Wesco International Inc (WCC) 2003 Q4 法說會逐字稿

Thank you for standing by and welcome to the WESCO International, Incorporated fourth quarter and full year ending 2003 conference call.

This conference is being recorded. With us today from the company is the Treasurer, Director of Investor Relation, Dan Brailer.

At this time I'd like to turn the conference over to him. Mr. Brailer, please go ahead.

This morning with me are Mr. Roy Haley, Chairman and Chief Executive Officer, and Mr. Stephen Van Oss, WESCO's Chief Financial Officer and Vice President. Mr. Van Oss will provide an overview of the earnings press release issued this morning.

Means to access this conference call by a webcast was disclosed, and the press release was posted on our corporate website. Replays of this conference call will be archived and available for seven days through midnight Eastern time February 19th. Following the commentary of Mr. Van Oss, we will open the session to your questions.

This conference call may include forward-looking statements, and therefore actual results may differ materially from expectations. For additional information on WESCO International, please refer to the company's annual report on Form 10-K for the fiscal year ended December 31, 2002, as well as other reports filed with the SEC. The following presentation may also include discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be obtained via WESCO's website, www.wescodist.com.

I would now like to turn the conference call over to Mr. Steve Van Oss, Vice President and Chief Financial Officer.

Thank you, Dan.

Good morning. Thank you for participating in our call. I'd like to start the discussion with an overview of our performance for the quarter.

Last quarter we discussed the progress the company has made in most areas of operations, ranging from improvement in margins, cost containment, cash generation, debt reduction, and improvements in our overall capital structure and liquidity position. We discussed WESCO's profit performance, the effectiveness of our business model. The markets we operate in appear to be stabilizing, and we're showing emerging signs of an increase in activity levels.

We discussed a variety of improvement initiatives that were building momentum and should deliver favorable results throughout the balance of the year. We emphasized the importance of regaining positive momentum on our top line sales performance to deliver even stronger operating results.

While the results have been good, sales for the quarter improved 4% over the fourth quarter of 2002 and 3% over the third quarter of 2003. Our operating profit improved by 35%, and our net income doubled, reflecting the positive impact of our margin improvement and cost containment initiatives and the leveraged impact of the sales increase.

Gross margin dollars at $160 million were the highest since the second quarter of 2001 and were achieved on lower sales. The gross margin percent at 18.8% was the highest in the company's history.

Cost containment programs have resulted in satisfactory SG&A performance, despite higher employee medical and retirement-related costs, and we intend to continue to work on productivity initiatives through our Lean Enterprise programs. Interest expense continues to decline and is at its lowest point since the recapitalization of the company in 1998.

Free cash flow generation was $15 million for the quarter and $96 million for the year, and was used to reduce debt net of cash by $69 million from year-end 2002. A series of capital market transactions over the past two years have significantly strengthened our balance sheet. These transactions, coupled with continued free cash flow generation, has positioned the company with considerable operating flexibility, $197 million of liquidity, and no significant debt maturities until 2007.

Lean Enterprise Initiatives continue to be expanded throughout the company with approximately 100 branches involved to date. The initial results are encouraging. These initiatives supplement and expand programs, touching on virtually all aspects of our operations from sales, margins, and inventory, to accounts receivable and order processing.

I'm now going to turn and talk about some specific fourth quarter results. Our sales were $850 million for the fourth quarter and were up $35 million, or 4.2% from the fourth quarter of last year. Sales increased by $24.5 million, or 3% over the third quarter of 2003.

The improvement over the third quarter was stronger than what we would expect to see due to normal seasonality. Typical seasonality would have put sales in the $790 to $800 million range. The daily sales rate also increased quarter over quarter, and the fourth quarter was approximately 3% over the full-year average.

We are continuing to see initial signs of improved activity in a variety of major industrial groups that are heavy users of electrical equipment and MRO products, although not near the historical levels of 1999 and 2000. A continuation of this improving trend would result in favorable comparisons in upcoming quarters.

Capital spending on commercial and production facilities continues to be weak, and its impact on construction and other industrial project activity has resulted in our sales to customers in these large market segments being down in the aggregate approximately 1%. Our utility operations were down less than 2%, continuing a strengthening trend which began last quarter as year-to-date sales were off 5%.

Activity levels for our customers in our manufactured housing markets continue to be depressed, but we saw signs of improvement in the recreational vehicle segment and in our overall market penetration. As a result, sales into this market were up over 7% for the quarter, an improvement from earlier trends.

Canadian operations were up over 20%, primarily on the strength of the Canadian dollar. Sales in Canadian dollars were up almost 7%. Sales to other international customers were up slightly for the quarter.

On the strength of new programs, sales to customers through our national accounts programs were up almost 9% over the fourth quarter of last year and were up over 3% for the full year, despite the weakness experienced in current programs where industrial and utility customers are experiencing weak end user demand. The roll-out of new programs and new customers in our integrated supply programs resulted in sales to these customers being up almost 5% for the quarter and up approximately 8% for the year.

For the quarter, pricing had a favorable $9 million impact on our sales. Overall, the total electrical price index for December was up 3% from last year.

The fourth quarter gross margin was 18.8% and compares to 18.3% for the fourth quarter of 2002. Our sales and business mix did not play a significant role in the margin change. Billing margins increased approximately 80 basis points over the fourth quarter of 2002 and 70 basis points over the full year of 2002.

Cost containment and reduction programs continued to receive focus and attention. SG&A expense for the quarter, at $128.2 million, is up $2.5 million, or 2%, over the fourth quarter of 2002 on a sales increase of 4.2%.

Our bad debt expense was up approximately $1.4 million over last year's fourth quarter, as we have seen an increase in low-profile, small dollar amount bankruptcies and troubled accounts as companies try to cope with the prolonged economic downturn. We are monitoring credit worthiness of our customer base closely and believe our credit limits and reserves are appropriate at this time.

Company-wide cost containment actions continue, with the primary impact coming from the staffing, related compensation, and general expense program reductions. Since March of 2001, when our staff rebalancing program was initiated, full-time headcount has been reduced by 950 people, or over 15%, with staff reductions continuing in the fourth quarter of 2003. All severance-related costs have been absorbed in the related periods. We will continue to take actions to reduce and/or rebalance headcount as the economy and our performance dictates.

Depreciation and amortization expense increased by $2 million for the quarter, due primarily to a one-time adjustment related to covenants not to compete, associated with an acquisition made in 1998.

Fourth quarter operating income was $24.7 million, or 2.9% of sales, versus $18.3 million, or 2.2% of sales last year. Gross margin dollars were significantly ahead of last year, and more than offset the increased SG&A spending. Operating income increased 35% over the fourth quarter of 2002 on a 4.2% increase in sales.

Interest expense and other costs totaled $11.3 million for the fourth quarter of 2003 compared to $11.9 million in the fourth quarter of 2002 and $12.1 million in the third quarter of 2003. The decrease in expense from last year resulted from lower debt outstanding during the quarter, offset somewhat by a slightly higher effective interest rate resulting from a higher proportion of fixed rate debt.

Also, during the quarter, the company entered into a total of $50 million of fixed to floating interest rate swaps, thereby reducing the effective interest rate on this debt by approximately 3 percentage points. Income before taxes of $13.4 million for the fourth quarter of 2003 compares to $6.4 million in last year's fourth quarter and $11.8 million for the third quarter of 2003.

We continue to work on planning initiatives to lower our effective tax rate, and over the past two years we've had several positive adjustments. For the fourth quarter, our effective tax rate was 29.5% compared to 25.9% for the fourth quarter of 2002. Favorable adjustments for this year's fourth quarter deal primarily with Canadian dividend planning.

For planning purposes, our normalized ongoing effective tax rate on a go-forward basis is estimated to be in the range of 34% to 36%. We believe that our current tax reserves are adequate at this time.

Fourth quarter net income of $9.4 million increased by $4.7 million over the reported fourth quarter of 2002, due primarily to the gross margin improvements. Net income for the quarter increased by $1.1 million, or 13% over the third quarter of 2003. Earnings per share for the quarter was 21 cents on net income of $9.4 million and compares to 10 cents for the fourth quarter 2002 and 18 cents for the third quarter 2003.

Now let's move to the balance sheet. For our discussions on debt, working capital and cash flow, our accounts receivable securitization program will be described as if it were on book.

Operating earnings and reductions in working capital have been used to reduce debt and improve the liquidity position of the company throughout 2003. Total debt net of cash decreased $69 million from year-end. Free cash flow for the quarter was $15 million. Debt net of cash for the quarter increased slightly over the third quarter of 2003, due to the repurchase of $4.3 million shares of stock during the quarter.

Working capital, which improved 16 days over the fourth quarter of 2002, and three days over the third quarter of 2003, contributed to the favorable cash flow during the quarter and during the year.

The components of net debt, including the accounts receivable securitization program, at year-end were our senior sub notes and other at $372 million, finance receivables at $225 million, real-estate financing at $50 million, and cash of $27 million. There was no outstandings on our revolving line of credit at the end of the year.

Liquidity, defined as readily available borrowing capacity and invested cash, was $197 million at year-end and compares to $186 million in the third quarter of 2003 and $161 million at year-end 2002.

Capital expenditures for the fourth quarter of 2003 were approximately $2.8 million versus $3.9 million for the comparable period in 2002. For the full year, capital expenditures were approximately $8.4 million versus $9.3 million last year.

During the quarter we participated in two equity transactions, both of which have been previously announced. The first transaction involved the purchase in a single, privately-negotiated transaction of approximately 4.3 million shares for a cost of $27.3 million, or $6.29 per share. The second transaction involved the redemption at a discount to market of the net equity value representing 2.9 million shares of in-the-money stock options. These stock option grants were originally made in 1994 and 1995.

As of the end of the year the company had accrued an $80 million liability to recognize the estimated amount owed under the purchase agreement with Bruckner. $50 million is classified as a non-current liability, and $30 million is classified as a current liability. These estimated payments were recorded as an increase to goodwill.

In summary, we had a very good quarter. Higher sales, coupled with improved gross profit margins, resulted in improved operating profit, both quarter over quarter and sequentially, and was the best operating profit in terms of dollars and percent of sales since the second quarter of 2001.

Our net income doubled. Progress in working capital initiatives coupled with operating earnings, tax and debt initiatives provided strong cash flow, allowing the company to pay down debt net of cash by $69 million over the past 12 months. This progress, coupled with improvements in our capital structure, has positioned WESCO with liquidity in excess of $197 million, no significant near-term debt maturities, and no restrictive debt covenants.

With our Lean Enterprise Initiatives providing additional emphasis in all areas of the company, we are well positioned to take advantage of what appears to be an emerging uptick in economic activity.

Before discussing our outlook, I would like to provide some commentary on the statement included in our press release relating to the appointment of independent counsel. As reported in today's release, the company's audit committee, immediately following the review of a recent internal audit report, engaged independent counsel to assess and make findings and recommendations with respect to one large branch operation and report back to the committee promptly.

The matters to be reviewed relate primarily to cash management and undocumented expense reimbursement practices at this branch, which did not follow corporate policies and procedures. Management and the audit committee do not believe the amounts involved were material.

Based on the internal audit report, the amounts involved have been accounted for in the financial statements for the periods involved. Management promptly implemented those remedial actions recommended by internal auditors, and independent counsel will consider whether additional actions are necessary.

When the audit committee review is complete, a further statement will be made if appropriate. But while the inquiry is continuing, it would be inappropriate to say more at this time. The company's internal audit group, outside counsel, and auditors are assisting in the review.

As for our outlook and general guidance, the company will not be providing specific sales and earnings guidance for the year 2004 at this time. However, we do offer the following general comments.

Our planning assumptions reflect an improving economic environment for industrial and large contractor markets, with a modest improvement in top-line sales in the 1% to 3% range. Based on current momentum and continuing operational improvement projects, we expect to achieve further expansion on billing margins as company-wide initiatives are continued in this important area.

Working capital productivity is anticipated to be maintained, and cash flow will be directed at acquisition earn-out payments and debt reduction. Capital expenditures for 2004 are anticipated to be in the $14 to $16 million range.

We are seeing improvements in the general trend of the economic data but manufacturing and construction industries are still under pressure. Even with further improvement, we anticipate there will be a time lag before we see a significant near-term, broad-based increase in capital spending. Accordingly, we continue to identify and implement further cost reduction and profit improvement actions, while being cognizant not to impact the company's ability generate new sales or respond to an uptick in activity levels in our end markets.

During the first quarter of last year we launched comprehensive company-wide initiatives to drive operating profit improvement, with the assumption of a flat or declining sales environment, while concurrently emphasizing sales programs and sales management activities to increase market share at the local level and benefit from the momentum developed in our national accounts and integrated supply programs. As we saw on the fourth quarter, these programs are beginning to favorably impact our operating results and will continue to receive top priority as we strive to continually improve our performance.

At this point, Roy and I will open the call for a question-and-answer session.

[OPERATOR INSTRUCTIONS]

And we'll first go to Rob Damron with 21st Century Research.

Great quarter, guys. Just wanted to ask you a question about the roll-out of the Lean Initiative. I believe you have rolled this out in 100 of your 350 branches. Where are you in that process with those existing 100? And then what is the timeline and the plan to roll it out with the balance of the branches?

Good morning, Rob. This is Roy Haley.

This initiative got launched around midyear last year, and we've made tremendous progress in a large part of the organization. We have clearly identified seven specific programs and initiatives that are all being applied through our branch operations. And we, as Steve pointed out, we've taken that group of -- or package of initiatives to approximately 100 branches. We have further taken parts of certain programs considerably beyond that initial group of 100.

Now, to your question, we are in the process of extending the -- that same package of seven initiatives to a broader range of branch operations. And we're using multiple techniques, some of them -- some of the techniques are very comparable to what we started with, that is, with the special teams that go in and work with operations. And in other cases we're taking groups of branch operations and doing more training and have more of an auditing and follow-up process, rather than a hands-on facilitation process. And the reason for that is both what we've learned to date and the procedures and techniques that we use, as well as the fact that we're better able today to have field management take more responsibility in leading that charge.

We're also beginning to add new Lean Initiatives, and we start with the first group of 100 branches, and we'll be applying new programs as the year goes along with that effort. It's a big effort. We've involved at least 30% to 40% of the company at this stage, and being personally aware of and in some way involved with these initiatives.

Should -- in modeling, should we anticipate the savings from these initiatives to more than offset the increase that the company is experiencing from healthcare and other, you know, incremental corporate expenses?

Well, that's a good way to look at it, Rob, and that clearly -- I think of it in that context, is that we are using productivity gains to offset rising costs in other areas, so that's one way to think about it.

Okay. And then I wanted to get my arms around the gross margin. Obviously had a great improvement in gross margin.

Maybe you could take us through, what was the main thing that resulted in the higher gross margins for the quarter? And then, if we begin to see more project business come back into '04, would that put some pressure on the gross margin at all?

Rob, it's Steve.

The primary driver on the gross margin change was improvements in our billing margin, pretty much across the board in all of our operating units. We had a significant improvement in billing margin, and that's the margin that we report as the difference between what we sell a product for to what our net cost is on that.

The gross margin grew and expanded as well, although not quite at the same rate that our billing margin did. The items that make up the difference between billing margin and gross margin would generally be supplier volume rebates, cash discounts given to customers, cash discounts received from suppliers, and certain inventory adjustments.

We had less favorable spread on those items than we did in the fourth quarter of 2002, primarily driven by our inventory adjustments areas, and that relates to full absorption accounting and other reserve true-ups at the end of the year. To summarize, the driver was improvements in pricing and improvements in the price that we pay for our products.

And -- and -- ?

-- 2004 as relates to a pickup in the contractor area, the direct projects, depending on the magnitude, that would generally have a downward pressure on the gross margin in an absolute percentage.

We have a series of programs that are aimed at both increasing the sales in that area, as well as improving the margins. And to the extent we can improve the margins there as well, we should be able to see some continued progress in our expansion of the billing margin.

Okay. That helps. Thank you very much.

And we'll next go to Keith Hogan with Eaton Vance.

Hi. Good morning. On the earn-outs that you talked about, $30 million this year as current, $50 million as non-current, do those numbers change if earnings continue to improve like they did in the fourth quarter, or are those fixed numbers at this point?

At this point in going forward, that's a fixed number. This was the culmination of the Bruckner purchase agreement. This is the maximum amount that can be earned under that agreement, and the payment schedule is such that no more than $30 million is required to be paid in any given year. That will start next year. So we'll see a $30 million payment in '05. A $30 million payment in '06, and the remainder in '07.

Okay. So the -- in calendar year '04 you don't have a payment going out? It's in '05 and '06?

Yeah, I'm sorry. I made a mistake there. It's '04, '05, and '06.

Okay.

There is a payment of $30 million in '04.

Okay. So it's 30-30-20. Okay, great. Thank you.

Okay.

We'll next go to Kathy Noland, Salomon Asset Management.

Yes. What was the cash flow from operations for the year?

Cash flow for the operations I believe was $96 million. Let me double-check on that. Bear with me for a second.

Sure.

Yeah, $96 million. That would have been the cash generated from the operations, less our capital expenditures.

Actually, looking for the number cash flow from operations as it would appear on the cash flow statement.

Well, the difference there, we do include the change in our accounts receivable securitization program on that, and I don't have that number real handy. But it would be less than that, because we had a pay-down of our accounts receivable securitization program of $68 million. So if I did the math quickly, it would probably be $35 million on a GAAP basis.

Okay. And the $35 million, is that, then -- that would include the negative cash outflow from your AR paydown?

Correct.

Okay. And I just want to make sure I understand the issue with the undocumented expense reimbursements. Were those expenses run through the P & L statement?

As we stated in the press release, this review was predicated by an internal audit report, and everything that was in the report that was reviewed was included in the books and records of the company.

Thank you.

And as a reminder, star 1 if you do have a question or follow up.

We'll next go to Joe Garner with Emerald Asset Management.

Good morning.

Hey, Joe.

And to Roy, Steve, Dan, and the whole team, congratulations. You guys have done an awful lot of hard work over the last few years, and it's good to see the -- starting to see that bear some fruit for you, so congratulations on that.

Thank you.

A couple questions. First, can you talk a little bit about what you're -- a little bit more about what you're seeing on the demand side, particularly as you look at, I don't know if you want to compare it to previous upturns in the economy?

How sustainable does it feel to you? Are you seeing it broad-based? Are there certain pockets of the country that you're seeing it more than others or -- ? Can you talk a little bit more about that?

At this time we don't -- we don't really see any dramatic differences if we look at it on a geographical basis, so the trends are -- at least as we see them today, appear to be fairly consistent. There are obviously differences if you look at different subsegments within market sectors, and, you know, therein lies some of the challenge.

As far as going forward, there are some positive trends, for example, in the oil and gas and petroleum and chemical industry. It appears that we would be expecting to see a long awaited pickup in maintenance and project related activities. And we've had indications from customers that we should expect that in their planning as the year goes along.

I think the one thing that is most -- we have to be most careful about, is the lag time, or the lead time, from the point at which new programs or plans by customers are committed to and the time that we see our materials flowing through those projects. And during the past year or two, a lot of plans were put on hold. Some of those are coming out now and being released, and those have -- some of those could start pretty quickly.

On the other hand, new development is going to have a longer cycle time to it, so it's certainly possible that as the year goes along, we could see a flat spot in the middle of the year as the -- as certain new projects are completed, and it's still early in the cycle for new plans and new projects coming along. So the soft spot there is generally in the large industrial and commercial project arena.

We expect to see improvement as the year goes along and as the economy continues to strengthen. I think we have to be careful about how that cycle is timed.

Inventory levels look particularly good at year-end. It's probably one of the higher inventory turns that I've seen the company have.

How do you expect, you know, to manage that going forward? Would you expect -- if you're seeing demand pick up, are you -- do you need to start growing the inventory you have on hand a little bit or can you get further gains on there from a turns perspective? How do you see that playing out?

Our expectation is that we will get some further gains and that those gains will, in effect, be offset somewhat by requirements on new volumes. So we don't expect to see, at least in the near term, a significant increase in inventory to the extent that we have further sales gains that would tend to demand more working capital. We think the programs that we have in process will mitigate that from a financial standpoint.

Okay. Any different thought on acquisitions? You're seeing the end markets improve, the company seems to be in reasonably good financial condition. Any interest in picking up activity on the acquisition side?

We've begun to receive inquiries or proposals, and we've certainly been giving them a bit more attention than we were a year ago. But our focus right now is to demonstrate a higher level of performance and success with the base business.

I think there can be, and will be, some potential acquisition opportunities that could come along during the year that we may want to pursue. But at the moment, there's nothing that I would say is on the front burner.

Okay. How's the competitive environment looking to you?

As my kids used to say when they were a lot younger, it's a jumble out there. The -- pricing is still a challenge. There is a lot of competition. And companies of all types are really working their supply chain initiatives very aggressively. Procurement staffs with our customers have been beefed up over the last four or five years, so it's clearly a challenge in that regard.

We're just pleased that we've been effective at working both ends of the supply chain ourselves to reduce discretion within our own system and to tighten up our pricing policies and programs and to simultaneously make headway on strengthening relationships with suppliers and being in a position to have favorable results on the buy side.

Okay. A couple quick questions for Steve. Steve, were there -- what impact did rebates have in the fourth quarter, if any?

[INAUDIBLE] rebates were slightly favorable versus the fourth quarter of last year, although we're still not at the levels we enjoyed in '99 and 2000 when we had top-line -- significant top-line growth and growth in purchases. A lot of our rebate programs include kickers or hurdles that require you to do better than the previous year.

There's also the effect of kind of resetting zero. You know, we -- they're generally based on the previous year's sales, or purchases, I mean, from the suppliers. As our inventory has come down, our purchases for the year are down somewhat less. So we believe we're in pretty good shape as we enter 2004 to maintain and improve this year's performance on rebates.

Yeah, it would sound like if the environment's picking up, you would have a chance for that to have a more significant impact next year.

Correct.

And then secondly, where's the -- where's the existing share count, just to get a sense of where you stand right now?

Well, for the year, our fully diluted base, roughly 45.5 million. And then if you would work in -- I'll give you -- for the first quarter, if you assumed a roughly share price of $11 because of the impact that you have on the options and the fully diluted effect into the share count.

Mm-hmm.

If you used $11 share price we would expect to be around 42.5 million for shares used in the EPS calculation at the end of the first quarter.

Okay. Great. Thank you very much.

Our next question will come from [Samata Biswash] with [Volaris] Capital Management.

Hi. Good morning. I was just kind of curious. I'm not sure if I got the numbers right or not. Working capital, ex working capital, cash flow from operations for the full year, after working capital is $35 million?

On a GAAP basis we tend to look at it, including the accounts receivable securitization program.

Sure. And after that it's 35?

Correct.

And I heard a free cash flow number of 96. So I was wondering how to go from 35 to 96.

The free cash flow number would have been utilizing the securitization program numbers, so that -- the $68 million reduction in our accounts receivable securitization program --

Mm-hmm.

-- we did not treat that as a reduction of cash flow.

Okay.

So that's basically the difference.

Okay. Thank you.

Our next question will then be from [Brian Clapp] with [Musenich & Company].

How you doing, guys? Sorry, I missed -- what's your capital expenditure plans for 2004?

We expect them to be in the $14 to $16 million range.

Okay. And by the sounds of it, working capital should be roughly flat for the year?

It would depend on what we see in our end markets, but with a modest improvement in sales, we would expect to get some improvement in working capital productivity. We would not anticipate that to move up dramatically.

Okay. And just remind me, do you guys have a kind of medium to long-term leverage target?

We look at it a couple of ways. Our leverage at this point in time, net of cash, including the securitization program, is just under six.

We don't have any financial covenants that drive us to a specific leverage number, so in that regard, we're not overly concerned. But we would like to bring that down into a blend that gets us over time in the 4.5 range.

4.5?

Yeah, and that -- really going to look at the debt to equity as well, and bringing that down somewhat. And that's a range that -- we're certainly comfortable with where we're at today, but the lower range provides a stronger and better access to lower-priced debt in the future.

Mm-hmm. Okay. Thank you.

And we'll next go to Lauren Holland with Lehman Brothers.

Hi. Kind of along those same lines, I was wondering if you had any intent around the notes, since they're callable in mid-March?

We did, you're talking about our subordinated debt. We did make some redemptions during 2003. We've taken -- have taken and continue to watch what our total capital structure is, where our liquidity is, and we had put some availability to repurchase during 2003.

We bought about $20 million, $21 million at par in at a price of substantially lower than par. The notes are trading right around the call premium. We don't have any program at this point in time, or much of an appetite, to do anything with that.

As far as -- expiration is 2008. We will watch what the high-yield market is doing and act accordingly, trying to balance what the net rate would be between issuance costs and redemption costs and what our effective interest rate would be when we were done with that. So right now there are no plans to do anything with that.

Okay.

But we'll be watching it in the future.

Okay. Thank you.

And as a reminder, star 1 if you do have a question at this time. And there appear to be no further questions at this time.

I'd like to turn the conference back to Roy Haley for a closing remark.

Thanks for your time with us today.

Just to wrap up, WESCO finished the year with a good fourth quarter. And that certainly helps us enter 2004 with some good momentum. Today, Steve has discussed and brought you up to date on what we see as improving trends in the economy and with the momentum that we've obtained in a variety of improvement initiatives, which we expect will further our performance in 2004.

We thank you for your continued interest in WESCO. Have a good day.

And again, this does conclude today's conference call, and we do wish everyone a good day.