Applied Industrial Technologies Inc (AIT) 2017 Q4 法說會逐字稿

Welcome to the Fiscal 2017 Fourth Quarter and Year-End Earnings Call for Applied Industrial Technologies.

My name is Julie, and I'll be your operator for today's call.

(Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Julie Kho.

Julie, you may begin.

Thanks, Julie, and good morning, everyone.

Our earnings release was issued this morning before the market opened.

If you haven't received it, you can retrieve it from our website at applied.com.

A replay of today's broadcast will be available for the next 2 weeks, as noted in the press release.

Before we begin, I would like to remind everyone that we'll discuss Applied's business outlook during this conference call and make statements that are considered forward-looking.

All forward-looking statements, including those made during the question-and-answer portion, speak only as of the date hereof and are based on current expectations that are subject to certain risks, including trends in various industry sectors and geographies, the success of our various business strategies and other risk factors identified in Applied's most recent periodic report and other filings made with the SEC, which are available at the Investor Relations section of our website at applied.com.

Accordingly, actual results may differ materially from those expressed in the forward-looking statements.

The company undertakes no obligation to update publicly or revise any forward-looking statements, whether due to new information or events or otherwise.

In compliance with SEC Regulation FD, this teleconference is being made available to the media and the general public as well as to analysts and investors.

Because the teleconference and its webcast are open to all constituents, all prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed.

Our speakers today include Neil Schrimsher, Applied's President and Chief Executive Officer; Mark Eisele, our Chief Financial Officer; and Dave Wells, our Vice President of Finance.

I will now turn the call over to Neil.

Thank you, Julie, and good morning, everyone.

We appreciate you joining us.

I'd like to welcome Dave Wells to his first Applied earnings call.

As previously announced, Dave will succeed Mark Eisele upon his retirement effective August 31.

We're pleased to have Dave onboard, providing his extensive industrial experience and financial acumen.

And we look forward to his leadership.

Now moving on to our results.

Our net sales for the quarter were $681.5 million, an increase of 7.5% compared with $634 million in the same period a year ago.

Net income for the quarter was $53 million or $1.34 per share compared with $26.1 million or $0.66 per share in the fourth quarter of fiscal 2016.

Net sales for the full year were $2.59 billion, an increase of 2.9% compared with $2.52 billion last year.

Net income for our full fiscal year was $133.9 million or $3.40 per share compared with $29.6 million or $0.75 per share in fiscal 2016.

As noted in our press release, our current year results included favorable onetime tax benefit in the fourth quarter of $22.2 million or $0.56 per share related to the write-off of the company's investment in one of our Canadian subsidiaries.

Prior year fiscal 2016 results included a noncash goodwill impairment charge of $1.62 per share recorded in the third quarter.

In the fiscal year, we generated $164.6 million in cash from operations, our second highest level in company history, while returning $52.9 million to shareholders via dividends and share repurchases.

Our performance reflects the positive strides we made throughout fiscal 2017, including continued sequential progress in the fourth quarter.

We've moved past the challenging environment in fiscal 2016 to realize the benefits from serving our customers' operating needs, driving continuous improvements in our business and enhancing our technical value-add capabilities, benefits that strengthen our market position and pave the way for ongoing value creation.

Overall, we're pleased with the return to growth, continued operating discipline and progress in executing our strategy.

Our value-driven continuous improvement culture includes productively serving current customers and reaching new accounts through our multiple channels to market, including 430-plus service centers; promptly meeting local customer requirements; 70-plus fluid power sales and service facilities providing engineered system solutions and value-added services for mobile and industrial OEMs and MRO end users; a digital and printed catalog serving as a valuable purchasing and resource guide; our Maintenance Supplies & Solutions vendor-managed inventory specialists; productively managing C-Class MRO supplies; and our applied.com e-commerce site providing fast access to technical product information and complete quote, order history and shopping capabilities to streamline purchasing.

As customers continue to consolidate their industrial spend with fewer more capable suppliers, we are well positioned for greater business across these multiple channels, providing choice, convenience and expertise to generate the success for our customers and value for all our stakeholders.

At this time, I'll turn the call over to Mark for more detail on our financial results.

Thanks, Neil.

Good morning, everyone.

I'll provide some additional insight regarding our fourth quarter fiscal 2017 financial performance.

Our sales per day rate during the quarter was $10.73 million, 8.3% ahead of the prior year quarter and 1.1% greater than our rate in the March quarter.

We had 63.5 selling days in the June 2017 quarter compared to 64 days in the June 2016 quarter.

This resulted in a 0.8% headwind when comparing total sales in the current quarter versus the prior year quarter.

Acquisitions had a positive impact on sales of 0.8% during the quarter, and foreign currency impacts decreased sales by 0.4%.

Excluding the effects of acquisitions and currency translation, our organic operations experienced a 7.1% sales increase in sales compared to the prior year.

In addition, we believe the impact of vendor price increases was minimal during the quarter.

Our product mix during the quarter was 29.7% fluid power products and 70.3% industrial products.

Fourth quarter sales in our Service Center Based Distribution segment increased $29.2 million or 5.6%.

Acquisitions added $1.7 million or 0.3%, and foreign currency fluctuations decreased sales 0.4%.

Excluding acquisitions and currency translation, organic operations in the Service Center Based Distribution segment experienced a 5.7% increase in sales.

Turning to our operations that sell to upstream oil and gas customers, we experienced a 73% increase in sales in the June quarter compared to the prior year quarter.

From a run rate perspective, we saw a 3.4% decrease in sales compared to our March 2017 quarter.

This small decrease relates to the seasonal nature of our business in Canada, as our U.S. oil and gas operations did experience sales improvements from the March quarter to the June quarter.

Our fluid power businesses segment experienced a sales increase of $18.2 million in the fourth quarter or 16.2% year-over-year.

Acquisitions added 3.2%, and foreign currency translation decreased sales by 0.4%.

Excluding the impact of acquisitions and currency translation, the fluid power businesses segment operations saw a sales increase of 13.4%.

Our fluid power businesses based in the U.S. drove the sales increases in the quarter.

From a geographical perspective, sales in the quarter for our U.S. operations were up 8.5% compared to the prior year quarter, including a positive impact from acquisitions of 0.7%.

Our overall Canadian operations experienced a sales increase of $0.8 million or 1.3%, with a positive impact from acquisitions of $1.7 million or 2.7% and the negative foreign currency translation impact during the quarter of 4.3%.

Canadian organic operations experienced a 3% increase in sales.

Consolidated sales from our other country operations, which include Mexico, Australia, New Zealand and Singapore, increased $1.4 million or 3.5% year-over-year.

This consisted of a sales increase in local currency of 3% and a positive foreign currency translation impact of 0.5% in the quarter.

Our gross profit percentage in the quarter was 28.8%, up 70 basis points from the prior year fourth quarter and 70 basis points higher than our third quarter rate.

During the fourth quarter, we recognized LIFO layer liquidation benefits totaling $9.4 million, along with scrapping $6 million of inactive and unsaleable inventory.

The net benefit of these 2 items to our gross profit percentage in the quarter was $3.4 million or a positive 50 basis points.

In the prior year fourth quarter, we realized LIFO layer liquidation benefits of $2.1 million.

Our selling, distribution and administrative expenses on an absolute basis increased $11.9 million or 8.7% when compared to the same quarter in the prior year.

Additional SD&A from businesses acquired added $1.3 million or 1% of SD&A.

And changes in foreign currency rates had the effect of decreasing SD&A in the quarter by $0.6 million.

On a sequential basis, fourth quarter SD&A increased 1.8% compared to the third quarter.

Besides acquisitions, this increase is due to additional incentives and associated benefits, which directly relate to our improved financial performance.

The effective income tax rate was a benefit of 14.2% for the quarter.

We recorded an income tax benefit of $22.2 million in the fourth quarter for worthless stock tax deduction.

This deduction related to the write-off of the company's investment in one of our Canadian subsidiaries for U.S. tax purposes.

Had we not recorded this tax deduction, our operational effective tax rate for the fourth quarter would have been 33.8%.

Our consolidated balance sheet remains strong, with shareholders' equity of $745.3 million and a conservative debt-to-total capitalization ratio of 28%.

Our after-tax return on assets for the fourth quarter and full year was 15.8% and 10.2%, respectively.

Excluding the worthless stock tax benefit, the full year return on assets was 8.5%.

Inventory at June 2017 was up $0.5 million compared to March levels.

This reflects operational inventory reductions of $2.3 million, offset by $2.8 million of inventory increases due to foreign currency translation.

Cash generated from operating activities was $86.1 million for the quarter and $164.6 million for all of fiscal 2017.

This compares to $70.7 million for the prior year quarter and $162 million for all of fiscal 2016.

That wraps up my remarks on our fourth quarter fiscal 2017 results.

Before I turn the call over to Dave to discuss some of our views for fiscal 2018, I want to express my appreciation for working with the analyst and investor communities through the years.

As CFO for the past 13 years and an Applied executive for over 26 years, the relationships I've developed have been fulfilling and helped me grow both personally and professionally.

As Dave takes over as CFO, I am confident that the financial leadership he brings will meet or exceed your expectations.

Now I'll turn the call over to Dave to provide some insight for our fiscal '18 expectations.

Thanks, Mark.

It's truly a pleasure to be a part of the Applied team in such a great business.

I look forward to picking up and carrying it towards to move the business forward.

Transitioning now to our outlook for fiscal 2018.

As noted in our press release, we're forecasting a sales increase in the range of 3% to 5% for the new fiscal year and expect earnings per share in the range of $3 to $3.20 per share.

We expect further gross profit margin expansion and anticipate delivering another 20 to 30 basis points improvement in gross profit margin in the coming years.

As a result of continued disciplined spending and further leverage of our (inaudible) initiatives and ERP investments, we foresee overall SD&A increasing at a rate slightly lower than our rate of sales increase.

We anticipate that our effective tax rate will return to the 34% to 35% -- 34.5% range for all of fiscal 2018.

Cash provided from operations in fiscal 2018 is projected to reflect another solid year performance with a slight increase over the near record year we delivered in fiscal 2017.

Volume fall-through and modest improvement in collections and inventory turns will combine to deliver this further improvement.

Capital expenditures are expected to be in the range of $18 million to $19 million.

Depreciation expense should be near $16 million and intangible amortization expense in the area of $23 million for fiscal 2018.

Applied had modest share repurchases in fiscal 2017, but we expect to ramp purchases in fiscal 2018 to be back in line with historic levels to meet our objective of slightly reducing share count over the course of the year.

In order to achieve this, we are targeting quarterly share repurchases in the range of $10 million to $15 million per quarter.

Returning cash to our shareholders through share repurchases and dividends remains a priority in our capital allocation strategy to drive shareholder value.

In fact, looking back over the past 4 years, we have executed share repurchases totaling nearly $159 million and reduced our average diluted shares outstanding by over 8% to 39.4 million shares at the close of fiscal year 2017.

Before I turn the call back over to Neil for some final comments, I would like to reiterate how pleased I am to have joined the Applied team.

Most importantly, I thank Mark for his tremendous support and assistance during the past few months of transition.

The firm foundation that Mark has helped to build during his time in the role coupled with his tutelage as I have shadowed him over the past 3 months, will truly enable me to hit the ground running in September as I step into the CFO role.

I wish Mark all the best in his retirement and a heartfelt thanks.

Now back to Neil for some closing comments.

Thanks, Dave.

I too would like to express my sincere thanks to Mark.

It's been a real pleasure to work alongside him these past 6 years.

And I speak on behalf of the entire organization when I thank him for his contributions over his 26 years with Applied.

Truly a great run and outstanding career.

We offer our best wishes to Mark and Marilyn a very happy and healthy retirement.

Looking forward, we have more work to do, and we're excited to build on our business momentum for continued growth in fiscal 2018.

Across our organization, we have more than 5,500 associates who are committed to driving the continued success of Applied, providing innovative products, solutions and specialized services that enable our customers' success.

In fiscal 2018, we maintain continuity and focus on our long-range strategic plan, including the 5 elements.

One, core growth, growing our core sales and marketing capabilities across 550-plus locations, leveraging our local market presence and plans to expand with existing accounts and new customers.

Two, product expansion.

Driving results beyond our base offerings with opportunities across all our product groups, including Maintenance Supplies & Solutions and other consumables.

Three, fluid power.

Building upon our North American leadership, leveraging our value-added services and expanded product offering for OEM customers and gaining increased share of MRO end users.

Four, operational excellence.

Driving continuous improvements across the business and realizing the full potential from our ERP systems.

And fifth, acquisitions.

With a productive M&A pipeline, staying active in extending our business reach and expanding Applied's capabilities to serve industrial customers in our geographic markets.

Nearly 95 years since our beginning, we are well positioned and committed to achieving our next level of growth in generating benefits for all our stakeholders.

With that, we'll open up the lines for your questions.

(Operator Instructions) Your first question comes from Ryan Cieslak with Northcoast Resource (sic) [Research].

First off, I just want to say congrats to Mark.

It's been a pleasure working with you and really best of luck in the future endeavours.

And Dave, same to you, congrats on the new role and looking forward to working with you.

Thank you.

Thanks, Ryan.

So first question to maybe wanting to get started at is, could you give some additional color on how maybe the quarter progressed on the top line perspective by month and then what you maybe are seeing so far in a year-over-year basis here into the early part of the first quarter?

Sure.

So Ryan, our sales per day trends for the overall fourth quarter improved 1.1% from the third quarter.

May was slightly below April.

We finished up in June.

July was positive year-over-year, probably mid upper single digits, so as expected, down sequentially from June, though, with seasonality.

And month-to-date August, we started well over these initial 7 to 8 days.

Okay.

And then just to dovetail off of that, in thinking about the sales guidance then for fiscal '18, up 3% to 5%, maybe what are some of the puts and takes there with regard to maybe what you're assuming for the oil and gas end markets?

It seems like, obviously, somewhat of a deceleration from maybe where you're running right now.

But -- I'm assuming that's maybe just more difficult comparisons.

But maybe just some color on some of the puts and takes in that guidance.

I'd say, overall, if you think about the first half of our fiscal year, the last part of the calendar year, we'd be thinking in that 5% to 6% range.

If you think about the second half of our fiscal year or the first half then of calendar 2018, 2% to 3%.

And so oil and gas, we expect oil and gas continues kind at its rate right now.

And then as we get into 2018, we think it has the opportunity for some growth above that.

So it's -- the comparable on that business in our first quarter, it will print nicely.

We see that continuing.

With oil price at or around $50, I think supplies are down a little bit.

For us, it's a location game.

Our upstream business in ongoing production in productive deposits and plays, including West Texas, is where the business is doing well.

And I think Mark pointed out earlier, sequentially, our U.S. business improved in that quarter.

And we think we've got opportunity in the year ahead.

Okay, great.

And then just lastly and I'll jump back into queue.

On the gross margin side of things for the outlook for the fiscal 2018, sounds like you guys are looking for ongoing margin expansion, which is good to hear, and certainly, particularly within this market, good to see.

What maybe are some of the things that are continuing to drive that improvement for you guys.

Is there something new, Neil, this year that we should keep in mind?

Or is it just a lot of the same things that you've talked about in the past that's supporting the gross margin here in this environment?

I think it's a lot of continued focus and execution.

We still believe we've got good improvement opportunity using tools and analytics to reduce variation around customer groups and product groups.

And looking back, we've done that.

So we believe going forward, we still have that.

We've got an opportunity around customer mix to positively help our margins, especially as we participate in local economies with those accounts.

And then in product mix, as we continue to grow across our product base, mix up into consumables, value-added services, those are margin-additive, margin-accretive to us.

So it's no one activity, no one lever.

Continuing that work across the footprint of our business is where we say we can grow margins 20 to 30 basis points as we look into this fiscal year.

And then, Neil, just quickly.

You strip out the LIFO benefit in the current quarter or the fourth quarter here.

The adjusted margin assumes you guys are -- or implies you guys are still running a little bit below where you are in the first half of the year.

Anything that came up or what was different than how you were thinking about the gross margin and how that essentially played out for the quarter?

Ryan, I'll jump in and chat about that.

You take about the net LIFO benefit and we get up to that 28.3% for Q4.

We were running around 28.4% in the first half of the year.

So we look at that just a little bit normal variability and that we're basically performing at the similar levels with the core operations.

Your next question comes from Steve Barger with KeyBanc Capital Markets.

This is Ryan on for Steve.

Just wanted to talk about the guidance, 3% to 5%.

How should we think about incremental margins on that top line growth?

Well, Ryan, this is Mark.

I think we're going to look at lot of those margin improvements in a very similar way that we've talked about in the past.

In the past, we've talked about organic sales growth providing incremental margins of up to 14%.

Now for the first 1% or 2% of those -- that sales growth, we do have some SD&A growth that goes along with it in the traditional manner.

So you don't get quite that 14% leverage on maybe the first percentage point or so of the sales increase.

But our expectations are that the sales growth that we're projecting for fiscal 2018 is helping drive and leverage up those incremental margins to get to the improved EPS growth that we're showing in fiscal 2018 as well.

Okay.

And then my next question, just comparing the top line growth you're seeing to your peers who are tied to fluid power, I mean, you guys are on top of the list.

Do you think it's more of a factor of you guys gaining share, or is it more so just your oil and gas exposure?

I think across our businesses, we are doing a very nice job on -- with mobile and industrial OEMs, combining technology to these traditional offerings, so helping them improve their products, their performance, the functionality of those, and it's helping them grow their business.

And then we're taking that forward into the industrial environment, helping customers lower their owning and operating cost, energy-saving products that help with sustainability.

I think across our fluid power group of companies, we're getting growth, showing growth out of probably 3/4ths of those.

And there is another view of those that are very, very close that we expect that will be tipping as we go through this fiscal year.

So I think it's a combination of we're providing a lot of value to our customers combining technology to traditional hydraulics and even pneumatics, and it's yielding benefits for us.

Ryan, this is Mark.

Let me jump in also and piggyback on what Neil chatted about, because the increase that we're seeing on our fluid power businesses, that's not really tied to the oil and gas increases.

Our oil and gas sales increases are all within our Service Center Based Distribution business segment.

So I don't want you to think that, that's really driving the fluid power increase in that segment.

So we're seeing those increases in the overall industrial economy and the mobile economies that Neil chatted about.

Good color.

And my last question.

Just want to go back to the LIFO liquidation, and primarily, the scrapping of the bearings.

I mean, can you give a little bit more color on that?

I mean, where the products are obsolete?

Or was there a recall?

Or is it just a factor of you guys maybe just getting rid of SKUs?

Right.

Brian, this is Mark.

I'll chat about that too.

Operationally, we review inventory activity and potential scrap on a monthly basis.

And also, much of our scrap represents inactive, but potentially usable product, where we do not have a viable sales outlet.

So in the fourth quarter, we conducted a deeper review around aged-bearing products, for form, fit, function along with saleability to determine final scrap-specific items.

And there was no reduction in our overall excess and obsolete inventory reserves in the fourth quarter.

And these reserves have increased throughout fiscal 2017.

And the point we'd like to make when we look forward is for fiscal 2018, we don't really expect an unusual amount of overall scrap expense like we saw on the fourth quarter, as well as we don't really expect major increases in any inventory reserves during the year as well.

(Operator Instructions) Your next question comes from David Stratton with Great Lakes Review.

Real quick to touch on inventory, flat sequentially.

What are you seeing as far as going forward any other opportunities for inventory improvements that you've been pursuing recently?

Well, Dave, this is Mark.

I think we always have opportunities to continually look at our inventory levels and have improvements.

When we look forward into our fiscal 2018 plan, we are expecting our inventory turns to improve compared to fiscal '17.

And the fiscal '17 turns did improve compared to fiscal '16.

So I think the bottom line concept is, we believe that we'll be able to deliver the fiscal 2018 sales with keeping inventory flat.

And if we can get it to be a little bit down, that's great.

But that's basically the prospective.

And so that -- with that, our inventory turn percentages could improve by almost 10% compared to the prior year.

I would say also up and down our supply chain.

I mean, we're looking to link with our suppliers and on the high velocity types, right, how do we stay productive with one another and beat those quickly.

If that gives us some inventory relief, then we can make investments in perhaps some slower moving items that are important to our customers and then fully leverage, utilize our distribution centers that feed our service center locations then on a nightly basis.

So we'll continue to have the right local inventory in service centers close to a customer and then be very close with those distribution centers coming across.

So I guess, any avenue in continuous improvement, we think we've got a good path going into '18 and really beyond to improve our inventory position and our overall turns.

I think our recent investments as well in technology and ERP platform really provides some tools to help us on that front as well with the visibility in driving that inventory management, there's stile opportunities lever there.

And the LIFO liquidation, was that strictly inventory management benefit, or was there any demand component in that?

It is primarily inventory management completely.

Okay.

And then looking at the CapEx forecast for the year.

Can you give any color around where you see the best use of those funds?

And what we should expect in that terms?

I'd say our CapEx still stays modest, and it's really around technology investments that can help our teams with the tools going forward, be a little bit around systems, some equipment around some of our service and repair facilities.

But it'll stay at really modest level, as we think about it for the fiscal year.

Great.

And then I guess, it wouldn't be a quarterly call if I don't ask about the 30 industry groups and what you see there?

All right.

So similar.

'18 more up in the past quarter.

Positive sort of around oil and gas, that we've talked about year-over-year and sequentially in the U.S. Other related industries, infrastructure, aggregate; cement, positives.

Seeing positives in machinery OEMs, transportation equipment and paper and food.

Those are probably the ones in the '18.

And I think the others start to narrow a little bit more too.

So I think all in all we saw good activity in the quarter.

It's a good base as we move into fiscal 2018.

Your next question comes from Chris Dankert with Longbow.

I guess, congrats, again Mark, and welcome, Dave.

Thanks, Christian.

I guess, first of, kind of touching back on the 18 out of 30.

Was metal and mining part of that, that group that was up in the quarter?

Or was that still kind of lagging a bit?

I don't have the list in front.

I would say, probably close into it in the plus/minus category.

So near the line, not a standout either way.

Those on the bubble.

Then you said, pricing was kind of a nominal impact on the quarter.

But I guess, moving into the first half of fiscal '18 here.

I guess, any thoughts on pricing, raw material inflation and kind of how customers are positioned for that right now?

We think we could see some continued inputs or increase as we move through the full fiscal year.

So looking back modest impact going forward, we'll have some supplier increases that will be coming through.

So likely as we go through the full fiscal year to have some inflation.

But to date again, looking back and we've had some of the increases, it's been more modest.

If you think about the full year ahead, perhaps there's going to be a little bit more of that realized.

Got it.

And would it be fair to say that positive pricing would be towards the upper end of guidance at this point or just -- and like a flattening more the midpoint?

I don't know if we would conclude on that.

I would say, we still have a very, very modest overall push with our sales guidance for supplier price increases to us.

When we continue to look back, we've had over 2 years of virtually no net impact of supplier price increases.

And we have a very small view of those potentially happening during fiscal 2018.

Although, like what Neil said, we do talk with our suppliers and we see some of the possibilities for more supplier price increases happening as the year marches on.

But with that said, it's still probably going to be modest, probably below 1% total impact on us.

Got you.

And if I could just kind of zoom out high level for a second here, in the past you guys have mentioned that, I think fluid power especially, there was some increasing connectivity, more data analytics associated with some of the fluid power products you were selling.

I guess, Is there any way to quantify the growth in those products or mix as far as what percent of products are, I guess, are connected versus more the historic legacy products?

It's really combining or connecting electronics to those legacy products.

So if you think about mobile and industrial OEMs, more controls, more features inside cabins or at the point of control, which in some cases could be off the equipment.

So I don't have a good mix, I mean, right?

Fluid power is big workforce in the industry.

So you're still keeping the fundamentals to do the work.

I just think the control is going around it to enable or have those happen are becoming a little bit smarter and a little bit better user interface.

So more friendly for the ultimate user.

And I think it's helping these OEMs improve their products that they're taking forward to their ultimate customers.

(Operator Instructions) Your next question comes from Steve Barger with KeyBanc.

Just one more follow-up.

Just on the pricing environment.

I mean, with the current demand you're seeing right now, I mean, could you guys may be push price beyond the supplier price increases?

Just kind of trying to get a sense of what kind of environment you need to see where you could go beyond just the supplier price increase?

So Steve, I'd say, it is in our margin outlook and guidance that we're providing.

And it is part of our review that we go through in reducing pricing variation that we have and make sure that we appropriately value pricing to those.

So if we start to get a little bit more material input in inflation, that may create the opportunity going forward, but probably needs a little bit more input for that.

And so as we look back, maybe a little less of that in the environment, we've been very focused on -- we have to help ourselves.

And so we help ourselves in using tools, reducing variation and doing the things that positively help mix both customer and product.

Your next question comes from Ryan Cieslak with Northcoast Research.

Just a really quick follow-up housekeeping question, if I can.

Is your guidance assuming share buybacks?

I think you mentioned in the prepared remarks there were some share buybacks by quarter you were expecting here going forward, does that include that?

And then also what is the top line assumed in your guidance with regards to any impact from foreign currency?

Yes, the guidance does assume as we talked about share buybacks of $12 million to $15 million per quarter, which puts us more back on track with our historical levels.

And there is nominal currency impact in terms of the forward view in the guidance.

There are no further questions at this time.

I will turn the call back over to Neil for closing remarks.

Okay.

I want to thank everyone for joining us today.

And we'll look forward to seeing many of you throughout the quarter ahead.

Thanks a lot.

This concludes today's conference call.

You may now disconnect.