Quanex Building Products Corp (NX) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Quanex 2015 fourth-quarter conference call.

(Operator Instructions)

During today's conference call, the Company and management may make future statements about the future prospects of Quanex Building Products. Participants should refer to the Company's most recent Form 10-K filed with the SEC for a more complete forward-looking statement disclosure.

Additionally, the Company may refer to non-GAAP figures throughout today's call. Reconciliation of EBITDA to the comparable GAAP figure is included in the Company's most recent earnings release, which is available along with the Company's Form 10-K and 10-Q documents at the Company's website at www.Quanex.com.

Last, participants are reminded that today's conference is being recorded. I will now turn the conference over to Mr. Bill Griffiths, Chairman and President, CEO of Quanex Building Products, for opening remarks. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us for our FY15 fourth-quarter conference call. On the call with me this morning is Brent Korb, our Chief Financial Officer.

2015 was a very satisfying and successful year for Quanex, both strategically and operationally. We closed the year with reported revenues of $645.5 million, and EBITDA of $59.9 million or EBITDA margins of 9.3%, a significant improvement over 2014, and slightly better than the midpoint of our guidance given at the beginning of the year, and at the upper end of the range, after adjusting for the acquisition of HL Plastics. Obviously, from a strategic standpoint, the highlights of the year were the addition of HL Plastics in June, and the addition of Woodcraft Industries two days after our fiscal year closed.

On a pro forma basis, assuming we had owned both businesses for the full year, and absent any transaction costs, 2015 pro forma revenues would have been approximately $935 million, and pro forma EBITDA would have been approximately $105 million or 11.3% EBITDA margins, well on the way to our stated goal of 15%. These two acquisitions also make us the largest supplier of components to OEMs in the building products sector.

Compare this to 2013, when reported revenues were a similar $952.6 million, with EBITDA of $42.8 million, or 4.5% EBITDA margins. This of course included our aluminum sheet business, which had a completely different set of operating dynamics than our core OEM component supply business. As you are aware, we divested this business in April of 2014 as the first step in our strategic transformation. These strategic moves over the past two years have improved profitability 2.5 times on a similar revenue base, and will put us within striking distance of our stated goal of 15% EBITDA margins.

While we have clearly made major and highly visible moves on the strategic front, we have also been working diligently in the background at improving the profitability of our legacy business. During the quarter, we continued to see margin improvements, particularly in our vinyl profile business.

EBITDA margins for the quarter in our legacy business improved a further 100 basis points on essentially flat sales quarter-over-quarter, and 500 basis points better than the prior year. Our number-one priority remains improving our EBITDA margins to 15% as a total Company, and generating cash to pay down debt.

After Brent covers the details of our fourth-quarter and full-year earnings, I will talk a little more about expectations for 2016. Brent?

Thank you, Bill, and good morning to everyone on today's call. Consolidated fourth-quarter net sales increased 19.3% to $195 million, while Fourth-Quarter EBITDA more than doubled to $27.5 million, compared to the year-ago quarterly results. The acquisition of HL Plastics was the largest contributor to the quarterly net sales increase. The comparable legacy business experienced a 6.2% increase for the fourth quarter.

For the year, revenues increased 8.4% to $645 million, and EBITDA increased 24.4% to $59.9 million. Similar to the quarterly performance, the base legacy business grew 5.9% in FY15.

The largest contributor to the fourth-quarter EBITDA increase was the improvement in our North American vinyl products, as we continued to experience a year-over-year improvement, coupled with the solid early performance of HL Plastics during its first full quarter as part of Quanex.

The increase in the full-year EBITDA was driven by vinyl extrusions in North America, vinyl extrusions in the UK, as well as screens and components. All of this, while we recognized $5.1 million of higher transaction-related costs during 2015, and $2.8 million of lower comparable EBITDA, from the 2014 warranty reversal. Adjusted EBITDA for the year increased $18.7 million, or 39.9%, to $65.5 million.

We ended the year with net debt of $34.3 million, comprised of senior debt of $50 million and other debt related to capital leases and industrial revenue bonds of $7.4 million, reduced by cash of $23.1 million. Of importance in all of this is the fact that we reduced the amount borrowed to fund the HL Plastics acquisition by $42 million in the 4.5 months since the acquisition.

Obviously, our leverage changed immediately following year-end, as we completed the acquisition of Woodcraft Industries on November 2. We borrowed an incremental $270.5 million of debt to fund the Woodcraft acquisition.

Immediately after closing, our senior debt was comprised of $310 million in term loan B borrowing, at an all-in rate of 6.75%, and $10.5 million of borrowings against our $100 million ABL facility. Based on LTM pro forma EBITDA of $105 million, our debt to EBITDA leverage ratio immediately following the Woodcraft acquisition was a comfortable 2.9 times.

While we have been focused Company-wide on generating cash flow, as evidenced by the sizeable debt reduction in the latter part of 2015, given the recent increased leverage position, we are redoubling our efforts, with a laser focus to noticeably lowering leverage through the reduction of net debt. We are targeting net debt reduction of approximately $50 million per year.

Note that FY16 benefits from the utilization of prior-year net operating losses, which we expect will be fully utilized during 2016, and limiting cash taxes to the latter part of the year. We expect to end FY16 well within our future focus long term average debt to EBITDA leverage range of 2 to 2.5 times. Any future acquisitions we might make will only be completed if there's a clear path to getting back to within this range in relatively short order.

As mentioned in the earnings release, additional 2016 assumptions include depreciation and amortization of $51 million, interest expense of $23 million, a tax rate of 34%, and capital expenditure spend of $45 million. The capital expenditure estimate assumes $16 million of capital at HL Plastics and Woodcraft combined for the first full year as part of Quanex.

One last item I would like to address is our go-forward plan for messaging the positive transformations that we completed over the last two years. The plan is to spread the word far, wide, and frequently. We intend to host an Investor Day in the early Spring, as well as proactively reaching out to existing shareholders and perspective new shareholders throughout the year. Timing and further details for the Investor Day will be announced in the coming months. I'll now turn the call back to Bill.

Thank you, Brent. Before I talk about specific expectations for Quanex in 2016, let me start by making three points: Firstly, since the housing recovery began, every housing industry forecast at the beginning of every calendar year has proven to be optimistic.

Secondly, on a comparable basis over the past two years, our core fenestration components business in North America has grown in line with the actual window shipments, excluding any planned revenue shrinkage. And thirdly, as I've stated previously, there is no benefit for me to be overly optimistic at the beginning of a new fiscal year, particularly when weather conditions have a large impact on shipments, and winter is still ahead of us.

With that, let's talk about 2015 growth rates, which, while they are not quite final, they are close enough they are unlikely to change materially in the next few weeks. Ducker is currently forecasting window shipments in calendar 2015 to increase 5.9%. This is based on 10.2% growth in housing starts, and a 3.1% growth in R&R. This forecast triangulates well with recently-reported independent forecasts of both segments.

It should be noted that at the beginning of 2015, Ducker was forecasting much higher growth rates, based primarily on a housing start forecast of 19%. On a comparable North American fenestration basis, our growth in FY15, excluding planned revenue shrinkage and petroleum surcharges for our core fenestration components business was 5.5%, very close to Ducker at 5.9.

Looking forward to 2016, Ducker is currently forecasting US window shipment growth of 7.5%. Current consensus for US housing starts in 2016 is 14%, with a range from 10% at the low end to slightly over 18% at the high end. R&R activity is also expected to increase to 4.2%.

At this point, we continue to view this as optimistic, and feel that 5% to 6% growth in the North American fenestration components business is more realistic. In other words, 2016 should be very similar to 2015. Having said that, we have demonstrated over the past two years that whatever the actual outcome, our revenues should reflect similar growth.

In the cabinet sector, growth rates are slightly higher and more predictable at 7% to 8%. However, growth rates are the highest in the stock cabinet sector, which is largely driven by new construction, particularly multi-family. Woodcraft does not participate as much in this sector, and as such, our expectation is for growth rates to be slightly lower, likely closer to 6%.

Market conditions in Europe remain healthy, particularly in the UK, and as such, we expect to see 7% to 8% growth in 2016 in our core European markets, which is slightly better than this year. When this is all blended together, we are anticipating 2016 revenues to be close to $1 billion. If in fact any or all segments experience higher actual growth rates, we would expect to see similar improvement in our revenues.

With this volume level and mix, we currently expect EBITDA to be between $112 million and $120 million excluding transaction costs and purchase accounting effects, most of which will occur in the first quarter. As we enter FY16 with net debt of $305 million or 2.9 times EBITDA, our clear priority in 2016 is to continue to improve profitability, and to pay this debt down to below 2.5 times by year-end. Revenue growth will be secondary to this goal, which means we may elect to shrink parts of our business if the long-term economics do not favor improved profitability and improved cash flow.

In summary, we expect to deliver close to $1 billion in revenue in 2016, and improved EBITDA margins with sufficient free cash flow to reduce our debt level to below 2.5 times, even with a continued healthy level of capital expenditures. As we enter 2016, Quanex is now $1 billion supplier of components to OEMs in the building products industry.

We have a business that is transparent and easy to understand. It is a pure play opportunity in the residential construction sector, which is still in the early stages of a recovery. If in fact our expectations are conservative, and the current economic forecasts for 2016 hold true, we could exit 2016 with a business that delivers 3 times the profitability than it did just three years ago in 2013.

And on that note, we would be happy to take any questions. Operator?

(Operator Instructions)

The first question is from Ken Zener of KeyBanc.

Well, 2016 is going to be a very different year than 2015, clearly. I wonder, Bill, if you could in light of transparency, the guidance you gave for EBIT, seems like the vast preponderance of that is associated with the acquisition. So similar to my question last quarter, why the conservative view on the organic piece, in terms of incrementals? And to understand that, you talked about the improvement of EBIT year-over-year. Could you talk about how much the different businesses, extrusion, screen, and warm-edge spacers just grew year-over-year, so we could understand if all of that EBIT expansion was associated with the vinyl business, relative to operational improvement?

I think, let me take a step back first, and say we do have conservative expectations for growth built into the legacy business. Much of that is just based on history, where as I said in my remarks, every calendar year starts with a great deal of optimism, and then gets ratcheted down. And clearly, there's nothing in it for us to be optimistic at this stage of the year. We believe the story is good enough even with conservative assumptions.

So in the legacy business, we did see a greater growth in our components business over our legacy spacer business. We also had confusing growth, if you like, in the vinyl profile business, because while there are really three important dynamics to consider when looking at revenue growth in the vinyl business. One is, the core business with a customer base that is performing well in the industry overall, is growing at or above window shipment rates.

There's another segment of the vinyl market, where the customer base is strategically shrinking their business to get better profitability. As you well know, a number of the vinyl window manufacturers are not particularly profitable. So I have a customer base in one segment that isn't growing at market levels, and obviously, we grow with our customer base. And then the third thing is there are planned shrinkages that took place in that business, and then maybe more to come yet as we go into 2016.

So a rather wordy answer but hopefully that gets at why we're taking a conservative view on the legacy business as we enter 2016. But let me make a final point, as I said in the remarks, it is pretty clear that whatever the outcome turns out to be, we are likely to see revenue growth in that range. So as I said, if we are being too conservative, and the housing starts are great, R&R recovers, and it's a much more robust year than we currently think, we would expect revenues to improve accordingly.

Thank you that was good. If I could ask one more question related to the legacy, more on the vinyl extrusion side, than anything else. Given your large market share within that extrusion business, and also a large competitor Company who's potentially reviewing its portfolio, this is a big-time question, but if something were -- assets in that space were to become available, is that something that you feel you would be able to look at, given your leverage position and recent acquisitions. Or how could we think about that, broadly speaking? Thank you very much.

Actually a good question and even broader than that, as we've said before, we've clearly done a tremendous amount of work in the Building Products arena, at uncovering potential acquisitions. Although it is not our number-one priority right now to go add businesses to the current portfolio, we are not going to withdraw ourselves completely from the market. So we will continue to look at any or all opportunities.

However now for the first time, in addition to the economic and strategic issues, we need to look at those potential opportunities with the backdrop of our current leverage profile. And we have no desire or intention to significantly increase that profile. But we do have the fire power to add some bolt-on deals if they are not that expensive. So we will continue to look and evaluate accordingly, but the priority will be improve profitability, pay down debt, but if an opportunity arises, you can't afford not to look at it.

Thank you very much.

Thank you. Next question is from Daniel Moore of CJS Securities.

Maybe just talk a little bit about the expected accretion from Woodcraft now, given the cost of borrowing was maybe modestly higher than we had anticipated?

Yes, I mean, I think we talked about it at the time of the announcement that it is going to be like $0.11, so obviously the borrowing was -- we were out in a difficult time. So I would say if you did it purely on the incremental, you're closer to mid single digits, so it's kind of in $0.04 to $0.05 range.

Got it, and then as a follow-up to that, maybe just remind, since the deal was done [intraquarter], your flexibility to refinance if and when, when does that become available, if the opportunity presents itself?

Yes, the way our facility works is, we have the opportunity, there's a hard call for 12 months with the 1% premium, but we can do it with the 1% premium whenever. I think the reality to it would be, we will need to deliver a couple few quarters, and then if the markets are right there whether it's a repricing or an overall refinancing, could do so, call it, 9 to 12 months down the road.

Great, and then with the improvements we've seen in the vinyl business, just maybe rank order the three businesses, legacy Quanex, HL, and Woodcraft, in terms of the opportunity for significant margin improvement over the next 12 to 24 months?

Well I think clearly the vinyl business still has the opportunity to improve their margins, perhaps more than any other segment of the business, in terms of order of magnitude. Having said that, they still face the toughest market conditions, in trying to get price increases, but there is still a lot to be done there on the cost side. We believe that there is still a good opportunity for further improvement at Woodcraft, and we have our operating teams already in there working on initiatives for margin improvement, most of which won't show up until the second half of the year.

The components business and the spacer business, I don't think we'll see a great deal of margin expansion there, absent operating leverage. And in HL, a similar story. Margins are pretty decent there anyway, so I think that will be the way we would rank order them.

Very helpful. Maybe one more, and I'll jump back. Maybe -- you gave a lot of detail in terms of FY16 guide, Brent. Anything, just in terms of SG&A, be it quarterly or for full year, how we should think about that with all three businesses combined?

Yes, we haven't talked that much. Our corporate cost came in for 2015 right in line with expectations, and in the past, we've talked about that being in the $35 million level. So we may have slightly elevated corporate costs next year, only because we will bear a bit of an additional integration cost with Woodcraft, and so there's some things we'll do from a Sarbanes-Oxley implementation and things like that, that will ramp those up a little bit. But nothing significant in the grand scheme of things.

And I lied. Go ahead, I'm sorry.

I was just saying we haven't given really the guidance overall on the combined Company SG&A.

All right last one I promise. The $50 million expected debt reduction or free cash flow annually in FY16, is that inclusive of some of the benefits of the NOLs that you mentioned?

Yes, that is. The thinking there is 2016 benefits from the NOLs, and then as we look out into future years, the growth and improved margin offset the lack of NOLs at that point.

Perfect, thank you.

Next question is from Nick Coppola of Thompson Research.

As you talked about in your opening comments, there was some nice gross margin improvement in the legacy business. And just looking for any further clarity on how to think about that, the real impact of the vinyl line upgrades versus any other items you're willing to share in terms of mix or price?

It's pretty clear. Most of that improvement came out of the vinyl profile business, which if you'll recall, was really anticipated after the investment in line upgrades. We said the second half of the year, we should start reaping the benefits of that. We expect that to continue into 2016, so we aren't going to give a great deal of granularity on that at this point, but that's where the bulk of it is coming from.

Okay, that's fair. And then in the press release, you called out reduced sales into Russia. So I was hoping you could add a little bit of color on that. Surely the impact of the economy over there and potentially anything else you have to add there?

It's one of the reasons why I answered in an earlier question that the growth rate in our spacer business in fact lagged the other components. A big factor there, so we never really talked about in the past, is we used to sell several million dollars of spacer product into Russia and the Ukraine, and in 2015, that number is zero. It just disappeared completely. And probably is not going to come back, and that's simply because of the geopolitical issues there, but that's where that comment came from. It was several million dollars worth of business.

Okay, understood. And last question here, can you just provide an update on the warm-edge spacer product and applications that [the entire group does]?

There, I mean I think, are you asking about the line we've talked in the past, about the line speeds and things like that for our customer?

Yes, just any progress on that initiative?

Yes, the first prototype at a customer out in California has been extremely successful, and they are talking internally now about funding a further expansion to add more lines. We have a second customer with a different manufacturer's line that just started up, and in fact, I'll be visiting with the customer's senior executive team. That facility, actually next week, to see that line running.

But the early indications there are that's going to be a very successful opportunity. That's a multi-year program in its early stages. We'll start seeing some benefits with improved volumes later in 2016, but it should really take off in 2017 and beyond.

Okay, thanks for taking my questions.

Thank you our next question is from Al Kaschalk of Wedbush Securities.

I just want to touch base on the multi-year outlook, and maybe just from a broader perspective. The 11% to 11.5% EBITDA margin I think going to 2015, is this more a volume benefit, or how do we think through the cost initiatives that I think are still underway? Operational efficiencies, particularly given the success you've had in 2015?

Yes, clearly, we expect continued margin improvement in the businesses, so a good portion of getting from call it 11.5% to 15% is actually going to come out of a better cost structure in a number of the businesses. And as I said with the earlier question, the opportunities there are still in the vinyl business, and in the cabinet component business. We will get operating leverage, particularly in spacers, as we see growth. So the combination of those, as you go out over the next few years, that's what's going to get us to 15%.

Is there any assumptions, Bill, that in terms of the operation, is there any facility consolidation, or it's still too early, or are you from a footprint standpoint comfortable with what you see in HL Plastics and your legacy businesses?

Yes, I would not expect to see in 2016 any consolidation moves with our current business. We're okay with the footprint as it is. We have the capability with the current footprint to grow with the conservative numbers we put out there, but we could handle double that growth rate if it actually occurred, and it wouldn't be an issue for us. But with the potential exception of labor in some jurisdictions, which continues to be tight.

Switch gears, on the petroleum side or the input raw material cost, hard to not think that there's some benefit, whether it be margin, even though there may be some lower input costs for you and therefore probably lower surcharges. But can you talk about the benefit in the fourth quarter, and what you see going forward from input costs on your side?

No, the input costs are effectively now margin neutral. So while the petroleum surcharge, which went negative on us, effectively reduced revenue numbers, it was margin neutral. The same applies to aluminum, which has been a drop in through the year. That's for the most part margin-neutral as well, and as we now know, resin is margin-neutral, so really, none of the benefit really came from reduced input costs. It really was a question of efficiency and reduced labor costs inside the operations.

My final question, I guess, just a little more if I may, on the nature of the Woodcraft acquisition, strategically how to think about that. I mean it diversifies the product offering but not sure if it diversifies your customer base as much, but maybe just talk a little bit further. I know you've spoken about it a little bit, but maybe just add to how this fits, and then the acquisition opportunities going forward, particularly as you look to grow above industry targeted growth rates?

I mean the primary consideration at Woodcraft is the business model is identical to our fenestration components business. It does diversify the customer base. It will really impact the seasonality of our business, too. As you know, cabinet installation is indoor work, so isn't as affected by the weather.

So it will be particularly helpful in our first quarter, although let me just footnote that by saying we will not see the benefits of that this first quarter because of purchase accounting and transaction costs. But it will definitely dampen the seasonality of our business, and we do see opportunities there to take a very profitable business and improve the margin profile, as we start getting our arms around it.

Thanks a lot, good luck.

Thank you, our next question is from Scott Levine of Imperial Capital.

So I know you aren't breaking out your EBITDA guidance for 2016 based on legacy versus the two acquisitions, but can you give us a rough sense maybe, of how much might fall within each bucket to the extent you'd be willing to do so? And I'm guessing the K might not be out for a bit but is your expectation you'll be breaking those out in separate reporting segments or anything new to think about there, as we restructure our models to incorporate Woodcraft?

Let me cover your last question first. On the reporting segment, we will do some additional splitting out here in the 10-K that you'll see the next few days, as a result of making the acquisition of HL Plastics. But then, we will again reassess that in our 2016 reporting, because that will be the first time we will be including Woodcraft. So I don't want to commit with certainty, but we would expect there to be some line of sight of these acquisitions, as we go through that financial reporting process.

To your earlier question on the growth rate, I'd hazard to not jump into providing the overall guidance of what the growth is. But I think if you attribute some of the additional cost at the corporate level, which is classified theoretically as legacy, to really the acquisition of Woodcraft and some of the integration, you could get into a little bit of a 50/50 a split, with some added growth at HL Plastics. Just because of where they are in their cycle, and how the UK market is performing we would expect higher than legacy like growth at HL Plastics.

Got it, thanks. A local up about international. You were asked earlier about Russia and Ukraine, and I'm guessing with HL, the vast majority of your overseas is the UK. But are there other markets to think about or consider as being meaningful contributors in your international footprint, or is it almost entirely UK? I think there was some Germany in the spacer business, but maybe an overview of the international mix, geographically?

International is almost exclusively the UK, and what I would call core Western Europe. Germany, France, Belgium. The Russia Ukraine thing was a little bit of an aberration, and that product was actually delivered out of North America, not out of our European operations. But the bulk of it is -- more than two-thirds of our international volume is going to be UK-based, so I think better stability there. We don't envision another Russia Ukraine situation. That really was a bit of an aberration.

Got it, thanks. One last one if I may. It seems like both the new acquisitions here are performing well, in line with your expectations. But anything you'd highlight either positively or negatively versus your initial expectations, based on what you have seen since you've closed both of these acquisitions, and just initial thoughts on both or whether, basically the same view you had articulated, when you announced both deals?

No surprises, positively or negatively, in both cases as advertised, so a testimony to our due diligence process.

Got it. Thanks, good luck.

Our next question is from Lee Brading of Wells Fargo.

Wanted to follow-up on the CapEx discussion a little bit, or if you could give a little insight on that. I think you talked about $16 million more incremental for the acquisitions, but hopefully you could talk about what the direction of the CapEx or what you'll be spending on the legacy business. I think if I recall, you'd done a lot of updating on the extrusion side on your lines, what's the next focus there?

The next focus really is going to be on productivity improvements, particularly as it relates to labor. We haven't had the severe shortages of labor that the home builders have, but in a number of our jurisdictions, it's getting increasingly difficult to find qualified labor as we grow. So we are looking more and more towards automation, so we are going to be investing in some automation projects in our legacy businesses, that really are all part of that how do we get to 15% EBITDA margins, and how do we continue to grow in tight and expensive labor markets. So that's really the focus in 2016.

Got you, and then the expectation would be for benefit and margin side in 2017?

Yes, and some of it we would hope to see as we start exiting 2016, but the real expansion should be in 2017, you're right.

Got you. And you've touched on this, I'm not sure how much more detail you'll want to provide, but I'll follow up a little bit. On the vinyl profile side, you talked about 500 basis point improvement year-over-year. When does that become more of a difficult comp, I guess, is the way to think about it, after the first half of next year?

Yes. I think as we get into the second half, that comp does become much more difficult, and thereafter, it's going to be pretty much normalized.

Thanks very much.

(Operator Instructions)

The next question is from Bill Baldwin of Baldwin Anthony.

Can you all offer any thoughts as to whether there's been discussions in your planning regarding the expansion geographically of the footprint of HL Plastics beyond the UK and to other countries in Europe?

No. The immediate focus at HL is going to be to continue to grow in the UK market. They still have some runway there to perform at above a normal growth rate, and that's the intent. So there are no current plans to expand that into mainland Europe at this point.

Secondly, are there meaningful cross-selling opportunities between Edgetech and HL in the UK market?

That's still under investigation. As we said when we did the acquisition, there were no benefits built into the transaction for any kind of cross-selling opportunities. We recently put in place a new leader in the Edgetech business in the UK, and he is starting to work with Roger at HL on exploring what opportunities there might be. So that's still a work in progress, and any benefits there will be upside to anything we have put on the table thus far.

Thank you, and lastly, are there any best practices benefits that will accrue to Mikron from transferring processes and technologies from HL Plastics into Mikron here domestically?

That is already in process. That's in work.

Thank you.

The next question is from Ken Zener of KeyBanc.

So if you could, or if you would clarify the statement you just made about regarding vinyl, the comps getting more difficult in the back half of this year, and then normalizing. Could you clarify what normalizing margins means for you in extrusion?

What I mean in terms of comps is by the time we get into 2017, when we start comparing 2017 to 2016, or the back half of 2016 to the back half of 2015, the opportunity for incremental improvement is going to start diminishing. So by normalized, I mean you could expect maybe whatever we close at, at 2016, 2017's are going to be similar. There isn't going to be the opportunity probably for 500 basis points improvements at that point.

Understood. Just was trying to give it a shot, thank you.

I know. You never give up, Ken.

Thank you, sir. There are no further questions at this time.

Okay, thank you. I want to thank everyone for joining us on today's call. Stay tuned for more information about our Spring Investor Day, and we look forward to updating you next on our first-quarter results in early March. Thanks, everybody.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.