lpg gas grill Worthington Industries, Inc. F4Q09 (QTR End 05/31/09) Earnings Call Transcript
Worthington Industries(NYSE: WOR) F4Q09 financial report phone July 15, 2009-30 PM ETExecutivesJohn page.McConnell-George P., chairman and chief executive officer of the Board of Directors.President and Chief Operating Officer.Andrew Rose-Chief Financial Officer robert McMaster-richard G, senior financial advisor.Welch -Charles, a very independent researcher at controleranalystluke Folta-Longbow Researcher Sal Talani-Goldman Sachs Saxony Tumazos-John TumazosTaylor company] Mark pal-kebank capital markets Slavin von Redon-hockey capital operators remind us that certain statements made during this conference call are forward-lookingStatement in the sense of the Private Securities Litigation Reform Act of 1995.These statements have the potential to lead to risks and uncertainties where the actual results are different from the suggested results.For more details on factors that may cause significant differences in actual results, please refer to the press release.The replay of this call will be available on the homepage of our website.Worth the industry.com.I would like to introduce your first speaker, John McConnell, Chairman and CEO.John P.To join me on the conference call today is our president and chief operating officer, George Stoy;Andy Ross, our chief financial officer.Bob McMaster, senior financial advisor;Richard Welch, our controller.We thank everyone for joining us this afternoon.Today, we will ask Andy and George to review the situation in the fourth quarter and this year.Andy, please start with the Financial Review.B.For the fiscal year ended May 31, 2009, net sales of Andrew Rose were $2.6 billion, 14% less than last year, net loss of $0.108 billion$1.37 per share after dilution.Excluding restructuring and non-restructuringThe loss per diluted share was $0.03 years.The event included $97 million in goodwill impairment costs associated with [inaudible] metal frames, $43 million in retirement, severance, professional and factory closure costs, and $8.The sale of the Aegis earned 3 million.Gross profit margin for the whole year is 6.6%, from 11.Last year, because of a significant drop in sales, the price difference between the sales price and the cost of materials was also low, which was 6%.In the fourth quarter of fiscal 2009 as of May 31, we reported a net loss of $13.$7 million or $0.Earnings per share fell 126% from $54 million in the same period last year.Our fourth-quarter results include $6.Cost or market inventory write down 3 million before tax and $6 million for pre-tax restructuring, negatively affecting income by $0.09 and $0.06 respectively.Our performance deteriorated in fourth quarter of 2009 and the fiscal year, mainly due to the unprecedented economic weakness in the global economy and the resulting impact on our business, particularly steel processing and metal frameworks.SG & A expenses decreased by $19 million compared with the previous year and $22 million compared with the previous year.The SG & A fee is 10.Quarterly and annual sales were 7% and 8%, respectively.The lower fees are driven by lower pay, as the company level and many of our business units have not paid profit sharing or bonuses over the past six months.In addition, there are a number of cost-cutting initiatives, including further reductions in labor cuts for SG &.Another component of SG & A is the cost of bad debt, while our bad debt reserve has increased by $7.Down 6 million from last year, in fact due to the reduction in Chrysler and GM-related reserves, the company fell slightly from last quarter.So far, our credit risk management in automotive and commercial buildings has been very effective.We expect that the bankruptcy of these two OEM cars will not cause any significant losses, and the current losses of the first and second tier suppliers are minimal.This environment is often mentioned by our credit team because the world credit series has done a fantastic job so far. Unfortunately, there is more work to be done in this regard.Operating losses for the quarter were $19 million, excluding equity income from our unincorporated joint venture.Equity income from the joint venture fell 60% from $9 million in the fourth quarter of last year to $22 million, as earnings from all of our unincorporated joint ventures fell.As a whole, they generated $49 million in equity income for the year and paid a dividend of $81 million.WAVE is the biggest contributor to stock income and dividends.Miscellaneous fees are lower than the quarter a year ago and the quarter a year ago, as the minority equity deduction for our Spartan Steel Coating joint venture is lower.Interest spending fell by $1 in the fourth quarter.4 million, due to a sharp reduction in debt and lower interest rates compared to last year.Our current rate is about $2.Based on our recent capital changes, 5 million pounds per quarter, or $10 million per year, will be discussed soon.Due to pre-tax losses, our income tax offer for the quarter was $3 million, compared to $38 million this year.Income tax expenditures for 2008 amounted to $17 million, compared to $39 million for the whole year.There are not many benefits to losing money, but this is a benefit.Our actual tax rate for fiscal 2009 is 25.Compared to 9%, 26.Fiscal 5% was 2008.Excluding the acquisition, capital expenditures for the fourth quarter were $15 million, while Depreciation and amortization were $16 million.Capital expenditures, depreciation and amortization for the year were $64 million each.Although we had specific expansion projects in fiscal 2009, they are now basically completed.We expect that capital expenditures excluding acquisitions in fiscal 2010 will be significantly lower than Depreciation and amortization.The company did a good job in managing inventory.The stock of the whole company is 63 days, from 60 days of pressure cylinders to 61 days of metal frames, and 68 days of steel processing.In the past year, inventories fell by 48% tons and the dollar fell by 54% to $0.27 billion.Our balance sheet at the end of the fiscal year is in relatively good condition, with short-term debt of $0.139 billion, long-term debt of $100 million and total funding debt of $0.239 billion, our revolving credit loan is $0.434 billion.As many of you know, we have completed a $0.119 billion bid offer for $0.138 billion out of 6 projects.7% bills were outstanding in June 12, 2009.The main purpose of this effort is to further reduce our interest expenditure and provide additional contractual flexibility.The bill repurchase is funded through a combination of cash on hand and existing short-term credit instruments.Now, we will turn to our bank contract;At the end of the quarter, our total debt-to-ceiling ratio was 32%, well below the maximum allowed 55%.Another important bank deed for us is to require EBITDA to pay interest greater than 3.25 times in 12 months.At the end of the quarter, this ratio is 8.72 times after adding backCash fee allowed for our facility.As you would expect, we continue to monitor our buffers on these covenants, as one of our top priorities is to protect our balance sheets and maintain our access to low-cost capital.If necessary, we will continue to act to support our efforts to maintain the number of buffer targets.Since our current interest rate spending is about $10 million per year, this goal should become more and more easily maintained in the coming quarters.Now let's talk about the three business units, the fourth quarter and the annual performance, we start with steel processing.Steel Processing's quarterly sales fell 57% from $0.179 billion in the fourth quarter to $0.413 billion.The decline in sales is due to the decline in prices and sales caused by the decline and slowdown in GM and Chrysler.A year ago, the price of hot rolls exceeded $1,000 per ton, and by the end of 5, it had fallen below $400 per ton.Total trading volume fell 39% this year.The direct processing of the materials we own has dropped by 37% and the charges have dropped by 44%.The decline in car production directly affected the results of steel processing in fiscal 2009.This part of the revenue accounted for 38% of the total industrial revenue of Worthington this quarter.Compared with last year's income of $22 million, the operating loss of steel processing was $26 million, and the operating profit margin fell to-12.3% from 6.2%.The price difference between the selling price and the cost of materials has declined this year and quarter.Sales this year are $1.2 billion fell by 19%, resulting in a loss of $68 million in steel processing operations.Annual operating losses include restructuring costs of $4 million related to the transformation plan.The metal framework business unit accounted for 23% of revenue for the quarter.$0.11 billion in sales fell 51% from $0.226 billion in the first quarter of last year.Driven by weak construction markets and falling steel prices, steel prices fell.Compared with the same period last year, the gap between the average selling price and material cost reached 4%.Caused a loss of $1.4 million excluding restructuring costs, revenue for the fourth quarter of last year was $17 million.The metal framework lost $0.143 billion in operating costs this year, including $97 million in goodwill impairment costs and $14 million in facility closure and severance restructuring costs.Sales of $0.661 billion fell by 16% compared with sales of $0.789 billion in 2008.The company's first-quarter sales were $ 27%, or 0.129 billion of the company's total revenue, down 24% from last year.Compared with the decline in the European market, sales in North America have produced good results.Sales in North America have been driven strongly by sales of 14 ounces and 16 ounces of small cylinders, gas grill cans, helium balloon party cans and hand torches.Operating income of $9 million in the quarter fell 56% from $21 million in the same period last year.Operating income as a percentage of sales is 7.It dropped 1% from 12.The first quarter of last year was 1%.This year, pressure cylinder sales fell slightly to $0.537 billion compared to $0.579 billion last year.Operating income this year was $61 million, compared with $70 million in the 2008 fiscal year.This is a very difficult year for the Worthington industry, and all of our businesses have been and will continue to be affected by reduced demand.However, the response of our people is very good.The hard work behind the transformation allows us to quickly scale down our business and is creating a more efficient company that will be more profitable when the numbers return.The company's strong balance sheet makes us the preferred supplier for many current and future customers.Our financial flexibility allows us to quickly take advantage of attractive acquisition opportunities.All these actions will ultimately enable us to thrive when the economy returns.George Stoy will now comment on the action.George P.While we have seen a slight improvement in the level of business in some parts of our steel business, overall, the volume remains weak compared to historical levels.In the past six months, the volume of metal frames has stabilized, but it is at an unprecedented low level compared to the past.We believe we will keep our share, but we are still worried about the future of commercial buildings in the coming months.Given the weak conditions, we focus on making appropriate adjustments to these businesses to address current market realities.We have taken special measures to permanently close or temporarily idle facilities.In the past year, we have closed seven positions in the metal frame section, narrowed down two positions, closed a steel processing site, and announced the idleness of our rock Hill South Carolina factory on Monday this week.Metal Frames moved its headquarters from Pittsburgh, Pennsylvania, and breesville to Columbus, Ohio.We have reduced our employment across the organization by more than 20%, and even after our acquisition of Worthington Stairs, which we completed early in fiscal 2009, we have reduced our number of new employees by more than 130.We started in fiscal 2009 with about 8,000 employees, and today we have about 6,400 people in our team.Our pressure cylinders and wave jv have seen their business be negatively affected by the current economic downturn, but to a much smaller extent than steel and metal frames.Our pressure cylinder business continues to perform well in the current environment.Our efforts to control the cost and strategically expand market share in some key cylinder product lines continue to provide us with good service.We recently closed the purchase of Piper, an aluminum cylinder manufacturer, which will add to our ever-expanding production line for pressure cylinders.Piper's current aluminum product line is mainly for medical and paintball applications.In addition, we recently finalized an important contract in Europe to produce solar water heater tanks for a factory in Portugal.This is the continuation of our efforts to expand our business scope and diversify our products.Prior to Europe, our products were limited to LPG, rechargeable refrigerant and high pressure cylinders.In the past few years, we have expanded our products, including helium balloon time.Reusable refrigerant, air decomposition tanks are now actively seeking opportunities to participate in the booming market for green products.Our factory in Austria has recently been recognized as one of the 100 largest companies in Europe, and we are very proud of it.The facility continues to work heavily with management and our staff.The spirit of the company has brought great success in this facility and enabled us to achieve our goals.We also continue to seek other acquisition opportunities to expand our market and product range in the field of pressure cylinders.We are currently reviewing several of these products.Our WAVE joint venture continues to differentiate from other companies in the market through innovative and exciting product offerings.At a recent large industrial trade show, WAVE released its new low-voltage grid product, DC FlexZone.This grid product will allow the lighting equipment to move freely within the building without changing the wiring requirements.This grid will change the design possibilities and provide almost unlimited flexibility for architects, designers, contractors and building owners.We believe it will completely change the market for architecture and design.For those who may be interested, we encourage you to visit www.EmergeAlliance.Watch a video of this award-winning product.On the other hand, WAVE's latest facilities in India are under construction and are scheduled to be put into use in October.Two things to note are that our oracle erp system is now fully deployed and operates in all of our steel processing facilities.One of these systems is always difficult and challenging to install, but the information we have now is crucial to helping us drive our transformation efforts.We are very proud of the determination and tenacity of all those involved in the successful implementation.The last thing I want to talk about is our excellent security performance throughout the organization.Over the past six years, we have again highlighted the safe operation of our facilities.We are very proud and grateful for these achievements.In the fiscal year we have recently completed, both the recordable and lost time events are at the lowest level in history.Obviously, this emphasis is critical to our employees.It's simple for us, and we want all of our employees to go home every day in the same state as when they come to work.From a financial point of view, the lower accident rate is reflected in the lower cost of workers' compensation and improved financial performance.I now turn the phone back to John McConnell's concluding remarks.John P.McConnell's fiscal year 2009 is the first loss in our 54-year history, although I am very disappointed with this result, given the sudden and true nature of the outcome of this recession, without prompt and thoughtful action, it could be worse.I am proud of the actions and support of our management team and our entire organization.When the recession began, we set two goals, strengthening our balance sheet and protecting our current credit facility.You heard from Andy that we are currently ready to complete both tasks.Although the output of steel processing has stabilized and some facilities are growing moderately, we continue to operate under the assumption that the economy may deteriorate further.Our "moving forward" program is our transformation effort to significantly improve our performance, and it continues to create more opportunities for improving profitability.The identified opportunities now exceed $0.125 billion and the implemented initiatives are $70 million.While the incredible work of our employees changing our performance is still covered up under the pressure of a severe contraction in the number, I believe that as the number increases, they will at some point, the great work of our employees will be rewarded with great rewards, and our shareholders will also be rewarded with great rewards.We are now ready to answer any questions you may have.Question-and-Your first question comes from Luke falta-Dragon Bow research.Luke falta-Lombok's first question to research me is about your metal framework business and your expectations for your cash flow neutrality this year.I guess, first of all, does this also take into account the reduction in working capital inventory, or just the reduction in operational aspects?B.Andrew Ross's goal is to keep it cash-flow neutral in operations that do not include working capital.Luke falta-Dragon Bow research can you give us some color on your assumptions about the shipment and/or the metal deposit?John P.Are you talking about the future of McConnell?Luke falta-Lambo Research CenterJohn P.As I think George said on the conference call, McConnell's volume is relatively stable and this may still be the case.I think we are prepared for its deterioration, although we have seen some signs of moderation, because we both won some work on the future metal frames and the buildings we won when they finally found the financing to be released.Therefore, it is clear that if liquidity continues to relax, this may affect it in a positive way.Luke falta-Lambert study on edge, metal spread?John P.McConnell's profit margin is also relatively stable.Again, our steel prices are falling, and one of our competitors has announced two gains in the market, which we believe will contribute to future profits.Luke Folta-Longbow research has just done research on the short-term prospects of the car, and we have heard some evidence of supplementary inventory, as well as some-discontinued production will also be a problem this quarter.Can you give us the recent expectations about the auto market? How will this affect your results?John P.Obviously, McConnell probably knows as much information about what they're going to do.Prices began to rise in June or early July.In the last two weeks of July, there are a few factories that will be closed again and we haven't really seen GM start to restore capacity yet.So, while it is expected to have started, they announced that the extension would continue in order to happen again.At the moment, as we said, of course in June and early July, we have seen some growth in sales, especially in our car-related facilities.This is encouraging and we will continue to focus on the order book as it will not fill in too much in advance so we don't have good visibility to tell you.The next question comes from Sal Talani, Goldman Sachs.Do you give us some color for your metal frame business?How does the backlog look, is it as stable as the business itself?George P.Sal, I think we may have seen the backlog stay stable for six consecutive months, looking forward to the future, and we may see the same amount of backlog as in the first six months.While it's at a low level, we certainly haven't seen it drop further and we're obviously looking at it carefully.Sal Tharani-Goldman Sachs Salso in terms of fees, have you seen progress or are they getting smaller every quarter?George P.I don't think it will deteriorate Sal any further, but it won't increase either.According to Sal Tharani-Goldman Sachs, is it because of the automotive industry, or is the factory receiving more and more paid business?George P.It's a combination of the two, but I think it's mostly general sales in the market.Sal Talani-Goldman Sachs has performed well in the wave business, and revenue has fluctuated significantly in the past few quarters. I just want to know if it comes from quantity or price that has caused volatility over there?John P.McConnell sold a lot.Salar Talani-Goldman Sachs, sakoso, you 've actually seen sales growth in the first quarter.over-quarter?The revenue or profit share for this quarter is much higher than this one?John P.McConnell No.That's not what I meant.Andy, would you like to add some color to it?B.Andrew Ross, I mean, there's a bit of noise due to the way we report through our stock account.WAVE's revenue has some seasonality for them, but this yearover-At least if you compare our fiscal year, they are not as unstable as they seem.Another factor affecting our stock account is that we have other joint ventures there that are volatile and some steel processing joint ventures TWB and WSP have suffered some losses, this makes the stock account look less stable than WAVE's earnings.One more thing, in terms of pressure cylinders, you also add a lot of products related to consumers.Can you give us some breakdown? How much is your pressure cylinder on the consumer side and how much is the industrial side?John P.McConnell, I don't think we have this problem at our fingertips.George P.You are right. we have more and more products coming into this market.As you know, we got 14 and 16 ounces of small cylinders there last year.I don't have an exact percentage in my mind to calculate the retail revenue.We have balloon time to go there and we also have some 20 pound cylinders for sale through retail, our new product range, and torch packs are also in retail.We can get this number for you, but I don't have an exact number and I can quote you from my mind.The next question comes from Luke falta-Dragon Bow research.Luke falta-Longbo research has seen a decline in unit income in terms of your pressure cylinder business.I think there may be a lot of this due to mixing.Can you give us a sense of portfolio and pricing?B.Andrew Ross, I'm not sure I can give you specific numbers, but camping cylinder lines, our market share in retail channels has grown significantly, and it's a smaller project if you want, so this may be the reason for this result.I can't quantify it for you from above my head.Luke falta-Lambo studied another person, right in the flat rolling environment we see, recently announced a lot of price increases, can you tell us where you think the price will end, will we see that most of these increases are successful?John P.McConnell, this is something I don't want to guess.Obviously they want to see the price on a per ton basis because they can make some money.I don't think we have seen the volume and whether the market supports it.The next question comes from John Tumazos, a very independent study by John Tumazos.John Tumazos-John Tumazos Very independent research you have released some press releases in the past month or so with different growth plans, which may be difficult to quantify from the outsideCan you separate which one or two between bond buybacks, Piper aluminum cylinder business, US respiratory system, specific cylinders, [INAUDIBLE expansion] adds maximum profitability? DC power grid and Indian wave plant?John P.Of course, the Indian wave plant and the DC grid have just started and wave India won't be able to start until October, so I can answer both questions.Let's see if Andy can tell the other people?B.Andrew Ross, I mean it's hard to say that the two companies, the Piper acquisition is a relatively small company with revenues of about $30 million, so there will be some contributions there.When we bought it, it was actually unprofitable and it was a very low purchase price.Bond buybacks, the answer to this question is that it is actually revenue neutral, but it is good for us because our contract reduces interest rates.Until the maturity of the bond in December 1, its earnings were neutral.Obviously, the reduction in interest is beyond the scope of the assumption that we let it finance in the way it is today.John Tumazos-John Tumazos is very independent research, so shouldn't we put too much into the model for the current fiscal year?John P.McConnell is not much.I think we will be able to operate the Piper and greatly improve the operation of the Piper.Obviously we already have all the infrastructure and back office services so some of the costs are going to go away and we feel like we know the market very well and are able to move these things actively, however, it's a very small operation, so I'm not going to bake a lot for it, no.George P.I think a clear count on WAVE is that someone has commented on the downturn in commercial buildings and how this will affect WAVE.I just wanted to clarify that WAVE's business is made up of about 65% of remodeling work, not new buildings, so it does have an impact on their future results.John Tumazos-John Tumazos is very independent in terms of dividend changes this quarter, is there any particular event that affects the timing?Do you want to see more benefits from your correct size, or do you want to see an increase that hasn't happened in the spring?John P.No, McConnell. it's not true.We just want to make sure we have enough money and cash.We have taken some additional measures internally through our labor and wage cuts, and we would also like to combine those measures with a slight reduction in dividends.The next question comes from a research group under Charles Bradford.There are a few questions from the Charles Bradford affiliated research group, can you tell us what you think is the tax rate, cap ex and depreciation for this fiscal year?John P.All of McConnell's events in Washington, I expect this to be hard to predict, but I'll let Andy try it out.B.The £ 2010 Andrew Rose Cap ex is expected to be between $35 and $40 million this year.Depreciation and amortization is about the same as last year's $64 or $65 million.I think the tax rate in the forecast is 32%.George P.Stoe we may want to elaborate that although our tax rate is heavily dependent on a mix of international and domestic, so 32% is based on what we are planning now, you are looking at the tradition, american of rate of less than American of half.You can expect things to be different, but our best guess is 32%.The research group under Charles Bradford, can you talk about the level of activity you hear in the industry, the delivery or inventory of processing service centers?When do you think inventory will be cut?John P.I think it's hard to say, McConnell.I don't think anyone we talk to sees anything but very low volume.I would like to read most of your work and if the quantity stays the same here, the inventory level will be close to a low point.So, there's not much new news for you, but that's exactly what we think is happening right now.George P.Charles, the other thing I would like to mention is that it is clear that there are already some reboots on the steel side, but our calculations show that their capacity is still slightly lower than 50% about the level of business.The research group company under Charles Bradford believes that in terms of the monthly supply, how much could these inventories fall?John P.McConnell No.I would like to add a comment on the issue of the dividend by John Tumazos, and you ask if we have planned a peak that has not happened.I think it might be better than the answer I gave you, and more thoughtfully, as the recession continues and deepens, although it has become a little flat at this point, we don't have clear visibility on the horizon yet, because it may turn, so we stick to it as much as we can.But given the ongoing uncertainty and the lack of increased visibility, that's why we withdraw our dividend a little.Robert McMaster John, I would like to follow up on the previous issue and the current retail volume of cylinders is about 20%.If you exclude the American and blue rhinos in the world, we will focus them there, with an increase of about 26% in volume.The next question comes from [David Taylor-David P.Taylor.David Taylor-David P.Taylor & Company] I just want to know how accounting works as steel prices fall.Are you recording your inventory to the market now?John P.We have done this twice.Andy, do you want to do more work on this?B.Andrew Ross accounting rules are cost or low market, so you add certain parameters to the inventory cost, relative to the margin you usually get when you sell, if the price drops in addition to these parameters, the market will also be forced to fall further.So this is something we can't control.David Taylor-David P.Taylor & Company] you are now in half the time of the first fiscal quarter, do you see prices stable in the market?B.Andrew Ross, I think yes, if you're referring to your last question about inventory, the answer is yes, we 've seen stability, even in the last month or soOn the question of whether this will continue or not, I think it is an open question at this point, but the factory is obviously working to raise the price.When we take on lower costs or market adjustments, it is usually due to a rapid decline in prices, as we usually have 60 to 70 days of inventory on hand.If the price goes down gradually, this is usually not a problem, and we have problems when the price drops rapidly.The next question comes from Mark Parr-Keybanc Capital Market.Mark Parr-Keybanc Capital MarketsI has a few questions, the first one is can you give me a combination of charges for this quarter?John P.What is the cost of direct mixing?George mentioned that, and I don't remember what you said, or maybe he didn't, he just reported the volume we haven't done math here yet.If you want to continue with your second question, we will put it here in a second.Mark Parr-Keybanc Capital Markets are curious about this you have some more car-oriented processing operations and some are more building-oriented and I think what I think is Sparta rather than Delta, I would like to know if you have seen potential integration opportunities as an opportunity to further reduce costs?George P.I think the general answer is No.They all produce different substantive products, which is a big difference, we can't run one in another, of course, one is a joint venture, so there is noMark Parr-Keybanc Capital Market is another thing I'm curious about if you can give us some comments we 've read a lot, see a lot about the flexibility of electric furnace protection steel producers in increasing production momentum.Following these lines of thought, I would like to know if you see any difference in the delivery time of the electric guard producer compared to the integrated producer?If you can comment on the lead time situation?John P.McConnell's delivery time actually makes a big difference between all plants, but I wouldn't call it a difference.So, the strange thing is that, as you already suspect, the scheduling of factories becomes more difficult in such a large market.Therefore, at the end of the day, the delivery time between the factories will change a lot, not because one is electric and the other is not electric.Mark Parr-Keybanc Capital market you will think of the fact that the decision to build a blast furnace involves a considerable amount of capacity, so it is very constructive that the integrated plant may postpone to their capacity orders.Do you have any restrictions on the EAF aspect you see from the lack of waste supply?John P.What is McConnell's question about the supply of waste?Mark Parr-Keybanc Capital MarketsI said scrap supplies forced some efs to extend the lead time as they couldn't find enough time?John P.I don't know McConnell.George P.Mark, I think this is a price issue.Clearly, scrap prices have risen significantly, and if some integrated suppliers have signed contracts for raw materials, this makes them more competitive, this may prompt them to start over and take action on the advantages they see as cost advantages.Mark Parr-Keybanc Capital market, if I could be on Piper, I had only one last question, Piper was involved in a series of different businesses long ago, especially the impact extrusion business of airbag components, I know their strategy a long time ago was to stay away from this and then go into the cylinder operation that apparently they have done.But, I would like to know if, through this acquisition, you have purchased a large amount of capacity that is not utilized or fully utilized?Also, can you talk about the utilization of Piper's current operations and what they might achieve in the next three to five years?George P.Stopped on the products I mentioned earlier about medical and paintball applications, and over the years they have been involved in a large number of other smaller use products, what we are doing now is evaluating how many products we want to produce as part of our long-term plan for the business.At present, our personnel within the cylinder business are actively engaged in this work.Mark Parr-Keybanc Capital market I think the more basic question is, Will Piper be profitable in the first 90 days of operation as the company's fees are properly integrated and eliminated?B.Andrew Rose. yes.Mark, in order to answer your question, the direct business in the fourth quarter was approximately £ 68% and the charge was approximately £ 42%.The next question comes from Lavin von Reden hockey capital.Captain ravenvon Reden Hockey wants to follow up on some JVs.You mentioned that some of them are actually losing money.What are your expectations when you look at 2010?Will we try to get these people closer to break even?John P.Well, that's certainly our intention, McConnell.I think we have been doing a good job at the steel company trying to catch up with the volume loss and we are moving on this road.So, at least we want to see them break even.On the other hand, the metal frame does a very good job of fully adapting to the current market, which is what we will focus on.If the volume drops further, we will continue to bring the business to the market, and we hope that the anecdotal evidence we have seen in the four or five buildings starts in October and we have stopped for a while, so when this happens, it will be a welcome news and I hope that this trend will continue to finance as these projects are discovered.Lavon Von Redden-Hockey CapitalI wants to make waves in the context of what you call 65% of the business being transformed.I think commercial construction is expected to drop by double digits next year, and I think some of the transformation businesses may drop slightly.Is it reasonable to assume that the middle digit of the remodel side drops and then the double digit drops on the building side in the wave?John P.It sounds very reasonable to us.Finally, for the joint venture, is there a way for us to think about the contribution of cash dividends in 2010?B.Andrew Ross is very good in philosophy, no matter what profit the wave brings, is usually paid in the form of dividends, as I said earlier, their forecast for this year is down from the previous year, but not significantly.So we don't want to give specific guidance on that.OperatorI shows you have no further questions.John P.McConnell thanked everyone for joining us again today.Of course, when we look at the environment in which we operate, I am very satisfied with where we are.We have enough liquidity and capital to act as we move forward.We will continue to try our transformation efforts that not only eliminate costs, but also remove all aspects of our business from how we buy, how we move, and how we sell our products.Mature in the company.It is not a coincidence that the position that started a year and a half ago is also the best performing steel position at this time, which clearly shows that it will continue to improve as each position matures.Thank you again for joining us and we will talk to you next quarter.This concludes today's meeting.You may disconnect at this point.