Good day, and welcome to this American Woodmark Corporation Conference Call. Today's call is being recorded. The company has asked us to read the following Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission and the Annual Report to shareholders. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. At this time, I would like to turn the call over to Mr. Glenn Eanes, Vice President and Treasurer. Please go ahead.

Thank you. Good morning, ladies and gentlemen. Welcome to this American Woodmark Conference Call to review the results of our second fiscal quarter ended October 31, 2012. Thank you for taking time to participate. Participating on the call today from American Woodmark will be Kent Guichard, Chairman and Chief Executive Officer; and Jon Wolk, Chief Financial Officer. Jon will begin with a review of the quarter, concluding with an outlook on the future, and after Jon's comments, Kent and Jon will be happy to answer your questions. Jon?

Thank you, Glenn. This morning, we released the results of our second quarter ended October 31, 2012 of our fiscal year 2013 that will end on April 30, 2013. Our earnings release contained the following highlights: For the second quarter, net sales were $159.8 million, representing an increase of 24% over the prior year's second quarter. Net income, both including and excluding restructuring charges was $2.0 million, $0.14 per diluted share exclusive of charges and $0.13 per diluted share inclusive of charges, compared with the second quarter of the prior year's net loss of $3.0 million or $0.21 per diluted share. The company generated $2.4 million of positive free cash flow compared with $1.1 million of positive free cash flow in the prior year second quarter. For the 6-month period ended October 31, 2012, net sales were $308.0 million, up 19% over the prior year's first half. Net income, excluding restructuring charges, was $3.0 million or $0.21 per diluted share, improved from the net loss of $5.7 million or $0.40 per diluted share in the prior year's first half. Exclusive of restructuring charges, the company's pretax income -- pretax and net income improved by $13.1 million and $8.7 million, respectively, over the prior year's first half levels on a sales increase of $48.4 million. Last December, we announced several restructuring actions to reduce the company's cost structure. These actions included permanently closing 2 manufacturing plants, placing a previously closed plant up for sale and realigning our retirement program. The 2 plants ceased operations in April and May of 2012, respectively, and the company's pension plans were frozen effective April 30, 2012. The company's current year results included restructuring charges related to these initiatives. Net of tax impact of these charges for the 3- and 6-month periods ended October 31, 2012, were $0.1 million or $0.01 per diluted share and $0.5 million or $0.04 per diluted share, respectively. Net income, including restructuring charges, for the 3- and 6-month periods ended October 31, 2012, was $2.0 million or $0.13 per diluted share and $2.5 million or $0.17 per diluted share, respectively. When we commenced fiscal year 2013, we provided our expectations about market activity and our performance. Regarding the remodeling market, we stated our expectation that existing home prices would finally bottom and begin to slowly increase as the fiscal year progressed. We also stated our expectation that cabinet market remodeling sales would correlate with this activity and be roughly flat for our fiscal year 2013. Regarding the new construction market, we stated our expectation that single-family home starts and new construction market sales of cabinets would continue to grow at a mid single-digit rate, as they had grown during our previous fiscal year. Through the first 6 months of our fiscal year, our expectations for remodeling -- for the remodeling market activity have been on target, while new construction market conditions have been more robust than we expected. For the remodeling market, fundamentals have been encouraging, but they have not yet translated into improved cabinet sales. Total sales of existing homes for the first half of our fiscal year were 11% higher than in 2011. Private sector employment remains a continuing positive, with seasonally adjusted employment levels having increased every month since March 2010. Consumer confidence, reported by the University of Michigan in October, registered its highest levels in the last 5 years and the Case-Shiller index has improved for 7 consecutive months, indicative of positive movement in housing prices. Each of these fundamentals for existing homes are trending positively, suggesting that our expectation for a cabinet remodeling market of flat-to-slightly-improving-sales should occur during our fiscal year 2013. Sales reported by members of the Kitchen Cabinet Manufacturers Association for the first 5 months of our fiscal year were indicative of a total market that was up by mid single-digits, inclusive of new construction that was up double-digits and, therefore, suggestive of a remodeling market that appears to have been flat to slightly down during this time. Against this tepid remodeling backdrop, our company's remodeling sales increased in the low-teens during our second quarter and by mid single-digits for the first half of our fiscal year, indicative of market share gains with both dealers and home centers. Recognizing that the remodeling market for cabinets is not yet increasing, the company's largest remodeling customers and its competitors have continued to maintain the elevated level of sales promotions that have persisted for the last 2 years, in the form of free products and/or discounts based upon the amount of sale. The company continues to maintain its promotional levels in line with market activity, with the goal of remaining competitive. The company experienced second quarter home center promotional costs that were in line with those of the first quarter and with prior year. Recent signs suggest a promotional environment that is gradually easing, suggesting that the company may be able to reduce its promotional level run rate, somewhat, for the upcoming spring selling season. For new construction, housing starts have exceeded our growth expectation, building on an uptrend that began in calendar 2011. Total housing starts have had a 29% year-on-year increase during calendar 2012. Breaking this down, single-family starts have grown by 25% and multifamily starts have grown by 41%. The growth in single-family starts has significantly exceeded our expectation of a mid single-digit increase. Even though the prior year comps get tougher as we get into the second half of our fiscal year, it appears that the market for single-family home starts is poised to exceed our expectation for the year. The 25% growth in single-family home starts helped propel the company to a year-on-year new construction sales gain of over 40% in both the second quarter and for the first 6 months of fiscal 2013, implying that a bit more than 1/2 of the gain was market-driven and the rest was the result of our market share gains. Regarding gross profit. The company's gross profit margin for the second quarter of fiscal year 2013 was 15.5%, higher than the previous quarter's 14.9%, and well above the prior year's 12.5% of net sales. The company generated a second quarter year-over-year incremental gross margin of $8.7 million on incremental net sales of $31.4 million, resulting in an incremental gross margin rate of 28%. Strong sales gain, combined with the 2 plant closures, enabled the company to realize excellent leverage on its manufacturing overhead cost and some favorability regarding labor cost. However, some of this leverage was offset by inefficiencies connected with the company's transition efforts during and following the plant closures, which were exacerbated by the unexpected magnitude of our sales increase. Rising material costs also continued to be a factor. Regarding operation -- operating expenses. Total operating expenses were significantly improved at 13.5% of net sales in the second quarter of fiscal year 2013, compared with 16.1% in the prior year's second quarter and 13.6% of net sales for the first half of fiscal year 2013, compared with 16.6% in the prior year's first half. Selling and marketing expenses were 9.4% of net sales in the second quarter of fiscal 2013, compared with the prior year's second quarter of 11.3% and 9.6% of net sales in the first half of fiscal year 2013, compared with 11.8% in the prior year's first half. Selling and marketing costs increased by $0.5 million or 3% in the second quarter on a sales increase of 24%. The cost increases were driven by higher sales commissions and higher product display and promotional cost for dealer business, offset in part by savings from the changes to the company's retirement plans. General and administrative expenses were 4.1% of net sales in the second quarter of fiscal year 2013, compared with 4.8% from the prior year's second quarter and 4.0% of net sales in the first half of the fiscal year 2013, compared with 4.8% in the prior year's first half. G&A costs increased by $0.5 million or 7% compared with the prior year's second quarter, driven entirely by increased costs related to the company's performance-based compensation plan that more than offset cost reductions from the company's retirement plan changes. The company's recent restructuring initiative resulted in the permanent closure of 2 manufacturing plants and the realignment of its retirement program. The company recognized pretax restructuring charges of $0.8 million in the first quarter of fiscal 2013 and $0.1 million in the second quarter related to these initiatives. The bulk of the restructuring efforts have been completed and out-of-pocket cost will decline as the fiscal year progresses. One of the company's closed plants was sold during the second quarter, leaving 2 properties still held-for-sale. The company has realized the expected pretax savings of approximately $4 million per quarter from these initiatives. However, we estimate that the company netted roughly half of that benefit during the second quarter because of inefficiencies related to significantly higher production volumes than were expected. Regarding the company's capital spending and cash flows. The company generated operating cash flow of $2.0 million during the second quarter of fiscal year 2013 compared with $3.7 million in the second quarter of its prior fiscal year. The decline was driven by payments for severance and other restructuring activities, the resumption of funding pension plan contributions and working capital investments made in receivables and inventories as business has grown. The company's gross investment in capital expenditures and promotional displays during the second quarter of fiscal 2013 was $4.3 million, up from $2.6 million expended in the prior year's second quarter. Both capital spending categories experienced growth over prior year due to investments made to expand the production capacity and grow the business. The company received total proceeds from the sales of a building and from equipment from its closed plants, aggregating $4.7 million during the second quarter of fiscal year 2013, creating a net inflow of $0.4 million for the quarter from investing activities. The company generated free cash flow, defined as operating cash flow net of cash used for investing activities, of $2.4 million during the second quarter of fiscal year 2013 compared with $1.1 million in the second quarter of its prior fiscal year. The improvement was related to the proceeds from the building and equipment sales, which more than offset the investment in working capital. For the first half of fiscal year 2013, the company generated free cash flow of negative $3.2 million compared with free cash flow of positive $3.2 million in the comparable period of the prior fiscal year. Severance and related plant closure outlays of approximately $3 million, pension plan contributions of $2.5 million and investments in working capital, more than offset the improvements from net income earned and from asset sales. The company expects to continue to fund its capital spending from a combination of operating cash flow and existing cash on hand. Regarding the balance sheet. The company's financial position remains outstanding. The company ended the quarter with a total of $70.1 million in cash, cash equivalents and restricted cash compared with long-term debt of $23.7 million. Long-term debt-to-capital was 14.9% on October 31, 2012, down from 15.5% at April 30, 2012. In closing, we continue to manage the business with the objective of delivering a superior customer experience and long-term value for our shareholders. We have chosen to continue to invest in a number of initiatives, including improving the quality and breadth of the company's products and services, maintaining promotional levels that are commensurate with competitors' offerings to sustain our market share in a challenging remodeling market, expanding channels of distribution that we have not previously emphasized, and maintaining a reduced but still significant capability for future growth as market conditions improve. We continue to expect that market activity will eventually return to its historical norms of 1.25 million to 1.4 million new households and 1.5 million new housing starts per year. Recent trends suggest to us that housing has finally begun to emerge from its long multiyear downturn. However, consumer confidence and macroeconomic conditions remain uncertain and difficult to predict, and many consumers remain unwilling or unable to make large ticket purchases because of lower home prices, availability of credit or because they simply lack confidence. From a market perspective, the wall of worry remains formidable, with global budget deficits growing and still not yet addressed. At the same time, U.S. household formation has returned to nearly normal levels, rental rates are rising as vacancy rates decline, inventories of both new and existing homes for sale are at their lowest levels in 5 years, and mortgage rates remain near historic lows. Recent data suggest that existing home prices may have finally put in their bottom and begun what we expect will be a slow climb upward. Although the cabinet remodeling market appears to have been flat-to-down during our first half, the first half of our fiscal year, we continue to expect that cabinet remodeling sales will follow the direction of existing home prices and that market remodeling sales will be roughly flat during our fiscal year 2013. Single-family housing starts have continued to show strength. Single-family starts now appear likely to grow at a 15% to 20% clip for the remainder of our fiscal year compared with our original expectation of mid single-digit growth. Having described our expectations for the market, I will provide our expectation for company-specific performance. The company's remodeling sales exceeded the market in the first half of its fiscal year by several percentage points, and seem poised to continue to maintain this type of performance for the balance of the fiscal year in a flattish market environment. The company gained significant market share in the new construction sector during the last 2 years, which enabled the company's growth to exceed the market by roughly 15 to 20 points. We continue to expect that the company's sales will outperform the new construction market, although the magnitude of this outperformance may shrink as our fiscal year progresses, as prior year comparables become more formidable. We are extremely gratified to have reported a net income for the first 2 quarters and believe that the company has the potential to operate profitably throughout the remainder of the fiscal year 2013. This concludes our prepared remarks, and we would be happy to answer any questions you have at this time.

[Operator Instructions] We will take our first question from Dennis McGill from Zelman & Associates.

First question on the home center side of the remodeling side. You made a comment that I think promotional activity across the industry was relatively comparable 2Q to 1Q and then also to the year-ago period, yet you saw a pretty strong acceleration in activity on the growth rate from 1Q to Q2. So can you just maybe square that a little bit, and maybe elaborate on what you think was driving the better performance without promotion's aiding it?

Yes, it's primary seasonal. Yes, the first quarter, once you come off, really you go kind of early May, first couple weeks in May, you get into the summer period and that's just seasonally is slow for remodel. Traditionally, that's been the case, people go on vacation, they don't do as much activity then. When you get into fall, which is one of the 2 big traditional selling seasons, it just picks up and you get some of that out in our second quarter. Not all of it, obviously, because it goes through November, early -- really, Thanksgiving, but certainly, it's mostly seasonal impact.

Well, I was actually thinking about it on year-over-year basis, so the growth rate? I think...

I thought you said sequentially, I'm sorry.

Well, sorry. The way I was looking at it was a growth being relatively flat on the remodel side in the first quarter, but yet up low teens in the second on a year-over-year basis?

Yes, I think last year, Dennis, we had bit of a falloff in the fall compared to what we expected, Q2 sales were lower than Q1 in home center. This year, they were sequentially about the same, so we didn't experience that falloff. So I think that we're feeling good, in a relative sense, that we didn't have that falloff, the home center -- or I should say, the remodeling sales were probably in line to maybe a little bit less than we had hoped for, for second quarter, but still at a healthy level.

Okay. And then on the new construction side, when you think about the outperformance that you've had on a unit basis and the market share gains you've had, is there any way to split that between partnering with builders or having relationships with builders that are growing faster than the market, versus doing business with builders today that maybe you didn't do business with 1 year ago?

Yes, by far the majority of it is partnering with builders that are growing in the market. There's a little bit of geography, we're in some areas that have recovered, I think probably more quickly than others in terms of concentrations. But generally speaking, it's partnering with our customers. Over the last -- because as Jon mentioned, it's really been a couple of years where we've tried to partner with customers that we think are best suited to grow. As the same comes, I think we've been pretty successful at that. We've also penetrated share within those customers, so we kind of picked the right customers and we've been able to build our share with them. So it -- that, there's a little bit, but there's not a lot of new builder activity or new relationships in that number. It's really partnering with the right people.

Okay, great. And then just last quick one. Any sense on when the inefficiencies that you've talked about the last couple of quarters would be normalized and maybe out of the P&L?

Yes, I mean, we have made progress. We look at -- in November, we've continued to make progress. As we talked about last quarter, I think the caveat we put on there was once the growth kind of slowed down and give us a chance to catch up, and as you can kind of tell from, obviously, from the numbers is it didn't slow down and give us a chance to catch up. So we are making progress but in some cases, we're still kind of chasing it because the orders still continue to come in at a pretty good clip, certainly, as you can see by the results in the second quarter. So we have made progress. We did get more of the inefficiencies out during the second quarter, and it was back-end weighted in term of our success, it also [ph] made progress through the quarter, and as we continue into the third and then the fourth quarter, we think we'll continue to make progress given the fact that we don't continue to see maybe these kind of growth rates and we get a little bit of chance to catch up. But we made progress, maybe not as much as we would have liked, but it's because the top line was growing as well, so we'll take that.

Our next question comes from Peter Lisnic from Robert W. Baird.

Just to follow up on that question on the inefficiencies and being able to kind of have those dissipate, is it still a labor issue at this point? Or is it primarily a labor issue just having the right people in place to meet the demand? It seems as though it's maybe taking a little bit longer to get some of these inefficiencies behind us?

Yes. I mean, it all starts with labor, now as we talked about last quarter, it can show up in other places. Inexperienced people have a tendency, for example, to generate more scrap just because they're not as proficient as their jobs. But maybe if you think back to the first quarter, the savings that we generated from the restructuring activities, we basically consumed all of those savings in the first quarter or close to it in our inefficiencies. As Jon mentioned in his comment, we got about 50% of a net in this quarter, so that gives you a magnitude of the progress that we've made. But it is still basically related to labor, there's a little bit in terms of changing some of the material movement with the 2 plant closures, but the source of -- by far the majority of it continues to be the labor. That has calmed down, we are still adding a little bit of headcount, but most of it is now replacement in terms of some of the turnover we've had with the summer hires that have decided that maybe the work isn't kind of their cup of tea. But it's still primarily labor and we need to calm the labor down, but we did, again, make a lot of progress during the quarter.

Okay, and is it -- I mean, is it one of those cases where we have a shortage of skilled labor? Is that primarily the issue that we're having here? Or is it just a learning curve that -- that the employees need to get past?

Yes, Peter, it's not that we can't find people because we're finding people, we're staffing up. It's really just a question of seasoning those folks that we've got in there and turning them into productive members of the team, as Kent was alluding to in terms of overall performance. It's [indiscernible] things like that.

Okay, all right. Got it. And then, switching gears on the remodel side. Have you seen anything in terms of a material change in the mix of the business that you're getting from the remodel market. In other words, are you seeing consumers maybe willing to spend a little bit more, have more "bells and whistles" on the products that they're adding?

No, not so much. It's been pretty flat but I think it's all -- it may be a relative question. In our mix of business on the remodel side, we never really saw it degrade during the cycle, during the down part of the cycle. The people that were out there buying continued to buy a good mix in terms of features, in terms of price points and certain terms of those types of things. The issue on the remodel side was just number of jobs, it was just pure volume. We never really saw a decline in the mix on the remodel side. The real shift in the mix downwards was on the new construction side. So to answer your question, it hasn't really changed, but then, again, it never really dropped. It's just kind of consistently been about the same number. We've upticked it a little bit because many of our new product introductions have kind of been on the higher side of our average mix, but there wasn't really anything to recover from on the remodel side.

Our next question comes from David MacGregor from Longbow Research.

This is Josh Borstein in for David MacGregor. Just keeping on the mix issue, what's been the impact from new construction on average pricing? How has it affected overall mix there?

Well, Josh, we have a -- the mix in general, on new construction business is lower than it is on remodel. Generally speaking, when people are remodeling, they're upgrading from whatever was in their homes previously, in all cases. So typically the new construction mix tends to be geared a little bit more toward opening price point, and in the market dynamic that we've had over the last several years, with appraisal prices being a challenge, sometimes that's tended to, if anything, increase that tendency, so that the home will appraise.

Okay, great. And then just on the new construction, saw some impressive growth there, 40% plus. What's the backlog or order book right now tell you about the business here in 3Q, and how much visibility do you have right now on new orders?

For us, the backlog doesn't really change a lot, I mean, a few days, but generally, we run with a 11- to 12-day backlog, that's just kind of how the cycle works. On the new construction side, we do have some visibility, not as much as we would like, but we do have some visibility into our customers' backlog, which is probably more important. We don't actually see it until they go ahead and release the kitchen, it's ready to us. But if you look at their backlog in terms of lots, in terms of orders, their backlog is still quite strong and it does support, Jon mentioned the increase or our anticipation for the rest of our fiscal year in terms of the activity on the new construction side, we can see probably 90 days out in -- with several of our major customers, and that backlog is still there. It will slow down a little bit in December on new starts, they have a tendency to concentrate on closing things before the calendar in fiscal year end. But if you, again, if you look at the lots that are under contract, they are not getting high cancellation rates, so we have a high degree of confidence that the things that they have under contract are, in fact, going to get built. There's sufficient backlog out there to, again, support Jon's kind of forward-looking comments, and good activity going through the winter and into next spring for us on the new construction side.

Okay, and then just lastly, could you quantify the impact from raw material cost increases in the quarter and if you have any comments on visibility you have, looking out to the next quarter or 2?

Yes, Josh, it didn't move the needle that much during the quarter. I mean, it was a noticeable impact, but you put at certainly, less than a percent of sales. But as we look out a little bit, it begins to get a little more spooky, if you will, because there are inflationary pressures out there within our supply base.

Your next question comes from Sam Darkatsh from Raymond James.

2, 3 questions, and a couple of them are piggyback questions on prior ones you've received. First off, Jon, I want to make sure I understood what you were talking about with respect to the sustainability of your expected home center demand. The -- you're growing at double-digits this quarter, the industry is flat to mildly down. Do you expect, over the next couple of quarters, for that variance to moderate, or for that variance to persist? I'm just trying to get a sense directionally of what -- of your performance versus the industry in the home center, kind of what you would expect over the next 6 to 9 months or so?

Yes, sure, Sam. What I said was that in the first half of our fiscal year, our remodeling sales were up mid single-digits, although, we had a stronger, obviously, Q2 than Q1 and that the market was flat to slightly down. So we outperformed by several points in the first half and we expect that we have the potential to perhaps continue to outperform the remodeling market on the second half by a similar magnitude.

As the first half combined, not the second quarter per se?

Correct.

Got you. So why again would that be, I'm sorry, why it would moderate from the strong second quarter differential?

Well, this is Kent, Sam. The kind of the biggest thing in the second quarter, and Jon mentioned it briefly, was our comp. It wasn't so much our run rate, our sequential run rate as, as last fall, we had one of our major competitors launch a significant increase in promotional activity at one of the major accounts, and we did not respond to that. And so our share last year during that period, when they were running the promotion, which was really the second and into the third quarter, it kind of drove our, obviously, our volume down. You could see that last year in our results. So what's happened in the second quarter, and will happen probably in the third quarter to some degree, is we're comparing our sequential run rates over a low comp. When we get into the fourth quarter, that had washed out of the system and you're back, kind of, to a normal share, year-over-year comp. So we would expect to see a -- something pretty similar, just reverse it. So we would expect the third quarter to see some reasonable gains like we did in the second quarter on a low comp, and then once we get into the fourth quarter and your comping a more normal level of activity in share, we would expect the fourth quarter to look more like the first quarter.

Which leads me to my second question, perfectly then, the promotional outlook, Jon, I think you mentioned that you expected to ease going forward. Is that due to more to the raw material inflationary outlook? Is it more due to the fact that the REIT retailers are not seeing the incremental pull from promotional spend? Why would you anticipate that dynamic, particularly as you suggested Kent, the promotional comparisons, I think, get a little bit more difficult going forward?

Well, not so much they get difficult, I think they normalize, is maybe a better way to put it is that we went through -- 1 year ago, our second and third quarter, where I don't think they were normalized across competitors or in the accounts. What I would say in terms of the larger question you have on promotion is it's kind of more the latter, is I think that people are recognizing the elasticity of demand, that some of these, kind of extra levels of promotions, are not driving any more business. They're not creating primary demand for either the account or the manufacturers as a whole. And so I think we're starting to see that ease, people are trying to find where that sweet spot is, where an incremental dollar of promotion actually does generate some additional incremental demand. We've gone through a period now of probably close to 2 years, where in my personal opinion, that hasn't been the case. And so I think people are testing the markets, they're trying to figure out where that point is, both our customers and within that the major suppliers. And what we're seeing is, I think, reflective in the marketplace, is activity that is recognizing that some of these incremental promotions, that started really 2 years ago, are not generating incremental demand. So I think that's what's driving a little bit of the easing off.

Last question, if I might. Accounts receivable grew, I think, 40-some odd percent year-on-year, which was considerably more than sales. I would think that's a bit counterintuitive only because your mix to your builders was growing, and I would imagine that your terms to the builders are considerably less than to the home centers from a day standpoint. So why would receivables have grown that much? Were you extending terms to builders, or how should we look at that?

Sam, first off, it's timing that drove the -- depending upon which day of the week the quarter ends, you'd be amazed at the difference it can make in receivable on cash balances, and so forth. So first off, that's the headline. The subtext underneath that is that, in fact, at least for our business, the new construction DSO tends to be a bit higher than the remodel DSO in general.

Yes, we haven't changed terms to any of our customers or channels distribution.

[Operator Instructions] We will take a question from Robert Kelly from Sidoti & Company.

Question on the remodel growth. Can you help us a little bit with what is going on in the independent dealer channel that you're starting to penetrate versus an organic growth rate, if you will, in the home center channel?

Well, we had market share gains in both -- with both types of customers during the quarter. As you know, Bob, we've been on -- we launched the dealer initiative really a couple of years ago and so with every quarter, there are more dealers transacting, there are more dealers signing up and pretty much every sales dollar is incremental when you're off of a small base. But having said that, we're pleased with our growth in the channel. I wouldn't say it's indicative of any kind of macro trend because we still have such small market share there, but we're pleased with how we're doing in that channel.

Right. So are you up 13% to the home centers? I'm just trying to get a sense of what's going on?

We were up with both categories of customers. I mean, obviously as a percentage, the dealer growth would have been a much higher percentage than with the home centers which is a mature business compared to a, essentially, a growing startup business, but big gains in both.

Last quarter, you said you did about $5 million in the independent channel of quarterly sales, could you update us on 2Q?

Yes, I mean, it was in that vicinity. I'd rather not get into real, specific numbers there, but we did have some growth over that level.

Okay. As far as the quarterly cost savings associated with last year's restructuring. About a $4 million run rate, all off sold [ph] equal, you said, you got half the way there. If we add that back in, assume you got that extra $2 million contribution margin on the gross line, is about 35%. Is that the right bogey going forward? I mean, is that what you're aiming for with this cost structure?

Obviously, we want to maximize. I'd say that anytime you're in the third is a 35% incremental margin level, you're feeling pretty good about how you're doing.

Right. But shouldn't the incremental margin be around 35% 1 year from now? I mean, shouldn't you be doing something north of that, just given all the cost savings that you got with the restructuring?

Well, it depends on a lot of factors. There's a lot of -- it's a simple question, but it's a complicated answer. There's so many factors that go into it. I'd say all things being equal, perhaps, but all things are never equal.

Right, understood. Fair enough. One final one. The new order growth from the public builders is in the vicinity of 30% for the last couple of quarters. And then you kind of talk about your second half being in the 15% to 20% growth range for the new construction channel. I mean, can you just help us reconcile that with the lags from when, I guess a builder order is closed to where you sell them the cabinet -- kitchen or what have you, and when it starts to show up for you.

Well, let me just clarify. We were up in new construction business north of -- a little bit north of 40%, in both of the first 2 quarters. The market was up in starts, single-family starts, roughly, let's call it 25%, during the comparable period or for the calendar year-to-date, let's say. And what I said in the guidance, going forward, was we expected that the market could either run 15% to 20% for the remainder of our fiscal year, at the last 6 months of fiscal year,. And that we'd have a shot at outperforming that because we've done pretty well so far in the first half. Our comps get a little bit tougher in the second half of our fiscal year, so it could be that our outperformance rate shrinks a little bit. That's really what I was trying to imply there in my comment.

Now I mean, I grasp that, it's just that there's a lag between a new order received for builder and when you're selling them the kitchen now, or do I not understand that?

Yes.

Okay, so what is that lag about?

Well, between the time -- we're probably -- at a normal builder's, the actual build cycle, we're probably 50 to 60 days into the actual build cycle after they move dirt or pour foundation. The time lag between when they actually take the order and when they start moving dirt can vary, obviously, by their production schedules and those types of things. So if you put an average in there, that's probably 6, maybe 8 weeks. So you can get a good 3.5 to 4 months between the time they actually sign a contract and our product will actually be going into the home.

Okay, great. And one final one, if I could. A lot of cash on the balance sheet, could you just talk about priorities for use of that cash?

Yes, I mean, we've talked it about before. I mean, the first one is, obviously, reinvestment and performance of the business and after that, we get to some of the other things that we've talked about. In terms of why it's still there, I mean, you could maybe help us there if you got a crystal ball, we're kind of looking at the next month here as we look at December 31, and there's a lot of things that can happen between now and December 31. We think that there's, obviously -- could be a lot of disruption in everything from the financial markets all the way through to the economy depending on what happens on the larger stage. So our short-term position really hasn't changed, which is that we're going to keep the cash and we're going to keep the flexibility until we think that we have a better look at what's coming down the way. It's clearly it's excess cash in a normal environment, but we're not in a normal environment. So we're going to continue to hold onto that and use it inside the business or use it as, if you will, as security to be able to deal with future shocks until we get some higher level of confidence that the industry's back, that the economy is going to stay on the right trajectory and that we're not going to end up here with a double-dip, or whatever you want to call it. So long-term, our priorities hasn't changed, and since we've talked 3 months ago really, the short-term hasn't much either, I think we're all just sitting around waiting to see what happens here between now and December 31.

[Operator Instructions] And it appears there are no further questions.

Since there's no additional questions, this concludes our call. Thank you, again, for taking time to participate, and speaking on the behalf of management of American Woodmark, we appreciate your continuing support. Thank you, and have a good day.

And once again, ladies and gentlemen, that concludes today's conference. We appreciate your participation today.