Cornerstone Building Brands, Inc.
Q4 2018 Earnings Call Transcript

Published: 19 Dec 2018

[Operator:]

Greetings, and welcome to NCI Building Systems' Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and answer-session will follow the presentation. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Darcey Matthews. Thank you, please go ahead.

[Darcey Matthews:]

Thank you, Brenda. Good morning. And thank you for your interest in NCI Building Systems. Joining me today for the call are, Jim Metcalf, our Chairman and Chief Executive Officer; Shawn Poe, our Chief Financial Officer; and Don Riley, the Chief Executive Officer of the NCI Business Unit. Please be reminded that comments regarding the company’s results and projections may include forward-looking statements that are subject to risks and uncertainties. These risks are described in detail in the company’s SEC filings, earnings release and supplemental slide presentation. The company’s actual results may differ materially from the anticipated performance or results expressed or implied by these forward-looking statements. In addition, management will refer to certain non-GAAP financial measures. You will find a reconciliation of these non-GAAP financial measures and other related information in the earnings release and supplemental presentation located on our website. NCI's fourth quarter 2018 earnings were released this morning. A copy of both the press release and our supporting supplemental presentation can be found in the Investors section of our website. Additionally, Ply Gem's third quarter unaudited results were also released today in 8-K. On the call this morning, Don will make a few comments about NCI's fourth quarter and full year results. Shawn will provide some details on NCI's financials, Ply Gem's third quarter, and discuss the cadence of the company going forward. And then Jim will conclude with some commentary about the market and our priorities going forward, before we open the call up to your questions. And now, I'd like to turn the call over to Don.

[Don Riley:]

Thanks, Darcey. Good morning, everyone. I'm pleased with NCI's fourth quarter results, which were in line with our internal expectations and demonstrated our continued ability to perform in an environment of increasing input costs, material weather events, and slowing market trends. Led by commercial discipline, NCI was able to offset the inflationary pressures in material, freight, and labour. And while our gross profit margin was essentially flat versus last year, we were able to expand gross margin in our Buildings and IMP businesses versus the fiscal prior year. NCI's consolidated external revenues were up 17% year-over-year to $574 million for the fiscal fourth quarter, reflecting solid performance in our Buildings and IMP segments, which were partially offset by weakness in Components volumes. The extreme wet weather had a disproportionate effect on our Components business due to the geographical significance of Texas and the Southeast to that business segment. Our fourth quarter was anchored by strong performance in our Buildings and IMP segments, which is driven by the increased bookings and backlog levels we saw earlier in the year. NCI continues to execute on the three key areas around cost efficiency, including advanced manufacturing, continuous improvement, and back office consolidation and around our growth strategy focusing on the segment's ability to drive adjacent products across our legacy distribution channels. We continue to expect these initiatives to deliver $40 million to $50 million of incremental profitability through 2020. For 2018, a key element of these initiatives was the installation of an automated frame line for the Buildings business, which is fully operational. As mentioned previously, the remainder of our cost efficiency initiatives will occur in 2019 and 2020. From a growth perspective, sales of IMP and commercial roll-up doors through internal distribution channels in our Buildings and Components segments continued to increase double digits as we executed on our adjacency strategy. And for the fourth quarter, IMP represented 39.5% of NCI's consolidated EBITDA. I want to close with a thank you to the NCI team for their continued efforts and a strong finish to our fiscal year and to our customers for their ongoing support. I will now turn the call over to Shawn to comment on our financial results.

[Shawn Poe:]

Thank you, Don. Good morning, everyone. As Darcey mentioned, I'm going to discuss a few key highlights from NCI's fourth quarter results, which ended on October 28, 2018, and then share comments on Ply Gem's third quarter results, which were issued in an 8-K this morning for the quarter ended September 29, 2018. Then I'll conclude with some information about our financial reporting calendar going forward. On the NCI side, as Don noted, NCI's consolidated external revenues were up 17% year-over-year to $574 million for the fiscal fourth quarter of 2018, driven by commercial discipline and the pass-through of inflationary costs. For the full year 2018, NCI achieved $2 billion in sales and $202 million of adjusted EBITDA or 10.1% of sales. Fourth quarter consolidated gross margin of 23.2% was within, but on the lower end of the guidance range, driven primarily by lower manufacturing efficiencies in the Components business from the weather disruptions, previously discussed. NCI's operating margins were largely in line with last year’s fourth quarter. Headwinds from cost inflation and rising steel prices were successfully offset by commercial discipline, the effective pass-through of these costs, and controlling and leveraging our engineering, selling, general, and administrative costs due to our cost reduction efforts over the past several years. For the year, NCI invested approximately $48 million in capital expenditures, or 2.4% of sales, as NCI continues to invest and execute on its advanced manufacturing, continuous improvement, and adjacency initiatives that Don highlighted. And now, I’ll turn to a couple of key highlights from Ply Gem's third quarter results. I would remind everyone that for the year-over-year comparison, the 2017 third quarter figures do not include the acquisition of Atrium, which was completed in April of this year. Additionally, Ply Gem’s third quarter figures do not reflect any contribution from the purchase of the Silver Line windows business, which we completed during the fourth quarter of the year. On a consolidated basis, Ply Gem’s third quarter 2018, which ended on September 29, delivered net sales of $684 million, an increase of approximately $120 million or 21.2%, as a result of the merger of Atrium into Ply Gem earlier this year. Ply Gem’s gross profit margins for the third quarter were 24.6% as compared to 23.4% in the prior period. Adjusted EBITDA for Ply Gem in the third quarter was $101.1 million or 14.8% of sales. Following this reporting period, the new combined company will be moving to a calendar year reporting schedule. Consolidated results for the transition period from October 29 through the end of the year will also include Ply Gem’s results from the closing date of the merger. The combined results will be reported in February 2019. With the new calendar periods, I would like to remind everyone of the cadence and seasonality of the company going forward. The second and third quarters will be the strongest quarters of the year, in line with the construction cycle, followed by the fourth quarter and the first quarter that historically is the seasonally slowest period for the construction industry. And now, I’d like to turn the call over to Jim Metcalf for closing remarks.

[Jim Metcalf:]

Thank you, Shawn. Good morning. As Shawn said on November 16, the merger of NCI and Ply Gem was completed. We believe this is transformational for both companies, creating a leading exterior building products company. We're excited about the broad portfolio of buildings solution and products that we now bring to our customers. Today what I'd like to do is provide a brief update on some of our early initiatives for the combined companies, our capital allocation, and our view on 2019. As the overall market has shown recent softness, our focus on costs and margin expansion are a major emphasis. They include our in-flight cost plans within both the NCI and Ply Gem as well as the deal synergies totalling approximately $180 million by 2020. We have line of sight to achieving our targets and have put in place a rigorous process to ensure that our cost initiatives are met. A majority of these actions are already underway and will be realized in 2019. This includes our ongoing commitment to automation investments, reduce G&A expenses, and leverage lean manufacturing to further drive operational excellence across our entire organization. Now that the transaction is closed, we've also launched a cross-selling selling team to identify short and long-term opportunities to leverage our broader portfolio to our customers. Some immediate initiatives include our Ply Gem's decorative stone product line into our NCI commercial buildings business and also marketing residential, metal roofing to Ply Gem customers. This ability to cross-sell has been a core competency of each company, which we have shown within the growth of NCI's inflated metal panels and board businesses as well as Ply Gem's exterior products into various customer channels. Cross-selling represents additional revenue opportunity, but it's not incorporated any of the synergy initiatives I just mentioned. With the combined 2018 sales estimated to be in the range of $5 billion, we expect to generate significant cash flow. Our capital expenditures will be in the range of 2% to 2.5% of sales per year. We also remain committed to deleveraging business through our base earnings growth, our synergy realization and cash flow generation which is also supported by covenant light balance sheet. Finally, as we look at the market demand, there's going to be areas of softness as I mentioned earlier. With the recent pullback over the last few months in residential, we do expect that to continue into 2019. In the commercial segment, we project low rise starts to grow in the mid-single digits, but the addressable markets for NCI commercial business will now be in the low-single digits and we have moderated our projection. R&R, which is one third of our overall business, has shown some pause, but still remains solid in the mid-single digits for 2019. We believe our company is well positioned as we enter 2019 even with a slowdown in the overall market demand. Our diversification and our end-use market and procurement as well as our broad customer base are key strengths going forward. We'll focus on our customers and provide them with innovative products, pull our cost levers to drive margin expansion and have a relentless focus on our balance sheet. I want to thank all of our customers, our employees and associates and our investors for your support. And I wish everyone a Happy Holidays. And with that, we’ll turn it over for questions.

[Operator:]

Thank you. We’ll now be conducting the question-and-answer session. [Operator Instructions] Our first question comes from the line of Matthew Bouley with Barclays.

[Matthew Bouley:]

First, I wanted to start just thinking about the combined company and the framework, Jim that you just gave on market growth expectations for next year. Has anything changed in the $680 million combined EBITDA projection? Is there any fine tuning on that?

[Jim Metcalf:]

We’re -- we have looked at the pull back in the market, but we still believe that the combined business is going to have double-digit EBITDA growth into next year as well with the poor in-flight with cost reductions both on the NCI and the Ply Gem side as well as the projections that we have for synergies on the new co. So we’re still very optimistic there has been some pullback. I think we do have an advantage with having the one-third residential, commercial, and repair and remodels, so diversification, but we’re still optimistic about our strategy.

[Matthew Bouley:]

And then just on the leverage side, do you have any update on the leverage targets? I think, if I look at free cash flow, and please correct me if I’m wrong. But I think my math suggest that the combined businesses maybe did around $40 million on an LTM basis. So is there any kind of framework you can add to what you said about CapEx for next year, just around how to think about free cash flow and then the leverage targets? Thank you.

[Jim Metcalf:]

Yes. And on the CapEx side, we said 2% to 2.5% of sales and that’s going to be kind of our run rate. Our CapEx is really focused on the advanced manufacturing that Don and Shawn mentioned. We have some very good projects on automation. As everyone knows, labor is very tight in the market overall with our customers and ourselves. So, we think there’s some great opportunities for low-risk, nice return CapEx projects. We have said that our focus is deleveraging the balance sheet as we put the deal together. We’re coming out around 44, and we think with the free cash flow we'll be able to get approximately a turn year. We’re still focused on getting our debt to that 2% to 3% over the next 2 to 3 years and that remains a focus.

[Shawn Poe:]

I think that covers it Jim, I don’t think that really anything has changed in our targets for leverage being in that -- getting to that 2x Matt, and -- nor has really anything changed in that respect.

[Matthew Bouley:]

And if I could squeeze one more in just on legacy Ply Gem. The 3% organic growth that I think you disclosed, I think in the proxy, you've talked about some heightened competitive actions, both siding and windows earlier this year. So is there any colour you can give on how volume and price are breaking out in that 3%, and just what you’re seeing on the competitive front with that side of the business? Thank you.

[Jim Metcalf:]

Sure. Matt, as you know, we are the leader in the U.S. on both the siding segment of the business as well as windows now with our acquisitions. We've been the price leader. This year, we led the market on our price increases, and we did that and stood by those price increases. And I would tell you that we have seen margin expansion specifically in our siding business. Matt, you may recall during 2017, we saw some margin compression. And I would -- I'm pleased to say that we delivered on what we told we would do and we’ve seen margin expansion. That probably has come at the expense of some share relative to our competitors, but not significant, Matt, so no significant share change overall, but down probably a little bit.

[Operator:]

And the next question is from the line of Lee Jagoda with CJS.

[Lee Jagoda:]

So can you start just by giving us some of the financial metrics around the Andersen business that was acquired? And then including the Andersen business, can you update us on sort of the beginning balance sheet and the capital structure details?

[Jim Metcalf:]

Yes, the -- I'll start with the Silver Line business is what we acquired, Lee. And that business is not quite $450 million top line, but about $440 million. The EBITDA in that business is in that -- call it that low to mid-20 range pre-synergies. We do expect to ultimately realize about $20 million in synergies from the acquisition, which will bring the Silver Line business more in line with where the Ply Gem business has performed. One of the -- I think, one of the positives on that is Ply Gem has a deep relationship already with a number of Silver Line's key customers, including the Home Depot. So that is a nice fit for us, and we think that ultimately to be a good acquisition for us. And frankly, the size of the acquisition doesn't really change our overall capital structure materially, Lee.

[Lee Jagoda:]

And then I assume -- given the $20 million of additional synergies, I assume that's the difference between the 180 that you referenced a few minutes ago and the 150 to 160?

[Jim Metcalf:]

That is largely the difference. That is correct. Yes.

[Lee Jagoda:]

Okay.

[Jim Metcalf:]

I would say to Jim's point or to that point it is primarily the difference, but as Jim said, we're highly confident in those synergies, and frankly they're all trending in the right direction. So that's why it's now at 180.

[Lee Jagoda:]

And one more just on the legacy NCS Building business, so can you go through sort of the dynamic in terms of what transpired on the metal components volumes and IMP volumes in the quarter? And why they sort of moved in different directions and whether there's some cannibalization or some other factor moving those around?

[Jim Metcalf:]

Sure, Lee. The simple part of the story is there is not cannibalization going on. We continue to get great penetration in the Insulated Metal Panels business as wall systems. We did get a good growth from that as we highlighted in my comments through the buildings and opponents channels, but we had a really strong quarter for buildings. We had a very strong quarter for the Insulated Metal Panels business. And the reality for the components business was they were hit especially hard by the weather that we encountered in the -- along the East Coast, Southeast, South Central. And a lot of -- there was a pretty heavy impact also on the South Central area. And it's probably had a material impact to their bottom line, but really the other businesses continue to power through in the other regions in the country. And so, we expect that business to bounce back and to continue to perform and move forward. So all-in-all really pleased with how the quarter did and how the business balanced out.

[Operator:]

Our next questions are from the line of Matt McCall of Seaport.

[Matt McCall:]

So maybe I'll start with the low rise outlook. It's not like you took the outlook down a little bit at least for your addressable market. Can you talk about the drivers of that decision? Is it something you're seeing now? Is it the macro or is it just the market weakness? Is there -- so, I just wonder what the specific drivers were for that decision?

[Jim Metcalf:]

Yes. As we said the commercial market mid-single digit, but the legacy NCI commercial business has always been in that six stories of the last 500,000 feet. That's always been trending below the overall commercial market. We've taken it down slightly in the ag business. There's been some slowness in the ag business because of macros and tariffs, but all-in-all it's just -- there's been some pause. Weather did relate to it, but it's a small reduction. But we just wanted to earmark it that the addressable market, which we said is low-single digits. We're just taking it little further down on that addressable market.

[Matt McCall:]

I guess similar question that the residential -- pullback in residential, I think, you said you expect that to continue. Can you clear little bit more few numbers behind that? And specifically I'm wondering about maybe the customer differences, growth from a growth rate perspective and looking at that from a price point perspective. So are you seeing more weakness with higher priced builders or better stream from lower priced builders just some of the underlying trends from a residential perspective?

[Jim Metcalf:]

Well, I think, it's what everyone's reading in the paper and what we're seeing with some of the consensus numbers. You see an overall consensus is coming out about for next year in the low single digits, 1% to 2% with really the multi-family being either a half a point or a point down going into 2019. So really if you look at total housing starts multi-family is projected by consensus. Again this is a lot of different groups NAHB and people looking at the industry. Labour is an issue for the building. You look at interest rates, I don't think, I'm telling you anything yet you aren't reading, but we would rather look at the macros. They are going to be what they're going to be. We're going to create our own success with cost reductions in leveraging new products. We just want to make sure that we are overly optimistic on what's happening. If you look at it regionally, year-on-year, the two regional areas that have been hit the hardest have been. And Don mentioned the Midwest with component with weather. If you look at the Midwest starts on single family have been choppy all year and actually the numbers that came out in November were down in the Midwest, and also the west. If you look at, those were the two regions out of the United States that are really trending down and with our business there is a lag. And we – that's about the customers side.

[Shawn Poe:]

Yes. Jim, I wanted to touch on that. And Matt, I think you know this from following the Ply Gem side, but maybe for others on the call. On the new construction residential side, our products, siding and windows typically go on the home 90 to 120 days following the start of the home. So if you look at single family housing starts, that will generally be a pretty good proxy for what’s going to drive demand for our -- the new construction, residential new construction piece of our business. So you can do the math and about 90 to 120 days. From a segmentation standpoint, windows were pretty much everywhere in the U.S., we’re residing it has the regional preferences. It dominates in the Northeast and upper Midwest and Mid-Atlantic. So you contend to focus on those markets. But as Jim said, I think, there is -- and as – I think, everybody's region in the various papers that there has been some pullback really in the later part of the third quarter and maybe early fourth quarter. And I think everybody is waiting to see how that plays out as we go into 2019. Does that help Matt?

[Matt McCall:]

Yes. It does. It’s very helpful. Thanks, Shaun. So and then my final question, I think in your earlier question you talked about expectations of double-digit EBITDA growth next year. I know you’ve got synergies and you still got some cost saves with NCI and for Ply Gem independently of the synergies. But what – maybe quantify those what the expectations are for those three buckets in 2019. And then what would be the assumed incremental or decremental margins for each of the two broad businesses?

[Jim Metcalf:]

Yes, let me -- I’ll talk about the 2019 synergies and then turn it over to Shaun and talk about the individual businesses. If you look at 2019 for NCI, we’re projecting approximately $25 million of Ply Gem’s around $50 million. The combined synergies that you do the build up as I talked that run rate of 180. The combined will be approximately $15 million will be in our 2019 numbers. If you look at the run-rate, NCI would be between $40 million and $50 million, Ply Gem run rate would be between $80 million and $90 million, and the combo of the new companies would be between $40 million and $50 million from a overall run rate. As we said we want to -- this is between now and 2020. So the numbers of 2019 are $25 million NCI, $50 million Ply Gem, and $15 million for the new business.

[Shawn Poe:]

And on top of the synergies, Matt, I would say that the -- we do have expectations of improved margin on the residential side in 2019, really driven by the pricing initiatives and the combined with the synergies that really have occurred over the course of 2018. And really is a tailwind for 2019, which will be good to have given that there has been some market pullback, as I think, everyone's aware.

[Operator:]

The next question comes from line Sam McGovern with Credit Suisse.

[Sam McGovern:]

I was hoping you can discuss a little bit more about where you think leverage should be over the course of a cycle where leverage should be mid cycle versus late cycle et cetera?

[Jim Metcalf:]

Sure. You know our target is around 2% Matt, as we've stated publicly, and that is really our focus. Now we're -- depending on where you view the cycle whether it's in the mid or getting later into the cycle, obviously, the lower or closer to that 2x target would be better. But I would say that this -- the combined business is one of the -- and we said this on some of our previous calls, NCI and Ply Gen share some common characteristics. And one of the -- I think, the keys is that both businesses generated significant and substantial free cash flow. So while we are focused on deleveraging, I'm very comfortable with the cash flow generation of the combined business. And as where we're at today, and frankly as we go through whenever that cycle may turn, I remain confident and comfortable with that. But with that said, our focus is deleveraging.

[Sam McGovern:]

Got it. With your comment in terms of the deleveraging coming both from EBITDA growth and then also debt reduction, how do you think about term loan repayment versus buying back bonds at a discount?

[Jim Metcalf:]

Yes. Well, I know which side you're -- typically we -- the nice thing about the term loan, Sam, is that we -- there's not a premium to pay that down and as you know that is Play Gem paid down $200 million voluntarily in the past of our term loan. So we've demonstrated not only ability, but the willingness to delever, not just from our growth of the EBITDA, but also from lowering the overall debt level. But those are things that we'll evaluate when that time is appropriate. The other point I would make on our debt structure is since you've brought up the bonds as well as debt, we are -- they are a covenant light. And our debt structure is pretty solid with a known near-term maturity; in fact our first maturity isn't until 2025.

[Operator:]

Our next question is from the line of Scott Schrier with Citi Group.

[Scott Schrier:]

I wanted to add on backlogs. Would it -- given the amount of steel price that's in there, it looks like it's fairly muted. I know you talked about a pullback in condition. I'm wondering if there’s any pull forward in demand, you had some nice volumes in both buildings and also in IMP. So I'm wondering what the dynamics were there to just pull forward the bidding activity really slows significantly to have that of a backlog only up modestly?

[Jim Metcalf:]

So, I guess, the way I'd answer that is, we had a really strong backlog going through, probably the first two thirds of the year, and we continue to have this strong backlog performance in the Insulated Metal Panels business. And as we discussed through all the price increases we ran, we knew we acknowledging the marketplace that we did have some pull-ahead activity associated with that. But we believe that right now our backlog reflects trends we're seeing in the marketplace. We continue to see solid performance in IMP along the lines that we've talked about due to the increasing mall systems penetration and a superior performance, and due to our ability to sell it through our adjacent channels. And then we see the buildings backlog trending in a pace that's in line with Jim's comments, around -- we historically said low rise, non-rise, 3% to 6%, our addressable market was 2% to 4%. And we see ourselves at the lower end of that range now. And -- but our backlog supports that. So we're comfortable that we're in line with that.

[Scott Schrier:]

Got it. And then I wanted to ask you about margins in IMP that look good. You're getting some incremental margins in there, not quite to the level that you've spoken about a while ago, is what you see normalized margin there. But is this margin profile that you're seeing for IMP? Is that sustainable? And could there be tailwinds if that mixed headwind that you had starts to alleviate over time. Just trying to think structurally, how you feel about the margin profile in the IMP business now? And how it could look going forward?

[Jim Metcalf:]

Yes. No, we're really pleased with the performance of that organization and the commercial discipline, they've demonstrated and the support they've gotten through the legacy business and the markets. And we believe that, as we stated in our last call that the mix we're seeing now is a reasonable expectation for the next few quarters, and then we'll continue to give you all insight and guidance as that moves forward. But we're really pleased with the performance of that business in it.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Steven Fisher with UBS.

[Steven Fisher:]

Just to follow-up on the last question, you touched a little bit upon the visibility on IMP. But I wonder if you could just talk a little more detail about it. Obviously, it's important to the growth trajectory here. Can you just talk about the potential to sustain the IMP growth at a double-digit pace? Or do you think that would slow to near the growth of your core markets over the next year or so?

[Jim Metcalf:]

Yes. So our core markets as we said is 2% to 4% the low end of that. And I don't remotely see that as an eventuality over the next 12 months for the Insulated Metal Panels business. As we talked about, it's a great story, is driven by energy codes, cost efficiency and installations, and its overall performance. And by the factor that it takes up less space to achieve the same thermal factor as ever competing products, and especially in a tightening labour market with increasing costs. It continues to be a superior solution. We see that. We see increased adoption. We are aggressively working in the marketplace on education, training, specifications of the product. As we talked about, we're seeing double-digits, good solid double-digit growth rates through our legacy channels. So we see that performance continuing to drive at the pace we have talked about historically, which is low double-digit growth rates due to the performance of the products and its capabilities in the current environment.

[Steven Fisher:]

And then, given the slowing in your core markets, I guess, to what extent are you guys feeling a need to find additional sources of cost savings around this deal? Or to what extent are you actually currently looking for to be more aggressive on the cost savings target?

[Jim Metcalf:]

We’re very focused on costs. This is a core competency of both companies. We talked about the combined -- the combination of the two companies. And really it’s exciting now because this -- the diversification of the market that we have, we aren't strictly in commercial or third commercial, third residential, but that repair and remodel side of the business is something that we want to continue to grow. That’s one of the reasons why we brought in companies like Silver Line that gives us a bigger footprint in that repair and remodel market. The margins -- have the different margin in each one of those segments. But also diversification of our procurement, if you look at the steel -- the legacy MCI steel procurement, approximately 60% of our raw materials were steel. That’s now under 40, the same with Ply Gem from a PVC standpoint. So it really helps us as you get through softening of the markets from a procurement standpoint because of our size. We’re also looking at freight. Freight has been a big issue over the last 24 months in both businesses. Now we’re a larger customer to carriers. We have commonality from the NCI commercial business and our siding business use very similar carriers. So we’ll be able to do things, for example, back hauls, common carriers and things where we are now a larger customer to carriers. So that gives us leverage and margin expansion. The automation at the plants, we’re finding some great projects there that will not only reduce our manufacturing costs, but also take an impact of the labour shortages that we’re all seeing. So that's another area that since we have now put the two companies together is our indirect procurement. We have subject matter experts on indirect costs, things, for example of the combined travel. We now have a bigger footprint healthcare. So there’s quite a few levers that having this combination that we can pull that -- individually, we didn’t have as much leverage. So our focus really is EBITDA growth. We -- from both an organic standpoint and inorganic standpoint, we want to have margin expansion. We’re very focused on margin expansion of each one our businesses. And along with that, we think there’s some great opportunity for innovation to be introducing new products to our customers. So we have numerous levers here that we can -- regardless of where the market is with us, we’re going to focus on navigating and create our own success.

[Operator:]

Thank you. There are no further questions at this time. I’d like to turn the floor back to Darcey Matthews, for closing comments.

[Darcey Matthews:]

Thank you, Brenda. Thank you everybody for your interest in NCI. We appreciate your time. Happy Holidays to everyone. And we look forward to speaking with you again in February.

[Operator:]

Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.