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Big Lots (NYSE:BIG)

Q4 2011 Earnings Call

March 02, 2012 8:00 am ET

Executives

Andy Regrut -

Steven S. Fishman - Chairman, Chief Executive Officer and President

Timothy A. Johnson - Senior Vice President of Finance and Vice President of Strategic Planning & Investor Relations

Joe R. Cooper - Chief Financial officer, Executive Vice President, Principal Accounting officer, Treasurer, Interim Treasurer and President of Big Lots Canada

Charles W. Haubiel - Executive Vice President of Legal & Real Estate, General Counsel, Corporate Secretary and Member of Executive Committee

Analysts

Charles X. Grom - Deutsche Bank AG, Research Division

Matthew R. Boss - JP Morgan Chase & Co, Research Division

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

John Zolidis - Buckingham Research Group Incorporated

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Jeffrey S. Stein - Northcoast Research

Anthony C. Chukumba - BB&T Capital Markets, Research Division

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Patrick McKeever - MKM Partners LLC, Research Division

Peter J. Keith - Piper Jaffray Companies, Research Division

Meredith Adler - Barclays Capital, Research Division

Operator

Ladies and gentlemen, welcome to the Big Lots Fourth Quarter 2011 Teleconference. This conference is being recorded. [Operator Instructions] At this time, I'd like to introduce today's first speaker, Director of Investor Relations, Andy Regrut. Please go ahead.

Andy Regrut

Thanks, Cindy, and thank you, everyone, for joining us for our fourth quarter conference call. With me here today in Columbus are Steve Fishman, our Chairman, CEO and President; Chuck Haubiel, Executive Vice President, Real Estate, Legal and General Counsel; Joe Cooper, Executive Vice President and Chief Financial Officer of Big Lots and President of Big Lots Canada; and Tim Johnson, Senior Vice President of Finance.

Before we get started, I'd like to remind you that any forward-looking statements we make on today's call involve risks and uncertainties and are subject our Safe Harbor provisions, as stated in our press release and SEC filings, and that actual results can differ materially from those described in our forward-looking statements. Our consolidated financials include results of our U.S. operations and our Canadian business since acquisition or July 18, 2011. Our statements also include immaterial amounts of discontinued operations activity. All commentary today is focused on continuing operations.

With that, I'll turn it over to Steve.

Steven S. Fishman

Thanks, Andy, and good morning, everyone. I'm pleased with the results we're reporting this morning. Our fourth quarter was a success as we executed our strategies extremely well over the holiday season, maybe better than we ever have before. And it generated strong financial results. Comps in the U.S. were up 3.4%. And operating profit in the U.S. and EPS were at record levels, and we continue to return significant amounts of cash to our shareholders through our share repurchase efforts.

From a merchandising perspective in the United States, our Seasonal and Furniture businesses were particularly strong, each comping up in the low double digits. You may recall that our Seasonal Christmas assortment was allocated more floor space and inventory this holiday season, a result of our strategic decision to downsize our traditional Toys business. We offer great quality Seasonal product, all priced at extreme values, and the customers responded in a big way.

In Furniture, all of our key classifications posted positive results. This year, our broader selection of decorative fireplaces appealed with the consumers. We experienced strength in Upholstery, which is often used to spruce up the house for the holidays, and our day-in and day-out Mattress business posted some of the strongest comps in the store. Consumables had another successful quarter, comping up mid-single digits. We made significant improvements in this business in 2011 with our merchandise, with planned events and our team and the changes have translated into meaningful sales growth. Our Food business, whether it was closeout, specialty or captive label, continues to drive Consumables. However, HBC, pet, chemicals and most every part of the category had positive comps for the quarter.

Our marketing, product presentation and in-store execution, including the wall of values that highlights the extreme value of our Consumables offerings, steadily improved as the year went along. The other big winner for the holidays was Electronics, which you may recall also benefited from our efforts to downsize Toys. Electronics are the Toys of the new age, toys with screens and memory cards. They're gadgets that fascinate a tech-savvy generation, have a broad appeal to consumers of all ages and create buzz in our stores and with our customers. What's most exciting about this strategy is that Electronics is not just a fourth quarter business but instead has growth opportunities throughout the year.

From a Canadian perspective, we made progress over the last 90 days to its 3 key initiatives, which Joe will cover shortly. Having been in Canada and visited stores during Q4, I can tell you that the presentation shopping experience has significantly improved, and I believe we are on the right track.

For the year in total, 2011 was one of significant milestones. We exceeded $5 billion in sales for the first time in our company's history. We delivered our fifth consecutive year of record earnings per share at $2.99 per share. We posted flat or positive annual comps for the 13th consecutive year. We completed a key strategic acquisition and expanded into Canada. We executed a successful IT rollout of a new merchandising systems, a multiyear, multimillion dollar cross-functional initiative that officially went live on January 29, without issues and on budget. We invested in our associates through a variety of training and development programs designed to increase our bench strength and prepare our workforce for future growth opportunities, both in the corporate offices and in the stores. And through all of this, our shareholders experienced meaningful financial gains as our share price increased 26%, which we believe was due to our performance and significant share repurchase efforts. I think it's safe to say we're pleased with the improvements we made this year, but we're not satisfied.

Before I go on to 2012, let me turn the call over to TJ for additional details on the fourth quarter and full year results.

Timothy A. Johnson

Thanks, Steve. I'm going to focus my comments on results, and then Joe will update you on our progress in Canada and speak to guidance for fiscal '12 and the first quarter.

Speaking first to U.S. operations, sales for the fourth quarter were $1.633 billion, an increase of 7.5% compared to the $1.519 billion we reported for the fourth quarter of last year. Comparable store sales increased 3.4%. For Q4, operating profit dollars were $196 million, an increase of $19 million or 10% compared to last year. Our operating profit growth was a result of our 7.5% sales increase, along with the expense leverage, partially offset by a decline in the gross margin rate.

As anticipated, our gross margin rate of 40.3% was down 50 basis points to last year due to merchandise mix, a slightly lower IMU and higher shrink costs. Total expense dollars were $462 million, and the fourth quarter SG&A rate was 28.3% or down 90 basis points to last year. Expense leverage came from store payroll, distribution, insurance, lower debit card fees, utilities and lower bonus expense. Offsetting this leverage was higher depreciation. Interest expense of U.S. operations was flat to last year at $0.8 million, and our tax rate for the quarter was 38.5% compared to last year's 37.6%.

In total, our U.S. business reported income from continuing operations of $119.8 million or $1.83 per diluted share for the fourth quarter of fiscal 2011, a 25% increase to last year's $1.46 per diluted share. From a real estate perspective, we opened 23 new stores and closed 17 in the fourth quarter of fiscal 2011, leaving us with 1,451 stores and total selling square footage of 31.5 million. For the full year, we opened a total of 92 new stores and closed 39 stores for a net addition of 53 stores or approximately 4% growth. Of the 92 new store openings, 25 were in A-type locations, with the balance in more traditional centers.

Turning to Canada. Sales in the fourth quarter of fiscal 2011 were $36.6 million, better than our original guidance of $25 million to $30 million as certain deals and category introductions were well received by our customer. The net loss for the quarter totaled $5.1 million compared to our guidance of $7 million to $9 million loss as better-than-anticipated sales drove the favorability. From a consolidated point of view, we reported income from continuing operations of $114.7 million or $1.75 per diluted share. This compares to $110 million or $1.46 per diluted share a year ago when we only had the U.S. operation.

Moving on to the balance sheet. Consolidated inventory ended the fourth quarter of fiscal 2011 at $825 million, up 8% to last year, with the key drivers to last year being a 4% increase in U.S. store count, a 2% increase in U.S. per store inventory, and lastly, the acquisition of our Canadian operations. For the full year fiscal 2011, CapEx totaled $131 million compared to $108 million last year. And depreciation expense was $90 million, an increase of $12 million to last year. Consolidated cash flows for the year were $198 million or similar to last year. U.S. operations cash flow for the year totaled $222 million, while there were approximately $24 million of cash outflows to support our Canadian operation. Our total investment in Canada for fiscal 2011 was $46 million, including both operations and investing activities. We ended the year with $69 million of cash and cash equivalents and $66 million of borrowings under our credit facility compared to $178 million of cash and cash equivalents and no borrowings under our facility a year ago.

Our use of cash and debt over the last 12 months was the result of our share repurchase activity and our investment to date in Big Lots Canada, partially offset by the cash generated over the last year. During the fourth quarter, we invested $46 million to repurchase 1.3 million shares at an average price of $36.79 per share. For fiscal 2011, we invested $359 million to repurchase 11 million shares at an average price of $32.79 or approximately 36% below where the stock closed yesterday. The 11 million shares repurchased represented approximately 15% of our outstanding shares as of the beginning of fiscal 2011. We ended the year with 63.6 million shares outstanding and currently have $99 million remaining under our current $400 million share repurchase authorization.

I'll now turn it over to Joe for forward guidance and details on our Canadian operations.

Joe R. Cooper

Thanks, TJ. Before we get to our guidance for fiscal 2012, I want to mention one accounting item noted in our press release. Effective January 29, 2012, with our successful go-live of new merchandising systems, we began valuing our inventory at the class level rather than at the department level with our prior systems. As part of this change, we will record a nonrecurring noncash after-tax charge of approximately $3.4 million or $0.05 per diluted share in the first quarter.

For the first quarter and throughout 2012, we will provide adjusted non-GAAP results to help investors and analysts better understand the performance of operations, net of this charge. There will be no effect on prior periods, and our forward guidance excludes this onetime charge.

Now moving to 2012 guidance. For the consolidated company, we estimate fiscal 2012 adjusted income from continuing operations to be in the range of $3.40 to $3.50 per diluted share compared to income from continuing operations of $2.99 per diluted share in fiscal 2011. We are operating under a 53-week retail calendar for fiscal 2012, and we anticipate the impact of the extra week adds approximately $0.10 per diluted share to our earnings for the year. The average diluted share count is forecasted to be approximately 65 million for fiscal 2012 with no assumption for share repurchase activity. We expect this financial performance will result in cash flow of approximately $200 million.

For our U.S. operations, we estimated adjusted income from continuing operations to be in the range of $3.63 to $3.73 per diluted share, a 14% to 17% increase over fiscal 2011 results of $3.18 per diluted share. This is based on a total sales increase of 8% to 9% and a comparable store sales increase in the range of 2% to 3%.

You may have noticed in our press release a change in our comp calculation. Going forward, effective in the first quarter, we will calculate comparable store sales for U.S. stores open for at least 15 months. In prior years, our calculation was based on stores opened for at least 2 years at the beginning of the fiscal year. We made this change to be more consistent with industry standards, but it would not have materially impacted the results for 2011.

We estimate the adjusted operating profit rate for the U.S. operations for 2012 will be relatively flat to last year. The adjusted gross margin rate for fiscal 2012 is expected to be slightly higher than 2011, driven by lower anticipated markdowns. Expenses as a percent of sales are expected to increase slightly in this model with the entire increase and more coming from higher bonus expense. You may recall our 2011 operating profit was below plan for most of the year, resulting in lower bonus expense and payout to management, stores and DC operations. Excluding bonus, we see expense leverage in our 2012 model, and in fact, our comp leverage point is estimated to be approximately a 1% comp, which by most industry comparisons is very low. Expense leverage comes from stores, DCs, credit card fees, utilities and the 53rd week, partially offset by higher depreciation expense.

Filling out the rest of the U.S. P&L for 2011 -- 2012, we expect net interest expense to be approximately $2 million, and the effective income tax rate is planned to be in the neighborhood of 38.0% to 39.0%. For the year, capital expenditures in the U.S. are expected to be approximately $130 million to $135 million. Maintenance capital is estimated to be about $40 million, which covers our stores, DCs and the General Office. New store capital is estimated at approximately $50 million to $55 million for opening 90 new stores. Investments in certain other strategic initiatives will represent approximately $40 million of CapEx in 2012. These dollars will be focused on our implementation in new systems, including new warehouse management, HR and Real Estate systems, retrofitting and refreshing a portion of our store base and new fixturing initiatives to support certain of our merchandising strategies.

Depreciation expense in the U.S. is forecasted at approximately $105 million against $88 million in 2011. Higher depreciation expense is primarily due to new store growth, new IT systems, store relays and fixturing initiatives and our continuing commitment to maintenance capital.

Turning to Canada. It's been just over 8 months since we finalized our acquisition of Liquidation World in Canada. During the fourth quarter, we made progress on the 3 critical initiatives we outlined from the start: sourcing great merchandise, recruiting and hiring talent and cleaning up the stores and implementing basic processes. From a merchandise perspective, our inventory levels grew, and the quality substantially improved. Inventory ended 2011 at $22 million with a goal in the future to be consistently in the $25 million to $30 million range. The customer feedback to our changes in assortment and quality continues to be encouraging, particularly in the areas of Furniture, Seasonal, Toys and recently in Consumables.

Our second critical initiative is recruiting and hiring talent. We've made substantial progress in recruiting merchants, planners and field operations talent to join us on the journey to turning around this business. We still have some work yet to complete from our initial goals, but the team we have in place is energized and motivated to turning this business into a profitable contributor to the Big Lots family.

And last but certainly not least, our store cleanup and re-merchandising efforts are moving along very well. Similar to the U.S., we've raised expectations of what is acceptable standard in our stores and continue to build our store teams to help us achieve our goals.

For 2012, in Canada, we expect our sales to be in the range of $140 million to $150 million, resulting in a net loss in the range of $14 million to $17 million or $0.21 to $0.26 per diluted share. We expect sales dollars to build each quarter and the operating losses to decline quarter-to-quarter as our inventory position improves.

From a stores perspective, we ended the fiscal year with 82 Liquidation World and LW stores. Our 2012 plan assumes no new store openings in Canada. For 2012, we want the organization 100% focused on testing and learning in the areas of merchandising and assortments, consistent store level execution and customer service. Also, our current plans do not reflect any store closings in 2012. However, our Real Estate evaluation is ongoing, and if a store needs to close, we'll not hesitate to make that decision.

Moving to total company first quarter guidance. We estimate our consolidated adjusted income from continuing operations for the first quarter of fiscal 2012 to be in the range of $0.75 to $0.81 per diluted share, a 7% to 16% increase compared to income of $0.70 per diluted share for the first quarter of fiscal 2011. As a reminder, this excludes the nonrecurring noncash after-tax charge described earlier.

Adjusted income from U.S. operations is expected to be in the range of $0.85 to $0.90 per diluted share, 21% to 29% increase over last year's $0.70 per diluted share. This is based on a comparable store sales increase in the range of 2% to 4% and a total U.S. sales increase in the range of 6% to 8%. We estimate the operating profit rate will be similar to last year's rate of 7%. The gross margin rate for the first quarter of fiscal 2012 is expected to be slightly down to last year. Our expense rate is anticipated to be flattish to last year as the natural expense leverage from a 2% to 4% comp is expected to be offset by higher depreciation expense and incentive-related costs.

Sales in our Canadian operations are expected to be in the range of $25 million to $30 million for the first quarter of fiscal 2012, resulting in a net loss in the range of $6 million to $8 million or $0.09 to $0.12 per diluted share.

A few things to consider regarding Canada: First, there will continue to be no tax benefit from the operating loss in fiscal 2012, which magnifies the impact on EPS. Second, the gross margin rate in Canada is expected to be below the rate of U.S. business as we emphasize our value proposition, test and learn as we develop our assortment and also begin to develop inbound freight efficiencies. Finally, we will invest in the expense infrastructure of Big Lots Canada, primarily in people, building inventory levels and addressing deferred maintenance in the stores. This activity adds to the cost structure near term, but we would expect to leverage these investments as volume starts to ramp up later in the year and into 2013.

Now back to Steve for some closing remarks.

Steven S. Fishman

Over the last 6 years, we've been consistent and diligent in our approach to transform this company, focusing on long-term strategies and returns for our investors. No shortcuts or short-term decisions, no compromises. We've been incredibly focused and simply been doing what we said we were going to do. It's improved our operating performance and execution. It's created meaningful employment opportunities and new jobs. It's improved our financial strength, which has allowed us to return significant cash to our shareholders. We've repurchased over $1.6 billion worth of company stock or 55% of our outstanding shares at an average price of less than $26 per share. And during that time, the compounded annual growth rate of our share price or return to shareholders has averaged about 20%, which is pretty important to understand in an up-and-down stock market.

As we look forward, we're excited by our future. We have improving trends coming out of 2011 and a focused strategy to execute in 2012. I see 3 key elements for the upcoming year: First all, it's -- first, it's all about growth. We'll grow organically. We will grow our U.S. store footprint. We will turn around Canada, and we will grow our organizational capabilities. Our business has always been about the treasure hunt, so merchandise is the key to organic growth. You've heard me talk about the improvements we've made in certain key categories in 2011 and you will see more activity in 2012 to distort our space and inventory to categories that are working and downsizing those that are not. From a real estate perspective, 2012 will be the third consecutive year of opening 80-plus new stores.

The newest leg of growth is Canada. We see an underserved customer who is looking for extreme value, and we have a multiyear plan to transform Liquidation World to fill that need, the Canadian version of our WIN strategy. The first 2 quarters have been encouraging, and 2012 will be a year of transformational change for the business. With this level of growth, our people and systems need to be ready as well.

Organizationally, we will continue to invest in our people, to train and develop them, to provide meaningful employment opportunities to support our future growth. In addition, we'll continue to proactively invest in all of our systems. With our new merchandising systems successfully up and running, we've shifted our focus towards new warehouse management systems, new HR systems and a new Real Estate system, all of which will be executed over the next couple of years.

The second theme you'll hear me talk about this year is consistency. I mentioned in my opening remarks a milestone of 13 consecutive years of flat or positive annual comps. While that's impressive, we must take it all to the next level. Our quarterly comps have not been as consistent as our annual track record. Our focus in 2012 needs to be more consistent and more predictable quarterly results.

And finally, the third theme is continuing to generate strong returns for our shareholders. We've done a great job over the last 6 years, and we have been and will continue to be good stewards of our cash and our shareholders' capital. This is not a 2012 goal or theme but an ongoing discussion and focus of management. To that end, we've already kicked off the process to develop our next long-range plan or LRP to position us for years 2013 through 2015. The process will take the better part of this year and is a healthy way for the business to refocus on the future and challenge ourselves to reach higher than we might have ever thought possible.

So with that, I'll call -- I'll turn the call back over to Andy.

Andy Regrut

Thanks, Steve. Before we go to Q&A, I have one housekeeping item to mention. As noted in today's press release, I want to draw your attention to a change noted in the timing of future press releases. Starting with the first quarter of fiscal '12, we will no longer publish a quarterly sales release. Instead, we will combine our quarterly reporting of sales and earnings to make our quarterly release of financial results more comprehensive and complete.

Cindy, we would now like to open the lines for questions at this time.

Question-and-Answer Session

Operator

[Operator Instructions] We'll take our first question today from Charles Grom with Deutsche Bank.

Charles X. Grom - Deutsche Bank AG, Research Division

Just on Canada, with the expectation that the losses get, I guess, a little bit lower each quarter here throughout 2012, should we expect fourth quarter to be breakeven? And do you still expect to make money in this segment in '13?

Joe R. Cooper

Chuck, this is Joe. We do expect sales to be more productive each quarter, losses to decline each quarter. Don't want to be specific in the fourth quarter, but clearly, we have -- we're very optimistic about our opportunities in the 9 weeks at Christmas. But don't want to break our trend and start giving guidance ahead of time. And regarding 2013, it continues to be our goal to breakeven in 2013. But we do have a lot of test and learn to happen -- to occur this year, and we'll be more specific later in the year.

Charles X. Grom - Deutsche Bank AG, Research Division

And Joe, just as a follow-up, can you just remind us when you start to make money, how are the tax implications once you start to breakeven and then eventually start to go into the black?

Joe R. Cooper

Yes. They -- we can start reversing those, the tax benefits, when it is more likely than not that we will continue to make money. So what tends to happen is assuming that, that trend is sustainable, then those will be fully -- the tax benefit will go against that, and those earnings would drop to the bottom line.

Charles X. Grom - Deutsche Bank AG, Research Division

Okay. Great. And if I could just sneak one more in, on the 2% to 4% comp outlook for the first quarter, can you give us a little bit of a sense for how you think the categories will perform relative to what you guys did in the fourth quarter? And if you could shed any light on February sales, that'd be great.

Joe R. Cooper

Yes, we won't on February, Chuck. We really don't do that. But it's pretty consistent, what's going. Furniture continues to run really strong into the first quarter from -- actually all of last year, but really strong in the fourth quarter. The Home business is refreshingly exciting, and we have high expectations for that piece of the business. And actually, my expectations is as the season goes on and the year goes on, we'll get better and better. The distortion that I kind of talked about a little bit in the presentation is going to start to occur in April. And Home's going to pick up some more space, particularly in the top of the bed area. So we have high expectations there. That's really it at a top line basis right now, I think, that I could share with you. Electronics, Electronics continues to be good. We have mentioned that. The tab business is really exciting to us, tablet, and then the accessory pieces that are associated with that. We're really learning, learning, learning. And fourth quarter was terrific, and beginning of the first quarter has been terrific there, too. It's just what's happening out there. I know you guys see that as much or more than we do. Everybody's got a phone. Everybody's got a tablet. Everybody's got accessories, multiple accessories to accessorize with it, and we're really trying to take advantage of that.

Timothy A. Johnson

Chuck, it's TJ. Let me pick up on what Steve mentioned about February. We do not necessarily always lay out comps by month for you guys, but clearly, we know February now. February for us was on plan. The difficulty in speaking to a specific comp is we do, from time to time, as you know, move events or have promotions at different timing throughout the quarter than maybe they had in the prior year. So that's why we won't -- we don't necessarily want to go down that path of explaining every month, every quarter. But February was on plan. And as Steve mentioned, the key categories that were good for us in fourth quarter, we think, have legs here into 2012, so that's encouraging.

Operator

We'll take our next question from Matthew Boss at JPMorgan.

Matthew R. Boss - JP Morgan Chase & Co, Research Division

In terms of your positive year-over-year gross margin guidance for 2012, how should we think about the mix shift from Toys to Consumables and consumer Electronics and where are we today in this process? And then along those same lines, can you walk through the tailwinds to offset this headwind in 2012 to get to the positive gross margin?

Timothy A. Johnson

Certainly. Matt, it's TJ. I'll start and ask Steve to speak to mix again. But from our perspective, the middle part of the year, the second and third quarter, was tough for us from a seasonal perspective for different reasons. But we took more markdowns than we would have liked. Our expectation would be that, hopefully, we don't repeat last year's weather in March through May and we've got a better running chance of Lawn & Garden in Summer to not have to be as promotional as we were a year ago. Additionally, as we get into the third quarter, Doug and his team have some different strategies to hopefully drive business and not be as reliant on Seasonal in third quarter, which was a little bit of a challenge for us, as you'll recall. Working the other way, gosh, it seems like every day the price of diesel bounces around differently, so we're mindful of that. Similarly with the price of oil, we're mindful of that. And as you mentioned, from a mix standpoint, we start to anniversary in the middle part of the year some of the changes that were made in terms of where we were focused, i.e., more focused on Electronics, less focused on Toys, in your example. So we do start to anniversary that as we get into the middle part of the year. So additionally, a little bit of a headwind this year could be a little bit higher strength, particularly as some of the categories changes, i.e., Electronics and things like that. So we put all that together, and at the end of the day, we think that the margin rate goes up a little bit for the year with markdowns being the key driver.

Matthew R. Boss - JP Morgan Chase & Co, Research Division

Okay. And then secondly is, Steve, how would you describe the availability of closeout inventory in the channel today? And are you seeing any material change in availability and particularly any categories of note that you can speak about?

Steven S. Fishman

It's always the same, Matt. I don't think I've changed my comments for 7 years. I will tell you that it, for some reason, has -- seems to have picked up to a more aggressive posture in the last 2 to 3 weeks. In particular, it tends to be in the Consumables area, which, to us, is good because we just like -- the Consumables business is the largest closeout piece of our business as a percent to total. So if you were taking a look at it, where we always talk about anywhere from 1/3 to 1/2 of our business being closeout, Consumables is between 70% and 75%, almost 80% closeouts. So it's been pretty aggressive and pretty active. We continue to work on relationships with the people who we do business with, the branded ones, in particular. I can't speak to why it has picked up. I can only assume that they either have a lot of inventory or someone's pushing back. That’s the same thing that happens all the time. But that's really where it's happening in a pretty aggressive posture, particularly in Food and in HBC.

Operator

And we will take our next question from Dan Wewer with Raymond James.

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

So Steve, you sound very upbeat on this broad-based sales recovery in a number of categories. It sounds like you expect that to continue in FY '12. But in looking at the guidance, particularly for the first quarter of a 2% to 4% increase, mindful that the business was down over 3% last year and surprised that you're not a bit more upbeat on the sales outlook for the first quarter in light of the comparisons. Could you give your thoughts on that?

Steven S. Fishman

We feel real good about the guidance that we've given, Dan.

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

Well, I know you do feel good about it, but I'm just saying, it does suggest some deceleration from where you were in the fourth quarter given the, I don't know, 3.5 comp on top of flat a year ago.

Steven S. Fishman

Well, but the businesses aren't quite the same in the fourth quarter from a volume base. The Seasonal business was terrific in the fourth quarter, but that was trim-a-tree. The Seasonal business in the spring is Lawn & Garden. We have to wait and see how the consumer reacts. And it's way too early in our business to figure out that it's very, very good or very, very bad or anything in between. The first quarter call is always impossible for us to even call the quarter. A year ago at this time, actually, we were flying, and we were all excited about it. Then the weather turned against us, and we were not happy with first quarter results. So it's way too early to talk about that. Electronics does continue to be vibrant. We're really excited about that. I'm excited about the plans that we have for Home, but we have yet to fully execute them. So it would be preliminary for me to get overly excited about that. And the business that drove the volume in the fourth quarter was predominantly Seasonal-related, so top-of-the-bed blankets and stuff like that, that doesn't occur in the first quarter. And Furniture does continue to be really, really good, so I will say that piece. So I'm not trying to -- I'm just trying to be reasonable in our guidance. Our expectations are that we've given guidance that we think are consistent with what we think the business is going to perform at.

Charles W. Haubiel

Two other things I'd add to that, Dan. First off, we did move and add circular out of the first quarter to second quarter. And we did try to take that into account into our comp guidance. But additionally, I would tag on to what Steve said. The challenge for us sitting here today is that the easy compares, to use your phrase, are ahead of us. And not knowing what weather is going to be, it's difficult for us to really step out and say, "Hey, let's comp on comp." We certainly wouldn't want to step out and buy the inventory that way because if we're wrong, we've got a challenge. So the easier comp is ahead of us. And without really having real clear visibility into it, we take a look at what were the trends coming out of, really, third quarter starting there, fourth quarter and what's going to be important to first. And we've got comfortable with 2% to 4%. It made sense for us.

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

And just real quickly, why would the gross margin rate drop in the first quarter but increase for the year? And then also, it looks like the pace of buybacks slowed during the fourth quarter relative to the first 3 quarters of the year just ended. I was just curious as to why the pace of the buybacks slowed.

Steven S. Fishman

Yes. From a margin standpoint, I'll go back to what I mentioned earlier. I think first off, we do start to anniversary in the second quarter, and the middle part of the year, some of the strategic decisions to go into different classifications which impacted IMUs. So that anniversary is ahead of us, so to speak. But the large difference in terms of why do we expect margins being up year-over-year is markdowns, which hurt us in the second and third quarter, not in the first.

Joe R. Cooper

Yes. Dan, it's Joe. I can speak to the buyback. We actually run on a grid, and so it depends on where the share price goes. And we've got 3 months to run on that grid. And particularly in the fourth quarter, the window's only 4 days. So the market dictates that.

Operator

We'll take our next question from John Zolidis with Buckingham Research Group.

John Zolidis - Buckingham Research Group Incorporated

I want to ask a question about something you touched on in the script, which is the consistency of same-store sales and the potential to improve that. I do think that, that's something investors care a lot about and would be really beneficial for your stock over time if we could get a greater comfort level that comps could come in a little bit more predictable and more consistently positive. So could you discuss some of the initiatives you have in place? Or are you thinking, I guess, at this point about what you can do to make the business more consistent on a quarter-to-quarter basis? And then how does the closeout nature of the business create a unique challenge there?

Steven S. Fishman

I'll address the closeout piece second and the consistency first. You know, Doug Wurl joined us almost a year ago. It was last May. He's Executive Vice President of Merchandising. And I think Doug is settling into put his touch on the business probably on a timely basis, and we need to let him settle in. And I think I and he feel real good about our plans for the year, so -- specifically to address some of the quarter-to-quarter issues, although I will tell we have a lot of initiatives, particularly as it goes to getting into the second quarter and early third quarter, which has really been our nemesis quarter, John. And I know you know that, and we've talked about it. We've been very open about it. We have stronger, more aggressive plans. Actually, what Doug's done, and I really support it -- you hear us talk about the 9 weeks of Christmas all the time. We focus on the 9 weeks of Christmas like we do nothing else, and we very rarely do anything but outperform the fourth quarter of the year in the 9 weeks. What Doug has done, along with the Merchandising organization, Planning and Allocation, is focused on a number of the businesses in 9-week increments for the balance of this year. And we've tried to take the same approach to 9-week periods, not just the 9 weeks of Christmas, and what are the opportunities and how we really go after those businesses in those 9-week increments, what are the things that are most meaningful to the consumer during that period of time. And starting in the second quarter, in particular, going into the end of the second quarter and to early third quarter and late third quarter and before fourth quarter, which is already done, the 9 weeks of Christmas is basically done and decided upon for 2012. We've got some really good plans, and I feel terrific about that piece. The second piece that he's addressing, in the Merchandising organization, is the closeout piece that I said I was going to address first, but it didn't, I'm sorry, which is we really are focused on understanding by business category and managing each one of the pieces about how closeouts as a percent to total really affect our overall business and different businesses, because they do affect us in different ways in different businesses. Some of it's made for us. We call it in and out. It's global, and it's seasonal, and it comes in on a 6-month basis. And we do a really great job with it, and we're really satisfied with it. But some of the businesses, Consumables, parts of Home, Hardlines, those businesses are really elevated when the closeout percent to total is elevated. And we're really focusing on that as a complete separate strategy, too, and really going after understanding how those closeouts are planned, what's on order, what are we doing about it, how aggressive are we. So instead of sitting back and kind of waiting for it, John, we're really aggressively approaching it. And we're out there in the market, probably stronger than we've ever been before and addressing those opportunities and making sure those opportunities aren't getting by us.

Operator

And we'll take our next question from David Mann with Johnson Rice.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Question about Canada. Can you talk about the timing for when you expect inventory to be at that target level? And also, perhaps comment on the marketing plans in Canada, perhaps the introduction of the -- your Rewards program or transformation of their loyalty program.

Joe R. Cooper

Sure. It's Joe. I would say the inventory we've been successful building in a limited number of categories, but still not the kind of assortment we would like. We're pretty successful with some trim-a-tree, some Toys. We've been able to get a few -- some Furniture up to Canada, and all of that has been successful although in limited quantities. For 2012, we're very focused on broadening our assortment, bringing Home, expanding our Home assortment. And certainly, we've been successful building Consumables, which is heavily closeout and needs to be sourced up in Canada. So to answer your question, late in the second quarter, our building through the second quarter in quantities, but really filling out the assortments where we would like is really a third quarter and certainly being set for the 9 weeks of Christmas. We'd like the stores to be set with a pretty strong assortment by the end of the year. But remember, it's still a year of test and learn, so we're going to make some mistakes. We're going to bring some merchandises in that might not play as well, and that's okay because we do want to test and learn. And that's what this year is all about.

Steven S. Fishman

I'll add to that, David, just because Joe's trying to be kind about it. We've made a conscious decision that marketing efforts are not what we want to do, which is really your first question. Let me tell you why. My point of view is that inviting people into the stores when you haven't really significantly changed anything and you're not ready to do it is the biggest mistake you can make, at least from a retail standpoint. And that's just my point of view. So we -- really, what we're finding right now is just that -- just putting great merchandise in the Liquidation World stores right now is pulling plenty of traffic in, and we're real happy, and we're seeing volume increase on a by-store basis on a week-to-week and month-to-month basis from where we were when we took it over in July. And putting great merchandise in there, helping them understand how to execute the right way, the Big Lots way, is the right thing to do in 2012. And we'll be ready to start talking about rebranding stores in 2013.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Okay. Very good. Joe, in terms of your comments about 2013, I just want to clarify this because in the past, I believe you talked about a return to profitability in '13. This morning, you used the words getting to breakeven. Is that any change in outlook in terms of your thoughts for Canada in 2013?

Joe R. Cooper

No, no. It's just -- I think what I was trying to emphasize is to believe we have a firm model for 2013 is -- it's premature. It's certainly -- I think the better term is the goal of the business. When we purchased the business, we certainly had internal models that ran '11 and '12 and into '13. There's an awful lot to accomplish in 2012. We're very focused on doing that. We think we're building the team to absolutely do that. But I'm careful to imply we have a firm model 1 year out when there's so much ahead of us this year. That's all.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

And then in terms of the Canadian stores and the comp calculation, should we expect that they will enter the comps 15 months after the acquisition?

Joe R. Cooper

I think -- we'll make that decision along the way. It's just the business was in such a dire straits last year. To comp it this year would obviously be misleading. We're really talking about productivity in the store in the sales increases. I guess we'll talk about entering whether the comp enters the calc in a year.

Steven S. Fishman

Yes. If we put those stores in, David, after 15 months, keep in mind, to Joe's point earlier, we'd have a fully assorted store versus a store that had roughly 20% of the inventory a year ago. So we wouldn't want to be misleading to you guys like that and be reporting some kind of huge, huge comps in the third quarter when really, more importantly, for the year anyway, for you guys hopefully, to judge our progress is, are we doing what we said we were going to do? Is volume from quarter-to-quarter going up like we anticipated? That's the most important thing, as Joe mentioned, to getting to '13 and feeling good about a model that gets us to breakeven.

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

And then one last question on SG&A. Last year, you talked about lower bonus in the first quarter of $8.5 million. In terms of this year's first quarter guidance, should we expect that, that entire bonus is recovered in the outlook?

Timothy A. Johnson

I would suggest the majority of it, but not all of it. Remember, back from the first quarter, the $8.5 million was a combination of the fact that we did miss our first quarter plan. But first quarter 2010 was a bang-up quarter, if you'll recall. We had a 6 percent comp and -- which was probably one of the biggest comps on a quarterly basis we've had in a number of years. So it's a combination of outperformance or underperformance in '11, but outperformance in '10. So not all of the $8.5 million.

Operator

[Operator Instructions] We will go to our next question from Jeff Stein with Northcoast Research.

Jeffrey S. Stein - Northcoast Research

A couple of questions for you. Number one, have you bought Seasonal up, down or about flat to last year given the fact that last year's Seasonal goods, particularly Lawn & Garden, was tough? How should we be thinking about that?

Steven S. Fishman

It's planned up. Actually, the entire season was flat. If you'll recall, Jeff, we made up in the second quarter what we dropped in the first from a top line standpoint. Unfortunately, we didn't from a profit standpoint. But it's planned up, and I would call us moderately aggressive in Seasonal this year. I would say it's as much as anything average price point too.

Jeffrey S. Stein - Northcoast Research

Okay. And another question, as we look at Canada and the 3 initiatives, kind of maybe you can tell us where on the glide path are you with regard to your 3 initiatives, with regard to hiring, merchandising and cleaning up the stores? Are you on track for each of them? It almost sounds a little bit like you're having some issues getting the inventory levels up to where you would like them to be.

Steven S. Fishman

I -- we're on track on all 3, Jeff. It's -- they run different timetables. Cleaning up the stores, I think the team did a great job doing that. But we had such minimal levels of inventory that we asked them to clean up the stores, and that was executed in the third quarter. Now execution in the stores and keeping them standing tall, we're working through, and I think we're making very good progress there. So the store cleanup's been executed. The hiring, the talent, principally very close to being done with that, added a lot of great talent to the team. And building inventory is just a much longer process. The focus in the back half of 2011 was really focused on closeouts to acquire quickly in Canada to get principally some Consumables, which took some time because it's very vendor-heavy and takes a while to build those inventories, and also tapping the significant resources of our Columbus organization to move up some inventory that we could because of labeling quickly. And that was Toys, Furniture, getting in touch with Serta nationally and leveraging those partnerships, which is working very well up there, and then Seasonal to the extent we can get it up there because we could not move anything with a plug, if you will, north across the border. So we moved some trees and some decorative items and some wrap up. And all of that worked very well, but it was very limited. And so in 2012, the organization will be able to and has plans to build the Seasonal inventories because we've had more time to plan that. Home is an area that's going to take some more time to develop, and we're adding resources there. So all across the business, developing what really is a pretty complicated assortment will take some time, and that's what I was speaking to earlier.

Jeffrey S. Stein - Northcoast Research

Okay. And what is the margin differential, gross margin differential, you're budgeting for Canada relative to the U.S.?

Timothy A. Johnson

Yes. Jeff, it's TJ. I think it's a little early for us to start breaking down margin and SG&A components for Canada at this point. Clearly, we'll give you guys the segment reporting like we've done today for fourth quarter, and you'll see those actual results as we go through the year. But I think it's more important for us right now to make sure we give Joe and the team the flexibility to test and learn whether it's high margin, low margin, markdowns, no markdowns, different types of promotions in the store, and not feel encumbered on a margin rate that we might give you guys.

Operator

We'll take our next question from Anthony Chukumba with BB&T Capital Markets.

Anthony C. Chukumba - BB&T Capital Markets, Research Division

I just had one question on Canada. And I know you've touched on some of this over the course of the call, but what has positively and negatively surprised you in Canada? It seems like the early results had been considerably better than you expected. So I just was wondering, what do you think is really kind of driving that? And is there anything that has, like I said, surprised you a bit on the negative side?

Steven S. Fishman

Well, I would say we've done a lot of due diligence on Canada. We've wanted to get up in that market for the last couple of years. So we weren't terribly surprised -- we have not been surprised on the market. We believe we know how we can win up there. We believe we know the categories that we win at will be successful in Canada. So the fact that the customers are responding to the limited assortment that we've been offering is very, very encouraging to us. Surprise to the downside, I can't speak to anything specifically. I think we are aware that there are significant challenges in turning around this business. And so the combination of the team that we're building up there with, again, the tremendous resources we have here in Columbus, we think, is a recipe for success.

Operator

And we'll take our next question from Brad Thomas at KeyBanc Capital Markets.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

I wanted to just follow up on something that maybe you've touched upon in one of the earlier questions. I really wanted to ask about it more directly, that theme of consistency. And I was hoping you could talk little bit more about the big opportunities for you to improve some of the predictability and consistency of the business.

Steven S. Fishman

Actually, I think I gave a pretty good explanation as far as it goes in what I shared already today. Deeper than that would revolve and involve discussing future plans on a quarter-to-quarter basis, and I'm just, as a consistent practice, not willing to do that. We feel very, very good that we have very specific merchandising plans for execution on a quarter-by-quarter, on a 9-week-by-9-week basis. And as we get into those periods, the end of the first quarter going into the second, we'll speak to that.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Okay. I appreciate that. With respect to one of your other main initiatives, the opportunity on systems, could you maybe talk a little bit more about where you think those can have an impact this year?

Steven S. Fishman

Yes. We feel really, really good about where we're at as far as that goes. I mean, we've made some great capital investments. Probably the 2 biggest ones clearly are SAP. And now that have retail up and running, although it's only been 4 weeks, I guess, at this particular point, I called it a feather dropping to the floor. It was probably the finest execution that we've ever done before. We had about 70 people internally committed to that program over a 4-year period, and it's up and running with really nothing going on except for better quality, more consistent information. So we're real pleased about that. If you combine that with the investment that we made a few years ago, in the entire chain of about $40 million worth of capital for new register systems, we're pretty well up-to-date where we want to be. What we're working on now, and the reason that I kind of indicated it'll take a few years, it's more of the warehouse management system piece of it. Now what we've done is we've gone back to, and I always spoke to the fact that the best way to make investments are when you don't have to, when you're not pressured up against the wall because you make them the right way and you make them intelligently. So now we're going back and we're looking at our warehouse management systems as we go forward and as we look at future growth for the company, the fact that we're at 1,450 stores. And probably, we'll end this year closer to 1,500 stores after the pluses and the minuses. And then we'll talk about at the end of this year or really a year from now the new long-range plan. In the next 36 months, we'll eventually be pushing up on the infrastructure as we have it right now. So new warehouse management systems will be great. We'll bring one of them up in one of our distribution facilities this year. We have 5 DCs across the United States. And then we'll -- we have a plan internally to bring some of the other DCs up in the next few years. So that's one thing. Number two, just to manage our human resources a little bit better, we've always known and we've always wanted a better system, and we'll be investing in that at some point this year into next year. And the third piece is, as Chuck's sitting here, he's been really good and passive about the fact that he needs a new Real Estate system, which is really a core to what we're trying to do as a company over the next few years and what we've invested in going forward. So we'll invest in a Real Estate system. So they're just the things that are going to make us a better and better company and help build for our future. They're not in any way what I'd consider to be near as significant as the capital expenditures on an individual basis as we've made in the past, which is another great thing. It just says that we can utilize our capital for growth, which will predominantly be keeping our infrastructure great and new stores.

Operator

We'll take our next question from Patrick McKeever with MKM Partners.

Patrick McKeever - MKM Partners LLC, Research Division

Just wondering about the private label program in the Food area and how it's going, how many SKUs you have, what areas and what's working, what's not. Is it a material piece of your Food business? And what are the plans going forward?

Steven S. Fishman

I don't want to give you numbers, Patrick, that I'm not real clear on, and I'm embarrassed to a certain point. I will tell you, both Fresh Finds and International Foods is doing quite well, probably from a volume base. And I won't share those specific numbers with you, but they're in the double-digit millions. After the first year, we were so pleased. We'll probably do in the range of double the business in both of those programs this year. So I think it's a very good point. At some point when it becomes, quote, significant, we will share those numbers with you. But both Fresh Finds and international, on a volume level, are almost identical or will be this year. And there's not much yet that's not working. But as we broaden the SKU base, and I want to say in Fresh Finds, we have about 150 SKUs. That's not what I'd consider to be wildly significant. So that's the only reason I mentioned that. But I'll get you better numbers, or TJ will or Andy. And we're expanding it out going forward into the first quarter and the second quarter. Most everything we're doing is doing well. The likelihood is as you expand the SKU base, that you're going to find some items that are not selling. We have relationship internally with a domestic manufacturer who is the best in the country, who does it for us and a lot of other people. And in fact, the resource is so committed to us that we will have a permanent relationship on staff in-house with them, so that's building, and that'll be significant. And then our Food people have been overseas, particularly in Europe, in the last few months, mostly Germany, where a lot of great stuff is coming out of between Germany and Switzerland, and et cetera, et cetera, snacks, chocolates, really exciting type, specialty-type food stuff. It's doing well. It's all doing really well.

Patrick McKeever - MKM Partners LLC, Research Division

So do you feel like the -- because one of the objectives there in building it out, I think, was to build more consistency in the Food area.

Steven S. Fishman

Yes, yes, real good...

Patrick McKeever - MKM Partners LLC, Research Division

Do you feel like that's happening?

Steven S. Fishman

Yes, you got it. You are right. And we probably should be a little bit more specific on that. And maybe next quarter, we will be.

Patrick McKeever - MKM Partners LLC, Research Division

Okay. And then just a real quick one, I mean, how weak was the Seasonal business last year, the Lawn & Garden business? You said that you have yet to come up against the really easy comparisons with last year. When did those hit?

Timothy A. Johnson

Think of it 2 ways, Patrick. Middle part of March through really Memorial Day, weather was not our friend. So that's both Seasonal, and I would suggest, Seasonal transactions, or that need for someone to come in and shop the rest of the store started to be a challenge. I think we said last year, comps for Seasonal in the first quarter were negative mid-single digits. And then they turned around, and were positive mid-single digits in the second quarter as we had to get more aggressive on price, et cetera. So for the spring season, to Steve's point earlier, comps were relatively flat. We're planning this season up this year.

Operator

We'll take our next question from Peter Keith with Piper Jaffray.

Peter J. Keith - Piper Jaffray Companies, Research Division

Steve, you talked in the past about with the Buzz Club and your point-of-sale system that allows for customer data capture. You might be able to implement more of a direct marketing program at some point in the future. Could you just kind of update us on your thoughts on that portion of your business?

Timothy A. Johnson

Yes. Peter, it's TJ. I would suggest to you there's still work being done there. I think what we learned -- we had some fairly good success in the fourth quarter communicating to our Rewards customers and giving them kind of a sneak peak or an opportunity to come in and take advantage of markdowns earlier than the general public. We know they like being treated special. I would suggest to you that there were -- will still be a fair amount of testing going on in the first half of 2012 because we're not as comfortable or we're not as pleased with the overall results of the program yet. We think we've done a great job of building a large database of customers to communicate with as e-mail and social communication becomes more and more important and print is less and less important. It's helped us keep our costs low in advertising. That's a very big benefit. We have a Friends & Family event coming up this weekend like we did last year. The Rewards weekends have gone extremely well. So there certainly are a lot of benefits to the program that we have in place. Communicating directly kind of outside of those events or outside of ads is where we see the opportunity going forward. We've got some, we think, some pretty good ideas to test. And when we have something that's, I'll call it, rolloutable that is meaning, we'll talk about it. But we're not there yet.

Operator

Our last question today will come from Meredith Adler with Barclays Capital.

Meredith Adler - Barclays Capital, Research Division

Nobody has really talked at all about the growth in the U.S., and you said you would be opening 90 stores this year. I just wondered, maybe Chuck can a talk little bit about what you're seeing in the Real Estate environment. How many of those 90 stores will be A sites? Is it -- has change gotten any tougher than 1 year or 2?

Steven S. Fishman

Meredith, I don't think it's a lot tougher. I do think, obviously, without new store growth or new store construction in those types of markets and without the same number of bankruptcies that we saw in the past, we do expect that we'd probably open about 20 A stores this year compared to about 25 last year. So I do think that we're starting to get into a cycle that I'm not sure is going to have that material of an impact on our store openings but is going to change the mix-ups as to the A sites and what we consider to be the better, more traditional sites.

Meredith Adler - Barclays Capital, Research Division

And the cost of Real Estate?

Steven S. Fishman

It's creeping up every year. I don't think there is, once again, a large material change in it primarily because, quite frankly, the As are the As. And so I think last year we started seeing a pretty significant move when those numbers got -- took a material reduction as far as availability out in the market. This year, I haven't really seen a big increase. I do think that what we are focused on that we haven't spent a lot of time talking about is the traditional centers that would be in more expensive locations. And one I'm thinking of, quite frankly, is one in Elizabeth, New Jersey, where the IKEA site is, if you're familiar with that. We just opened a store kind of across the parking lot next to Toys "R" Us. And that's a pretty high-rent district, we don’t classify that as an A store. But we're looking at that as a different model, obviously, with the higher demographics and the higher customer counts there to offset the higher occupancy costs.

Meredith Adler - Barclays Capital, Research Division

Great. And then I'd just like to ask about whether you'll say anything about how you use your free cash this year. Is it reasonable to think that you might do some buybacks?

Steven S. Fishman

I guess I'll jump on that as well. The board just met yesterday. And as we discuss every quarter with the board, obviously, there's $99 million authorization still remaining. Joe kind of alluded earlier to it that we look at not only what's occurring during the open window and what's moving with the stock, but typically, the board will also put in place a 10b5-1 grid that, depending on what the market does, could result in us having some buyback. Nothing else has been authorized or wasn't authorized at yesterday's board meeting. So it will be quarters going forward.

Timothy A. Johnson

Yes, I think, Meredith -- TJ. Just to chime in on what Chuck's saying, we've got -- we ended the year with a little over $60 million in debt. As you know, our first quarter is one of our heaviest cash flow quarters of the year. So clearly, we've got a pretty good opportunity here to be rid of that debt absent any kind of extra buyback activity or use of the $99 million. Having said that, we expect to generate $200 million of cash flow this year. We've got a $700 million revolver. I think Steve and the board both believe that we've got plenty of dry powder to do what we want to do, both in the plan, or if there's an opportunity, if the market gives us an opportunity to continue to buy back meaningful amounts of shares. So we've -- we're in a real good position right now. Being a high cash flow company with a big yield is clearly a benefit to this model, and we feel very good about how we're heading into 2012, both from a business standpoint, as well as a balance sheet and liquidity standpoint.

All right. Cindy, we thank everybody for their time today, and we look forward to talking to everybody at the end of May on our first quarter call.

Steven S. Fishman

Thank you.

Operator

Ladies and gentlemen, a replay will be available for this call within the hour and will end at 11:59 p.m. on Friday, March 16, 2012. You can access the replay by dialing (888) 203-1112, that is for toll-free U.S. and Canada, or you may dial (719) 457-0820 for international callers, and enter the passcode 4069205. Again, ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect.

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