Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the NCI Building Systems, Inc., Second Quarter Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions). This conference is being recorded. I would now like to turn the call over to Ms. Layne de Alvarez. Please go ahead, ma’am.

Thank you. Good morning and welcome to the NCI Building Systems' call to review the company's results for the second quarter of fiscal 2014. To access a taped replay of this call please dial 1-888- 203-1112 and enter the pass code 1277255 and the # sign when prompted. The replay will be available approximately two hours after this call and will remain accessible through June 18th. The replay will also be available at the company's website www.ncibuildingsystems.com. The company's second quarter results were issued yesterday afternoon in a press release that was covered by the financial media. In keeping with SEC requirements I advise that during this call we will be making forward-looking statements that involve risks and uncertainties. Actual outcomes may differ materially from those expected or implied. For more detailed discussion of the risks and uncertainties that may affect NCI please review our SEC filings, including the 8-K filed yesterday. Forward-looking statements speak only as to the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required by applicable securities laws. In addition our discussion of operating performance will include non-GAAP financial measures. A reconciliation of these measures with the most directly comparable GAAP measures is included in the earnings release and the CFO commentary, both of which are available on our website. At this time I would like to turn the call over to NCI's Chairman, President and Chief Executive Officer, Norm Chambers.

Good morning everyone and welcome to our second quarter 2014 conference call. Joining me this morning are Mark Johnson, our Chief Financial Officer; Todd Moore, our General Counsel and Layne de Alvarez, our Vice President of Investor Relations. Our second quarter earnings were released yesterday afternoon. So I hope you had time to review our results and commentary. Before I give a brief overview of the company I would like to make a few points to assist investors to better understand the effect of the widely reported winter weather on our second quarter results. First, our first two quarters are our seasonally weakest. Relatively small changes in volumes, mix or cost, either positive or negative have a disproportionate effect on our earnings and EBITDA. Second, while our revenue grew on a year-over-year basis we estimate the weather impact reduced our top line between $8 million and $10 million. Third, we estimate the weather related disruptions to our operation, supply chain and product mix negatively impacted our gross margin by approximately 130 basis points. As a result the combination of the reduced revenue and impaired margins negatively impacted our EBITDA by more than $5 million. But on a positive [mix] as the conditions begin to improve our margins sequentially recovered each month strengthening a 130 basis points from February to March and an additional 90 basis points from March to April. And finally sequential monthly improvement has continued into May, as volumes improve in our seasonally stronger second half we expect margin expansion to continue. As a seasonal business we know our earnings are backend loaded which is why we are not discouraged by our performance in the first half of fiscal year during one of the most severe winters in recent memory. In fact we’re energized by the earnings potential…

Thanks, Norm. In our press release and in the CFO commentary both of which are available on our website we've provided a discussion of the key elements of second quarter financials. Now I'll take a few minutes to add some additional color to the results. First let me comment on our consolidated revenue and the seasonality of our business. We were pleased to report a 4.2% year-over-year increase in revenue during the second quarter driven by volume growth in certain key businesses and our value pricing strategy. Each of our three segments was able to achieve year-over-year growth in revenues. In addition we were able to generate these higher revenues despite the fact that non-residential construction was down during our fiscal second quarter particularly for low-rise construction. Although some of our product lines and therefore our sales mix continue to be negatively impacted by severe weather during the quarter we are achieving growth in certain key areas which we believe validates both our growth initiatives and your expectations for continued recovery in new non-residential construction activity. I’ll discuss these growth areas when I overview each of our segments momentarily. As many of you know our business like many in the construction industry is highly seasonal. Historically we have typically generated between 55% and 60% of our annual revenue in the last half of the year. Accordingly and as a result of higher utilization of operating assets we generally have earned between 60% and 90% of our annual adjusted EBITDA in the last half. One of the key determinants of the level of seasonality we see in any given year is the severity of the winter weather and its impact on construction site conditions. Therefore we believe it is reasonable to expect that given the severity of the weather earlier this…

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions). Our first quarter comes from Trey Grooms with Stephens.

Hey, good morning.

Hi.

Norm, thanks for breaking out the April and May bookings numbers, it's very helpful. I know it's early but can you comment at all on the trends you are seeing as we've gotten into, I guess the early innings of June here has that continued?

Yeah. So one of the things that we always like to have a fairly consistent view of our expectations for a given quarter, particularly our seasonally stronger quarters and we know that we will generate the greatest amount of our profit in the last month of the quarter because we're 4, 4, 5. So we expect to see our activity grow throughout the quarter, May, June and July. And certainly the preliminary numbers for May look consistent with our expectations for the third quarter. We really have seen the tail end of April of recovery and improvement in our bookings, in our backlog and in our shipping schedule. So it's difficult for people to grasp when they look at how bad the first half was and the weather. But I got to tell you things look to be stacking up where we expect them to stack up for the second half.

So turning other way, I guess you have taken the guidance you have given I guess for the end market demand. I believe you said in the most recent, the prior quarter sorry that you expected that end market demand can be up mid to high single-digits. I think in this press release it said mid-single-digits. So is that just primarily a result of the second quarter coming in worse than you had originally thought, and that the back half is shaping up at least from where you sit today looks likely to be shaping up as expected, is that the way to read that?

Yes. We expect the second half to be as we expected and it's consistent -- we think it's consistent with the growth in bookings and backlog in the Buildings group. And when we talk about what we're seeing in the other parts of our business that's pretty doggone important because while I want to think I am reaching by talking about 2004 I got to tell you there is some sense that our Components group sells more broadly to the market and when we see that our legacy business Trey as you know which has been sputtering at best really pick-up some steam I got to tell you that our guys in sales in the Components group are feeling pretty good about what they are seeing.

Well that's encouraging. Shifting gears to margins, Mark maybe this one is for you, looking at the margins, gross margins for the quarter, 19.5% thank you for bridging that for us, that's helpful with the 130 basis points reduction. The [130] from product mix and other weather affected inefficiencies including material manufacturing, transportation so forth, how much of this would be reoccurring in to the current quarter and I guess as a segue Mark how should we be thinking about gross margins as we get more into the more important back half of the year, I know Norm mentioned margin expansion but just wondering if you could quantify?

So we talked a lot about the 130 basis points from the weather related impact. And that's across all real segments. It's across the mix of the business that we ship, it's across the freight and the efficiency with which we can get freight at the right cost and it affects the efficiency of our operations and manufacturing. So it's pretty pervasive and we don’t see any of that continuing into the third or fourth quarter. We have that behind us. We began to see that dissipate in April and we don’t foresee that in June at all. So that’s gives me good confidence that we won’t see that conversation in the future and we have consistently said and we consistently expect progressive improvement in our gross margins based on two fronts, three fronts really. First of all the increased operating leverage we will experience in the last half as we always do; second, the inroads we’ve made on value pricing have been very significant. We expect to be seeing the benefits of those and then third the dissipation of this weather condition.

And again if you please limit yourself to one question and one follow-up question. Next we’ll go to Lee Jagoda with CJS Securities.

Hi, good morning. Can you hear me?

Good morning Lee.

So last year in Q3 for buildings you were impacted by some shipping delays that slipped into Q4. This year I would think you’d see the benefit of not only that easy comparison but the benefits from some better pricing and likely some pent-up demand just because of the weather. You kind of, you care to comment any further on the growth rate expectations for Q3 specifically?

You know, I think that you have heard on a couple of very real differences between our expectations for this Q3 versus the past year. And our expectations are very high for our Buildings group in terms of all the work they’ve been doing and I mean really working very hard as you would expect both in terms of pricing and with regard to efficiencies. And I know I mentioned just a couple of things that are very different from last year, this year and that’s the whole central scheduling. And what that means to our ability to reduce the amount of overtime by scheduling more effectively to the whole quarter and that was really not existent last year and is very prevalent this year. And so we are very encouraged about that. Even in a very short period of six months the improvements we’ve made in our manufacturing where five of our eight building plants have shown levels of operating leverage at utilization rates below 40% that we would have historically never seen until we were at somewhere closer to 70% utilization. Now we still have three of the plants that we’re kind of working to improve that but we are very encouraged and we have set high expectations for the team over in the Buildings group.

And then just a follow up Norm assuming the industrial renaissance that everyone is anticipating over the next three to five years in the Gulf state -- Gulf states actually occurs particularly in the energy and chemical space, can you talk about the role that NCS products play in the construction of those plants and then the percent of revenue that, that represents today and where that could trend over time?

Yeah. So what we know and you know I was in oil and gas for most of my adult life that the oil and gas market place isn’t cyclical so much in terms of the economy, but we’ll see expenditures that are consistent with our expectations on what utility prices are going to be. So there can be some movements from year-to-year. But I will tell you that we have invested in some additional human resources focused specifically on upstream, midstream and downstream oil and gas and we can participate and do participate in all those and certainly both our Components group and our Buildings group can participate in refineries and finished products in our painting lines. So the activity opportunity for us in oil and gas is real, is significant and being based in Houston is a plus. So we still have formed because of the spread of our activity is very diverse that I think that we have yet to see oil and gas be above 10% of our revenue. But I would think that we could see that increase and I hope it's not at the expense that other parts of our economy are not increasing because our view is that we are seeing a broader recovery. So my hope is that the oil and gas will continue to be additive to our total revenue picture.

Thanks very much. And look forward to seeing you at our conference next month.

Thanks Lee, see you then.

Now we go to Winnie Clark with UBS.

Good morning.

Good morning.

Hoping you could talk a little bit about pricing, can you give us some color on the impact that you realized in the quarter and what pricing, and last quarter you talked about 190 basis points of pricing in the backlog, are you still running at about that level and do you still hope you can benefit, that can benefit you at about that level in the second half?

Yeah, so we're running at better than 200 basis points of improvement in our backlog and margins. And there is kind of two important gateways to actually realize that 200 points plus something above it. The first is managing the flow of the work from backlog into production, and doing that in a way that is responsible and reflective of the relationships we have with our builders and changes in deliveries and times that they have. That has to be very carefully managed to make sure that we don't leak any of the margins. And the second piece is, this thing I was [inaudible] just recently is that the improvements in our manufacturing that we’re seen are really fundamental to not just preserving the margins that we won through hard work, working with our customers and their end users to increase our pricing but also we have a chance through manufacturing to yet improve on that performance, okay. So my point being that I don't want you to think that the pricing is a walk in a park, it is a challenge that our sales force really have to work out. They have to constantly try to find where we can add value, that, that value is perceived by our customer and plus their end use. And they have done a first class job at doing that, a very, very real job of doing that. So long winded, we expect to see all of that margin improvement to come out.

Okay, that helps. Thank you. And then just on the low rise construction start I believe you said last quarter they were down 5%, what was the trend in the second quarter and then what gives you kind of confidence that we're going to be at a mid-single-digit growth rate for the year?

Yeah that’s a good question and I think that it really falls into what occurred. So when we look at the second quarter actual non-res stats were just slightly positive at 0.4%, but low rise was down 4.7% in volume. And when you think about that, when you think of the first six months of our year November bookings on a year-over-year basis which kind of reflects the market going forward but positive and then we were negative on a year-over-year basis for the months of December, January, February and March and didn't see a pick-up until April. So we have this period in the middle which by the way coincided with the U.S. economy dropping from an expected 0.1% growth to 1% decline. Right, so it really was hand in hand. So then we say what did occur is that we saw a market change in bookings from the last two weeks of April very strong bookings right through to May very strong bookings. And that's without really price erosion, I mean that's just activity based. I would suspect that our competitors saw the same thing. So we're seeing those trends continue through May and into June. So our expectations are that with the level of growth we are currently seeing that we will end the year overcoming the first part deficit to show mid-single digit growth in volume in non-res markets for the year.

And by volume he means square feet?

Yes, square footage, new construction starts.

Okay, great. Thank you very much.

Yeah.

And now we will go to Will Randow with Citi.

Hi, good morning. This is actually Scott Schrier in for Will. Thanks for taking my questions. First I wanted to ask about, you mentioned solid inquiries and are you noticing any differences in terms of the trends as the urgency of getting bids, the competitive nature of the bidding environment, your win rate. And also in which end markets are you kind of seeing more strength or unexpected weakness in the bidding process.

Yeah, that's a good question. And we always try to dig the current data to try to see if it's stacking up to our expectations for the year both geographically, redundant counties and end markets. And I'll tell you that the manufacturing, warehousing piece continues really to be quite strong, oil and gas are certainly showing some strength over the past year, which was down from the previous year, so we should see some uptick. And I would say that there are regions of the country that were showing considerable growth, the Northeast being one and I am particularly talking about New England was slower than they have been for a while. But I'll say that when I think about our business across all fronts I am seeing in the Coating business more opportunities in appliances and HVAC which we think is quite positive. When I look at their Components group and I see that the spread of legacy products which go to more retail, really some institutional, some much smaller kinds of activities and to see the growth there are really very encouraging. And then the Buildings group while it's focused more, certainly more on pricing and value, nevertheless their bookings and uptake in their business and inquiries reflect a larger types of projects which again kind of speak to an improving sense, an improving new sense of optimism. So I hope that helps you, it's what we're seeing.

Great, thanks. And my follow-up is I wanted to touch more on the backlog. I know it's been head on and the margins in that segment. I know you said there was a $5 million hit to EBITDA. Is there any way to quantify, one, what was the -- how much of that was in the buildings and going forward I know there was a question about pricing and value -- pricing inefficiencies. But can we expect any changes as far as the operating leverage that we look at in the business?

So, Mark will add some color to this but I just want to correct one thing. So the $5 million hit, it really had very little to do with the backlog except that work that we would have hoped to have manufactured in the period was pushed out largely due to work site conditions, okay. And work that we had expected to book in the months that I talked about in the call before December, February, sorry December, January, February and March were down year-over-year. So our bookings were not at the levels that we expected to see during that period, pick up in April and May and continue in June. So when I look at the backlog at the Buildings group being up that's pretty solid and that was at the end of April. But when we have a quick look at the first month of our third quarter we continue to see bookings improving and we saw the backlog grow as well. Now let me just get right to the first part of your question. One of the things that's clear to us is we are seeing a heightened level of urgency coming up on the season for people to say gee, I need space in your manufacturing schedule because I need this building at next date. And frankly that’s -- we like to deal with those kinds of urgencies. That's a positive both from the standpoint that it helps us better schedule our plants and also it helps us differentiate the level of service by being able to accommodate our customers. Mark, do you want to add something?

Sure I was going to try to break that 130 basis points that we described in our operating efficiency down into the segments for you. So that 130 basis points equates to somewhere around $3.6 million and you can split that across our segments at about $1.8 million in the Buildings segment, little short of a $1 million in the Component segment and around $800,000 in the Buildings segment.

Great, thank you very much.

Now over to Brent Thielman with D.A. Davidson.

Hi good morning.

Good morning.

Norm were there any specifics end markets as you got in April and May that have gotten worse or declining versus the prior year in terms of bookings?

I would show you that one of the markets that we find challenging is kind of in the Southeast is the Georgia, the general the General Georgia area and that historically has been, we guess there’s a population of very good small local builders here. And so our Buildings group is challenged at times to give what we consider to be our share of the action there. But by the same token on the flipside our Components group sells to a lot of those small builders. So we kind of benefit on that side. So it's kind of a mix in the story. The Northeast in particular really showed early recovery and has staggered gotten a little bit slower through the winter and into this part of the year and we would expect to see that improve because of the seasonality was a bit more pronounced there.

Okay, so it's more from a geographic kind of point of view versus building types.

It seems to be more geographic than end market specific, yes it does.

Okay, great. And then just as a follow-up, may be one more for you Mark, in Components could you give us the costs associated with the ramp up of the Richmond facility I think there were some specific costs there, and do you expect sort of similar level going into Q3? I didn’t see that in the CFO commentary.

Sure, so there is more than one thing going on in the Components segment and what I was speaking to in growth initiatives was an incremental $1.2 million that was spent in ESG&A, and the total that we’re spending on these growth initiatives is about $2.8 million in the second quarter and that $2.8 million is now driving about $5 million of incremental revenue. This is the first real quarter where an incremental revenue is now starting to be achieved, and we see that cost there being progressively more leveraged going forward. But those numbers I am speaking to are several different initiatives, the architectural panel in Richmond Virginia is only one of those and on the ESG&A front that’s only about $340,000 of that expense.

Okay. Thank you.

And now we go to Robert Wetenhall with RBC Capital Markets.

Good morning.

Mr. Wetenhall, your line is open. Okay, moving on over to Alex Rygiel with FBR Capital Markets.

Thank you. Good morning gentlemen.

Good morning.

Good morning.

Norm, can you talk a little bit about the May bookings again? How much of that is what you had called catch up versus how much of that feels like underlying strength?

That’s a $64,000. I would say that the one thing that became clear in the tracking of inquiries which precede our winning the job and [booking] it, is that there were a number of jobs on the horizon that did not get bid and booked in the first half of the year. So I am not ever quite sure whether that’s catch up or whether that’s just a timing piece of the business. I will say that there were clearly some jobs and specifically every Tuesday we kind of recount these jobs that have really reflected a hesitation and then and then a pent-up kind of demand, a pick up but I'll tell you, I still think from the anecdotal information we have that at least half if not more in the early part of May was literally new work and it wasn't a pent-up demand. And I say that, that's a rough estimate. It may been as low as 25% was your pent up demand, demand has really should been in the first the first half of our bookings.

And is there anything interesting occurring within the size of bookings, is the average size any larger or smaller than may be you've seen in the past?

Well we look at our bookings on a weekly basis and we look at the complexity from one to 10, 10 being the most. And historically it's a bit of bell curve with the four, five and sixes in the middle and the biggest part of our… And I would say that bell curve is changing slightly in shape that we are seeing enhancing success with our expressed buildings which are smaller and we've seen nice success in the growth of that level of work which is quite good because it's stuff that moves very quickly through our manufacturing. And we've seen a pick-up in the more complex work. And so what we have probably seen in the first half of the year was a more reticent kind of mid-bell curve in there was four, five to sixes were a bit less than we would expect. But that seems to be balancing out now in a more normal way which I think is a good thing.

Thank you very much.

Our next question will come from Dan Oppenheim with Credit Suisse.

Hi, this is Mike Dahl on for Dan. I wanted to start with some of the comments on the outlook and so appreciate the seasonality here but it’s 60% to 90% of EBITDA in the back half, it translates into a pretty wide range and I know Mark you commented that you expected to be towards the higher end of normal seasonality but the comments still out there that it's 60 to 90 so what's driving, what's the thing that's keeping you guys from actually formally kind of increasing that range what are the biggest swing factors here? Thanks.

Well, the biggest swing factor for the second half of the year…

His question is what's causing us to not increase the range or increase the upper end of that range, even though…?

Well if you think it's towards the higher end of the normal 60 to 90 and we're midway through the year and you've got some positive commentary on the trends you are seeing in the business, that's still really wide range so what are the biggest swing factors here?

Well again I think that as I said not too much a caveat but as I mean I am not sure that there were many that expected to see the U.S. economy step from what was going to be a very modest growth of 0.10% down to a full 1% negative. That coincides with exactly what we saw in terms of our bookings as I think I said were year-on-year monthly negative and the words negative comp monthly year-on-year for December, January, February and March. So my point of this is that our belief is that the U.S. economy is recovering, that we will not see a negative GDP in the second quarter or the third quarter or the fourth quarter. But if that were to occur then that affects our range, right, that affects our range. So I think that when we look forward, we see a very robust opportunity for us in the second half and that's exactly what we believe we're seeing in the bookings, we believe we're seeing in the backlog and we expect to continue to see.

So just to be clear, absent any deterioration in the overall economy you are very comfortable with the higher end of that?

Yes.

This you do 90.

Yes.

Okay. Thanks that's helpful. And then just shifting gears back to the complexity question. How should we think about the timing of some of the higher complexity projects that are getting bid and booked today or in May?

Well I mean there is no question that higher complexity utilizes more of our resources and takes longer. But we have on our on our Tuesday call, in our Buildings group we have a very good transparency of all the jobs that are in and how they are falling in the schedule and I was impressed with the -- I wasn’t on the Tuesday call, the week before that 92% of the jobs are coming out of our engineering and drafting and going to manufacturing on time. So my point being that I don't think that would have been the case any year in the past, which means our ability to convert an order through the process of engineering and drafting and then get it to be able to ship has fundamentally improved. Now that doesn't change the fact that some end user sites are really dictated to have particularly up North are dictated to have things installed and kind of what not in the ice season when the ground is firm. And so there will be some of those kinds of things. I think the other part of it is that when you look at the complexity in some of the mining facilities that we look at you see often times disruptions due to environmental requests that could slow up the schedule date. So in complexity does seem to run a higher risk of us having delays. But I will tell you that we really welcome that work because it's very important part of building up our backlog.

Okay. Thanks and good luck in the quarter.

Thank you.

(Operator Instructions). We will next go to David Cohen with Midwood Capital.

Yeah. I'd like to go back to the prior questioners, question regarding this range for EBITDA which guys have been consistent on but arithmetically you have put out there a range or if just the math is you did $14.3 million of first half EBITDA so that's either 40% of the full year or just 10% of the full year by virtue of the complement of your 60% to 90% range. That leaves a range for the full year EBITDA that's a mile wide with the high end being the $140 million. Is this company going to do almost a $130 million of EBITDA in the back half, I find that hard to buy into?

Sure. That's hard to buy into. That would mean that we see growth vastly exceeding our expectations.

But that's the math that occurs if the first half is 10% and the back half is 90% of your annual EBITDA?

Correct. Yes that's the math.

That's just the arithmetic.

Yes.

Yeah I think we were confirming that we would be more towards the upper end of that range. We weren't confirming any precise number within that range.

And is there some point at which you would consider greater precision around the financial objectives of the business on an annual basis or is this messaging likely to be just, this is your messaging as you look into next year this is going to be the same type of messaging?

So one of the things that those if any, with our messaging is our ability to actually deliver that, right? I mean we don't want to either understate or overstate what we think the future is going to hold. But to be sure in the first half of the year it is a son of a gun to get it right. We're easily disrupted, particularly at levels that are 40% lower than the previous beginning of the cyclical recovery in 2004. So volumes are very much still in a depressed mode. So our sense is that as we -- as the market recovers we will I am sure get better at providing you and others with insights as to where we think we're going to be. But I'll tell you within the recovery we're still a ways off from having that level of confidence for a given quarter. We think that the second half of this year will produce results that are consistent with our expectations which would show year-over-year growth and that's what we're working towards.

All right, thanks for taking my question.

Yes, thank you.

Now we'll go to [inaudible].

Good morning there, can you folks address some of the earnings drag that you saw on the Coatings group in the first half of the year and whether that will persist, you mentioned utilities and you mentioned the spend related to growth initiatives amongst a couple?

Yeah so one of the primary impact on the Coatings group that was a drag was the interruptions to their plant activities due to weather delays they had several plants that were forced to shut down by the utilities because they were using utilities… And in addition to that the utility costs were higher. So you mix all that together with a very, very efficient operation and you introduced that kind of activity it becomes a less efficient operation. Outside of that the biggest single driver for the challenge to them is the disruption to the supply chain which drove some unforeseen cost into our steel costs that they had to therefore pass on when they sell packages of steel and so there was margin depression. And then finally I mentioned the incremental cost there incurring for some marketing and sales programs, part of that's around marketing and branding the Middletown, Ohio facility and the rest of their sales initiatives.

Which of these do you foresee persisting?

Well I think that we have gotten through the steel issue and I don't foresee any of the disruptions to the plant operations so that part will not continue. We'll spend a little bit of that $300,000 on marketing in the quarters ahead of us and not less than half of that amount, so less than half of the $300,000.

And Mark could you comment again may be, I didn't quite get this when you talk about weather disruption are you under some obligation when there is a call upon power that you need to shut down so that, that power can go somewhere else?

Yeah we don't see that very often but there is a couple of places where we do see that, Ohio being one of them, where the utilities can really say we need the power to heat homes and therefore you need to have a plant shutdown day.

Okay. Second question, final question can you talk about the tone in your insulated panel business year-to-date and what you foresee in the back half of the year?

Yeah, so I will tell you that the level of cold storage continues to be quite good and the level of shipments of commercial industrial have been weaker than a year ago. But by the same token we have seen an increase in C&I applications of insulated panels that flow through our Buildings group. So overall we have seen a continuation of growth in commercial and industrial but it has been slower in the first half of the year than last year and we think that was more to do with weather. So we are expecting the insulated metal panel group to have a stronger second half of the year for sure and they are working very hard at that. We again have been pushing them with other parts of our business due to the value price and sometimes in certain markets that they find that is challenging as some of our other folks do. But nevertheless we think it's important and we're going to continue to do that.

Norm, has there been any change in the capacity available to the market, particularly in the commercial and industrial side?

So there has been a bit of increase if we are talking insulated metal panels?

Yes.

Okay. So yeah one of our competitors brought on a line in Arkansas, late last year.

Very well, thank you.

Good, thank you.

All right. We'll go back to Robert Wetenhall of RBC Capital Markets.

Hi, thanks for taking my question, this is [Dazzie] filling in for Bob.

How are you?

Good. When you think about your mid-cycle guidance do you guys have any assumptions embedded in there with regard to your ability to grow faster than the overall market as you have historically or could that be a source of upside? Also what sort of incremental EBITDA margins are you guys using to arrive there?

Sure, effectively the way we've progressed that is using our fair share as the market as the primary under component. So when you think about the market recovery and we maintain our fair share of that, that's the foundation. Then we have some very specific initiatives, insulated metal panels being one and there are others where we expect to grow faster than the marketplaces because there are new investments to us. So it's a combination of both of those. There is a really good page in our investor presentation I don't have in front of me but it's 31. It does a pretty good description of reconciliation of how we think about that incremental margin, but I believe it's a 23% incremental margin is what is huge.

All right, great.

Just more in line with historical levels than it is any extraordinary improvement, yes.

All right and then second question on pricing, you had touched on a few times and you pointed out that gross margin performance benefited from the 40 basis points of prices, is that impact do you think that could accelerate or is 40 basis points on the gross margin level what we should be thinking about for the balance of the year?

Well my view is that it should increase. It should increase, 40 basis points is what we are currently recognizing out of the 200 basis point discussion you were having earlier where we've seen improvement in our pricing and our backlog. So we should expect to see that incrementally improve.

Great, thank you.

At this time there are no further questions. I would like to turn it back over to our speakers for any additional or closing remarks.

Assuming there is anybody still left in the call we now thank you very much for joining us and look forward to the third quarter call. Thank you.