Ladies and gentlemen, thank you for standing by. Welcome to Central Garden & Pet's Third Quarter 2012 Financial Results Conference Call. My name is Denise, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Steven Zenker, Vice President of Investor Relations and Communications. Please go ahead.

Thank you Denise. Good afternoon, everyone. Thank you for joining us. It's my pleasure to welcome you to today's call and to introduce our other speakers. With me on the call today are Bill Brown, Central's Chairman and Chief Executive Officer; Gus Halas, President and Chief Executive Officer of the Central Operating Companies; and Lori Varlas, Central's Chief Financial Officer. As a reminder, we issued a press release this afternoon providing results for our fiscal third quarter ended June 23, 2012. The press release is available on our website at www.central.com. Before I turn the call over to Bill, I would like to remind you of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements made during this conference call, which are not historical facts, including expectations from proved efficiency and profitability from the company's transformation initiatives, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in Central's Annual Report on Form 10-K filed on November 21, 2011, as well as the company's other Securities and Exchange Commission filings. Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise. Now I will turn the call over to Bill Brown. Bill?

Thank you, Steve. Welcome, and good afternoon. I know all of you have seen our release. Clearly, it was a good quarter. It reflects some of the good momentum we expected from our transformation plan and our investments in brand building. Revenues, margins and earnings were all up over last year. Also, we addressed the shipping backlog issues that affected us last quarter. Our revenue growth rate is a welcome sign that our increased marketing and our master brand strategy is yielding tangible results and helping us to build a solid base for sustainable future growth. I think, however, as Gus will agree, that while we are pleased with our progress, which should position us better for any economic environment, we're still in transition. The economy continues to be soft and consumers continue to be stretched. And weather and commodity prices, of course, are always something to factor into any given quarter. Before I turn the call over to Gus, I want to acknowledge our whole team has been working extremely hard to implement our transformation. Essentially rebuilding the airplane in flight. I know that kind of change can be unsettling, especially for those on the frontlines. But I am tremendously seeing focused dedication, renewed energy throughout the company. And I want to take this opportunity to publicly thank the rest of the management team and all of our employees for their contributions and hard work. We still have a lot of work ahead, and we are going in the right direction. With that, I'll turn it over to Gus. Gus?

Thanks, Bill. In the third quarter, we delivered both significant top line growth and sizable increase in earnings versus a year ago. This makes 6 out of the last 7 quarters that we have grown revenues, reflecting our increased focus on marketing, brand building and innovation to drive customer demand. Margins in both Garden and Pet segments rose during the quarter, something we haven't been able to say for quite some time. We saw a substantial growth in our Pet segment, in which revenues increased by 19% on widespread strength across many of our categories, particularly in flea and tick. Our Garden sales also grew by 2%. Lori will cover the results in more detail in the call. We are seeing the team's efforts bear fruit in the form of increased sales and market share gains. We're taking more aggressive stance, positioning our brands and educating our consumers about our products. And these messages are resonating with our consumers. Last year, we put marketing muscle behind our grass seed and gained significant share. This year, even in a down market for grass seed, we further grew that share, thanks to the performance of our Premium segment [ph] even as we faced strong advertising blitz by one of our major competitors. In our Control Products business, we also gained market share, particularly in the categories where we focused our advertising and promotions. AMDRO and SEVIN are doing especially well. We expect to grow market share even more next year with what we believe is game-changing innovation we will be bringing to market. In our Pet segment, our flea and tick business was a home run in the third quarter, helped by new distribution and innovative new applicator used to apply product on the pet and the first TV advertising we have…

Thanks, Gus. The press release we issued this afternoon covers the financial results, but let me spend a little more time commenting on a few aspects of the quarter. On a consolidated basis, our 10% sales increase in the third quarter was largely due to strength in our Pet segment, specifically flea and tick. Our sales gains were predominantly from higher unit volume, which benefited from increased distribution of our products, as well as the delivery of some backlog products from last quarter. Our consolidated gross margin for the quarter rose 300 basis points to 33.8% from 30.8% in the third quarter of 2012 due primarily to changes in product mix, which include higher margin flea and tick products. In the near term, we don’t expect to see such a large impact from mix changes as we experienced this quarter. Commodity cost remains high during the quarter. We're keeping a watchful eye on the impact of the extreme heat and drought on fall crop yield and prices. Our supply chain and sales teams are working together to respond proactively and in a more coordinated fashion. One note on bird feed margins, as you may recall, it was the sharp rise in bird feed grains last year that negatively impacted margins. Our bird feed margins this quarter improved over the prior quarter and over the third quarter of last year. Recent price trends on bird feed ingredients may result in lower margins in future quarters for our bird feed business if grain prices do not moderate. The higher sales and the expanded gross margins translate to a higher consolidated operating margin. Let's turn to our segment results starting with Pet. In the Pet segment, sales were up 19%, reflecting strong consumer demand for our products. While flea and tick was the…

[Operator Instructions] And our first question will come from David Mann of Johnson Rice.

A nice rebound after last quarter, I'm sure you're happy with that. I guess the first question, you guys did a great job in revenue and gross margin improvement and growth this quarter. I guess the SG&A was a little higher than we expected. So I was wondering if you could just parse into a little more of how we should think about, on the SG&A line, the kind of growth in the future? Were there any other extraordinary items in that line perhaps related to some catch-up of those shipments that have been delayed?

Sure. So as always [ph] , the SG&A, as I've mentioned, the SG&A line was 24.6% of our overall sales this quarter versus 23.3%. The delta was driven by obviously increase selling and delivery expenses related to our expanded sales. We had some higher variable comp as we grew the business, and we had brand-building investments included in that SG&A number. You may recall, at the beginning of the year, we had said that we're going to spend 7% more in marketing this year in brand-building activities in 2011 and 20% more than in 2010. So as we move forward, we explained that -- as you may be thinking again, we need to continue to invest in our master brands as part of our key strategy.

I guess, I would think you would have had some of those marketing expenses in the last quarter. Is there are some reason that we didn't see it as much impact you in the second quarter?

Sometimes our marketing investments aren't necessarily linear. It depends on the quarter. Some things fluctuate as it relates to Garden and how the season is unfolding. So it's not always just necessarily linear. And we spend that as we -- to support our products as the season rolls out.

And more importantly, Dave, sometimes it falls into the next quarter.

Understood. You mentioned some expanded channels of distribution. Can you elaborate a little bit more on where you are opening up, sales of product or introducing sales of product and the type of impact that's having?

Well, more specifically, I think we've talked a little bit about in the past, more specifically on the flea and tick side. We opened up a rather large channel, which was in the club. And that had a profound effect in just that business. But it sort of goes across-the-board. I think, with the sales organization that we have either developed or have brought in, we've expanded our distribution into flea, drug, and mass, other club areas, all the way across-the-board and just new customers that heretofore we had not been -- had not been part of our portfolio, if you will, for our distribution channel.

Are you able to quantify how much of the growth this quarter came from some of those new channels and distribution?

We haven't -- yes, we can quantify it, I don’t know if we're prepared to talk about it.

Okay. One last question then I'll get back in queue. On the commodity cost that you might be facing due from the drought. Obviously last year, you went through some pressure in commodity cost. Can you just talk a little bit about how you might be prepared differently now for some commodity cost pressure versus where you were 12, 18 months ago?

We're happy to speak to that. So the thing about commodity costs, and if you think about the quarter that we just exited Q3, well, for certain of our commodities, they were off their peak they still remain high. And as we are exiting, exit third quarter into fourth quarter, everyone's aware of the drought and extreme weather conditions. And so if we think -- going forward, we're certainly watching that. Some of the changes we've made relate to increased visibility and transparency. And as you think about our operating model, we're very focused on being a integrated, multi-brand company. I think that's certainly helps us leverage talent and visibility across the company. We've got a much more coordinated effort, I believe, between our supply chain organization and our sales organization, such that we've got discipline around watching those market costs, taking the right action, and importantly, talking to our customers and educating them along the way, such that if prices don't moderate, we’ve got an ongoing dialogue with customers as we think about how do we offset those increased commodity prices.

An important aspect on that, David, is that we have to have data and we have to be very clear with our customers of the argument of why we need to take certain price increases.

Our next question will come from Joe Altobello of Oppenheimer.

Just a few questions. I guess, first, in terms of the tips in top line growth, how much of that, if you can quantify for us, was due to the backlog that you saw last quarter?

Right, so as you may recall in the last call, we talked about the issues we had in fulfillment, and there was a number of posted reasons, but it’s very difficult to quantify based on how the ordering process transpired. Because an order, that might be in 1 week may be canceled, but then it's repeated of following week. And so the visibility and to quantify that is difficult. But what we do know as we look at our revenues for the third quarter is that if you look at the Pet segment, they're up $44 million and obviously primarily through a flea and tick. But our Pet segment probably lesser impacted. And so a lot of that growth was driven by the innovation and increased distribution of our products in the Pet segment.

Okay. So most of the backlog, if there was any impact, was on the Garden side, it looks like?

More so.

Okay. And then in terms of the expanded distribution you mentioned club on flea and tick. And from what I understand, in the club channel, distribution tends to come and go sometimes. I’m curious what your thoughts are of "keeping that distribution" going forward?

I think we can make the point to distribution anywhere in the channels. We have to be ahead of not only what we grow but we actually have to outgrow our competitors. There are tectonic shifts in the marketplace that's why innovation, branding and our positioning is becoming more and more important. You're not guaranteed any spots just because you have the position from season-to-season. You have the maintain that in advance. So while you may make the point that surely that in the club channel we may have more risk, I think the risk as of this point in all honesty is across-the-board on all channels. I mean, we have in one customer, we took -- and this is in food, drug and mass, we took business from a supplier that provided this particular customer for 54 years. So there's a lot of shifting going on in the marketplace, and we have the be very mindful of that and be way ahead of the curve. So while you may make the point that some clients they can shift, you'll shift more on, I would call, the nonactive portion, meaning toys, other things like that, not necessarily in something that has actives such as flea and tick with particular patented technology.

Okay, that's helpful. Just one last one in terms of the share repurchase activity, it looks like there was none in the quarter. Your thoughts on share repurchases going forward? And maybe related to that, is there anything that you're working on, on the M&A side that may have kept you from buying back stock in the quarter?

Well, on the M&A, as I reported last quarter, more activity and more interesting things going on. And obviously, we're active in the marketplace. With regard to the share buyback, we're comfortable with where we are. And didn't see any particular reason to be buying back given all the different dynamics that are going on in terms of the ability to deploy capital.

And we stated before, as it relates to cash, our hierarchy is investing in our business and growing the top. The company is first, and M&A remains second and then share buybacks is third on a hierarchy.

Our next question will come from William Reuter of Bank of America Merrill Lynch.

Another question on your gross margins, it sounds like a large driver was mix between flea and tick and controls in both Pet and Lawn & Garden. Would gross margins have still been up if it not for the dramatic shifts in mix?

If you think about comparing Q3 2012 to Q3 2011, and the thing to remember is last year the commodity cost was skyrocketing. They were going up quickly and very high highs. And we were chasing the market trying to get our price increases intact. If you look at where we exited the quarter, commodity costs quarter-over-quarter were roughly in-line, but we had, had an opportunity to take price increases and work with our customers throughout the year. And so we had some benefit of price increases in addition to mix. But mix, if you think about control products, as you think about our flea and tick, certainly helped on our overall gross margin.

Okay. And then you touched upon, in a response to an earlier question, the escalating grain costs. I am curious when that will start to be impacting your financial results. Is that something we're going to see in the fourth quarter? Is that you guys are maybe hedged in some way that will push out when that will impact you, guys?

Well, if you think about the key commodity essentials in our bird feed, which are milo, millet, sunflower and corn, we do buy ahead, we do manage our overall inventories and carefully watch those commodity prices. But I think we along with most companies out there are watching very carefully the markets because the drought continues to be prolonged. So I don't think we're in a very different position than anyone else. I mean weather impacts, impacts all of us. And so I think – well, we're waiting to see how that -- how it all plays out.

Okay. And then lastly, last quarter you noted that you still continue to expect 2012 EPS to be below 2011. But then you guys reported a great quarter this quarter. Do you still expect that to be the case?

Yes, so we don't provide numerical guidance. I think we made decent -- a qualitative-type commentary at the beginning of the year when we said the first half would be more challenged. And we expect to see some progress and improved numbers in the second half, which we think we’ve delivered on here in the third quarter. But we didn't give specific guidance around EPS.

Our next question will come from Reza Vahabzadeh of Barclays.

Can you talk about the potential impact of the drought going on in the central spine of the country on some of your product lines down the road, just the potential impact?

Sure. Happy to do that. So as we think about some of the Garden area such as grass seed, if you look at the category, we had a very, very mild winter. And then we -- [indiscernible] to talked about the impact that's had on the grass seed category overall. From a summer perspective, if you think about the heat, oftentimes there's damage comes along that sometime in the future can impact product sales as people repair their damaged lawns. It's hard to call the timing of that because there's so many different factors as you think about that heat. People may repair in the fall. They may repair in the spring. There could be drought issues, who knows? It's really an analysis point how it will play out. So we're watching that from both the sales perspective of impacts on our product line in addition to the commodity cost and the cost of for input cost.

Right. But as far as the sales are concerned, the impact that would be felt potentially on your business would be only the grass seed product line?

Could be in the Controls area as well, depending on how that is affected -- affects the bugs that are coming out.

And then you obviously talked about the triple-digit increase in sales of flea and tick products and double-digit increases in some of the Pet Products. Can you talk about sell-through, POS trends? At some of your key retailers, did the sell-through POS trends match the shipment trends?

Can you be more specific? Because there are different POS trends not only within the 2 segments but also within all the customers. Because take Garden for instance, just the big 3, they had a different POS even with – even though they're selling to the same consumer, the same demographics, there tends to be a difference in terms of the POS based on their marketing, et cetera, et cetera. And then you have the whole myriad of customers, which is not as concentrated in Pet that literally could have different POS almost across-the-board. So we can if we narrow it down, we can give you direction if you'd like.

Right. So I mean if you look at POS trends in your Pet business for flea and tick business, would you consider the sell-through the POS trends to be comparable to your shipment trends for just flea and tick?

We're gaining market share, does that answer -- I apologize...

I guess I was just trying to make sure -- I'm just trying to see if consumer takeaway of your product at the point of purchase at retail match your shipments into retail.

So I think, if you think about our point-of-sale data, I think it's starting very strong on sales gain. So we're both shipping product to our customer and they’re selling through on to the consumer.

If you were to say, is there an inventory build going on at retail, we don't see that.

Right. And I'm sorry, you went through the sales gains for the products away from flea and tick, but I missed them. Can you highlight a few besides flea and tick?

Sure. We also had very strong sales gains in our controls business, our chemical controls business on the Garden side. And on Pet, aquatics also had a very strong quarter.

Right. So were there any product lines that were lower in sales year-over-year?

Recall that some of our sales volumes were partially offset by reductions in some of our areas such as grass seed and decor. But all in all, if you look at our Garden sales, we're up about $5.5 million or 2% on the Garden side.

Operator Instructions] And our next question will come from Karru Martinson of Deutsche Bank.

Just a follow-up on the flea and tick. The sell-in is complete. The sell-through is going strong. And so going forward, in the next couple of quarters here, we should see a similar pattern? Is that kind of what you're saying? Or is this a onetime bump as you sold in, and then we go to a more normalized non-triple-digit sales growth rate?

That's going to hard for us to really quantify, simply because it's a seasonal business and there's a lot of factors that extenuating outside our control. Weather being the biggest one. Infestation is another. I mean, there's a lot of different factors that are really outside our control in terms of what's going to happen, so it's hard to predict. If we continue -- the weather is favorable to having more bugs in the area, both our Controls business and our flea and tick will increase. And while they may not maintain the same digit, they will have continuation of increases.

Okay. You clearly won -- you guys have alluded to shelf space with the new products and the features that they have. When do those line reviews normally take place for the upcoming season?

A lot of them are going on right now.

Okay. And when do you guys kind of have a sense on when those new orders will be placed?

Probably by within the next -- well, it's not just a single point of date. There's different dates, but they actually start from anywhere from the month from now all the way up to 3 or 4 months from now.

Okay. And when we look at the run rate of cost savings here, we're at 20 of the 30 right now. For over the 3-year period, we talked about $120 million goal. Do you still feel that we're going to be tracking to that number?

Well, the only year that we committed exact numbers were this year. And one of the things is that any time you have a transformation of this magnitude, you have to prioritize as you move along. While the end number, we still feel very strongly about, priorities will dictate how soon, how fast and to what result we're going to get on an ongoing basis. This year, we committed to the $30 million because we can see that far ahead. But as we encounter -- because we have only limited amount of resources and while we would like to do everything, we have to prioritize. Once we start doing this, sometimes we find that we go faster or slower in the process. But we're still committed to the 3-year $120 million.

Alright, so you are committed to $120 million over 3 years?

Yes.

Okay. And then just lastly, when you guys talked about use of cash, certainly reinvesting in the business. But when you look at the M&A opportunities that you referenced, can you give us a sense of scale of the magnitude? Are you looking at tuck-in acquisitions? What's the target areas? What's the fit that you're going after here?

Well, you know the businesses that we play in, things that are going to complement that business are all of interest to us and sizes range the gamut. There are some transactions that might be too big to swallow without putting some equity in. But there are many, many sizable transactions that our balance sheet would fund, and there are tuck-ins that are just pretty straightforward and easy to do.

And would you guys rule out pursuing equity as part of any kind of transaction? I guess what I'm trying to get at is, some of your competitors have added legs to the stool or whatever euphemism you want to use. You guys are very good in Pet and Garden. I mean have you looked at branching out beyond that as well or some sort of a transformational acquisition?

We have what we call a third-leg initiative and have been following and vetting that out for some period of time, in addition to our core businesses. But our focus first is organic growth, second is acquisitions within the core business and third would be looking at a third leg.

Our next question will come from Carter Dunlap of Dunlap Equity Management.

A couple of questions. You've made reference in the past and in the comments about the inventory goals for the rest of the year about some of the big-box retailers attitude about their inventories and what they want to keep relative to their revenues. Of your customer base, have most all of them come through that, or are there several ahead in your mind?

There are several ahead, and some have made no comment. But we do have to be prepared. As I mentioned during the conversation, it's a combination of factors of the inventory issues. One is clearly sales-driven, which obviously our sales have increased. So that's one area. The other area is strategic inventory, where we find opportunities that we will be able to average down our cost for however you want to look at it, where we've got opportunities to buy ahead. And finally are the customers that really do want to maintain a certain amount of lean-and-mean approach that we have to ship more often and with a smaller amount. So we have to have more inventory on hand.

Okay. But if you say there's -- let's say, there's 4 that matter, are -- only one of them switch to lean and mean, are they 2, or …?

A couple.

A couple, okay.

Carter, the best way I can say it is there's enough that matter that we really have to rethink about, probably will be best way to say it.

And two other quick ones. You made reference back in you press release back in April, the Boise shared service center is supposed to get going up in June. It takes 18 months to roll in. What's the manifestation of what that will mean? Is that going to bring G&A out of the business units? Or what is it going to allow you to do that you aren't doing now?

Sure. If it's anything about [ ph] the shared service center, and we are underway, primarily focused on our accounts receivable and accounts payable transaction processing currently. What we want to do is ensure that we get our deposit [indiscernible] very dependent upon our SAP rollout, which helps us drive standard of formats of numbers that are analytical reporting. But we certainly want to drive efficiencies through those processes and take advantage of best practices. And so as we think about internally there’s a benefit, there's also a benefit to our customers. We want to make sure that we're easy to the business with, we're predictable and as far as our approach to different transactions. And so the benefit’s not only internally but externally as well.

And the easiest way to think about it is, while the savings may not monstrous, the efficiencies within our customer base is substantial because we have been hard to deal with. And so they've asked us for a lot of other changes that we're making.

Okay. And lastly, you always get questions about allocation of capital to acquisitions, third leg or core. But I don't hear often questions about dispositions. Is there a thought process or any businesses that you review for disposition?

We always review the portfolio and assess what's performing, what's not performing, what aligns itself and what doesn't. So that is an active rigorous part of our review each and every year and sometimes multiple times a year. We do not announce, prior to any action, anything that we're doing, and we don't have a history of selling businesses. That having been said, we evaluate it all the time.

Our next question will come from Carla Casella of JPMorgan.

This is Paul Simenauer on for Carla Casella. I just wanted to follow just a little bit with bird feed. I know you talked about you're still kind of waiting to see how this all plays out. But do you guys lock in any of those prices for bird feed at all, or are you thinking about doing that?

Well, we can't -- on commodities we can't lock in. We can only buy ahead. There's no -- it's not as though we could hedge or do anything else. Where we see that, that's one of the things that I had talked about, is that potentially we might be buying strategically. This would be an area where we might be buying strategically, if we need to, or we see an opportunity. And that's how...

Do you guys see an opportunity?

We definitely see opportunities with certain commodities and we are looking at it. And we are buying certain things.

From time-to-time, we have made and do make those kind of forward purchases. However, we're not like Southwest Airlines who goes out and, what I’ve heard, takes as much as a year's worth of gas ahead. That's not us.

Understood. And also have you also seen similar increases in the other seed inputs besides bird feed at all?

Obviously, we've got -- things are impacted by fuel cost. There are other commodity types -- inputs out there that impact, but clearly that certain product lines that are more impacted than others.

Okay. Great. Just one last question. Can you talk at all about regional performance and also just how the drought might be affecting your Garden business?

I think we talked about how it's affecting our business overall. But we don't report by regions, and we don't segment that in any area other than internally, of course.

Our next question will be a follow-up question from David Mann of Johnson Rice.

Just going back to the question about SG&A. Can you talk a little bit back in April when you had to play catch-up with your supply chain disruption. Was there -- is there some amount of SG&A that was excessive in terms overtime or extra cost that you could parse out for us?

Sure. Certainly there were costs that we incurred to ensure that we were remedying the situation as quickly as possible, but we haven't necessarily called out a specific number. But we certainly invested to one that only addressed the issue at hand in the moment but also to make sure, as Gus described, a number of processes to ensure that we are more efficient and focused on this going forward.

And in terms of some of the other variable expenses, was there a big jump up in incentive or bonus compensation, and could you quantify?

Yes, so again, the components around SG&A were primarily that increased selling and delivery expenses which would vary obviously with our sales. We had variable comps associated with that and the brand-building investment. So those really are the 3 components that impact our SG&A.

Gus, you’ve talked in the past about the moves by some of your customers, the threat of them going to private label. It's a question I get from investors. Can you just give us a state on where you think that is as a threat or as an opportunity for you to perhaps pick up some business as well?

I always hate to answering this question like I'm about to, but, yes, it's both. And, frankly, we're prepared for both sides. We saw that coming some time ago. We are -- we welcome it with some concern and a lot of optimism because we can use it as a marketing tool. We can use it as a revenue growth. And we also have to manage it in terms of what it means to our business, and our business model overall. So the short answer is, while we're focusing on our brands, there are opportunities for us in terms of private label. It's an area that we're focusing on, and it's an area that we would like to pursue on an ongoing basis. But at the same time, there may be some customers that use private label as only a cost reduction, unrelated to the marketing direction that we want to achieve. But we're not going to pursue. So overall, we don't see it as a big threat. We see it as something that we have to manage along with anything else.

And then one last question, if I could, for Bill. This is a question I think I get a lot of times from investors. And that is perhaps you can elaborate a little bit about your relationship and division responsibilities with Gus. Clearly, from your initial comments to start the call, you sound pretty excited about what's going on with the transformation. But I guess, the question is, given that you are the founder and largest shareholder, you've essentially given the keys to Gus to make some of these changes. But there is a concern or at least a question about your ability to sort of change the direction at some point. Maybe if you could talk about that a little bit that would be appreciated.

Would be happy to. First, I'm delighted that Gus is here. He's a wonderful partner. We've worked together -- well, we talked about this before, we worked together before he came in full-time. And this transformation is our entire management team going off-site, working through it with Gus and myself, all of us buying in, all of us committing to it. And I am unequivobly committed to it, there is no going back, we're going forward. Gus is leading this transformation. He's driving the operations of the businesses, and we're very fortunate to have him and the rest of the management team doing it. And that's the state of play

[Operator Instructions] We have a follow-up question from Joe Altobello of Oppenheimer.

Just going back to the incentive compensation question, Lori. I'm not sure if you quantified what the year-over-year change was in the variable comp line.

I didn't. If you look at SG&A again, as a percentage of sales, it's 24.6% of sales for 2012 and 23.3% of sales in 2011. I didn't call out any specific items numerically.

Okay. Is that a onetime item? I mean, in terms of maybe an accrual or something like that, that hit this quarter? Or is this variable compensation level something we should expect going forward?

Well, I think as sales grow, we would hope that the variable compensation would methodically grow the company.

Well, that's was my last question. What's the biggest driver of that variable comp? Is it top line that you guys are paid on?

We have a host of things in our compensation plans. We're aligned with our investors. We want to make sure we're growing the company’s top line and that we're delivering profitability on the bottom line. We have a number of metrics from a working capital perspective we're focused on as well and you'll see that our working capital this quarter is improved with receivables almost [indiscernible] and receivable is down and our working capital is improved.

And ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Central's Chairman and Chief Executive Officer, Mr. Bill Brown for his opening closing remarks.

Well, thank you for joining us on the call, and we look forward to seeing you next quarter.

Great. Thank you.

Thank you.

Ladies and gentlemen, the conference has concluded. We thank you for attending today's presentation. You may now disconnect.