Zep Management Discusses Q1 2013 Results - Earnings Call Transcript

| About: Zep Inc. (ZEP)


Q1 2013 Earnings Call

January 07, 2013 8:30 am ET


Don De Laria - Vice President of Investor Relations & Communications

John K. Morgan - Chairman, Chief Executive Officer and President

Mark R. Bachmann - Chief Financial Officer, Principal Accounting Officer and Executive Vice President


Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Peter J. Cozzone - KeyBanc Capital Markets Inc., Research Division

Matthew Schon McCall - BB&T Capital Markets, Research Division


Good day, ladies and gentlemen, and welcome to the Zep Inc. First Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host, Don De Laria. Please go ahead.

Don De Laria

Good morning, and thank you for joining Zep Inc. today for our first quarter fiscal 2013 conference call. Before I begin today's call, I'd like to remind participants that our earnings call format includes an online presentation to augment our comments. You can access this presentation, as well as this quarter's earnings press release online at www.zepinc.com in our Investor section under Webcast & Presentations. Included within this quarter's earnings press release is a reconciliation of any non-GAAP measures that may have been referenced throughout this presentation to their nearest GAAP measure.

Here with us today are John Morgan, Chairman, President and Chief Executive Officer; Mark Bachmann, Executive Vice President and Chief Financial Officer; and other selected Zep officers. Following comments by John and Mark, we'll open the call to questions.

I'd like to remind everyone [ph] that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. All statements other than statements -- or all statements other than statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company's expectations are disclosed in the risk factors contained in the company's annual report on Form 10-K dated November 8, 2012. All forward-looking statements are expressly qualified in their entirety by such factors.

I'll now turn the call over to Mr. John Morgan.

John K. Morgan

Thank you, Don, and welcome, everyone, to our first quarter earnings call. I'll start by discussing the highlights of the quarter, including updates on key initiatives, and then Mark will follow with a review of our financial results. And as always, we'll conclude the call with questions and answers.

Let me say that I'm pleased with our financial performance during the quarter, having delivered earnings per share of $0.16 even after giving effect to the $0.04 per share of the integration and acquisition expenses. It was an exciting first quarter as we have now closed the very strategic acquisition of Ecolab's Vehicle Care business and have begun the process of integrating it with our own existing Vehicle Care business to create a new subsidiary called Zep Vehicle Care.

Over the past year, we have also invested significant capital and resources to design and implement our new ERP system to better manage our business and serve our end customers. I'm pleased to announce that in early December, we went live with a new SAP platform and would consider the launch to be very successful.

And now I'd like to discuss a few financial highlights in more detail. Revenue in the first quarter was up 2.9% to $158 million and resulted in reported earnings per share of $0.16. The year included approximately $0.04 of integration and acquisition-related expenses not incurred last year.

EBITDA for the first quarter was $10.4 million or 6.6% of sales. Our EBITDA margin represented a nice improvement compared to last year when considering the current quarter was impacted by integration and acquisition-related expenses totaling $1.2 million or approximately 80 basis points.

I think it's also important to note that our $4.7 million of free cash flow represents a $6.8 million improvement compared to last year. During the quarter, about 20% of our growth was organic as sales continued to benefit from the impact of previous acquisitions and from pricing. These gains were somewhat offset by declines in volume and the impact of foreign exchange rates.

We continue to make efforts to stabilize our North American Sales & Service channel and are pleased to report that it delivered sales that were essentially flat with the comparable quarter last year. This channel benefited from gains in food, vehicle wash and industrial end markets offset by challenges in the auto servicing, government and institutional end markets.

In our distribution channel, we achieved mid-single-digit gains in the industrial/MRO area, which was more than offset by challenges in Jan/San end markets as distributors tightened inventories, all of which resulted in a decline of 3.3% in sales through distributors.

Our Retail channel grew by an impressive 19% as a result of the continued growth with automotive retail customers and the expanded distribution of our products at over 7,000 retail outlets. In particular, I would like to congratulate our Zep commercial team on introducing the CleanStone Plus line of products, created specifically to clean and care for natural stone and tile. It's a neutral pH, low VOC product line and it provides professional-level performance to those who want to clean and protect services of all kinds in home and workplace.

We discussed this briefly last quarter, but I want to reiterate that Zep continues to be the only major national manufacturer serving key strategic verticals utilizing a customer-centric, multichannel strategy that includes sales through a combination of Sales & Service, distribution and retail channels.

Our Sales & Service channel lends significant support to our business while we continue to make progress on our long-term diversification strategy to grow the distribution and retail channels at an accelerated rate. As we've said in the past, 21% of the market prefers to be served by the technical expertise of our Sales & Service organization.

Sales through distributors is an $8.4 billion opportunity, representing 44% of the U.S. market, but only 21% of our revenues. Retail sales is a $6.8 billion opportunity, representing 35% of the U.S. market, but only 18% of our sales. It's the solid foundation of our Sales & Service channel, along with the long runway for growth in distribution and the retail markets that energizes us to drive -- and drives us to achieve in the future. With each new day, our disciplined, multichannel and brand approach, combined with strategic acquisitions in key vertical markets makes us a stronger, more vibrant company.

While we've previously discussed our recent acquisition and the formation of Zep Vehicle Care, I want to highlight just a few key elements. First, I would like to welcome Steve Nichols and his very capable management team to the Zep family. The team will maintain its headquarters in Minnesota and, over the next 6 to 12 months, will coordinate with key associates of Zep to transition the business under the Zep Vehicle Care umbrella. During that process, we will combine our respective Vehicle Care operations, including our truck and fleet wash organization.

Second, I think it's important to reiterate that Zep Vehicle Care will utilize its nationwide footprint to sell the market-leading family of brands in the North American Vehicle Care market, including Zep, Blue Coral, Rain-X, Armor All, Black Magic and Niagara National.

Third, I want to emphasize that the formation of Zep Vehicle Care represents a key strategic investment with a dedicated focus on the vehicle care market. On a pro forma basis, Zep Vehicle Care will represent approximately 13% or $90 million of revenue and approximately 24% of Zep's EBITDA.

We're very excited about the cash flow characteristics of the vehicle care market and expect it to be modestly accretive to results during the balance of this fiscal year and $0.08 to $.10 accretive in fiscal 2014.

With the completion of this investment, all of the things our teams have worked on over the past 2 to 3 years bring the transportation and industrial/MRO business to a level that now exceeds 60% of our overall business. Driving revenue in this direction is absolutely key in that it provides significantly better competitive positioning for Zep in the future.

Before concluding, I want to recognize Joe Seladi's Zep automotive team and Jeff Fleck's supply chain team, for receiving the 2012 Gold Toyota Quality Alliance Award and the Subaru Gold Supplier Excellence Award. And I want to thank each of these important clients for supporting and recognizing our accomplishments over the past several years.

I want to conclude by emphasizing how encouraged I am by our progress against strategic initiatives already in fiscal 2013. And over the near term, we will continue to focus on the successful integration and the launch of Zep Vehicle Care. We will optimize our operations with new data and intelligence from our SAP implementation to deliver unparalleled customer support and we will focus on paying down debt to deliver -- to delever, pardon me, the balance sheet to prepare for future opportunities.

And with that, Mark, let me turn the call over to you to review financial details.

Mark R. Bachmann

Thank you, John, and good morning, everyone. Revenues in the first quarter were $158 million, up $4.5 million or 2.9% compared to last year's results. Acquired revenue added $3.5 million or 2.3% to net sales in the quarter, while favorable pricing added $2.1 million or 1.4% to net sales. Volume decreased $800,000 and foreign exchange did not materially impact our results this quarter.

Turning to gross profit, first quarter gross profit was $75 million, $2 million higher than the comparable quarter of fiscal 2012. Our gross profit margin declined approximately 10 basis points to 47.4% due to a 100-point favorable relationship between pricing and raw material costs, which was more than offset by 110 basis point increase in manufacturing costs. Approximately 1/2 of the increase in manufacturing costs was due to lower absorption resulting from differences in inventory levels between the current quarter and the year-ago quarter and the other 1/2 was due to increases in employee-related expenses.

This past quarter, we experienced a period of relative stability in raw material costs, which allowed us to regain some of the gross margin loss in prior quarters when feedstock were increasing rapidly.

On a sequential basis, gross profit, as a percentage of sales, increased approximately 190 basis points, with 50 basis points coming from a favorable business mix, 80 basis points from favorable price-cost relationship and 60 basis points from lower manufacturing costs.

We are pleased with our overall gross margin in the current quarter. It was slightly higher than we might have expected as a greater mix of business came from our Sales & Service channel.

With respect to the next several quarters, I want to remind investors of 3 key items: Our second quarter is typically our lowest gross margin quarter of the year. Sequentially, Q2 is historically 200 basis points lower than our first quarter.

Second and more generally, I'd like to continue to remind you that our gross margin rate can vary quarter-to-quarter based on the impact of raw material costs, labor and overhead absorption and our business mix. I am pleased to report that we are presently rolling out our new store sets with a major retailer, which will create a mix effect in Q2, further lowering gross margins.

Third, as John discussed earlier, we went live with SAP in early December. We continue to expect a number of long-term benefits from SAP. As we are able to reduce inventory as a result of better information systems, this may result in lower labor and overhead absorption in a given quarter or quarters, temporarily reducing gross margin, but improving cash flow.

Now when you include the benefit of the Vehicle Care business into our results for the balance of the year, we would expect our full year gross margin to be in the range of 46% to 48%, which is a full 100 basis point improvement of this range.

During our first quarter, we generated $10.4 million of EBITDA and reported an EBITDA margin of 6.6% or 20 basis points below last year. Our EBITDA margin in the current quarter was adversely impacted by $1.2 million of integration and acquisition costs associated with the 2 previous acquisitions in the U.K. and the recent acquisition of the Vehicle Care business, which, together, accounted for an 80 basis point decline.

Our effective tax rate for the first quarter was 37% compared to 35.6% in the first quarter of 2012, and within the range of our expected tax rate for the year of 37 -- 36.5% to 37.5%.

Net income for the first quarter decreased approximately 2.7% to $3.5 million from $3.6 million. While on a reported basis, first quarter EPS of $0.16 was equal to last year, this includes $0.04 of integration and acquisition-related expenses, which did not occur last year.

Free cash flow, defined as cash flow from operations less capital expenditures, was $4.7 million for the first quarter of 2013 compared with cash usage of $2.1 million in the first quarter of 2012. The increase in free cash flow was driven primarily by changes in operating and working capital.

Capital expenditures for the first quarter were $3.8 million, which was approximately equal to last year's comparable quarter and reflects the continued investment in the ERP system. We expect total capital spending in fiscal 2013 to range between $10 million and $12 million.

Our net debt position at the end of the quarter was just under $250 million, an increase of approximately $113 million due to the borrowing to fund the acquisition of Ecolab's Vehicle Care business. As a result, we would expect fiscal 2013 interest expense to approximate $9 million to $10 million.

As we discussed at the time we announced the acquisition, our debt covenants were temporarily amended to permit us to consummate the financing.

Our debt-to-EBITDA covenant was increased to 4.25x for the first 4 quarters before dropping to 4x in the fifth and sixth quarters following the acquisition and then reverting back to 3.75x thereafter. Our fixed charge ratio was lowered to 1.15x for the first 4 quarters following the acquisition rising to 1.2x in quarters 5 and 6 before returning to 1.25x. Our leverage ratio, including the impact of the acquisition as of the end of the first quarter, was 3.77x and the fixed charge ratio was 1.77x, well within the amended debt covenants. We continue to believe that we will be able to operate this business within the current covenants and delever by approximately a half a term by the end of the first fiscal quarter of 2014.

As we look toward the future, I want to be clear that 2 investments, the recent SAP go live and the completion of the Vehicle Care acquisition, are expected to reduce earnings by approximately $3 million to $3.5 million in the second quarter and not likely to affect subsequent quarters.

Let me provide a little more color behind this estimate. While SAP is going well, it is not uncommon with a major systems implementation to experience a temporary decline in productivity that results in additional operating costs such as overtime or reduced sales volume. We would not expect this to last beyond our second quarter. Further, we would expect the additional depreciation expense of $2 million per year to be offset by operating cost savings beginning in fiscal 2014.

Regarding the Vehicle Care acquisition, we will incur additional transaction costs during our second quarter. Additionally, we will begin incurring integration costs over the next 12 months. Further, our Vehicle Care accretion estimates were done internally, but we are obtaining an independent valuation of the Vehicle Care assets and we will file pro forma financial results by mid-February.

Another thing I want to emphasize is that all of these acquisition costs were anticipated when we projected modest earnings accretion for fiscal '13 and $0.08 to $0.10 EPS accretion for fiscal '14. Once the valuation process is complete, we will update our estimates with respect to the amount of amortization expense to expect going forward. That information will be available in the filing and we expect to summarize this impact to our accretion projections during our next quarterly earnings call in April.

In closing, we are pleased with the strong results we reported during the first quarter. We are investing in managing our business better and investing in key market segments. We are confident that our customer-centric, multichannel strategy provides a unique foundation from which to grow our business and achieve our long-term financial objectives.

Now, we'd like to open up the call to questions. Operator?

Question-and-Answer Session


[Operator Instructions] Our first question comes from Liam Burke of Janney Capital Markets.

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

John, it looked like distribution was off in the first quarter. Was there any seasonality in there? I mean, I know year-over-year the seasonality should reflect that, but you had weakness in one vertical was -- do you expect that to continue throughout the rest of the year?

John K. Morgan

We really don't. It was predominantly the janitorial, the Jan/San business and the feedback that we get from distributors has more to do with the timing of orders with us relative to their inventory levels. So we don't expect that really to continue in any material way.

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

So it's safe to presume that the trends that you saw in the past year on the distribution channel be consistent for the rest of the year?

John K. Morgan

It always scares me to say, "safe" anything. But yes, Liam, we -- but yes, we expect to continue to see growth in our distribution channels and in our retail channels.

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Okay. And then in terms of the retail side of the business, you saw nice growth. Without being too specific, do you see additional retail partners coming on line?

John K. Morgan

We do. We -- and thank you for not asking me to be too specific because some of those things that we're looking at that we, of course, would be asked by those retailers not to disclose. But we just are really optimistic by what our teams accomplishing and in the retail space, not only with new retailers, but also with introducing additional products to our existing retail partners. So we're seeing a lot of progress there. We like what we see there.


Our next question comes from Peter Cozzone of KeyBanc Capital Markets.

Peter J. Cozzone - KeyBanc Capital Markets Inc., Research Division

A macro question to start here, but seeing your exposure to small businesses in North America, can you talk a little bit about the sentiment of the small business owners as we enter 2013? Is it more cautious than it was heading into 2012? And I know it's early, but have you seen any early signs of sentiment improvement post-election or fiscal cliff?

John K. Morgan

Let me just give you my perspective and anybody in the room can add theirs. From the feedback we get from across the thousands of small businesses, and, frankly, moreover, from the reading I do of the reports of people who are stronger prognosticators of that type of thing than certainly we are, we don't see a whole lot of change there. We are encouraged by the modest decline in the unemployment rate. I think we've said for now several years that, in particular, our Sales & Service business and, frankly, the demand through -- or at the end market for a number of our distributors, of course, is impacted by unemployment rate, or, more correctly, the employment rate since most of our products are used by people on the job. And so to the extent that, that macro environment continues to improve, that will be helpful. But I still think that small business, in particular, remains what I'll call cautious and we don't see a rapid turnaround of things like capital expenditures and that type of thing. So we are of the view and we are operating the business in a manner that suggests we would expect to continue to see really just modest GDP growth in the future periods and not this hockey stick turnaround that you've seen after some previous recessions.

Peter J. Cozzone - KeyBanc Capital Markets Inc., Research Division

Great. And I know it's a little early, but any initial puts or takes on the SAP implementation there relative to your expectations? And could you maybe just remind us the areas where you expect to benefit the most as these processes are rolled out?

John K. Morgan

This is the fourth one of these I've been through in my career. And as you know, it takes a real toll on the people of the organization. Our people have worked extremely hard for really 1.5 years getting ready for the go live. And then once you go live, that's when the work really starts; when you find not only the bugs that have to be fixed, but also the natural productivity declines that occur as you learn to use new tools. It's like getting a new cell phone or new car or new TV. It takes a while to learn to use it. And -- but I'm really pleased when I contrast it with others I've been through, I'm pleased with what I've seen. I'm pleased that we turned it on, and the next day, we were taking orders, processing orders, invoicing customers and so forth. We'll, of course, be closing our first month on SAP, the month of December, and I'm just really optimistic by what I see there. About 1/2 of the benefits that we would expect would come in the form of improvements to the balance sheet that occur when we're able to run our supply chain more tightly and about 1/2 come on the expense side as we increase productivity across the operations in really a number of areas.

Peter J. Cozzone - KeyBanc Capital Markets Inc., Research Division

Great. And then lastly, can you update us on the size of integration efforts for the recent U.K. acquisitions and maybe discuss the organic sales of those businesses in the quarter or at least the trend? And then you might not have quantified the earnings improvement during the -- or I'm sorry, the earnings contribution during the quarter, but could you remind us maybe of the margin profile of these acquisitions relative to the overall company average?

John K. Morgan

Let me -- you're asking, Peter, specifically about the U.K.?

Peter J. Cozzone - KeyBanc Capital Markets Inc., Research Division

Yes, about the U.K. acquisitions.

John K. Morgan

Yes, let me characterize the integration and then ask Mark to comment on the financials because, frankly, I don't recall what we have and have not disclosed relative to that specifically. We -- the 2 acquisitions we made over the previous year, each had their own factory operations and each of them are relatively near to Manchester, England. The integration of those businesses, which we had actually -- or planned, and to be more specific, the combination of those factories and the closure of 1 moving into a single factory as opposed to 2 factories, we had originally, in our internal planning, anticipated for some time in the spring of 2013. Our teams over there were able to accelerate that process, which is why we announced and took that charge in Q1. And that was about $0.02 a share of the $0.04 that we took in Q1. We expect the benefits from that integration really to be about a 6-month payback. And so I was really pleased with what our team was able to do to get those operations integrated. Mark, anything you'd like to add to that?

Mark R. Bachmann

Well, we didn't disclose the financial profile of those 2 given their relative size, but I would say that the margin structure is comparable to the rest of our business.


[Operator Instructions] Our next question comes from Matt McCall of BB&T Capital Markets.

Matthew Schon McCall - BB&T Capital Markets, Research Division

So, Mark, the gross margin outlook was helpful. My question is on the SG&A line and maybe asking for some help in looking out and the direction of that line. But specifically, I'm curious about the impact of maybe increased advertising or brand-building spending as you're focused more and more on retail and how that's going to impact the SG&A line going forward.

John K. Morgan

Matt, let me just comment on what our retail and distribution folks are intent on doing from a brand-building standpoint and then turn it over to Mark to get into the SG&A numbers. But we don't think that our products and our brands are the types of products where it make sense for us to invest in things like national advertising associated with television, radio, that type of thing. We do, however, see a lot of benefits from increased use of digital forms of advertising, the Internet and social media. Just one example, we have a product line, which last year we -- our teams were able to grow about 168% and it was all driven by the use of social media tools. So we, frankly, are developing capabilities and learning more and more about where we can pull those levers. And certainly, we will support our retailers in their advertising programs that include our products and our brands. But on a direct basis from us, we are much more inclined to focus on the professional user and to focus our brand building and product promotions really on that narrow group, not the consumer, but the professional user where we can be much, much more focused through digital forms of advertising at a much, much lower cost. So I don't expect that, that in and of itself would have any really material impact on our SG&A cost structure. Mark, would you highlight the SG&A overall?

Mark R. Bachmann

Yes. So as John said, I don't see that being a major driver and we'll continue to drive continued improvement in our spend productivity, which is a major initiative of ours.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. Look, from a seasonal -- no commentary around the seasonality of that line, I mean there has been a little bit of volatility on it as the mix has shifted; any outlook there?

Mark R. Bachmann

Well and you know, Matt, we don't provide annual, let alone, quarterly guidance. We are committed to our long-term financial objectives of improving EBITDA margins by an annualized rate of 50 basis points and we're working all aspects of the P&L to achieve that.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Got it. All right. John, so during the -- I guess the Ecolab due diligence process and now in the initial period of ownership, can you talk about what you've learned? I specifically am curious about what you've learned around the margin delta there. I believe the margins were a little bit better. And anything that you've learned that you maybe can apply to not only the vehicle side of your business, but to other parts of the business?

John K. Morgan

That business, as you know, was extremely well run by Ecolab with an outstanding team running that business. I think that what we see in that business, especially when we contrast it with our own previous car portion of the Vehicle Care business, is that scale really matters in this space. Brands really matter in this space. And to be able to now take our product line and their product line and our brands and their brands and combine those and take advantage of the benefits of scale, in particular, the benefits that are offered when you can deepen and broaden your service organization across the country and have a service capability that's more economically viable, than certainly you can with a much, much smaller business, I think you really see the benefits show up in the EBITDA of the business. And certainly, if we could invest in other key verticals, I think, as you know, because we've discussed in the past, we continue to focus on the verticalization, for example, of our Sales & Service business. As we continue to focus on key verticals where we can continue to build scale and get the benefits of a nationwide footprint, where our primary competitors are literally hundreds and hundreds of smaller chemical blenders, we see that benefiting the margins on the business. And so, we'll continue to look for those opportunities to build platform-type businesses, where scale and focus really makes a difference on the margins of the business and that's really what we've seen there.

Matthew Schon McCall - BB&T Capital Markets, Research Division

And maybe for you, Mark, the $0.08 to $0.10 of accretion in the out year, does that assume anything beyond just synergies? Does that assume that the existing or legacy vehicle business benefits from some of the scale John just mentioned?

Mark R. Bachmann

Not significantly. When we look at the combined business, it's how we can combine those 2 businesses together and achieve some cost synergies. We do not assume any revenue synergies there.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. The -- you talked about the 100 basis points of -- or 110 basis points of manufacturing costs, 1/2 from absorption and 1/2 from employee-related costs. So the absorption, it sounds like that -- and you did give some good insight into the margins. So I'm just curious about that employee-related expense pressure, maybe some more specifics there and direction of what should we expect?

Mark R. Bachmann

Well, I think it's -- you saw a year-over-year impact. But sequentially, you saw actually some improvement there and so I would focus more sequentially on what's happening in manufacturing costs than the year-over-year.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Got it, okay. And lastly, I just missed a couple of things, the pricing impact and then I missed the -- what you said about the direct business. I apologize, John, but direct, just up or down year-over-year and then what was the pricing impact in the quarter?

John K. Morgan

The Sales & Service business was essentially flat compared to the previous year, which is, as you know, it's the first time that's happened in the last 4 or 5 years. And I should comment, I think that that really is 2 things. We really have a good team of people there that is now stable in terms of the organizational design. The team has now been in place for over a year -- the same team has now been in place for over a year after all the changes I put through them through and those changes were very difficult on them. And I do think that as the unemployment rate begins to improve somewhat, that that reverses some of the headwinds or at least reduces some of the headwinds and so I think that's helped that business a good deal. Pricing, Mark?

Mark R. Bachmann

Yes, pricing added $2.1 million to our net sales for the quarter, 1.4%.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. Back to the direct business, last question. So flat -- is the trend -- is that -- do you expect growth there this year? Can you get -- or to that point where you got some stability and employment's moving the right direction to the point where you can get some growth there this year?

John K. Morgan

In the current period, I don't really expect what I would call material growth in that business. I think the rate of decline has moved to sort of an asymptotic level where you've seen that rate of decline continue to reduce period after period after period over the last 3 or 4 years and has now come to a point at being flat in our Q1. And -- but for the sort of anomaly that I expect in Q2, as a result of disruption of the go live for SAP, I would expect that business to be essentially flat in the immediate future.


Mr. Morgan, I'm not showing any further questions at this time. Please proceed with any further closing remarks.

John K. Morgan

Great. Thank you. I want to thank everybody for joining us on the call today, and we look forward to reporting to you on our progress again in the early April time frame. Thank you.


Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference, and you may now disconnect. Everyone, have a wonderful day.

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