Good day, everyone, and welcome to the Pool Corporation Fourth Quarter 2016 Conference Call and Webcast. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that the event is being recorded. I would now like to turn the conference over to Mr. Mark Joslin, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone, and welcome to our year-end 2016 earnings 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 2017 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, which we expect to file late next week. In addition, we may make references to non-GAAP financial measures in our comments. A description and reconciliation of our non-GAAP financial measures is posted to our corporate website in our Investor Relations section. 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. 2016 marked another year of excellent performance complemented by good weather. As noted in our release earlier today, our sales increased 9%, our operating income increased 18% and our earnings per share increased 20% in 2016. Since the market trough in 2009, our adjusted earnings per share have increased at a 21% compounded annual growth rate, consistent with our 20% earnings per share compounded annual growth rate for our 21 years as a public company. Further, as stewards of the capital entrusted to us, our trailing four quarters after-tax return on invested capital was 21.5%. Our cash flow from operations was 111% of net income, and we returned $228 million of capital to shareholders in the form of dividends and share repurchases. All in all, a very strong year. We remain focused on creating shareholder value by emphasizing what we refer to internally as the value creation fundamentals: organic profit growth, return on invested capital and cash flow generation. Apparently, investors understand and appreciate what we do and have rewarded us with a 26% compounded annual growth rate in total shareholder return over the course of 21 years. 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 shareholders and customers and suppliers as we strive to realize our vision of being the best distributor of outdoor lifestyle products. Our people genuinely care about our customers, our suppliers and especially each other. This caring sentiment channels their talent and time to promoting the growth of the industry, the growth of our customers' businesses, and to continuously strive to operate more effectively. In reviewing 2016, our base business sales increased by 7%, with some…

Thank you, Manny. I have a number of things to cover this morning, so please bear with me for the next several minutes. First, while Manny has already covered our headline operating metrics for the year, I'll add a little color here starting with operating margin. As noted, we achieved a 10% operating margin this year, which had been a long-term target for us for over a decade and was a stretch goal for 2016. We did this by adding a greater-than-normal 90 basis points to our 2015 operating margin of 9.1%. About 20 basis points of this 90-basis-point operating margin improvement was driven by an increase in our gross profit margin, while the remainder came from operating expense leverage. The extension of the season in both the first and fourth quarters with warmer-than-usual weather was a benefit here, enabling us to utilize what is normally excess seasonal capacity to help gain this operating leverage. For the year, our base business gross profit growth of 7.7% was more than 2 times our base business expense growth of 3.6%. This 2 times GP operating expense growth metric is a key operating target for us in achieving our earnings growth goals and is something we've accomplished in four out of the last five years, while, at the same time, continuing to invest in the areas that we believe will benefit our business long term. Likewise, our 21.5% return on invested capital, which is calculated on a trailing four-quarter basis, as Manny mentioned, surpasses the 20% ROIC target we've had in sight for many years and was well ahead of our 19.1% ROIC for 2015. While our earnings growth was a big factor here, improved working capital management, particularly as it relates to inventory, was also a factor as evidenced by our improved…

Thank you. We will now begin the question-and-answer session. And the first questioner today is Ryan Merkel with William Blair. Please go ahead. Ryan J. Merkel - William Blair & Co. LLC: Thanks. Good morning, everyone, and congratulations on a nice quarter.

Good morning, Ryan. Thank you.

Thank you. Ryan J. Merkel - William Blair & Co. LLC: So, first, I want to talk about the very strong organic growth in the fourth quarter on a very tough comp. I think October was running up low-single-digits. So growth picked up in November and December. And I'm wondering; is this mostly weather-driven or were there product groups that stood out as being very strong?

Well, great question. On the product group side, I referenced the building materials, commercial as well as equipment, and those were highlights that not only took place in the first three quarters of the year, but also continued strong through the fourth quarter and helped drive our overall sales growth. And we've continued to gain share especially in those areas. So, I think those are probably what spearheads the growth and enables us to continue to post the numbers that we are continuing to post. Ryan J. Merkel - William Blair & Co. LLC: Okay. And then, Mark talked about, in the first quarter, flat gross profit year-over-year. So, I'm assuming that you're expecting base business to be flat to slightly down in first quarter.

I actually said modest and gross profit improvement largely offset by expense growth. So...

So, therefore, what we're looking at is, from a comp standpoint, base business up 13% on 10%. So that, over the past two years and as you know living in Chicago, last year was an early start to the season. Don't know what the weather is going to be like in the next 45 days, but if we take normalized weather, we factor in that Easter is a couple of weeks later, which is a psychological factor in terms of when people open pools in certain cases. We expect a little bit of a later start. And with that, although we will have normally natural growth, the fact that that start will be a little later, we expect very modest growth in terms of top line and GP. Ryan J. Merkel - William Blair & Co. LLC: Got it. Okay. Just wanted to calibrate that correctly. And then lastly from me, congratulations on a 10% EBIT this year, EBIT margin. Do you have a new long-term operating margin target in mind that you can share with us? Sorry. Always asking for more, Manny.

I appreciate that. 10% is a psychological threshold, just like when we hit $100 per share was a threshold. 10% was not a long-term objective; it was a stepping stone along the way. I think that when you look at our business and you look at how we do and how we execute, the continued expansion of base business operating margins is basically innate to us and you will continue to see improvements over time. At some point, we will cross the 11% threshold and at some point, we will cross 12%. How long that will take depends on various factors, but I think what you can bank on is ongoing expansion and that's as much as I can say at this time. Ryan J. Merkel - William Blair & Co. LLC: Very good. Very helpful. Thank you.

The next questioner today is Ken Zener with KeyBanc. Please go ahead.

Good morning, gentlemen.

Good morning.

Good morning.

Obviously, weather in 1Q is going to be an issue, which you just addressed. I wonder, Manny or Jeff, if you guys can go into perhaps some regional trends in Texas, Florida, California and how actually that demand side – not on the service perhaps, but on the new construction or remodeling is playing out. For example, channel checks that we do here in California point to people really – just the confidence being very high because the contractors' backlogs are really still carrying over from last year. If you could just maybe expand on that a little bit to give us insight into the confidence that you're getting in and how it might differ from past years because it does seem that backlog is actually stacked for a lot of the people that we speak with.

Well, Ken, let me give you a little flavor here. When you look at our base business growth for 2016 specifically, and it was 7%, basically the major markets were all in the 6% to 8% range as were all the rest of the more seasonal markets. So no significant variation on overall basis. When you look at new pool construction, specifically with the most discretionary elements in product segment that we have and we serve, outside of Texas, there was growth in California, Arizona, Florida and the rest of the country. Texas was basically flat year-on-year. Some of that is the spillover languishing impact from the energy sector. It wasn't down; it was basically flat year-on-year. As we look at 2017, there are a number of external indicators that are very positive. There is a little bit of a lag in terms of how it impacts our industry, but I see those indicators all turning positive. You mention a number of those in your comments, and I think you sent out a note in the last day or so about that as well. The essence of it is that with increases of millenials now beginning to buy single-family homes, the increasing prices of single-family homes, the increasing equity in those single-family homes, the expected reduced regulation on the banking sector to enable cash to flow to people that want to invest in their homes, all those bode well for us as a industry and as a sector. So, I am cautiously optimistic that not only will the growth that has been taking place in a gradual sense on the new construction side continue, including Texas in 2017, but that it could further expand as we get into 2018, 2019 and 2020.

Thank you. And as it relates to the earlier question about 10%, where you look to be going in terms of guidance, is it fair to assume that more gross margin than SG&A can swing around from an EBIT basis, you're still assuming a 15% incremental EBIT?

Yes. That's a reasonable expectation.

Thank you, gentlemen.

Thank you, Ken.

Our next questioner today is Garik Shmois with Longbow Research. Please go ahead.

Hi. Thanks and congratulations. First question is just on the SG&A guidance for the first quarter. Just to be clear, the increase in operating expenses in Q1, is that mainly a function of decreased leverage on sales because of the tough comparison, or is there anything else on the cost side that we should be aware of?

Well, every year – there's two parts. One is we did a transaction April last year, metro on the Green side of our business, and therefore that's not embedded into our first quarter. So that's not base business, but that will add some expense to our first quarter base. The second factor is as, we look at our business for the year, we have a handful of new locations that we've opened and then there is some modest cost inflation baked into our numbers. So, overall, I see some operating expense growth, but nothing extraordinary from a percentage standpoint or anything else.

That's helpful. I guess that brings me to my next question just on M&A. You talked about $0.05 accretion in 2016. Wondering how much is going to carry over into 2017, and if any accretion from 2016 spillover is in your guidance. So I guess that's the first part of the question. The second part of the question just more high level. If you could speak to the M&A environment and where you're positioned for 2017, that will be great.

Sure. First, given the seasonal nature of our business, although the acquisition that we made in 2016 is in North Texas, the impact is largely weighted still to the second and third quarters of the year. So, in the big picture, it'll not provide any accretion or any benefit to speak of in 2017. In terms of the overall M&A environment, we are very disciplined here. And the crux of it is we always have a choice in terms of, A, how we grow share in the existing market that we have reasonable share in, how we grow share in a market we have low share in and how we enter a market that we're not in. So, as a general rule, where we have reasonable share are by far our best return on capital is just continuing to grow organically in that market. Where we have low share or where we have no share in a market, we compare whether we do it ourselves or we acquire somebody in that market. And over the course of time, we have done a lot of both. We have opened up over 100 de novo locations and we've added over 100 locations through acquisitions over the course of the past 20 years. So, the return metrics are the same in both cases and the ultimate objective is how do we establish the position that enables us to provide the return on capital that we're looking for and the organic growth that we're looking for over time. So those are the fundamental bases. We have ongoing dialogue with a number of prospective acquisitions, again, in market that we're not in or in markets that we have low share in. And to that end, typically, when we do a transaction, it provides little to no accretive benefit in the first year and it's what we do with it post-acquisition, generally speaking, that enables us to create value for our shareholders. So active discussions, generally speaking, it has averaged about 1% of sales over the past five years and a negligible amount of accretive contribution in the first year.

Great. Thanks so much and best of luck.

Thank you.

The next questioner today is David Manthey with Baird. Please go ahead. David J. Manthey - Robert W. Baird & Co., Inc.: Hi. Good morning, guys.

Good morning.

Good morning. David J. Manthey - Robert W. Baird & Co., Inc.: Could you just tell us how many new service centers you opened in 2016 and are those green, blue, or both?

In 2016, we opened up six locations. And by the way, that's referenced in one of our addendums to the press release. And I believe that included one green location and five blues, and there's another green location that we just opened up in the first quarter of this year. And we will be opening up another estimated five to six, depending on permits and everything else, but five to six again in 2017. David J. Manthey - Robert W. Baird & Co., Inc.: Okay. And obviously, the job market and the housing market and the general economy seem fairly healthy right now. And earlier, Manny, you referenced banking regulations and obviously some of the big ticket items you're dealing in, people need capital to get things done. Could you give us an update? I mean, as it stands now, without speculating on what might happen, can you just talk about the general lending environment for consumers that are wishing to renovate or build a new pool?

Sure. Just to frame it, historically – and I say I say, historically, it's prior to the Dodd-Frank and prior to the downturn in the industry in 2007, 2008 and 2009. About 50% of major home improvements were financed using home equity in one form or another. And that market has essentially been shut down until we began to see some limited activity in 2015, we saw a little more in 2016 and we're anticipating that to continue to loosen up. The two factors there, one is logically the continued growth or build-up in single-family homeowner equity and secondly is basically banks looking for a place to put their money where they can get a better return than lending to companies like us. So I think those are the two factors playing into it. The regulatory side, though, on lending to consumers has really, call it, compromised a number of financial institutions and their ability to reach consumers efficiently, particularly when you're talking about a $50,000 loan or a $75,000 loan. And therefore, the cost per loan is very high. So therefore, as the reduced regulations happen, although it's understandably speculative, we expect that that should free up a lot of capital because then the return dynamics for financial institutions will be a lot more favorable than they have been historically. David J. Manthey - Robert W. Baird & Co., Inc.: Okay. Thank you. And then, finally, are you currently experiencing any labor issues? Are you hearing anything from your customers regarding labor? And are there any other areas where you're seeing inflation start to surface?

Sure. That's a great question, particularly on the customer side. One of the impediments to significant growth on the part of particularly the builder sector of our customer base is labor and the availability of labor. A lot of the labor that was available 10 years ago has either migrated elsewhere or gone into other industries. So that is a limiting factor to growth. Certainly, the market has tightened. There are markets like, for example, Arizona, which, in November, passed a new minimum wage law, which significantly increased minimum wages there. And as a result, there's a spillover inflation impact certainly to our customers and as well as to us as a result of that. So, yeah, the biggest factor is availability of labor and the second factor is cost. And again, for our customers, particularly the more labor-intensive sectors, that's going to be an impediment to growth. Now, does that play into our expectation? And the answer is yes, but – and we factored that in already into what we look at for 2017, 2018 and 2019. And the cost factor is there as well, impacts both our customers and ourselves. That's largely passed on in the marketplace as it will drive overall market inflation.

Our next questioner today is Matt Duncan with Stephens. Please go ahead.

Hey. Good morning, guys.

Good morning.

Hey, Matt.

So, Manny, I just want to make sure we understand the full-year growth rate you guys are expecting from revenue that's implied by your earnings guide. You had, as you called out, probably about a 1% help from the weather last year. Are you assuming that becomes a 1% headwind going the other direction assuming more normal weather this year and what total rate of revenue growth should we be thinking about?

The way we have modeled it, and coming up with our guidance for the year, is we're looking at base business growth of 5% to 7%. And you're 100% correct, where we – with those expectations on top of normalized weather, it would have been more like 6% to 8%, right?

Okay.

So that 5% to 7%, in fact, reflects that benefit of approximately 1% that we got in 2016.

Perfect. And then, Mark, and I apologize to everyone for bogging this down with accounting detail here, but I want to make sure we understand the accounting change on tax correctly and the go-forward impact beyond just this year. Will the tax rate from a GAAP perspective stay at some lower rate going forward as a result of this or does it revert back to 38.5% next year?

Yeah. Good question, Matt. If I think about the tax rate on income, it's going to be at the 38.5% and the benefit that we get is not affected by income. It's really affected by the tax benefit on equity that vests and options that exercise. So it's an expense benefit on the tax line and it's going to create bumpiness in the rate. So I gave you the expected benefit for 2017, I would expect a similar benefit for 2018 and 2019.

Okay. So the right way to do this then is to add 500,000 shares to share count and you walked us through what those share counts would be. Model with a 38.5% tax rate, but then you've got to go in and lower the P&L income tax expense by taking that $10.7 million, and you said 10%, 10%, 25%, 55% for the four quarters of the year. And basically taking that amount out of the tax line in terms of what you'll show on a GAAP reporting basis, correct?

Exactly right. You got it.

Okay. So it's going to show a tax rate from a GAAP perspective of more like 34.5% to 35%.

Right.

Okay. So it does carry forward. I just want to make sure we understood that, that is sort of – while it's abnormal, it will carry forward, and this is kind of the new normal for the way your taxes are going to look. So, I apologize for that. I just want to make sure we understood that.

Yeah. No, that's good question. I'm glad you clarified it.

All right. And then just thinking about the three different pieces of the business – U.S. Pool, international Pool and the Green business – as we think about growth. Manny, are you thinking about all three growing in a similar fashion in terms of base business growth going forward? Or is there something unique to one of those three parts that may make it stand out one way or the other?

I would say in the near term, they would be very similar. But I would think in the medium term, the Green business will grow a little faster from a base business standpoint. And there are two reasons for that. One reason is the fact that the Green business has, as a percentage of the sales, a greater weighting to the discretionary side of the buy on the part of sales, A. And B, we have, generally speaking, a lower share of market in the Green business than we do on the Blue business. So I think in the near term, 2017 is not going to be significantly different, maybe a shade higher on the Green side. But as we go to 2018, 2019 and 2020, just given weighting and given share, that should grow a little faster than the Blue business.

Okay. And then last thing from me, cash flow, you're already getting $10.7 million more cash, it sounds like, into the business from this accounting change, where the U.S. corporate tax rate should be lower, that would further increase your cash flow. Just talk about what your plans would be for that excess cash?

Well, unless the board changes the direction provided to management, the priorities for us have been now consistent for many years. First is investing internally in our business. Whether that'd be the opening of new locations, the expansion of existing locations, the adding to our fleet, the continuous investments in technology, those types of internal investments are first. Secondly would be acquisitions, entering new markets, or a way to accelerate our share position in markets where we have low share will be second. Third will be dividends. And dividends, by the way, continuing to target approximately 35% of net income. And then fourth in this current state would be share repurchase, as we target maintaining a 1.5 times to 2 times trailing 12 months EBITDA/debt ratio. And by the way, we were at 1.6 times trailing 12 months debt-to-EBITDA through fourth quarter of 2016. So we're at the low end of our target capital structure range from a debt standpoint. So, share repurchases is fourth. If we get to a point where, for some reason, we go above 2 times debt-to-EBITDA, then the bias would be debt repayment.

Perfect.

And, Matt, let me just clarify one misperception perhaps. The accounting folks can pass all the guidance they want, but they can't increase our cash flow. But they can dictate where it shows up on our cash flow statement. So the $10.7 million really just moves from what's called financing activities in our cash flow, up into operating cash flow.

Okay. That's helpful. Yeah. Thanks for the clarification, Mark.

Yeah.

Our next questioner today is Anthony Lebiedzinski with Sidoti & Company. Please go ahead. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Good morning and thank you for taking the questions. So just, I guess, one more question as far as the accounting change. So when you report the Q1 results and going forward, will you report the results first on a GAAP basis and then will you also report on the old way? Or like how are you thinking about like reporting the numbers starting in Q1?

Yeah. Good question, Anthony. As you've been perhaps reading from the SEC, they're very concerned about non-GAAP measures and how those are reported by companies. So we will always report GAAP basis in terms of first and prominence, but then we'll show you how that GAAP basis would be adjusted for this accounting change so it's clear what the new and old GAAP results look like. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Got it. Okay. Thank you for that. And, Manny, what is your outlook for 2017 new pool construction?

We expect that that will grow close to 10%. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Okay. Got it.

Right about 10%. It was 65,000 to 70,000 pools, new in-ground pools built in 2016 and we expect that to be up about 10% again in 2017. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Got it. Okay. And also in December, you hired Peter Arvan as Executive VP. So I was just wondering if you could comment how is the board thinking about long-term management succession planning. If you could share any thoughts, that'd be very helpful.

Sure. Well, Pete is onboard and fully emerged, getting familiar with our people, our vendors, our business in every which way possible. Basically, when I look at the business, when the board looks at the business, to the extent that we can take the opportunity to further create depth in the organization to enable us to grow further faster, that's a very good thing. So that's the essence there. I try to keep up with all that's going on, but I certainly don't want to slow anybody down, and we have a lot of great people in the organization. And now, with Pete on board, I won't be slowing anybody else down. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Okay. All right. Thank you.

The next questioner today is David Mann with Johnson Rice. Please go ahead. David M. Mann - Johnson Rice & Co. LLC: Yes, thank you. Manny, I'm not sure any of your people would say that you've been slowing them down. Congratulations on a good year.

Thank you. David M. Mann - Johnson Rice & Co. LLC: Couple of questions. First on gross margin. The outlook for 2017 and it looks like you didn't do much in inventory pre-buy activity. Just how that might affect the year-over-year comparison.

Sure. Overall, for the year, I would expect very similar gross margins, 2017 versus 2016. So I would say the likelihood range of variation would be probably plus or minus 10 basis points. A lot of that has to do with product mix first; vendor mix, second. In terms of pre-buy activity, really what happened there is that we had a little better than we expected fourth quarter. So with that, that ate a little bit into our inventory year-on-year. So, therefore, had our numbers come in as expected from a sales standpoint, our inventories would have been a shade higher. But nothing material to report in terms of early buy activity or anything along those lines. David M. Mann - Johnson Rice & Co. LLC: And then, I don't know if you answered earlier about – the question on inflation, if I missed that. What are you thinking about any chance for a pickup in inflation in 2017?

Sure. There's two factors there. One factor is when you look at equipment, certain commodities that are heavily weighted towards energy like, for example, plastic pipe, there are certainly some inflation pressures there. But on the other hand, you look at other product categories, which are oversupplied in the marketplace like chemicals, which is our largest individual product category, and accessories, which is also very significant overall, and there's virtually no inflation there. So I think, overall, I would think at this juncture, it'll be 1% to 2% in terms of overall inflation with perhaps it being 2% to 3% on items like equipment, for example. Overall, although there are some equipment items that may go up more than that and some may grow less than that, but probably overall increment 2% to 3%. Some commodities probably a little higher. Chemicals and accessories flat. So probably on a weighted basis, 1% to 2%, which is consistent with our long-term average. David M. Mann - Johnson Rice & Co. LLC: And that's fairly consistent with last year, correct?

Last year, I would say, it was probably closer to 1% than to 2%. David M. Mann - Johnson Rice & Co. LLC: Okay. And then, a couple of sort of housekeeping questions. Mark, on the share repurchase activity that we should expect for 2017, is there any change in sort of the thought process about buying stock? Especially, it seems like it's about $20 above the average you paid in the fourth quarter. How should we think about that when we're building out our model?

Well, certainly, as you've probably noticed from history, we don't buy shares on a consistent basis month-to-month and quarter-to-quarter. We do that somewhat opportunistically. But over the long term, we know it's very beneficial way to return cash to shareholders through share repurchases. So, as we look at our cash flow and priorities for use of cash, that remains a significant use of cash for us in our priorities and we will continue to invest in shares on, again, opportunistic basis. So, in terms of how you model that in, that's kind of up to you. But I would expect to use in the range of $100 million to $150 million in cash for share repurchases in 2017. David M. Mann - Johnson Rice & Co. LLC: Great. And then, from a housekeeping standpoint, the blue and green base business growth in Q4 in the year, if you have it.

Sure. The blue business was up 6% and the green business was modestly down. This is base business. David M. Mann - Johnson Rice & Co. LLC: Right.

And then, for the year, the blue business was up 7% and the green business was a little less than that, but not much less. David M. Mann - Johnson Rice & Co. LLC: And the green business in the fourth quarter, what was going on there?

Tough to say. I would just – let me put it this way. We didn't do as well as we should have and there were certainly some execution issues. David M. Mann - Johnson Rice & Co. LLC: Okay. Thank you very much.

Thank you, sir.

The next questioner today is Al Kaschalk with Wedbush. Please go ahead.

Hey. Good morning, guys.

Good morning.

Good morning.

Most of my questions have been answered. I want to dig a little bit at the gross margin. Manny, I think you said 10 basis points in 2017, but there's probably a big influence on mix on that, meaning some puts and takes. Is that fair? And if so, could you -

Yeah. Just to make sure, it's plus or minus 10 bps. And that would be correct. Number one factor there is product mix and number two factor within product mix is vendor mix. So, there are products I'll use generically, low-dollar, harder-to-handle items where the cost to serve is higher. We typically try to recapture that with higher margins. On the other hand, higher value items that are relatively small cube, that proportionate to sales or sales dollars are lower cost to serve and those generally are sold at lower selling margins percents. So, that's the product mix component. And so we sell a number of items that are 40-plus percent margin, which have a cost to serve that in sometimes makes it marginally profitable, if profitably at all, even though you have a high gross margin. Examples being products like sand and salt. And although we're not at 40% on either sand or salts, the cost to serve there is very high as a percentage of the sales price. On the other hand, there are some higher value products that are relatively small cube, which are proportionately lower cost to serve where we may be having margins that are less than half our company overall gross margins. And in those cases, again, a much lower cost to serve. And even though they may be at half of our company overall gross margins are still profitable.

And does the blue or green business matter? Or is there one...

No, not significantly so. When you look at blue versus green overall, gross margins are very similar. Within the green business, there's a same mix dynamic as there is in the Blue, as would be in just about every trade distribution sector. And my perception in also industrial distribution sectors as well, but no, no noteworthy differences between the two.

Okay. And then, finally, just around the same discussion, but on inventory particularly, I think it was Mark said earlier about working capital and inventory turns. Given the seasonality and the timing on when you do buys, it may not be a fair question, but let's go for it. Is there more room on the inventory side for benefits to working capital or are you largely played out there? I know you're monitoring it all the time. But just trying to appreciate as the business grows, what investments maybe necessary? And is it more in inventory or is it in other places?

Sure. So first part is we are a service business. So our first bias is to make sure we provide the right level of service to our customers and fundamental to that is having the right inventory in the right place. So if we're going to err, we're going to err on the side of a little higher inventory to provide better customer service. Now, having said that, could we improve our internal disciplines in terms of inventory replenishment? Could we work better with manufacturers to make sure that we are communicating effectively and have the right parameters set in our system for replenishment? Could we do a better job of managing the system prompts in terms of line items beyond order point and things of that nature? The overriding answer is yes. So while certainly, first and foremost, the bias is on the service to our customer, we can certainly make process and execution improvements to further improve our inventory turns and therefore our gross profit return on inventory. And those are drivers that's top of mind throughout the organization.

Okay. Thanks for all the time.

Thank you.

This will conclude our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, William, and thank you all for listening. Our next conference call is scheduled for April 20 when we will discuss our first quarter 2017 results. Thank you and have a great day.

The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines.