Continental Building Products' (CBPX) CEO James Bachmann on Q4 2015 Results - Earnings Call Transcript

| About: Continental Building (CBPX)

Continental Building Products, Inc. (NYSE:CBPX)

Q4 2015 Earnings Conference Call

February 22, 2016 5:00 p.m. ET

Executives

Rodny Nacier - IR

James Bachmann - CEO

Dennis Schemm - CFO

Analysts

Mike Dahl - Credit Suisse

Nishu Sood - Deutsche Bank

Keith Hughes - SunTrust

Trey Grooms - Stephens

Matt McCall - BB&T Capital Markets

Scott Schrier - Citi

Todd Vencil - Sterne Agee

Operator

Greetings, and welcome to the Continental Building Products Fourth Quarter and Full Year 2015 Earnings Conference Call.

[Operator Instructions]

I'd now like to turn the conference over to your host, Rodny Nacier, Investor Relations. Please go ahead.

Rodny Nacier

Good afternoon. We would like to thank you for joining us today for Continental Building Products' fourth quarter and full year 2015 earnings conference call. Today's call is hosted by Chief Executive Officer, Jay Bachmann, and Chief Financial Officer, Dennis Schemm.

This afternoon, we distributed a press release detailing our fourth quarter and full year financial results which can be found in the Investor Relations section of our website at www.continental-bp.com.

During our call today, management's remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include statements regarding expected performance, especially expectations with respect to revenue, gross margins, operating income, and cash flow, as well as non-GAAP financial measures such as adjusted EBITDA.

These adjustments which may occur during our prepared remarks or during the question-and-answer session may be identified by words such as expects, should, anticipates, intends, estimates, believes, or similar expressions that are used in connection with any discussion of future financial and operating performance.

As a reminder, forward-looking statements represent management's current estimates and the company assumes no obligation to update any forward-looking statements in the future. We encourage you to review the company's past and future filings with the SEC, including without limitation, the company's Form 10-K and 10-Qs which identify the specific factors that may cause actual results or events to differ in a material way from those described in these forward-looking statements.

Now, I'll turn the call over to Jay.

James Bachmann

Thank you, Rodny. Good afternoon, everyone, and thank you for joining us today on our fourth quarter and full year 2015 earnings call. On today's call I will discuss our operating highlights and business activity. Dennis will then discuss additional details on our financial results, balance sheet, and outlook. After our prepared remarks, we will open up the call for your questions.

We entered 2015 with a goal to substantially grow our adjusted EBITDA and to generate significant cash flow for shareholder value-enhancing opportunities. We are pleased to deliver on these objectives. For the full year 2015 we increased adjusted EBITDA by 9% to $125.3 million and improved our adjusted EBITDA margin by 260 basis points to 29.7%, excluding the long-term incentive plan that was directly funded through our private equity sponsor, we converted 90% of this EBITDA into operating cash flow of $113.2 million. This is a direct result of our highly efficient manufacturing capacity, low capital needs, and strong focus on operational excellence.

This strong cash flow generation allowed us to continue lowering our debt leverage ratios while also deploying our capital into share repurchases. For the full year we reduced our debt by $55 million and repurchased $48.5 million of common stock, representing approximately 6% of our share base. These combined efforts also resulted in a substantial increase in our adjusted earnings per share, up over 50% to $0.84 per share for the full year.

Looking at our operating metrics, our wallboard volume for the full year increased 1%. This was held back by a decline in volumes in fourth quarter as there was no pre-buy activity with the change in timing of our price increase from January 1 until April 1. However, given no fourth quarter 2015 pre-buy and leaner inventories in the distribution channel, we saw volumes improve in January 2016 compared to January of last year. We also believe this improvement was assisted by milder weather that helped speed up housing completions.

So while there have been bumps in the financial markets, we have not seen that in the construction markets. New residential construction continues to move higher, and housing starts in 2015 of 1.1 million were still well below historical averages. New commercial construction continues to slowly improve, particularly helped by the larger metropolitan markets and the fact that they can see rates for both the office and retail sectors continue to decline. And we see solid activity in repair and renovation work continuing into 2016.

Given this positive momentum, we estimate mid-single digit expansion in U.S. wallboard shipments for the year. We feel Continental’s business is well positioned to capitalize on this growth. Our focus on operational excellence continues to generate high margins and top in class free cash flow yields. We are actively managing our costs across our highly efficient manufacturing capacity and also driving improvement in SG&A.

Additionally, we continue to maintain a sharp focus on capital discipline to ensure that we drive performance, sustainable cash flow generation and translate that into shareholder value. At year end we had over $40 million remaining on our $50 million share repurchase program and plans to further invest incremental cash flow through purchase shares given the attractive valuation of our stock.

In summary, our goal is to drive costs lower and provide great service and top quality products to our customers. The entire Continental team is aligned with that objective, and dedicated to executing our strategy. We are committed to being the wallboard producer of choice in our markets and leveraging our low-cost efficient capacity to maximize our cash flows in order to deploy them into shareholder value enhancing opportunities as our balance sheet metrics improve.

I will now turn the call over to Dennis to provide additional details on our financial results.

Dennis Schemm

Thank you, Jay, and good afternoon to everyone on the line. I will first detail results for the quarter, then provide some comments on the balance sheet and liquidity. And from there I will conclude by providing some additional perspective for the full year 2016.

For the sixth straight quarter adjusted EBITDA margins expanded with the fourth quarter up 150 basis points to 30%. This was achieved despite softer volume. Fourth quarter overall average mill net price was $148.37 compared to $152.79 in the prior-year quarter, impacted by weaker Canadian dollar, regional sales mix, and softer demand. At constant exchange rates, mill net prices were 2.1% lower compared to fourth quarter last year.

Gross margin remained stable at 26.2% compared to the prior-year quarter as strict cost controls and favorable raw material pricing, primarily energy, more than offset lower fixed cost absorption.

Selling and administrative expense as a percentage of sales improved to 7.3% in the fourth quarter compared to 8.5% in the prior-year quarter. For the full year, SG&A expense came in at $34.9 million excluding $1.4 million in incremental non-cash amortization expense for the new ERP system. SG&A costs for 2015 were down slightly from 2014, reflecting strict cost control.

Interest expense declined by $700,000 to $3.9 million compared to the prior-year quarter, reflecting a reduction in long-term debt from sustained efforts to improve balance sheet leverage metrics with the solid cash flow that was generated by the business.

Our effective tax rate was 36% for the fourth quarter, and for the full year 2015. We paid cash taxes of approximately $2.5 million, and were consistent with the expectation to be a cash taxpayer by year end 2015, and for the full year 2016. Adjusted net income increased to $10.6 million, or $0.25 per share, compared to $10.4 million, or $0.24 per share.

Moving to the balance sheet and liquidity metrics. During the quarter, we remained committed to exercising disciplined cost controls and rigorously managing working capital requirements to help generate $32.4 million in cash flow from operations.

On December 31, 2015, we had cash on hand of $14.7 million, total debt of $294.6 million, along with $47 million of availability on an undrawn credit facility. For the full year 2015, net cash provided by operating activities increased to $82.6 million. Excluding the long-term incentive plan that was funded by Lone Star, we produced $113.2 million of adjusted cash flow from operations.

We primarily use cash from operations in a balanced approach, returning cash to shareholders in the form of buying back stock and paying down debt. During the fourth quarter we repurchased approximately 470,000 shares of common stock with an aggregate value of $8.5 million. This brought full year 2015 aggregate repurchase activity to a total of 2.4 million shares, representing a 5.5% reduction in outstanding shares since the beginning of 2015. The diluted share count at year-end was approximately 42.1 million.

During the fourth quarter we also used cash to reduce debt by another $20 million, bringing aggregate debt reduction efforts to $55 million during 2015. The net debt to trailing 12-month adjusted EBITDA ratio at year-end was 2.2 times, down from 2.4 times at September 30 and down from 2.9 by December 31, 2014.

As we look ahead the full year 2016, we want to provide some insight regarding expectations for the year. We continue to see steady growth in the construction markets and forecast mid-single-digit wallboard volume for the U.S. We reconfirm our price increase for April 1st.

We expect full-year SG&A to be in range of $36 million to $30 million. For natural gas, we have entered into hedges representing approximately 35% of volume from November 2015 to October 2016. These hedges lock in prices slightly below $2.50 per MMBTU. Natural gas represented between 5% and 6% of our total cost of goods sold in 2015. We expect low single-digit raw material inflation for the remainder of our manufacturing costs.

Looking at cash flow, we expect capital expenditures to be stable and in the range of $10 million to $12 million. We expect the effective and cash tax rate to be approximately 36%. And regarding the capital allocation strategy, we plan to continue to repurchase shares under the share buyback program while also lowering debt levels.

In summary, the entire Continental team is energized to ensure that we have strong financial discipline to support long-term growth, translate that growth into cash and return that value to shareholders. We look forward to working hard to improve the business for the long-term recovery ahead of us.

Thank you again for joining us today. Operator, we are now ready to take any questions.

Question-and-Answer Session

Operator

[Operator Instructions]

Operator

Thank you. At this time we will be conducting a question and answer session. [Operator Instructions] Our first question comes from Mike Dahl from Credit Suisse.

Mike Dahl - Credit Suisse

Hi. Thanks for taking my questions. Jay, wanted to start with the comments around January. And there’s obviously a lot of different things happening between the fourth quarter and the first quarter this year just given the shift in some of the pre-buy activity. And so, just curious if you could give us any sense of magnitude for the improvement in January and where you think distribution inventories are relative to last year heading into the kind of the spring construction season.

James Bachmann

Sure, Mike. You have to keep in mind January’s a small month relative to the full year, particularly given our northern markets. But I guess the perspective I would put is probably last, you know, if you take a look at the last couple years, you had pre-buy that was in that 30 million to 40 million square feet range. And in going into obviously the quarter you don’t have that situation where you have that shift going on like we did last year. So, certainly we’re better there in terms of how the pre-buy has been smoothed out.

The other aspect though is that the core markets are going better. If you take a look at just even the completion rates being up with the milder weather, that’s helped us out. So I hesitate to give a percentage at this point because it’s hard to read through all that as to what that really means. But when you take a look for where we're starting the full year, I feel pretty good with our estimate that full-year U.S. volume growth will be in that mid-single digit range.

Mike Dahl - Credit Suisse

And do you feel like pre-buy has started ahead of the April 1 price increase?

James Bachmann

Not yet. So I would really say that that’s probably more the end of this month, beginning of March is when we would start to see that. I’d say what we’re seeing right now is more just core volume growth.

Mike Dahl - Credit Suisse

Got it. And then if I could shift over to pricing. I guess price you’ve seen kind of deceleration through the past couple of quarters. So as far as setting expectations for at least how we’ll start the year, just curious if you could provide any context as to progression through the quarter on price, or was the exit rate on price entering 2016 lower than the quarterly average price? And if so, you know, any color you can give on how we should think about that.

James Bachmann

Sure. No, you’re right in that sequentially pricing it did move down. And part of that is we were hurt by some softer volumes in the market. And we did need to make certain moves to support our key customers. But this was really primarily at the end of the third quarter, very beginning of the fourth quarter. And since then we have seen pricing steady out, which is positive. And so really our key focus now is on getting that April 1 price increase. And given we’re seeing some better volumes here, I’m looking at that as a positive as we move into April 1.

Mike Dahl - Credit Suisse

Okay. Thank you.

James Bachmann

Thank you.

Operator

Our next question comes from Stephen Kim from Barclays.

Unidentified Participant

Hey, Jay. It’s John [ph] filling in for Steve.

Just wanted to follow on the pricing question. You gave three buckets -- weaker FX from the Canadian dollar, regional sales mix, and then softer demand. How would you split the sequential decline pricing amongst those three things? And on the regional mix topic, across the different regions, or were the sequential declines similar to what we saw in the fourth quarter aggregate? Thanks.

James Bachmann

Yeah. Hey, John. When you look at it on a sequential basis, there is a little bit of a foreign exchange impact but it’s not huge. And then it’s really just more a matter of a combination of mix. And certainly, just like I mentioned before, at the end of Q3, beginning of Q4, we did make some moves to support our customers. So that is really where the impact came in. Like I said, this is steadied out so that’s a positive there when you take a look at where this is going.

Unidentified Participant

Got it. And then you said that you hedged 35% of the volume through October, slightly below $2.50. What was your average price for 2015? For nat gas?

James Bachmann

I apologize. You were talking about natural gas. I apologize.

Unidentified Participant

Yeah.

James Bachmann

I’ll turn the natural gas question over to Dennis here.

Dennis Schemm

So, for 2015, average price -- we were probably $2.70 per MMBTU.

Unidentified Participant

Got it. And finally, it looks like freight per MSF was down about 10% in the fourth quarter. Is that a run rate that we could expect to persist throughout the upcoming year?

James Bachmann

Yeah, I mean if you look at freight, I think freight ran somewhere between $30 to $31 per MSF in that fourth quarter right there. And there is still going to be some -- you have two impacts here. You are going to have some inflation on the carrier side in terms of freight rates. We’re working hard to try to keep those down but given you still need -- given there’s still a need for drivers out there, that’s putting pressure on rates.

And really then the other component that’s been helping us, although it’s already pretty low, is on the diesel side. Diesel has come down so that has helped us. But I would still say that the freight rate and what’s happening with the carriers is going to put some inflationary pressure there.

Unidentified Participant

Thanks, guys.

James Bachmann

Thank you.

Operator

Your next question comes from Nishu Sood from Deutsche Bank.

Nishu Sood - Deutsche Bank

Thanks. So, another terrific year of cash flow conversion from EBITDA, from net income. As we look ahead to 2016, you folks have had very good cost controls. Obviously, the input -- some of the input costs have gone away, such as natural gas for example. And obviously the tax situation has been helpful as well. So what can we expect in terms of cash flow conversion as we look ahead to 2016?

James Bachmann

Yeah. When you look at -- I mean the key thing there is going to be -- you have two factors. So, one, the LTIP is gone. So that was funded by Lone Star. So that gets equalized out of the equation, but that was equalized pretty much 2015 anyways.

And then it’s really the cash tax side. So, cash, the effective rate we've talked about is 36%. We would expect cash taxes to be in that range also. But as you pointed out, Nishu, I mean if you go ahead and just look at 2015 and you look at our operating cash flow and you take out the LTIP, which was funded by Lone Star, and you put that normalized 36% tax rate, that means our free cash flow yield for 2015 was over 12%, particularly given where the share price is today below $16. So I look at that free cash flow yield and I feel that that gives us a lot of potential with what we can do.

Nishu Sood - Deutsche Bank

Got it. And so on the cost side of things you would expect continued progress, or at least maintenance, that it would be neither a headwind or a tailwind in terms of your cash flow conversion from EBITDA.

James Bachmann

I think what you’ll see is it certainly will give some benefit on the natural gas side and that if you look at forward rates today, that's maybe in the $1 million to $2 million. On the other manufacturing costs, you are going to have some inflation there, but it’s going to be low-single digits. You’re dealing with anywhere in that 1% to 3% range, depending on the category. So you will get some inflation there that will push costs up. Natural gas will not completely offset it, but it's going to be pretty low.

Nishu Sood - Deutsche Bank

Got it. Thanks. And the second thing I wanted to ask was about the mid-single digit volume growth assumption for this year. I wanted to dig into that a little bit. What end market assumption are you thinking about or assuming for that number?

And also, the pre-buy being shifted, what -- are you assuming that it happens again April 1 next year? Or are you assuming going back to the prior schedule? I’m just trying to think about the effect of whether there would be two pre-buys this year or just one.

James Bachmann

Yeah. When we looked at it from -- and I’ll pass it over to Dennis to talk about the different components, but when we looked at it from a pre-buy, we were trying to look at more just core markets. So, if, for example, you ended up having two pre-buys this year, we've not built that in. So we’ve looked a little bit assuming that you would get some pre-buying in March. But at that point we just said okay, just asking one for now. Beyond that I’ll go ahead and let Dennis talk about the different components we had in terms of housing, repair and renovation and new commercial.

Dennis Schemm

Yeah. So, Nishu, our markets really are broken out in three. So, about 38% of our business is going to be new resi. And we have housing that starts at about 1.2 million for 2016. About 17% of our business is new commercial. We have that growing in that low to mid-single digits. And then the remainder is 45% R&R, and I'd probably split that right down the middle between residential and commercial. And leave that, you know pretty strong. I mean that's single digits as well. So you know put it all together and we're about 4% to 6%.

Nishu Sood - Deutsche Bank

Great. Thanks for the detail.

James Bachmann

Thank you.

Operator

Our next question comes from Keith Hughes from SunTrust.

Keith Hughes - SunTrust

Thanks. Just a question on the mix on the pricing. I don't know how you do this, I don't know if you look about plan by state. But is there any way to kind of look on a year-over-year basis by geography what pricing did?

James Bachmann

Are you trying to look at, for example, fourth quarter this year versus fourth quarter last year?

Keith Hughes - SunTrust

You know, what pricing at Palatka was versus at Buchanan and something along those lines.

James Bachmann

Yeah. No, you could imagine, Keith, for competitive reasons we don't go down to that level of detail. We have said that certainly the northeast is where you have the higher pricing. And that's just the combination of more five-eighths inch the board being sold which sold at a, say a $20 premium relative to half-inch. And then you have, and then you also have this that New York is a higher cost market so it drives a higher price into that market. Beyond that, I would say that you know really the one thing that impacted us, and you saw this versus last year is that we did have a pretty negative foreign exchange rate that I think Dennis was somewhere in the impact of $1.40, $1.50 negative impact between this year and last year on a full-year basis.

James Bachmann

Yeah. That's a good range.

Keith Hughes - SunTrust

Okay. Thank you.

James Bachmann

Thank you.

Operator

Our next question comes from Robert Wetenhall of RBC Capital Markets.

Unidentified Participant

Hi. This is actually Colin [ph] filling in for Bob. I was just wondering if you could provide us a little more detail about the different components for EBITDA as to providing a bridge basically how lower volumes, prices and the cost savings from natural gas and other initiatives impacted just EBITDA?

Dennis Schemm

For -- so are we looking at Q4 year over year?

Unidentified Participant

Yes.

Dennis Schemm

Yeah. So I mean the big drivers of EBITDA just you know going from, what was it, 34.5 right down to our current EBITDA. I mean price was an impact there for us. Price and volume were probably the two biggest drivers from a year-on-year basis. And those were partially offset by better input costs and better freight, I'd say that's probably be the high level view.

James Bachmann

Yeah. I mean the reality is that we did a good job on our absorption. I think natural gas gave us some tailwinds, probably helped us out anywhere from 150 basis points to 200 basis points on our gross margin. But beyond that we certainly, if you look at the SG&A control, we were down significantly in SG&A as we went ahead and controlled those costs. So we're doing a lot to make sure that we keep costs under tight rein as we go ahead and manage each quarter.

Unidentified Participant

Great. Thank you very much.

James Bachmann

Thank you.

Operator

Thank you. Our next question comes from Trey Grooms from Stephens.

Trey Grooms - Stephens, Inc.

Hey. Good afternoon. A question on just the volume and the cadence that you're seeing here after kind of the end of the year, you mentioned January being in a good -- being a good month. It is seasonally small, and I believe there's probably some easy comps there; but you also mentioned that the pre-buy is yet to happen. Can you give us some sense of what you guys are seeing in February? And how that February comp compares year-over-year?

James Bachmann

Sure. Yeah, I mean February we're still definitely favorable February this year versus February last year where we are as of today. January is where the easiest comps are, so the comps start to get a little bit more difficult as you get into February. Not surprisingly the spring selling season, when you get more into that March, April timeframe, is where things get more normalized. So that's where we stand today.

Trey Grooms - Stephens, Inc.

And so if you go back to years past, if you think about, well especially last year, there was kind of a vacuum that was left in January. Did that also continue into February as well? Like on the years where we did have a 4Q pre-buy?

James Bachmann

It would a little bit. It would a little bit. And dependent on the part of the region or the part of the country that you were in; but normally by the time February rolls around, things started to let up. And that's why when I mentioned before that we had probably around 30 million to 40 million square feet of pre-buy, it gives you at least a sense of what we're playing with.

Trey Grooms - Stephens, Inc.

Okay. Yup. That's helpful. One last one for me, and you kind of touched on it with the free cash flow conversion and that sort of thing, but just specifically looking at operating leverage and incremental margins on volume, can you -- and I know you've given us some kind of ranges in the past, but Jay, can you give us an update on how we should be thinking about incremental margins, specifically on volume, as we kind of look over the -- just through the recovery or through the next several quarters, however you want to phrase it up?

Dennis Schemm

Yeah. The way I’d look at it is on incremental volume you would have margin flow through at the 45% level down to EBITDA.

Trey Grooms - Stephens, Inc.

And that would just be purely on volume, and also with the backdrop of the kind of layout for costs that you’ve given us earlier?

Dennis Schemm

That’s correct. That is just purely on volume.

James Bachmann

So I think you assume you keep pricing flat and you just get volume. That gives you a general sense of the flow-through.

Trey Grooms - Stephens, Inc.

All right. Thanks. That’s very helpful. And good luck.

James Bachmann

Thank you.

Operator

Thank you. Our next question comes from Matt McCall from BB&T Capital Markets.

Matt McCall - BB&T Capital Markets

Thanks. Good afternoon, guys.

James Bachmann

Good afternoon.

Matt McCall - BB&T Capital Markets

On the volumes, I just need to understand to appreciate the detail around new resi and new commercial and R&R. Those are national numbers, if I understood you correctly. When you think about your addressable market, how should we think about any outperformance our underperformance? I guess you could look at it as the total 4% to 6%. You expect the entire country to grow 4% to 6%. And you’re going to be a part of that? Or are there going to be faster growing parts? Maybe you’ve had exposure to faster growing parts.

James Bachmann

No. It’s a good question. We do look at that on a national basis. And then if you line up our regions and it’s still early in the year, we estimate we’re going to be roughly in line with that. Not surprisingly, the Southeast for us, you know the good old Sun Belt there, is something where we could see some faster growth in. And we think that helps us out say relative to say the north central, more the Midwest area. But overall we’re still expecting good growth in all of our markets.

Matt McCall - BB&T Capital Markets

And then one more, Jay. On the new commercial side I think you said low- to mid-single digit. Can you talk about any sub categories that might be expected to outperform, underperform? Or is it probably low to mid-single digits across most markets?

James Bachmann

It really gets into the different -- I mean what we’re finding with commercial, it depends on the markets you’re in. The larger cities are definitely what are doing better. And then it just depends where you go.

So if you go to the Southeast, not surprisingly Miami is doing extremely well. Orlando has strong theme park work that we would expect to continue. In the Northeast New York City has been doing well in general on the commercial side. And then in the Midwest I’d say the strength has been primarily in Indianapolis, Columbus, Ohio, even Nashville. And that’s been a combination of some work on colleges and universities, along with healthcare and hospitality.

So it depends on the part of the country you’re in. But I’d say the bigger cities have done better. But it’s certainly -- you’re right, it’s not even across everywhere.

Matt McCall - BB&T Capital Markets

Okay. Thanks, Jay.

James Bachmann

Thank you.

Operator

Our next question comes from Scott Schrier from Citi.

Scott Schrier - Citi

Hi. Thanks for taking my questions, and congrats on the progress. I wanted to ask you about the volumes sequentially. So volumes in 4Q were pretty good given the fact that I would have expected without the pre-buy, you might see them decelerate a little bit. It looks they were up about 5% versus about 6% last year. So were there any trends that you uncovered during 4Q of this year possibly regionally or if it was in non-res or res that kind led to volumes holding up pretty well?

James Bachmann

I think the -- for me, it was really December turned out better than we expected. And when you take a look at some of the completions, particularly on the resi, new resi side, that was -- it was better than we had anticipated going into the very end of the year there. I think that's where the big difference was.

Scott Schrier - Citi

Got it. And then everyone's talking about the mid-single digit demand growth. Can you just talk a little bit about Canada and what you're seeing there?

James Bachmann

Sure. Canada is a bit of a tougher environment, as I'm sure people realize. I think it's technically gone into recession. That said, we would expect that you'll -- the demand there should hold steady. We'll see how that plays out. You have to keep in mind that Canada for us now represents below 10% of our volumes, so it's not a significant player in our overall volumes, but it is a good position to have. We have good customers there. We're willing to support them, it's just going to be a -- probably a tougher time this year than some of the previous years.

Scott Schrier - Citi

And are you seeing pricing decline there a little more?

James Bachmann

I would actually say no. I mean, from a pricing side, we've actually overall I'd say we've held our own pretty well there.

Scott Schrier - Citi

Great. Thanks for taking my question.

James Bachmann

Thank you.

Operator

[Operator Instructions]

Our next question comes from Todd Vencil from Sterne Agee.

Todd Vencil - Sterne Agee

Hey, guys. Good afternoon.

James Bachmann

Hey, Todd.

Dennis Schemm

Good afternoon.

Todd Vencil - Sterne Agee

Following up on that question about volumes in the fourth quarter, they were up from 3Q, which wasn't what we would expect given no pre-buys. So, good job there. I get the comments about the bump-up in housing completions. You talked on the last call about some destocking at your customers. Any sense that that maybe abated or even turned around and started going the other way and might have contributed to the 4Q strength, or not so much?

James Bachmann

I think -- yeah, it's a good question. I think if you take a look at end of Q3, no doubt there have been destocking that took place. I did not see what I would call restocking in Q4. There's no doubt that if some of that volume got a little stronger than people anticipated in the distribution channel though, that they needed to buy more in December to meet that demand. So it certainly helped us there. So I think people did bump up their inventories a little bit, but I would not call it restocking.

Todd Vencil - Sterne Agee

So at least maybe going from restocking to buying in line with demand.

James Bachmann

Yeah. Yeah. Or maybe, or maybe even just getting a little bit more in anticipation of some good buying, or, I’m sorry, good building opportunities they were seeing coming up, even in the first quarter.

Todd Vencil - Sterne Agee

Got it, good.

James Bachmann

But much more, much more in line with demand.

Todd Vencil - Sterne Agee

Okay, good. On the utilization front, can you step in on where you stand there, nameplate and effective?

James Bachmann

Sure, on the nameplate, it’s right in that 70% range. And on an effective basis, in terms of what we’re staffed for, it’s more around that 85%.

Todd Vencil - Sterne Agee

Okay. Soou talk about maybe that your next step of be going to bring it on overtime rather than hiring, that you had some room to play with there. Is that still the plan, and do you have any better sense on whether you might end up doing that later this year?

James Bachmann

Yeah. No, we’ll definitely go ahead and use overtime as our first base, in order to meet the extra demand that’s there. And then, depending on the strength -- and how it plays out -- we very well could be in a situation, and I’d be happy to be in the position where we go ahead and add another shift on, in order to meet the volume demand. But at this point, it’s focused on bringing more overtime to get it done.

Todd Vencil - Sterne Agee

Good. Good. And then, last one for me. Your price increase, you said that you’d reconfirmed. What’s the term of that? How long is the price good through?

James Bachmann

So what we’ve gone ahead and done is we’ve said, April 1 is the price increase. We’ve gone ahead -- on the letter, it said 15%. We did not give an end date to that. So we basically just said, this is when the price will go up. And then we’ll -- that’s what our focus is right now. Certainly, we’re working with our customers to go ahead and finalize that.

Todd Vencil - Sterne Agee

No end date? Okay. Thanks a lot.

James Bachmann

Thank you.

Operator

Thank you. At this time, we have no further questions. I will send the call back over to Jay for closing comments.

James Bachmann

Well, I appreciate everybody’s questions on the call. Look forward to seeing you and talking to you again this upcoming quarter. Have a nice day.

Operator

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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