MSC Industrial Direct Co., Inc. (MSM) Q4 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to the MSC Industrial Direct Fourth Quarter 2012 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Alex Tramont of FTI Consulting. Please go ahead.

Thank you, and good morning, everyone. Welcome to the MSC Industrial Direct Fiscal 2012 Fourth Quarter and Full Year Conference Call. An online archive of this broadcast will be available 1 hour after the conclusion of the call and available for 1 month on the home page of the company's website at www.mscdirect.com. During today's presentation, management will refer to financial and management data included under the section Operational Statistics, which you can find on the Investor Relations section of the company's website. Let me now take a minute to reference the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This call contains forward-looking statements within the meaning of the U.S. securities laws, including guidance about expected future results, expectations regarding the company's ability to gain market share and expected benefits from the company's investments and strategic plans. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these statements. Information about these risks is noted in the earnings press release under Risk Factors and the MD&A sections of the company's latest annual report on Form 10-K filed with the SEC, as well as in the company's other SEC filings. These forward-looking statements are based on the company's current expectations, and the company assumes no obligation to update these statements. Investors are cautioned not to place undue reliance on these forward-looking statements. In addition, during the course of this call, management of the company will refer to certain adjusted financial results, which are non-GAAP measures. Please refer to the tables attached to the press release and the GAAP versus non-GAAP reconciliation in the Investor Relations section of the company's website, which contain the reconciliation of the adjusted financial measures for the most directly comparable GAAP measures. I would now like to introduce MSC Industrial Direct Chief Executive Officer, David Sander. David, please go ahead.

Thank you, Alex. Good morning, everyone, and thank you for joining us today. With me on the call are Erik Gershwind, President and Chief Operating Officer and soon to be CEO; Jeff Kaczka, our Executive Vice President and Chief Financial Officer. Also with me is John Chironna, our new Vice President of IR and Treasurer, the most recent addition to our executive team. As you know, our Vice President of Finance and Accounting, Shelley Boxer, recently retired after an extraordinarily successful 40-year business career. We were so fortunate to have had Shelley almost half of that time in his role devoted to MSC, with him being such an integral part of driving our company's access. Many of you know him going all the way back to our IPO, as he was instrumental in taking our company public and has helped shape the MSC story ever since. We would like to thank Shelley for his service and immeasurable contributions to MSC. We would also like to introduce John Chironna and welcome him to our company. We all recognize that while John will have big shoes to fill, his many years of experience in IR and finance and his exceptional background and track record of success have prepared him well to take MSC to the next level in our growth story. Please join us in welcoming John as you have the opportunity to meet him in the months to come. In light of our recently announced transition, I will make some opening comments and turn it over to Erik to lead the call. Jeff will then provide details on our financial performance. I came into this industry almost 4 decades ago and have seen extraordinary change during that time. What customers may have once regarded as a nice-to-have is now considered a business imperative and requisite to their survival. There is a shift occurring away from the traditional distributor relationships that previously cemented the bond to a customer's increasing focus on consolidating spend and reducing supply base, better managing inventory and reducing the costs of the metalworking products and MRO supplies required to run their shop or facility. Driven by this increase in customer demands, there could be no doubt that the pace of the consolidation in our fragmented industry is accelerating and will continue to gain further momentum. The scales have clearly tipped in favor of those distributors with national scale, extensive information technology and e-Commerce capabilities, sophisticated inventory management offerings and a platform that can flawlessly deliver virtually any product a customer needs in a matter of a day while providing the technical expertise to help make their businesses more productive and profitable. The announcement of Erik as CEO is the culmination of a carefully planned leadership transition in our company, much the same as when Mitchell Jacobson succeeded his dad, our founder, Sid Jacobson, and when I succeeded Mitchell. It's part of a seamless process at MSC, which makes us a company that is built to last. In working with Erik for more than 16 years, I've had a unique bird's eye view of his growth and development as a leader, how he thinks and approaches business decisions. And I've witnessed firsthand his incredible vision for the future, strategic acumen and depth of understanding of our business and perhaps, most importantly, what it takes to win for all stakeholders. I can say to all of you with complete certainty that Erik is the right leader for this next phase of accelerating consolidation in our industry. I have absolute confidence that he and his team will take MSC to new heights of success and levels never before seen in our history. I'd like to congratulate Erik on his appointment to Chief Executive Officer, and I look forward to working with him to complete a seamless transition. I'm gratified by the opportunity to have led our organization for many years and humbled by our team's unwavering dedication and support. The amazing talent of each and every one of our almost 5,000 associates is what has enabled us to accomplish so much together. In assuming my new role as Executive Vice Chairman of the Board, I have never been more excited about the future of our company. And lastly, I'd like to thank all of you in the investment community for your support through the years. Thanks, everyone. And I'll now turn the mic over to Erik.

Thank you, David. It's an extraordinary opportunity to lead MSC as we enter this next phase of our growth story. I plan to uphold the values that our company was founded upon and to continue executing the enduring strategic vision that we've outlined for you. I'd like to thank our Board of Directors for the confidence that they've shown in me. And David, I'd like to extend a heartfelt thank you to you. We've always shared a common set of values, and I couldn't have asked for a better mentor and partner. Finally, I'd also like to thank all of our associates around the country and the world for the support that you've shown for me and David through our transition period. Before diving into the quarter, I'd like to take a moment to recognize the severe impact of the storms this week upon much of the eastern seaboard. Our wishes go out to everyone on the call and hope that you and your families are safe. We hope that by delaying our call a day, we were able to make one small gesture that allowed those of you affected to focus on your families. I'll now turn to the current landscape. The macro backdrop is seeding an eroding demand environment. Economic readings indicate a further slowdown in industrial activity. Recent ISM survey results reflect the headwinds of the European debt crisis, uncertainty surrounding fiscal policy in the election season and a slowdown in major Asian economies. The September ISM reading was an uptick and a pleasant surprise that bodes well for future growth rates, if that upward trend continues. However, the prior 3 months of sub-50 readings are more reflective of what we're seeing and hearing from our customers currently. Activity levels have softened since we last reported. Most customers have expressed more caution and are in a holding pattern through the election and resolution of the fiscal cliff. For this reason, predicting what happens to the economy beyond the next month or 2 is extremely difficult. We remain cautiously optimistic about the prospects for an improved environment in 2013 as 2 of the factors driving uncertainty and a stall in spending will soon be behind us. Against this backdrop, net sales rose 19.1% in our fiscal fourth quarter, and average daily sales growth was 10.4%, right about at the midpoint of our guidance range. As you know, there was an extra week in our fiscal fourth quarter. Growth in the manufacturing business was 11.9% for the quarter on an average daily sales basis and continues to demonstrate our share gains. Growth did, however, progressively slow through the quarter in our manufacturing business consistent with the macro trends that I just referenced. Growth in the nonmanufacturing business was approximately 7.9% on an average daily sales basis, holding up nicely compared to the prior quarter's 7.4% in the face of an eroding environment. Our government business, a subset of nonmanufacturing, saw a significant lift in average daily sales in August and September due to government's fiscal year-end spend and, as a result, showed growth over prior year for the quarter. Government currently represents approximately 9% of total company revenues, and we continue to see evidence of share gains, such as the penetration of state government business through the WSCA contract award. We're pleased with solid gross margin and cost control performance during the quarter, as Q4 read-throughs came in at 15%, excluding the nonrecurring relocation costs of Davidson. Our growth margin came in slightly ahead of guidance, primarily due to strong pricing realization. We implemented a small adjustment early in Q4 followed by our Big Book price increase that was between 3.5% and 4%. The Big Book increase went into effect in the beginning of August, a few weeks earlier than normal. And while we're clamping down on discretionary spending in our business, we continue to forge ahead on select strategic investments for the future, and I'll touch on a few of them. Vending continues to contribute significantly to our growth and delivered approximately 4 points of sales growth in the quarter. Given that we're still in the early stages of the vending initiative, we're driving to accelerate the program further. As a result, our ratio of new account implementations to total implementations remains high, serving as a near-term gross and operating margin headwinds. We'll remain active in vending, as it provides a great opportunity to take market share, to secure key accounts and grow our business. At the same time, our 3-year look into vending account profitability gives us confidence that the margin headwind decreases over time. We also continue to see good progress with our private brand initiative. We added approximately 5,000 private branded SKUs to our new Big Book, bringing our total private brand offering to nearly 75,000. This compares to total catalogs SKU additions of about 19,500, which brings our total catalog offering to nearly 600,000 SKUs. Private branded products now represent in excess of 12% of our catalog offering. In addition to our catalog SKU additions, we continue to add many more items to our searchable electronic database, which is now in excess of 900,000 SKUs. e-Commerce is another key growth initiative. As we've described on past calls, we've made significant investments across a number of areas, including a new search function, improvements to our product information and a new transactional platform, which is being rolled out during the remainder of calendar 2012. And we continue to see e-Commerce increase as a percentage of sales. You'll notice on our website statistics that we've provided a new measure of e-Commerce revenues. As our e-Com initiative has evolved, mscdirect.com has become part of our value proposition in selling into large accounts. In many cases, our website is integrated into our customers' ERP system. As a result, it's become more difficult to parse out exactly what business flows through our website as compared to other electronic means such as EDI. As a result, we're now reporting our entire e-Com revenues. So this includes not only the website sales as we previously reported, but the other electronic channels such as EDI that I mentioned and vending sales that flow through the machines themselves. You'll notice that total electronic commerce as now defined is in excess of 40%. We see plenty of runway here to take this number significantly higher, as we expect to continue the upward trend during the upcoming quarters. We've broken ground on our headquarters co-location in Davidson, North Carolina and remain on target to complete construction in 2013. And with our new customer fulfillment center in Columbus, Ohio, we plan to break ground on the 400,000 square-foot facility in the spring of 2013, on track for a late 2014 opening. Over the long term, both of these projects will increase our flexibility, our efficiency and our productivity as we continue to grow. At this point, I'd like to provide guidance for fiscal Q1. We expect revenues to be between $576 million and $588 million and diluted earnings per share on an adjusted basis to be between $0.98 and $1.02. This implies 6.7% average daily sales growth at the midpoint of our guidance range. Our revenue guidance assumes a continuation of the current demand environment and takes into account the impact from the recent storm. With that, I'll turn things over to Jeff to discuss the financials in greater detail.

Thanks, Erik, and thank you all for joining the call. I hope you and your families are safe from the effects of the storm. Overall, we're pleased with our results for the quarter and the way we've ended our fiscal year. For the fourth quarter compared to the same period last year, sales grew 19%. As you know, there was an extra fiscal week in our fourth quarter. So on an ADS basis, our sales growth was 10.4%. We return back to a 52-week period for FY '13. Our GAAP earnings per share was $1.09 and grew 17% for the quarter. As I mentioned on the previous earnings call, we are capturing the nonrecurring relocation costs associated with the co-location of our headquarters in Davidson, North Carolina. Beginning with this quarter, we are reporting adjusted operating income, net income and EPS measurements, which exclude these relocation costs. So our adjusted earnings per share for the fourth quarter was $1.11 per share. That is growth of 19.4% from the fourth quarter the previous year and, of course, this included the extra fiscal week. Providing a little color on these results. Our sales of $635.3 million for the quarter were just about at the midpoint of our guidance. The ADS growth of 10.4% slowed as expected from the third quarter, and this trend continued into September and October. Nonetheless, we continue to experience growth from our investment programs. Of the 10.4% ADS growth in the fourth quarter, about 4 points came from customers within our vending program and approximately 3 points came from our recent acquisitions. The remaining growth came from other volume and pricing. Our GAAP EPS of $1.09 and adjusted EPS of $1.11 for Q4 exceeded our guidance range. The primary factors contributing to this favorable EPS were slightly higher gross margins, favorable operating expenses and a lower-than-expected tax provision. Let's talk briefly about these. Our Q4 gross margin was 45.2%, slightly better than expected as we experienced a more moderate summer seasonal decline, aided by some pricing actions. Gross margin was 80 basis points lower than prior year, driven by about 50 basis points of dilution from the acquisitions and about 50 basis points related to our vending program, partially offset by the pricing action among other factors. Next, versus guidance. Our improved operating expenses were the result of some reduced discretionary spending, as well as favorable results in such areas as payroll and freight expenses. And lastly, our favorable EPS was also aided by a lower-than-expected tax provision due to favorable state income tax audit results. Our operating margin was 17% in Q4, and incremental margin was 13.8%. Excluding nonrecurring costs, our adjusted operating margin was 17.2% in Q4, and adjusted incremental margin was 15.1%, a little better than our expectations of 13%, which we shared on our last call. As I mentioned on that last call, because of moderating revenue growth, lower gross margins and important growth investments being made in areas such as vending, we expect lower than historical incremental margins to the next several quarters. Turning now to the full fiscal year results. We achieved record sales and profitability levels. Sales were $2.356 billion, a 16.5% increase over fiscal 2011 and, on an ADS basis, an increase of 14.3%. Our total year operating margin was 17.5%, and incremental margin was 18.7%. Excluding nonrecurring costs, total year adjusted operating margin also came in at 17.5%, and our adjusted incremental margin was 19.1%. Our GAAP EPS was $4.09 per share. Excluding the nonrecurring cost, our adjusted EPS for the year was $4.10, and that is growth of 19.5% from the previous year. Q4 balance sheet metrics remain strong. DSOs were 44 days, approximately the same as the prior quarter. And inventory turns were 3.32, down slightly from Q3 levels. Cash flow conversion was outstanding. We converted 129% of our net income into cash flow from operations in Q4, and we had approximately $168 million in cash and cash equivalents at the end of fiscal 2012. Our current cash position stands at approximately $226 million, and we ended the fiscal year with virtually no long-term debt. And I'm pleased to report that our Board of Directors has recently approved a healthy increase in our quarterly dividend to $0.30 per share, reflecting our strong balance sheet and confidence in our cash generation capabilities. In regard to capital expenditures, for FY '12, our CapEx was $47.7 million, which was as expected. This included a large increase in vending and $4 million associated with the Davidson facility. CapEx in FY '13 will be elevated and likely be in the $100-million range, driven by the previously announced infrastructure investments in the Davidson facility and the new CFC in Columbus, Ohio. In regard to our guidance for Q1, our anticipated sales growth at the midpoint is 6.7%, reflecting the moderate growth environment and included the hurricane impact that Erik described. We expect gross margins for Q1 to be in the range of 45.9%, plus or minus 20 basis points. This takes into account the dilution from ATS West, as well as sales mix and the impact from our vending program growth. In Q1, we expect operating expenses will decrease at the midpoint of guidance by approximately $12 million versus Q4, driven primarily by one less week in Q1. In addition, as mentioned earlier, we are continuing to take actions that will slow down the growth in our operating expenses as we continue to invest in key growth initiatives such as vending. We expect our adjusted incremental margin in Q1 to be about 14%, consistent with the expectations we provided on the last call. And we anticipate the tax rate to be approximately 38.2%. Thanks. And now I'll turn it back to Erik for the wrap-up.

Thank you, Jeff. We remain very pleased with our company's performance. Despite an eroding demand environment, we delivered solid results in Q4 and continue to do so during our first quarter. Visibility remains extremely limited due to the pending election and fiscal cliff resolution. We're cautiously optimistic about an improved environment in 2013 as clarity replaces uncertainty. Regardless of how things pan out in the economy, we plan to take market share under any circumstance just as we've always done. In fact, history shows that we're even more successful during challenging times when efficiency and cost reduction are vital for our customers, and those distributors with limited capital come under even more pressure. We've seen this scenario play out in the past, and we would expect similar and better results in the future as industry consolidation continues to heat up. As a result, we remain confident in our march towards our ultimate vision of $10 billion and our intermediate growth goal of $4 billion in revenue by the end of 2016. I'd like to thank our entire team of associates for their dedication and their strong execution of our plan. And I'll now open the line for questions.

[Operator Instructions] Our first question comes from Matt Duncan at Stephens.

Hope you made it through the storm okay.

Matt, thank you. Thank you. You too.

First question I've got, guys, if you could maybe talk a little bit about what the impact you're assuming from the hurricane is in the first quarter guidance on revenues?

Sure. Matt, this is Jeff. As you know, the storm just hit, and it's difficult to make an assessment at this point in terms of what the impact would be. But right now, we're forecasting about $2 million to $3 million in terms of the shortfall in revenue. Obviously, that could be more or less, and we'll gauge that over the course of the next few days.

Okay. And then, Erik, maybe a question for you on just sort of the end-market trends and demand patterns. It sounds like you're maybe seeing further weakening sort of economically that's probably tied to the election and the fiscal cliff, and I can certainly appreciate it's hard to sort of parse out how much of the weakening is from those things versus maybe actual economic softening. But are there any end markets in particular that are weak and maybe if you could just talk about the sequential trends that you're seeing?

Yes, Matt, sure. And I think you described it well, which is that, I mean, we've definitely seen and what you hear from us and the current snapshot is that activity levels have come down. Customers are in what we're describing as a holding pattern right now. Very, very difficult, but the visibility right now is so limited. We basically can't see past the election. So it's tough for us to parse out how much of this is just holding pattern due to election and then the resolution of all the tax changes and fiscal cliff versus true activity levels coming down. So I think, like everybody else, we have a seat and we're going to watch this play out post resolution of those things. I'll tell you that -- you know what, you heard cautious optimism about 2013 that at minimum, we're going to have 2 events that are driving uncertainty behind us. So one way or another, there's going to be more certainty. In terms of particular end markets, what I would tell you is that the softness is very broad based. Of course, there's, here and there, some pockets where we're seeing more relative strength than others. But for competitive reasons, I'm not going to go into the detail on the call.

Okay. And then last thing and I'll hop back in the queue. In terms of the vending initiative, can you talk about -- that's been running at about a 4 percentage point benefit to your growth rate. Do you think that will continue through FY '13? Does it accelerate or decelerate? Sort of how you're thinking about that in FY '13?

Yes, Matt. We've been very pleased. I mean, we've obviously highlighted, that is one of the primary share gain program that we have right now. With everything we see, we expect that to continue. Again, visibility right now is so poor that it's tough to pin down a precise number on growth contribution going forward. But certainly, as gauged by success of the program, all signs are pointing in the right direction that this thing continues to trend well for us.

Our next question comes from Sam Darkatsh at Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: I hope everyone in the organization is safe and well. Obviously, you guys are right in the crosshairs.

Thank you, Sam.

Thank you. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: A couple of questions here, if I could. First off, Jeff, you mentioned that your expected Q1 incremental margin is right around 14% or so. There seems to be a lot of moving parts that are around discretionary spending and taking down and which are growth initiatives and perhaps field associate growth moderating. As we look over the next 2 or 3 or 4 quarters, how should we look at that incremental read-through and also what's the sensitivity of that to sit to various levels of sales growth?

Yes, thank you, Sam, for that question. Obviously, on the last call, by the way, as a reminder to everyone else on the call, we said to expect -- we forecasted read-throughs at 13% in Q4, and we said this was going to be more typical of what we expect to see over the next several quarters. And the guidance I just provided shows that we'll have read-throughs of about 15% even though the sales had declined somewhat from -- the sales growth, I should say, had declined somewhat from Q4. And we're still able to maintain a read-through of about 15%, so we're pleased with that. And I think what that shows is we manage the business quite effectively. There are levers that we can pull, and we have pulled them in terms of discretionary expenses and so forth. There's so many factors that go into read-through as we go forward in terms of revenue growth, the gross margin and the impact from the pricing environment. There's OpEx leverage and so forth. So we're sticking with what we had mentioned on the previous call in terms of what to expect in terms of typical read-throughs. Obviously, if the revenues -- the revenue growth declines much more, then it will be difficult to maintain those read-throughs on the counter. If the revenue growth picks up and picks up into the double digits or mid-teens, you would expect a different picture, something higher than what we had said. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Okay. Two questions, if I might. First off, I don't think the folks bought any stock back or any meaningful stock back in the quarter. You bought back a fair amount last quarter at higher levels or at least the average price was higher in Q3 than Q4. Could you throw some color in terms of what your thoughts are for that sort of cash outlay?

Yes, sure. And it's -- we're pleased that we had the cash balance of $168 million at the end of the fiscal year, and that balance has grown. And in these periods of economic uncertainty, it's nice to have cash available. Our priorities, though, remain the same and reinvesting in the business for organic growth, quarterly dividends, occasional special dividends and share repurchases fall into that category. So a lot of factors go into it. We don't have a fixed plan in terms of the share repurchase, but we'll evaluate all the factors in terms of making that decision going forward. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Last question, if I might, and then I'll defer to others. Erik, the new definition of your e-Commerce, you mentioned that you're now including vending within that definition. Is it the entirety of the vending that is now going through that line? And if so, I have a follow-up on that.

Yes, Sam. Actually, that's a great catch. The answer is no. So what we've done -- and just, again, let me make sure it's clear on why we changed the definition. It's harder and harder as our website is a big part of our value prop, particularly at key accounts. So in cases which are significant, when our website is integrated into a customer's ERP system, it's very difficult to parse out what's coming through the site and what's coming through EDI. So we wanted to be sure we had an accurate measure, and that's total e-Com revenues. Specifically to your question on vending, what's being captured in this definition are the sales that run through the machine. And as you know from prior quarters, as we've described vending, the majority of the business at a vending account does not run through the machine. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Okay. So the 4% growth that you cite when you're talking about the vending initiative, is that the products through the machine? Or is that growth from the accounts that have a vending solution?

Yes, it's the latter. Thank you for teeing this up because it's a good point of clarification. So when we cite vending growth, the growth contribution, it's the total account that has vending. Of that total growth, there's a portion of that, that's coming through the machine itself. And then a large portion of it that's coming outside of the machine but in the surrounding plant, like all the spot byte-type business that we get that makes up the total vending contribution. So the portion of vending that's included in this e-Com measure is the subset that's running through the machine itself.

Our next question comes from Hamzah Mazari at Credit Suisse. Hamzah Mazari - Crédit Suisse AG, Research Division: Congratulations on your new roles, and hope you guys are safe as well.

Thank you, Hamzah. Hamzah Mazari - Crédit Suisse AG, Research Division: The first question, just wanted to get your thought process and how you're thinking about, if we continue to see continued economic weakness and we take another leg down, visibility, as you said, is pretty low, how do you think about your investment spend at that stage? Do we continue spending? Or do we cut back on certain buckets? And if so, what?

Hamzah, it's Erik. I'll take that. Very good question. So let me start with the macro, which is that if you look at our overall perspective, you've seen from us over years and if you go back, harken to the last time there was a significant downturn as for an example, what you've seen from us is the ability to manage the business and take significant share in any environment. And I think what you've also seen from us that we would plan to continue is a balance between making sure we're managing to the current environment by clamping down on expenses as revenue growth decelerates and, at the same time, having some select strategic investments that are very much tied into our longer-term outlook and forging ahead on them and, in fact, forging ahead to the point where should things get really bad, there becomes some amazing opportunities. And you saw us the last go-around capitalize on them. So where we're at right now, we've obviously described, we've begun to see things soften. We don't know whether that extends beyond the next couple of months or not. And the way we've managed in that decelerating growth rate still producing what we think are very solid read-throughs in our guidance are -- we've begun to take serious actions on removing discretionary spend. Should things get worse, as you described, you'd expect us -- what can you expect from us? You can expect us to further clamp down on spending, and you could also expect there'll be other investment initiatives that aren't part of the core few we want to forge ahead in that we would defer. Hamzah Mazari - Crédit Suisse AG, Research Division: That makes sense. And just a follow-up, how should investors think about how much of your businesses is related to MRO facility maintenance versus how much of your business is really levered to the OEM production cycle? You don't have to give numbers, just you can talk about it qualitatively, if you like.

Sure. Yes, Hamzah, I won't give -- look, there are numbers that you can reference in terms of our manufacturing statistics. We've given you a feel for metalworking spend. But I think important to note that really what we've tried to get across to you, as we talk about strategic vision, is that the core of the business is not really facilities maintenance, it's tied into the manufacturing floor. And that's been where we generate -- that's certainly the majority of our revenues. It's where a lot of our investment is pointed in terms of technical expertise and some of the value-added solutions we've been describing, like vending and like VMI and our solutions. So directionally, what I would tell you is the vast majority is pointed at the production floor.

Next question comes from Ryan Merkel at William Blair. Ryan Merkel - William Blair & Company L.L.C., Research Division: I wanted to start with October. It looks to me that sequentially, it fell a little bit more than normal. Is there anything specific to call out there? Or is that just still the -- just the choppiness in the market?

Yes, Ryan. It's Erik. I think you got 2 things going on. One is there's a bit of an impact that we're projecting. Jeff described for you our projections on the storm. But then, 2, yes, there's no question that we've seen as the election's gotten closer, more and more of a holding pattern. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. Yes, I wanted to clarify whether the projection of the storm was in October, and it sounds like it is.

Correct. It is. Ryan Merkel - William Blair & Company L.L.C., Research Division: And then just looking at the active customer count, about 325,000, it's been flat for a few quarters now, but the average transaction size has gone higher. So is the story here really you're getting more wallet share with existing customers and that's because vending and e-Commerce are working so well?

Yes. Ryan, I think that's exactly right, and it's really been what we've been painting for you over the last several quarters in terms of the strategic plan that as the business has moved from, years back, what was strictly a direct marketing program targeting small accounts and very small accounts, we see this huge embedded potential of high-potential accounts within our existing base. And there's absolutely a lot of penetration. What I'd also tell you is there is an influx of new accounts coming in as part of our growth story, so whether that's national accounts, whether that's our vending program. So you're seeing a net number that continues to be a movement towards a high potential accounts, and that's both within our existing embedded base and the new accounts that we're bringing in. Ryan Merkel - William Blair & Company L.L.C., Research Division: Right. I figured that was part of the story, so thanks for clarifying that point. And then lastly as it relates to vending, you mentioned after 3 years, the margins move up quite a bit. Can you just spend a minute walking us through why the margins progress higher over time?

Yes, sure. And, Ryan, that's right, you heard me mention the 3-year look that we have. And I mean, it's not surprising. It's what we've described in the last few calls, so let me put a little color on it. Year 1, there is a lot of work upfront that goes into installing a vending machine and developing the program. So that's selling costs. That's implementation costs. So what happens year 1 is you've got a high amount of fixed costs, number one. Number two is the gross margins tend to be a little lower upfront because of the products that are running through the machine tend to be the production-related items. And so what we see is you have a high burst of fixed cost that brings profitability levels down significantly through year 1. And then as we look to years 2 and 3, 2 gets considerably better than year 1 and year 3 gets considerably better than year 2. So the story you have going on is tremendous growth in the account, very high retention rates, a leveraging of the fixed costs that we're needed upfront to sell and install the system, not to mention the gross margin upside that we have by pulling through lots of products on the plant floor, around the plant floor, but not through the machine at higher gross margins. Ryan Merkel - William Blair & Company L.L.C., Research Division: Right. Well, that's great. It sounds like the upfront investment is quite worth it.

That's our feeling. And, Ryan, one other point I'll hail which is the beauty of the program is not only do we see this nice progression and profitability, but we've got internally a bunch of programs pointed at improving the water level for all 3 years going forward.

Our next question comes from John Baliotti at Janney Montgomery Scott.

Erik, congratulations as well on your new promotion.

Thank you, John.

I was -- I'm sure every company would prefer higher organic growth, higher GDP growth and so on. But it seems like, as you pointed out in your comments, that this is the kind of environment that historically MSC has taken share in, and share is obviously sticky. And I'm wondering, based on some other questions that have come up, how do you, I guess, balance the fact that given your size, it's a real advantage for you to invest, to capture that share right now versus maybe trying to mitigate some of the lack of visibility that's out there in terms of the revenue growth and kind of trying to balance that with the margin.

John, it's exactly what you said, which is it's a balance. And I think your point is right, and it's worth underscoring that really the worse the environment gets -- I mean, there's, obviously, things about it that are not delightful at all. But the worse the environment gets, the stronger the MSC value proposition becomes. And you have 2 dynamics going on. One is on the customer front. When things get bad, cash becomes at a premium, which means they don't want to stock any inventory and they need to rely on distributors with really high service levels and lots of inventory, like an MSC. And the second dynamic at play for the customers is the need for productivity and efficiency. They've got to start doing more with less. And that's where our technical capability, the sales force, the metalworking expertise and the value-added solutions really come into play. So our value proposition is one dynamic as things get bad, and then the other one that David referenced in his opening comments is the fact that 70% of this market is made up of local distributors who really come under pressure. So we have weakening competition and a stronger value prop. We get very, very enthused about the ability to take share. That said, it is a balance. So what you see from us and I think you can expect is similar to, if things were to get worse the way we managed it the last time, which is discretionary spending, as we've defined it, we really clamp down on. And then the things that we view as strategically really important, we'll press on the accelerator and make sure that we don't lose out on what could be an amazing opportunity to take share.

Yes, because it seems that your inventory turns have improved nicely throughout the year and picking up from the improvements you're making last year. And so it seems like even by providing that inventory and being that location for your customer, that hasn't impacted your cash flow. It hasn't impacted your working -- your capital turns. So is there -- while you hold that inventory, while maybe you build that inventory, are you still -- is there a net efficiency improvement that you're getting?

Yes, John. So I think one of the beautiful things about our business and for those who followed us back in '08 or '09, you saw that the worse the environment gets, the better our cash generation gets. So that is really a weapon for us, and we can really be on our toes and not our heels. So Jeff, when he described our cash position, said that it's not the worst thing in the world right now to have a little more cash. Either way things go, we think that's good and that can really be a weapon for us.

Our next question comes from David Manthey at Robert W. Baird. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Just a handful of quick hits here. First of all, could you just talk about the magnitude in pricing -- magnitude in timing of the pricing actions that impacted the quarter? And then what was the impact on the quarter of those pricing actions, specifically?

So you're referencing the Big Book increase, David? David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Yes.

Yes. So what I described in the prepared comments is that we moved it in by a few weeks, which, you've been following us for a while, is not atypical of what we do. So certainly, we're not going to break out the specific. If what you're looking for is the gross margin, the gross margin contribution, we're not going to break that out. But certainly, we got a few weeks of benefit in Q4, and what that accounted for was a softer seasonal dip than we've seen over the last few years from Q3 to Q4. And obviously, it's driving the expected uptick in Q1. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. Did you mention what the magnitude was?

Yes, we did. It was between 3.5% and 4%. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. I missed that. Second, at what growth rate do you expect to grow the sales force next fiscal year?

David, I'll tell you that right now one of the themes that you probably hear coming out is lack of visibility, and it would be very tough to give you a sense for the year because a lot of it is going to depend upon what happens to the economy. So what you saw -- and if you looked on the stats, what you saw was a slight downdraft from Q3 to Q4 by a few people. I wouldn't make too much of that. We didn't hit it in the prepared remarks because there was so much to cover. I'd expect in Q1, that number to come up a bit and be in the range of where it was in Q3. And really, the sales force expansion and how hard we hit it will be a function of, number one, what happens in the economy; and number two, the -- what we see in terms of opportunity. So if you think back to the last downturn, we invested in our sales force through the downturn because we saw this really unique opportunity to attract top industry talent that in a normal environment you couldn't get. We still see that opportunity out there should things get worse, so we're going to weigh a multitude of factors in determining the rate of sales force expansion. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Great. Third, thinking about the manufacturing versus nonmanufacturing customers. As you look at the next $1 billion in revenues, do you expect that mix to change much? I know you said you're -- obviously, you're geared toward the manufacturing shop floor. Is there anything you're doing to target that nonmanufacturing customer that, that might actually increase as part of the mix or no?

Yes, David, good question. So I mean, I would refer back to the strategic vision that we've outlined. And one of the beautiful things about the business is there's so much -- so if you think about the priorities in the revenue roadmap we've laid out, we see a ton of opportunities still in the core of our core business of metalworking, given that's still relatively low share position combined with leadership in metalworking. We then see opportunity outside of metalworking but still on the plant floor and manufacturing. And then third would be outside of manufacturing altogether. So certainly, there's things that we're doing now to prime the pump and begin to get growth out of the nonmanufacturing segment. And the one I'd pointed to as example would be the one we mentioned on the call in government, where we're really pleased with our performance, so it's certainly outside of manufacturing but one that we continue to invest in and see as a growth engine for the future. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. So it sounds like just the nature of the business, we're not going to see a significant shift. The percentages might stay about the same going forward. And then finally, Erik, is there a positive offset in November, you're selling clean-up-related products at all? I mean, again, knowing that you're mostly manufacturing, but you've got to sell some tarps and chainsaws and things. But is there a positive offset potentially or you're not factoring that in?

Yes, that's a good question, David. When Jeff gave you the estimated impact range, that was our best guess. And I want to just couch it that it's still early here. We're a day after the storm. Our best guess of the net impact -- so we do see some pickup as you describe. But given that our business is mostly industrial, it tends to net out being a detractor, not a contributor, that what we lose in plants being shut down and the lack of production for the few days more than offsets what we see in a pickup in the relief type of spending. But we do see some.

Our next question comes from John Inch at Deutsche Bank.

So I wanted to talk about the guide or focus on the guidance for a second in the revenue guide. So 6.7%, I think, was the midpoint. If we still presumably got this vending contribution of 4 points and price of 3.5% to 4%, is the implication that kind of -- even based on your own commentary, that sort of the nonmanufacturing aspects of your portfolio or -- excuse me, of your customer mix seem to be holding in or likely holding in. Does that suggest that's kind of the -- if you strip that away in the core guide is down mid-single digits, is that what you're expecting?

John, so let me give you -- so what you're really getting at is a breakout in Q1. So if you think of the 6.7%, you've got the vending contribution which, if it were to continue with the rates it's been, it's around 4 points, pricing -- I wouldn't conclude that pricing is 3.5 to 4 points and the reason is there's a realization effect, so it would actually be lower. But there's some number on pricing we have a little bit in Q1 from the ATS West acquisition. That pretty much gets you in the ballpark of the total growth. So if your question is, does that mean that the rest of the customer base is flattish and maybe slightly down, we think yes. In light of what's going on right now, yes. Now does that mean it continues? We have no idea. We think there's a reason from some optimism beyond this murkiness that we're in now. But with the picture we see now, there's a holding pattern going on.

Yes. No, it's reasonable, so the condition of the rest of the customer base is flat, was sort of my question. I'm assuming that manufacturing is probably down proportionately versus the rest of them. I mean, is it -- but you're also holding in profitability really well. So any color around that?

I would tell you that the profitability -- holding up in profitability more than anything, John, is a function of 2 things. One is strong price realization; and two, is we have not been standing still. There's been a lot of discretionary cost that we've moved on. And as I've described earlier to Hamzah, there'd be a lot more to come if things get worse and just harken back to our playbook. But we've not been standing still. So I think what you're seeing is more a function of that than it would be of any customer mix.

Erik, you're talking -- I know you're probably still talking to an awful lot of customers. Given that in your August fiscal year, so the quarter guidance through November, I'm not trying to be Captain Doom or anything, but shouldn't we really be sort of concerned about the fiscal second quarter if -- which captures the month of December and customers are all of a sudden planning extended plant shutdowns or something on that order. I mean, I'm just wondering how you're thinking about at this juncture based on discussions that you're having with your customers.

John, the true answer is we don't know. I mean, there is -- we, right now, can't see past the end of November and the election. And I think the key for us is we're going to be prepared and take the right measures no matter which way this thing goes. So I think there is -- look you heard from us, some cautious optimism. We think there's a good chance there'll be benefit just by virtue of certainty, whichever way things go on the election, whichever way things go on tax resolution, there'll be clarity for businesses to plan. But we don't know. Who knows? At this point, your guess is as good as ours. And our job is to make sure that we're prepared, whichever way things turn.

No, It's a fair answer. Last question for you, Erik. I mean, as we roll into tax changes, right, that seem almost certain to at some sort of degree, in terms of taxes going up, are there prospectively going to be some acquisitions from the part of owners that maybe just want to cash out ahead of that, that we could look forward to? I mean, you've got a very strong balance sheet. You, clearly, would like to do some acquisitions. Should we be seeing tax-driven deal activity possibly pick up a little bit here before calendar year end?

Yes, John. It's actually a great question. I'll tell you our M&A funnel remains full. I mean, so you've not seen us announce anything in the last quarter. It's not because the funnel is not full, it's more because we've got pretty strict criteria. So the business has to meet our return threshold. It's got to be a strategic fit. It's got to be a culture fit. We've got the think of it as a leadership position. So all that is a pretty strict set of criteria. I would say specific to the tax changes, it's certainly a factor. But in a loan, I don't know with the -- would drive a deal, but it's certainly -- it's a catalyst that could. And certainly, we think on the minds of some business owners.

I would just think that you've more willing sellers, basically.

Our next question comes from Robert Barry at UBS.

Also share my congratulations to everyone in their new roles. I wanted to quickly follow up on the pricing question and just wanted to clarify what the pricing contribution to revenue growth was in the quarter.

Rob, it's Erik. We actually don't break that out. So what we do is for the Big Book increases, we'll give you the size of the increase. We then include it. We don't break the pricing revenue contribution out separately. What we do on, if you look on the sheets, is we'll break out pricing combined with mix and volume and some other factors.

Yes, okay.

And just to explain, by the way, my point was so if the Big Book increase was 3.5% to 4%, there's a little of that in Q4. There's obviously more of that, given that we have a full quarter of it in Q1. But my point was just that the realization is not 100%, and it takes time to realize some of the increase.

Yes. No, fair enough. Fair enough. And actually, I was just curious about how you were thinking about the pricing. It's encouraging to see that in this environment, and even with some signs of deflation, that you are getting that pricing or feel like you could get that pricing. I'm just curious how you're thinking about, you're seeing any signs of deflation or there are offsets elsewhere?

Yes, Rob. I would say right now, I mean, generally, I'd characterize the environment, the commodities, the pricing environment, as generally stable. I think what you're seeing is a couple of things but it's stable. But the same as it goes to revenues, our view into the future. So if you want our outlook on pricing, it's really similar to the revenue story, I hate to say, which is we have such limited visibility, we don't know what the future is going to bring. I think what you're seeing now is a reflection of a strong value proposition and a value prop that gets even stronger in tough times because we think we're bringing, I described before, the service for our customers and the ability to help them take cost out.

Okay. And then just lastly and this is a big picture question, and I'll preface it by saying that I think the level of profitability you're seeing in the business is very strong, and it's clearly holding up despite a very weak environment. But kind of big picture as we look at some of your other big public peers, acknowledging also that there are differences between the distributors, but at a high level, it seems like we're seeing margin expansion at some of these peers despite similarly aggressive levels of investment. And they seem to be funding this margin expansion with finding a lot of productivity in the business, and it just seems like that is not occurring to the same extent at MSC. In fact, you're seeing some margin degradation on a year-over-year basis. So I'm just wondering as you kind of compare your performance to a Grainger or a Fastenal and you see that, what do you think the difference is that's driving their ability to invest aggressively and still see margin expansion, still see very good margin expansion?

Yes, Rob, it's Erik. Let me give you our perspective, which is, number one, tough to talk about other companies. I know there's a desire to line up Grainger, MSC and Fastenal. But as we look big picture, and you said it was a big picture question, and look out over the next number of years, we see just an amazing growth opportunity that we're marching right along towards our goals. And most of the business that we take doesn't come from those 2 guys, and it's really from the 70% of the market that's made up of local distributors. That's where our eyes are set, and that's where we see the biggest opportunity. So look, in any given period, Jeff, on the last call, had described that we expected read-throughs to be lower for the next few quarters than historical based on a few of the investments that we're making. But big picture, we feel great. And I think the other point I would reference is that a couple of our strategic programs that we've chosen to put the foot on the accelerator have temporarily muted margins and read-throughs. So the 2 we've hit on are -- on recent quarters, vending, being one; and some of the acquisition work that we did, being another. Both of them excellent investments, both that we see where there's a temporary headwind that gets lessened over time, but both certainly in the near term have muted to some degree the contribution margins.

Our next question comes from Adam Uhlman at Cleveland Research.

This is actually Courtney Killion on for Adam. Just to go back to the incremental margins real quick. Just wanted to get your thoughts on kind of longer term, if you think you can get back to the 30% range maybe after fiscal year '13 or after fiscal year '14, what you're thinking about structurally where the business lands?

Yes, Courtney. It's Erik. So look, big picture, we don't think anything has changed fundamentally in the business. So we don't give you guidance for read-throughs beyond the next few quarters that we can see. But just sort of big picture, fundamentally, we don't see anything that's changed in the business. Any given year, it's really a function of the variables that we keep pointing to. So it's hard to give you any precise measure for the next year because you'd have to tell me what the environment is like and, hence, what growth rate we have, what sort of inflationary environment we're in, and then we could give you a better feel. But I think, generally, what you're seeing is a combination of some of the investments that we're making for the future combined with decelerating sales growth and combined with a couple of the investments that we've described as being near term dilutive and highly accretive long term. But I think the fundamental point is not much has changed in the business.

Okay, great. And then just real quick, kind of on the inventory levels. It looks like inventories are kind of flat on maybe -- flat to down one sales growth, if you exclude kind of the additional week. Just curious what you guys are doing with the inventory levels today, if there's been any change in how you're thinking about your inventory position strategically, given kind of the slower decelerating sales growth environment?

Yes, Courtney. This is Jeff. Managing inventory obviously is critical to us. It gets a lot of our attention. We're committed to our service levels, and we do keep a very good eye on the demand levels. And we actively manage to that environment. And I think, if you see over time, you can see that the inventory turns are in a relatively tight band around that 3.5% range. And I would expect this to continue going forward.

Our next question comes from Scott Graham at Jefferies. R. Scott Graham - Jefferies & Company, Inc., Research Division: And I'll certainly echo congratulations to you all. So I have 2 questions for you. The first one is regarding private label. And as that continues to edge up for you, what type of consolidation of your vendor base does that mean. And moreover, the vendors that are not consolidated, are they kind of -- do you sense that maybe they're kind of like looking over their shoulder a little bit at this and concerned about it with you?

Scott, it's a good question. Private brand -- look, so private brand, you hit it on -- it's a great program for us, and it's still relatively early in the growth story here. And we see it as a big margin tailwind over time. But I think it is important also to highlight that it complements our product portfolio and strategy. It doesn't replace it. So sure, I'd be lying if I tell you that there weren't times where -- does it create some tension with some suppliers? Sure. But really important to our product portfolio and our go-to-market strategy is our branded manufacturers that we still lead with. And certainly, Kennametal is a great example of a very important strategic partnership where we've done really well. So I think our partner suppliers for the most part, those who invest in MSC and invest in continued growth, would say that they still feel pretty darn good about their prospects with MSC. R. Scott Graham - Jefferies & Company, Inc., Research Division: Understood. The second question relates to the 2016 aspirations. Just sort of wondering, coming at this from 2 different perspectives, is there -- I mean, you talked about a really good funnel for acquisitions. It's been a little bit quiet. I was just wondering if in the next 12 months, Erik, if there was nothing, would you really be disappointed in that? I assume that there will be something, but maybe you can give me an idea on that. But also, maybe kind of compare that to -- is there another program that you guys are contemplating? Because it's a big leap in the total sales that you're looking for. And I'm wondering, is there another Kennametal-esque type of deal that's out there for you guys to take your business into another category?

Scott, another really good question. So what I'd tell you is so the goal -- I think, what you're referencing is the $4 billion by 2016? R. Scott Graham - Jefferies & Company, Inc., Research Division: Of course.

Right. So that's -- I mean, when we put that out there, it implies 15% compound annual growth rate. And I think, if you look over the course of time for the company, we feel pretty good about that when combining organic historical growth and what we expect to deliver going forward with M&A. I would tell you that M&A continues to be a vital part of our plan. But that said, we would not do a deal to hit a number, that the -- I would only be disappointed in not doing an acquisition over the next 12 months if I felt we missed one that met all of our hurdle rates, which were complementing the strategy, high returns, strong culture fit and a company with leadership position. If we passed on companies that didn't meet that criteria, I wouldn't be. In terms of the other part of your question, yes. I mean, I think if you walk the halls here, we have a bunch of exciting initiatives, some of them that we're currently capitalizing on, like vending and like e-Commerce, and some other ones that are in earlier stages and give us room for excitement for the future. R. Scott Graham - Jefferies & Company, Inc., Research Division: So that Kennametal model could be sort of redeployed in a different way?

Right. So, well, Kennametal, what you're referencing in Kennametal is a key strategic partnership with a supplier. So certainly, that would be one example of the growth program, and then we have other growth programs that may not be related to one specific supplier.

Our next question comes from Holden Lewis at BB&T. Holden Lewis - BB&T Capital Markets, Research Division: I wanted to ask you a little bit, I guess, more about the price increase. The 3.5% to 4%, that sounds like it's sort of atypically high, particularly against when you had another small one, I guess, immediately preceding it. I just kind of want to get your sort of thoughts around that number. Because obviously, as you said, sort of the raw material side seems to be relatively stable. The macro seems to be somewhat soft. I mean, what's the impetus for such a big increase?

Holden, it's Erik. So when we do our price increases, there's a number of factors that go into the decision on the sides of the increase. So that includes what we're seeing from suppliers and what the current environment is like. It also includes how our relative value proposition stacks up against competition and what stage our customers are at. And I think it's a reflection more than anything else of the value that we're bringing. And particularly, again, as times get more difficult, we've invested an awful lot in our inventory to keep service levels at all-time highs. And we've invested a lot in the technical expertise that we bring to bear at our accounts to take them -- take cost out on the plant floor. Holden Lewis - BB&T Capital Markets, Research Division: Okay. And do you -- sort of in terms of showing, or being able to prove that you warrant that price increase, and I get it, you're basically saying that you've increased the services you provide to your customers and you need to be compensated for that. Do you have kind of a means of measuring those savings? So that you can go to the customer and kind of say, "Here's where we're getting this price increase. Here's where we're saving you money." Or do you just sort of jam the price through and they'll see it in the book and you hope that they don't begin shopping elsewhere?

No, we do have -- with that, I'm not going to get into a lot of detail for competitive purposes. But certainly, we do have with our key accounts a method of documenting and sharing cost savings with them. Holden Lewis - BB&T Capital Markets, Research Division: But only with the key accounts. The other -- the large majority accounts, I guess, it would be untenable to do so with such small customers and things like that. Right?

Yes. So when I say key accounts, really where we have a salesperson and a relationship with somebody, that's a pretty broad base of accounts. So don't think of it as a handful of accounts. Think of it as a broader base of where we have a relationship. Certainly, in those cases, we have means of sharing cost savings. For the rest of the customer base, which is what you're referencing, look, we have other marketing programs that we use to help them achieve cost savings in a different way. Holden Lewis - BB&T Capital Markets, Research Division: Okay. And then just sort of bridging from that, when you look at sort of your average order size, it increased in fourth quarter, like it usually does, but it was a relatively light increase. It's about 2.8% sequentially from Q3. And if you go back, usually, it's more than that despite the fact that you're putting in some greater pricing. What's sort of the dynamic there? Are you seeing a difference in your customer base that may set up or any other pieces in the mix?

I think the biggest thing I'd point to, Holden, is what we're describing definitely a change in the environment. So I think you have people in somewhat of a holding pattern, and that's really the primary driver. So what we're really pleased in this environment, we're pleased we're seeing average order size go up. It's a driver of efficiency for us. But if your question is why relative to historical wouldn't it be a tie? I think I'd track right back to the statements about what we're seeing in the current environment right now. Holden Lewis - BB&T Capital Markets, Research Division: Okay. And then just [indiscernible] ones, you said that gross margin in Q1, you were expecting 45.9%, plus or minus 20?

Correct. Holden Lewis - BB&T Capital Markets, Research Division: Okay. And then, did you give sort of the acquired revenue bp, an approximation for Q4?

We -- the impact of -- to the gross margin or to the sales? Holden Lewis - BB&T Capital Markets, Research Division: No, no. Just -- I'm sorry, incremental revenues or revenues coming from acquisition in Q4.

There's a little bit of an overlap left with the ATS West acquisition, a little more than 1 point of the sales growth is associated with that. Holden Lewis - BB&T Capital Markets, Research Division: Okay. And then there'd be a little bit more in Q1, then we're done. Right?

I'm sorry, that was Q1. In Q4, it's 3% in total because there was still some of the ATS East overlap.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Erik Gershwind for any closing remarks.

Thank you, everybody, for joining us. We'll see you next quarter. And I hope everybody remains safe and sound and recovering from the impact of the storm.

Thank you.

The conference has now concluded. Thank you for attending today's event. You may now disconnect.