Pool Corporation (POOL) Q4 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to the Pool Corporation Fourth Quarter 2014 Conference Call. [Operator Instructions] Please note, this event is being recorded. [Operator Instructions] I would now like to turn the conference over to Mark Joslin, Vice President and Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone, and welcome to our 2014 year-end earnings call. I'd like to remind our listeners that our discussion, comments and responses to questions today may include forward-looking statements, including management's outlook for 2015 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. Now I'll turn the call over to our President and CEO, Manny Perez De La Mesa. Manny?

Thank you, Mark, and good morning to everyone on the call. Well, based on the reaction of the stock in the last hour or 2, I don't think I need to say very much. But I will. Let me give you my prepared remarks. 2014 marked another strong year of performance with 8% sales growth, 9% gross profit growth, a 14% increase in operating income and a 19% increase in earnings per share. Our cash flow from operations was 110% of net income and our after-tax return on invested capital was 18%. During 2014, we also surpassed the cumulative return of $1 billion to shareholders in the form of dividends and share repurchases, finishing the year having returned $1.1 billion since going public in 1995. These results are only possible because of the commitment of our people throughout the company to execute on our mission of providing exceptional value to our customers and suppliers as we work to realize our vision of being the best distributor of outdoor lifestyle products. We are very fortunate to have individuals who genuinely care and endeavor to use the available tools and resources to promote the growth of the industry, promote the growth of our customers' businesses and continually strive to operate more effectively. In 2014, once again, an abbreviated season impacted our sales growth in seasonal markets as we realized 5.4% base business sales growth in these markets, compared to 8.4% base business sales growth in the year-round markets of California, Florida, Texas and Arizona. Our overall 6.9% base business sales growth compares with the estimated 3% to 5% industry growth as we continue to grow share. Two of the important drivers of both market share and sales growth were building materials, with 20% sales growth; and commercial, with 14% sales growth. Altogether, these 2 product categories represent over 13% of our total company sales as we make outdoor living come to life. To provide context to our results and illustrate the opportunities available to us, new pool construction was essentially flat in 2014 versus 2013, and down approximately 70%, 7-0 percent, from the peak level of 2005. Remodeling and replacement activity in 2014 continued its gradual recovery, but behavior was still down 20% from historically normal remodeling and replacement levels. Last, the favorable consumer demographics with an aging population and southern migration are ideal for increased residential investment, especially in outdoor lifestyle products. Our more than 160,000 products provide the most comprehensive offering to this market in the industry. Our present 330 locations, coupled with our investments in people, inventory and systems enable an unprecedented level of service. We believe that we are in the right place at the right time. In 2014, we continued our pace of investments with 10 new locations, including geographic expansion into Australia, Colombia and the Maritimes, and product line expansion of natural stone in North Texas and Missouri. We also rolled out new technology tools and expanded our delivery fleet and facilities. We maintained our process of diligence as we make all of our investments looking for long-term return even in certain cases -- even when, in certain cases, it may have a short-term adverse impact. It is this commitment to the future that has enabled us to realize the success that we have had to date. Later in 2015, specifically October of this year, we will realize our 20th anniversary as a public company. The public markets in a free enterprise society enables capital to flow efficiently to its best uses and is integral to economic growth and the personal and professional development of society. As stewards for POOLCORP, we take our fiduciary responsibilities very seriously and appreciate the trust placed in us. Thank you for your continued confidence in our team, and we look forward to another successful year as we continue to create exceptional value for our shareholders. Now I'll turn the call over to Mark for his financial commentary.

Thank you, Manny. Financially speaking, we ended 2014 in very good position. On the income statement, you can see that for the year, we increased gross margins by 20 basis points to 28.6% of sales, a relatively modest increase but our first in the last 3 years. We also increased our operating margin by 40 basis points to 8.4%. While this is still below our record 2006 operating margin of 8.8%, this represents steady improvement over the last 5 years from our 5.7% operating margin in 2009, and certainly puts the 8.8% within striking distance. Our contribution margin on base business results, which measures the contribution to operating income from incremental sales during the year, was 15.3%. Excluding the $2.7 million catch-up and incentive compensation, as discussed on previous calls, our contribution margin would have been a very respectable 17.1%. This was in spite of relatively high expense growth for the year due in large part to investments in personnel and technology that should benefit us in the future. On the balance sheet, we ended the year with healthy levels of -- and quality of working capital. Our receivables continue to be well managed as illustrated by our year-end days sales outstanding, or DSO, of 28.7 days; and our greater than 60-day past-due balances of only 4.6% of total trade receivables, down from 5.4% last year. Our inventories, net of trade payables, grew in line with sales growth for the year and include the addition of many new products to support our current and future growth. At the same time, the year-end value of our highest velocity domestic Blue business inventory remained unchanged from last year at 75% of the total value of our inventory. In terms of performance ratio, one that stands out is our return on invested capital, which, as Manny mentioned, for the year was 18% and that's up from 17% for 2013. We calculate this as the net operating profit after tax divided by non-debt net assets for the year. Turning to cash flow. You'll note that our earnings growth and working capital management allowed us to generate a record $121.8 million in cash flow from operations in 2014, which was 110% of our reported net income and a 15% improvement from 2013. After investing in the business, we returned excess cash to shareholders in the form of share repurchases and dividends. For the year, we used $131 million to repurchase 2.3 million shares, which is reflected in our year-end 2014 shares outstanding of 43.5 million shares, which is down 1.9 million shares from year-end 2013. We also increased our dividend per share payment during the year by 16%, paying out $38 million in dividends for the year, which was 34% of our net income. From a debt standpoint, we ended the year with leverage of 1.66 based on average net debt-to-EBITDA. This was up from 1.40 last year, but still represents a conservative debt level and is within our long-term target range of 1.5 to 2.0x. Some of our listeners are in the process of fine-tuning their models for 2015, so I'll take a minute now to let you know what our fully diluted share count projections are for the year by quarter, excluding the potential impact from any share repurchases. For the first quarter, we expect 44,781,000 shares; second quarter, 44,927,000 for the quarter, 44,894,000 for the year-to-date; for the third quarter, we'd expect 45,027,000 for the quarter, 44,979,000 for the year-to-date; for the fourth quarter, where we had a loss in 2014, we expect 43,999,000 basic shares, and for the full year, 45,067,000 fully diluted shares. Before I turn the call back over to the operator to begin our Q&A session, I want to take a couple of minutes to address questions we've received over the last several weeks about the impact that the stronger dollar and weaker energy prices may have on our business. As you know, the dollar today is significantly stronger against most major currencies than it was a year ago. And given the relative strength of the U.S. economy, it may stay that way for some time. So a question we get is how does this impact us. Keeping in mind, first of all, that only about $210 million or 9.3% of our total revenue is generated outside the U.S., the impact is a good news, bad news story. The good news is that although our total revenue would take about a 1% hit at current exchange rates compared to last year, the stronger dollar should have relatively little impact on our net results. This is because, at present, we have relatively modest results overall in our international businesses, meaning gross profit and operating expenses are pretty well matched, which is the bad news. We also don't have a lot of export business and most of our purchases outside the U.S. are sourced locally. So we have some but limited exposure on procurements, which could result in modest margin compression where we have this exposure. A more complicated question is how we are impacted by the decline in energy prices, assuming that energy prices stay in the range similar to where they are today. This answer has 2 parts, with part one being the direct impact we could expect on products and services we procure, and part two being the indirect impact on marketplace demand. On the procurement side, it's safe to say that the products we purchase for resale should remain relatively unaffected, at least through this pool season. Given the seasonal nature of our business, price increases for the season were instituted by manufacturers in the fall for the majority of products sold in the industry and will remain in place for much of this year. These products, in general, are well downstream from oil and natural gas and the production process and not subject to significant price fluctuations as a result. The likely outcome for us, as we see it at this point, is little to no impact to 2015 with the potential for modest to no inflation looking ahead to 2016. Another direct impact is on fuel costs. Our expectation at this point is that we'll benefit from lower fuel costs, but as we discussed last year, there is an ongoing driver shortage that has been pushing upgrade rates and will largely negate the benefit we might receive from the lower fuel costs. So we don't expect this to have much of an impact for the year. As for the answer to part two, which is how lower energy prices will impact demand for pool and irrigation products this year, it's safe to say that this is anybody's guess and we'll have to wait and see. While lower fuel costs and an overall healthier economy may put homeowners in the spending mood for discretionary home products, many of our best performing markets in 2014 were those that benefited from the energy boom. And in these, we could see a slip in demand. At this point, I'll turn the call back over to our operator to begin our question-and-answer session.

[Operator Instructions] Our first question comes from Matt Duncan at Stephens Inc.

So Manny, second year in a row, you guys have had double-digit growth in the seasonally slower fourth quarter. It sounds like, from your prepared comments, this is probably a function of the year-round markets doing better than the seasonal markets right now. Is there anything else you would attribute that to?

Yes. The -- first of all, I think when you look at the numbers, we also benefited in the fourth quarter in terms of total sales by the addition, particularly of Australia, that came into play. On a same-store basis, the same-store sales growth was not quite double digits.

Okay. On Australia, you guys are going through your first, I guess, good selling season down there with it being warm. What are you seeing from that business so far?

Well, when we did the transaction is, it was just on the cusp of the start of the season. So in essence, we are more in the mode of observing and providing or -- and developing plans for the next year. But things are moving right along. No significant surprises, positive or negative, from what we expected.

Okay. Then last thing for me. You had very good SG&A expense leverage this quarter. I know that it had been a focus after it had been much lower for the first 3 quarters of the year. Were there any specific actions you guys took to help drive the better SG&A expense leverage you saw? And how should we think about that going forward, Mark?

The bigger factor on a year-on-year basis is, given how the year played out in 2013, we had, in essence, a catch-up on our incentive accrual in the fourth quarter that we did not have this year, as we did a better job of anticipating what the annual incentive comp would be this year. So there was a little bit of a shift that I think Mark may have mentioned in at least the prior call on that year-on-year change.

Our next question comes from Luke Junk at Robert W. Baird. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: Manny, I was just wondering as we start the new year here, could you maybe help us frame how you're thinking about some of the various initiatives in the business, be it building materials, commercial -- I know you both mentioned in the prepared remarks, as well as retail. I know at the Analyst Day, for instance, you highlighted the opportunity in hardscapes for the building materials business, I guess. Are there any other areas of emphasis we should be paying attention to in the coming year here? Or on the other hand, any areas that you're deemphasizing to some degree?

Well, first of all, we can only handle so many things at one time. So I think you pretty much layered it out in terms of what we got on our plate. We talked about building materials, and that has been an opportunity that we continue to build on and build on in terms of product offering, and then also resources, whether it be on the sourcing, product management or sales side. Obviously, operationally, we need facilities and more robust delivery vehicles to help make that all happen. So that's a major thrust, and we see it as a significant opportunity on a go-forward basis. Much the same way, commercial, we continue to invest there in terms of inventory, geographically dispersed throughout the country to provide better service to commercial accounts; as well as sales resources, product management and, again, other resources to help create demand as well as support that demand operationally again with inventory, locations as well as other delivery and things of that nature. So those are 2 very significant initiatives, but we can't take for granted the business we have. And in fact, we have a number of initiatives in individual markets on a market-by-market basis, given the local nature of our business, to further our penetration on what I'll call traditional business. And to that end, I mean, we are going at full speed to help -- be more effective, provide more value, enhance the tools that we have for our customers, enhance the marketing programs we provide for our customers to continuously work to help them succeed. And that's a fairly full-time job on the part of the entire team. And as we get those things lined up, maybe sometime down the road we'll tackle a few other initiatives. But I think we got a pretty full plate as it is. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: No, that definitely sounds like great color, Manny. Then second, in the current quarter, as we just look at the base business growth of 8%, could you possibly break that out between the Blue and the Green business either in terms of the sales or gross profit dollar growth?

Sure. When you look at the quarter, the numbers were, in fact, very, very similar, actually, 8.1%. And just as a matter of course, the Blue business was 8.1%. So the Green business was right on top of it as well. So nothing significant there. And in terms of geography, the lion's share of our business in the fourth quarter is weighted towards the Sun Belt, and therefore, that's what drives the entire amount. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: Great. And then last question, maybe this one may be better for Mark. I know -- think about modeling for the first quarter here. I think I had my notes from last year that we had an $8 million shift into the first quarter due to the timing of the early buy. Is that something that you think will repeat this year and kind of make the comps apples-to-apples? Or do you foresee something shifting there?

Actually, Luke, I see a similar shift this year that we saw last year. Early indications, of course, are not -- we're not to the point where we shipped a lot of early buy given where we are in the year, but early indications from customers are they will see a very similar shift and could be even more significant than it was last year.

Our next question comes from Ken Zener at KeyBanc.

Manny, your comments on the stock are accurate in terms of what's happening there. Using that as an entry point, the base business did 8% in the fourth quarter, 7% for the year versus the long-term range. I think you highlighted 6% to 10% still. Could you talk about your -- I know you have these long-term views, but is there something happening, albeit in the end market, that you're seeing that makes 2015 perhaps structurally different than 2014? We ended the year on very strong job growth. Oil is lower. Is there anything you would point to there that would give you more confidence in us reaching the higher end of that range given the momentum we had this year?

Ken, I -- really, I think that from a sales and GP dollar perspective, it's reasonable to think that we would be in a similar number as we were for the year in 2015 and -- as we were in 2014.

Okay. That's fine.

And I think that, that's a very reasonable expectation.

Yes, that's good growth. Now on the -- your building products where you're clearly gaining share, that's leading to core growth, your growth being well above the industry growth. Is there -- since your presentation at your Analyst Day, which was informative about that market and your competitors, has there anything -- has there been anything that shifted structurally? I know it can be a pretty staid area. But was there anything that's making your business have a lot more momentum, perhaps, than you thought during your Analyst Day, because your growth rates are so strong there?

No. I appreciate that. The -- our growth rate there is a combination of factors. First is certainly our growing share. But I think it goes without saying that one of the things that I think distinguishes us as a distributor is what we do to work with our customers to help them grow their businesses. Now since we don't sell to consumers, our conduit to, in essence, create consumer demand is our customers. And in many, many cases, we have worked and continue to build those relationships to work with our customers to help create consumer demand. So one of the added components to our profile is, in fact, how we are creating new demand with new products that help really enhance the outdoor home life. And that's something we can't do by ourselves. We have to do that in partnership with our customers as well as a number of strategically aligned vendors all over the world, and I think that's something that's critical, and that -- and it certainly contributes to our success that we've had in the building materials space.

Good. And then, I just have to ask this question to Mark as we enter '15. Gross margins can move around on product mix, SG&A for the same reason. You still guiding to roughly a 15% incremental EBIT on total sales, correct?

On base business sales growth, yes.

Our next question comes from Ryan Merkel at William Blair. Ryan Merkel - William Blair & Company L.L.C., Research Division: So I want to start, Manny. What do you think the market grew in 2014? You grew base business 7%.

Certainly no more than 5%, probably closer to 4%. Ryan Merkel - William Blair & Company L.L.C., Research Division: Probably closer to 4%, okay. And then, what is your outlook for industry growth in 2015?

About the same. Ryan Merkel - William Blair & Company L.L.C., Research Division: About the same, okay. And what are your price assumptions? And maybe you could comment specifically on chemicals.

Chemicals are essentially flat on the higher-profile chemicals. Some of the specialty chemicals are up a little bit, but the overall weighted mix on chemical pricing is very, very modest increases. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then price in terms of your sales guidance for '15, how much is price? Is it rounding up to 1 or...

On the overall or just chemicals? Ryan Merkel - William Blair & Company L.L.C., Research Division: Overall now.

Oh, overall, probably we'll be, I would say, between 1% and 2%, overall. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And is it therefore...

What happens here, Ryan, is on, call it, the products that are basically priced, generally speaking, once; tops, twice a year, which is a lot of what we sell, that's a fair barometer. What I don't have the visibility to are commodities, and those certainly go up and down during the course of the year. But at this point, I think the overall number, 1% to 2% is a fair assessment. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then on the share buyback -- and certainly, you're likely to buy more stock in '15, can you give us a sense of what you plan to spend? Or should we just wait and see on that?

I think wait and see is best. Our objective is to maintain our debt-to-EBITDA at 1.5 to 2x. And as Mark mentioned in his prepared remarks, we finished the year at 1.66. So we're right where we, I think, need to be. And logically, as we grow our EBITDA and generate cash in 2015, we have to find a home for it. And share repurchases have proven to be a good source of -- or a good -- yes, a good outlet for our funds. Ryan Merkel - William Blair & Company L.L.C., Research Division: I would agree. Well, last one then on gross margins. Are you still thinking flattish is kind of the right outlook?

Yes. I think that when you have all the various factors that play into margins, whether it be commodity prices up and down, the local competitive nature of the marketplaces that we're in, as well as product mix. I mean, we're still having and, in fact, working in tandem with a number of manufacturers as they roll out higher efficient, more aesthetically pleasing products that tend to command a higher price. Those higher prices may end up generating more GP dollars but lower margin percent. So I think when you weigh all of those factors together, I think that roughly the same is a good basis or forecast for '15 and '16.

Our next question comes from David Mann at Johnson Rice. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Mark or Manny, going back to the earlier comments about the impact of lower energy prices on the demand side. Can you elaborate for us what percent of revenues you estimate are coming from markets that are -- that might be sensitive to lower energy prices? And what was the growth rate that you saw in those markets?

Well, certainly, the biggest market there, David, is Texas, and Texas was a very strong performing market for us to last year. So if you look at kind of Texas on a year-to-date basis, it was not quite double, but in that range, that -- kind of the corporate average growth rate. So -- and of course, there's other markets, pockets around the country that also have a predominant energy component to the local economy. So those are ones that we would be concerned about this year in terms of seeing that level of growth. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: And sort of Texas and that South Central region, what percent of revenue might that contribute?

When you add Texas plus Oklahoma and Louisiana, you're talking probably in the high teens as a percentage of our total sales. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Okay. And would you expect that Canada is also going to slow down?

Canada slowed down big time the last couple of years. So I think at this juncture, the discretionary spend is pretty much at depression type levels, and most of the business being driven today is maintenance and repair and main baseline replacement. So therefore, I think that hit is largely behind us. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Okay. And then when you're looking out to 2015, remind -- what's the implied base business growth rate? And how should we think about any assumption in there for some slowdown in these markets? Just bring that all together.

I think the overall assumption that we have is mid- to high-single-digits sales in GP dollar growth. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Okay. And do you think that these -- are you planning for these other market -- for these energy-related markets to be negative? Or you just think that they'll just be somewhat below this company average or at the lower end?

Well, no, no. Certainly not negative. There's -- if you look at the business that we do there, it's primarily maintenance, repair, remodeling and replace. The new construction component is a very small percentage of the total business that we do in those markets, and that would be the area that would be affected. So the point here is, instead of having double-digit sales growth as we've had the last couple of years in those markets, it would be more modest and probably more in line with the company overall average.

And it might not kick in right away either because projects take -- remodeling projects, in particular, have long lead times. And so things are, I think, going to cool off over -- kind of throughout the year and into next year. So won't see it all at once. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Great. Now those clarifications are very helpful. In terms of the EPS guidance for the year, I mean, you did a 19% EPS growth in '14. I think your presentations show long-term EPS growth of 15% to 20%. This year, you're starting off at 12% to 18%. Can you just reconcile that? Any thoughts, being conservative. Or maybe it doesn't include in guidance for buyback. Just can you bring that together?

Sure. I think really when you look at it, it is reasonable to expect us to have mid-teens EPS growth. And I think there's certainly upside opportunity there, but we also got to be cognizant of the entire world in which we live in. And that affects -- whether it'd be weather, whether it'd be any political shocks or anything that may happen, and we try to encapsulate in our range the full spectrum of most likely probabilities. So if you look at -- and we're -- and as you know, David, we're very, very transparent. And in that vein, seldom do we come outside of our initial range and certainly not to any order of magnitude on both the negative and the positive side. So I think that's the thought process in establishing the range that we did. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: And just to clarify, is any buyback in that 12% to 18% guidance?

It would be more on the 18% and less, obviously, almost none on the -- at the lower end.

[Operator Instructions] And our next question comes from Anthony Lebiedzinski at Sidoti & Company. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: A couple of questions here. So obviously, a lot of discussion about the buyback and the other usage of cash flow would be dividends. So just what is your outlook for the dividend? I know you've increased that consistently over the last few years. So how should we think about that?

The dividend is part of our May board meeting agenda, where we talk -- typically talk about capital structure. And the past practice has been that the board has decided to maintain, approximately, a 35% dividend payout ratio as a percentage of estimated net income. And if you look at our history the last 3 years, I think we've been right between 34% and 36%. So I would look -- that's probably going to be the case, but I can't speak for the other 7 directors. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: Okay, that's helpful insight. And then, can you talk about Europe? What are you seeing there as far as trends? What are your expectations for 2015?

Sure. Europe, there's 2 parts here. And Mark talked about the stronger dollar. Certainly in dollar terms, Europe business is going to be smaller or it will likely be smaller in 2015 than it was in 2014. But in 2014, in Europe, we had good sales and GP dollar growth far outperformed the market. The unfortunate part is their expenses grew almost as fast as our GP dollars. So while we certainly had improvement on the bottom line, it wasn't necessarily what we were looking for. I look for continued progress. I mean, there's a number of things that we put in place over the last several years in Europe that is yielding dividends to us in the form of increased share, first of all; secondly, increased service level to our customers; increased efficiency, operationally. So as those initiatives continue to take hold, it will continue to further our position in the European marketplace. Now the European market is really depressed, much like the U.S. market. I mean, it's interesting. We look at our results, and you still got to remember that new pool construction last year in the U.S. was 60,000 pools compared to 215,000 in 2005. So the same type of dynamic applies in Europe. And Europe is feeling some of those same headwinds, the entire market is. But just like in the U.S., we continue to gain share. We continue to improve our service levels. We continue to improve our value add to our customers, becoming more and more important to them, and continue to operate our businesses more effectively. So I think those are all the same. And the European macro environment is not as positive as the U.S. macro environment, but that's okay. I think if we do what we're supposed to do, we'll continue to make headwinds -- headway against those headwinds and continue to succeed. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: All right. And also, just overall, how should we think about gross margins in the next couple of years? As you mentioned earlier, you did see an improvement in 2014, so trying to take into account the product mix changes, also the level of penetration of private-label products. What is your outlook for the gross margins?

Again, Anthony, net-net, this should be about the same as they were in the next couple of years as they were in '14. And you highlighted -- you know our business very well, you've highlighted some of the points. We have some positive things going on with our private-label initiatives and some of the value-added things that we do in the marketplace. On the other hand, we have and continue to sell more higher-priced products, which, generally speaking, don't command the same margin percents as the lower-value products do. So that mix always together, so I think when you look at it prospectively, I think that we stay about the same level at the gross margin percent level, is a reasonable expectation. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: And lastly, you talked earlier about some wage pressures for truck drivers and so on. Are there any other cost pressures that we should be aware of?

Not in a significant way. I think the issue that exists with corporate America in terms of the increased burden of regulations -- and really, I can't say dwarf taxes for successful companies like ours. But certainly, the increased cost of regulations at the local state and even much more so at the federal level, and the compliance cost with those regulations, is a cost to all of corporate America, and we're not exempted from that. So I think that's a factor that's just across the board. And really, the cost is not the fact that we have to change anything we're doing. The fact is that we have to submit paperwork to more and more people. And it takes more time to get things done than it did 5 years ago or it did 10 years ago, and I don't see that changing anytime soon. So again, that applies to all of business, all of corporate America. Obviously, the weighting on the regulators is always on the more successful companies, so they have really the greatest burden from a compliance standpoint. But that's a reality and we've been facing that for years. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: Right. All right. So yes, it sounds like just normal cost of doing business nowadays.

Yes.

Unfortunately.

Our next question comes from Garik Shmois at Longbow Research.

This is Mark Zikeli on for Garik today. I wonder if you could talk about inventory levels a little bit. It looks like since last quarter you've been pretty diligent in buying ahead of some 2015 price increase. Just wondering where levels stand now and how you expect it going forward here in the next couple of months.

Sure. We typically, as manufacturers announce increases, we try to buy into those increases. That's a pattern that we've done for many years, again, to the extent that it makes sense. And that's no different. When you look at our inventory relative to cost of goods sold, I don't see that changing in a significant way in 2015 versus 2014. We'll continue to make progress in many fronts and in terms of addressing whatever issues we may have. But our first focus there is on service level to our customers, and then the second focus is making sure that we don't have too much inventory. We have, as a company, in essence, virtually no issue on excess inventory. So the inventory that we have in place is good inventory. Whether we have 2 weeks' worth of a particular item or 4 weeks' worth or, in some cases, 4 weeks -- or 6 weeks, that is all variable based on the supply chain dynamics for that particular vendor or product line as well as the -- our objectives for service level to our customers.

Okay. And just thinking about guidance for the year. Just wondering if you could talk about maybe some of the opportunities that take you to the high end and then maybe highlight some of the risks that would take you to that $2.72 level?

Sure. If we have -- I'll do the negative first and hopefully finish on a high. The negative would be that there is any kind of disturbance politically that results in a general pause in terms of consumer behavior. That, coupled with perhaps a bad weather year, those are probably the bigger factors that would bring us to the low end. On the high end, a little bit of share repurchase, like we've done in the last few years, coupled with no pause, no big political disruption that causes people to change their behavior or pause their behavior, normal behavior, and even better execution on our side. We've built in improved execution. We've built in improved market share into our expectations throughout the organization. And overall, we deliver on that improved execution. But how much improvement is the key operative word there or term. And I think that, that's what really will drive -- the $2.87 type number will come from very good improved execution, coupled with no adverse external factors from a macro standpoint, and some share repurchases.

There are no further questions at this time. I would like to turn the conference back over to Manny Perez De La Mesa for closing remarks

Thank you for listening. Our next call is scheduled for April 23, when we will discuss our first quarter 2015 results. Thank you, again, and have a great day.