Terminix Global Holdings Inc (TMX) 2012 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the ServiceMaster Company's fourth quarter 2012 earnings conference call. Today's call is being recorded and broadcast on the Internet. Beginning today's call is David Martin, ServiceMaster's interim Chief Financial Officer. Mr. Martin will introduce the other speakers on the call. As a reminder, during the question-and-answer session, please limit yourself to one follow-up question. At this time, we'll begin today's call. Please go ahead, Mr. Martin.

Good morning and thanks for joining our fourth quarter 2012 earnings conference call. Joining me today is ServiceMaster's Chief Executive Officer, Hank Mullany, and our interim controller, John Mullen. We'll make some prepared remarks and then address your questions during the question-and-answer session.

Before we begin, I'd like to remind you that throughout today's call management may make forward-looking statements to assist you in understanding the Company's strategies and operating performance. All forward-looking statements are subject to the forward-looking statement legends contained in our public filings with the Securities and Exchange Commission. These forward-looking statements are not guarantees of performance and are subject to risk factors contained in our public filings that may cause actual results to vary materially from those contemplated in the forward-looking statements. Information discussed on today's call speaks only as of February 26, 2013, and any rebroadcast or distribution of information presented on today's call after such date is not intended and will not be construed as updating or confirming such information. The ServiceMaster Company undertakes no obligation to update any information discussed on today's call.

Earlier this morning, ServiceMaster filed a press release highlighting our fourth quarter financial results. Additionally, a handout summarizing our fourth quarter results and key performance indicators can be found next to the webcast icon on the Investor Relations section of our website. Included in our press release and handout are additional disclosures that we believe will enhance your understanding of our financial and operating results. We may reference throughout today's call non-GAAP financial measures such as adjusted EBITDA and operating performance which factor in adjustments related to such things as restructuring expenses, non-cash goodwill and trade name impairments, and non-cash option and stock-based compensation expense, among others. We have included in our press release available on our website definitions of these terms, and we have included in our press release and handout relevant reconciliations to the most appropriate GAAP financial measures in order to better assist you in understanding our financial performance.

During the question-and-answer session we encourage you to ask any questions that you may have. Due to our disclosure policy and legal requirements, we're limited in our ability to hold a follow-up conversations with our public side investors and, as such, we request that you please ask any questions during this public forum. I will now turn the call over to Hank Mullany for opening comments. Hank?

Thanks, David. Good morning, everyone, and thanks for joining us on today's call. David will cover the details of our fourth quarter and full-year 2012 financial performance with you in a few minutes. We'll spend a good deal amount of time talking specifically about TruGreen, but first I want to share some overall highlights from the fourth quarter and some observations on the full year.

As you can see in our earnings release issued this morning, our revenue in the fourth quarter decreased 2.5% and operating performance decreased 37.4% compared to 2011. We finished 2012 with a slight decline on our operating revenue compared to 2011, which was driven primarily by an 11.1% decline in TruGreen's revenue. We also saw operating performance for the full year fall 7.8%, again that was driven primarily by TruGreen's operating performance declining 26.9% over the previous year. While we're obviously disappointed with these results, we did finish the year in line with the guidance we provided to you in November.

There's more to the story, however. Excluding TruGreen for the year, the rest of the Company grew revenue 5.2% and operating performance improved 2.1%. Excluding TruGreen, that would be the second best revenue growth the Company has experienced since 2007; however, in the real world you don't get to pick and choose that way, so we've been spending the last few months implementing a number of strategies to put TruGreen on track for 2013 and beyond. And as we lay out a plan to revitalize TruGreen, we've seen the great benefit to having a diverse set of businesses under the ServiceMaster family of brands.

We saw particularly strong performance by both Terminix and American Home Shield in 2012 and we've made excellent progress in our franchise businesses with the addition of new leadership, improved processes and best practices to better meet the needs of our franchise owners and their customers. There's a lot of reasons to feel good about ServiceMaster and I'll talk more about those shortly, but right now let me bring you up-to-date on our TruGreen transformation.

Last time, I told you we were focused on three priorities at TruGreen. First was finding the right leader to take TruGreen into the future and I'm pleased to say that we've hired David Alexander as our new TruGreen president. David has an outstanding track record of executive leadership and customer service operations, supply chain and driving revenue growth. He's a high-energy leader and a strong communicator and passionate about developing high-performing highly engaged diverse teams. He has excellent experience running large field-based operations with numerous locations and he brings a wealth of expertise in process improvement and talent development. We're thrilled to have him on board.

Second, we knew that getting TruGreen on track and restoring consistent growth and profitability to the business was going to require a thorough review of our sales and marketing programs for the 2013 selling season. Our number one focus is to ensure our product offerings are aligned with what consumers want and ultimately provide the right mix of choices to drive revenue growth. We believe we developed a great product with the Healthy Lawn Plan. It's an excellent treatment plan that matches the growing conditions in each part of the country. It provides homeowners with the results they're looking for -- healthy, green, and weed-free lawns and it showed up in our customer satisfaction scores and in higher retention for customers who were enrolled in the plan. So, we know we're on the right track.

One thing that hurt us in 2012 was that we didn't provide consumers with enough choices. So, in some cases, we abandoned profitable segments of our customer base that wanted more options in lawn care services. Maybe a basic fertilization and weed control plan or maybe something more comprehensive including aeration and over seeding. We've done extensive consumer research in the last four months. Based on that research, this year we're selling three product options, a tiered offering that will meet the needs of a broader range of customers. We'll be offering a weed free program called True Maintenance, a more robust program called True Health that includes insect control to protect the lawn, and the premium program called True Complete which includes aeration and seeding to strengthen and fortify the lawn. Each of these programs will be competitively priced and tailored to the environmental, climate, and soil conditions of our customers to ensure they are getting a healthy, green lawn and fulfilling our brand promise that TruGreen has the science, specialists and service guarantee to ensure you'll get the lawn you love.

The third priority we're focused on he is getting better execution. The one thing we have complete control over is our ability to execute our strategies. Neighborhood sales is a good example. You'll recall in the 2008-2009 timeframe we put more resources into neighborhood sales, but it had lower first-year profit margins so we decided in 2011 to scale back on the neighborhood sales in favor of other more profitable channels. Unfortunately, due to poor execution, we dialed back our neighborhood selling program too far last year and it had a negative effect on both revenue and earnings. This year we intend to return to our planned 2012 level of neighborhood sales and we put the resources and tracking in place to make sure we have a better mix among all of our sales and marketing channels.

We also have to get our workforce management and labor costs in line with the seasonal customer demand. We've made good progress on branch standardization and introducing improved training and new technology to make our field technicians more effective and more efficient, but we haven't always been able to staff our branches at the right levels in the right times in 2012 or just quickly enough when demand shifted. That left us with higher labor costs and lower productivity. TruGreen has to be more nimble so that we can adjust quickly and seamlessly when we need to adjust our workforce without threatening our financial performance. We're putting those workforce management tools in place for 2013 to better track labor costs and adapt to shifts in demand.

The two months I spent as interim President of TruGreen in 2012 allowed me to take a deep dive into TruGreen's operations and learn a great deal about what we needed to do in the business. We opened the lines of communications up with our field operators who are closest to our customers and we listened to what we needed to do to get the business back on track. What they told me they wanted was better and more frequent communication. With David Alexander in place I can tell you we're going to stay focused and we're going to do more listening to the improvement ideas that come from our front-line associates who interact with our customers every day.

When I asked our lawn technicians what they needed from us, one of the things they said we must improve is routing and scheduling. Too often they felt we were wasting time driving from point-to-point instead of actually serving their customers. So, we've embarked on a plan using new technology to improve route density and achieve more productivity from our people and our vehicles, which will both reduce costs and enhance service. In fact, we believe this initiative holds so much promise that it's the best practice will also introduce into Terminix as well. So, while our full-year 2012 results didn't meet our expectations, we're committed to getting TruGreen on track and putting the people, processes, and technology in place to make that happen.

As I said both before, we believe TruGreen has the right fundamentals and is positioned for success in the marketplace. We're number one in the professional lawn care service category and more than four times larger than our nearest competitor based on revenue. We have the size and scale and we have invested in new technology and new improved services. As I said earlier, we're already making changes in the business to help drive sustainable, profitable growth at TruGreen. It's not going to be an overnight transformation, but we are making progress and we will get the business on the right track in 2013.

Even with the challenges at TruGreen, there are plenty of positive developments around our Company that will help us propel ServiceMaster into the future. One advantage we have is that we have a strong experienced senior leadership team in place to execute our strategies. Earlier, I mentioned the addition of David Alexander as the new president of TruGreen and we believe he has the right expertise to revitalize the brand and retool the business. We're making progress in our search for new CFO and I'll provide you with an update as soon as we have more information to share.

Meanwhile, I'm very pleased with the executive team we have in place to lead our businesses and support functions. Led by Chuck Fallon, Terminix delivered 6.1% revenue growth in 2012, its second best annual revenue growth rate since we went private in 2007. Customer satisfaction scores in December reached an all-time high. All in all, in 2012 Terminix remained the most consistent performer in our portfolio and had the highest customer retention rates of all of our businesses. The Terminix team is focused on growth, both in residential and commercial businesses. Last year, you'll recall we acquired Schendel Pest Services which operates 10 office locations across six states with a focus on commercial business. In December, we completed six smaller acquisitions to add geographic diversity to the Terminix portfolio. We believe we have a solid game plan to continue to grow Terminix by expanding our residential and commercial footprint in the US both organically through better territory optimization and through acquisitions.

American Home Shield finished the year 5% revenue growth and 7.2% growth in operating performance. Taking a broader view, from 2008 through 2012 AHS has grown revenues 22.6% while gradually diversifying its home warranty sales among the real estate, direct-to-consumer, and third-party channels. While the majority of American Home Shield's growth in 2012 came from our core home warranty business, we're also pleased with the sales of new preventative maintenance contracts in 2012. Preventative maintenance contracts offer a recurring revenue stream and a new growth opportunity with the product that's a perfect complement to the traditional home warranty. It's designed to help homeowners keep their major home systems and appliances in good working condition and avoid more costly repairs and replacements down the road. We know that handling and completing service requests in a timely fashion are key drivers of customer satisfaction at American Home Shield.

While we saw some late year improvement, we must do more and under our AHS president, Mark Barry, we will do more to improve our customer experience in 2012. For example, we've improved our staffing model and begun to put new processes in place that will help create a better overall experience for customers and we hope to build on the coming months. Planned enhancements to our American Home Shield technology platform will deliver these service improvements, but as I told you on our last call it is a significant investment and we want to make sure that it's executed properly.

After a slow start to the year, ServiceMaster Clean grew revenue 10.6% in the fourth quarter while Merry Maids beat our expectations for the full year. Tom Coba recently completed his first year as president of our franchise businesses, and he's driving a number of initiatives to generate revenue growth both for our franchisees and for ServiceMaster. One of our growth strategies is market expansion and we're making strong advances in that area adding a total of 183 new franchise licenses in 2012. At ServiceMaster Clean we saw a strong increase in our janitorial national accounts, which is the fastest growing segment of our commercial business. From a customer experience standpoint, ServiceMaster Clean enjoyed some of the best satisfaction scores in the Company, a real tribute to the great franchisees who deliver outstanding service to customers every day. At Merry Maids we saw continued improvement in both customer satisfaction and in total customer counts due in part to the success of our dedicated team members who have implemented new tools, technology, and cleaning techniques to drive higher retention, up 420 basis points versus 2011.

Across our Company, the commitment to transform the customer experience is the foundation of our work, our mission. We want to simplify and improve the quality of our customer' lives. Why should you be confident in ServiceMaster's future? Five reasons. Number one, we have leading market positions with valuable iconic brands that have been around for decades. Number two, we have a proven and diverse product lineup with compelling growth potential. ServiceMaster's top three brands, Terminix, TruGreen, and American Home Shield, are market leaders that operate in highly fragmented categories with room to grow. Number three, we have a strong senior leadership team with a track record of success and leadership and brand management and while some of them are new to the team, they are backed up by leaders who have decades of experience at ServiceMaster in one or more of our brands. Number four, we have a proven and consistent business model that has weathered the uncertain economic environment very well over the past few years. And, number five, our business model has delivered strong cash flow that has allowed us to improve our key credit ratios since 2007.

Before I turn the call over to David, I want to thank you for your confidence in us. In 2012 we took decisive actions to improve our financial strength and liquidity and put the Company in a much better position for the long term. In February of 2012, we issued $600 million of bonds at 8% which will mature in 2020. In August, we issued another $750 million of bonds at 7% which will mature in 2020. We used the proceeds of these bond offerings to pay off approximately $1 billion worth of notes that had an interest rate of 10.75% and were due to mature in 2015 and to pay down approximately $275 million in term debt. In August 2012, we also extended the maturity of approximately $1 billion worth of term debt from July 2014 to January 2017 and we also just announced the completion of $1.2 billion of our term debt being extended to January 2017.

While we didn't see the total top and bottom line growth rates that we would have liked in 2012, we believe we have a strong foundation for the future. We have a plan to get TruGreen on track and we have the leadership and strategies in place to achieve our vision of transforming ServiceMaster into a rapidly growing, best-in-class service provider. We will be the best place to work and invest. I'm looking forward to reporting our progress on our next call. David?

Thank you, Hank. Let me briefly cover our consolidated results and then I'll move on to the segments. Full-year consolidated revenue decreased slightly to just under $3.2 billion. Full-year operating performance decreased 7.8% or nearly $48 million to $563 million. For the fourth quarter of 2012 consolidated revenue decreased 2.5% to just under $676 million compared to $693 million a year ago. The decrease in revenue was primarily driven by an 11.3% decline in customer counts at TruGreen and lower revenue at American Home Shield partially offset by growth in revenue at Terminix.

Operating performance decreased 37.4% to just under $81 million or approximately $48 million below fourth quarter 2011 results and fourth quarter operating performance margins declined 660 basis points to 12% compared to 18.6% in the fourth quarter of 2011. The decrease in operating performance for the quarter was primarily driven by two things, lower revenue, a reduction in labor productivity and higher sales and marketing expense at TruGreen and lower revenue and higher contract costs at American Home Shield.

Cost of goods sold as a percentage of revenue increased 490 basis points to 63.3% compared to the fourth quarter of 2011. The increase primarily reflects lower labor productivity at TruGreen and higher fuel costs. Fourth quarter 2012 cost of goods sold also includes approximately $2 million of impairments relating to intellectual property and abandoned real estate at Terminix. Year-over-year, for the quarter we saw fuel prices increase $1.6 million Company wide and for the full year, fuel prices had an unfavorable impact of a $8.9 million compared to 2011 after the impact of fuel hedging.

SG&A expense as a percentage of revenue increased 190 basis points to 28.5% compared to the fourth quarter of 2011. The increase primarily reflects increased sales and marketing expense, increased investments in ongoing productivity and standardization initiatives at TruGreen, and increased investments to drive improvement in service delivery at American Home Shield.

Moving to the balance sheet for the fourth quarter of 2012, our cash balance increased from $325 million to $423 million during the quarter, or 30%. We recently announced that we were able to negotiate an extension of the maturity date of $1.2 billion of borrowings under our term facilities, moving it from July 2014 to January 2017. Net cash provided from operating activities for the quarter of $135 million was driven by $23 million in earnings adjusted for non-cash charges and $117 million decrease in working capital needs. That was partially offset by $5 million in restructuring payments. The decrease in working capital requirements resulted from normal seasonal activity.

For the quarter, net cash used for investing activities of $20 million primarily reflects purchases of technology and property improvements of $11 million and $16 million used for tuck-in acquisitions. That was partially offset by $7 million in proceeds from the sales of marketable securities. For the year, capital expenditures were $73 million. Additionally, new lease financings for vehicles were $42 million in 2012. Net cash used for financing activities was $16 million in the fourth quarter consisting of scheduled debt repayments of $15 million and an additional $1 million of debt issuance costs related to the sale of the 2020 notes in the third quarter of 2012.

Our liquidity profile remains strong. Cash and short- and long-term securities totaled $549 million, of which $244 million is associated with regulatory requirements at American Home Shield and other working capital requirements. We currently have $447 million of capacity under our revolving credit facility and there were no borrowings on the revolving credit facility during the fourth quarter of 2012.

Now, let's talk about the segment results. At Terminix, revenue for the fourth quarter of 2012 was $289 million, up 5.6% compared to the fourth quarter of 2011, reflecting strong growth in both pest control and termite business. Pest control revenue increased 5.7%, which reflected new unit sales and acquisitions, a $2.7 million increase in other pest revenue, primarily bed bug services, and improved price realization partially offset by 130 basis point decline in the customer retention rate. Termite revenue, including new unit sales and renewals, increased 4.5% which reflected improved price realization and new unit sales partially offset by a 50 basis point decline in the customer retention rate. Terminix's operating performance for the fourth quarter of 2012 was $66 million, a decline of 3.5% compared to the fourth quarter of 2011. This $2 million decrease in operating performance reflected approximately $2 million of impairments relating to the intellectual property and abandoned real estate. Fourth quarter 2012 operating performance also reflects higher fuel prices partially offset by the impact of higher revenue.

At TruGreen, revenue for the fourth quarter of 2012 was $184 million down 14.3% compared to the fourth quarter of 2011, which reflected a decrease in new unit sales and acquisitions and a reduction in ice melt sales partially offset by 190 basis point improvement in the customer retention rate. TruGreen's operating performance for the fourth quarter 2012 was just under $9 million, a decline of 82.3% compared to the fourth quarter of 2011. This $41 million decline in operating performance mainly reflected the impact of lower revenue, a reduction in labor productivity, higher technology costs related to a new operating system, higher sales and marketing expense, increased investments in ongoing productivity and standardization initiatives, and higher fuel prices.

At American Home Shield, revenue for the fourth quarter of 2012 was $140 million, down 3.9% compared to the fourth quarter of 2011. This decline reflected the impact of a change in the expected timing of contract costs and 140 basis point reduction in the customer retention rate. That was partially offset by improved price realization and new unit sales. American Home Shield's operating performance for the fourth quarter of 2012 was $16 million, a decline of 27.3% compared to the fourth quarter of 2011. This $6 million decrease in operating performance primarily reflected the impact of lower revenue, higher contract costs, and increased investments to drive improvements in service delivery.

The ServiceMaster Clean segment, which also includes the Furniture Medic and AmeriSpec brands reported revenue for the fourth quarter of 2012 of $40 million, up 10.6% compared to the fourth quarter of 2011. This was driven by an 82.5% increase in janitorial national account revenue driven by strong sales activity and a 23.8% increase in sales of products to franchisees driven by higher demand for equipment. These items were partially offset by a 0.9% decrease in domestic royalty fees primarily from a decrease in disaster restoration services. ServiceMaster Clean's operating performance for the fourth quarter of 2012 was $20 million, an improvement of 3.8% compared to the fourth quarter 2011. This nearly $1 million increase primarily reflected the impact of higher revenue.

The other operations and headquarters segment, which includes our Merry Maids operations, ServiceMaster acceptance company, and our business support functions reported revenue for the fourth quarter of 2012 of $22 million which was comparable to the fourth quarter of 2011. This reflected comparable revenue at Merry Maids where a 4% increase in royalty revenue was offset by a 1.9% decrease in revenue from Company-owned branches. That decrease was driven by a $1 million reduction in revenue driven by the sale of 11 Company-owned branches in late 2011, partially offset by a 420 basis point increase in the customer retention rate and improved price realization.

Merry Maids operating performance for the fourth quarter 2012 was just under $6 million, a decline of 25.2% compared to the fourth quarter of 2011. This $2 million decrease primarily reflected a gain on the sale of 11 Company-owned branches recorded in the fourth quarter of 2011 which did not recur in 2012. The operating performance of ServiceMaster acceptance company and the Company's headquarter functions improved $2 million in the fourth quarter of 2012 compared to the fourth quarter of 2011. This was primarily driven by a reduction in costs in our centers of excellence and lower incentive compensation expense, partially offset by a reduction in interest and net investment income.

I think it's important to reiterate something Hank said earlier. Although revenue and operating performance growth at TruGreen were challenged during the year, our other businesses grew revenue by 5.2% and operating performance by 2.1% during the year. Moving forward, we will continue to stay focused on executing our strategies that will get TruGreen on track for the 2013 season and drive growth and profitability in all of our businesses. That concludes our prepared remarks. Operator, let's open up the lines for questions.

(Operator Instructions)

Michael Plancey with ING.

Two quick questions. The first -- I was wondering if you can comment on the decline in the retention rates at Terminix in the fourth quarter? And then the second would be to just get any color on the early acceptance to the new marketing at TruGreen?

Michael, thanks for the call. In terms of our decline in retention at Terminix, that was really a function of some modest price increases that we took, which we felt were appropriate based on the business and what we wanted to accomplish.

Then, in terms of the selling season for TruGreen, that really begins later on, in the March/April time period. That's when we'll really get a good pulse on the acceptance of the new products that we've developed. But, again, we used extensive consumer research, and we believe we've got a compelling portfolio of products for the TruGreen consumers.

Okay. Just to follow up on that. The technology investments that you're putting into place to better manage expenses, is that now complete or is there still more to go on that?

The technology implementation at TruGreen is right on track. It's actually live now, and operating in our branches. There will be some additional things that we'll be rolling out later this year, but on track, and initial indications are good.

Thank you.

Kevin Coyne, Goldman Sachs.

I was just wondering -- just on the healthcare reform front, are you expecting an increase in your healthcare costs this year? And, if so, can you couch how big it will be?

Kevin, thanks for the call, and thanks for the interest in our Company. In terms of the Healthcare Reform Act, we've implemented strategies this year that will mitigate the increases caused by that program, and also still provide our associates outstanding healthcare benefits. So, you won't see a major impact there.

Okay. And just turning to TruGreen, I know you are taking more of a longer-term view, but I was wondering if you could give us perhaps a sense of the cadence from quarter to quarter of how we should think about our models. Because I'm getting the sense that we should think of the first half as somewhat consistent with the year-over-year decline in 4Q, but as the marketing benefits kick in the second half, we'll get the benefit of those, plus the easier comp. So, should we be thinking about second half flat year over year or potentially just down single digits?

Well, Kevin, as you know, we don't provide guidance, but I can share with you what we'll be looking at in terms of TruGreen. As you know, we started the year with fewer customers. As the marketing programs take hold and our selling season shapes up in the April/May time period, then what you'll see is, after that, after the selling program impacts, you'll see the improvements in labor productivity that we talked about. And again, that will take -- that will be mainly impacting throughout 2013.

Okay. And just one final question. I know you did the various tuck-in acquisitions on the pest side. Can you give us a range of what types of multiples you paid for those?

We don't share that type of information, but we believe that these are very good investments that will be accretive, and increase our revenue and profits. We really feel good about the acquisition program that Terminix has in place.

Okay. Thank you for your time.

(Operator Instructions)

Marianne Manzolillo with Angelo, Gordon.

Another question regarding the TruGreen. The choices that you're giving the customers now, the three choices -- the weekly program, the True Health, the True Complete -- how does that compare then to what you were offering your customers last year? So, last year, if my understanding is correct, you were not offering three different choices, it was just kind of a full program. So, with these three choices, are there -- does the pricing vary between the different levels? Do you think you're addressing what I thought was a problem last year, in fact, perhaps the affordability of the full program was beyond perhaps what some consumers were willing to spend?

Marianne, last year we offered just one program. It was called the Healthy Lawn program. And what we found in watching the performance of that program is -- great program, provides outstanding results, helps with improved customer satisfaction scores. Also helped our retention for the consumers that were on that program. But we also heard from consumers that they wanted more choices. So, the options that we have today provide three choices, and at different price points.

So, we feel very good about the choices. And, again, it's anchored in consumer research. And also, we feel very good about building on the base of the Healthy Lawn Plan, but providing more choices. And those choices are a function of -- one of the options provides full insect control, which, in certain parts of the country, would be very advantageous. Another one of our options provides aeration and overseeding, which, again, in certain parts of the country, is extremely helpful.

So, for instance, your weekly program -- would that likely be priced lower than your Healthy Lawn program of last year?

We've got three different price points. One of the options is priced lower than last year, Marianne.

Okay. Good. Hopefully that results in a pickup in sales. And then the return to the neighborhood sales, could you expand on that a little bit because I viewed that as a source of perhaps some unprofitable sales, or sales that had a lower retention rate?

Yes. If you remember, if you think about the TruGreen business, Marianne, we felt that in the 2008/2009 time period, that sales channel had become too high, too large a percent of our business for the items that you talked about. So, we wanted to dial it down, not eliminate it, not dramatically reduce it, but dial it down to more rational levels. As we went and did that last year, we found that it got dialed down too much. So, our plan for 2013 is to go to neighborhood sales channel exactly where we had planned for 2012. But in 2013 we have tighter controls in place so that we can make sure that we turn the dials and adjust that to get the exact level that we're looking for in 2013.

And I would just add to that, that through improved scripting that we've provided to our sales force on the neighborhood side, better tools such as handhelds with pricing guard rails and the like, we think we can have very -- we can be very effective with that as a marketing channel as part of an overall marketing program going forward.

Great. Wonderful. And then just one question regarding the cash flow from operations, since the cash flow statement's not included in the 8-K. It sounds as if cash flow from operations was similar to last-year fourth quarter?

That's exactly right. Yes. Very close to fourth-quarter prior year.

Okay. Wonderful. Thank you very much.

And there are presently no further questions at this time. I'll turn the call back to you. Please continue with your presentation or closing remarks.

We thank you very much for joining the call. We look forward to speaking with you again after our first-quarter 2013. Thank you very much.

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