is important to note these issues are behind us. We expect Metal Framing to return to profitability in the fourth quarter because our inventories are where we want them to be. We are buying significant quantities of secondary material that helps to lower our overall material costs. Volumes have been improving, and we expect that trend to continue. We have announced selling price increases for March and April and have seen our competition announce them as well.

In addition, the UltraSTEEL rollout is on schedule. Two of our West Coast facility conversions have been completed and the Stockton, California, facility will be completed yet this week, leaving only the Washington and Hawaii facilities to be completed by fiscal year end.

UltraSTEEL recently received several key code endorsements, including one by ICC or the International Code Conference Evaluation Services, which is accepted by almost every code jurisdiction in the United States. The ICC code approval was a significant milestone for this product, as some distributors were waiting for this approval before stocking it.

The approval also makes it easier for architects and specification writers to specify UltraSTEEL for jobs. The ASTM standard, which was specifically rewritten to include UltraSTEEL drywall studs and tracks, is having a positive impact as well.

These approvals also benefit our sublicensee, Clark Western. They are now selling UltraSTEEL in Florida, the Southeast and the Northeast, which has helped to strengthen the overall product launch.

I would now like to move on to our Pressure Cylinders segment. Although the Pressure Cylinders segment has always been a great business for us, the strength of the results continues to surprise some people.

We are not surprised, however. We carefully orchestrated a plan to improve our European operations. The process involved closing our LPG facility in Portugal; adding two new products in Portugal, our helium and nonrefillable refrigerant cylinders; adding a totally new product line for us in the Czech Republic, air tanks for trucks and trailers; closing our corporate offices in Vienna; and expanding operations in Austria to meet increased demand.

We are also seeing continued strong demand and results from our cylinder operations in North America. We continue to grow our market shares in many product lines and have grown our participation with retailers, who are making up a larger and larger share of our overall business.

I will move on now to Steel Processing. In Steel Processing, third-quarter results were impacted by greatly reduced demand in December, combined with too much higher-priced inventory and a falling price environment. The situation is much improved going forward as inventories are in line, demand is seasonally stronger and prices are escalating.

In summary, we expect a turnaround in Metal Framing, seasonal strength in Steel Processing and continued strong results in Cylinders and the joint ventures for a much-improved fourth quarter.

With that, I will turn it back to John McConnell for some final comments.

Well, thank you, George. Well, that is the information on this quarter. In short form, we had pieces of the Company that did not perform well, Metal Framing at the forefront, and pieces that worked at record levels.

At this point, we will be happy to take any questions you might have.

(OPERATOR INSTRUCTIONS). Michelle Appelbaum, Appelbaum Research.

Kind of some strategic questions here, to start you with some easy (technical difficulty). Sorry, the phone broke. You shouldn't have your conference calls on spring break. Let's see, Mitsui/Steel Tech, number one about that -- what does it do to the marketplace?

Well, I don't know what it is going to do to the marketplace, Michelle. I am not intimately aware of what they're going to do. We can link up I guess some of Mitsui's comments and you would -- I guess a lot of it depends, in my mind, on how much capacity is currently available. I understand part of that was to ramp up a little bit and serve some new domestics. But I am not aware of what their current capacity utilization is or whether it will increase any assets in the space.

So if they need to serve the new domestics more, does that help you with the old domestics, potentially?

I suppose that is certainly a possibility. Again, I think it kind of comes back to how much capacity they have open and whether they're going to expand, leaving enough capacity to try both fronts.

So which of those do you think is going to happen? Your best guess.

Our best guess is I think it helps probably stabilize a little bit their approach in the marketplace and that they will try to serve both of them.

And then the next question is, again, strategic on the Mitsui acquisition, I'm just curious -- you've said recently that your strategy has kind of gone back to this acquisition mode. Was there an opportunity for you to look at Steel Tech here? I wasn't aware that it was being marketed. And if so, what did you think of the valuation? And in any case, whether you looked at it or not, what do you think of the ultimate valuation this thing went for?

To your first point, we wouldn't have been aware if it was being marketed either. And beyond -- largely, I think it appears to us that that was something that came out of their joint venture relationship. Again, as far as I know, it was never on the market. The valuation -- that is really kind of Mitsui's business at this point.

Well, let me ask you, how many -- you've done one acquisition recently. And in general, we are seeing acquisition prices that are going double what other stocks are selling for. Have you bid on other acquisitions, and what does the pricing look like as a buyer for you out there?

I think there's we think multiples are high. we have been involved in a few attempts at some different companies and we were unable to come to terms that we thought were reasonable. So I would say as long as capital remains very available, prices will probably remain somewhat high.

Well, along the same lines, is there a potential go-private scenario that might make sense for Worthington?

No.

Leo Larkin, Standard & Poor's.

Could you give us any guidance for CapEx and DD&A for 2008?

Well, it would be just about the same as it is for 2007 -- depreciation will be between $60 and $65 million, maybe around $65, and CapEx will be around $65.

Timothy Hayes, Davenport & Company.

Questions that I have are on Metal Framing. If you could help put some more color on the use of primary versus secondary hot dipped? And if I get it straight here, you typically would buy 70% primary hot dipped and 30% secondary, but in an attempt to reduce your purchases you decided to buy less of the lower-cost material. Does that mean you have contracts that you have to buy the primary stuff from the mills rather than -- and no contracts on the secondary side?

In Metal Framing we typically don't have any kind of a long-term contract for either one. Secondary materials are very, very spot. It is even shorter than the month -- it is almost what is available out there in any given day, and we'll often place what they call accumulation, where every time they produce some, we say we will take it.

But prime commitments are definitely made, so if you think about those things, commitment to buy prime is definitely a longer period of time than the secondary. And we were trying to move quickly.

And the other part of that and the reason we did that is that at the time we made that decision, the spread between secondary and prime was extremely narrow. So there was almost no difference in the price. And it is fair to say we did not anticipate that as we retracted from the market, even though we are one of the larger buyers, we didn't anticipate it falling nearly as rapidly as it did, or the spread increasing nearly as rapidly as it did.

How did set spread change? Isn't the spread between primary -- or actually, if you could just walk me through the trend on that spread, what is the normal spread between primary and secondary? And at what point was that spread the narrowest, and what is it now?

It does fluctuate all over. It, again, depends on a lot of different market dynamics at the time and any particular price. But George Stoe is going to walk you through that.

Normally we see a spread of about $100 a ton between prime and secondary. There were periods of time in our third fiscal quarter where that actually got up to as high as $200 a ton. As John mentioned, when we backed away from that marketplace, that spread widened between prime and secondary. And now, we're seeing it going back again the other way. It is now down back to about $100 a ton.

So your reduction of purchases and scrap, secondary hot dipped actually caused that spread to widen.

I believe that is correct.

You must be one of the major buyers of secondary in the country, then.

We certainly are.

And then in terms of pricing for Metal Framing, we saw that sequentially there was a decline of about 4% in unit revenues. Did you cut prices there or was that just a mix effect or both?

Prices really did come down in the marketplace more than anything.

So was it a deliberate -- you actually had to trim your prices somewhat, you felt a need to do that?

Yes, we did -- as volumes were falling, we were trying to maintain market share.

And then you just said that for the March and April coming up, you have raised prices again?

That is correct, we did. We announced a 10% increase for March and a 10% increase for April, and we have seen our major competitors in the marketplace announce similar increases.

Now, on that note, a year ago you did a similar where you raised prices. And did that contribute to -- I guess I worry that that is going to make you more or less competitive against wood, and therefore potentially lose sales because it makes wood even more attractive.

I think the gap is such at this point that it makes no difference if it gets bigger. In other words, wood has already displaced what it can and will continue to until that narrows, which means we've got to go fight even harder for what is available in the marketplace. Does that make sense?

Yes, it does. I'll circle back. Thanks.

Mark Parr, KeyBanc Capital Markets.

I wanted to just get your sense of -- maybe ask you to give a grade or something to the Metal Framing business. It seems like there is a tremendous amount of volatility in the quarterly performance of the business, and I'm not sure if I'm hearing anything that would suggest the volatility is really going to get less as we go forward.

Is there anything that you could talk to as far as giving us some additional color that this business is poised for perhaps a bit more stability in the next 12 to 18 months?

I think it will be more stable in the next 12 to 18 months. You have seen zinc prices start to come back down over the last few months, and that will take some pressure off of the galvanized material. And I think they will let it settle in there and not let it drop too rapidly too quickly.

So from a pricing standpoint of raw material, it ought to get a little more stable. I think that we are seeing, particularly as the weather changes here, a number of orders released towards the end of February, and through March so far, volumes have increased fairly well.

And I think that there was a lot of pent-up demand out there. I talked to someone else in a related product that we kind of go hand in hand with who talked in terms of August just turning off like a light switch in their business. And that is pretty much what we saw, for whatever reason. And I think all that backlog is starting to get released now. So I think there's a lot of work out there.

If you look out longer, we are continuing to, of course, push on important code changes in the Gulf Coast areas for the rebuild that I think are important for the area and for those homes as they go in, which would add a lot of stability if those code changes, in terms of strength and insect-resistant materials, would start to favor steel and drive wood prices up, because it would have to be heavily treated lumber at that point.

So those kind of things and our mid-rise efforts as they continue to go as we focus particularly on the hotel industry, I think all that internal demand we can drive can help also add a lot of stability longer term.

Just as a follow-up to that, do you think that there is an opportunity to significantly enhance your presence in some of the overseas markets as a way to reduce volatility?

It is an option and one that we have been pursuing. We haven't talked about our building in China for some time. It is complete. It has gone through -- the Ministry of the Interior has gone through a number of tests with different people over there and continues to go through those, has passed a number of fire tests at the moment. And we're looking for June/July to get the final signoff from the Ministry saying, okay, we accept all this.

So we have been in kind of a waiting mode as they have been assessing the building and making judgments. Obviously, we hope that they like it and go beyond saying it is okay and begin to endorse it, which, yes, would give us a new market to (inaudible).

Mark, John Christie. Just on the volatility, as long as steel prices continue to bounce in large swings, and we are on a FIFO basis, our FIFO is going to accentuate the volatility.

Yes, I can certainly see that, and yes, the zinc situation hasn't helped matters either, I am sure. All right, terrific. Thanks very much.

Sal Tharani, Goldman Sachs.

Just a quick question, back on the secondary/primary steel -- is there any way you can fine-tune this model, because you are the major buyers, and if you withdraw from the market, it automatically gives an advantage to your competitors to get into there and prices [drop again]. Is there any way you can do it better? In the future, you may have a similar situation.

Yes, I guarantee you, we will do it better in the future. We have really been in the process, right in the middle of this, we're revamping our whole methodology around purchasing. But a simple answer to what you just said, we will continue -- we will not turn off secondary material under almost any circumstance. We'll just go ahead and pay the interest rate on higher inventories and keep that in there. So in other words, we will accept a higher inventory than use that as a method to pull it back.

And also, on the inventory, the prices are rising, as we read in different trade magazines and different announcements by different companies. Are you accumulating inventory at this point, expecting a higher pricing in next couple of months?

No, we are not. As you heard from John, we have been very aggressively pulling inventories down. We never really go play an inventory game. That is not our business. We order material to jobs and what we see out in front of us.

There are some very high prices we're hearing in the market. Are you still seeing any push-back, or is there any cheaper inventory still at other service centers which are competing with the replacement inventory costs right now?

I am sure there are. People might have had more than we had. Some people, that is their business, is to play the inventory game. So I'm sure there's some people out there with lower-cost material, if prices continue to rise. The last round, the last I've updated is, really only one mill is out there with an increase and hasn't been followed at this point, which would be a second push at increasing prices. So we will see whether that stays.

And how do we look at the Pressure Cylinders business going forward? I mean, you've got a better unit price. Was this more of a function of price or is it also you are increasing the efficiency of these facilities?

I think it is both. I think a big part of it is product mix. Some of the high pressure that we produce, particularly in Europe, has been very strong for us. And that has certainly helped the overall price of the product we have going forward.

(OPERATOR INSTRUCTIONS). Fritz von Carp, Sage Asset Management.

It seems like most of the discussion has been on the last quarter. I am more curious about the forward quarter. You have made sort of vague, positive statements, but I was wondering if you are willing to give us any more color or something I can get my hands around, to know what I might expect.

As you probably know, we are very reluctant to give any kind of a forward view in a tight range.

Even qualitatively, how are things better in the market or something?

Demand has been increasing in the steel business since December very steadily. Obviously, from a significant loss in December, worked themselves into a positive territory, which of course was helpful, even though it was only $2 million. So that is a good thing.

Dietrich, being able to pull out of a $21 million loss into profitability, which we fully expect them to be, though -- I'm not going to get overly optimistic here. I think it is going to be very good, but this is a dog that just bit me, so I am not going to reach down and pet it too nice here. I think it is going to be just fine as we go forward. So that is a huge swing -- turnaround.

We are talking about getting back towards something like your historical levels of profitability, the recent historical levels. Are you moving back towards that, or should I think that is way above anywhere we are going anytime soon?

I think towards that is a very fair way to look at it.

Mark Parr, KeyBanc Capital Markets.

John, I just wanted to -- it's going to follow on what Fritz was talking about regarding just the underlying secular health of the metal processing business. It seems as if the profitability for all the public industry players, and looking at you guys and Steel Tech and Gibraltar, the profitability metric has been gradually diminishing over the past several years.

I can remember when Worthington used to talk about an 8% to 11% range as a normalized EBIT margin range for the processed metal business. And I don't think we have been anywhere close to that in quite a while, with some very strong steel markets.

I recognize that the big three have certainly been on the weak side, but I was just wondering what your thoughts are about what needs to happen to try to get the industry, and more specifically, to get you guys back more in line with that historical profitability range.

Mark, that is a good question. Obviously, we haven't been sitting here trying to watch the erosion without doing anything. We certainly are focused on purchasing. The mills obviously have consolidated. And we changed, and I started talking about this on the question with Dietrich -- we have made a significant change in leadership in how we -- leading up to steel purchasing area and all purchasing, for that matter, have a much more robust process in place, both to work with the mills and try to affect our incoming material. And we look at it really [landed] material, at a slitter, at a roll former, and affect that price.

Obviously, the other things we are focused on are costs. I think -- I was talking to our employees this morning -- we have been pretty good at taking out incremental costs, but that's not going to be good enough. We are going to have to do a significant effort on costs and improve on that side of it as well. I think we can do that.

But those are the two fundamental areas, and of course, raw material being our largest cost, which is why it has never been on the list.

Mark, a couple of things. You follow the industry. We've been through a couple years where surcharges have been flying all over the place. And we are in the middle, and we certainly pay to get steel. Do we get everything back during certain times? That has always been a challenge for this middleman process.

The other part of it is we have done an excellent job in the Steel Processing area of our credit risk function, even though it has taken a lot of time. But we have had several bankruptcies of customers in the processing steel. And we have very, very minimal losses. That also makes you a little bit more conservative in the marketplace when you are reaching out for new customers. But I think we have done an excellent job of handling both of those -- both passing charges through, as well as we can, and managing tight credit risk.

I think the bottom line on that is we believe we can get a couple points of margin back over the next 12 to 18 months.

(OPERATOR INSTRUCTIONS). Timothy Hayes, Davenport & Company.

Could you remind me, on the Steel Processing side, how much of that segment goes to construction, and then within that, how much would be nonres?

This is George Stoe. You didn't ask the question about automotive, but obviously the largest majority of our Steel Processing businesses is in the automotive industry. It is about 33% total. And on the construction side, on the Steel Processing side, we're probably at 20% to 25%, somewhere in that neighborhood.

So the construction is 20% to 25% of sales for Steel Processing?

Yes.

and that is mostly nonres, right?

That is correct.

And then how much of your construction sales, whether it comes from Metal Framing or -- I'm assuming it has been predominantly Metal Framing -- goes into Florida? Do you have a number -- a rough number on that?

The total Company is about 42%.

42% of your sales goes into Florida?

No, into construction, I am sorry.

And any feel for how much of that construction sales goes just into Florida?

I honestly don't know.

We wouldn't break it out that way. We know that Dietrich is one of our larger customers at the Steel Processing company. And Florida is a heavy presence market for them. So some fair amount of that would be in Florida, but we don't track or quantify by state that way.

At this time, we have no further questions.

Well, I thank all of you for coming on the call today. And I hope we were clear as to where we have been and where we are going. We do see a much stronger fourth quarter out in front of us and look forward to talking to you at the end of the fourth quarter. Thank you.