Good day, ladies and gentlemen, and welcome to the Quanex First Fiscal First Quarter 2013 Conference Call. [Operator Instructions] During today's conference call, company management may make forward-looking statements about the future prospects of Quanex. Participants should refer to company's 2012 Form 10-K filed with the SEC for more complete forward-looking statements disclosures. Additionally, the company may refer to non-GAAP figures throughout today's call. A reconciliation to the most comparable GAAP per year is included in the company's most recent earnings release, which is available with the company's Form 10-K at the company's website at www.quanex.com. Last, participants are reminded that today's conference call is being recorded. I would now like to turn the conference call over to Mr. Dave Petratis, Chairman, President and CEO of Quanex, for opening comment. Please go ahead, sir.

Good morning, and thank you for joining us for our first quarter conference call. On the call with me today is Brent Korb, our Chief Financial Officer; and Martin Ketelaar, our Vice President of Investor Relations and Corporate Communications. Today's call will include a brief recap of first quarter results and a general outlook for demand in fiscal 2013. Engineered Products began the year with first quarter net sales up 6.7%, and operating income up $1 million over the year-ago quarter. Sales increases were driven by higher vinyl extrusion sales, a nice trend that began in 2012 and has continued into 2013, the modest growth in insulated glass spacer sales and the inclusion of 1 month sales from our recent Aluminite acquisition. Excluding Aluminite, EPG sales increased approximately 3%. Lower solar sales and higher material costs partly offset some of EPG's sales and profitability improvement during the quarter. According to Ducker Worldwide, the marketing intelligence firm we use to benchmark EPG's performance against the industry, total estimated U.S. window shipments increased approximately 5.8% for the 12-month period ending December 2012, with nearly 25% growth in new construction, more than offsetting the 2.7% decline in the repair & remodel market. For Quanex, our domestic fenestration sales for the last 12 months increased 7.9%, thus outperforming the industry. Turning to Nichols, I'm very encouraged by the significant improvements in operations we are seeing. Net sales were $84.6 million, an increase of 29% over first quarter 2012 results. Nichols shipped 59 million pounds, 33% better than the 44 million pounds shipped in the year-ago quarter. Much of this improvement can be attributed to the great work of the Nichols team and the work -- much of this improvement can be attributed to the great work the Nichols team has been making regarding equipment reliability and improving our on-time delivery to our customers. We have moved a large amount of repair and maintenance spending into the first quarter to make sure our equipment will be fully operational during the peak demand periods later this year. This improvement in equipment reliability has allowed us to reduce our backlog of outstanding orders to the lowest point in several years and improve our on-time delivery to customers to nearly 90%. We are proud of this accomplishment. We will continue to push for greater improvement in the equipment reliability and on-time delivery. Nichols' operating loss was $4.2 million, an improvement from the $5.5 million loss reported in the year-ago quarter. The improvement -- the improved results also included $6.8 million in repair and maintenance spending, which was $2.2 million higher than the spending in the year-ago first quarter. We expect repair and maintenance costs to be approximately $4 million per quarter for the remainder of 2013, which will be lower than the repair and maintenance incurred during the same periods of 2012. Lower spread of $0.44 compared to $0.48 in the year-ago quarter also contributed to the operating loss. The decline in spread is the result of a larger decline in aluminum prices compared to scrap metal prices. The Aluminum Association, which tracks industry shipments of sheet products, reported industry volumes for the 12 months ended January 31, 2013, up 7.7%, while Nichols shipments declined by slightly less than 1%. Our underperformance is primarily attributable to the impact of the 2012 strike and equipment reliability issues in 2012. I'm encouraged that we are ahead of schedule, related to the turnaround at Nichols, thanks to the effort of Russ Brown and his team. Let me now turn the call over to Brent, who will take you through some additional financial highlights.

Thank you, Dave, and thank you to everyone on today's call. Quanex reported a net loss of $0.22 per share in the first quarter compared to a loss of $0.18 per share in the year-ago quarter. Adjusting for $0.02 in transaction-related charges and $0.03 in ERP costs, the adjusted loss was $0.17, comparable with the adjusted loss reported a year ago. Also included in this quarter's operating loss was a small 1-month loss from the Aluminite acquisition, resulting from purchase accounting adjustments. Corporate expenses increased $4.7 million to $12.3 million this quarter, compared to $7.6 million in the year-ago quarter. The higher expenses were primarily driven by higher ERP cost of $1.3 million and transaction costs of $1 million. The majority of the remaining increase was due to higher information technology cost, stock-based compensation expense, group medical and workers' compensation cost. I'm pleased to announce that we successfully went live with a major phase of our ERP implementation earlier this week. As a result, we will be placing approximately $20 million in capitalized cost into service. Our corporate expenses will begin seeing higher depreciation of about $700,000 per month or $2.1 million per quarter until the completion of the next phase. Due to the higher depreciation expense, we'll begin presenting and discussing our EBITDA results on a consolidated and business segment basis. In the first quarter of 2013, consolidated EBITDA was a loss of $4 million, compared to a loss of $1.6 million in the year-ago quarter, driven by the higher corporate costs just discussed. At EPG, EBITDA grew 17% to $10.3 million, compared to $8.8 million in the year-ago quarter. At Nichols, EBITDA results improved to a loss of $2.6 million, compared to a loss of $3.1 million a year ago. ERP costs peaked in the first quarter of 2013, and we expect those costs to be reduced for the remainder of 2013. As a result, we expect our corporate expense to be approximately $12 million per quarter for the remainder of 2013, comprised of approximately $10 million of cost and $2 million of depreciation, primarily driven by ERP. Our cash balance declined from $71 million at year-end to $5 million at quarter-end, as a result of $22 million spent on the Aluminite acquisition, $11.5 million on capital projects and $40 million in working capital commitment. We expect to see meaningful improvements on our cash balances and working capital usage as we get further into the building and construction season. During the quarter, we finalized a new $150 million revolving credit facility, with a $100 million accordion feature. The new facility has very attractive pricing and a 5-year term expiring in January 2018. This facility allows us to reduce the near-term cost of the older facility, while providing the additional capacity to meet any future need. We have borrowed $10 million on the new facility early in the second quarter and expect that amount to remain outstanding for the next several months. Our intention would be to pay off the borrowings by the end of the third quarter, if not before, as our cash balance improves throughout the year. We continue to invest in internal growth initiatives and making acquisitions that add to or complement our fenestration footprint. I'll now turn the call back to Dave.

Thanks, Brent. Moving to our 2013 business outlook, I continue to characterize it as cautiously optimistic. There are clear signs of recovery in the U.S. new construction market, which is refreshing. Last week, Case-Shiller report with -- showed new home prices increasing -- with home pricing increasing about 9%, and up for the first 3 consecutive quarters, was also very welcome news. Additionally, we expect continued growth in Europe for our warm edge spacers. The outlook remains cautious for the Canadian markets, which appear to be just now experiencing this downturn, and the U.S. repair & remodel market portion of the window market. As you know, with our emphasis on energy-efficient products, Quanex has much more opportunity in the repair & remodel market than new construction, and we are not seeing the R&R market come back yet in the U.S. in any meaningful way. Recent reports from our competitors and customers have been mixed at best regarding their results in the R&R market. Even with the improved U.S. housing starts and our 2013 estimate of approximately $42 million U.S. window shipments, up from 40 million units in 2012, those numbers remain recessionary from a historical perspective. We also believe that Ducker's estimate of a 2.2 million unit improvement in R&R shipment is aggressive. While we firmly believe the recovery in R&R will eventually occur, we need to see continuing improvement in the macroeconomic factors, led by increasing home values. We think that full recovery in R&R could lag new construction by 12 to 24 months, as we believe big ticket window replacement projects will come after the lower ticket home projects are completed. Excess industry capacity, particularly on the vinyl side, coupled with our moves to increase price over the last 4 years, has led to some pricing challenges in the current quarter. In fact, renewed contracts with a couple of our large customers had volume-based price decreases that took effect in January of this year. Additionally, a large customer recently lost some business to a competitor, which could have some impact on our vinyl business later this year. Further improvements in our end markets will increase demand and help alleviate some of that pricing pressure. I can assure you that we are taking the necessary steps to minimize the impact of these challenges on our bottom line, and will remain well-positioned to add to our market-leading positions through organic growth and acquisition. We continue to have a strong balance sheet and a strong calendar team ready to serve our customers. We remain very bullish on our long-term prospects. With that, we are ready to take your questions.

[Operator Instructions] Our first question comes from the line of Daniel Moore from CJS Securities.

Maybe focus on Nichols a little bit. In terms of the spread, are you seeing any improvement in Q1 versus the levels you saw -- excuse me, in Q2 versus levels in Q1? And just update us in your outlook for the remainder of fiscal '13?

Spreads are compressed. I would say, in terms of Q1 and looking back historically, they're as compressed as I've seen through the downturn going back to 2008. We have been aggressive in the rolling charge, as we're booking new businesses, but I'm cautious that spreads will improve as we go through the year. Our opportunity really sets in our ability to take short lead-time time business. That's why we put the heavy investment in Q1. With our on-time delivery and low backlog, we think we're in a great position, but it's all opportunistic.

Okay. And one of the factors impacting, you mentioned, was solar tape, obviously highly profitable. You expect that to remain weak? Or what's the outlook for the remainder of this year?

I think demand for solar edge tape over the next, really, 2 to 3 years will be pretty consistent. So our shipments on solar really peaked 2010 and '11. As the solar industry has declined -- We've shown that in our numbers. But I think it will be pretty level through 2015, then the long-term tax incentives run out, and then it's -- we'll have to figure out where it goes. In the quarter, we did sign a 3-year agreement to supply solar edge tape, so we got that pretty locked up. And that major customer's got pretty solid backlogs.

That's helpful. And then lastly, with the incremental firepower over dry powder, if you will, on the balance sheet, what are you seeing in terms of acquisition opportunities? And are there other things that you would consider, share repurchases or other ways, to maybe flex the balance sheet to -- in the interim, while the markets are sort of bouncing along the bottom here?

Yes. I mean, I'd say we still -- we remain active talking to folks on the acquisition front, as we have over many years, quite frankly. But so we think there's still an opportunity on the growth through acquisition. And if over time, it looks like that may be less and less likely, then we will look to doing some things, be it share repurchase or what have you. But we still think we are finding the opportunity to come to an agreeable valuation on some of these potential acquisitions. So that will be our goal in the near-term here.

Our next question comes from the line of Trey Grooms from Stephens.

This is Patrick [indiscernible] sitting in for Trey. Just you guys called out on your release that Alumco contributed 3.6% to EPG's top line. I was just wondering if you could give us more detail on the acquisition. Specifically, can you talk a bit about the margin profile of this business and kind of how it compares to the rest of the segment?

Yes. So I think we gave with the 2012 sales were, like approximately $47 million. We haven't talked about what their profitability is, but what I would say is, it's fairly comparable to our existing screen operation and engineered components from a percentage basis. Now -- and let me point out that is also before the purchase accounting adjustments. So then we have to go through, once the dust settles on that final purchase accounting, to understand what the go-forward margin will look like.

Okay. And then just a second question, in EPG, you called out a shift towards unfavorable mix in the quarter. Can you talk a bit about more about what happened there? And is this something that was more onetime in nature or do expect this mix shift to continue?

Well, I believe the mixed shift will be consistent through the year, and it's because of the types of low-end construction and multifamily window opportunities that are in the marketplace. Where we're seeing new construction starts, it's been heavily pushed by multifamily and let's say, homes, less than $250,000. And they just carry lower efficient windows.

Yes. And maybe I'll jump in here real quick, and just think about it as this new construction market has been taking off, a builder typically is trying to fill the hole in the house that they have with the lowest-cost, cheapest product. They can fill that hole lift versus repair and replacement. It tends to be a higher-end, higher performing window. So to the extent that new construction continues to grow and repair and replacement declines or remains flat, that mix will remain.

Our next question comes from the line of Robert Kelly. And Robert Kelly comes from Sidoti.

A question on Nichols. You saw nice growth in the shipments. Was that related to winning back share? Or was it the short lead time waters picking up with the construction seasons? Help us out there.

I believe we've got back some share that we lost during the strike. Overall, aluminum demand feels pretty good, filling those new construction opportunities, but I'd describe it as share.

Okay. And then as far as the cost drags from maintenance and repair spending, I believe you called out $4 million. So there, a quarter for the balance of F '13?

That's right, I was extremely pleased with our execution at casting and throughout Nichols. But particularly at casting, we took out 29 days in the quarter and produced more -- the highest level of metal since like 2007. So I look at that as a very good sign. And we have lost opportunities in the past construction seasons because the system was not up and reliable. We've made several investments there that, I think, will really raise our capability.

Yes. And Bob, too, the $6 million that we spent in the first quarter, that was planned. Our objective was to move more of that spend into the first quarter because that's when we take our big shutdown. And so the objective was to get into a preventative maintenance mode and do everything we could, while we had the plant down anyway, instead of repair and maintenance when something fails unexpectedly.

So the question is for Nichols. It seems like the volumes are coming back due to some productivity initiatives and share gains. The spend is going to be a drag on the bottom line for Nichols in this year, but eventually it comes back to you. If you're trying to build a model for this segment, I mean what kind of savings will the maintenance spend generate as far as fixed cost operating leverage? Any help you can provide on that front will be a great deal of assistance to us.

Yes. Well, what I want to make sure we're clear of is our total spend for the year for repair and maintenance for 2013 is expected to be slightly below the spend in 2012 for the full year. So we feel confident that we will get the reliability and get the pounds out and not have a further drag from the repair and maintenance spending. But also remembering, too, we have a very large project with our oven replacement in Alabama for that May, June timeframe that will be key and critical as we move forward because that would be big area where we spent some dollars on the repair and maintenance historically. So getting that in and up and running and reliable will be very important to both our reliability, as well as bringing our spend down over time.

I mean, is it fair to assume that we'll see the benefits of all the spend you put in, in '12 and '13 on the top line, but not necessarily on the operating line in F'13. That's more an F '14 story where it comes back to you?

I believe that how you position the spread number will have significantly more impact at Nichols than the investments I'm making. I'm confident we're going to improve and are showing the improved reliability, but spread's going to drive the day. If we get some increases in aluminum prices, that's going to help us.

Understood, understood. And then as far as on the Engineered Products side, the consolidation savings are due to kick in, in 1Q '13 -- I mean, I'm sorry, for F '13. Could you talk about what the benefit was, if any, in 1Q '13 and if you're still on track for that $8 million savings number?

Yes. So I'd say it this way; the bulk of that $8 million that we've projected in savings is clearly going to be in the latter half of the year. But when we evaluate our internal forecasting of how that rolls in, we feel pretty good about first quarter that we achieved what we're looking for. But it obviously picks up in the second quarter. And third and fourth quarter are going to be the highest benefit times. It all goes to when we have the most activity, most volume.

I want to reemphasize, though, I was pleased with our Q1 tracking on that saving. And as we pick up the volume, it helps us even more. There's a little bit of a mixed shift, but -- at IG, again driven by the lower performance windows and the solar, but I feel good about where we're at.

And correct me if I'm wrong, the $8 million comes back to you even if volume and mix is similar to F '12, is that correct?

Yes, that would be fair. But I mean, just to the extent we can get improved and favorable mix in increased volume, it only helps.

Our next question comes from the line of Peter Lisnic from Robert W. Baird.

I guess, first question, Dave, can you give us a little bit more flavor of color on just on the pricing trends in EP, I know you mentioned there, some of the pressures there a little bit. So I'm just wondering order of magnitude. And then what's the probability that maybe there's some vinyl capacity in the industry that's taken out to maybe help the pricing situation?

Unless we, let me -- I'll take your second question first. In terms of vinyl capacity, I don't see it leaving. And we would have to acquire it and deal with it that way, which vinyl is always on our acquisition pipeline, but I don't see any capacity leaving. There's a second driver that's important that we've been investing in the last couple of years, and that's raising codes and standards. Those will twink up. It forces vinyl extruders to change tools, and that's a good thing for us. The 2014 energy codes will increase window performance. We would elect it to have been higher. So that's kind of the view on that. Pricing, in terms of its effect on the vinyl industry, our vinyl pricing. Brent, thoughts?

Yes, clearly, a lot of pressure going on because of the capacity issue that you mentioned, Pete. And we have had to do some things here in 2013 just to give up some price to some folks that are really doing an excellent job of taking share and growing their business, and thereby growing our business. So we have had to give a little there. And whenever we do, do that, we're obviously looking at everything we can do on the cost side in an attempt to offset that. But there's definitely been pressure in that arena. And to understand, too, we've put a little bit of additional pressure on ourselves because we've been raising prices, really, since 2008 each year in small ways. But that just further distances us from the competition, which we feel we offer value that makes that worthwhile for our customers. But when there's excess capacity, it's clearly pressured.

I would say, whatever we split across to be able to retain business, we've got action plans in place to drive that through productivity.

Okay, all right, that's fine on that. Now if you look at the high-end window market, I mean, we could see the aggregate numbers that you're putting up in terms of revenue growth at EP and what the industry proxy is, but I'm just wondering, if you look at that high-end piece of the market, if we could slice and dice that, are you grabbing your fair share there or are you gaining share on that high-end piece? How does that share trend look?

I'd describe the high-end piece as the wood market. And I would say, holding share is slightly up. But that market is declining, and that's pretty obvious in the Ducker. If you move in the high-end vinyl, that move with Aluminite gives us there, and we're all over on the vinyl side. So I think if you see our growth numbers at Engineered Products, we clearly see that the largest gain's in the lower end, but we're doing well in the midrange, and it's our EnergyCore product, our EnergyQuest product and our ability to put accessories on those. We're extremely -- we're very well-positioned in the marketplace.

Yes, all right. And then, Brent, just on corporate expense, if I just take out some of the things that have been nonrecurring over the past several quarters, the run rate used to be somewhere around $7 million, if I'm kind of doing the math right. Now you're saying it's going to step up to $12 million, and I get the couple million bucks of depreciation on the ERP system. But it just seems like that's a pretty material step-up. So is there something there? A, is my math right? B, is there just something there that is a bit different that I'm not understanding from a modeling perspective? I'm just trying to understand why it's such a significant step-up.

Yes. And what you have in the $10 million, excluding the depreciation, is a continuation on the ERP front. We just went live with -- we basically, this week replaced in effect about 3 systems with SAP. It was a huge event for us to go live. It's been successful on our first 3 days. It's obviously still early to tell. But we will continue now forward with our template, but we will continue for the next phase, our next rollout with some pretty high expenses. And that's driving the bulk of that differential from the $7 million to the $10 million that you referenced.

I would also -- your ratios are right in terms of where it's going. But we're also -- as we're in the middle of the deployment, we're centralizing some back office capabilities. Payroll would be an example, credit claims, those types of things. So as we put the systems in and create that back office, our costs are up and they'll come down in future quarters.

And I think, just to give everybody a flavor for what this looks like is our second implementation will be -- lower cost than what we've experienced here over the first rollout. But it will really see significant decline in our cost once we go beyond that one because at that point, we, Quanex, will be able to do it using purely internal resources. And so there, we'll see substantial reduction in our go-forward expenses.

Okay. And at what point do we hit that? I mean, it sounded like the $12 million of corporate goes through at least this fiscal year?

Yes. Well, to be completely honest, we're going through the go-live phase right now. Next 30 days, we will be building our detailed plan of exactly what -- how long the next phase will last, and then we can give a better sense. But I'd say, it's safe to assume future rollouts are -- I think a rule of thumb every year, we should have at least one, and our goal is to accelerate that to the extent we can. But we feel very good about where we sit today now we have a template that we can bring across the EPG location.

The other thing that I would say, cost up on the system. We delayed the output to the system, but we went live and we're shipping product.

Okay, all right, that helps on that. And then last question, then I'll hand it off. Just the first quarter cash flow, free cash flow or cash from operations, either one, just seasonally looked somewhat weaker than is typical. Anything there? I mean, some part of it's probably Nichols-related, but just wondering what or how we should think about the cash flow generation of the business in the first quarter and what it should look like for the year?

Yes. I mean, we obviously anticipate growing our cash throughout the year, with the bulk of our cash generation really being third and fourth quarter, which is typical for us. First quarter is, generally always a cash drain. But definitely, this first quarter it was more of a drain than historical. We did use more cash for working capital purposes. Some of it, building inventory, an example in Nichols, building inventory ahead of the oven shutdown, so some things that were intentional on our part. But we feel confident that we will grow the cash flow throughout the year.

So we shouldn't expect any sort of material change in turns relative to history. Is that putting up [ph] ?

No, not at all.

I was pretty strong with the Nichols team. I want you to run well when you run. And if that creates some more work in process inventory is okay with that.

Our next question comes from the line of Jack Kasprzak from BB&T.

I just want to make sure I caught, Brent, the bridge from the $0.22 reported loss to the $0.17 adjusted loss. Could you review that again, please?

Yes. The $0.22 and then we were back -- hang on. I'm trying to flip through, make sure I do the right thing. I don't want to tell you the wrong...

Yes, Brent, it's actually in the press release. There's a table. So the reported loss of $0.22, we got a $0.02 transaction-related cost and a $0.03 ERP implementation, that gets you down to the $0.17.

So it was just those 2? Got it, okay. And on that issue of excess vinyl capacity, I just want to make sure I understand, that's not anything new, I assume. Business has been soft here for a while. And so that's just an ongoing issue or is there something new that's affecting that situation?

I think the only change there, think about the big extruders, it's us, it's Royal, which is Georgia Gulf, Deceuninck, Veka, some groups out of Canada. There's been no capacity takeout during the downturn. And now, you're 5 years into this, people will lower their price or their -- just to get volume through the factory. I'd emphasize that another way, during the downturn, we dropped to $38 million windows from $75 million, no capacity takeout. I'd say people are getting undisciplined in the marketplace. So we're responding to that. But capacity's long. The recovery's welcome, but people are hungry to fill their factories.

No, I was just going to say, there has been one player, if you looked over the last 5 to 8 years. The gentleman that owned Royal that sold it some time ago, has started up a new business, a fairly new business, called Vision up in Canada. And so that group would be adding net new capacity to the market. So even in a period where there has been overcapacity issues, there has been some new coming on, and Vision has taken quite of bit of share just in the last 5 years.

Okay, I guess with volumes up a little bit, maybe there's a grab for that volume now that we're seeing a bit of increase. Is that part of what's going on?

I would just say, you've got 2-, 3-year contracts coming up for a review. So it opens up the competitive window. I would say, on the window fabrication side, among the big guys in the regionals, it's also been very competitive.

Okay. And Brent, your comment on ERP rollout in terms of the number of phases, have you guys said how many phases there are?

No. But I mean, at some point, you roll off to this kind of phase thing and then it becomes a way of life for -- and I say that from a standpoint that as long we continue to grow through acquisitions, we will continue to have to convert locations onto SAP. But the goal, clearly, is at some time in the not-too-distant future, where we've developed in-house expertise, that we can just do that with our internal resources and not be dependent on outside resources. So at some point, we get to stop having to talk about phases.

Our next question comes from the line of Philip Gibbs from KeyBanc Capital Markets.

The inventory build was a little bit surprising to me in the first quarter of the year. I would assume you're holding that level into the second quarter of the year, if you're finally tapping into that revolver. Is that something that seems reasonable to you?

Yes. I mean, I would say, we will hold a portion of that inventory build. Again, a part of that is building some inventory ahead of when we take the ovens down in Alabama. So we will do some prebuild of inventory to be able to handle the supply. That's intended to be about a 2-week shutdown and a 1-week startup. So we will have, in essence, 3 weeks of inventory that we'll need to have prepared ahead of that. So yes, I think we will see slightly higher inventory through the second quarter with the ability to really get it back down in the third.

Okay. So Nichols is tying up cash right now. And then you expect to get that back and then some in the second half, I would assume afterwards?

Yes, we're confident in that.

Okay. And how should we think about the 2Q to 1Q bridge? And I apologize if you addressed this already, on the maintenance expense. Is it -- if the maintenance expense was X in the first quarter, how much comes off in the second?

Yes. We spent about $6.4 million off the top of my head, and we're projecting about $4 million in second, third and fourth quarter on a quarterly basis. And that $4 million per quarter would be less than what we spent in those quarters last year because our objective was to move as much of the repair maintenance into the first quarter when we have the facility shut down.

How does that jive with what you guys have been saying about increasing the preventative maintenance if your spending levels are lower?

I think we're right in line. You don't -- it's moving our philosophy from break fix to preventative. You want to do your preventative maintenance in the winter months when you're demand's at the lowest, and have your maximum uptime when the demand's the highest. So I'm extremely pleased with our execution there.

And then just the last on the housekeeping side, $46 million of DNA this year, how do we view that moving into fiscal '14 as the ERP launch gets into kind of the second and third, say, is your depreciation going to taper down in '14? Or does stay it level and move higher?

I would expect it to level and then go higher as we go live with the second phase. And then we've got to do some more detailed modeling further out, but I would expect it to kind of level off ideally, after that one and begin to decline. And again, it all gets to when we can move this effort to all internal resources and really bring the cost down significantly.

Our next question comes from the line of John Koller from Oppenheimer.

It's Oppenheimer & Close. A quick question, a couple of questions. Capacity utilization for EPG, if you have a rough estimate? I know it's across a whole bunch of different lines.

I would say 50.

Okay, great. The maintenance CapEx going forward on a sort of a normalized basis, I was wondering if that's still in the $15 million or so annual range once you get over the hump at Nichols?

Yes, we're right on that number.

Okay, great. The $27 million in non-Nichols CapEx, I was wondering if you could talk a little bit about where you're looking to spend some of that, projects or anything along those lines.

Yes. I mean, so obviously, the ERP portion that we've been talking about already is a big chunk of it. Other things are, we generally have a noseful [ph] amount of capital in tooling at our vinyl business. That's for both replacing tools that have worn out, as well as tooling for new window lines, new profiles. That would probably be our second largest category. Then we roll into some new IG spacer lines that we're actually shipping one over to Europe as we speak today and likely to have some more -- have another line by the end of the year because -- just for a historical view on that, in 2011, we had no lines in Germany. Today, we have 2, with the third one on its way. That third one's already sold out before it lands, and we're likely to be in that same position on the fourth one by the end of the year. So those will be the big buckets, and then you get into much smaller, a whole bunch of smaller after that.

Okay, great. And then on the balance sheet, I know the revolver's been tapped, and it's [indiscernible] I understand it will come back. But as you look at the acquisition front, I'm wondering, if you still maintain the same discipline that you had before or do you get a lot more conservative, maybe, on your pricing now that you're going to be tapping the revolver?

I would say, we would use the same discipline. Again, we're tapping the revolver in a very short-term basis, intentional. But no, we would -- I think, have been very disciplined through the downturn, and we'll remain to be that way. I mean, we've walked away from many a deal just over the last 24 months just because the valuation wasn't right.

Great. And then the last question is, on that Nichols spend, how much, if any of that went through the income statement?

Of the $6 million?

Yes, exactly.

Yes, all $6 million of it.

Our next question comes from the line of Keith Hughes from SunTrust.

I understand there was a spread compression at Nichols. But given the strong poundage growth, just really surprised there was only a $500,000 improvement in the EBITDA. Can you just kind of go over again what happened, why we didn't see a bigger jump?

Yes, just that the first part that you talked about, the spread -- $0.04 of spread, that's equivalent to a $3 million impact reduction in our earnings even if we just hit the same volume numbers. So that...

Coupled with some increased maintenance.

Yes. I mean, there's a -- so you've got a $3 million hit from spread. You've got a $2 million hit from maintenance. So that was our starting point, if you will. And then the incremental volume obviously helped us offset a big chunk of that. We were more efficient, so we did on some of our conversion costs, operate more efficiently, which benefited us. But the spread and the higher maintenance costs from the first quarter was clearly the big drag.

How were you able to do so much higher maintenance when you had such a big poundage increase? It seems like that would really just to take some maintenance off the table.

No. We took -- I've mentioned, 29 days out. We're really trying to drive a discipline at Nichols when we run wide or narrow that we run extremely well. And I think it's reflective of the progress that we're making on that.

[Operator Instructions] Our next question is a follow-up question from the line of Daniel Moore from CJS Securities.

Just following up on that capacity at Nichols. Given the investments that you made and the fact that you did nearly 60 million pounds despite being down for 1 month. Should we think about the quarterly capacity previously with 80 million pounds? Should we think about that being closer to 90 million going forward?

You need to think about that when I prove it. Sometimes, Nichols can be like my golf game. I just want to minimize the number of bad shots. So when I lower my handicap, then you can make that assumption.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Dave Petratis for any further remarks.

Thank you. As 2013 progresses, we will continue to drive the operational performance at Nichols to new levels through our lean process initiatives and preventive maintenance approach. We will deliver the savings from last year's IG facility consolidation, as well as drive productivity improvement, and improve customer service as we grow our customer base across Quanex. All of this will benefit our shareholders in the long run and allow us to achieve our vision of profitable growth. That concludes today's call. Thanks for joining us, and have a great day.

Thank you, ladies and gentlemen, for your participation at today's conference. This does conclude the program. You may now disconnect. Good day.