麥卡遜 (MCK) 2008 Q4 法說會逐字稿

Ladies and Gentlemen, thank you for standing by and welcome to the PPS World Medical fiscal year end 2008 conference call. During the presentation, all participants will be in a listen-only mode. And afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Thursday, May 8th, 2008.

And I would now like to turn the conference over to Robert Weiner, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Jennifer. Good morning, everybody. Thank you very much for joining our call today for the fiscal year 2008. I know it's a busy earnings season, lots of people all over the place, so we'll try to be mindful of that. Today on the call speakers are David Smith, Chairman and CEO and David Bronson, Executive Vice President and CFO. We issued two press releases last evening for fiscal year 2008 and EPS goals for fiscal years 2009 through 2011. If anybody needs a copy of these please call us here at our corporate headquarters 904-332-3000 to request a copy and we'll get one out to you. Our releases and the financial workbook for fiscal year 2008 are available on our website at www.pssworldmedical.com. The financial workbook, as many of you know, contains GAAP and non-GAAP financial measures. We provide a lot greater detail into each of our businesses.

Now I'll look at the forward-looking statement. During this call, we may make a number of forward-looking statements regarding revenue, gross margin, operating expenses, operating margins, earnings per share and other matters that are not historical facts. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from what is expressed or forecasted. For a list and descriptions of certain of these risks and uncertainties, we refer you to the forward-looking statement disclosures in today's press release and to the other information provided in our most recent form 10-K and other SEC filings, copies of which are available from the SEC, from the investor relations section of our website or from our office here in investor relations.

The Company wishes to caution listeners to this call and its replay not to place undue reliance on any such forward-looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and as such speak only as of the date made. The Company also wishes to caution our listeners that it undertakes no duty or is under no obligation to update or revise any forward-looking statements. Let me remind you, we reference certain non-GAAP measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You'll find reconciliation charts at the end of our financial workbook and our form 8-K submitted to the SEC. As David Smith mentioned in the Press Release, we will hold our annual Investor Day in Boston this year May 22nd on Thursday. Please call the Company should you need additional information about this meeting. For our call today, we will follow formal remarks by a Q&A session as prompted by the operator. We will limit the call to no more than one hour in duration as we spoke about the heavy earnings season. I'm now pleased to turn the call over to David Smith, our Chairman of the Board and Chief Executive Officer.

Good morning, everybody. Thank you for joining us. This is our fiscal year 2008 year-end conference call. In addition to announcing our year-end results, we disclosed our next three-year strategic plan goals in a subsequent press release last night. Our Investor Day, as Rob said, is May 22nd in Boston and can be seen on our website. We announced these three-year goals ahead of the meeting to fill the artificial vacuum of silence between today's call and May 22nd. The new 19% growth goals are good. However the quality of our strategies, the investments, tactics and combined with the 19% growth goal and Q&A with Management will be better. So plan on joining us in Boston on May 22nd.

Today's call is about fiscal 2008 results and the completion of our 2006 through 2008 three-year strategic plan. Even with the stock pull back, along with the market, our shareholders have gained 34.8% compared to the NASDAQ composite gain of 13.9% during this planned period. We believe the bedrock foundation of that shareholder gain is the execution by our people of our strategic plan. They have successfully grown revenues over two times that of competitors, utilizing innovative and unique customer solutions, new products and programs, and they have embraced change with enthusiasm and competency. We have successfully created three relatively new businesses with $230 million of select brand sales, $280 million of pharmaceutical sales, and $150 million of home care sales.

Along the way we dealt with revenue growth adversity. We made the decisions to exit $200 million of flu vaccine business and (inaudible) business until conditions improve for us and our customer. We have driven innovation with products and services and systems, bringing real value to our customers. Examples include Repara, wound care product, Smart Scan, our customer automation tool, our new Athena Health relationship , our unique Encino and Tiger Medical QC and sourcing relationships and dozens of customer focused distribution services. Overall our revenue growth was strategic, but it also is what we call smart growth. We were able to leverage our infrastructure, systems, core competencies and peoples bandwidth and new processes for record operating profit, cash flows, and return on committed capital performance. Over the three plan year period, our operating margin expanded 230 basis points and consolidated return on committed capital hit in Q4 of 35.7% and 28% for fiscal 2008.

During the three-year plan, profit growth success overcame various types of adversity from hurricanes and gas price increases, plus the $200 million of annual revenue we smartly exited. We actually missed our three-year operating margin goal as a result of costs incurred to comply with the new pedigree laws. Most important through all this success and adversity, we stayed true to our principles and focused. Our execution culture and customer centered business are both healthier than they have ever been before. Today, I can tell you we are focused on our people, innovation, and service for our customer, smart and profitable growth with ethical behavior and balanced decision-making and of course, execution, execution, execution.

Before I turn the call over to David Bronson, let me comment on 2009 through 2011 three-year plan. We did pre-announce the goals to remove the artificial silence between today and May 22ne, our Investor Day. Our three-year plan just ended produced a 13% compounded growth. Our goal for the next three-year plan period produce a 19% growth. On May 22nd, we will discuss the strategies, significant investments, tactics and metrics that form the foundation of the plan as well as assumptions concerning our industry, reimbursement, the economy and competitors that influenced our strategies. Everything from our recent trip to Asia to new deals with vendors to current economic and customer trends. The new plan is similar to the old, a continuation and progression of business themes, similar risk profiles, but it also includes new products, programs and initiatives and some significant investments. But it's also still more about execution than Hail Maries. It's aggressive and adaptive to the needs and trends of our ever-changing environment and customer and we're looking forward to joining you on May 22nd.

Thanks, Dave, and good morning everyone. I'm going to start with a quick review of our financial results for the just completed quarter, our fourth quarter for fiscal 2008 and then I'll talk a little bit about full year results and some balance sheet and cash flow metrics for the Company. Consolidated revenue growth in the quarter was 11.4%. Of the $51 million of revenue growth over prior year, about $4.5 million was from an acquisition the Physician business completed last spring. Revenues in the Physician business grew 13.6% in the quarter and Elder Care sales grew 6.2%. Growth in revenues was across-the-board in all strategic categories with select, our private label brand, growing 22% in the Physician business and 23% in Elder Care. Equipment revenues for the Physician business grew by over 8 % and sales of pharmaceutical products grew by 17.5%. For Elder Care we saw an acceleration of growth in home health agencies to 11% over prior year.

Operating earnings grew by almost 21% in Q4. Operating income as a percent of sales was 8.4% for the Physician business, 5.2% for Elder Care and 5.9% for the Company overall, a 40 basis point improvement from Q4 of last year. We monetized a portion of our investment in Athena Health during the quarter which generated a pretax gain of about $4.6 million. That gain shows up on the other income line of our P & L and added about $0.04 a share to our quarter which we reported last night at $0.31 per diluted share. You may have noticed that our effective tax rate for the quarter was higher than usual. Our quarterly tax rate, as we've noted in the past, is subject to some degree to volatility in the stock market such as we saw this past quarter and is related to deferred compensation retirement plans whose underlying assets are mark-to-market. When the market goes down sharply, our deductible G&A expenses lower and the lower deduction increases are tax rate. The opposite happens in periods when the market turns up sharply. Our full year tax rate of 39.3% is closer to our normalized rate that you should expect going forward.

During the quarter, we repurchased 2.9 million shares in open market transaction for about $50 million. Operating cash flow for the quarter was $24 million, very good results in accounts receivable management with both businesses improving both in terms of DSOs or Day Sales Outstanding and also in the aging statistics. And we also saw this quarter some improvement in our inventory turns.

Now for the full year. Reported revenue growth for fiscal '08 for the Company was 6.6%, and as Dave mentioned and as most of you are aware, we chose not to participate in the flu vaccine market this past year. Revenue growth for this year excluding last year's flu vaccine sales of $49 million would have been 9.6%. On that same basis, the Physician business grew by 11% in fiscal '08. Elder Care grew by 6.4%. Both these results significantly overachieved our goal of growing at least twice as fast as the market and reflect a success of our innovative sales and marketing programs, the rapid growth of our select product line, the quality and focus of our salesforce and the breadth of our product and service offerings.

We had double digit growth in operating income in each business in fiscal year '08. The Physician business did, however, feel the effects of increased pedigree costs as a drag on operating income growth this year. The Elder Care business grew their operating income over 16% for the year and achieved an operating margin of 4.6%, up 40 basis points for the year. The Physician business generated 11% growth in operating income for the year, again, impacted by incremental operating costs as we complied with pedigree regulations here in Florida. We continue to gain operating income leverage from our model even though some of those costs this year had somewhat masked the improvements. Even so, we generated incremental operating margin of 9% on new revenues and 10% in the fourth quarter as some of our pedigree related costs began to diminish. And just to provide some color, excluding the pedigree related costs of $6.3 million incurred this year, our operating margin drop through on you new revenues would have been about 14% on the $114 million of growth in revenues.

Cash flow from operations was $69.8 million for the year, ahead of our goal of $63 million to $67 million and, as Dave said, consolidated return on committed capital for the Company was 28.1% for the year and 35.7% in the fourth quarter, both of these are new highs for us and reflect very good progress toward our long term goals. We returned over $112 million to shareholders during the year, repurchasing 6.4 million of our common shares at an average price of $17.68. I hope you'll make plans to join us in Boston two weeks from today for our Investor Day where we'll share the details behind the three-year earnings goals as we communicated yesterday. Now I'll turn the time back over to Rob for questions.

Operator, if you could begin the queue, we'll start taking questions.

(OPERATOR INSTRUCTIONS) The first question comes from the line of Lisa Gill with JP Morgan. Please proceed with your question.

Great. Thanks very much. I was wondering if maybe you could just talk a little bit about you made a comment in your press release around fuel costs. Can you talk about how much you're passing through to your customers and if there were any other drivers in SG&A this quarter besides fuel costs that didn't meet your expectations. And then secondly, when you look at the plan which you laid out for next three years, can you just maybe talk about the different drivers, I know that you said in the last three years the growth was 13%, now you're anticipating 19%. Is there any big acquisitions in there and if there's not acquisitions what are some of the drivers to continue to grow your operating earnings?

Okay, I'll take the fuel cost one. Our fuel costs in Q4 increased maybe a couple 100,000 dollars and we were able to pretty much offset that with either surcharges or increased efficiencies of our fleet, and both of those continued to contribute to helping us managing those costs. We do expect, fuel costs have gone up fairly sharply more recently, so we're doing the best we can to manage those costs with moving to a more efficient fleet, better route planning, scheduled deliveries with our customers. There's a number of triggers that we continue to work with our customers to manage those costs. But that was the effect in the quarter.

And isn't that part of what you're talking about for 2009, that that will impact 2009 versus 2010 and 2011 from a guidance perspective?

So, Lisa, that's a great question and I can't wait to explain it to you on May 22nd!

I will be there on May 22nd, David.

Lisa, I would tell you that acquisitions are historically never in our numbers, which was the first part you asked and it's impossible to really predict those, so we really don't put them in, and I wouldn't expect that we ever would. So no to the first part and I would just tell you to come on May 22nd, can't wait to explain to you how we're going to hit 19%.

Great. Well I absolutely will be there on the 22nd. I look forward to seeing you, but let me just ask one other question then. When we look at your private label select product, with the weakening dollar, are you seeing impact around your purchasing ability on that?

Another great question, can't wait to show you our strategy for that on May 22nd, and I will just tell you that, yes, the dollar has declined as a currency, yes, costs are rising all over the world, and fortunately, we've got a lot of volume going up that helps us with negotiations. We also have some really good partners that help us with detailed evaluations of the factory costs themselves that bring a lot of value and I can't wait to explain all that to you on May 22nd.

Great. I'll see you in Boston in two weeks. Thanks very much.

Okay.

Thank you. The next question comes from the line of John Kreger with William Blair. Please proceed with your question.

Hi, thanks. Given your responses to Lisa, you may not want to answer this, but if you look at your three-year plan, David, it does have a fair amount of volatility or variability from one year to the next across the three years. Other than the selling day difference, anything else that you can comment on now that might be driving that?

Well, there's -- again, come May 22nd that will be a great conversation. It also, John, probably you probably would answer this the same way. There's a lot of uncertainty in the world we're in today and we probably look at all of those things as factors that influence our strategies and our assumptions, so not too many people know what's going to happen this next year. If they do, they've got a crystal ball and they're making a lot of money so we have to look at the world around us. We have to look at the economy. We have to look at health care in general and make some assumptions and I think we've done that effectively and I'd really like to walk that through with you on the 22nd.

Okay, great. Thanks. What is your salesforce telling you about how the economy is impacting their customers?

That's a very good question. Everybody's costs are up. Everything from coffee to the employees that work at every one of our customer accounts and even everyone of our employees here are facing higher food costs, higher living costs and people are having to make trade-offs. People are having to make decisions and one of the greatest times to have a solution based salesforce is when you have a crisis in a market, where people are looking for answers, people are looking for ways to save money. It's great to have your own brand that is a high quality product that you can help them reduce cost at the patient level with. It's a great time to have systems that really drive efficiency for both inside the distribution model and the customer and it's really a great time to have unique product offerings that can help generate revenues or improve patient care at the same time to offset some of those costs, so I would tell you that not one customer is not dealing with the same things. Every one of our employees and every one of your people that you work with are dealing with, which is rising food costs, rising energy costs, rising housing costs, etc.

Great. Thanks and one last question, I noticed it looked like your corporate expenses were a bit higher in the quarter than normal. Anything in particular driving that?

The gain that we recorded on the sale of securities, coming as it did at the end of our three-year plan, did have an impact on compensation expense for the quarter. Because it's a three-year plan, we had to true-up the compensation all in the quarter, so that caused it to be a little bit higher.

Okay, great. Thanks.

Thank you. The next question comes from the line of Larry Marsh with Lehman Brothers. Please proceed with your question.

Good morning, David. Just a couple quick questions here. First, I guess Mr. Bronson, I get through all of the details of the different components but clearly, and I guess you had the same number selling days this year versus last, it's 64, is that right?

That's correct.

Okay, so looks like your pharmaceutical sales were up a little bit stronger than I would have thought, but just to summarize, what was it specifically that you think that drove the healthy increase in internal growth this particular quarter? Was there anything of note that you would say was particularly worth calling out for March?

Hi, Larry. I think the biggest win in the Physician business was our diagnostic line, our lab diagnostics and our rapid diagnostic products. We had a couple things, you had -- it was 27% I think, it was a big number, 27.1 is what I'm seeing in my head. It really -- a couple factors, one, we came out with new products that were pretty exciting, some of our own select diagnostics. At the same time, unfortunately for the U.S, there was a pretty tough flu season because the vaccine really didn't match up well with the flu. I know I was a person that got a flu shot but got sick, and it was a pretty bad bug and I definitely went to the doctor to tried to find out what was wrong with me. It was 25.1. My partner, Mr. Bronson, was right. I hate that. So you had a combination of our fiscal year end, all of our kind of promotions and everything coming to a head. You had a pretty high flu season and you had some new products come out for us in the diagnostic lines. Our equipment was decent, probably the biggest gain we had for the year. And things like laser and ultrasound were really moving well in the quarter and then select grew really well and, yes, pharma grew really well. So I can't really, I would have to pick out lab diagnostics and rapid diagnostics to say that was the biggest gainer.

Got it. Was there particular manufacturer of note that helped that category?

Yes.

Are we going to hear about this as well on May 22nd?

No. Quidel and Inverness were the two winners.

Okay.

Probably -- I don't know who got the most, Inverness may have done better than Quidel. I don't have those numbers particularly in my head, but they both did pretty well.

Okay. And should we think of that as more of just an end of year promotion or is that new product innovation that could continue to help you this year?

Well, the part that was related to the flu is definitely transitory, it's seasonal. The part that had to do with us rolling out new products I think you're going to continue to see ourselves and Inverness be aggressive there. And you know what? We're having discussions with Quidel, I don't know if -- what's going to to happen with them, as far as participating in our programs, but they had had a very good year with us, they had a very good quarter.

Right, okay. The nickel or so from pedigree and mostly pedigree this year, which was --

$6.3 million.

Yes, so one of the things that everyone sort of struggles with as you think about this next year is, what do you do with that because that's obviously non-recurring. And I know you aren't saying too specifically some of the programs you're investing in for fiscal '09, but obviously that's a big call out, because the initial impression would be a very easy comparison in the first quarter. Are you going to explain all that on the 22nd or is there something of note in terms of how you're thinking about it that we should be aware of?

Actually, no, that's a really good question. There's 20 states that are half put it in or are putting it in. And what I would tell you is that even in Florida, we're going to have cost. We're still transitioning out of Columbia into Orlando and will be for the next couple months, product, and so we have transitory costs just from getting in compliance with the Florida law for Q1 and -- but I would tell you we have pedigree costs going forward, and I would tell you we've got some pretty nice investments for growth. That's how we'll get the 19% growth is we're going to invest in our business, so it's a combination of that doesn't all go away and we're making other investments that, yes, we'll get to on the 22nd. But your assumption on pedigree that it just kind of disappears is, I think, rosier than I would like it to be from the standpoint of reality. There's a lot of things. Fortunately, California delayed by a year or two their launch because RFID wasn't ready, but there are other states that are moving forward. And there's legislation that's coming out right now at the federal level that should clarify a lot of it by the states. But you still probably have a year or two of transition between now and then, so we're going to have some costs associated with pedigree going forward.

So it sounds like you are assuming some additional costs this year?

Yes. I don't think it can go all the way. I think we're going to have some of it going forward.

I see and so just to clarify, I know you were encouraged by some sort of motion in Florida about how the agency interpreted the law as being a little egregious, are you saying maybe that's not as much progress there as you thought in the legislature?

No. I think we've got a bill on the floor that looks very promising, very good, that will clear up some of the unknowns and interpretation issues and I think will help everybody really get a sound footing. So no, I think that's going to happen. I just think that even if that was perfect, I still am transitioning business from Columbia to Orlando and then we're still going to have an extra couple bodies in Orlando, so even if it was perfect, the legislation, and it passed here in the next month or so, you would still have some transitory costs even for Florida.

Okay. And finally, in your Elder Care segment, I know you've moved your market segment a good bit, but have you you seen any change in behavior around your customers' ability to pay on a timely fashion and are you anticipating any change?

Well, Larry, we are very tough on receivables and we will not sacrifice the balance sheet for growth and -- you know me, how many times I've said that. In our receivables, when you look at the workbook, you're going to see our receivable days are the lowest they've ever been in the history of the business for the long term care business, so we probably are sacrificing some growth. We could probably grow the top line faster if we weren't as conservative on the balance sheet side. So I'm not sure that I'm seeing it, but you may be seeing us be a little bit more conservative because we're worried about it. You're maybe seeing us asking questions about what are peoples' bank line situations. What are peoples' credit availability? What are their expansion plans? Moreso, how quickly do they pay and do they pay exactly on time? So you may have just -- the industry may not have transitioned but I think we did.

I think we became more introspective about the risk out there and more conservative in our approach and so we may have walked away from some revenues, we may have collected more of our receivables than anybody else in the industry, just because I'm kind of worried about it and I think that we've done the right thing. I think that you will see us grow steady but you will not see us take risk on the balance sheet to grow that revenue. Because that -- the root of the question you're asking me is the one I'm asking myself and have been for the last five months, which is are things going to change with their ability to pay and fortunately, I'm hearing a lot of different things for reimbursement. I'm hearing any where from a cut to a gain. I'm hearing anywhere from $700 million to $400 million cut to gain, so -- in long term care, so I think we have to wait and see which is some of the conservative going forward. I think you have to be careful not to do anything wrong in a changing market, and yet, at the same time, we're going to grow 19%, so I think we've got a good balance here. Sorry for the long answer but you're asking a pretty insightful question there.

Okay, we'll follow-up, thanks.

Thank you. (OPERATOR INSTRUCTIONS) The next question we have comes from the line of Eric Coldwell with Robert W. Baird. Please proceed with your question.

Thanks very much. First, a question for Mr. Smith. Dave, on the call you said that there's a lot of uncertainty in the world we live in today, nobody really knows what's going to happen over the next 12 months, but at the same time you're projecting accelerated growth two and three years out versus over the next 12 months. So I guess, I'm curious on what gives you more confidence in projecting years two and three versus projecting year one, if you could just give any color on that would be useful.

Well I think we did in the press release. There's extra days in the second year, so part of that is the days. Part of it is our knowledge of our investments. Part of it is just the progression of our programs from today to then, so just like we did, if you kind of look at our numbers we put out three years ago, there were some chunks in there that weren't exactly smooth that people complained about back then. So this is a very good plan, very confident, because probably have never seen a healthier organization from a strategy standpoint, connection with compensation metrics, investments in the right strategic areas rather than in the wrong ones, just seeing really solid business today. Yet we live in a pretty uncertain world. So part of it is the days in that second year that jumps up the growth, rather than some greater vision of two years from now than today and part of it is how our return on our investments are playing out. Something is in the second year, something is in the third year, something is in the fourth year in that second year and so it just is a more attractive business. All that being said, all off our compensation is tied to that plan. So it's not like we just came up with that it will make it look good on the out years. We actually have to hit that to get our compensation so there's a lot of accountability and a lot of symmetry between investments, compensation metrics and performance. So I don't know, David would you answer it any different?

No, I think that's a great answer.

Okay, now yes, that's very fair. I guess in the same vein, you talk about being a little more cautious about what accounts you're going to take on, sacrificing some growth for balance sheet and cash flow stability and improvement, which I applaud. I think that's a good thing. At the same time your doubtful accounts provision, if I'm reading it right, came down year-over-year, was virtually de minimus in the March quarter, so is it that you've walked away from the riskier accounts and therefore you're taking less of a provision or did something else unique happen on that?

We've made steady progress on our receivable balances, both from an aging standpoint as well as the quality of those receivables. We've made a significant effort during the past year to collect and resolve old balances. All of that drives that provision, that provision is a calculation that's based on both the amount of the receivables and how old they are and our judgment of the quality of those receivables, account by account. So all of that, our methodology hasn't changed. The quality of our receivables has changed and has gotten better and that's what's driven our bad debt provision. Having said that, it's increasingly difficult for our customers right now to get credit or to refinance, so we are very watchful and very cautious about extending new credit to customers unless we really have a good solid understanding of their underlying financial situation.

I understand, that's great. Sorry if I missed this, did we get an update on the number of Athena leads in the marketplace and what number of physicians have been converted that PSS introduced to Athena ?

I didn't, and I really want to talk about Athena, but it's more of a May 22nd conversation. I'll just tell you that we made the same progress in Q4 we made in Q3 and I would say we're probably going to make the same progress in Q1 we made in Q4. And we have had a very good meeting with Athena. We've got some very good programs and investments together that I think will pay nicely in the middle to end of next year. And so kind of I'm not paying attention to anything we're doing right now, because we've got all of the problems figures out. Now it's do we make the right investments together to really take advantage of what I see as an opportunity in the market and I think that's what we're going to do. And I'd like to walk that through with you rather than today -- I'd rather do it on May 22nd.

Okay and same vein of questioning on Smart Scan. Can we get an update on the number of installations?

Yes. We're at about, actually we had a pretty decent kind of combination of Smart Scan and My PSS. We're up to 29,000 total eCommerce users. We were at a little over 7,100 Smart Scans because we were doing the investment in the new Smart Scan right now and we focused more of our effort on the My PSS users, which got to 28,600 and we're going to have a goal specifically for eCommerce for next year built into our plan and our metrics. We hit 27% for the year and we're going to have a healthy goal for that for next year. And so we backed off a little bit on the Smart Scan users while we were -- not retooling it, but we needed to add things like I told you last call, online statement and invoicing, cataloging, product file improvement and superseding improvement, reporting improvement to it, because we had customers demanding it of us. So we have moved the new customers to My PSS rather than put them on the Smart Scan until we get that finished. And we've got some things just finished last month, we've got some things that are coming online in the next 30 to 60 days to finish the Smart Scan upgrade.

Got you, and final question is on global sourcing. I'm hoping we can get some color on how the rise in commodity costs, wage inflation and sourcing markets and fuel and transportation costs, how is that impacting the contribution margin on your global sourcing business? Or how are you offsetting those pressures, assuming that you are.

Okay, just one product. All right, Kevin, this is Kevin English is in here and he can follow-up. It's really miniscule and it was on one product that we had an impact in Q4, which is we have the same product showing up whether it's a good economy or bad economy, which is latex gloves. It has a lot of variability in it, but there are costs associated with bringing the product over the pond , there are costs with deflation of the dollar, there are costs with raw material and labor and what I would tell you is we're constantly looking at new areas of the world to invest in. I was just in a lot of new areas of the world last month and what I would tell you is, we've got a pretty good plan in place to mitigate cost or to pass on cost or to drive better manufacturing relationships with intelligent partners. So I'm really looking forward to you hearing the presentation on May 22nd on how we're going to mitigate that and how we're going to take advantage of maybe others in the market that can't mitigate that. But I would tell you in Q4 it was on one product specifically and not much else and it was latex, like it's been for the last three

Okay. Thanks very much.

Thank you. And we have no further questions.

Okay. Thank you all very much. It was a great year and I'm looking forward to May 22nd. It will be fun, so come and join us, thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you very much for your participation and we ask that you please disconnect your lines.