MWI Veterinary Supply, Inc. F4Q08 (Qtr End 09/30/08) Earnings Call Transcript

MWI Veterinary Supply, Inc. (MWIV)

F4Q08 (Qtr End 09/30/08) Earnings Call Transcript

November 6, 2008, 11:00 am ET

Executives

Mary Pat Thompson – SVP, Finance and Administration, and CFO

Jim Cleary – President and CEO

Analysts

John Kreger – William Blair

Mark Arnold – Piper Jaffray

Robert Willoughby – Banc of America Securities

Lisa Gill – JP Morgan

Presentation

Operator

Good morning, everyone, and welcome to the MWI Veterinary Supply’s fourth quarter fiscal 2008 earnings conference call. Today’s call is being recorded. Now, at this time, I would like to turn the conference over to Ms. Mary Pat Thompson, Senior Vice President of Finance and Administration and Chief Financial Officer. Please go ahead, ma’am.

Mary Pat Thompson

Good morning, and welcome to MWI Veterinary Supply’s fourth quarter and fiscal year 2008 earnings conference call. This is Mary Pat Thompson, Senior Vice President, Finance and Chief Financial Officer. Joining me today is Jim Cleary, MWI’s President and Chief Executive Officer.

Certain statements contained in this conference call that are not descriptions of historical facts are forward-looking statements, as such term is defined in the Private Securities Litigation Reform Act of 1995. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to those discussed in filings made by MWI with the Securities and Exchange Commission. Many of the factors that will determine the company’s future results are beyond the ability of management to control or predict. Listeners should not place undue reliance on forward-looking statements, which reflects management’s views only as the date hereof. MWI undertakes no obligation to review or update any forward-looking statements or to make any other forward-looking statements whether as a result of new information, future events or otherwise.

Another note that I would like to point out during the call is related to financial comparisons that are made. All financial comparisons are for the fourth fiscal quarter or fiscal year ended September 30, 2008 compared to the same period in the prior fiscal year, unless otherwise noted. Now, I would like to turn the call over to Jim Cleary to begin our remarks.

Jim Cleary

Good morning, and welcome to MWI Veterinary Supply’s fourth quarter and fiscal year 2008 earnings conference call. Today, I will walk you through an overview of the results that were presented in our earnings announcement released earlier today. Mary Pat will provide additional detail and explanation of those financial results. Then I will discuss the company’s business outlook for the fiscal year ending September 30, 2009. Lastly, we will open the call to questions.

Today, MWI reported revenue growth for the fourth quarter ended September 30, 2008 of 18% to $224.8 million compared to $190.2 million. Of the 18% revenue growth during our fourth quarter, revenue from product sales grew by 19%, revenue from sales of product to Feeders Advantage grew by 8% and commission revenue grew by 27%. Net income for the fourth quarter increased 25% to $5.4 million or $0.44 per diluted share as compared to $4.3 million or $0.35 per diluted share.

Revenue growth for the fiscal year ended September 30, 2008 was 17% to $831.4 million compared to $710.1 million. Of the 17% revenue growth during the fiscal year, revenue from product sales grew by 17%, revenue from sales of product to Feeders Advantage grew by 9% and commission revenue grew by 35%. Net income for the fiscal year increased 18% to $19.9 million or $1.62 per diluted share as compared to $16.9 million or $1.40 per diluted share.

Additional highlights for the quarter and fiscal year included; first, selling, general and administrative expenses as a percentage of revenues were 9.6% for the quarter compared to 10.2%. SG&A expenses as a percentage of revenues were 10.1% for fiscal year 2008 compared to 10.3%. Second, our internet sales to independent veterinary practices and producers grew by approximately 43% for the fourth quarter and 39% for fiscal year 2008. Third, we acquired substantially all of the assets of AAHA MARKETLink in July 2008 and entered into long term sponsorship and licensing agreements with the American Animal Hospital Association. And fourth, cash flow provided by operations for fiscal year 2008 was $10.6 million, and we completed the fiscal year with $3.4 million in cash and no borrowings on our $70 million credit line.

Fiscal year 2008 was another excellent growth year for MWI. I would like to thank our employees for their continued dedication and hard work, and I would like to thank our loyal customers and vendors for their continued support of MWI.

In summary, regarding the quarter ended September 30th, I believe that it represented one of MWI’s best operating performances to date. We delivered excellent growth and financial results, and we successfully integrated a strategic acquisition, all in spite of the economic environment. Now, I will turn the call over to Mary Pat Thompson, Senior Vice President and Chief Financial Officer, who will provide additional detail of our financial results.

Mary Pat Thompson

Thank you, Jim. As Jim indicated in his remarks, we experienced continued growth in our revenues during this fiscal quarter. Revenues growth was 18% for the quarter ended September 30, 2008. Revenues attributable to new customers represented approximately 62% of the growth in total revenues, while growth from existing customers was approximately 38%. Included in the new customer growth were approximately $2.8 million of revenues attributable to new customers acquired as a result of the acquisition of AAHA MARKETLink on July 1, 2008.

Additionally, we had $5.4 million of incremental revenues as a result of the acquisition of AAHA MARKETLink from customers who had previously been purchasing from both MWI and AAHA MARKETLink.

Revenues from sales of Feeders Advantage increased 8% to $10.7 million. Revenues from commissions on agency sales increased 27% to $3.2 million. Gross profit increased by 17% to $31.2 million. Gross profit as a percentage of total revenues was 13.9% compared to 14.0%. Vendor rebates increased approximately $95,000.

In our press release issued January 31st, 2008, we reported that rebates for the three months ended December 31, 2007, were approximately $1 million less than anticipated, due to a difference with a key vendor over the amount of rebate dollars that were expected during the quarter under their program. We earned approximately $250,000 of this amount during the quarter. We have now earned the entire $1 million related to this difference.

Operating income increased 32% to $8.8 million. SG&A expenses increased 11% to $21.6 million. SG&A expenses as a percentage of revenues were 9.6% for the quarter ended September 30, 2008, compared to 10.2%. This reduction was due to improvements in compensation and benefit costs as a percentage of revenues, occupancy and location expense, and travel expense also as a percentage of revenues.

During fiscal year 2008, our overall head count increased approximately 10% to 881 employees, including 23 field sales representatives and 18 telesales representatives.

Our effective tax rate for the quarter was 39.3% compared to 38.1%. Net income increased 25% to $5.4 million. Diluted earnings per share were $0.44 per share compared to $0.35 per share, an increase of 26%. Total revenues grew 17% to $831.4 million for the fiscal year ended September 30, 2008, compared to $710.1 million. Revenues attributable to new customers represented approximately 57% of the growth in total revenues, while growth from existing customers was approximately 43%.

Revenues from sales to Feeders Advantage increased 9% to $39.5 million. Revenues from commissions on agency sales increased 35% to $13.0 million.

Gross profit increased by 17% to $119.6 million. Gross profit as a percentage of total revenues was 14.4% for both fiscal years. Vendor rebates increased by approximately $1 million for the year over previously earned rebates. Operating income increased 21% to $32.4 million. SG&A expenses increased 15% to $84.1 million. SG&A as a percentage of revenues was 10.1% compared to 10.3%. Our effective tax rate for the fiscal year was 39.5% compared to 37.7%.

Net income increased 18% to $19.9 million. Diluted earnings per share were $1.62 per share, compared to $1.40 per share.

Our balance sheet reflects the increase of receivables of $16.9 million during the fiscal year ended September 30, 2008, on increased sales volume. Inventories increased by $23.8 million with the addition of a Kansas City distribution center, the addition of new product lines, as well as increased sales volumes. Offsetting the inventory increase, accounts payable also increased by $24.3 million. Our cash balance was $3.4 million at the end of the fiscal year, and we had a zero balance under a $70 million revolving credit facility with Bank of America and Wells Fargo. The revolver has an interest rate of over [ph] LIBOR plus 70 basis points.

Now, I’ll turn it back over to Jim.

Jim Cleary

Thank you, Mary Pat. Now I would like to turn our attention to MWI’s outlook for the fiscal year ending September 30, 2009. We expect revenues will be from $900 million to $950 million, which represents growth of 8% to 14% compared to revenues in fiscal year 2008. Diluted earnings per share will be from $1.75 to $1.85 per share, which represents growth of 8% to 14% compared to diluted earnings per share in fiscal year 2008.

Actions planned for fiscal year 2009 include; first, we will continue our focus on value-added services, including our e-commerce platform, inventory management system, pharmacy fulfillment program and other value-added services. Second, we will expand our sales force into new sales territories. This will include the integration of customers acquired in the AAHA MARKETLink acquisition. We will service these accounts as an important part of our business. Third, we will continue to stay committed to improving our low cost structure and making smart decisions with both our operating expenses and capital expenses. Fourth, we will continue to invest in productive infrastructure, including moving into a larger distribution center in Dallas in the current December quarter, so that we can continue to grow in Texas and the surrounding markets. And fifth, we will evaluate potential acquisitions that are a strategic fit for MWI and add to our shareholder value. As you can see, we are staying committed to achieving both growth goals and expense control.

Now, I would like to open the call for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator instructions) We will take our first question today from John Kreger with William Blair.

John Kreger – William Blair

Hi, thanks, Jim and Mary. I just wanted to probe a little more on your thinking behind the guidance for next year. Could you give us a sense about how you think your production versus small animal companion business is likely to perform in the coming year? And also, how you handle the issue of rebates in guidance?

Jim Cleary

Sure. I’ll address the first part, and then Mary Pat can address the rebate part of that. You know, when we came up with our guidance for the year, we evaluated many data points in the animal health market, as well as the financial information released by our competitors and other participants in the animal health market. And based on all those pieces of information, we came up with the guidance that we did, and which shows that we’re continuing to grow and we expect to significantly outpace the growth in the overall animal health market. With regard to small animal versus large animal, we’ve seen that the small animal market is performing relatively better than we would have expected. And the cattle market and the equine market are performing relatively weaker than we would have expected. And so that is built into that guidance, John.

And at some point in time, we think that the cattle market is going to turn, and we’ll start to have good comparables, and we’ll see some good growth there. But, up to this point in time, as I’ve said the small animal market has been relatively stronger than we would have expected, and the large animal market has been relatively weaker than we would have expected.

John Kreger – William Blair

Okay.

Mary Pat Thompson

Great. And I’ll just finish up with the rebate question. At this point in time it’s difficult to say about rebates for next year because obviously the contracts for 2009 have not yet been negotiated. I do still see trends for more margins being earned on upfront transactions and less weighted toward rebates. Overall, we would expect rebates to be down as a percentage of revenues in fiscal year 2009.

John Kreger – William Blair

And Mary Pat, when do you think you’ll have more clarity on that – is it a sort of an end of February timing?

Mary Pat Thompson

Yes, that’s historically been when we have received the final contracts.

John Kreger – William Blair

Okay. And then just one more question. Given the challenging environment, what’s happening with your private label initiative? Is that something that you’re ramping up, or the customers are more interested in, or is that still a fairly minor part of where you’re focusing?

Mary Pat Thompson

Yes, this year we ended Vet One sales at about $25 million. For fiscal year 2009, we’re forecasting an increase of 20% to $30 million. It is an important strategic initiative for us. The gross margin percentage on it is about 3% to 5% better than what we’re receiving today. So that will be one of the opportunities for gross margin improvement in 2009.

John Kreger – William Blair

Okay. Thanks.

Operator

We’ll go to our next question from Mark Arnold with Piper Jaffray.

Mark Arnold – Piper Jaffray

Congratulations on a nice quarter.

Jim Cleary

Thank you, Mark.

Mark Arnold – Piper Jaffray

I guess just to start with, can you give us a sense for how much of the gross margin drop here in Q4 was due to the higher marketing expenses related to bringing on MARKETLink. And, is that spending likely to tail off here in your fiscal Q1?

Mary Pat Thompson

Yes, we did have – as you noticed we talked about the increased revenue in the fourth quarter, and we said we would not have gross margin dollars completely going to the bottom line because there were launching expenses and integration expenses. Those have for the most part been completed. So what you would see in the gross margin percentage – in a decline or a little bit of a decline, it was very slight – is there was rebates only at $95,000. So as a gross margin percentage that was down slightly and as I said earlier, I do see a transition to more a positive upfront gross margin on the upfront transactions.

Mark Arnold – Piper Jaffray

Okay. So most of that spending that was related to MARKETLink is completed. So we will see a little bit of – we should expect to probably see a little bit of rebound on that gross margin number just due to that here in the next quarter?

Mary Pat Thompson

Yes. The spending is done. I continue to think that gross margin percentage will be roughly flat in ‘09, especially since we’re still waiting on contracts, which will of course have an impact on gross margin percentage.

Mark Arnold – Piper Jaffray

Okay. And then, just following up on the question from a previous person here. You said that the rebates will probably be down – are you saying they’ll be down because of that move to transactional margins, or do you think they’ll be down because of slower revenue growth?

Mary Pat Thompson

I think right now, as I said earlier, we do not yet have the 2009 contracts, so we’re really operating in the dark path the December quarter. But the trend that we’ve seen in the industry – and we view it as a very positive trend – is the move away from everything weighted towards rebates and instead rewarding companies for strong transaction performance everyday. And I think that that transition will continue to happen. We were able to actually have a good rebate performance in the September quarter. One of the vendors has performed better for us than we had anticipated, but of course when we were looking at rebate performance for next year, we were also considering our sales growth guidance that Jim just presented earlier during the call.

Mark Arnold – Piper Jaffray

Okay. MARKETLink seems to have kind of surpassed your initial expectations right out of the gate here with $8.2 million in sales, if I’m reading the press release correctly. Should we view that as a baseline of sales that you are able to keep from the $40 million or so that they were doing previously?

Jim Cleary

Yes, Mark. That’s right, and it has exceeded our expectations out of the gate.

Mark Arnold – Piper Jaffray

Great. I guess just a couple last questions here. It sounds like from some of your competitors that the September and October were pretty challenging in the production animal industry. Should we expect that production animal business to be maybe a bigger drag here in the first part of fiscal ‘09 than your expectations for the full year? How should we think about that piece of your business?

Jim Cleary

Sure, yes. As we’ve said before, the production animal part of our business has performed relatively weaker than we would have expected. And of course, keep in mind that about half of our production animal business is dairy, and the other half of the production animal business is beef. I think that that business will turn around and will start to perform better, I’m just not sure when. Now one of the things for instance, that we could see in the fourth quarter is manufacturers typically have price increases effective January 1, which typically creates large customer quarter – excuse me, large customer purchases in the month of December. This year I expect we will see manufacturer price increases, but some customers may decide that instead of buying up big in December, they’ll all wait and buy it as they need it in January and February. And while that might have a negative sales growth impact on the December quarter, I think overall it’ll have a positive impact on our business, if we get away from the large customer buy-ins and move towards more purchasing as they need the product.

Mark Arnold – Piper Jaffray

Great. I just had one last question, and I’ll jump back in queue. Webster bought Columbus Serum back in early October. Can you talk about what that means to you from a competitive standpoint?

Jim Cleary

Sure. I think that type of acquisition is a win-win. I think it’s a win for Webster. I think it’s a good acquisition for them and will help their business. And it’s also a win for all the other industry participants including us, as consolidation happens in the market. You know, I will say that the sellers of Columbus Serum are two of the best people on the animal health business. They’re excellent guys and they’ve built a great company. And so I think it will be a good acquisition. And – but, I’ll also go on to say that not every acquisition makes sense for us from either a geographic standpoint or in a lot of cases from a product mix standpoint. And so in that case, I think it made better sense for Webster than it did for us. And overall, I think it will be a positive for them and a positive for all the market participants, including MWI.

Mark Arnold – Piper Jaffray

Great. Thank you, guys.

Jim Cleary

Thank you.

Operator

We’ll go next to Robert Willoughby with Banc of America Securities.

Robert Willoughby – Banc of America Securities

Hi, Jim. I guess the AAHA acquisition – was to the earlier question about $40 million in revenues here. I thought the starting point you said, maybe – the business you’d hoped to retain was sort of in the neighborhood of $22 million or $23 million, so obviously this is a surprisingly strong number, isn’t it? Shouldn’t we be emphasizing your success there more, or would you revise your thinking. Can that revenue ramp up dramatically, or where does that go?

Jim Cleary

Yes, we were expecting to retain about 60% of the business out of the gate, and so –

Robert Willoughby – Banc of America Securities

Okay.

Jim Cleary

We have about $24 million of revenue or about $6 million a quarter out of the gate, and obviously we’ve come in better than that. And what we did is we really segmented the customers in this acquisition between the customers that have been doing business with AHAA MARKETLink and were brand new to us versus the customers that had been doing business with both of us versus the customers who had been doing business with MWI, the AAHA members who had doing business with MWI but had never done business with MARKETLink. And we had really effective marketing programs to each of those three segments, and it worked out better than we had anticipated. And so, we are optimistic that we’ll continue to see growth from that acquisition and it will be one of the many positive parts of our business in fiscal year 2009.

Robert Willoughby – Banc of America Securities

Can you give us the number of sales reps you finished the year at, and what the ‘09 guidance entails in terms of sales rep additions?

Jim Cleary

Sure. We finished the year with field sales reps of 186 people, up from 163 last year. And so we had really great growth in our sales force during fiscal year 2008, and we found that the hiring environment was very positive for us during fiscal year 2008. And maybe some of the external factors in the economy actually was a benefit to us in terms of the hiring environment. We don’t have a target number for fiscal year 2009. We have a target profile that we hire to, and we’ll hire whenever we can to that profile. I would expect that we’ll try in fiscal year 2009 to have the same type of success we had in fiscal year 2008 in hiring. And how much success we have on that front, will impact, will be one of the factors that impacts whether or not we come in at the high end of the guidance level or at the lower end of the guidance level, Bob.

Robert Willoughby – Banc of America Securities

And what have you assumed for new store openings for Banfield as they look on track for this year, but do you take a more guarded view on next year in terms of what they may plan to do?

Jim Cleary

In the past year or so, they’ve been doing about 80 a year, and we expect that they’ll continue to grow as they have in the past. And Banfield has both a veterinary practice and business and MWI customer, has been performing very well.

Robert Willoughby – Banc of America Securities

I guess that brings up a point, is kind of AAHA has a little bit better sales reps kind of in line year-over-year, Banfield’s more or less in line – it’s less clear to me why we’re kind of not pushing that revenue number a little harder, Jim. Is it one, is just the production animal business where you’re showing some concern? I would think the number should be a bit higher.

Jim Cleary

You know the – we took a lot of factors into account with coming up with our guidance, Bob. And the stronger parts of the business than expected are, as you’ve said, the AAHA MARKETLink acquisition and then the small animal business, including our independent veterinary practices and Banfield. The weaker parts of the business right now, or relatively weaker, are cattle, equine and also capital equipment, and so we took all those things into account, and of course we’re just at the very beginning of the year now, and so that’s why we set up that guidance range, Bob. But you are absolutely right that AAHA, small animal, and Banfield are all performing very well.

Robert Willoughby – Banc of America Securities

I guess one last shot at it. I mean many of the areas that you have pointed to that were weak, would have been weak, I would have thought, for several quarters now. I mean, year-over-year, are you really implying anything’s down materially, in ‘09?

Jim Cleary

No. No, it’s just, what we are anticipating is low growth in cattle, equine, and capital equipment.

Mary Pat Thompson

And also it’s very early. Our fiscal year starts now in October, but most of the manufacturers are calendar year companies. So we’re also waiting to see what kind of new contracts and marketing programs that they come out with, which of course won’t really be visible to us until February of ‘09.

Robert Willoughby – Banc of America Securities

Okay. Thank you.

Jim Cleary

Thank you, Bob.

Operator

(Operator instructions) And we’ll go next to Lisa Gill with JP Morgan.

Lisa Gill – JP Morgan

Hi. Thanks very much, and good morning.

Mary Pat Thompson

Good morning.

Lisa Gill – JP Morgan

I was wondering if maybe we could just touch on two things, first is coming back to the small animal market. Are you – in addition to the market doing better than, say, the production side of the market, are you continuing to take market share, can you maybe talk about the competitive dynamics of that market? And then, secondly, as we think about acquisitions and the current environment from a credit perspective, can you maybe talk about some of the things that are out there, and players that have a better balance sheet like yourself, maybe being in a better position to make acquisitions and some others, and maybe talk about what you’re seeing from a valuation perspective on some of the acquisitions? Thanks.

Jim Cleary

Sure, sure. There are two questions there; first on small animal market share and second on acquisitions. So let me address those in that order. With regard to small animal market share, we’re seeing ourselves gaining market share in really all of our geographic markets, even the markets where we have our highest shares and are most mature, we see ourselves growing meaningfully faster than the market. And then, we are experiencing very high growth rates in some of our newer geographic regions in the eastern United States and the Midwestern proton of the United States. And so I think that addresses the small animal market share question. With regard to –

Lisa Gill – JP Morgan

Actually, before you move onto the next question, would you just mind telling us maybe where you’re taking that market share from – so is it existing small players, or are you taking it from some of your other larger competitors, and is it specific programs that you have in place that you’re able to take some market share?

Jim Cleary

It’s difficult to tell who the market share is coming from. It’s probably a combination of participants in the market. And we’re doing it with the same plans and programs that we have used for years. First is to increase the share of spend from existing customers, and we have marketing programs and other tools to do that – of course veterinary practices buy from more than one distributor, and we find that we can use these programs and tools to increase share of spend. Second is to increase the number of veterinarians served. There are still a lot of veterinarian accounts that we don’t do any business with, so that’s why we are always adding sales reps to increase the number of veterinarians served. We’re expanding our product lines and expanding our agreements with both new and existing vendors so we can be a more complete supplier, and when we have additional product lines we can try and be – we can offer more to both existing and new accounts and get more business. And then, we’re really focusing on these value-added services to provide new and innovative services to our customers, which really increases the loyalty of the customer and reduces the need for them to call someone else. And so, it’s really a combination of all those things that we’re doing to increase our small animal market share. And then, with regard to the acquisition question. We think that consolidation will accelerate in the animal health market. There are a number of factors that are driving it, whether it be uncertainty in the economic environment, or whether it be increased regulatory compliance in our market, which we think is a good driver of consolidation. Manufacturers wanting to narrow the number of distributors that they want to work with. We think all those things are going to drive consolidation. And it’s really interesting – you asked about valuation, and one thing that may slow down consolidation for a period of time is – I think buyers like ourselves – probably, valuations are coming down from our perspective, and I’m not sure that they are coming down from the sellers’ perspective yet. And so that may slow down consolidation a bit for a period of time. But, I still think there is going to be more consolidation in our market in the next couple of years than there’s been in the last couple of years, Lisa.

Lisa Gill – JP Morgan

Great. Thanks for the comments.

Jim Cleary

Sure.

Operator

(Operator instructions) We’ll go next – it looks like we have a follow up from Mark Arnold, Piper Jaffray.

Mark Arnold – Piper Jaffray

Just one follow-up question. Fuel prices have dropped off here dramatically in the last few months. Have you guys seen that carry over at all to your freight costs, and how have you kind of – should we expect to see some improvement going into 2009?

Jim Cleary

Given our efficient distribution model, we were not terribly impacted by freight costs on the way up. There was some, kind of minor negative impact to us, and on the same way, it isn’t going to be a huge benefit on the way down. We think that there will be some minor positive impact for us. Given our distribution network and the freight strategies that we use, we’ve been very efficient from a freight standpoint. So on the way down I do think we’ll see some minor benefit, but it’s not going to be a huge driver of the bottom line.

Mark Arnold – Piper Jaffray

Great. Thank you.

Jim Cleary

Sure.

Operator

And we’ll return to John Kreger with William Blair.

John Kreger – William Blair

Thank you. Mary Pat, I know you don’t like to give quarterly guidance, but as you look at your fiscal ‘09, should we expect a pretty typical quarterly distribution, or is there anything unusual that you’re seeing this year compared to prior years?

Mary Pat Thompson

Yes. What I would say is I think Jim talked to you all a little earlier, last year there was a very significant price increase announced effective January 1. And of course that really drove the revenues to be up 26% in the December quarter. And of course that pulls through some from the March quarter. And so, I think that there will probably be a little bit more even spreading this year versus last year because we’re not sure that the livestock producers – and those are typically the ones that participate in the progressive buy-ins. We’re not sure that they’re going to make the same aggressive buys this December, but instead perhaps wait and buy as they need it throughout the year. So there might be a more equalizing of quarters between December and March this year.

John Kreger – William Blair

Okay. Thank you. And then, one last question, Jim. Given these challenging times, are you seeing any new trends with your suppliers, with the manufacturers, about using the channel more or less, versus going direct?

Jim Cleary

No. We really haven’t at this point in time. There has been a long-term trend towards distribution because we’re very efficient at what we do, John. But we haven’t seen any acceleration or deceleration in that trend, and as I’ve said, we are just getting into contract negotiations now with manufacturers for next year.

John Kreger – William Blair

Great. Thanks.

Jim Cleary

Thank you, John.

Operator

And there appear to be no further questions at this time. I’d like to turn things back over to management for any additional or closing comments.

Jim Cleary

Yes. Once again, we were really pleased with our results for the September quarter and the fiscal year. Thank you very much, everyone, for participating on the call, and have a great day. Goodbye.

Operator

Again, that does conclude today’s conference call. Again, we’d like to thank you for your participation, and you may disconnect at this time.

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