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Knoll, Inc. (NYSE:KNL)

Q4 2008 Earnings Call

February 5, 2009 10:00 am ET

Executives

Andrew Cogan – Chief Executive Officer

Barry McCabe – Executive Vice President and Chief Financial Officer

Analysts

Budd Bugatch – Raymond James & Associates

Matt McCall – BB&T Capital Markets

Todd Schwartzman – Sidoti & Company

Mark Rupe – Longbow Research

Chris Agnew – Goldman Sachs

Operator

Good morning, everyone, and welcome to the Knoll, Inc. fourth quarter 2008 conference call. This call is being recorded. This call is also being webcast at knoll.com. Presentation slides accompany the webcast. In addition, this call may offer statements that are forwardlooking. These forwardlooking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the company's control. Actual results can differ materially from the forwardlooking statements as a result of many factors, including the factors of risks identified and described in Knoll's annual report on Form 10K and its other filings with the Securities and Exchange Commission.

The call today will also include references to the nonGAAP financial measures. Reconciliation of these measures to the most comparable GAAP financial measures are included in the company's earnings release dated February 5, 2009, and presentation slides that company the webcast. Let me turn it over to Andrew Cogan, the CEO of Knoll. You may begin, sir.

Andrew Cogan

Thank you, good morning everybody. Welcome to our full year 2008 earnings call. I am extremely proud of what our team accomplished and the results that we delivered in 2008. Overall, in spite of a challenging macro economic environment on both the top line and in terms of input costs, we grew sales 6% versus a decline of 2% for BIFMA, 1:50 improved our gross margins from 34.6% to 35.3%, protected our industry leading operating margins above 13% and delivered $150 million of adjusted operating profits, up $7 million from 2007.

Adjusted EPS grew by 28%. I do not think that anyone expected us to perform so well in 2008. Clearly, what we've achieved since the last downturn began in 2001 puts Knoll in a much stronger position to face whatever the next couple of years may bring. Our sources of revenue are significantly more diversified and less dependent on North America office system demand trends in particular -- something that we could not have said 7 years ago.

In addition, our higher margin, more diverse specialty businesses compose a much greater part of our revenue and profitability and international sales outside of North America represent the largest portion of our revenue ever. In fact, this quarter we booked one of the single largest international orders in the history of our company. This means that going forward we would expect our sales to decline less, not more, than the overall industry.

Importantly, as you can see, our balance sheet is strong, with our outstanding debt near the lowest it's been in the past decade and with leverage also at near record low levels. Our liquidity is strong at close to $175 million and our credit facility runs into 2013.

From a macro standpoint, it's hard not to be all doom and gloom, but as I look across Knoll, I also see great reason for optimism. First, there are projects out there to win and we are well positioned on some of the most important ones. Second, I believe that our pipeline of new products is the richest it has ever been from major seating initiatives to our new storage collection and across the specialty businesses.

Not only will we benefit in 2009 from these efforts, but in 2010 to 2011, we also have concrete designs that will build on our incipient strength in seating and anticipate new work styles in the systems front. Historically, seating has outperformed other categories in a downturn, and we could not be better positioned to grow in this increasingly important category.

Additionally, we should benefit from a couple of macro economic trends in 2009 which will help ameliorate the pain on the top line. First and foremost has been the turnaround in the inflation picture. Over the past couple of years, inflation has cost us $15 million to $20 million annually. In 2009, at its worst, it will be a quarter that bad; and it's our belief that it may even be help if steel, metals, and transportation costs continue their rapid decline.

Second, foreign exchange has cost us dearly over the past couple of years. Yet, with the Canadian dollar back around $0.80 to the U.S. dollar, we have a tailwind of over $10 million helping improve our margins. The two wild cards remain volume and price and will have to stay flexible as we react to the conditions that present themselves.

In this regard, we've been extremely disciplined about the areas that we invest in in 2009, focusing on those now product initiatives that have the biggest bang for the buck, along with selective investments in sales, marketing, and operations. Anything nonessential has been put off. We took actions early in December to reset costs across Knoll and enter 2009 with head count down about 9% from where we are about a year ago.

We also made a decision at that time to freeze all nonhourly associate salaries. In 2009, we continue to take actions to align head count and operating expenses with demand. We know that we're an inherently cyclical business and, as a result, have developed a proven business model that allows us to rapidly adjust our costs to the particular economic environment that we are in with a minimum of restructuring.

In fact, if you look back at our operating expense spend in 2001 on comparable sales, the number is almost identical to what was at the end of 2008. Yet at the trough of the last cycle in 2003, we had reduced that spend almost $100 million or just over 40%. We are perfectly capable and willing to do to same thing again if the need arises.

Lastly, before I turn the call over to Barry, I want to let you know that we have decided to no longer provide quarterly guidance. We believe that our track record of managing Knoll to maximize shareholder value throughout the business cycle has been strong. And we would rather focus attention on the strategies that have resulted over a near decadelong period in a fundamentally stronger and more diversified enterprise that consistently generates industryleading levels of profitability than in a particular quarter's results. Now let me turn the call over to Barry.

Barry McCabe

As Andrew stated in his opening comments, we were very pleased with our results when you consider not only the worldwide economic environment, but also the significant fluctuations in commodity prices and international currencies to the dollar throughout the year. Every quarter had different challenges, and the fourth was no exception.

As we review our results, sales for the quarter were $276.3 million, a decrease of 2% over the prior year period, reflecting a continuing decline in the North American office systems category. Again, we are pleased that our diversification strategy, growing complementary, specialties, and international, allowed us to offset most of the decline facing the office systems category in North America and slowing growth elsewhere in the world.

Backlog for the fourth quarter was $201.7 million, a 5.8% increase over prior year. Approximately 25% of this backlog will ship in the second quarter, which is high than normal. Despite the higher backlog, sales activity as represented by client visits, mockups, and the quantity of orders is declining.

Gross margin for the quarter was 36%, a 90basispoint increase from a year ago. The increase was primarily due to favorable sales mix, price realization, continuous improvement programs in our factories, global sourcing, and favorable foreign exchange more than offsetting the higher inflation.

Operating expenses were $60.9 million or 22% of sales, an increase of 90 basis points above last year. Actual spending increased $1.4 million, which was primarily due to an increase in bad debt expense to cover a dealer issue. Without the bad debt expense, spending would have been less than a year ago.

Restructuring charges were $1.2 million as we continue to adjust our cost structure in light of the deteriorating economic environment. We estimate $3 million in annual savings associated with the restructuring.

Operating income as a percent of sales was 13.5% for the quarter, a decrease of 50 basis points from last year. Excluding the restructuring, operating income as a percent of sales would have been 13.9% essentially flat with last year.

Interest expense was $3.6 million, a decrease of $2.4 million from a year ago due to both lower rates and debt. Other income was $1.8 million, which compares to other expense of $.7 million for the fourth quarter of 2007, due to foreign exchange gains and losses on currency.

Our tax rate for the quarter was 36.2%, compared with 36.8% rate a year ago. The decrease in the rate is primarily due to the mix of business in the countries in which we operate.

All this resulted in net income of $22.7 million for 8.2% of sales and an adjusted EPS of $0.52, an increase of 23.8% when compared to net income of $20.7 million or 7.3% of sales and an EPS of $0.42 a year ago. Year to date net cash provided by operations was $112.2 million, of which $103.8 million was provided from net income plus noncash amortizations plus $8.4 million of favorable changes primarily in working capital and deferred taxes and current liabilities. Capital expenditures were $18.5 million for the 12 months.

Cash used in financing activities was $92.4 million which included net debt repayments of $31.1 million, $40.9 million of common stock purchases offset by $2 million of common stock proceeds and related tax benefit, and $22.4 million of dividend payments.

We look at liquidity; we have $14.9 million in cash at quarterend and another $159.3 million available under our revolver. We are in compliance with all our debt covenants and our leverage ratio is 1.92:1.

With our strong balance sheet and increased liquidity, we are well positioned to face the economic uncertainties of the next few years. We will continue to take the necessary actions to protect our profitability while investing in the new products that allow us to meet the needs of more clients around the world.

We anticipate incurring in the first half of 2009 restructuring charges of approximately $8 million associated with voluntary and involuntary layoffs, of which approximately $6 million will be in the first quarter. We will now take questions.

QuestionandAnswer Session

Operator

(Operator Instructions) your first question comes from the line of Budd Bugatch from Raymond James.

Budd Bugatch – Raymond James & Associates

Good morning, Barry, congratulations on the quarter and the year. In the past, you have told us that a penny of movement of the Canadian dollar is about a million dollars worth of operating profit on an annual basis. Does that relationship still hold? Did it hold in the quarter?

Barry McCabe

That's an approximate relationship, and it did hold in the quarter.

Budd Bugatch – Raymond James & Associates

Secondly, can you quantify for us maybe the pricing? I think you put in a price increase of about, if I remember right, 3% or 4% in February. We've got you getting about $2 million of favorable pricing, maybe 3/4 or 1%, is that a reasonable guess for the quarter?

Barry McCabe

Yes. I don't have the specifics in front of me, but we've said normally we realize, due to any price increase, anywhere from 25% to 33% of any increase. If you did a 5%, you might expect a 2%.

Budd Bugatch – Raymond James & Associates

Finally, contribution margin in the gross margin area, would a 55% contribution margin for gross margin be reasonable?

Barry McCabe

That seems a little high, especially as you move forward and think about absorption of fixed costs.

Budd Bugatch – Raymond James & Associates

I understand that. Are you talking about with inflation?

Barry McCabe

I think when you look at inflation and the question is inflation seems to be backing off. So we expect tailwinds as we look at some of our key commodities and other things. It's hard to say in this environment when you are looking at where your volume is going to be, the benefits you might pick up from inflation, the mix within your factories, to come up and say what would be a typical margin contribution on sales.

Budd Bugatch – Raymond James & Associates

In this quarter, inflation was still a headwind, right? Yearoveryear?

Barry McCabe

Yes, it was.

Budd Bugatch – Raymond James & Associates

Would you care to quantify a little bit of that? Other than fuel. Fuel went the right way, I think.

Barry McCabe

Things started to move at the end of the quarter. Steel was moving directionally favorable. Inflation turned out to be not quite as high as we thought it would be going into the quarter. It probably helped us couple million dollars.

Operator

Your next question comes from the line of Matt McCall from BB&T Capital Markets.

Matt McCall – BB&T Capital Markets

Can you talk about the order patterns in the quarter, how they proceeded through the quarter and specifically across the different markets you talk about? North America is separate from specialty, separate from international. Can you talk about how the order patterns progressed through the quarter?

Andrew Cogan

Again, I think looking at any particular month or something is not particularly meaningful. I think this [inaudible] you are seeing is pretty accurate in terms of the directionality of we're seeing take place on the orders line. We're well diversified. I think international is declining probably worse than what we're seeing right now in the U.S. because obviously that's compounded by some of the foreign exchange changes. Our specialty businesses are doing a little better than some of the other areas. I think it's pretty broadbased in terms of the decline across geographies and segments and markets.

Matt McCall – BB&T Capital Markets

When you talk about the decline, Andrew, talk about order patterns for the quarter, I don't know if you quantified it if they were down, I got on a little late. What were orders in the quarter?

Andrew Cogan

We quantify it and again backlog, as Barry mentioned in his comments, backlog was up. We didn't have a bad, orders were not bad for the fourth quarter. I think in general, though, when you look at the BIFMA data in the range of 20% order decline, and you know I think that's indicative of where demand is and where it's heading. As we think about the year, we're factoring BIFMA shipping number between $8 billion and $9 billion into our thinking. That would suggest there's probably further deterioration in demand in the months ahead. That's kind of what we're expecting.

I would personally hope that we continue to outperform the industry. If you go back to 2004 and you look at our growth since 2004, we've grown our top line almost 60% versus 25% growth for the industry. We've had significant share gain over the last 3 or 4 years. Again, I think we're going to do better on the downside and decline less given the diversification of revenues, variety of end markets we're in, and the pipeline of new products we have. That's basically our thinking right now.

Matt McCall – BB&T Capital Markets

The outperformance versus the industry, is that inclusive of assumptions that the international would continue to be worse than the U.S. because of foreign exchange and then specialty may be a little better?

Andrew Cogan

I think that's right. You remember while international is the most as a percent of our revenue as it has ever been for us, it's still a lot less than it is of everybody else's. I don't think we will be hit as bad as others may be in that regard.

Matt McCall – BB&T Capital Markets

I think in the past you talked about kind of a targeted SG&A range, I think, in the 22% to 23% range. If you assume that type of decline, you talked about the flexibility of your model, is that still a good target range for 09?

Andrew Cogan

I think it will be tough to stay in that range. Clearly, our goal is to continue to generate double digit operating profit margins. I think in the last cycle our operating margin bottomed out around 10%. We need to see where gross margin heads and we need to keep them where volume heads, and then we're going to keep scaling and flexing operating expenses.

I think it's important for everyone to know that, in the last cycle, the exact same team that's running Knoll was leading Knoll through that cycle and; we took out $100 million of operating expenses. We reduced operating expenses by 40%. I feel like we know exactly how to scale our costs if need be and that we will do so if we need to. It won't happen overnight.

Barry McCabe

You will have spikes up and spikes down based on the timing of your actions and actually where your volume in any given quarter ends up.

Matt McCall – BB&T Capital Markets

Last, Barry, can you give us an ending share count for the quarter?

Barry McCabe

I was going to do that at the end of the call, but I will do it now. Ending share count was around 45,212,000 shares. For anybody else that's interested, we did purchase about 2,650,000 shares this year. The other thing that I'd like to mention for you doing your modeling is the tax rate we estimate will be somewhere between 37% and 38% for the year.

Matt McCall - BB&T Capital Markets

I'm sorry, I do have one more. Bad debt expectation, you mentioned the one, did you quantify what the bad debt was? The one item you broke out?

Barry McCabe

I didn't quantify it. I did say that it was due to our bad debt expense being up in the quarter or our operating expenses would have been lower than a year ago. That's something we're going to take a close look at throughout the year.

Operator

Your next question comes from the line of Todd Schwartzman – Sidoti & Company.

Todd Schwartzman - Sidoti & Company

Good morning. My first question is, Barry, I am not sure if you touched on this, but Q4 CapEx seems kind of high. What went into that? What did you spend on?

Barry McCabe

There was a lot of product development as Andrew touched on as our products come in, we hope to introduce a banner year in 2009. It just is from the timing of those expenditures and a lot of them came in in the fourth quarter.

Todd Schwartzman – Sidoti & Company

I would have thought the bulk of that would have been earlier in the year, but I guess not. If you could attribute your outperformance visavis BIFMA allocating the percentages, if you will, the various categories. Would you say it was 60% specialty, 30% international, 10% other? Can you just give us a sense as to what those factors are so we can maybe get a better sense as to what extent that's going to continue and for how long you will beat the pants off of BIFMA?

Andrew Cogan

Again, it's not in any one year. This is over a fouryear period. We had a conscious strategy of trying to diversify. Remember, when we went into the last downturn, we were heavily systems dependent, with 70% to 75% of our revenues were systems. That's a category that does tend to perform worse in a downturn.

We had a conscious strategy back in 2000, 2001 to strengthen our seating, our storage, our casegoods offerings. We have made significant progress in all those areas, but I can tell you our market share in those areas is still half of what it should be. So we have initiatives over the next couple of years which you will start to see this year, that I think significantly strengthens what we're doing in seating, what we're doing the storage, and we'll accelerate our growth in those categories.

We've strengthened our systems position. We have gained share in that category. We have strengthened it both at the upper end of the market and at the entry-level price point, and we continue to make major enhancements to the products we have in those categories. We have new platforms in development which we think in 2010, 2011 will position us well where we think the workplace is evolving to.

We have made a conscious effort to aggressively expand our specialty businesses. Today, our specialty businesses, our international businesses, got a third of our sales, and over 40% of our operating profits. If you went back to the beginning of the decade, those would have been 15% of our sales, 20% of sales, and 20% of our operating profits. We have dramatically expanded those businesses across the board.

Then international, we have basically doubled. There's not one place I can point out. It's just a broadbased strategy; and every one of those elements has worked, and we believe they will continue to work on a relative basis.

Todd Schwartzman - Sidoti & Company

For specialty, what additional color can you provide as to the components of that segment? Was anything down for the quarter, for example?

Andrew Cogan

We've never broken out the specialty components, and we won't start doing that now.

Todd Schwartzman - Sidoti & Company

Lastly, client visits, how are those trend something

Andrew Cogan

Everything is down. Every macro indicator you want to look at is down. That's, again, why we're factoring into our thinking about how we set the cost structure, how we set the operating expense spend, and a BIFMA number in the $8 billion to $9 billion range. We think that's a reasonable expectation for the industry this year and, again, our hope is to continue to do better. That's our thinking.

Operator

Your next question comes from the line of Mark Rupe from Longbow Research.

Mark Rupe – Longbow Research

Congratulations on the quarter. You talked about the product categories and what you're doing in seating and storage and casegoods. On the international side, you have obviously doubled that. What are you doing kind of in the near term going forward? Are you still expanding that business? Is that an opportunity to offset some of the declines?

Andrew Cogan

We continue to have an active international program. We've had some very large successes in some emerging parts of the world that really did help us in the fourth quarter, and I think as those orders flow through, it will help us again on a relative basis in the first half of the year. But all those international markets are challenged as well. They have the additional challenge of negative foreign exchange trends.

Foreign exchange from an operating profit standpoint is going to be quite helpful to us because, again, I think we're one of the few that will benefit from a strengthening U.S. dollar. In terms of taking revenue internationally, that is kind of an additional headwind that makes us less optimistic that international will have the kind of blowout year that it had last year.

Mark Rupe - Longbow Research

Just lastly. On the government business, can you remind me, is that a more stable business in a downturn like this or is that pretty much standard with the North American office?

Andrew Cogan

It's more stable. We are quite strong there.

Operator

Your next question comes from the line of Chris Agnew from Goldman Sachs.

Chris Agnew – Goldman Sachs

Good morning. Congratulations. First question on the pipeline of new products. Can you give us any indication on how quickly you believe you could ramp that up? Is that a second half 2009 story or is it really more looking into 2010?

Andrew Cogan

I think it's second half 2009. It will obviously help the back half of this year. Then there's additional things coming that will help 2010 and beyond.

Chris Agnew – Goldman Sachs

On the commodity costs, how quickly can you pass that through? Are you looking into 12month agreements or as in the way up where, for example, steel mills kept ripping up agreements. Can you keep pushing down and where you are paying them on the way.

Barry McCabe

Our strategy is keep pushing down. We do, I think, in this environment, it's hard to look much beyond a given quarter, the way things are moving.

Andrew Cogan

We are not locking in. We are staying fluid to receive the benefit of deterioration in commodity prices. There's a quarter lag as you work it through inventory.

Chris Agnew – Goldman Sachs

Either somewhere where I've been wrong, because it's difficult to think about the demand drivers. Think about for example the leather business within your specialty, I am thinking that obvious things like corporate jets and luxury cars. Maybe could you talk about where the demand drives are coming from or how your taking share. It's a bit of an opaque market.

Andrew Cogan

I think we have got our specialty businesses are well positioned in a diverse segment of businesses. Obviously we have aviation segments, there are hospitality segments, maybe those aren't so great right now. There are residential segments, parts of those businesses are okay. There's the corporate segment, that's challenged. Again, the specialty, there's health care that we're positioned in, education, we're seeing decent demand, and in government. The specialties kind of play, maybe not in government, but they play in all those other segments.

We have an exceptional sales force at Knoll. They are really good, and exceptional sales leadership across the businesses. They are really good at going where the money is and going where the activity is. As they see less opportunity in one area, they will move over and go after where other opportunity is. They're just very agile about it. They've got the products and we've got a portfolio of products that you can tailor and make work in all those different segments. I think that's how we kind of play it.

Chris Agnew – Goldman Sachs

You talked about that business, it generates 40% of your operating profit. Can you give us any sort of sense of fixed versus variable? Is that business much easier to scale up and down?

Andrew Cogan

I think the easier part is scaling up because it has a lot less fixed costs. You don't really need factories in those businesses. Most of the production is outsourced. We make a little bit of it ourselves. As a result, we're not dealing with some of the restructuring charges that obviously you deal with when you have a fixed manufacturing footprint. To that extent, it's a little bit easier to manage.

Barry McCabe

Probably a way to look at that is the contribution margin on a dollar sales doesn't really change in the specialty businesses because you don't have factories, you don't have depreciation, you don't have all the other factors that you do when you are more vertically integrated. So, the challenge there is how do you adjust SG&A if the volume starts to fall. It's not an issue on the contribution margin side.

Operator

You have a follow up question from the line of BL from Raymond James.

Budd Bugatch – Raymond James & Associates

Just a couple of follow-ups. I think, Barry, you said the structural savings from restructuring is like $3 million a year if you heard you right. Is that in this quarter as well? What do you think it will be going forward?

Barry McCabe

I made the statement that as a result of the fourth quarter restructuring, which we did of about $1.4 million, that the annual savings on that annual, which would mean throughout 2009 would be about $3 million.

Budd Bugatch – Raymond James & Associates

Do you have a feel that you can give us for what it was in and what the prior restructurings did in this quarter? In the quarter we just ended?

Barry McCabe

Not specifically by quarter, what we did is when we made the announcement, did our first restructuring at the early part of April before our first quarter conference call, that wasn't just people, there was some product line impairment and other stuff. We estimated that to be in the neighborhood of $10 million annually, which we did obviously see benefit in the second half of 2008 and we will see a little bit going forward into 2009.

Chris Agnew – Goldman Sachs

I want to make sure I understand the inflation, the commodity issue, you are going to see a tailwind, I think sometime in 2009. Are you going to see it early in the year? How does that factor into your thinking? I know it's pretty difficult because things move so fast.

Barry McCabe

I think we need to first half the first half. We did a great job last year in postponing, and we mentioned that on other calls the inflation that was out there by delaying it anywhere from one quarter to two quarters. We were really more impacted by the negative inflation late second into the second half of the year. So the extent that you want to compare where commodity prices were in the first half of 2009 versus the first half of 2008, I would say they're still going to be higher. But we are benefiting by inflationary cost coming down. The question is how far down will they come. We'll benefit quarter to quarter throughout the year as they continue to decrease.

Chris Agnew – Goldman Sachs

A modest drag decreasing in the first half and a tailwind yearoveryear in the second half as I read what you say.

Barry McCabe

Yes.

Chris Agnew – Goldman Sachs

Just, finally, you in the past give on overall operating margin target. I don't know that I heard you repeat that again. I recognize that the environment is certainly skittish, at best.

Andrew Cogan

But our operating margin target hasn't changed. Our target is to run this business generating 15% operating margins. We troughed at 10% and we got very, very close to that 15% number as we ended this cycle, let's say. We got to 14.5%, high 13s, that's where we would like to see this business run. Obviously, that's dependent on where gross margin is headed.

There are pluses on gross margin like deflation and FX. There are challenges on gross margin which are absorption and potentially pricing and volume. We're going to keep scaling operating expenses to try and stay in some of the target ranges we talked about; but clearly as volume falls off, that's going to be a challenge.

But our longterm goals remain trying to operate this business at 15%, continue to generate the industryleading operating margin. I think it's going to take the while to get back up to those levels as we go through this downturn. But, our eye is always on that ball, and that's always where we want to be, and I think we've shown a very strong track record of protecting our margins in the downturn and getting benefit on the margin line during an upturn.

I think the other thing I want people to leave with is a sense also that this is a company that knows how to manage through a downturn, to scale our costs through a downturn, but also make the investments in the downturn that let us come out stronger. When I point out our performance from 2004 to 2008 and that top line growth, that's because while we were scaling our costs down from the last cycle; we kept the critical investments going in the new products, in the sales force, in marketing initiatives that allowed us to come out and rebound stronger, significantly than the industry overall.

I would expect this to play out the same way. I don't know what the duration of this downturn will be; but we will try and do our best to continue to invest through it such that we outperform, decline less, and we come out stronger on the way up.

Chris Agnew – Goldman Sachs

My last question. You talked about a lot of new products on the forward product road map. Will we see those at NeoCon? Is that where you will get them?

Andrew Cogan

I think you will.

Chris Agnew – Goldman Sachs

Any preview?

Andrew Cogan

I think you will see them at NeoCon. I can tell you this. I am excited about them. I think it's some of the most important, significant work we've done since I have ever been associated with this company.

Chris Agnew – Goldman Sachs

Areas? Anything that you would share with us?

Andrew Cogan

I think we've been very public about seating. It's certainly one of those areas. But we've got good stuff we're doing. I am very proud of what our team is doing in that regard. It's exciting.

Operator

You have no further questions. I would like to turn the call back over to Mr. Andrew Cogan for closing remarks.

Andrew Cogan

Thank you, everybody. And we look forward to chatting with you again in April. Take care.

Operator

Ladies and gentlemen, thank you for your participation in today's conference call. You may now disconnect. Have a wonderful day.

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