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Simpson Manufacturing Co, Inc. (NYSE:SSD)

Q4 2009 Earnings Call

February 3, 2010 9:00 am ET

Executives

Barclay Simpson - Chairman of the Board

Karen Winifred Colonias - Chief Financial Officer, Treasurer, Secretary

Analysts

Torn Esprin (ph) – CGS Securities

Garik Shmois – Longbow Research

Trey Grooms – Stephens, Inc.

Barry Vogel – Barry Vogel & Associates

Steven Chercover – D. A. Davidson & Co.

Keith Johnson – Morgan, Keegan & Company, Inc.

Robert Kelly – Sidoti & Company

Peter Lisnic – Robert W. Baird

Operator

Good day and welcome to the Simpson Manufacturing Company fourth quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-answer session. (Operator's Instructions) I would like to turn the call over now to your Chairman, Mr. Barclay Simpson. Please go ahead, sir.

Barclay Simpson

Well good morning, everybody, and thanks for joining our CFO Karen Colonias and myself. Charles Dickens because his novel A Tale of Two Cities with a phrase that clearly describes Simpson Company's performance last year. "It was the best of times, it was the worst of times." 2009 was our worst year in terms of profit, the only one in the history of the company where we've lost money in two quarters, and I must admit I did not see that coming. But where 2009 was one of our best years was in our progress in becoming more of an international company. Losses in various operations and entities were largely because of setting the stage for future sales and profits internationally. One substantial loss that was not an investment in the future was Dura-Vent's '09 operating loss of $3.9 million. While we've made a lot of progress in reducing Dura-Vent's operating cost, we continue to work on a long-range program for achieving an acceptable return on capital.

Especially costly last year was the Liebig acquisition. Its metric mechanical anchors and code approvals are a key to substantial markets in China and Asia as well as Europe, and major changes in personnel and manufacturing will continue to be costly there this year. But the future positive financial results from being able to manufacture these products in and for China and other markets is an important part of our future. The costs of integrating Swan sales in the Strong-Tie branches was another expense that lasted longer and was more costly than anticipated. However, it's done and Swan should contribute substantially to profits this year.

Other one-time costs included the several million dollars in severance packages and integration costs for Aginco and Ahorn acquisitions, and both should contribute to profits more this year than in '09.

Sales in the fourth quarter were a mixed bag. Simpson Strong-Tie sales were down 7.5%. Canadian Strong-Tie sales were up 14%. Dura-Vents were down 31%. European sales were up 11%. Asian sales, although still insignificant, were up substantially, and our Australian operation is providing increased sales and profits. Strong-Tie's home center business was down 3% for the quarter and 6% for the year.

To summarize our current situation and future plans, first we have a strong balance sheet with record cash for acquisitions. Currently we're in the process of hiring additional help in finding suitable acquisition candidates. At present we have prospects, several of them, but nothing yet where we're ready to make an offer.

Secondly, we are not counting on the US market for our products turning around in the near future, but when it does we'll be ready. We continue to work on increasing our sales with new products and more sophisticated merchandising. Third, becoming more and more international remains a major goal, but making international operations acceptably profitable will take time. Last year's opening of the 175,000 square foot plant in China and the Liebig acquisitions are a couple of important steps forward.

Lastly, we remain a long-range company and we're not for sale, which continues to enable us to attract and keep the very best people, and that's an absolute key to success. Well, thank you for listening and I'm sure there'll be some questions.

Question-and-Answer Session

Operator

(Operator's Instructions) And we'll take our first question from the line of Arnie Ursaner with CGS.

Torn Esprin – CGS Securities

Hi, good morning. This is actually Torn Esprin (ph) filling in for Arnie. Can you tell us what percent of your total sales were from international this quarter, please?

Barclay Simpson

Yes. Well for the year it was 24%. For the quarter, what was it for the quarter?

Karen Winifred Colonias

20% for the quarter.

Barclay Simpson

20% for the quarter.

Torn Esprin – CGS Securities

Okay, thank you. In your press release you mentioned you're seeing sequential increases in steel costs, I'm a little bit unsure how that flows through your income statement. Does that mean that the steel you're using to make products in the first quarter will be comparatively more expensive than it was in the fourth quarter?

Barclay Simpson

No.

Torn Esprin – CGS Securities

Okay. Also, your SG&A this quarter increased against Q3 which I don't think is typical, what caused that?

Barclay Simpson

Karen, what would you think?

Karen Winifred Colonias

The SG&A was actually down 13% for the quarter.

Torn Esprin – CGS Securities

Compared to Q3?

Karen Winifred Colonias

Oh I'm sorry, compared to Q3.

Torn Esprin – CGS Securities

It increased, I believe which I don't think usually happens. I'm just wondering if you can tell us what caused that?

Karen Winifred Colonias

Yeah. We had some severances that were impacted in Q4.

Torn Esprin – CGS Securities

Okay, thank you. And very quickly going back to the steel costs, when would you expect to see the increasing steel prices start to affect your margins?

Barclay Simpson

I really don't want to go into that.

Torn Esprin – CGS Securities

Okay. And my last question, looking at this year it looks like you had at least $5 million or more of losses that appear to be one-time in nature, how much of that would you expect to recur next year, and conversely are there any costs that you've cut that you'll have to add back?

Barclay Simpson

Well, that is a very good question and we think they're going to be substantially less this year than they were last year, but there are some that will continue like we still have a lot to do with Liebig and that one last year, my recollection I think it was $5.4 million that it costs us and I think it'll be about the same amount this year. But like I mentioned in my talk, with some acquisitions like Aginco and Ahorn, we had substantial costs, but they're done now and they will contribute to profit. So generally it's going to be down, but we've still got some and if we make some acquisitions you almost invariably get a surprise or two and they're never a plus and they're always costly so it's very hard to project right now what they'll be. My guess is outside — well, this isn't a guess, outside of any new acquisitions, our one-time costs will be down substantially.

Torn Esprin – CGS Securities

Okay, thank you both.

Operator

We'll take our next question from the line of Garik Shmois at Longbow Research.

Garik Shmois – Longbow Research

Hi, good morning. My first question is just trying to understand the margin degradation from the third quarter to the fourth quarter. I think on the last call you had mentioned that you had expected margins to be relatively stable, maybe even slightly up, just wondering if you could rank, if possible, the major impacts? Was it mainly fixed-cost absorption or material costs or labor or the integration costs? What was the major swing factor sequentially?

Barclay Simpson

Yeah. That question's a good one and I've got to admit that the biggest difference that I've had in trying to project it at the start of the quarter — and it was acquisitions largely. These acquisitions, particularly Liebig and Ahorn, just cost us a lot more than we had thought they would. It doesn't mean that they're not extremely important for the long-time future of the company, but they were major. What else would you think, Karen?

Karen Winifred Colonias

Those were the main, and the severances and the (inaudible) for the acquisitions as Barclay just mentioned were the main filaments in reducing our gross margins.

Garik Shmois – Longbow Research

Okay, thank you for that. And do you have a breakout in the profitability in the quarter for Strong-Tie versus Dura-Vent for venting products?

Barclay Simpson

No, we don't yet. A breakout in what way do you mean?

Garik Shmois – Longbow Research

Just the dollar amount of the operating income or loss from Strong-Tie and venting products?

Barclay Simpson

Well, Dura-Vent as I mentioned, we have not solved the problems there and we're looking probably for further losses. With Strong-Tie, why I think it's going to be quite a little better.

Garik Shmois – Longbow Research

Oh I'm sorry, I was referring to the fourth quarter. In the past I believe you've offered the profitability that you've generated from those two segments?

Karen Winifred Colonias

The operating loss from Strong-Tie in the fourth quarter was just a little over $500,000 and in venting the loss was around $185,000.

Garik Shmois – Longbow Research

Okay thank you. That's what I was looking for. And just lastly on pricing trends, we are of course starting to see steel creep up. Can you talk about opportunities to raise prices to offset in 2010? I believe you've been hesitant over the last year given what you're seeing with your customers to raise prices, just wondering what the appetite is right now for price increases should you need them?

Barclay Simpson

Well generally if there are substantial increases in costs like your major cost of steel of course, well everybody's costs go up and we have to raise them, and the same thing if it goes down substantially well, we will drop them. But specifically in the near future, I don't want to discuss it.

Garik Shmois – Longbow Research

Okay, thank you very much.

Operator

And we'll take our next question from the line of Trey Grooms from Stephens, Inc.

Trey Grooms – Stephens, Inc.

Hey, doing great, Barc. How are you? I've got a couple of questions. So you say the primary reason for the margin, I guess coming in a little bit lighter than you had originally thought was severance and then acquisition costs. Could you tell us about how much those things impacted the quarter or kind of maybe what margins would have looked like if you took those things out?

Karen Winifred Colonias

About 3% increase.

Trey Grooms – Stephens, Inc.

Okay all right, so you'd have been closer to 33 I take it in the quarter then?

Karen Winifred Colonias

33-34, yes.

Trey Grooms – Stephens, Inc.

Okay, perfect. And then, Barc, looking back over the last few quarters you've taken a stab at your thoughts on margins for the year. Could you help us out with your thoughts looking into 2010? Do you care to take a stab at that?

Barclay Simpson

Oh boy, after the results from the fourth quarter I'm reluctant. I'll tell you what, I'll leave that up to Karen so if there's any problem with it it's her fault.

Karen Winifred Colonias

I think we'll be climbing a little bit closer to the 34%-35% for the margin.

Trey Grooms – Stephens, Inc.

For the full year?

Karen Winifred Colonias

Yes.

Trey Grooms – Stephens, Inc.

Okay that's very helpful, thank you. One other question, Barc, are you guys thinking about or planning on hosting another analysts day this year?

Barclay Simpson

Oh yes we are, it's June the 2nd. Wait a second, I've got it on my calendar. I'll get it. It is June the 3rd and we'll love to see you there.

Trey Grooms – Stephens, Inc.

I will definitely be there. And then one last question, so you said the M&A pipeline, you had some things you were looking at, would you care to go into any kind of color as far as is this something along the lines of your current businesses? Is it outside your current businesses? Can you give us any other kind of color at all? Is it international, is it domestic? Anything at all?

Barclay Simpson

Well, it's more international than domestic, but we're looking everywhere in the world, but including the US because if we see an acquisition here that will immediately contribute to profits and good return, we'll take it. But we are really interested now in things that go a little beyond US housing. US housing, we let ourselves get way too dependent on it and we're doing everything to reduce that dependency. So any acquisition that is commercial, products for commercial construction that has maybe nothing to do with housing, why we're interested and we've opened up our minds to various things. They don't have to be exactly what we're doing now.

Trey Grooms – Stephens, Inc.

Okay thanks, guys. I appreciate it.

Operator

And we'll take our next question from the line of Barry Vogel from Barry Vogel & Associates.

Barry Vogel – Barry Vogel & Associates

Good morning, Barclay. Good morning, Karen. I have a couple of questions for Karen first because you probably have the numbers. Can you give us percentage changes in sales regionally starting with the west excluding California in the fourth quarter?

Barclay Simpson

Ask that question again?

Barry Vogel – Barry Vogel & Associates

The regional changes in sales in the fourth quarter versus last year starting with the west, excluding California?

Barclay Simpson

Oh okay all right, just a second. Well, in the fourth quarter, the west was down 16%.

Barry Vogel – Barry Vogel & Associates

And California?

Barclay Simpson

California 9%.

Barry Vogel – Barry Vogel & Associates

South, southeast?

Barclay Simpson

South, southeast around 19%.

Barry Vogel – Barry Vogel & Associates

Midwest?

Barclay Simpson

Midwest, 17.5%-18% call it.

Barry Vogel – Barry Vogel & Associates

Northeast?

Barclay Simpson

20%.

Barry Vogel – Barry Vogel & Associates

Okay. Could you tell us what the percentage changes in sales in the quarter were for Strong-Wall anchoring systems in Europe?

Barclay Simpson

Well, in Europe all of Europe was up 11% in the quarter.

Barry Vogel – Barry Vogel & Associates

Okay, and of course that includes acquisitions?

Barclay Simpson

Yes, that does.

Barry Vogel – Barry Vogel & Associates

Anchoring systems in the quarter, percentage change?

Karen Winifred Colonias

That was 13% down.

Barry Vogel – Barry Vogel & Associates

And Strong-Wall?

Karen Winifred Colonias

5% down.

Barry Vogel – Barry Vogel & Associates

Karen, can you tell us what your actual capital expenditures were in '09 and what your projection is for 2010?

Karen Winifred Colonias

The CapEx expenditure in '09 was $15 million. The budgeted for '10 is $28 million.

Barry Vogel – Barry Vogel & Associates

And D&A for next year for '10 rather?

Karen Winifred Colonias

That was — well the depreciation for '09 was $29 million.

Barry Vogel – Barry Vogel & Associates

And 2010 projection?

Karen Winifred Colonias

I don't have that in front of me right now.

Barry Vogel – Barry Vogel & Associates

Now, Barclay, could you give us an idea of what the Asian startup costs were in 2009?

Barclay Simpson

Oh boy. We had so many different costs there, have we got a total?

Karen Winifred Colonias

I don't have that with me right now.

Barclay Simpson

Substantial though.

Barry Vogel – Barry Vogel & Associates

You don't have a number?

Barclay Simpson

No, we don't.

Barry Vogel – Barry Vogel & Associates

Okay, and as far as inventories, you reduced inventories fairly decently from the third quarter to the fourth quarter, has that stopped essentially, relative to sales?

Karen Winifred Colonias

We are working on an inventory increase. We've seen an uptick in our inventories in January and we are working to continue to build some inventory so that we will be able to take care of our customer needs.

Barry Vogel – Barry Vogel & Associates

Is that because of seasonal needs?

Karen Winifred Colonias

It would mainly be due to the reduction that you've seen in our inventories and we wanted to be sure that we're going to be able to meet our customer requirements.

Barry Vogel – Barry Vogel & Associates

Okay. Now Karen I have a question, the commentary you had in the press release about valuation allowance, can you tell us how much that was that changed your tax rate?

Karen Winifred Colonias

I'm sorry, could you repeat that?

Barry Vogel – Barry Vogel & Associates

You talked about a valuation allowance, can you tell us how much it was in the quarter?

Barclay Simpson

Valuation allowance?

Barry Vogel – Barry Vogel & Associates

Yes. It was in at least the press release that I read. It made a comment about valuation allowance.

Barclay Simpson

Well, we better take a look here.

Barry Vogel – Barry Vogel & Associates

I'm trying to find it. Yeah, it said on the Page 2, Paragraph 3, the effective tax rate is higher than the statutory rate primarily due to the valuation allowances taken in foreign losses, differences in US statutory rate and local tax rate in countries where the company operates.

Barclay Simpson

Oh sure, that really hit us hard.

Karen Winifred Colonias

Right, so that is our tax forward allowances that we have not been able to take until we've got some profits in our foreign entities.

Barry Vogel – Barry Vogel & Associates

Can you give us an idea of what the dollar amount was because it lowered the earnings per share I believe?

Barclay Simpson

Don't have that right now, Barry. We'll have it later.

Barry Vogel – Barry Vogel & Associates

Okay. Now I know you're very sensitive about steel because every call, I know for a long time people ask about that, and you did mention in your press release that there was a negative impact, can you give us some idea of the steel inventory and pricing effect on gross profits or gross margins in the fourth quarter versus the third quarter?

Barclay Simpson

I really don't want to go into that, Barry.

Barry Vogel – Barry Vogel & Associates

All right, because it obviously was partly responsible for a small loss in Strong-Tie.

Barclay Simpson

Okay, next question.

Barry Vogel – Barry Vogel & Associates

(Laughs).

Operator

And we'll take our next question from the line of Steven Chercover with D. A. Davidson & Co.

Steven Chercover – D. A. Davidson & Co.

Good morning, Barc. Well, I'm not going to drill too far on questions where you either don't have the data or won't answer it, but I wanted to speak about the inventory build potentially for the first quarter. The US economy apparently grew at 5.7% because inventories were stocking in Q4, that's not the time to do it in building materials, but what do you see for the opportunity for yourself and your clients?

Barclay Simpson

Well we are, as you've undoubtedly heard me say in the past, we really don't spend a lot of time trying to figure out what's going to happen to the market here in the US because we have zero control over it and right now we're not seeing any significant increases anywhere in the country. All of our in the so far first month of the year, everyone of our major branches here, Strong-Tie branches in the country, is a little bit, not much, but a little bit below last year. So when somebody tells me the housing starts are up and so forth I say well, maybe they are in this particular little area, but across the country they aren't, not yet.

Steven Chercover – D. A. Davidson & Co.

Okay well we know you're a long-term company and we also know that housing will come back eventually, do you have any new products in the pipeline that will cater to housing when it finally comes back?

Barclay Simpson

Oh yes we have all kinds of stuff. One in particular is the sales of this new frame that we have are quite low because it depends on housing. Most of the frames go into housing, but when it comes back that's going to be a substantial addition and we have — every year we come out with 10 or 20 new products and we're not reducing that. In fact, we're pushing hard in that department and that's why when you look at the reduction in US housing starts and the reduction in our sales, totally different because we constantly come out with new products. That's one reason of course we constantly work on improving our merchandising and making acquisitions.

Steven Chercover – D. A. Davidson & Co.

And final question, after the terrible tragedy in Haiti a couple of weeks ago, are you guys going to be giving any material contributions to the reconstruction and longer term do you think that your components will be a significant part of the rebuilding efforts?

Barclay Simpson

Well I think longer term anything like that, it doesn't matter where it is, anything like that in the long run is always good for our products because internationally we have the reputation for being able to provide products that prevent buildings collapsing, but it takes time. It takes time. It's like building codes in this country. It took many years for the majority of the country to have building codes that they enforced and something will happen there and we certainly are aware of it and our sales and engineering staff will do anything that we can to help out there.

Steven Chercover – D. A. Davidson & Co.

Thanks, Barc. Surprise us in 2010.

Operator

And we'll take our next question from the line of Keith Johnson with Morgan, Keegan & Company, Inc.

Barclay Simpson

Hello, Keith. It seems to me I've talked to you recently.

Keith Johnson – Morgan, Keegan & Company, Inc.

Not too long ago. How are you this morning?

Barclay Simpson

I'm fine, how are you?

Keith Johnson – Morgan, Keegan & Company, Inc.

Good, how are you, Karen?

Karen Winifred Colonias

Great, thank you.

Keith Johnson – Morgan, Keegan & Company, Inc.

Just a couple of questions. I guess first off similar to a question earlier about how much of an effect some of these severance changes have on gross margin, what about on the SG&A accounts? Could you give us an idea of the dollar effects related to maybe severance for some of the personnel or operational changes you may have had to make in the fourth quarter?

Karen Winifred Colonias

Severances were in excess of $1 million.

Keith Johnson – Morgan, Keegan & Company, Inc.

Okay, and that was all fourth quarter calls?

Karen Winifred Colonias

Yes.

Keith Johnson – Morgan, Keegan & Company, Inc.

What about operating rates kind of throughout your system as you went through the third quarter of this year to the fourth quarter of this year, was there a change one way or the other?

Karen Winifred Colonias

The plant operations?

Keith Johnson – Morgan, Keegan & Company, Inc.

Yes.

Karen Winifred Colonias

As I mentioned at the last call we are working on building inventories. It takes a little while from the production standpoint to ramp up with what we think is a reasonable production rate. So we were working on building inventories in the fourth quarter and the first quarter. You see that we had a decline in the inventory so we were really selling a little bit more than we were producing. We have just had a slight upturn in our inventory that we've begun building through January.

Keith Johnson – Morgan, Keegan & Company, Inc.

Okay. When I look at the year-over-year change in the connector revenue I guess it was down maybe if I'm recalling this correctly around 7.5% in the fourth quarter. That's much better than what we saw in the second and third quarter of '09 when it was down in excess of 20%. Maybe year-over-year comps in the fourth quarter were a little easier, but were there other factors in the connector market where this product may have ended up either at inventory changes at your customers or maybe some underlying improvement in demand in the fourth quarter?

Karen Winifred Colonias

Well, I think what you saw earlier was our customers also burning off their inventory in the second and third quarters. We are looking at many different avenues in which to get our products that aren't necessarily tied to housing starts, remodels, decking industries, and we have ourselves been pushing very hard looking at all possible avenues in which to sell our products and so that has been helpful also, but I think the main element would've been the customers' inventory.

Keith Johnson – Morgan, Keegan & Company, Inc.

Okay. And maybe a little bit of a restocking in the fourth quarter this year?

Karen Winifred Colonias

Yes.

Keith Johnson – Morgan, Keegan & Company, Inc.

Stabilization in some of the end markets in the fourth quarter, do you guys have any feedback from your plants that maybe some stabilization is beginning to show up in some of those markets?

Barclay Simpson

Well let's see, stabilization. As I mentioned, we're still down in the US compared to the fourth quarter of last year and January this year is down. So while we don't see any real evidence of substantial significant increases, we aren't seeing much more of a drop either. And as Karen mentioned, our customers pretty much took their inventories and got rid of them and so now they need to replace them and one thing that you know about this company, because I've said it many times, we decided many, many years ago we're not going to run out of product even though it makes our inventory turn not very popular, but that's just absolute key to long-range relationships with customers.

Keith Johnson – Morgan, Keegan & Company, Inc.

Understandable. Thanks a lot and good luck.

Barclay Simpson

Thank you, Keith, but we're not going to wait for luck.

Operator

And we'll take our next question from Robert Kelly with Sidoti & Company.

Robert Kelly – Sidoti & Company

Hey, Barc. Good morning, Karen. Just a question on the SG&A expense run rate. You did a bunch of cost cuts earlier in the year, have we hit the floor as far as quarterly run rate being in the $38-$40 million range for the next couple of years or was there possibly more you all could take out?

Karen Winifred Colonias

I think we're at a level where we're fairly stable.

Robert Kelly – Sidoti & Company

So to do more you would have to see end markets weaken further?

Karen Winifred Colonias

That would be correct.

Robert Kelly – Sidoti & Company

Okay great. Now on the gross margin, what sort of utilization is that implying? You kind of talked about 2010 being closer to 34%-35% range, what sort of utilization does that imply for 2010?

Karen Winifred Colonias

Well, I think as I mentioned before that our factories are certainly working on building some inventory since we've drastically cut our inventory and so have our customers so we will be — you should see an uptick in the utilization of the factories. We've started to see it a little in the fourth quarter and we will continue to see that until we get to a point where we feel very comfortable that we'll be able to supply our customers as they're used to being supplied. Again, we don't want to have any backorder situations so you will see some increase in our utilization over the next few months.

Robert Kelly – Sidoti & Company

Okay great, thank you.

Operator

And we'll take our last question from the line of Peter Lisnic with Robert W. Baird.

Peter Lisnic – Robert W. Baird

Good morning, everyone. I guess just first question, a clarification I thought I heard for Liebig $5.4 million in costs for the year, is that the right number?

Barclay Simpson

Loss, yes.

Peter Lisnic – Robert W. Baird

Oh loss, all right. And then when you look at these acquisition in some of these higher than expected costs that you're incurring, can you give us a sense of exactly what those are? Is it just you're trying to restructure the businesses and incurring costs to move machines around? Is it labor related? What exactly are those costs?

Barclay Simpson

Well you said it, it is all around because when you really try to analyze an acquisition you go and you talk to their people, but you don't spend a week on the floor watching the manufacturing and you don't know that the guy who ran the second shift was terrible and you had to fire him and there wasn't anybody to replace him with. You just get surprises and they're always negative and they're always costly and they're all those things. Inventories, sales force, merchandising, manufacturing, materials — now like Liebig, Liebig, the product line is very, very good and very important to our future. Very important, those metric mechanical anchors. So we're willing to spend whatever is necessary to get the proper guys and equipment in the proper places and get the right people and we're spending it. And it's pretty general.

Peter Lisnic – Robert W. Baird

Okay. Well, when you look at it I would assume that you're still thinking that the growth opportunity is still significant as it was when you were looking at and consummated the transactions or the acquisitions. Did you have any feeling that the return profile of these businesses might be a bit different than when you decide to actually pull the trigger and buy the companies?

Barclay Simpson

Well yes. With Liebig, I really didn't think that it was as important as it's going to be in our future. We knew it was a real plus once we got rid of all the problems, but those products, we're going to end up probably making them in China for around the world.

Peter Lisnic – Robert W. Baird

And when you do that, presumably again the returns will be sort of in line with what you thought when you got into the business, is that —

Barclay Simpson

They will be better.

Peter Lisnic – Robert W. Baird

Oh better, I guess that's even better. All right, if you switch gears then, I know this is sort of the second quarter we've talked about venting and discussing some strategic options there, but what I'm wondering is what exactly can you do to improve the return profile of the business? Is it something where I would imagine you've taken some good looks at the manufacturing footprint, restructuring actions — what's on the table in terms of being able to turn that business around?

Barclay Simpson

Now you're talking about Liebig?

Peter Lisnic – Robert W. Baird

I'm sorry, venting.

Barclay Simpson

Oh venting, I should've caught that. I don't have a good answer. We do not have a good answer yet. I wish I did.

Peter Lisnic – Robert W. Baird

Okay, but working on it taking costs out —

Barclay Simpson

Oh we're working on it absolutely.

Peter Lisnic – Robert W. Baird

Okay all right, I appreciate all the help and best of luck for 2010.

Barclay Simpson

Okay, thank you.

Operator

And at this time we have no more questions.

Barclay Simpson

Okay well, thank you all anybody who's still on the line and thank you, Kate.

Operator

This concludes today's conference. You may disconnect at this time.

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