Simpson Manufacturing Co Inc (SSD) 2018 Q1 法說會逐字稿

Greetings, and welcome to the Simpson Manufacturing Co. First Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host today, Ms. Kim Orlando with Addo Investor Relations. Please begin.

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Co.'s First Quarter 2018 Earnings Conference Call.

On this call, the company may discuss forward-looking statements such as future plans and events. Forward-looking statements, like any prediction of future events, are subject to factors which may vary, and actual results may differ materially from these statements. Some of these factors and cautionary statements are discussed in the company's public filings and reports, which are available on the SEC's or the company's corporate website.

Please note that the company's earnings press release was issued today at approximately 4:15 p.m. Eastern Time. The earnings press release is available on the company's website at simpsonmfg.com. Today's call is being webcast and a replay will also be available on the company's website.

Now I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer.

Thanks, Kim, and good afternoon, everyone. We had a strong start to the year, with our first quarter net sales increasing 11% year-over-year to $244.8 million, mainly due to growth in sales volume. As you may recall, first quarter of 2017 was negatively impacted by severe weather. We have continued to execute on our 2020 Plan, which we unveiled just 6 months ago, to provide more clarity into our longer-term strategic plan and financial objectives. The plan has been a welcome change within our organization as we have been diligent in openly communicating with our employees who all know their role will make a difference. Given our goal-oriented culture, we believe these necessary steps will take Simpson from what we view as already a great company to an exceptional company.

I'll now elaborate on our key 2020 Plan objectives in detail. They include: a focus on organic growth, rationalizing our cost structure to improve company-wide profitability, improving working capital management and overall balance sheet discipline. We continue to believe we can achieve an organic compound annual growth rate of approximately 8% for our consolidated net sales through 2020 from our reported 2016 net sales of $861 million. Subsequent to quarter-end, we announced an 11.5% price increase on all our U.S. wood connector products in an effort to offset rising raw material costs. As a reminder, after announcing the price increase, we provide our customers with a 60-day notice period before it goes into effect with a clause that prohibits significant prebuying ahead of the increase in order for us to properly manage our inventory levels. We anticipate the price increase will go into effect by mid-June, which will help us maintain our strong gross profit margin.

Also factored into our top line growth assumptions is the $30 million annualized revenue opportunity for our mechanical anchor product line in the Home Depot. As of March 31, it has been rolled out into 330 Home Depot locations across the U.S. We anticipate the completed rollout into all 1900 stores will be accomplished by 2020. Further, we expect growth in U.S. housing starts, which are a leading indicator for approximately 60% of our business, to continue at an annual mid-single-digit rate over the next few years, with repair and remodel market also expected to grow at a similar rate.

In Europe, overall economic conditions remain positive, which provides a solid foundation to continue growing our presence in the Nordic and Western European markets for both our connectors and fasteners. Lastly, our top line growth assumptions include market share gains in both our truss products, which includes software and our concrete products. Truss sales were up modestly quarter-over-quarter, supported by increased conversion of medium-sized component manufacturers, who purchase our truss plates and utilize our proprietary software.

In the concrete space, we remain on track to grow our current 10% share of the $1.3 billion addressable market to approximately 14% by 2020. While we are prioritizing organic growth supported by strategic capital investment, I would like to reiterate that should an attractive tuck-in acquisition target presents itself in either fasteners, connectors or software, we would be open to pursuing it if it meets a stringent set of criteria to add value to the company. That said, we are not presuming acquisition in the concrete repair space.

During the quarter, we completed the asset purchase of LotSpec in an effort to facilitate builders' abilities to complete complex designs and do full takeoffs in collaboration with our CG Visions software. LotSpec is essentially a suite of software applications for homebuilders designed to optimize efficiency and productivity around construction document and option management solutions. When coupled with our 2017 acquisition of CG Visions, LotSpec will continue to deepen the Simpson strong type partnerships with top builders, architects and engineers by offering scalable software solutions to key application compatible with industry standard design platforms.

In addition, we announced the strategic software partnership with Hyphen Solutions, a leading cloud-based construction management software company. Hyphen offers integrated information exchange between its software and our existing CG Visions takeoff platform to more efficiently create detailed plan estimates, designs and production specifications to automatically flow through to purchasing systems. We believe that the LotSpec asset purchase and the Hyphen strategic partnership align well with our strategy to continue strengthening our value proposition by being the industry's trusted partner in construction solutions and building systems software.

As our second objective states, we remain keenly focused on rationalizing our cost structure to drive improved profitability without sacrificing our competitive edge. Our 60-plus years of long-standing trusted brand reputation is what sets Simpson apart through our network of deep industry relationships, proprietary testing capabilities to ensure the safety and reliability of our solutions and our involvement with building code officials to continually improve construction practices. Today, we are restating our 2020 Plan, our target to improve total operating expenses as a percent of net sales to a range of 26% to 27% by 2020 from 31.8% in 2016. By the end of 2018, we believe we can achieve total operating expense as a percentage of net sales in the mid-29% range.

As previously discussed, we will aggressively manage our total 2018 operating expense dollars to be less than 2017 levels, including additional planned SAP cost, which I will discuss shortly. We've been working with a management consultant to uncover incremental opportunities to enhance our operating efficiency. We are well on our way with a transition office and have dedicated senior leadership members involved at each of our projects, helping to prepare us for potential additional operating expense reductions in 2019 and beyond. While it is still too early in the process to quantify the impact that these projects will have on incremental cost savings, we will be transparent in the coming quarters should we have material updates to share. We look forward to benefiting from this consultant's expertise as they continue to perform an in-depth analysis of our operation.

In North America, we have substantially completed the move from our truss plate manufacturing operations into our wood connector plants and are now producing truss plates at those branches. The move was completed in order to best maximize efficiency and plant utilization. When the former truss facility is sold, we expect to reduce our cost of sales by approximately $2 million annually from prior levels as a result of reduced cost in our manufacturing footprint and reduced freight time to move truss plates to our end customers. In Europe, we continue to target an operating income margin of approximately 12% by 2020. In addition, we are consolidating our European management team to now encompass only 1 head of European operations versus dividing the responsibility between 2 managers. While this planned consolidation did not impact our first quarter results, we will provide details in the coming quarters in regards to severance costs.

In contrary, we are reiterating our gross margin target of 42% by 2020. Our narrowed concentration on 6 distinct product categories in the concrete space enables us to focus on high-margin products to drive this enhanced profitability.

Turning to expenses associated with our software effort. We will continue to allocate dollars towards software development to support the evolving needs of both builders and truss component manufacturers. Software is critical to the preservation and growth of our core wood connector business, with over 40% of our customers requiring software solutions to efficiently conduct their business. We have been primarily focused on converting medium-sized component manufacturers to purchase our truss plates and corresponding software solution while continuing to support our valued smaller component manufacturers we've already converted. We have over a dozen conversions in process. Our SAP project has continued to progress, and we are currently focused on improving efficiencies from the wave 1 locations that went live in Q1. In the first wave, we incurred approximately $1 million of incremental cost versus plan due to additional on-site support that was needed to ensure a smooth transition. Therefore, we now estimate approximately $8 million to $9 million will be expensed in 2018, including the amortization of capitalized SAP cost. That said, we expect some of these incremental costs could be offset in future waves, and as such, we continue to estimate a total of $30 million to $34 million of SAP implementation cost, including amounts capitalized from 2016 through 2019. Since the project began, we have capitalized approximately $13 million and expensed $6.5 million.

The third key objective pertaining to our 2020 Plan involves improving our working capital management and overall balance sheet discipline through inventory reduction and tightening management of our payables and receivables. Through these efforts, we continue to believe we can double our inventory turn rate from 2x in 2016 to 4x by 2020. Our total inventory came in roughly flat compared to our levels at March 31 of last year. In an effort to rightsize our inventory, we have been working through 3 phases of SKU reduction. Phase 1, which has been completed, included the elimination of approximately 10,000 SKUs which were not transferred to our SAP system. We're currently working through Phase 2 of the process, which involves the identification and removal of slow-moving SKUs. We've been working to phase out these SKUs over a transition period as we convert our customers over to replacement products.

For Phase 3, we currently estimate we should have room for further inventory reductions amounting to approximately 30% of our raw materials and finished goods over the next 3 years. Importantly, I'd like to note that these SKU reductions will not impact our ability to deliver product to our customers, which is often within 24 hours. Further, to support our efforts, we have been working with our external lean consultant to assist us in identifying incremental improvements to our inventory management, which has been a very positive experience. We look forward to sharing more details in the coming quarters.

As evidenced of our continued confidence to execute against the 2020 plan, we repurchased 437,500 shares of our common stock during the first quarter at an average price of $57.14 per share for approximately $25 million. We generated an estimated $16.3 million in cash flow from operations during the first quarter, which was used in part to pay out $9.8 million in quarterly cash dividends compared to using $7.5 million of cash in the prior year period. We remain committed to returning a minimum of 50% of our cash flow from operations to our valued stockholders in the form of share repurchases and dividends. Over the past 3 years, we have returned approximately 80% of our cash flow from operations to stockholders.

Through delivering on our 2020 Plan targets, we believe we can substantially improve our return on invested capital from 10.5% in 2016 to a range of 17% to 18% by 2020. We are tracking towards this goal by continuing to reduce our total operating expense dollars, improving our inventory turn rate and continuing aggressive share repurchase activity.

In summary, the first quarter marked a strong start to the year as we continue to perform against our strategic plan to ensure long-term sustainable growth and operational excellence. We believe our key objectives will provide additional capital to continue returning to our shareholders. While our 2020 targets are aggressive, we are confident in our ability to execute on these stated goals, given current market conditions and look forward to updating you on our progress in the coming quarters.

I'd now like to turn the call over to Brian, who will discuss our first quarter financial results.

Thank you, Karen, and good afternoon, everyone. I'm pleased to discuss our first quarter financial results with you today.

Our consolidated net sales for the first quarter of 2018 were $244.8 million, up 11% compared to $219.9 million in the first quarter of 2017. Within the North America segment, net sales increased 12% year-over-year to $206.2 million, primarily due to increased sales volume over the first quarter of 2017, which was impacted by heavy rainfall in the Western parts of the U.S. In Europe, net sales increased 6% year-over-year to $36.3 million, primarily due to increased sales volume and unit prices as well as positive impacts from foreign currency translations. Sales growth in Europe was partially offset by the divestiture of our Gbo fastener business units in Poland and Romania in the fourth quarter of 2017, which contributed $3 million of net sales in the first quarter of 2017.

Wood construction products represented almost 87% of total net sales in the first quarter, in line with the first quarter of 2017. In concrete, construction products represented 13% of total net sales in both the current and prior year quarter.

Our first quarter consolidated gross profit increased 8% to $108.5 million from $100.2 million in the first quarter of 2017, resulting in a consolidated gross profit margin of 44.3%. Compared to the first quarter of 2017, our gross profit margin declined by approximately 130 basis points, primarily due to increased raw material costs.

Currently, we do not anticipate the margin pressure experience as a result of higher steel prices to impact our full year 2018 gross profit margin guidance of 45% to 46%, due to the recently announced U.S. price increase on our wood connector products, which will go into effect in the second half of this year.

On a per segment basis, our gross profit margin in North America decreased to 46.9% from 48.4% in the prior year quarter, due primarily to increased material costs, which were partially offset by reduced factory costs. In Europe, our first quarter gross profit margin was 31.9% compared to 32.2% in the year-ago period.

From a product perspective, our first quarter gross profit margin on wood products was 44.8% compared to 47.1% in the prior year quarter and was 35.1% for concrete products compared to 32.1% in the prior year quarter.

Now turning to our first quarter costs and operating expenses. As part of our ongoing efforts to improve our cost structure, consolidated research and development and engineering expenses for the quarter declined 6% year-over-year to $11.2 million. The decline was primarily due to decreased cash profit sharing and stock-based compensation expenses. Also included in research and development and engineering expense is approximately $8 million per year for the ongoing development of our truss software initiative to help support and grow our core connector business. Consolidated selling expenses for the quarter decreased 7% year-over-year to $27.6 million as a result of decreased stock-based compensation expense. On a segment basis, compared to the prior year quarter, selling expenses in North America decreased by $1.8 million and decreased by $0.4 million in Europe. General and administrative expenses in the first quarter increased 6% year-over-year to $38.2 million, primarily due to increases in professional and consulting fees associated with the SAP project, IT-related costs to upgrade hardware systems and depreciation and amortization. These costs were partially offset by decreased cash profit sharing and stock-based compensation expenses. On a segment level, general and administrative expenses in the North America segment increased by $2.2 million, and in Europe, G&A increased by $0.9 million compared to the prior year quarter.

We are committed to reducing our total operating expense dollars as a percentage of net sales. For the first quarter of 2018, total operating expenses as a percentage of net sales were 31.4%, down 390 basis points from the prior year quarter. We are pleased with this result, which includes $3.2 million of cost related to the ERP implementation in the first quarter of 2018 compared to $0.2 million of ERP-related costs in the prior year quarter. Our consolidated income from operations for the first quarter increased 45% year-over-year to $32.8 million compared to $22.6 million in the first quarter of 2017. Our income from operations for the quarter included a $1.2 million gain on disposal of assets, primarily due to a sale of property in the State of Texas, which was declared eminent domain. In North America, income from operations increased 34% year-over-year to $36 million. And in Europe, loss from operations was $1.6 million compared to a loss of $1.8 million in the prior year period. Included in Europe's loss from operations were SAP-related costs of approximately $700,000 in the first quarter of 2018 and $100,000 in the first quarter of 2017. As a result, our operating income margin of 13.4% on a consolidated basis increased by approximately 310 basis points from the first quarter of 2017.

Our effective tax rate decreased to 22.2% from 24.9% in the first quarter of 2017. As a reminder, the bargain purchase gain recorded in the first quarter of 2017, in connection with our acquisition of Gbo Fastening Systems, resulted in a positive 9.3% impact to the prior year quarter's effective tax rate.

Our consolidated net income for the first quarter was $25.4 million or $0.54 per fully diluted share compared to net income of $23.1 million or $0.48 per fully diluted share in the prior year quarter. It's important to note that our consolidated net income in the first quarter of 2017 included the aforementioned bargain purchase gain of $8.4 million [or] an impact of $0.18 per share.

Turning to our balance sheet and cash flow. At March 31, 2018, cash and cash equivalents totaled $137.4 million, a decrease of $31.1 million compared to the balance as of December 31, 2017. Capital expenditures were approximately $10.9 million for the quarter and were primarily related to investments in machinery, equipment and software, including $1.4 million of capitalized costs related to the ERP project. We remain debt-free, with only a small portion of capital leases amounting to approximately $3.5 million. On April 24, our Board of Directors declared a quarterly cash dividend of $0.22 per share, which represents a 5% increase over the first quarter of 2018 dividend. The dividend will be payable on July 26, 2018, for shareholders of record as of July 5, 2018. In addition, we received 182,171 shares during the quarter as final delivery for the $50 million accelerated share repurchase program initiated in December 2017, which accounted for 10 million of the $34.9 million worth of shares repurchased during the first quarter of 2018. Further, we repurchased an additional 437,500 shares during the quarter at an average price of $57.14 per share for a total of $25 million. The remaining amount authorized under our current repurchase program, which expires at the end of 2018, is $125.9 million. As Karen mentioned, share repurchases will remain a priority as we believe our stock is a good value at current levels versus where we expect to be upon completion of our 2020 Plan.

Before we turn it over to questions, I'd like to discuss our outlook. Although we experienced margin pressure during the quarter, due to rising raw material costs, we currently believe the price increases we announced in mid-April, which will become effective in mid-June, will enable us to achieve our previously issued guidance. As such, we are reiterating our outlook for the full year of 2018 as follows: we expect our consolidated gross profit margin to be in the range of 45% to 46%; the effective tax rate to be in the range of 26% to 27%; depreciation and amortization expense to be in the range of $39 million to $40 million, of which $34 million to $35 million is pure depreciation; and capital expenditures to be in the range of $30 million to $32 million, including $9 million to $10 million that will be dedicated to maintenance.

In summary, we are pleased with our first quarter results and look forward to updating our shareholders as we continue to execute against our strategic initiatives and 2020 Plan objective. Thank you for your time and attention today. We'd now like to open up the call for questions. Operator?

(Operator Instructions) Our first question comes from Daniel Moore with CJS Securities.

I want to touch first on the gross margin guide and price increases. Certainly impressive holding the line, given the inflation that we've seen. 11.5%, is that one of the biggest price increases you've had to put through in more than some time? And I guess what's the initial feedback you're getting from customers?

Dan, certainly, 11.5% is pretty substantial for what we see, and I think it's pretty indicative of what's going on in the market from the tariffs and what we see from the steel pricing. The information is so predominant in the market and builders and our customers are getting price increases pretty much from anybody that has material made out of steel. So certainly, it's understood. It's been publicized for a very long time about what's going on in the market with steel prices. Our customers appreciate that we give them a 60-day notification, and they're in the process of accepting that price increase.

Very helpful. Just shifting gears, in terms of the quarter, Brian, can you give us a sense of the impact of both FX and price increases of raw material pass-through had on revenue growth?

Raw material price increase pass-through, not significant. As Karen noted, that will be later in this year. Foreign exchange had a -- bear with me just a second, about a $4.5 million positive impact.

Got it. Perfect. And lastly, and I'll jump back in queue, LotSpec, any more details you can share? Purchase price, what revenue looks like, EBITDA multiples and any color you want to give on how it fits in the CG Visions beyond the prepared remarks will be great.

Sure. Dan, it's Brian. It's really an asset. It wasn't a business per se. It was the software application that we bought. It was a immaterial purchase price, and it will have a little bit of a effect on depreciation on a go-forward basis. But on an annual basis, it's not significant.

And just a little bit more about LotSpec, it's really an application for both AutoCAD and Revit, so AutoCAD being 2D, Revit being 3D drawing platforms. And what it allows us to do is convert those drawings into a 3D model, which we can then push through what's called Pipeline, which is a takeoff software that's part of CG Visions software platform. So it's really helping us make that takeoff much easier for the builders.

Our next question comes from Tim Wojs with Robert W. Baird.

So maybe on free cash flow. So I think free cash flow was positive in the first quarter, I think, for the first time since 2007. And so I was just wondering if maybe there's some guardrails to how we should think about free cash flow for the year as you kind of tie in some of the working capital reductions with inventory?

Sure, Tim. This is Brian. So free cash flow in Q1, income -- cash flow from operations, as Karen noted in her prepared part of the remarks, $16 million, but largely, CapEx and acquisitions in Q1 were much lower than in prior years. From a seasonality perspective, I'm not sure that I'm seeing, on the operating cash flows, much significant changes quarter-over-quarter. But you're right, it was a -- last year, we were on a net use versus a net received on cash. So I think one of the primary ones was the -- you'll see a change in inventory was a bit less this quarter. I think that's pretty much it. There were some other movements in other working capital items that changed that, [for our use to be provided].

Okay. Maybe I'll ask it a different way. So if I look at -- do you expect working capital to be down year-over-year in '18 versus '17?

Well, to the extent that we're returning cash to shareholders via buyback and dividend, yes. You've heard us talking about the improvement efforts we're looking at from inventory and then some of the AP and AR elements, want to see how far we get with those 2 elements. But if we were to look at cash as a part of working capital, I would expect that to be less.

Okay. Okay. And then maybe back on to pricing, just 2 questions. Have you put through anything in terms of price increases in Europe? That's one. And then second, when you put through a price increase in North America, is the realization on that price increase typically pretty good in terms of -- you don't have to give -- kind of, back-end percentages, but if -- what -- how good would you expect that 11.5% to, kind of, stick?

So, Tim, it's Karen. Yes, we did put some price increases in Europe that was happening in the early part of the year. They also have some significant increases in steel pricing in the European market. So again, that was taken in the first part of the year. From the standpoint of -- I think as we look at our price increase, we work very hard to justify what that needs to be and have conversations with our customers as to what that's based on. So we certainly anticipate, once you get through the staggering of customers and again, that June -- mid-June time frame, that the majority of that price increase will stick.

Tim, if I could revisit one item on the working -- on the cash flow from ops. Just as a reminder, last year, that bargain purchase gain of about $8 million was a use of cash so that also contributed to the net differential or primarily the net use of cash in last year's Q1. So I just wanted to provide a little additional clarity there.

Our next question comes from Kurt Yinger with D. A. Davidson.

When you talked about the mid-29% operating expense target, was that a full year 2018 goal? Or by the fourth quarter, that's, sort of, what you're expecting it from a quarterly run rate?

That's the full year 2018 goal.

Okay. And then with the lower tax rate in the first quarter here and the 26% to 27% guide for the full year, should we expect you'd be at the high end of that as we look out over the next 3 quarters?

On the tax rate?

Yes.

Yes, I think that's right.

And then could you talk a little bit about the differences between the small, mid and large-sized truss manufacturers and why you're, like, you're gaining some traction, it sounds like, with those mid-sized manufacturers?

Sure. So the small-sized manufacturers are a little less complicated from the standpoint of what they need on the software from a feature set. And typically, they have fewer locations that we're needing to support. So small-sized truss manufacturer, again, just using designing trusses, not floor systems and not wall panels. On the large -- or excuse me, the medium sized, as we go up, this becomes more complicated. So a medium-sized truss manufacturer typically has more locations. They require floor systems as well as truss design and certainly, a management software. And then as we get to the larger-sized component manufacturers, they have many, many more locations, and they require the use of wall panels, roof truss and floor systems. The reason we're getting some good traction is last October at the Building Component Manufacturing Conference, we released -- we put out a new release of our software, which had some additional feature sets, which was well received by the medium-sized component manufacturers, and we have got our sales force directed to work specifically with those medium-sized component manufacturers on those conversions.

Great. And lastly, I apologize if I missed this, but can you talk about your CapEx assumptions for the year? And are there any sort of significant discretionary spends within that?

So we do -- Kurt, this is Brian. We've got about 1/3 of that we called, kind of, maintenance CapEx, about a $30 million to $32 million annual amount projected for the year. So part of it is the timing, so that assumes all projects that we're looking at are finished by the end of the year, and often projects will roll over just because the spending may carry over into early next year. But we've based that amount on projected projects that would finish this year. So it may end up varying a little bit from that again, due to how much it's completed and put into use by the end of the year.

Our next question comes from Julio Romero with Sidoti & Company.

Just appreciate the color that you gave on truss sales up year-over-year. You called out some new feature sets that might be driving that. To the extent that you can -- I don't know if you can go any more granular, is that really like based on the cloud-based offering? Or any other features of that software that's resonating with customers?

Yes, I think as -- we've mentioned in the past that our software is, number one, modular in design, and number two, it is cloud-based. Additional feature sets are always added to software, and it's the things needed to make component manufacturers more efficient. So as we survey our customers and potential customers and get the input that we're looking for, that what do they need to be more efficient, those are things that we've input into the software. So we've just put elements that have made those medium-sized component manufacturers more efficient. And as I mentioned before, it's not only our truss design, but it's our management software that really can help them manage their inventory and efficiently produce those -- produce the trusses. So it's the truss design software as well as our management software that is appealing to them. Again, it has to be something that makes them more efficient so that it's worthwhile converting to Simpson.

That's helpful. And just on that point about the management software, the partnership with Hyphen Solutions. Can you give any additional color there? And should we expect Simpson to continue to explore those type of collaborations going forward with others in the market?

Sure. So Hyphen Solutions is a leading cloud-based software for builders in the ERP space. So if you can imagine a large builder on the front-end has AutoCAD drawings or Revit drawings, 2D or 3D, they would like to get them into a 3D model so they can then do a takeoff, which would happen in our Pipeline, which is CG Visions. And then you want to be able to push that data into an ERP system that can help you with scheduling, warranty information and that sort of things. So our connection with Hyphen Solutions is to allow a free flow of data so that this makes, again, the builders' life much easier from both the front-end and the back-end of their project with the current software solutions that are available. And Hyphen is predominant ERP solution used for most builders. So it's been -- it's a nice partnership that we have. And again, it's just exchanging the data to make that a faster process for the end users.

We have a follow-up question from Daniel Moore with CJS Securities.

I just missed -- can you give us the number of Home Depot stores that were mechanical anchors who are now rolled out? And what's the current run rate revenue look like?

We are currently in -- 335, I think, is the right number. Of the 1,900 stores, we're currently in 330 locations. And on the run rate, we anticipate that we'll convert several hundred stores this year. It's a little hard, Dan, to give you the run rate, and the reason is that we are not displacing someone in the Home Depot. So it takes a little bit longer to find that space and then set those stores. But what we'll do is be giving you a quarterly update on how we're progressing.

Helpful. And lastly, would you update your 8% organic growth goal if raw material prices continue to move higher? Or should we think of that as, sort of, a net of inflation goal?

Yes. I think we're going to have to think about that one a little bit more, Dan, provide a little bit more color, possibly next quarter.

At this time, I would like to conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.