Applied Industrial Technologies, Inc. (AIT) Q2 2012 Earnings Report, Transcript and Summary

Welcome to the fiscal 2012 Second Quarter Earning Call for Applied Industrial Technologies. My name is Monica, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I would now turn the call over to Julie Kho. Julie, you may begin.

Thank you, Monica, and good afternoon, everyone. On behalf of Applied Industrial Technologies, thank you for joining us on our Fiscal 2012 Second Quarter Investor Conference Call. Our earnings release was issued this morning before the market opened. If you haven't received it, you can retrieve it from our website at applied.com. A replay of today's broadcast will be available for the next 2 weeks as noted in the press release. Before we begin, I would like to remind everyone that we'll discuss Applied's business outlook during the conference call and make statements that are considered forward-looking. All forward-looking statements are based on current expectations regarding important risk factors, including trends in the industrial sector of the economy, the success of our various marketing strategies and other risk factors identified in Applied's most recent periodic report and also with other filings made with the SEC. Accordingly, actual results may differ materially from those expressed in the forward-looking statements. In compliance with SEC Regulation FD, this teleconference is being made available to the media and the general public, as well as to analysts and investors. Because the teleconference and its webcast are open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed. Our speakers today include Neil Schrimsher, Chief Executive Officer of Applied, who will provide an overview of the quarter. You'll also hear from Ben Mondics, our President and Chief Operating Officer, who will discuss operational activities; and Mark Eisele, Vice President and Chief Financial Officer, who will discuss our financial performance in detail. Here to start us off is Neil Schrimsher.

Okay. Thanks, Julie. It's good to be with all of you today. So to recap our release from this morning, sales for the quarter were $570.4 million, representing an 8% increase over the prior year quarter and our eighth quarter in a row of year-over-year growth. Earnings for the quarter were nearly $21 million or $0.49 per share. In the quarter, we had a couple of one-time costs that reduced earnings $4.4 million or $0.07 per share. The one-time costs include the CEO transition and the curtailment charge associated with freezing the company's Supplemental Executive Retirement Benefits Plan or SERP. Mark will provide more details on the specifics in his comments, however, I want to make a couple of points: That one, the core business performance in sales, gross profit and SD&A management was solid; and two, the curtailment of the SERP is one of our actions to better align compensation with broader shareholder interest. The SERP changes will reduce expense associated with executive retirement compensation in the current fiscal year and going forward. Now additionally, we're pleased with our financial position. Our ability to generate cash remains strong and we are in a good position to invest in new programs, resources and acquisitions, and to also return cash to the shareholders in the form of dividends and share buybacks. Today, we announced an 11% increase in our quarterly cash dividend, raising it from $0.19 to $0.21 per common share, this marks our third dividend increase in the last 18 months and we are committed to generating increased shareholder value, including paying an attractive dividend. Now we're also encouraged about our overall business prospects for the remainder of the fiscal year. Given our second quarter results and the continued growth of the industrial economy, we're maintaining our full year guidance for earnings per share between $2.40 and $2.55 on expected sales of $2.35 billion to $2.45 billion. Now during my initial months, I've thoroughly enjoyed the opportunity to meet with many customers and strategic vendors. The sessions have confirmed: one, that the value that Applied delivers every day to our customers and manufacturers; and it's confirmed two, and identified opportunities for us to do even greater business together. In addition, I've enjoyed meeting with our associates in all areas of the business. Service centers, distribution centers, our fluid power companies, area leadership teams and the headquarters staff. I'm encouraged by the level of associate engagement and commitment to the business along with the shared belief that we can do even more in generating profitable growth. As a business and a leadership team, we're updating our long-range strategic plan to accelerate growth, we're in the process of identifying numerous organic growth opportunities with existing and new customers, targeting attractive vertical markets, expanding products and solutions offering, and building the acquisition pipeline. And operationally, our plans will include the ongoing generation of continuous improvement across the operating landscape today and we'll benefit from leveraging our new ERP system over the strategic horizon. Now I want to turn it over to Ben to talk about the details of our operating performance for the quarter.

Thanks, Neil. Let me begin by providing an overview of the industrial market. We continue to see signs of growth in the economic indicators that we track. During the month of December, industrial production increased 0.4% and manufacturing production rose 0.9%. Also improving was manufacturing capacity utilization, which increased to 75.9% in December. For the fourth quarter overall, manufacturing production increased at an annual rate of 3.9%. The ISM Purchasing Managers Index rose from 52.7 to 53.9 for December, putting it at its highest level since June and keeping it above the expansionary threshold of 50. This was a larger than expected increase and suggests the economy has gained some momentum heading into the New Year. In addition, to these economic indicators, our discussions with suppliers and customers are generally positive and are in line with the general consensus calling for continued economic growth in 2012. Looking at the top 30 industries we serve and comparing them to last year's second quarter, we saw increases in 22 industries with strong double-digit growth in '12. Sales volume declined in 8 industries with most of the declines being relatively small. Overall, our end markets continue to show good growth with only minor areas of weakness. In summary, we continue to see positive trends across the industrial markets and within our customer base that support our growth estimates for the remainder of the fiscal year. From an operation standpoint, we're pleased with our second quarter gross profit of 27.3%, up slightly from last year's 27.2%. Our SD&A as a percent of sales for the quarter was 21.4% as compared to 21.0% in the same quarter last year. This quarter included one-time charges related to the SERP curtailment and CEO transition expense. Our year-to-date SD&A of 20.7% is 10 basis points below prior year. Net of acquisitions, our headcount at quarter end was basically flat year-over-year and sequentially. We continue to be diligent with our expense controls and are continually looking for opportunities to reduce costs where possible, and to invest in additional resources to generate profitable growth. Our first ERP system, Go Live, launched on December 5, at select facilities in Canada. Since that date, these locations have been operational on the new system and their business metrics have shown continued improvement in the weeks following the launch. As expected, the launch has brought key learning opportunities for future launches. We are embracing this important information as we prepare to push the system out to other parts of our business. Through our continued work on the project and as a result of our initial launch, we have found opportunities for additional enhancements that will increase functionality and productivity as we move forward. With the enhancements and added functionality, the project cost will likely be at the high end of the budgeted $70 million to $75 million range with the phased roll out approach continuing over the next 2 years. Mark will have additional comments on the expenses related to the ERP project in his remarks. I'd like to point out that our teams have demonstrated strong effort and commitment throughout the first launch, and I applaud their hard work to date. I will now turn the call over to Mark for a discussion of the quarter's financial results.

Thanks, Ben. Good afternoon, everyone. Let me provide some additional insight regarding our second quarter fiscal 2012 financial performance. Our sales per day during the quarter was $9.4 million or 7.7% above our prior year quarter with the same number of selling days in both the December 2011 and 2010 quarters. Of the total quarterly sales increase, acquisitions contributed 0.3% and we believe the impact of vendor price increases was between 1% and 2%. Unfavorable currency fluctuations during the quarter lowered sales by 0.2%. Our product mix during the quarter was 29.1% Fluid Power products and 70.9% industrial products. Second quarter sales in our service center-based Distribution segment increased $32.2 million or 7.5%. And sales in our Fluid Power Businesses segment increased $8.7 million or 8.4% from the same periods in the prior year. From a geographic perspective, sales in the second quarter from our U.S. operations were up $27.3 million or 6% with acquisitions accounting for 0.2% of this increase. Sales from our Canadian operations increased $10.2 million or 16.1% with 0.8% coming from acquisitions and 0.6% from foreign currency translation. Our Mexican operations sales increased $3.4 million or 22.6% despite an unfavorable foreign currency translation of $1.3 million. Our gross profit percentage for the quarter was 27.3%. This compared to 27.2% in the prior year's quarter. Our gross profit margin experienced positive impacts as the result of higher U.S. service center point of sale margins, higher supplier purchasing incentives and lower scrap expense. These improvements were partially offset by prior year LIFO benefits, which are not recurring in the current year. Our selling, distribution and administrative expenses as a percentage of sales of 21.4% for the quarter are 40 basis points above the prior year second quarter rate. SD&A expense has increased from the prior year in absolute dollars by $10.9 million or 9.8% compared to a sales increase of 7.7%. Our ERP project and identified one-time expenses of $4.4 million in the quarter, drove this increase. These one-time expenses included $1.3 million of CEO transition expense and a $3.1 million curtailment charge as a result of freezing the company's Supplemental Executive Retirement Benefits Plan. This SERP plan freeze will lower our ongoing SERP expenses in the future. Expected SD&A reductions from the SERP curtailment versus our previous forecast over the remaining 6 months of fiscal 2012 are estimated to be $1.2 million. Our ERP project expense included in SD&A was $4.2 million in the second quarter and $8 million year-to-date. Total capital expenditures related to ERP included in property additions for the second quarter were $4.8 million. We are forecasting additional capital expenditures of between $9 million and $11 million for the remainder of the fiscal year. Quarterly SD&A expenses pertaining to the ERP project should run around $5 million per quarter for the remainder of fiscal 2012. Our consolidated balance sheet remains strong, with shareholders' equity of $646 million. On a current cost basis, inventories only increased 6.9% from June 30 to December 31, 2011, compared to a year-to-date sales increase of 8.8%. Our annual inventory turns remain consistent with last quarter and continue to be at an all-time high. We expect inventories to be stable or slightly higher for the remainder of the fiscal year. Overall, receivables decreased while our DSOs increased slightly in the quarter. Our effective tax rate for the quarter of 35.7% is slightly lower than our guidance for fiscal 2012. We are experiencing lower tax rates from our foreign operations and certain state and local jurisdictions. We expect our tax rate for the remainder of fiscal 2012 to be in the 35% to 36% range. We also purchased 24,100 shares of our stock in the open market during the December quarter and we continue to have board authorization to buy our stock in the future. Now I'll turn the call back to Neil for some final comments.

Thanks, Mark. As we close the books on the first half and my initial months, I can say that I'm pleased with the strides we're taking to build on the strong business foundation and to identify priorities for profitable growth. We are confident we will generate strong shareholder value and benefits for all Applied stakeholders. And with that, we'll open up the lines for questions.

[Operator Instructions] Our first question comes from Jeff Hammond of KeyBanc Capital Markets.

Just in terms of the business trends, can you give us kind of a progression to the quarter? We saw some from other distributors a little bit of decel into December. And then it seems like the SIC codes you talked about, still more positive than negative, but maybe a little more balance. And I'm just wondering what markets, if any, you seeing any clear inflection either up or down?

Yes, I'll talk a little bit about the first half. Into December, December is one of our weaker months on a sales-per-day perspective just because of the amount of holidays during the month. And a lot of the business days around the holidays do not have the most robust production happening with our customer base. So we saw the numbers in December being relatively at our expectations, but from when we think about the sales per day throughout the quarter, December is not a month where they go up. I guess on the industry segments, I think last quarter we had 25 out of 30 industries, were up and in this quarter, 22 out of 30. So from those numbers you could say maybe a slight change in the numbers. But from an overall standpoint, conversations with customers and suppliers, still a tremendous amount of strength out there in the market. Some of the areas where we're seeing good growth, the machinery manufacturing segment, food and beverage, primary metals, power generation, transportation equipment and mining. And then the weakness is, really only a few that have any significance: forest products industry, and then some weakness in the high-tech area.

Okay. And then just you called out the $0.07 item, is that included in the guidance or excluded?

Yes, that would be included in the overall guidance. And so we're keeping our guidance the same of EPS of $2.40 to $2.55 for the full year.

Okay, great. And then I guess just a final question for Neil. Are there any examples you can give where you see obvious opportunities, like you mentioned, expanding on the products that are in the vertical markets that clearly AIT isn't in today that you think are clear opportunities?

We're working through the opportunities on multiple fronts and we just had our Board of Directors session over the past couple of days. Obviously, they're interested, they're engaged, they're highly supportive as we go through this. And really, as we go through it and talk with customers about where they have input and where our suppliers are offering input and even support on opinions and direction, we're kind of seeing numerous opportunities on a lot of fronts. So as a leadership team, then we're saying, how do we work through those on a quantitative and qualitative basis to pick the best priorities to go through? There's a couple of obvious ones that start to drop and say, hey, we should naturally start these and implement, and some we're working through the deeper set of analysis to pick those priorities. Our plan is that we continue to do that work, we'll be back with our board throughout the quarter in the April session. And this will feed into our fiscal '13 plans and we will be coming out and establishing strategic targets, strategic targets around growth, and strategic targets for the business and profitability over the 3-year horizon.

Is that something you plan on sharing with the investment community?

It will be.

Our next question comes from Matt Duncan of Stephens Incorporated.

I guess the first question I've got is I'll take another shot at the first question that Jeff asked. Just if maybe you could give us the month-by-month growth rates and average daily sales to see if there was any noticeable differences month-to-month, and then how is January tracking so far?

I guess throughout the quarter, as Mark already stated, December is typically slower than November. We had a very strong November. January is shaping up to be similar growth rate compared to the fourth quarter, in line with our expectations and our guidance for the year. And we typically have a stronger second half of the year than the first half and that we have that built into our plan and that's our expectation for the remainder of the year.

Sure. And then as you look at November '11 versus November '10, and then December '11 versus December '10, was there any discernible difference in the growth in the business?

I don't have the numbers. Sequentially, I could tell you that November was better than December. I don't have the year-over-year numbers in front of me.

Okay. And then you referenced the early impact of the ERP install there in Canada in a few locations. Did you notice any revenue disruptions in the business in the branches where you went live on December 5? Or did things sort of kick right along and move straight through that without any real disruption in the business?

There's some disruption. I think it happens in any system changeover. But we're keeping a close eye on all the important metrics and the business has continued to improve every week and we're tracking somewhat in line with expectations and improving every week. We're proud of the team, we're pleased with our results and we're starting work on the next phase of the rollout.

Yes. I'd say from my perspective, as we look at the metrics and obviously, with any cut over, you know the date you're going to do it, I think there was a healthy pull-in to November, right? Because you want to cut over with as low a load as you can and work the system, then that was done December 5. Good steady ramp up as the team looks at the metrics on sales, on orders, on purchasing. A little bit of holiday time in there. But each week, the trends are going the right way, and I would echo Ben's comments on the team: doing a nice job on the system development and the deployment, and really building the confidence going forward. This ERP system supports continuous improvement around customer satisfaction and it's an enabler for productivity, for operating performance and really helping growth. So hey, going forward, I think it's a big enabler for the company to scale for growth.

Okay. And then as you look at fill rates at those branches, were those impacted at all or were those pretty steady through there?

I don't have those numbers in front of me.

Okay, fair enough. And then the last thing I've got is Neil, you walked through a little bit of sort of the long-term strategic plan and what some of the pillars of that plan will be. Do you have any thoughts around what type of organic growth you'd like to see AIT putting up on an annual basis once you get that plan in place? And then secondly, on M&A, you guys have been a little bit quiet on the acquisition front recently. I'm sure the CEO transition has a lot to do with that. Sort of what are your plans for maybe accelerating M&A activity and where is the focus there right now?

Well, I don't know that I'd share the focus, but I'd say the process, the pipeline's building. If look at kind of the velocity that we think about or consider of things moving through stages for discussion, there's good velocity there. The management team's engaged in good reviews and productive discussions on those. So I think the business has been active. What the mid-part of the 2000s decade, probably 12-plus transactions, $400 million or so. So the business knows how to acquire, to assess and to integrate. We think we're going to be able to do that perhaps at an accelerated pace. Got the financial position, but I'm also encouraged by the leadership team and the business capability to do that as well. So that's on the acquisition side. And when I'm out with customers, but also as important, without our -- with our leadership team and associates, hey, there's a real believe that the business can and will grow organically. We think that's logically some multiple of a base industrial economy. But hey, let us work through our strategic plan and know the elements and it will be part of our establishment of strategic targets that we'll have out in our fourth fiscal quarter.

Our next question comes from Jason Rodgers of Great Lakes Review.

Looking at the one-time cost just to be clear, that was all included in SD&A expense, correct?

That is correct.

Okay. And for the SAP implementation, the $8 million in costs year-to-date that are expensed, do you anticipate that same level, around that same level for the second half of the year?

We believe the quarterly expense flowing through SD& A for ERP will be around $5 million per quarter. So that would say it would be around $10 million for the last half compared to the $8 million in the first half of the year.

[Operator Instructions] Our next question comes from Gregory Macosko of Lord, Abbett.

With regard -- just help me understand Canada, with up 16% is -- does that imply that the ERP operation really didn't have an effect on the sales growth there or is that an acquisition? I'm not clear on that.

Greg, I'll jump in on that one. Actually, our foreign operations both in Canada and Mexico are incorporated within our financial statements on a one-month lag. So the Canadian operations for the quarter that we're reporting now is -- they're actual -- for them, it's their quarter ended November 30. So none of the transition to ERP, none of those sales are incorporated in these sales numbers, that'll happen next quarter for that. So the 16% increase, while there are some, there was a small acquisition we did in Québec late summer that before the 0.8% increase from that, the majority of that 16% increase in sales was just activity in our service centers.

Okay. And so the point being though, do you expect any impact going forward, it's in place and you feel like you won't be at least on a short-term basis impacting sales growth up there?

I think with the conversion for those, the small number locations we have up there, this is really the laboratory for the first Go Live. And as we said, this is a great learning moment for us. So our view is the Canadian results, we're expecting them to hit their forecast and their plans.

Okay. And if I look just generally speaking at the 7.7% per day sales growth that you talked about and then the 8% overall, would it be fair to say that sort of on a volume basis, sales growth was something on the order of 6% or something like that? Is that a fair way of looking at it?

We did mention that we thought pricing was 1% to 2%. And the acquisitions and foreign currencies sort of net themselves out to 0. So, yes, you're right there, right in the ballpark for that would be volume and mix combined.

So volume and mix would be something on the order of 6% to 6.5% then?

Yes.

Okay. And then talk about -- I mean, last quarter, you mentioned government being down slightly. How does -- and there were headwinds there perhaps, I don't know. How does that look in sort of federal and state? Give us a feeling on the government side of your business.

Yes, for the quarter, our sales were slightly down in our government segment. As you mentioned, we continue to see headwinds in the segment with budget constraints and reduced defense-related spending. But at the same time, the broad government segment is still an attractive segment for us and we're still targeting that for growth. But, again, in the face of some of the headwinds, it's a challenge right now, but still a good opportunity.

And then with regard to the customer, actual customer numbers, I think you talked about that number might have been expanding last quarter? How is that looking just in terms of the locations that you're selling into?

Well, for revenue-producing locations, we actually expanded by 1 this quarter compared to last quarter. So we actually have 475 revenue-producing locations at December 31, whereas in we were 1 less last quarter.

Okay. And then finally, you seem to make fairly positive comments about the dividend increase. Is that a focus for the board? You mentioned 3 times in the last 18 months. And is that something that is getting more attention by the board at this point?

I would say from our strong cash generation, the board is supportive of our recommendations. We want to be, will be an attractive dividend provider in that. So one element of how we plan to deliver shareholder value.

Our next question comes from Brent Rakers of Morgan Keegan.

Just start maybe with, if you can give us -- you talked about the price inflation in the quarter, could you talk about future price increases that you're seeing from suppliers? And then second, I guess hiring was flat sequentially. If you could talk about the outlook for hiring plans going forward as well?

I guess on the price end of it, price increase point of view, our teams are managing the cost-price relationship well, as evidenced by our gross margin. With price increases from suppliers, we're seeing somewhat of a normality, so to speak, on the frequency of the increases and maybe a slight uptick in the magnitude. So we're maybe 6 months or 1 year ago, we were talking about increases, announced increases in the range of 3% to 5%, probably looking right now at 4% to 5% to 4% to 6%.

Ben, if you were to extrapolate that again, when you talked about 1% to 2% net effect of price benefit this quarter, but you're talking about 4% to 5%, I mean, you're implying maybe next quarter and the quarter in the future, you could be looking at maybe a 2% to 3% company-wide kind of increase?

Yes, Brent, I'll jump in on that one. I think the range of the impact of supplier price increases on our sales is generally a little under half of what those announced increases are. And so we don't see any great pressures for that to move up. So while it may go up above the 1% to 2%, it may stay within that range as well.

Great. And then maybe second, again on the hiring trend or maybe the sales addition question?

Yes, on the hiring piece, we -- there are areas where we would like to add additional sales staff, and we're working hard to get those positions filled. So we wouldn't be upset if we had an increase in our overall headcount over the next couple of quarters.

Okay. And then lastly, I understand you definitely don't want to get specific on the M&A question, but could you maybe talk if, Neil, if you're thinking more traditional acquisition strategy, geographic in fill, fluid power, that type of route or if you're looking at new verticals, maybe a little bit more color there?

I'd say at this point I'll stick with the pipelines growing. We got interested and we see attractive areas. But hey, let us work through them. Obviously, we'll announce as we go. And as we work through some of these strategic priorities, perhaps we'll give a little bit more color then on direction, but that's all for now.

[Operator Instructions] Our next question comes from Holden Lewis of BB&T.

You sort of alluded to, I guess, what you'd expect the expense to be on SAP this year. I guess, you talk about that $18 million. When you look ahead to sort of fiscal '13, fiscal '14, certainly, discussions you've had in the past as it relates to sort of how the benefits roll out in those years and how the costs roll out at a generally lower level, do those all look like they're sort of on the same pace at this point or have there been some changes in sort of the contribution of those 2 sides in out years?

Yes. What I'd say I'll start, because I don't know what historically has been provided. But hey, I'll start and say, as we work forward, right, we will establish targets that we will have from a strategic plan standpoint on growth and profitability. My view is ERP is an enabler of that. And it gets harder to divide, right, what's good business practice and what do you assign to just that you have the system. The system's going to support business transformation and improvement, the things that can support inventories, things that can support productivity, things that can enhance margins, things that help control or better optimize SD&A. When is that the system or when is that your own improvements? I'd say we're going to be talking to you about our general plans around the improvements.

And, yes, specifically focusing back on 2013, Holden, for you, we don't have anything really to comment on it that -- for any changes at this point in time. We'll keep you guys abreast when we're ready to comment on the expenditures in '13 and '14 and how they're going to flow through.

Okay, got it. And then if you look at sort of your year-over-year improvement on the operating margin, and I stripped out the SERP and that sort of thing to sort of get to sort of a basic operating number. But I mean it's probably, in terms of the year-over-year improvement, it's probably one of the smaller gains that you've seen in a lot of quarters. If you sort of take -- if you accept the one that had the comp against that tough LIFO quarter. And are we seeing any real slowdown in terms of momentum to be able to achieve margins whether it's just because we're getting later in the cycle, or you're at the point in the cycle where you can no longer stick to that, keeping OpEx growth at half or less the level of sales. I mean, how are you thinking about margin expansion going forward, setting aside the SAP thing given what we've seen here?

I think besides those one-time items that we identified in the press release, the other big item in there is the ERP expenditures that are flowing through the SD&A. And while the total expenses of $4.2 million for the quarter, incrementally there was about $3.5 million of that was incremental, because we did start spending a little bit last year in the December quarter. So that is another item that would impact things on when you're trying to compare operating margin percentages. So I would say the view on our operating margin is ERP is having an impact for those incremental expenses on building that system and delivering that plan. But I don't think we've necessarily seen any inherent changes in the core business model when we get an extra dollar in sales and how much that provides on the bottom line from incremental margins.

Our next question comes from Adam Uhlman of Cleveland Research.

Mark, how are you thinking about gross margin unfolding for the rest of the year?

I'm thinking we're going to work hard on it.

It seems like you had some good progress at the point-of-sale level. I'm just wondering if inflation's picking up a little bit? It sounds like that might give you guys an opportunity to expand the gross margin?

Yes. Obviously, the gross margin percent, in getting the gross margin dollars, that's job one for us at converting those sales to profits. So we have continued to have lots of initiatives on the gross margin to try to push that to help, and we're going to continue to work on those initiatives. We have not forgone any initiatives because of the ERP work and implementation. Our operating folks still have their marching orders to try to work on their margins and improve things. And we were fortunate enough this quarter to see some improvements.

Okay, got it. And then, an unrelated question, I spent some time with -- since we've talked about it, but do talk about what you're seeing with the catalog-related business and the internet-related business? Any update there that you could provide us? And then does the ERP upgrade give you any new functionality to add to those different channels?

Yes, Adam, this is Ben. Both the catalog and the website, we kind of meld together into one number. And if you take all of our electronic channels in combination with the catalog, we continue to see good, a fair amount of our business. I don't have the percentage in front of me, but a fair amount of run through those channels right now. When it comes to additional functionality, we'll be looking at that on the back end towards the end of the ERP project and working on that end of the business. But right now, we still have a good flow of business that goes through there, and it's a good enabler for us and all of our initiatives.

At this time, I'm showing we have no further questions. I will now turn the call over to Mr. Neil Schrimsher for any closing remarks.

All right. Thank you very much. Hey, it's good to be with all of you today. I look forward to upcoming meetings and calls, and also being back with you in April. So thanks for joining us.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.