Universal Stainless & Alloy Products, Inc.
Q4 2013 Earnings Call Transcript

Published: 5 Feb 2014

[Operator:]

Good day ladies and gentlemen and welcome to the Universal Stainless Fourth Quarter 2013 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder this conference is being recorded. I would like to hand the conference over to June Filingeri. Ma'am, please go ahead.

[June Filingeri:]

Thank you, Karen. Good morning everyone. This is June Filingeri of CommPartners, and I would also like to welcome you to the Universal Stainless conference call. We are here to discuss the company’s fourth quarter 2013 results reported this morning. With us from management are Denny Oates, Chairman, President and Chief Executive Officer; Mike Bornak, Vice President of Finance and Chief Financial Officer; Paul McGrath, Vice President of Administration and General Counsel, and Chris Zimmer, Vice President of Sales and Marketing. Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will take your questions. And Karen, will instruct you on procedures again at that time. Also please note that in this morning’s call, management will make forward-looking statements. Under the Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements which are more fully described in today’s press release and in the company’s filings with the Securities and Exchange Commission. With these formalities out of the way, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin.

[Dennis M. Oates:]

Thanks, June. Good morning everyone. Thanks for joining us here today. The fourth quarter was our weaker sales quarter of 2013 and concluded a very challenging year for the Metals Industry and for Universal. The fourth quarter also was a period in which Universal reported a 42% increase in bookings over the fourth quarter of 2012 and 26% sequential increase in bookings, despite a loss of a major customer during the quarter. Our fourth quarter net sales were $40.3 million, a decrease of $6.6 million from the fourth quarter of 2012 on 5% lower volume. Sequentially sales were down $8.2 million on 14% lower shipments. While our sales level was in line with our expectations, the sales mix remained weighted towards semi-finished products. Low shipment and plane [ph] activity levels, the mismatch of surcharge and raw material costs and expenses associated with customer approvals and new product development combined to limit profitability. As a result our gross margins slipped to 3.7% of sales. The net loss per share was $0.41 for the quarter including a $0.14 write-down of a deferred tax asset. Before the deferred tax asset write-down was $0.27 per share about the same as in the 2013 third quarter. Cash flow from operations remained positive and strong in the fourth quarter at $7.5 million. We aggressively managed inventories, controlled capital spending and reduced debt. For all of 2013, we reduced inventories by $13.2 million, that was approximately $11 million of vacuum induction melted products in work in process at year end. Debt was reduced by $16.9 million for the year, as a result our debt-to-total capitalization felled at 31.4% at the end of 2013 versus 35.1% at the end of 2012. There were additional accomplishments in 2013. The order of our first contract with Rolls Royce is among the top items in the list. The five year contract required an extensive effort to meet their demanding requirements for qualifying our entire manufacturing system, including vacuum induction melting and forge production in North Jackson. Our fourth quarter sales included order shipments tied to that contract, which didn’t officially begin until January 1 of this year. Our agreement with Haynes International is another major achievement which leverages both our vacuum induction and melted capacity and hardworking capabilities of our radial forge. Haynes has become an important melting and conversion customer for Universal. Our technical and operating teams have also begun technology exchanges with mutual benefits for each company. There were additional customer approvals and new products developed for major customers in the aircraft, power generation and oil and gas markets. We’re continuing to keep those names confidential for contractual and competitive reasons. Our plan to move to more technologically advanced higher margin products that we launched with the acquisition in North Jackson has required us to earn additional industry certification for all our facilities. We obtained nine such certifications since 2012, four in 2013, while our main certification objectives have mostly been accomplished there remains much to do in 2014 and 2015 regarding further customer approvals. We introduced more than 50 new products in 2013, defined by grade and shape. In addition to our focus on winning customer approvals and certifications, we continued refining operating processes company-wide. Commissioning new finishing and testing equipment and cross training our workforce. We have maintained a productive relationship with our workforce as reflected in the yearly renewal of the Bridgeville contract which runs for the next five years. Taking together our accomplishments in 2013 that positioned us to capture broader opportunities as the metal industry recovers. As I mentioned earlier the notable increase in our order entry in the fourth quarter, which was up 26% sequentially and 42% higher than the fourth quarter of 2012 is indicative that some level of recovery is beginning. Our order entry remains strong in January. Customers are expressing more optimism, although they remain cautious, while their direction is clearly more positive than recent quarters, we expect some level of volatility will undoubtedly continue. Let me turn to our end markets to give more contracts for 2014 with the overall comment that if customers simply buy based on their demand and destocking slows or stops, shipment volumes at the mills will demonstrate measurable improvement. With that said aerospace remained our largest market in the fourth quarter of 2013 at 57% of total sales. We shipped 6% more tons to the aerospace market compared with the fourth quarter of 2012, but sales were down 11% due to lower surcharges and mix. Sequentially our aerospace sales were down 20% on 14% lower shipments consistent with customer year end inventory and management, and supply chain, our backlog going into the quarter and sales mix. Majority of our increased order entry since December, has been for aerospace products. There is growing commentary in the marketplace that aerospace inventories have stabilized after the misalignments caused by delays and the rollout new aircraft models a few years back in inventory adjustments in the aftermarket. From our perspective few of our customers are talking about further destocking. Let’s look at some of the demand trends. Airline passenger traffic remains healthy, the international air transport association reported a 5% increase in global passenger traffic year-to-date in 2013 through November. Freight traffic also showed improvement. There is been more activity in the aftermarket, GE reporting that their commercial spares orders were up 16% in the fourth quarter. GE attributed the increase to three factors. Increased flying hours, aging fleets and some re-stocking after a period when airlines cut back on their spare parts inventory. The news in schedule production ramp up, that the aircraft makers also remain positive. Boeing reported a record 5,080 airplanes in their backlog at year end 2013, including 1,355 net orders won last year. Cumulative orders for the 737 MAX reached to 1,800 and a reported record orders and commitments for the recently launched 777X and the 787-10. In terms of production levels they have now achieved 10 per month of the 787 and recently announced plans to increase their rate to 12 per month in 2016 and 14 per month by 2020. Meanwhile, the 737 MAX is scheduled to move to 42 per month in the next few months and 47 per month in 2017. Airbus entered 2013 with even more airplanes in their backlog in Boeing a total of 5,559, Airbus itself is exploring additional production ramp ups for both the A320 and A350. As I mentioned last time the A350 XWB will be powered by the Rolls Royce Trent engine. Power generation was our second-largest market in the fourth quarter representing 12% of sales inline with both the fourth quarter of 2012 and 2013 third quarter. Volume increased to 8% from the fourth quarter of 2012 although sales were down 15%. Sequentially sales were down 22% on 33% lower shipments. It was especially weak year in the power generation market where demand was mainly confined to maintenance projects. There maybe some improvement on the horizon. GE reported that coding activity picked up in the fourth quarter with most of that strength in the U.S. as well as in China, while they were not calling a significant turn in gas turbine demand. They did say coding activity has made them much more positive. Our customers remained cautious planning around more maintenance business in 2014 with new turbine opportunities late in the year. Oil and gas market sales represented 8% of fourth quarter sales versus 10% in the third quarter of 2013 and 16% of sales in the fourth quarter of 2012. Our oil and gas sales were 39% lower sequentially on similar decline in volume. They were down 60% from the fourth quarter last year on 51% lower volume. We are seeing an ebb and flow in oil and gas all year, but the fourth quarter was especially slow. The oil service majors has some positive observations about the prospects for 2014. Schlumberger expects to increase their E&P spending this year, impart due to ongoing strength in deepwater activities in the Gulf of Mexico. BakerHughes is projecting a 5% increase in well count and plans to increase its investment in new products. Halliburton had some weather disruptions in North America in the fourth quarter, but expects growth in North American in 2014 also partly due to the strength in the Gulf. We expect some further destocking in the first half with improved sales activity in the second half. Heavy equipment market sales represented 11% of fourth quarter sales, up from 9% in the third quarter of 2013, and 10% of sales in the fourth quarter of 2012. As expected we saw a sequential improvement in this category with sales up 10% on a 9% increase in volume. Sales and volume were down slightly from 2012 fourth quarter by 4% and 2% respectively. Automotive model changeovers are a major driver for our tool steel sales to this market. Ford planned to launch 16 newer refresh vehicles in North America in 2014, which is triple a level they launched in 2013. General Motors will introduce 15 new or upgraded models in the U.S in 2014. So the year is setting up well although imports can always be an offsetting factor in this market. With my end market review complete, let me turn the call over to Mike for his financial review.

[Michael D. Bornak:]

Thanks Denny. As Denny indicated, our fourth quarter net sales were $40.3 million, which is a decrease of approximately $6.9 million or 15% when compared to the fourth quarter 2012 net sales of $47.2 million. For the full-year 2013, our net sales were $180.8 million, which is down approximately $7 million or 28% from full-year 2012 on a 24% lower shipment volume. Our net sales for both the fourth quarter and full-year were primarily impacted by soft market condition in most of our end markets. On a positive note, we are encouraged that market conditions maybe improving as reflected and more than 17% increase in our backlog from the end of the third quarter much stronger fourth quarter 2013 bookings. The increase in bookings is carried over into 2014 as far as Denny mentioned. Our gross margin in the fourth quarter of 2013 was $1.5 million or 3.7% of net sales, compared to $6 million or 12.7% of net sales of 2012. The decrease from the prior year period is primarily due to lower shipment volume, operating activities, a lower product margin mix and a mismatch of surcharges for raw material costs. For the full-year our gross margin was $13.9 million or 7.7% of net sales, compared to $41.1 million or 16.4% of net sales in 2012. Our full-year 2013 margins were primarily impacted by the following factors compared to 2012 levels. One the 24% increase in shipment volume and less favorable product mix, two, lower operating levels throughout the year which hampered our ability to absorb the fixed costs, as we would have under normal operating conditions, three, higher fixed cost and depreciation expenses with the full integration of North Jackson and four, the lower raw material surcharges which were mismatched with higher cost inventory melted in prior period being shift over the year, in particular in the second half of 2013. Our selling, general and administrative costs for the fourth quarter of 2013 in the full-year 2013 were approximately leveled with the same 2012 period. As a result, our fourth quarter 2013 and full-year 2013 operating losses were $2.6 million and $4 million respectively, compared to our operating profit of $1.8 million in the fourth quarter of 2012 and $23.4 million for the full-year of 2012. In the fourth quarter of 2013, we also took a valuation allowance or write-down of a state deferred tax asset of approximately $1 million. As the future tax benefits of this asset, which were tied to direct sales to end customers in the State of New York are unlikely to be realized in the foreseeable future. This valuation allowance had no impacts on our bank covenants, but it reduce our fourth quarter 2013 diluted earnings per share by $0.14. That brought our net loss for the fourth quarter of 2013 to $2.9 million or $0.41 per diluted share on approximately 7 million diluted shares outstanding. In comparison, in the fourth quarter of 2012, we posted net income of $1.1 million or $0.16 per diluted share on approximately 7.5 million diluted shares outstanding. For the full year, our net loss was $4.1 million or $0.58 per diluted share compared to net income of $14.6 million or $2.02 per diluted share. As I indicated last quarter, we have responded to industry conditions by making concerted efforts to reduce our inventory levels throughout the second half of 2013. And flexed down our capital spending programs to help generate cash and repay a portion of our long-term obligation. During the fourth quarter, we generated cash from operating activities approximately $7.5 million. For the full year, we generated cash from operating activities of $28.6 million. Primarily as a result of reducing our inventory levels by $13.2 million and reducing on our accounts receivable balances by $3.3 million. With the cash generated, we repaid $4.8 million of bank debt in the fourth quarter of 2013 and $16.9 million for the full year. Our total debt to capitalization at the end of 2013 including the 31.4% compared to 35.1% at the end of 2012 and we are in compliance with all of our bank covenants. Our capital expenditures in the fourth quarter of 2013 totaled $1.4 million compared to $4.3 million in the fourth quarter of 2012. For the full year 2013, our capital expenditures were $11.8 million compared to $35.1 million in 2012. The lower capital spending when compared to the prior year is primarily due to the completion of assets placed in service during the latter half of 2012 and early 2013 related to our North Jackson facility, as well as delaying certain capital projects until market conditions fully improve. Before I turn the report back to Denny, I did want to note that heading into the first quarter of 2014, we expect our gross margin to be negatively impacted by higher natural gas cost in the range of $500,000 to $600,000 resulting from severely cold weather conditions since the beginning of the year. That concludes my financial report. Denny I’ll turn the call back over to you.

[Dennis M. Oates:]

Okay, thanks Mike. As I said at the outset the fourth quarter concluded a difficult year for the metals industry and for Universal. This is very much reflected in our sales activity and profitability for both the quarter and the full year. We took actions throughout the year to adjust operating levels, managed inventories, control capital spending and reduced debt with a result of cash flow from operations was positive in each quarter of 2013 and increased 35% for the year. The fourth quarter and full year 2013 also includes substantial progress of Universal, as we execute our plan to move to higher margin more technologically advanced products. We achieved major customer approvals from such companies as Rolls and Haynes. We completed the heavy lifting on critical industry approvals and were successful gaining accreditations across the board. We introduced 15 more new products, we strengthened our operations company wide and we trained, cross-trained and maintained our workforce the next phase of growth. As a result, we are in a best position we have ever been to capture broader opportunities as the metal industry recovers. We are starting 2014 with more wind in our back than we had entering 2013. However, let’s me be clear, the first quarter is still going to be a tough quarter for us, even as the early positive momentum continues. All indications for the marketplace suggest 2014 will provide progressive demand improvement, as the year proceeds with our development integration in North Jackson adding to our opportunities, customers remain cautious. Our strategy therefore is to keep laser focused on executing our long-term plan, so that as demand recovers we will be ready to seize the opportunities. With that I will end our formal remarks and turn it over to you for questions.

[Operator:]

Thank you. (Operator instructions). Our first question comes from the line of Michael Gallo from C.L. King.

[Michael W. Gallo:]

Hi, Mike, Denny good morning.

[Dennis M. Oates:]

How are you doing Mike?

[Michael W. Gallo:]

I am doing okay. Just a couple questions. I am trying to get my arms around the gross margins. Obviously, they bounced around quite a bit. So I was wondering, you obviously had the headwind on natural gas in the first quarter, but you had a significant relative increase in reroll business as a percentage of mix in the fourth quarter. So what kind of gross margin levels should we think about going forward at least for the first quarter? Will it be improved from Q3, Q4? Can you get back to where you were kind of first half of 2013 or is that more second half to kind of get back to a double-digit rate?

[Dennis M. Oates:]

I would characterize it has improved driven by a couple of things, the major one being our activity levels in the first quarter will be higher than what we saw in the third and fourth quarters, everyone has a negative volume variance picking out into our P&L, so that’s one basic positive that really killed us in the third and fourth quarters, we expect sales to be stronger than we’ve seen in the last couple of quarters.

[Michael W. Gallo:]

All right.

[Dennis M. Oates:]

We don’t see us getting back to the margins back in 2011 and 2012, in the first quarter though, the one wild card in that is this whole weather situation.

[Michael W. Gallo:]

So, I mean it sounds like natural gas to be 100 basis point kind of headwind to gross margins in the first quarter?

[Dennis M. Oates:]

Yes that is a reasonable number, and Mike called out 500,000 to 600,000 that’s our best estimate based upon where we are today, and as I’m sitting here, I mean it is last night, we are expecting more bad weather over the weekend, that’s our best estimate, it could be a little bit higher than that, we assume though that depends upon how the weather plays out and that’s our natural gas and some delivery cost of electricity to our Dunkirk facility, it doesn’t take any consideration some of other issues we wrestled it, just operationally in terms of getting product to customers, getting raw materials into our facilities and that kind of thing.

[Michael W. Gallo:]

And in terms of just the backlog, how much of that is scheduled to ship kind of in Q1 or Q2? I guess how much is the improvement in Q1 predicated on continued improvement in order flow as we come through February and into March as opposed to what you already have in backlog? And then I was wondering, as a second part of that, how much of the backlog as it exists today is related to reroll business that I think rolls off, correct me if I'm wrong, in the March or April timeframe?

[Dennis M. Oates:]

Yeah let Chris Zimmer answer the first part, and I will take the second part.

[Christopher M. Zimmer:]

I would characterize our first quarter is being about 85% to 90% on the books right now, we have a general idea of where that business is going to trend based upon bookings, for the re-roll business the loss of the Talley business will still have some carry over from 14 shipments in the first part of the first quarter but in larger part that business is going to be roughly half of what it had been traditionally.

[Dennis M. Oates:]

And our last shipment in Carpenter, Talley would be in February

[Christopher M. Zimmer:]

That's right.

[Dennis M. Oates:]

At this point, not March.

[Michael W. Gallo:]

Okay, so you'll have, how much revenue do you expect? Do you expect kind of a $2.5 million-ish number for the first quarter from Talley? Is that back of the envelope right?

[Dennis M. Oates:]

Right now it’s about $1.1 million.

[Michael W. Gallo:]

$1.1 million? Okay. So it is pretty much running down and that will be added in going forward. That will be out of the business. And then final question, how much of the backlog is in the premium alloys now?

[Dennis M. Oates:]

That struck in right around 5% to 10%, it’s a growing number, but it’s still in that number single-digit range.

[Michael W. Gallo:]

Right. I mean, I would think just the nature of the Talley business rolling off, that that is going to grow it as a percentage, but I assume the whole number is growing as well?

[Dennis M. Oates:]

Yes, the percentage of our business will continue to evolve in a positive direction, more remelted products, more finished products did naturally have a higher margin associated with them, that mix will improve with these new approvals that we have, the new contracts that we are taking on and with the Talley business going away that's semi-finished business that was towards the lower end of the margin side of our portfolio.

[Michael W. Gallo:]

So I think, it helped it from a utilization standpoint?

[Dennis M. Oates:]

Yes, if you look at the Talley business, the negative on that is, it's a sizable amount of volume 150 to 200 historically at the Bridgeville facility. Two things to do there Mike, one is to adjust your cost structure which we done, so it doesn’t have a negative impact on the bottom line. The other one is to look for replacement business which we are in a process of doing and some of that I think you see in the level of bookings we had in the fourth quarter and its more to come there.

[Michael W. Gallo:]

All right, okay. Okay, thanks very much.

[Dennis M. Oates:]

You are welcome.

[Operator:]

Thank you. And our next question comes from the line of Dan Whalen from Topeka Capital Management.

[Dan M. Whalen:]

Great, thanks. Good morning everyone.

[Dennis M. Oates:]

Hi, Dan.

[Dan M. Whalen:]

Just I guess circling back on similar issues. One, I guess just given your broader commentary regarding Q1, is it fair to assume that we will see additional inventory reductions and further debt paydown?

[Dennis M. Oates:]

In the first quarter?

[Dan M. Whalen:]

Yes.

[Dennis M. Oates:]

I would not account on that, no and the reason I won't account on that as we look at our bookings coming into the fourth quarter, quite frankly right now we are producing at a higher level.

[Dan M. Whalen:]

Okay.

[Dennis M. Oates:]

So it’s going to be a function of how fast we turned that in the first quarter. My expectation internally is it will be basically flat.

[Dan M. Whalen:]

Oh, great. Okay, so we have kind of normalized on that.

[Dennis M. Oates:]

Actually inventory, I don't see significant reduction, we don't see significant reductions inventory or significant debt paydown in the first quarter.

[Dan M. Whalen:]

Okay. So it sounds like inventory turns will be picking up and just kind of looking in the rearview mirror here, certainly first half of 2013, we just saw a continuous slide in nickel prices. The second half was kind of rangebound, more stable. Is a lot of this misalignment between surcharges and raw materials through the system or is it more a second-quarter event where it is kind of more normalized?

[Dennis M. Oates:]

There is still some more to come and keep in mind some of the good example of that would be where we are making product, its vacuum induction melted. We made a lot of that product on an experimental basis as far ago with fourth quarter of 2012, its good product, we didn't have the approvals, as the approvals come on we are able to sell some of that product, that's going to come out of the inventory. The inherent metal cost in some of that product is a lot higher than what it would be we made it today. So we make money on it, we don't make the same margins spread on it, so that’s a typical example what we are talking about there.

[Dan M. Whalen:]

Okay, so…

[Dennis M. Oates:]

But actually look each month at the going forward, and you look at the trend in nickel, nickel has been down and bouncing around for the last six months in a relatively tight band. So that issue is becoming smaller and smaller with each passing quarter, but we still have product in our inventory that was produced prior to that drop off that occurred really mid second quarter 2013.

[Dan M. Whalen:]

Okay, so first quarters, I mean…

[Dennis M. Oates:]

See a little bit, you’ll see some – we still more to go in the first quarter, that will be less than the fourth quarter and that will continue to cycle until we flush that all through the system.

[Dan M. Whalen:]

Okay, great. Okay, thanks a lot, I appreciate that.

[Operator:]

Thank you. (Operator Instructions) Our next question comes from the line of Philip Gibbs from KeyBanc Capital Markets.

[Philip N. Gibbs:]

Good morning.

[Dennis M. Oates:]

Hey, Phil. How are you?

[Philip N. Gibbs:]

Doing, okay. I am just curious, Denny, the last couple of weeks of the – this last couple weeks here in 2014 as far as what you are seeing, I think a lot of the macro data has been fairly muted to just downright negative as far as the slowdown in some of the industrial indicators and the automotive indicators and some of the construction indicators. Some of that I think a lot of people want to pin on weather, but I am just sitting back kind of scratching my head wondering maybe it isn't and maybe we are slowing down. Is there anything that you can see in your business over the last couple weeks that would maybe say that you believe this is temporary or is it just too early to tell?

[Dennis M. Oates:]

I can't point to anything at our business, that would say that we are slowing down, if you look at our booking in January, they have continued at or slightly above what we're in the fourth quarter. It hasn’t declined in the last few weeks or anything along those lines. If I look at raw materials, we are seeing a phenomenon, we are not seeing spikes in raw materials going up, and things aren’t running away from a price standpoint. But we are seeing problems and I look at this is a positive, I think we got little spoiled, we could call and order raw materials and get delivery the next day. Virtually all of 2013, in the last two, three weeks, things have tightened up, that we had to do a little more planning, advanced planning and we can’t get stuck in the next day or two, in terms of raw material. I am talking about scrap here and things like that, so to me that’s indicative, the reason I say is positive, that’s indicative, that activity levels are picking up, some of that maybe weather related, it’s hard to discern, but I don’t think we are generating that much scrap, due to the weather and so forth and as a result we are seeing some tightness there from a supply standpoint. So when I look at raw materials, I don’t see it there, I don’t see it on the sell side, but one place you think it would be automotive or general industrial type stuff and there we continue to see our customers saying demand would be relative healthy in 2014, not jumping significantly, but at relatively healthy levels where they were in 2013. And other customers are generally positive, but you'll note in my comments I used the word cautious probably five times I believe, and that's the reflection of I think what you are seeing and assuming out there that people aren't seeing anything directly negative in the business, they are typically talking about growing their sales in the year 2014, the most common number I hear was 3% to 5% with much less destocking which is good news for mill standpoint, but people keep reading the same thing in a newspapers and get little concerned about that, so that's the reason why I say cautious so much. So I'm not seeing and I can't point one thing in our business that saying things are going to slowdown are definitely nothing would indicate things that slowdown based upon the last two or three weeks.

[Philip N. Gibbs:]

Okay. And just curious, in the cost-of-goods breakout, typically, we've been getting a material, a raw material cost and then the operating costs. Should we expect that in the filing or is there any breakout you could give us there because I know that is typically something we look for?

[Dennis M. Oates:]

Yes, it will be in the filing Phil.

[Philip N. Gibbs:]

Okay. And then just lastly, Denny, anything that, maybe aside from the cold weather or maybe the spike in energy costs, anything that really surprised you in the fourth quarter relative to what you were thinking at the end of the third-quarter call?

[Dennis M. Oates:]

I think the incoming level of bookings were stronger than I anticipated at the third quarter. The level…

[Philip N. Gibbs:]

Anything related in the mix though in there that may have surprised you or were you looking for the mix to be more?

[Dennis M. Oates:]

I think some of the year end push outs occurred in products that typically carry a higher margin and we had to flushing out of the final Talley reroll billet that was a normal quarter shipments in the fourth quarter or so. When you put the numbers together our mix came up less positive or more negative how we want to characterize it than we anticipated going into the quarter, but that was largely – we knew the reroll billet number was there, when you look at what was pushed out that was largely some of our more profitable margins products.

[Philip N. Gibbs:]

Okay, thank you.

[Dennis M. Oates:]

You’re welcome.

[Operator:]

Thank you. (Operator Instructions) We have a follow-up from the line of Dan Whalen from Topeka Capital.

[Dan M. Whalen:]

Great, thanks. Just more a modeling question and I may have missed this in your initial comments, but just with North Jackson, how should we be thinking depreciation and amortization as we progress through here in 2014?

[Dennis M. Oates:]

I mean I think it would be pretty steady Dan, full-year depreciation expense was about $14 million last year, not expect above the similar level for this year as well.

[Dan M. Whalen:]

Steady sequentially through the quarter?

[Dennis M. Oates:]

Yes.

[Dan M. Whalen:]

Okay. Great, thank you.

[Operator:]

Thank you. And I see no additional questions at this time. I would like to turn the conference back to Mr. Oates for any concluding comments.

[Dennis M. Oates:]

Okay, thanks again for joining us today. 2013 was a year of challenge and progress for Universal. We started 2014 with cautious optimism as evidenced by our bookings and our backlog. Especially when we look at the second half of the year, we expect the year to be one of the progressive improvement. In any of event we remained fully focused on building on our progress to date and executing our long-term strategic plan and look forward to updating you in April on our progress during the first quarter of 2014. Hope everybody has a good day and stay warm and out of the snow. Talk to you soon.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.