Pool Corporation (POOL) Q3 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the Pool Corporation 3Q 2015 Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mark Joslin, Senior Vice President and Chief Financial Officer. Please go ahead. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Thank you, Kate. Good morning, everyone, and welcome to our call. I would 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. And with that, I'll turn the call over to our President and CEO, Manny Perez de la Mesa. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, Mark, and good morning to everyone on the call. I'd like to start my comments this quarter with a bit of reflection. As many of you know, our mission is to provide exceptional value to our customers and suppliers, creating exceptional returns for our shareholders, while providing exceptional opportunities for our employees. Without providing exceptional value to our customers and suppliers, we cannot achieve an exceptional return for our shareholders or provide exceptional opportunities for our employees. To that end, we have invested consistently over the course of over 20 years to further our value proposition and further distinguish us in the marketplace. It is our employees who make our exceptional value proposition a reality every day, the same employees who have been provided exceptional opportunities, in many cases having started with us as drivers, working in the warehouse, in customer service or in management training programs and who are now running businesses, regions, or divisions within our company. As to our shareholders, earlier this month, we celebrated 20 years as a public company. The bottom line was a 26% total shareholder return compounded annual growth rate, ranking us in the top 1% amongst S&P 1500 companies, public for the past 20 years. A special thank you to all who helped make this happen, but we still have much left to do. In the third quarter, we were fortunate to have a mild September, helping extend the season a bit in northern markets, which contributed to our domestic Blue business's 8% base business sales growth in the quarter and 7% base business sales growth year-to-date. Texas and adjacent markets recovered to normalized growth rates in the quarter after the heavy rains of the second quarter, while the pool industry in California continued to educate authorities to protect against shortsighted decisions. In an industry that increased sales by an estimated 2% to 3% this year, our results are clear evidence that once again, our unique proposition is being recognized and rewarded by our customers and suppliers. Building Materials again led the way, with 12% sales growth in the quarter and year-to-date. We continued to gain share with Building Materials as well as expand the market, working in partnership with our customers and suppliers. Equipment sales increased 10% in the quarter and 8% year-to-date, reflecting both the continual, gradual recovery of replacement activity and an improved mix with higher priced, more energy-efficient products. Commercial Products sales were up 9% both in the quarter and year-to-date as we continue to capture share in this product category. Retail product sales increased 4% in the quarter and 3% year-to-date despite recent years' negligible growth of the pool install base and there being virtually no price inflation. In Chemicals, by far the largest product category sold through the retail channel, our sales were also up 4% in the quarter and 5% year-to-date, which is in contrast to the overall industry results as we, together with our customers, continue to gain market share. Our growth in international markets in local currency was very similar to our domestic Blue business at 6% both in the quarter and year-to-date as we continue to increase share in targeted markets and product categories. Our Green business sales declined modestly both in the quarter and year-to-date due primarily to our discontinuing several unprofitable product lines, although in this case, shortsighted decisions in California to pave or cover in plastic lawns and landscaping also impacted sales. As expected, our gross margins were essentially flat versus prior year as were our base business expenses in the quarter. Year-to-date, our expenses were modestly lower given the impact of the stronger dollar. This leveraging of our infrastructure enabled us to increase our base business operating margin by 80 bps both in the quarter and year-to-date. The leveraging of our structure carried over to our asset base, with our after-tax trailing 12-months return on investment capital increasing by 120 bps to 19%. These results incorporate our ongoing investments in facilities, people, technology, marketing, et cetera, as we continually strive to further enhance our value proposition for the future. Altogether, our base business operating profit increased by 13% in the quarter and 12% year-to-date with earnings-per-share increasing by 15% both in the quarter and year-to-date, despite the adverse currency impact. With the season winding down, our expectations are more the same in the fourth quarter with our realizing another successful year of solid growth, driven by improved execution in every facet of our business. Effectively, we are executing our mission as we have for over 20 years, creating exceptional value for our customers, suppliers, shareholders, and employees alike. Our results and our success are premised on the commitment of our people. It is their dedication, their engagement and their use of the tools and resources uniquely available to them that enable us to provide exceptional value. Now I'll turn the call over to Mark for his financial commentary. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Thank you, Manny. Starting with operating expenses, you can see that we've continued to have very good results here. Our goal this year, as it is every year, is to leverage gross profit growth by driving efficiencies through our operating structure, resulting in operating margin expansion. 2015 looks to be a very successful year in that regard as we have the opportunity to set a new high mark of exceeding 9% operating margin for the year. In 2015, we benefited from currency translation of the stronger U.S. dollar on our non-U.S. operations, which resulted in a $2.4 million reduction in reported expenses for the quarter and $6.5 million year-to-date. Offsetting this for the quarter was $2.8 million in higher incentive comp expense based on our improved performance expectations for the year, with year-to-date performance comp expense up nearly $1 million. Our biggest cost, which is labor, was relatively flat for the quarter and up very modestly for the year as we've been able to handle most of the increased volume with the existing staff with year-over-year head count as of the end of September increasing just 1.5% over last year. Moving down the income statement to interest expense, we reported $600,000 higher expense for the quarter, which was primarily due to the currency settlement losses in the quarter rather than interest expense, which was relatively flat compared to last year. This was offset by lower tax rate in the quarter as we benefited from our usual annual Q3 tax rate true-up. Looking at our balance sheet, our increase in total net receivables at quarter end was 6% and was consistent with our sales growth, while our net inventory balances were flat year-over-year. These results, along with our growth in income, helped put us in a good position on cash generation at the end of September, with cash flow from operations of $78 million, which was up $41 million from last year. We've continued to use excess cash to repurchase shares throughout the quarter, with 414,000 shares repurchased since we last reported, at an average price of $69.18 per share, for a total use of cash of $29 million. This gives us 1.3 million shares repurchased year-to-date at an average price of $67.86 for a total use of cash of $86 million, leaving us with $78 million under our current share repurchase authorization. Despite our ongoing share repurchase program, we've continued to maintain a relatively conservative capital structure. Our leverage at the end of September, which is measured on the basis of a trailing 12-month debt-to-EBITDA was 1.65, which compares to 1.60 a year ago. At this level, we are at the lower end of our target leverage of 1.5 times to 2 times debt-to-EBITDA. At this point, I'll turn the call back over to the operator to begin our question-and-answer session.

We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. The first question is from Matt Duncan of Stephens. Please go ahead.

Hey, good morning guys. This is Will (11:03) on the call for Matt. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Good morning.

Congrats on the great quarter. I just wanted to start – you mentioned the California drought and the water restrictions. I wanted to start there. And I was wondering if you're still growing above that 5% year-to-date rate that you were in the second quarter and possibly update us, maybe a little more color around the education process of the pool efficiencies there and how that's being received in the market. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. When you look at our California Blue business, our California Blue business has been pretty solid all year, growing 5% in the quarter and 6% year-to-date. And what we've done there is we, together with other important members of the industry, including the industry association, as well as local builders, remodelers, so basically our customer base and important manufacturers in the industry, we've gotten together efforts and it's almost like a very basic blocking and tackling of providing those that are making decisions at the local water boards and the rest on, in fact, how much water is or is not consumed by existing pools, as well as ways to mitigate water loss through evaporation, and also reflecting on the economic contributions that swimming pools as an industry make in California. And when you translate the economic contribution as well as the employment created by the pool industry in California, how that translates to per gallon of water, we rank very favorably. In fact, we rank ahead of many other industries, including the energy industry, the agricultural sector. So, there's a lot of industry that benefits – and what we've seen, there's a lot of industries where our economic contribution far exceeds theirs on a per-gallon basis. So that's the efforts that we've undertaken on the Blue side of the business and we've been effective in doing that and avoiding any hit to speak of. That is not the case on the Green side of our business. The watering of lawns is now basically – is socially unacceptable in many circles. And even those that have invested in smart irrigation systems to keep their turf, which generates oxygen and reduces surface temperatures, those are disparaged in some cases by virtue of the fact that they invested in smart irrigation to really help the environment. And therefore, there is almost like a populist mentality of turf and landscaping being bad, which is ironic given the, generally speaking, environmentally-sensitive nature of people in California. And in that regard, our sales on the Green side of our business in California are down both in the quarter and year-to-date. We are working with industry association and manufacturers to educate those in California for making – from continuing to make shortsighted decisions in covering what was formerly lawns with plastic, which is, I don't think, the best thing you can do for the environment. It simply results in increasing surface temperatures and – as well as reducing the generation of oxygen, so, neither one of which is good for the environment. So that's the situation on the Green side. And hopefully, we can rally forces together to do a better job educating the authorities in that area.

Very helpful, Manny. I appreciate that. And sticking with the Green business a little bit, outside of California, have you seen an overall improvement from the 2Q mark of – I think it was down 7% (15:30) within the total company Green business? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Yes, overall the Green business is down, I believe it's 2% on a year-to-date basis, so that's – and that includes not only the impact in California, but even more so the fact that we discontinued certain product lines that were unprofitable. So overall, our Green business profitability is up on a year-to-date basis despite the decline in sales.

Okay, and last thing from me and then I'll hop back in queue. On the share repurchases, trying to think about where your stock is today, how you guys are thinking about share repurchases going forward through the remainder of the year. Should we expect you guys to remain active throughout the fourth quarter as we head into 2016? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: When you look at our share repurchase program, it really comes back to our capital structure, both in the near term and longer term, as well as the cash generation that we have in the business. In the 10-K, we describe our priorities in use of cash and those priorities start with the ongoing investments in our business that we continue to do to further our value proposition. Secondly, acquisitions, to the extent they make sense, to help us enter new markets or enhance our share position in markets that we are weak in, and then third, dividends which are basically targeted at 35% of net income. And then after that, it's a matter of where we are in our capital structure, so our target debt to EBITDA on a trailing 12-month basis is 1.5 times to 2 times. We finished the quarter at 1.65, which is, as Mark mentioned, at the lower end of our targeted range, so you can expect us to continue to buy shares during the course of time to stay in that 1.5 times to 2 times, ideally a little higher than 1.65. The timing of that, it's really a matter of all the rules surrounding when we can buy back shares and – but I think what you've seen over the course of years now from us is that we're pretty deliberate and we continue to do that every year, that ends up being some quarters are a little more than others, but a lot of that is really outside of our control given that we set established parameters and the market just solved itself over the course of time.

Great. Thanks a lot, guys. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you.

The next question is from David Mann of Johnson Rice. Please go ahead. David M. Mann - Johnson Rice & Co. LLC: Thank you and congratulations on the 20-year run. Look forward to the next 20 years. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, sir. Appreciate it, David. You've been around for 20 years. David M. Mann - Johnson Rice & Co. LLC: Yeah. Thank you for reminding me. A question, you talked about the recovery you saw in Texas to normalized growth. That seems to contrast with some just general comments from consumer-related companies about slowdown in Texas. So can you just talk a little more about what you're seeing, whether it's just pockets of strength, or what you envision for the health of your Texas market? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Well, if you look at Texas as a market, first of all, you've got an installed base of pools. And that installed base of pools, a number of those continue to age and there are opportunities to either replace the equipment or, for that matter, remodel the pool. And both those areas are areas that we've been growing with not only in Texas, but throughout the country. And that continues to bode well. When you look at new pool construction in Texas, for the year, it is marginally down year-on-year given largely to the hit that we had in terms of activity or reduced activity in the April, May, and early June timeframe when it was really wet and everything got pushed back. We have seen, in August and September, new pool permits creep up a little bit above last year. But still, I think for the year, new pool construction in Texas will be down modestly year-on-year. And I think given the August and September activity, given the realities that we saw of actual work being pushed back, I think it's largely driven by the weather impact that we had and where we lost – our customers lost workdays back in – for about a six-week to eight-week period of time. So I mean, big picture, yes. There are certain areas within the Texas economy that are getting hit. But if you look at overall Texas, Texas is still growing jobs. I mean the Texas economy has really diversified significantly over the past 30 years. And this isn't the 1980s Texas. This is a new Texas and a very healthy environment overall. And when you look at Texas GDP growth, when you look at Texas job growth, I think it's still certainly above average from a national standpoint. David M. Mann - Johnson Rice & Co. LLC: Great. And then, if I could follow up, when you start looking at your initial glance at 2016 in terms of the puts and takes, factors that could affect your business, can you call out anything that you would see that could help you accelerate from your sort of 15% growth rate in EPS or anything that could be a headwind? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. I'll tell you right now, we don't see anything significant in either case. As you know, we had an estimated $0.04 hit year-to-date on currency. That's not a reflection on our international performance, which is very solid. I mentioned earlier 6% growth in sales both in the quarter and year-to-date in local currency with very strong cost controls, very similar to the U.S. market. And although Mark mentioned the fact that our expenses are down year-on-year because of exchange, in local currency our expenses are pretty much flat, which means that the increased GP went to the bottom line. So, I don't think we'll have that same hit next year in terms of currency year-on-year. And really outside of that, I'm looking at overall, the market – certainly in the second quarter, we got a hit from the heavy rainfall in Texas and adjacent areas. In essence, in a very rough sense, we believe we got that back with the milder weather in the northern markets helping us particularly in September. So, I think those two, more or less, offset. So when it's all said and done, it works out to basically an average weather year, a little hit on currency, but for next year, look forward to an average weather year. Hopefully it rains a bit more in California and the overall west. That will hurt us and help us, depending on which side of the business you're in, but net should be a net-negligible impact to the company overall. And – I mean, we're going to continue to get better at what we do and that's one of the things that sometimes gets lost in our numbers over time. When you look at our growth in sales and gross profits and you look at our growth in expenses and hone in on base business in both regards, you've seen that over the course of 20 years, we've increased our efficiency in how we conduct our business by virtue of the fact that our GP sales and GP growth rates far exceed our expense growth rates, and that's given the investments we constantly make on our talent, the development of that talent, plus the tools that we use in our business to execute better, but also more efficiently as well. David M. Mann - Johnson Rice & Co. LLC: Great. Good luck with that. Thank you. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you.

The next question comes from Ken Zener of KeyBanc. Please go ahead.

Good morning, gentlemen. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Good morning. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Morning, Ken.

So Manny, since you're concerned around plastics increasing heat in Texas, maybe you guys are going to get into the nursery business as well. So, if you just described this year in terms of headwinds or tailwinds next year's average, because Texas, California in 2Q was offset by a milder northern climate, and later – weather is what I just heard you summarize. El Niño is talked about and that would seem to bring a lot of rain. I mean, do you think this – could you – because there's different regions, right, Texas, California, North helped you this quarter. Can you quantify – that drag that we had in California and the deceleration we had in Texas which are very large markets was lost sales. It's hard to imagine that, that North really just offset that. So it seems like you would have a tailwind potentially next year associated with that. And because California recovered – that was what concerned me most about last quarter was the deceleration in California. Was there really a big product mix deceleration, so chemicals slowed down in California and that's what accounted for the decline? I mean I didn't explore that with you last quarter. But I mean, was there particular segments that slowed down in California that then recovered or were the competitors acting differently? If you could just maybe do a little more postmortem on that because that was such a big surprise last quarter and now it's gone. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. Going back to California, California started off from a winter standpoint and you live in California, so you know this firsthand. California started the year with very mild winter, so it started off with a very strong start to the season. But then they had cooler than normal temperatures, particularly in May and June and what that does is basically the water doesn't – the chemicals don't burn off the water as much so therefore you need less chemicals to maintain the water properly sanitized. So that really impacted our business. But then it reverted back to normalized weather in the third quarter in California from a temperature standpoint and therefore chemical sales picked up back to normal. So, nothing from a competitive standpoint unique or different. It was mainly due to the little shifts in weather, not little, but the shifts of weather from period to period versus normal. In terms of California and El Niño, all the expectations for next year, the first expectation or the first hope is that the increased rainfall is in fact retained in California and not shift into the Pacific Ocean as California tends to do with a lot of its rainfall every year. So that's hope number one and therefore they do a better job of managing the water they do get naturally. And if that's case, how that impacts our business? Well, and again, these are offsets – water tends to unbalance the pool water, on the other hand the cooler temperatures means that you burn off less chlorine, so those two wash off against each other. When you talk about more rainfall in California, this is not like what happened in Texas this year or what happens in Florida every year when you may be receiving 10 inches of rain in a month. California may go to 10 inches of rain in a year and that would be a great thing for California. So therefore you don't have the issues of really affecting the water temps that much or the water un-stabling that much. So net-net it's going to affect our business and just like this year. It may affect us positively a little bit one quarter, hurt us a little bit in the other quarter, but when I look at the entire year for California, net-net I'm not expecting any big swings one way or another from an El Niño impact.

Okay... Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Go ahead. I'm sorry.

No, that was it. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: And then in terms of Texas, I mean, Texas, really we lost a couple of months or really our sales were down for those couple of months year-on-year, very unusual; picked back up to normal as soon as the rains went away and we did get that in essence value back in the Northeast, Midwest, and Canadian markets with a little bit of an extended season.

Okay. I appreciate that detail. But the only reason I ask is because – it obviously impacted your impression of earnings in the second quarter. And Mark or Manny, I mean, do you guys really think you're going to be a public company in 20 years, the way you're buying back stock? Mark W. Joslin - Chief Financial Officer & Senior Vice President: Well, 20 years is a long time, okay. But you know what? Those that still hold on to their shares 20 years from now I think will be very richly rewarded.

Thank you.

The next question comes from Garik Shmois of Longbow. Please go ahead.

Hey, guys. This is Mark on for Garik today. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Good morning.

I just have two questions. Just looking at the base business, you've done a really good job at chipping away at SG&A over the last couple of years and operating margin, this quarter was the best 3Q we've seen I think in some time. You talked on currency and labor a little bit. Just wondering like are we witnessing a structural change in the business's overall profitability right now or is it more so related to timing and seasonality? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Well, I think it's better, Mark, if you look at things from a year-to-date standpoint. And quarter-on-quarter is the same thing. What you've seen is, in our history, up until 2006, you saw a gradual increase of our operating margins year-on-year as we continued to invest in people, technology, tools, et cetera. And therefore, become progressively more efficient in providing our value to the customers and our suppliers and doing that more efficiently. So that pattern continued steadily until 2006. 2007 through 2009 was... Mark W. Joslin - Chief Financial Officer & Senior Vice President: By the way, our operating margins were 8.8% in 2006. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Which is a previous peak. Mark W. Joslin - Chief Financial Officer & Senior Vice President: Previous peak. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: So therefore what happened is 2007 to 2009, you saw a significant reduction, basically 80% reduction in new pool construction in the United States, as well as close to a 40% reduction in replacement activity, the more somewhat discretionary areas. Huge hits which affected us adversely in our structure but the way we look and manage our businesses longer term, so we didn't make any short-term decisions or short-sighted decisions. We continued to make investments as we needed to and we took a hit – knowingly took a hit in 2007, 2008, 2009 where our margins contracted given the industry impact on the reduced new pool construction and reduced replacement and remodeling activity. Beginning in 2010, that was really more of a transition year. But after 2010, you have seen a gradual recovery of remodeling and replacement activity. You have seen very little recovery overall in terms of new pool construction over that period of time. But you've seen more consistent recovery on the replacement and remodeling activity. So therefore the industry has begun to recover, still 70% less new pools being built this year than were built back in 2005. But through that, we continue to invest, continue to get better, continue to gain market share, and continue to gain efficiencies in how we do our business. So you've seen a constant gradual process of recovery and increase in operating margins really following along the same patterns that we had from our genesis in 1994 through 2006.

Okay. That's helpful. Just in terms of guidance, you have a $0.05 spread between the upper and lower end of the range. Just wondering what are some of the puts and takes there? That's it for me. Thanks. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. Puts and takes, well we've got two-and-a-half months left to go, so we have certain expectations on sales. That could be plus or minus a little bit. Gross margins, again our assumptions are basically flat for the quarter but that could be plus or minus 10 bps to 20 bps depending on mix of products primarily. So those are the two biggest factors, not anything to speak of on the expense side. So that's really the main factor. Is there anything else Mark that you can think of? Mark W. Joslin - Chief Financial Officer & Senior Vice President: Just a reminder, this time of the year we're really talking about Southern market, year-round markets and the Northern markets really shut down. So weather becomes important to those markets if the El Niño should hit sometime next week, next month, whatever. That would obviously have an impact given the over-weighting of the Southern market business to our results. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Net-net $0.05 is a comfortable range given the fact that we've got two-and-a-half months left to go.

The next question comes from Anthony Lebiedzinski of Sidoti. Please go ahead. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Hi. Good morning, guys. Thank you for taking the question. So now that 2015 is almost over, Manny, what is your expectation for pool construction overall plus also any possible outlook for next year? That would be very helpful. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Sure. Currently – again some states lag in their reporting. We see the bigger states on a monthly basis. Overall we're still looking at 60,000 to 65,000 pools for the year domestically. And then for next year, we're expecting that to improve a little bit, probably to the tune of 65,000 to 70,000 for next year. Again, it pales in comparison to the 215,000 to 220,000 that the industry did back in 2005, but I think here what we're looking at is the lack of a robust recovery in single-family home construction, particularly the medium to upper end of single-family home construction. We've seen new home construction recover on the multi-family side, which is really not reflective of the environment that would prompt people to put a pool in their existing homes. So I think until such time as you see a real recovery of the single-family homes, particularly on the mid to upper end of single-family homes, you won't have the environment for a really robust recovery where we could see 15,000, 20,000 more pools built a year. And again, we're waiting for that to happen. We're anticipating that will happen. It's a little later than we would have expected it to happen at this juncture. But nonetheless, we're still plugging along and gaining share and building out our services and tools so we can compensate for that. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Right. Do you think part of this issue is the fact that I think a lot of millennials have seen their parents or other relatives struggle, and saw what happened during the housing crisis that perhaps there's just no need to rush into buying a new home? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: I think there are two factors here. And certainly the psychological impact of home values declining is one since they were viewed as – or homes were viewed as the ideal and most important investments for most households. And it had a pattern of never going down since World War II. So, I think that's important and certainly a factor. I think the other factor is given what happened economically and the shock that our system had back in 2008, 2009, you've had people deferring basically getting married, deferring having children, so all those factors I think is a postponement of what will in theory take place; it just takes place later. And again, a generation ago, people were getting married on average four years, five years earlier than they are in this current generation. So I think that deferral is all part of the process. And I think that generational change coupled with the psychological change, I think those are the two that are causing this delay in terms of home ownership and young people's desire to invest in homes. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Got it. That's very helpful color. And then, switching gears to the Green business, you mentioned before, well, today and also on the previous calls as far as the sales impact of the discontinued product line. So, I was wondering if you were to strip out the discontinued product lines on the same product basis, what would the Green business do in terms of same base business sales for the quarter and year-to-date? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: They would be up like 2% to 3%, both in the quarter and year-to-date. And then, if you take out California, it'd be humming along just like the Blue business at the 8% type range. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Okay. That's helpful. And lastly, what is your outlook for acquisitions for both the Blue and Green segments? Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Well, first of all understanding criteria; criteria is entering markets that we're currently not in. Certainly there's more open space or green space in our Green business, given that we're basically only covering about half of the Sunbelt, so that's certainly something that we continue to look at. There are very few pockets like that on the Blue side of the business domestically. There are some pockets internationally, but again, we're very deliberate as to the markets and how we enter those markets there. So that's one and the other factor is, and it's – where we have a weaker share, we look at it as well, although the criteria is a little different than when we have no presence whatsoever, so those are the two. It's not going to be a big part of our business. I mean when you look at from our transaction standpoint in the last 10 years, I think after 2005; 2006 to 2015, probably our sales contribution from acquisitions averaged probably no more than 1% of total sales per year with a negligible contribution if any bottom line. So, it's a form, a way for us to enter the market. We compare that always with opening up our new locations, and in fact, we've probably done more in terms of new locations over that 10-year period than we have in terms of acquisitions. And again, those are more resource-intensive, sometimes more challenging than doing more of the same. So our first bias is always growing more of the same, and then looking at what else we can sell to existing customers. An example of that would be building materials and then – after that then we get into new markets and because the return on capital and the risk profile resource intensity is greater in those areas, so therefore we have to balance the whole equation. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Got it. Thank you very much. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you.

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Manny Perez de la Mesa for any closing remarks. Manuel J. Perez de la Mesa - President, Chief Executive Officer & Director: Thank you, Kate, and thank you all for listening. Again, we've had a very good 20 years. Some of us in the company were disappointed that we were ninth in terms of 20-year return. Okay, we were in the top 1%, but still we were ninth, so we have eight more to go. Hopefully we will be there at the next mark in five years. Our next earnings call is scheduled for February 18 when we'll discuss our full year 2015 results. Have a great day. Thank you.