Orchids Paper Products Management Discusses Q4 2013 Results - Earnings Call Transcript

Feb. 6.14 | About: Orchids Paper (TIS)

Orchids Paper Products (NYSEMKT:TIS)

Q4 2013 Earnings Call

February 06, 2014 10:00 am ET

Executives

Keith R. Schroeder - Chief Financial Officer, Principal Accounting Officer and Secretary

Jeffrey S. Schoen - Chief Executive Officer, President, Director, Member of Audit Committee and Member of Nominating & Corporate Governance Committee

Analysts

John Nobile - Taglich Brothers, Inc., Research Division

Marco Rodriguez - Stonegate Securities Inc., Research Division

John H. Curti - Singular Research

Operator

Good morning, and welcome to the Orchids Paper Products Q4 2013 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. And I would now like to turn the conference over to Keith Schroeder, CFO. Please go ahead.

Keith R. Schroeder

Thank you, operator. Good morning, and thank you to everyone for attending our 2013 fourth quarter earnings call. My name is Keith Schroeder, and I am the CFO. I am here with Jeff Schoen, our President and CEO. The agenda for our call today will begin with my review of the quarterly and full year results. Jeff will then provide his perspectives on our results and key initiatives. We will conclude with a question-and-answer session.

I'd like to inform you that certain statements made during this conference call are forward-looking statements and are made pursuant to the Safe Harbor provisions in the Securities Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth during this discussion. Among other things, these risks and uncertainties include the risks and assumptions as described in Item 1A and Item 7 of our Form 10-K for the year ended December 31, 2012.

First, I will start with some headlines. Our total fourth quarter net sales were $30.8 million, which established a new record, bringing our full year net sales to $116.4 million. The current year quarterly and full year sales were up 28% and 15%, respectively, over the prior year. Earnings in the quarter were solid as well as we delivered $6.7 million of EBITDA, an increase of 26% over the prior year and which includes approximately $500,000 of expenses related to the transition to our new CEO. The quarterly result brought our EBITDA for the full year of 2013 to $26.2 million, an increase of 23% over the prior year. Earnings per share in the quarter were $0.42 per share. Excluding the transition-related costs, the earnings per share would have been $0.48 per share.

And now, for some details. Our strong quarterly sales were driven by record converted product shipments in terms of dollars and units. Net sales of converted product were $29 million, up 33% over the prior year quarter. Units shipped in terms of cases were $2.1 million, an increase of 28% over the prior year. Poorly converted product tonnage shipped was up over the prior year by 31% to 13,600 tons. Selling prices on a per-ton basis increased about 2% over the prior year.

This brings our full year converted product sales to $109.6 million and 8.2 million cases, an increase of 21% and 16%, respectively, over the prior year. As a result of the higher converted product shipments, [indiscernible] available for sale were lower, thereby reducing sales of parent rolls on a comparative basis in both the quarter and full year periods.

Our gross profit margins benefited from the increased converted product sales and cost controls in the papermaking operation. In the fourth quarter of 2013, our gross profit margin improved to 23.5% compared with 22.6% in the prior year. For the full year, gross profit margins were 24% compared with 22.4% in the prior year. The improvement for the full year period was primarily driven by the favorable effects of the improved margin on the incremental converted product shipments, lower fiber prices and lower paper manufacturing costs.

Fiber costs were lower in the full year period by approximately $1.1 million. Paper manufacturing costs were lower primarily due to lower repair and maintenance costs and lower gas and electric costs. For the quarter, the improvement was primarily driven by the effects of increased converted product shipments.

Selling, general and administrative expenses were $2.6 million in the quarter, bringing the full year total to $9.5 million. These totals are higher than the previous year by $531,000 and $1 million, respectively. The primary reasons for the increase are the previously mentioned $500,000 of transition-related expenses and higher sales commission expense of $140,000 and $478,000, respectively.

Our full year -- or excuse me, our effective tax rate for the full year is 26.9%, which includes the 1.3% favorable effect of an Indian employment tax credit for 2012 that was recognized in the first quarter of 2013. This rate is comparable to the 26.2% effective tax rate, including the Indian employment credit estimated as of the end of the third quarter of 2013.

I would now like to turn your attention to the balance sheet and cash flows. For the full year of 2013, we generated cash from operations of $20.8 million compared to the prior year period amount of $17.5 million. Cash earnings were somewhat offset by increases in accounts receivable and inventories to support the increased sales. We maintained our quarterly dividend rate of $0.35 per share in the quarter, resulting in a dividend payment of approximately $2.8 million during the quarter. For the year-to-date period, our dividend payments totaled $10.7 million.

Capital expenditures for the 12-month period were $12.2 million in 2013 and $6.8 million in 2012. This total for 2013 includes approximately $3.1 million in expenditures related to the $30.4 million strategic capital projects for the paper machine and converting line upgrade that we announced last year. For 2014, we're expecting total capital expenditures of around $23 million. The total is comprised of approximately $19 million of capital expenditures to support the strategic capital projects with the remainder being routine smaller items. Approximately $8 million in capital expenditures will remain for the strategic capital projects for 2015.

We expect to fund the announced strategic capital projects with a combination of cash on hand, cash flows from operations and additional debt, but we have not finalized our funding plans. At this point, we expect additional debt coming to be in $15 million to $20 million range. Our total debt outstanding as of December 31, 2013, was $15.1 million, and the total cash and short-term investments stood at $12.2 million. As a result, our net debt outstanding as of December 31 was $2.8 million. At the end of the year, our funded debt-to-EBITDA ratio was 0.58:1.

I will now turn the call over to Jeff.

Jeffrey S. Schoen

Thanks, Keith. Good morning, everyone. I appreciate the time you've taken to participate in this call today. As a new CEO of Orchids and a board member for 7 years, I believe I have the unique perspective on where Orchids has been and on where it is heading. Over the past 7 years, Orchids has invested in assets to improve quality, capacity and cost to allow a successful entry into the premium or mid-tier channels of the towel and tissue product categories while maintaining a strong foundation within the value channel. In 2006, we built a new paper machine, and in 2010, we started up a new converting line to support the introduction of Orchids into the premium tier channels of the market for towel and tissue. We've also completed some de-bottlenecking projects to improve our manufacturing flexibility and reduce cost.

Today, Orchids product mix between mid-tier and value is approximately 35% and 65%, respectively. Now in 2014, due to the successful penetration of the premium channel, we are approaching full capacity in both converting and in papermaking. During our strategic planning process, we discussed what will be the most effective way to grow capacity while also improving our product development capabilities and cost structure. One approach was to add an additional paper machine and converting line, which would require additional infrastructure spending as well as dilution of our existing resources. Another approach was to upgrade our existing assets. Insight to the quality of products required to further penetrate the premium channel led us to conclude we were not as competitive on some of our existing assets as we believed was necessary to effectively compete in the higher tier channels.

The requirements of the premium tier markets and the constantly changing overall market revealed weaknesses in product quality, manufacturing flexibility and operating cost on some of our assets. As we looked at what would be required to resolve this issue, it became apparent that upgrading our existing assets will provide the most value for the capital invested as we would achieve better product development and execution capabilities at a lower cost structure without additional infrastructure spending or dilution of our existing resources. We announced last November that we will invest approximately $30 million to upgrade our papermaking and converting assets and are pleased to say the project's on track in both cost and timing. The project will be funded by a combination of cash and debt, which will not negatively impact our ability to continue the dividend at its current rate.

In October, we will shut down 2 older, slower paper machines and replace them with a high throughput paper machine which will provide us the manufacturing and product development flexibility to continue to gain share within the value and premium channels as well as remove between $6 million and $8 million of cost from our system and increase our parent roll capacity by approximately 13,000 tons. During the shutdown period, we expect to consume about 4,800 tons of parent rolls purchased on the open market at an additional cost of approximately $1.4 million. The paper machine is projected to start up and be at full production capacity by April of 2015 with an initial startup beginning in February when we will start to gain a portion of the benefits of the project. In November, we will upgrade an existing converting line to increase its manufacturing flexibility and to provide additional annual EBITDA of between $2.8 million and $3.4 million when fully utilized. We expect to be at standard production run rates on the upgraded converting line by end of the year.

As Keith discussed, Orchids has strong momentum in its sales, which I expect to continue in 2014 through improved product development and a stronger focus on strategic partnerships with our suppliers and our customers. We will continue to drive cost out of our system by improving our efficiencies, which will allow us to provide more value to our customers. We believe we have untapped potential in both quality and cost within our existing papermaking and converting assets, so our focus in 2014 will be to unlock that potential while we prepare to gain the benefit for the major capital expenditures in 2015.

I will now turn the call back to the operator for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question will come from John Nobile of Taglich Brothers.

John Nobile - Taglich Brothers, Inc., Research Division

I see, kind of against the brick wall right now with your capacity, so I just wanted to get an idea of what you would save with the new machine. If I could assume, maybe a 56,000- to 57,000-ton capacity with the new machine, I know it's going up to 70,000 but just to compare apples to apples, what do you think an annual saving on production cost would be with the new machine over what you currently have?

Keith R. Schroeder

John, this is Keith. The -- I think the best answer to your question basically refers back to the cost savings that we announced for the project. Again, that was in the press release from last year and what we went through this morning, but that will be in the $6 million to $8 million range. And so that is -- and most of that savings will be through cost savings. So the overall production cost that we will see out of the operation once the new machine is up, most of that comes from the cost savings.

John Nobile - Taglich Brothers, Inc., Research Division

Okay. And if I could back up, you said you were going to be purchasing, was it, 4,800 tons of parent rolls in the secondary market when the machines are shut down?

Keith R. Schroeder

Yes.

John Nobile - Taglich Brothers, Inc., Research Division

Okay. And that starts when again?

Keith R. Schroeder

That would start, roughly, at the beginning of the fourth quarter and continue through the first quarter of 2015. So we'll probably recognize -- this is really rough figures because it really depends on our inventory and the parent rolls we have going into the project, et cetera, but we probably recognize roughly 75% of that this year and 25% next year.

John Nobile - Taglich Brothers, Inc., Research Division

Okay. And now you're going to be purchasing these parent rolls. So does that mean by Q2 of 2015 now, that the new machine will be up and running as far as your estimates are concerned?

Keith R. Schroeder

Yes, that's true.

John Nobile - Taglich Brothers, Inc., Research Division

Okay, because I thought it was going to be like about a 2-year period there before that would be up and running. So, all right, I just wanted to get clarification on that. Now capacity with the new converting line project, now currently, I think -- you have a pretty high capacity now, but I think the press release said that you were looking to actually increase it from what you are at now. So what are we looking at converting capacity to be with this upgrade?

Keith R. Schroeder

Well, what we're looking at is really our effective selling capacity right now is around 10 million cases, okay? But as we continue to build the business, we wanted to get out in front of changes in the market. We wanted to put a line in that would allow us to lower our cost, increase flexibility and et cetera. So after this new line is up and running with some other changes that we'll make, we should probably be in the -- as far as effective selling capacity, around 11.5 million cases, which is around 70,000 tons.

John Nobile - Taglich Brothers, Inc., Research Division

Okay. So you're going to be matching your parent roll capacity. So there should be no need to purchase parent rolls in the secondary market, but I think in Q3, you purchased them in the secondary market. I'm looking at the tonnage that was shipped this quarter, Q4. Could I assume that parent rolls were also purchased in this -- in the secondary market for Q4?

Keith R. Schroeder

For Q4, no. Again, going back to our call for the third quarter, the reason we have some purchase parent roll cost in the third quarter is that in the early part of 2013, our sales forecast at that point in time indicated a real spike in sales during Q3. So in answer to that, we bought some parent rolls out on the open market. We did not [indiscernible].

John Nobile - Taglich Brothers, Inc., Research Division

I'm looking at total tons shipped, which is over 59,000 for the full year. And with a capacity of, say, 56,000 to 57,000, I would assume that the excess of that was all in Q3 in parent roll purchases then on the secondary market?

Keith R. Schroeder

Yes, John, that is correct.

John Nobile - Taglich Brothers, Inc., Research Division

All right. And gross margins, last quarter -- and not just last quarter, Q3. Q1, Q2, Q3 were all around 24% and even higher than 24% gross margins. But this quarter, Q4, I think it was 23.5%. So I'm just curious what changed on this quarter, because you had much higher revenue. Was it the mix? Or was there some other thing in there that caused the margins to sequentially decrease?

Keith R. Schroeder

You're talking about the gross profit?

John Nobile - Taglich Brothers, Inc., Research Division

Yes. Well, the margin of 23.5%, the gross profit was -- yes, but as far as the margin is concerned, there was a drop even though that was a nice increase in revenue. So I just wanted to know what factors played into that.

Keith R. Schroeder

Well, the mix to a certain extent and then the other piece was we did sell a few more parent rolls in the fourth quarter than the third quarter, and the price came down about $60 a ton of that, actually, about $70 a ton.

John Nobile - Taglich Brothers, Inc., Research Division

On the parent roll prices?

Keith R. Schroeder

Parent roll pricing, correct, yes.

John Nobile - Taglich Brothers, Inc., Research Division

Okay. And just one quick question and I'll leave it open here. I assume the Indian tax credits are going to apply to 2014 also, because you have a sufficient employee count there, correct?

Keith R. Schroeder

Well, actually, at this point in time, those tax -- or that tax credit, excuse me, and a lot of other tax extenders all expired at the end of 2013. So [indiscernible], they're not active for 2014. Now this is the way these work, we expected them, that they will be extended, but we don't know that for sure. And what has happened a lot in the past, we have not seen those extended until the very end of the year. And if you remember, back in '12, they didn't get extended until 2013. So what you'll see in our tax rate for 2014 is that until those are re-extended, we will not include those in our tax calculation.

John Nobile - Taglich Brothers, Inc., Research Division

So without those included in your tax calculation, what do you anticipate your effective tax rate to be for 2014?

Keith R. Schroeder

Right now, we would anticipate around a 32% rate.

John Nobile - Taglich Brothers, Inc., Research Division

Okay. And that could lower the -- by 1.3% if indeed that comes into play for 2014?

Keith R. Schroeder

Yes.

Operator

[Operator Instructions] And our next question comes from Marco Rodriguez of Stonegate Securities.

Marco Rodriguez - Stonegate Securities Inc., Research Division

I had a quick follow-up in regard to the CapEx spend. I didn't catch all the numbers. Can you kind of review the numbers that you put out there that were spent in Q4 on the new expansion and then how that moves into '14 and '15?

Keith R. Schroeder

Oh, sure. In Q4, we spent around $3.1 million on the project. For 2014, we expect about $19 million and the rest of it, the $8 million remaining, was cash flow in 2015.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Got it. Okay. And then in terms of the paper machine line, just kind of wanted to understand a few items here. I understand that the start date is kind of like July, 2015. Can you maybe -- and I think I heard on your prepared remarks that you might be running a little bit there in February of '15, if I heard you correctly. Can you kind of maybe walk us through how we should be thinking about the ramp of that machine and how the revenues might come through? Any sort of capacity numbers you might be targeting or seem realistic by the end of 2015?

Keith R. Schroeder

Oh, sure. Again, what -- as we'd analyzed the project further and as we have fine-tuned things, the startup of the project is now anticipated to be February 1 of 2015, okay? And we expect to be at a full rate of production about 2 months later, so the start of Q2, all right, of 2015. So as far as a total capacity or an expected capacity number, we would expect to be at the full 70,000 ton rate by, let's say, Q2, end of Q2 for sure.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Okay, perfect. Okay, most of my other questions were asked and answered, just one last quick one then. What percentage -- I don't know if I caught this. What percentage of your product mix was in the mid and premium tier in the quarter?

Keith R. Schroeder

It's about 36% for the quarter. So it's been pretty consistent for the last 2 or 3 quarters.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Okay. And is there a target you're aiming for to end with fiscal '14?

Keith R. Schroeder

Do you want to tell him the target?

Jeffrey S. Schoen

I don't -- this is Jeff. I don't think we have a target per se except that a lot of our product development that we're focused on on our new products are geared toward that channel. So we do expect it to increase in terms of percentage this year.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Okay. And then just with a last quick one and I'll jump back in the queue. Just coming off from a high level, when you guys announced this, the expansion of your capacity here, what sort of communications did you have with your clients? And what sort of reception did you receive?

Jeffrey S. Schoen

Our clients? Customers? We have not -- I wouldn't say that we've used this as a tool yet with our customers in terms of proactively talking to them about the machine. We will probably start doing that this quarter, but we're going to do it in conjunction with talking about the value that we will add in terms of new products, speed to market, flexibility, et cetera. So it will be part of our conversation. I don't view it as the major part of our conversation with our customers. We're going to be talking more about our new products, how we can align with them more strategically to improve our penetration, improve their share, et cetera and likely do it at a better cost structure than what we're currently doing it.

Operator

The next question is from John Curti of Singular Research.

John H. Curti - Singular Research

My first question, you guys rattled off lots of numbers, and I couldn't write quite fast enough. The estimated cost of the 4,800 tons of purchased parent rolls, please?

Keith R. Schroeder

Oh, that's about $1.4 million.

John H. Curti - Singular Research

All right. Do you anticipate having much sales volume of parent rolls this year? And would it only occur in the first part of the year?

Keith R. Schroeder

We will have sales of parent rolls through the first 9 months. And then during the time that we are in the middle of the installation of the new machine, we will not have any parent roll sales. We'll be buying parent rolls. So the parent roll sales, first 9 months will be less than 10% of our tonnage.

John H. Curti - Singular Research

Will you be building some extra inventory of converted product ahead of the new converting line?

Keith R. Schroeder

No, because the way we had that project set up, there really won't be much in the way of a stoppage of work in the plant. So I think you're really talking about a down of maybe about a week, and that's it. And that's not the whole plant. That's just really one line. So [indiscernible] .

John H. Curti - Singular Research

The cost for the CEO transition and the retirement of Bob, were those costs or some of those costs non-tax deductible, that $500,000?

Keith R. Schroeder

No. They were all bill tax deductible. That's the appropriate term .

John H. Curti - Singular Research

Okay. Because I just applied the rough tax rate of the fourth quarter, and I got less than that $0.06. So I didn't know if I was missing something else.

Keith R. Schroeder

Some of that's current tax. Some of that's a deferred tax item.

John H. Curti - Singular Research

Okay. And as you entered 2014, just based on your existing book of business, what does it look like in terms of increased volumes over 2013, that 8.2 million?

Jeffrey S. Schoen

If you use 8.2 million as what we did in 2013, what we consider our foundation business right now is 8.6 million cases, so we consider that. If nothing else changes this year, that's what will happen. We don't expect it to happen, but...

John H. Curti - Singular Research

I realize that you're going to add some more business. That 8.6 million, can you kind of give me an idea of the progression? Are we still going to kind of see increased volumes year-over-year or quarter-over-quarter so that like first quarter of '14 should be a little better than fourth quarter of '13, et cetera?

Keith R. Schroeder

Well, what you'd expect to see off of this foundation business, if you will, is that the first quarter, just to the -- normally, the first quarter is softer, so the first quarter, we would expect to be down just slightly from Q4. And then the rest of the year, we'll be back up around the Q4 run rate.

John H. Curti - Singular Research

As a result of all of the bad weather the country's been having, has that affected your business at all in the first quarter?

Jeffrey S. Schoen

Not so much in the first quarter. It did impact us in the fourth quarter, though. We had weather-related pickup issues, productivity issues, et cetera. We have not seen that in January.

John H. Curti - Singular Research

So a little bit of business got pushed from December into January?

Jeffrey S. Schoen

That's hard to say. I mean, the -- the snow outages or whatever you want to call it, we had the one in late November. So that should have been resolved in December. And December, I think it was more midyear. So you always get some kind of disruptions related to the holidays, and I would not say that is significant, that anything rolled over into the first quarter.

John H. Curti - Singular Research

Okay. What would be a good number to use for D&A for this upcoming year?

Keith R. Schroeder

Oh, hang on. I got that number down. It's up slightly over last year, as you would expect. Depreciation and amortization would be around 8.3%.

John H. Curti - Singular Research

And then with the addition of the converting line, fourth quarter and then the new paper machine in '15 would take another -- would take a pretty good step up.

Keith R. Schroeder

Yes. What you can use there for the converting line, use an average depreciation life of around 12 years. Well, no make it 15 for the converting line 'cause it's all aligned. And then on the paper machine, you're looking an average of around 25 years.

John H. Curti - Singular Research

The higher sales commissions of $140,000, so how much of your business now is being done by the outside sales brokers that you're using? And do you anticipate that that's going to continue to go up? Or will you be hiring additional internal salespeople?

Keith R. Schroeder

On percentages basis, it will probably stay about the same.

John H. Curti - Singular Research

Can you talk at all about the various factors that improved or reduced cost in the fourth quarter in terms of like recycled fiber prices or manufacturing costs or maintenance, anything like that?

Keith R. Schroeder

Well, in Q4, the price -- the cost of fiber was pretty flat with Q3 and with the prior year. And maintenance cost, if you could go back to 2012, we had a lot of higher cost in that area. That is through the first 3 quarters of '12. So the fourth quarter '12 was down. So the spending that we -- the reductions we saw during '13 that were under the first 3 quarters of 2012, when we got to the fourth quarter of '13, those costs were pretty flat.

John H. Curti - Singular Research

Okay. Do you have a year end share count?

Keith R. Schroeder

It's 8,066,000 shares.

John H. Curti - Singular Research

How would you characterize kind of your future order flow and discussions with new and existing customers for maybe additional shipments in 2014 in terms of, say, relative to '13, just in terms of a timeline and the quality of discussions, et cetera? I'm trying to get an understanding of, I guess, the momentum as we enter here in 2014 versus 2013 in terms of new customer adds.

Jeffrey S. Schoen

Yes. You may get somewhat of a rhetorical answer from me on that, because the -- our approach to our customers this year is driven by new product development. So within our existing paper machines, for instance, we have the capabilities or we're -- and we have actually run trials. We've improved capabilities to meet certain attributes that we think are important to the customers, for instance, strength, absorbency, softness, things like that. We're be able to give more of that with our existing assets. So we're going to leverage that with our customers, which will allow us -- if you take the premium channel and kind of cut it in half, there's a lower tier premium and maybe a higher tier premium. And we think penetrating into the lower tier premium based on the quality of the paper that we've been making, we believe we now have the capability to produce paper that will be in that upper tier. So we are approaching that with our customers. There are also some different types of demographics that we are going to target with our customers. I expect me, personally, to spend more time directly with our customers, talking about strategic initiatives that we might do with them. So the momentum is going to be based on our ability to sell on these new products at a competitive price and to do it quickly relative to what maybe our competitors might be doing it.

John H. Curti - Singular Research

And then what's kind of your outlook or what are people saying in terms of fiber prices for '14 versus '13?

Keith R. Schroeder

Well, it's a little interesting, John. When you look at the grades of fiber that we buy, the virgin fibers are really -- most of the forecasting people that we look at are -- expect it to drop during 2014. The recycled grades that we buy are forecasted to go up slightly. So they're going in a bit of a different direction, but again, those are just forecasts.

John H. Curti - Singular Research

And remind me of your rough mix between virgin and recycled now and as you move up the quality chain?

Keith R. Schroeder

They're probably 20% kraft right now, and the rest will be recycled.

John H. Curti - Singular Research

Any benefits in 2014 for further declines via your contracts for electricity and gas? Or might they be going back the other way?

Keith R. Schroeder

No, gas, we have the fixed prices after 2016. So we'll see a little bit of reduction in '14 and '15, I believe. That's all in our Ks and Qs. Electricity, we don't really have any way to fix that.

John H. Curti - Singular Research

And you mentioned earlier that you're doing about 35%, 36% in the premium tier, and the rest is in the value channel. Where do you think that goes long term? Do you think, eventually, maybe over a 2-, 3-, 4-year period, that you're going to be more than 50% premium? Is that a goal to get that percentage up to at least 50-50?

Jeffrey S. Schoen

I don't think that's a goal. I think that the value channel, the premium channel, the ultra premium channels tend to stay. People believe that value will eventually go away for [indiscernible] reasons, but there's always -- value is based on a certain quality of product and a certain price point. And I believe the retailers, well, most of them anyway, will establish a three-tiered strategy where they will have value and premium and ultra premium. So for us, our goal is to have good margins in all 3 categories, and we do very well in value. As we take cost out of our system, we still believe that we can do well in value even if price were to be reduced to compensate for maybe something happening in the premium channel. So the combination of premium value that we get is really going to be dependent on where we think our margins are going to be maximized and the volumes that we can attain into those -- in each of those channels, but I don’t see us as having -- of assuming that value goes away.

Operator

[Operator Instructions] I'm showing no further questions. This will conclude our question-and-answer session. I'd like to turn the conference back over to Mr. Schoen for any closing remarks.

Jeffrey S. Schoen

I want to thank you all for your time. I personally am excited to be here in my new role. Just for your information, we'll be -- Keith and I will be presenting at the Sidoti Conference in New York City on March 18. So I hope to maybe see a few people there that I can get to know and continue to talk to throughout the year. Thank you.

Operator

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

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