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Houston Wire & Cable Company (NASDAQ:HWCC)

Q1 2008 Earnings Call

May 12, 2008, 11:00 am ET

Executives

Charles Sorrentino - President and Chief Executive Officer

Nicol Graham - Chief Financial Officer

Analysts

Jeff Germanotta - William Blair

David Manthey - Robert W. Baird

Michael Cox - Piper Jaffray

Sam Darkatsh - Raymond James

Bill Dallam - Titan Capital Management

George Bargeef - Scopia Capital

Holden Lewis - BB&T

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Houston Wire & Cable Company’s First Quarter 2008 Conference Call. My name is Shikwana, and I’ll be your operator for today. This call is being recorded for replay purposes. (Operator Instructions).

As a reminder, comments during this conference call may include forward-looking statements relating to sales, earnings, financial conditions, plans, and goals of the company. These statements are not guarantees and actual results could differ materially from what is indicated in forward-looking statements, as a result of various important factors, including those set foward in the risk factors and MD&A section of the Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC on March 17, 2008.

At this time, I would like to turn the call over to Chuck Sorrentino, President and CEO. Please proceed, sir.

Charles Sorrentino - President and Chief Executive Officer

Thank you, Shikwana. Good morning, ladies and gentlemen and welcome to Houston Wire & Cable’s 2008 First Quarter Conference Call. My name is Chuck Sorrentino and I’m the President and Chief Executive Officer of the Company. With me today on the call is Nic Graham, our Chief Financial Officer.

Houston Wire & Cable's policy is to release the 10-Q with the press release. As some of you may know, the 10-Q was mistakenly released on last Friday afternoon. Houston Wire & Cable was surprised as the document was scheduled to be released in this morning in concert with the earnings press release. This early filing was a mistake on the behalf of our third-party provider as Houston Wire & Cable follows the same procedures from previous quarters.

Now let’s move on to quarter one comments. Sales growth at 9.4% in the first quarter was all organic. As a reminder, we were rolling over a very robust quarterly numbers from 2007, when we saw 23% sales growth. Estimated sales in our repair and replacement segment in the first quarter were moderately negative, while sales growth from our five growth initiatives approximated 20 to 25%.

As result of successfully penetrating our target markets and adding new products, we have differentiated our revenues stream. Houston Wire & Cable's five initiatives, new Power Generation, Environmental Compliance, Targeted Industrials, Engineering and Construction Firms, and LifeGuard led us to record revenues in the quarter. Additionally sales of our proprietary LifeGuard Low Smoke Zero Halogen product offering are key component of our growth plan continue to grow rapidly and at a pace that exceeded the overall growth of the company during the quarter.

Furthermore, we are not directly associated with residential and light commercial real estate markets which are driving a softer underlying economy this year as compared to last year, as result of the influence on the liquidity of the financial markets.

Gross margin for the quarter was 25.3% reflecting an improvement over recent trend. Margins were favorably impacted over trend by product mix. There was some inflation, but this was largely mitigated by price competition and copper neutral project business. Just to reminder, we anticipate future gross margins to very as we continue to build our business. Our primary focus on margins has been and will remain at the operating income level.

Operating income margin was 12.8%, once again delivering double-digit performance well above what I will consider to be industry norms. Operating expenses were 12.5% of sales, well within expectations. These expenses include the sales force expansion, which is front loaded as new sales personnel take several quarters to become fully productive.

Operating cash flow of $7 million continued its excellent pace. During the first quarter of 2008, we had an aggressive stock repurchase program, which resulted in buying back 3.9% of our outstanding stock at an average price of $14. Also as of March 31, 2008, we had $23.9 million remaining under our current Board Authorized stock buy back. Additionally, our Board of Directors authorized an $.085 quarterly dividend payable on May 29, 2008.

At this time the business outlook for the balance of 2008 remains mixed. We are not expecting the broader economy to rebound much, if any, throughout 2008. Our day-to-day repair and replacement business appears to have stabilized at its current level, but we remain cautious until the liquidity issues in the capital markets are resolved and the border based economy reinstates confidence across the business community.

I believed the major projects and infrastructure investments by end users and Federal and State Governments will continue at or near its current pace and we will likely experience a similar activity level to 2007.

The backlog data and the activity levels at the engineering constructions firms support this belief as we are encouraged to see the work in progress and backlogs at very high levels. As such our growth plan, which is targeted at power generation, industry and infrastructure has performed well and for the 18th consecutive seasonally adjusted quarter showed record revenues in spite of the surrounding economic environment.

Accordingly we expect our five growths initiatives to be the drivers of our 2008 sales growth. And lastly a special thanks to all of our HWCC members for a great start in a difficult economy.

Now let me turn it over to Nick Graham for his comments.

Nicol Graham - Chief Financial Officer

Thanks Chuck. Another quarter of healthy sales, as we again increased revenues over the prior year period, despite challenging economic circumstances. Our ability to continue to grow our revenues is a solid indicator of the breadth of the industrial market place which we serve and the depth and strengths of the sales model.

Gross margin percent, while we expected to have decreased from the comparative 2007 period at 25.3% versus 27.1%, appears to have stabilized over the past three calendar quarters. It has now returned to more historic norms prior to the abnormally high 2006 gross margin levels.

We saw additional leverage from our operating expense platform, as expense fell to 12.5% of sales from 12.8% in the prior calendar quarter, and from 12.9% in the comparative 2007 quarter. We continue to be extremely frugal with our discretionary expenses, but are still willing to invest on qualified sales personnel to support the sales effort.

The resulting operating income margin increased to 12.8% from 11.5% in the last calendar quarter, but short of 2007's 14.7%, as we couldn’t negate the impact of the gross margin decrease. As our business model continues to involve, we will use operating margin as a primary measure of our operating efficiency and success. Interest expense increased due to higher debt levels primarily attributable for the stock repurchase program.

The balance sheet remains healthy with minimal movement from year end 2007. Working capital remains steady at $98 million, the bulk of which remains invested in inventories and receivables. We remain vigilant in our investment at both of these two categories. The electrical wire and cable that we sell is not normally susceptible to technological changes, so we can vary the inventory investment on an as needed basis.

On receivables side we are fortunate that we are dealing with a mature fairly well capitalized customer base. We have dealt with most of our customers for over 20 years and we are familiar with the payment patterns. Credit decisions are made in Houston and we don’t off shore our credit and collection efforts. Receivables show no signs of weakness and we remain diligent to ensure that HWC is not saddle with onerous unfavorable contract terms and conditions.

Day sales outstanding and bad debt write-offs remain at or above the historic norms.

Our CapEx spend for the quarter was inline with historical trends at $0.1 million. We do expect a slight increase in this trend as we upgrade our inventory bar-coding equipment, invest in additional software costs, and telephone system upgrades and replacements. Our annual spend has been running between $0.6 million to $0.7 million over the past two years and that spend could increase to $1 million in 2008. HWC's distribution model has limited CapEx demands.

Debt levels increased from 2007 year-end levels primarily to fund the stock repurchase program. During the quarter, we purchased another 728,000 shares of treasury stock for a total cost of $10.2 million under our previously announced $75 million stock repurchase program. To date we have purchased 3,142,000 shares under this program or 15% of the outstanding shares prior to the commencement of the program. We also continued the recent trend of paying a dividend.

We are very pleased with the third consecutive quarter of cash flows at or in excess of $7 million. In addition our cash conversion efficiency was again extremely strong at 104% for the quarter. We still have adequate capacity on our existing line of credit to fund operations and stock buy back program. We continue to manage our capital as effectively as possible to maximize shareholder returns.

At this time, we will open up the call for any questions you might have.

Question-and-Answer Session

Operator

(Operators Instructions) Your first question comes from the line of Jeff Germanotta with William Blair. Please proceed.

Jeff Germanotta - William Blair

Congratulations on a nice quarter gentlemen.

Charles Sorrentino

Thanks Jeff.

Jeff Germanotta - William Blair

Hey, with the gross margin coming back and sales were relatively stronger than we thought you would have done. Can you comment on how much of that might be volume or did inflation help you a little bit there too?

Charles Sorrentino

There was some inflation in the quarter Jeff but there was also some heavy or I will say moderately heavy price competition. So the net of all of that is difficult to get a good read on. But essentially I think that there was probably enough price pressure that it mitigated the inflation in the quarter.

Jeff Germanotta - William Blair

So, I know it's artful, but said another way most of that 9% was volume and it was in the newer channel strategies?

Charles Sorrentino

Exactly yes that’s correct.

Jeff Germanotta - William Blair

And the gross margin come back, again just…?

Charles Sorrentino

This product mix, I mean did you have certain product mix that could favorable in this particular quarter, it was favorable. I mentioned that we are seeing a rapid increase in our private branded products which also helps the margins. So you got a confluence of some events influencing the margin up, at the same time you have some headwinds out there, the competition, some other things occurring in the marketplace that negatively impact it. So we were pleased that the gross margins were up over trend, but we also want to make sure everybody understands that those margins will vary from time to time and quarter to quarter as we build out our business and that we really focus on the operating income margin as it means to manage the business.

Jeff Germanotta - William Blair

Thank you.

Charles Sorrentino

You bet.

Operator

Your next question comes from the line David Manthey with Robert W. Baird. Please proceed.

David Manthey - Robert W. Baird

Hi, good morning guys.

Charles Sorrentino

Good morning.

Nicol Graham

You bet.

David Manthey - Robert W. Baird

In days in inventory were about 95 days in the first quarter of '08. If I look back at couple of years ago clearly in a different growth environment, you had about 67 by my calculations. I am wondering if you could talk about where you feel comfortable in terms of days in inventory and why have you seen such a increase here lately?

Charles Sorrentino

The part of the increasehas come from the project business, the cable management side of the project business, where we actually manage the inventory for our customers. Essentially this is I won't say completely risk free, but nearly risk free and view of the fact that we have commitments from the customers for the inventory. It's just that it hasn't been shipped yet. So for all practical purposes we have the commitment, even though it has not been shipped yet. So I view that as a very positive sign because it's working capital have directed towards improving the overall sales and penetration of the business.

S

In addition to that, in some cases we have prepayments on the inventory. So there is some things that are occurring in the inventory side of the business that are actually helping driving our sales, which is one of the benefits of having a strong balance sheet like we have because we can afford to make those kinds of investments to drive the top line. The cost of money right now is relatively low as you know, and therefore the ability to drive additional sales and get more gross profit dollars versus the cost of relatively low capital or cost of money, is a very easy decision to make. So in essence that's where we are at and that’s why it's happening, it’s there to support the sales.

David Manthey - Robert W. Baird

Got it, okay. And then could you give us the number, the percentage of your revenues that's coming from your top ten customers, I think in the annual report you said 12% was WESCO, but you didn't mention the top ten. Do you have that percentage, Nick?

Nicol Graham

No, we don't have that percentage Dave. I think as you said WESCO always been one of our top customers and a couple of the other national chains have been fairly high as we….

Charles Sorrentino

It hasn't changed all that much percentage wise there.

David Manthey - Robert W. Baird

Okay. Thank you.

Operator

Your next question comes from the line of Michael Cox with Piper Jaffray. Please proceed.

Michael Cox - Piper Jaffray

Congratulations on a very nice quarter guys.

Nicol Graham

Thanks Mike.

Michael Cox - Piper Jaffray

My first question relates to the 2008 guidance that you provided on your fourth quarter call. Now its one quarter under your belt, any thoughts on that guidance that you provided?

Charles Sorrentino

No change MikeI on the guidance as we give annual guidance we don't give quarterly guidance as a matter of policy, but there no change to the guidance at this point.

Michael Cox - Piper Jaffray

Great. And as we look at the MRO business of that segment of your business, you commented that it appears that has stabilized at this current level. So as we look through the balance of the year, should we expect it to be down slightly as the year unfolds or by the second half of the year should we maybe expect that to be more relatively flat.

Charles Sorrentino

Let me start off by saying, all things being equal, in the second half of this year we will be rolling over softer numbers from last year. So flat is a possibility and we might even see a little bit of an uptick there. So we will see a softer series of base numbers in the second half of this year. So one would expect just from that a slight improvement. And then again that’s all things being equal, we are also seeing some headwinds now that we didn't see at the beginning of the year. Some of the energy prices are starting to take off.

Michael Cox - Piper Jaffray

Sure that’s fair. And then my last question, in the release you had commented of getting tractions in new products introductions, I was wondering if you could describe what segments those are in or maybe extensions into existing product lines?

Charles Sorrentino

Well one of those is really kind of more of a test market right now, but its starting to get traction. And that is essentially on the upstream side for oil and gas production of product that would be in that market. We've also added to our armored cable product line extended, our armored cable product line. And there is some other things, some smaller items like electronic cable that we have introduced. So its not any one thing, its a series of things. Mostly I would consider it be kind of in the test market phase right now, but showing very good signs of getting traction in the marketplace.

Michael Cox - Piper Jaffray

That’s great. Thank you very much.

Charles Sorrentino

Okay.

Operator

Your next question comes from the line of Sam Darkatsh with Raymond James. Please proceed.

Sam Darkatsh - Raymond James

Sam was unable to call in this is Jeff calling in for him.

Charles Sorrentino

Hi, Jeff.

Jeff

Good morning Chuck, morning Nick.

Nicol Graham

Hey, Jeff.

Jeff

First question was on the price competition that you noted and I was wondering is that, the inability to pass the copper inflation on and are you seeing that mainly due -- is that coming from the end customer or is that coming from other channel partners, the larger distributors unable to pass it on?

Charles Sorrentino

Let me elaborate a little bit more on your question because I want to make sure that our comments aren't misunderstood.

Jeff

Please.

Charles Sorrentino

Number one, the price competition that we are seeing now is probably a little bit closer than normal than abnormal. When you compare it to say 2006, when the demand was abnormally high. So what we are seeing now is not that far from being abnormal. Secondly, in order for there to be copper for that matter any commodity to have influence on your pricing, there is three or four things if that’s has occurred. Number one there has to be a price change, which there has been in this particular case. Number two, there has to be sustainability of that price change for some period of time, several weeks even in the months for it to take effect for it to seat itself. Thirdly, you have to have competitors that will move along with that price change. And right now that is essentially not occurring, but I think that’s more due to, one of which is the softness in the market place and secondly of course is this price influence this copper inflation hasn’t been with us that long. It was up on the first quarter, but if you look at April and May numbers, it is actually going back down now. So it doesn’t look like it’s really seeded itself. And then of course you have to have all the things being equal, in other words you don’t have freight costs going up or down, or you don’t have other commodities influencing your sales like steel going up and may be causing delays in projects and to things of that nature. Even in a perfect environment with all things being equal, rarely do get 100% translation of inflation in the price of product instantaneously, usually takes some period of time, and rarely if ever do you have a perfect environment. So I think this is a long answer to your question but copper inflation has had a minimal impact if any in the first quarter for those reasons.

Jeff

Okay. That’s very helpful. My other question was you mentioned some of your new products in the upstream oil and gas side. I was wondering, if maybe you could talk, I know you don’t give numbers on this kind of things, but even just qualitatively about what the energy sector has meant for you guys over the last year and whether or not you see business accelerating there given what is going on?

Charles Sorrentino

Well the energy sector, in our opinion is fairly robust, primarily driven by upstream prices for oil. I think you have to be a little bit careful here too is that you know, these high prices for oil permeate the entire economy. And at some point in time they are going to, if they haven’t already, they are going to start adding downward pressure on the economy. So it’s really a mixed bag for us, you might think for most people, but I think if we had our choice we much prefer stabilize pricing as compared to pricing dramatically increasing and increasing very rapidly. The other things too is that puts pressure on petrochemical companies that have oil as essentially as a feed stock for their own cost of goods and the high energy prices affect manufacturing cost through electricity in a lot of other ways. So it is a mixed bag, we would much prefer to see stabilized prices than changing prices.

Jeff

Thanks a lot. Congratulations on the quarter.

Charles Sorrentino

Thanks.

Operator

Your next question comes from the line of Bill Dallam with Titan Capital Management. Please proceed.

Bill Dallam - Titan Capital Management

Thank you. First of all would you be able to breakout your sales and/or level of success within each of your major initiative areas and if you don’t want to address it quantitatively, some qualitative perspective would be useful.

Charles Sorrentino

Bill as a matter of policy, we don’t breakout sales components, or gross margins, or operating margins relating to product category families. Let me offer this if I may, the growth initiatives are many times interrelated and that is one of the reasons why we do not break it up, because it is very difficult to isolate individual numbers. I will give you an example, if we have a successful project that is being designed by an engineering and construction firm that goes into a new power generation facility, do you credit the E&C or do you credit the power generation facility. I mean if this becomes difficult in terms of isolating a project and therefore we don’t want to be double counting. I can't say that any one of these initiatives trumps the other, they work in concert with one another and that’s really kind of a beauty of them is that they are synergistic. We had a great deal of success in the last few years in the utility side of the business both in power generation and emission controls, but we’ve also had a great deal of success with E&Cs and infrastructure projects, mass transit, infrastructure projects that support population density and things of that nature. So at the end of the day it’s very difficult to isolate on anyone has been trumping the others.

Bill Dallam - Titan Capital Management

That’s helpful. Thank you. And then for second question, you had mentioned in your release and this was partially addressed with a prior question, that you are starting to see benefit from investments in 2007. And there were only three areas that you addressed; the sales force, product line expansion, and new product introductions, and I believe that to response to your prior question you did address the new product introductions, but would you are continue on and address the sales force and product line expansion that you were specifically identifying there with that comment in the release?

Charles Sorrentino

Yeah, the sales force expansion is really twofold, one of which is simply more people, more sales personnel. And then secondly, more tools, more resources for the existing sales personnel. So we are adding more people and we are now also adding resources for those people on an ongoing basis. And we have been doing this now for several years. We feel that our growth initiatives, if you think of our growth initiatives as the engine for our growth, the transmission that delivers that torque to the marketplace is the sales force. And there is a lot of companies out there that can have wonderful idea for growth plans, but if they can't execute them for a practical purpose, they have no merit. And so we have to make sure that only do we have the right plan, but we also have to make sure that we’re executing it. And the growth and expansion of our sales force, both in terms of number of people and in terms of the resources they have to work with, is actually critical to our long-term success. So that’s the sales force piece.

In terms of the product line expansion, the product line expansions are somewhat akin to expanding the LifeGuard opportunity into newer markets, newer end markets. And that’s working very well, its been working now well for the last 12 to 16 months since we have started it, and that’s just a further expansion of the product line, either into an new market or expansion of a product line into -- the pure expansion of a product line, so those two items would cover the product line expansion.

Bill Dallam - Titan Capital Management

Thank you.

Operator

(Operator instruction). Your next question comes from the line of George Bargeef with Scopia Capital. Please proceed.

George Bargeef - Scopia Capital

Hi guys, congrats on the quarter.

Charles Sorrentino

Thanks.

Nicol Graham

Thanks.

George Bargeef - Scopia Capital

Not to dwell on the copper issue too much, but I noticed that clearly copper prices have increased significantly during the quarter and I also noticed you bought a fair amount of inventory in the fourth quarter, calendar quarter of last year presumably when copper was overpriced. So my question is were MRO margins higher in this quarter compared to I guess the fourth quarter of last quarter and if so, how sustainable do you think that is?

Charles Sorrentino

I don’t know that we can say MRO margins were higher in the first quarter versus the fourth quarter. There is a lot of things that go around those margins. Copper is one of things but there is a lot of other influences on it, such things as rebates, freight adjustment, purchase price discounts. The copper numbers were choppy, I mean it wasn’t consistently high, there were days where it was high, another days, where it wasn’t high. So I don’t think we could say that we saw a benefit, but I should say a change from the fourth quarter, we simply don’t know.

George Bargeef - Scopia Capital

We don’t know, okay?

Charles Sorrentino

We don’t have enough information to isolate that in and of itself, because there are so many variables.

George Bargeef - Scopia Capital

But when you mentioned that gross margins, we should sort of caution ourselves because they fluctuate. We are a month and half into the current quarter, are you sort of suggesting gross margin are coming down or how should I think about the volatility that you sort of sign posted earlier?

Charles Sorrentino

Well, we can discuss the second quarter when we have the second quarter results. Okay, I mean we can't discuss that now. What we are saying is it has nothing to do with quarters, my comment. It has to do with a fluctuating environment going forward, much of the same as it has fluctuated for the last several quarters. As a company goes through a self renewal process and builts its business in the new markets and new areas with new customers, there is a variability that comes with that. We want to make sure that we caution on the side because in the past people have paid more attention to the gross margins or I should say placed more emphasis on very high gross margins in 2006 for example which was an anomaly at the time.

George Bargeef - Scopia Capital

Right. There is still a pretty big difference to earnings, even if it's 25.3 versus 24.3. So having some sort of understanding or precision on that I think is important to the earnings power of the company?

Charles Sorrentino

You're right. They do have a big difference on the earnings, and that's why we focus on the operating income margins, because they reflect not only the gross margins but also the SG&A expenses and everything else that goes into it. You cannot isolate on one line item in a growth company. You have to look at all your variables, when you look at your margins you have to look at your operating income, at least we feel you have to look at your operating income margins and adjust accordingly.

George Bargeef - Scopia Capital

You said your 25.3% level, should I think about that as gross margins? I understand it fluctuates as a growth company. But that sort of a fair basis for me to think about gross margins for the remainder of the year?

Charles Sorrentino

We have cautioned that we expect the gross margins to be within historical levels of 24% to 26%. That's as good as I can answer.

George Bargeef - Scopia Capital

Okay. Thanks so much.

Charles Sorrentino

Okay.

Operator

Your next question comes from the line of Holden Lewis with BB&T. Please proceed.

Holden Lewis - BB&T

Hey, thank you. Good morning.

Charles Sorrentino

Hello. Good morning

Holden Lewis - BB&T

Just in terms of the SG&A expense, in dollar terms, its $11.1 million in Q1, which is not a lot different for what we had in Q4, Q3,. Even year-over-year the rate of spend was certainly below where it was on the revenue side, yet. You talk about these areas that you're investing, whether it would be the sales force and that sort of thing. If you're investing heavily on one side, but keeping sort of the dollars flat then you must be getting cuts elsewhere. Can you give a little bit more color as to some of the moving pieces within the SG&A?

Charles Sorrentino

Well, one area this year versus last year was the secondary offering expenses and related to that. We had a more professional fees last year because we were implementing Sarbanes-Oxley last year and we had contracted out with consultants. And between the consultants and additional professional fees from accountants and lawyers, just implementing that process was more expensive last year than it is this year. Is there anything else Nick, which you could……

Nicol Graham

We have seen some saving on insurance cost too, Holden. It just helps that some of those costs are going down, it does mitigate some of the other investments we are making on the sales side.

Holden Lewis - BB&T

Okay. So there is nothing in the quarter that might be perceived as overly heavy or sort of one time in nature that might make the SG&A move up in future quarters as you spend on the growth?

Charles Sorrentino

No. Nothing, that we are aware.

Holden Lewis - BB&T

Okay. And then last, the last follow-up question on the gross margin. I understand you sort of talk about the mix, but when I think about the moving pieces in gross margin, mix I guess is not one that I thought would be sort of cited as the mover primarily because as LifeGuard is certainly helpful, I think the project work in general tends to be somewhat lower. And so I guess, I thought mix would be a little more neutral and you are arguing that inflation and price are probably pretty much neutral as well. Yet you did see about a 100 basis points improvement sequentially, is that just seasonality or what else maybe in there or am I sort of misreading some of that?

Charles Sorrentino

Well, did you say, you're comparing it to the fourth quarter Holden

Holden Lewis - BB&T

Yeah.

Charles Sorrentino

Did I understand that correctly, okay.

Holden Lewis - BB&T

Correct.

Charles Sorrentino

Well, let's look at the two quarters, one of which we had more volume, so volume helps with the gross margin because you have certain components of gross margin that are volume related. In addition, some of the projects business that we have can and often will be more heavily weighted towards LifeGuard in some quarters than maybe other quarters. Some projects maybe more lucrative from the standpoint of just being -- that's just the way they are, that's just the way they come out as compared to other quarters. So product mix has a fairly significant influence on gross margins for a variety of reasons, some of which I mentioned and some of which I probably haven't mentioned. But it’s very much an important factor.

Holden Lewis - BB&T

Okay. And since project works can obviously come in higher or lower, how much visibility do you have into that in any given quarter. I mean you sort of know which project is sort of coming due in Q2 and you know what that margin is and so you can give you a little bit of flavor around that or how should we view the visibility?

Charles Sorrentino

We have reasonably good visibility on an annual basis with respect to projects that we have commitments for, but the projects themselves, the timing of the projects can vary dramatically for a variety of reasons. They can vary from quarter-to-quarter, for weather reasons, for engineering related reasons, for onsite labor reasons, there is a number of factors that cause one to be very careful about looking at the projects business in any given month or a quarter with some degree of finality. On an annual basis it’s a little bit better.

Holden Lewis - BB&T

Okay. Thanks, I will jump back in.

Charles Sorrentino

Okay.

Operator

At this time, I would like to turn the call over to Mr. Chuck Sorrentino for closing remarks.

Charles Sorrentino

Operator, are there no more questions?

Operator

No sir.

Charles Sorrentino

Okay. Well, thank you everyone very much for your participation in the conference call today. And have a good day. Thanks.

Operator

Thank your participation in today’s conference. This concludes the presentation. You may now disconnect. And have a great day.

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