Winnebago Industries Inc (WGO) 2014 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth quarter 2014 Winnebago earnings conference call.

My name is Kim and I will be your operator for today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Sheila Davis.

Please proceed.

Thank you, Kim.

Good morning and welcome to Winnebago Industries conference call to review the Company's results for the fourth quarter of FY14 ended August 30, 2014.

Conducting the call today are Randy Potts, Chairman of the Board, Chief Executive Officer and President; and Sarah Nielsen, Vice President, Chief Financial Officer.

The news released with our fourth quarter results was posted on our website earlier this morning.

This call is being broadcast live on our website at www.wgo.net/investor.html.

And a replay of the call will be available on our website at approximately 1:00 p.m.

central daylight time today.

If you have any questions about accessing any of this information please give us a call at 641-585-6803 following the conference call.

This presentation may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that forward-looking statements are inherently uncertain.

A number of factors could cause actual results to differ materially from these statements.

These factors are identified in our filings with the Securities and Exchange Commission over the last 12 months.

Copies of which are available from the SEC or from the Company upon request.

I will now turn the call over to Randy Potts.

Randy?

Thanks, Sheila.

We had a strong finish to FY14 with the continuation of the revenue and earnings growth that we saw in the previous three quarters going into the fourth quarter.

The result was a fantastic year for the Company in which we achieved earnings growth well in excess of our top line growth.

Of note, FY14 EPS of $1.64 was the Company's best since FY05, up 45% over last year.

Several factors contributed to our strong FY14 results.

In particular, our motorized growth through July of calendar year 2014 has significantly out-paced the industry.

According to statistical surveys, through the first seven months of calendar year 2014, Winnebago's motorized retail volume increased 34.2% in North America.

That's well above the industry's growth rate of 12.9%.

This above-average increase has resulted in Winnebago's motorized market share growing to 20.9% through July of 2014 versus 17.6% through July of 2013.

Our internal retail reporting system reflects year-over-year increases of 17% in the fourth quarter and 28% on a rolling 12 month basis.

The growth was driven by strong consumer demand across most product categories.

We continue to see particularly strong demand for our new products built on the Ram ProMaster chassis, including the Class C Trend and Viva, and our Class B Travato.

These products largely began shipping to our dealers during the second quarter, so they're still new to the retail market.

And speaking of new products, the retro-inspired Brave and Tribute Class As began shipping in the fourth quarter.

This is a fun, new product that we think will be a real hit across multiple demographics.

Winnebago's culture of innovation generated many new products -- product introductions this past year.

This proved to be a key driver of our success in both motorized and towable businesses.

On the towable side, we are very pleased to report that the fourth quarter marked the third straight quarter of profitability for this group as operating income improved by $1.4 million.

This significant improvement contributed towards the towable groups contribution of approximately $1.3 million to our operating income for the year.

We believe that we currently have the right range of products, and with the market share of just under 1%, we see an abundant opportunity to capture a greater share of that towable market.

Looking ahead, there appears to be opportunities for Winnebago's continued growth with RVI forecast for motorhome shipment growth of approximately 17% and 2% for calendar years 2014 and 2015 respectively.

And given our strong position in the market, we will strive to outperform those industry projections.

Finally, consistent with our commitment of returning capital to our stockholders, we are pleased to announce the reinstatement of our quarterly cash dividends.

The first quarterly dividend of $0.09 per share will be paid on November 26, 2014 to shareholders of record on November 12, 2014.

In addition to the dividend, we also have our share repurchase program, which we actively participated in both during and after the fourth quarter.

With that, I will let Sarah go over the financials and some other matters in greater detail.

Thank you, Randy.

During the fourth quarter of FY14 revenues grew nearly 15%, primarily driven by motorized volume growth of approximately 25%.

Similar to last quarter, approximately 18% of our fourth quarter shipments were of products that were not available at this time last year.

Our motorized volume growth was partially offset by lower ASP's of 8.4% due to the growing popularity of our new Class B and C products.

Additionally, fourth-quarter towable revenues increased 8.6%, comprised of ASP growth of 9.9% and unit growth of just under 1%.

Specifically looking at our fourth quarter ASP's year over year, here are the key changes.

Class A gas ASP was 93,510, up nearly 2%.

Class A diesel ASP was 172,841, which is a 9% decline due to an increase of sales of lower-priced products such as the Forza and Solei.

As a result, Class A ASP was 111,118, down over 10%.

Class C ASP was 70,276, which is 4% lower and influenced by the sales of the Trend and Viva products.

Class B ASP was 71,183, a decrease of nearly 10% as a result of higher Travado sales.

Finally, all motorized ASP together were 91,924, a decline of over 8%.

Moving over to our towable product, travel trailer ASP was 19,088, down over 4%, a result of a greater mini and micro-mini sales.

Our fifth wheel ASP was 41,094, an increase of just over 46%, and influenced by shipments of our new Winnebago Destination, Voyage and Latitude fifth wheel offerings.

Towable ASP was 23,319, up nearly 10% in aggregate.

Given the continued strength in motorized shipments during the fourth quarter, our dealer inventory increased significantly compared to last year and stood at 3,979 units as of August 30, 2014.

However, on a sequential basis, dealer inventory was up a modest 181 units when compared to May 31, 2014.

Notably, fourth quarter dealer inventory includes a few hundred units that were in transit and not yet on dealers lot at the end of August.

This also impacted our receivables, which I'll cover in a minute.

Additionally, higher dealer inventory in part is a result of the strong demand for new product offerings as many of our dealers continue to increase their stock of these products during the quarter.

As Randy pointed out, we've seen solid consumer demands for these products, and believe that they will continue to generate increased retail demand.

Further, dealer inventory levels are also attributable to our expanded points of distribution for these new products as our number of dealer locations grew 12% on a year-over-year basis.

Gross margin declined 20 basis points year-over-year in the fourth quarter.

Attributable to non-cash LIFO reserve expense of $500,000 in the FY14 quarter compared to LIFO reserve income of $1.6 million in the same period last year.

The LIFO reserve expense in FY14 fourth quarter reflects inflation in certain areas as opposed to deflation in the prior year.

Excluding the LIFO adjustments in each quarter, FY14 fourth quarter gross margin would've increased by approximately 70 basis points compared to last year, due in large part to the fact that variable cost as a percentage of revenues declined year-over-year about 40 basis points, primarily driven by improved towable results.

Meanwhile, fixed overhead as a percentage of revenues improved about 30 basis points as a result of greater volumes, which resulted in higher absorption of fixed overhead costs.

For the full FY14 year, gross margins expanded by 50 basis points over the prior year.

Looking to FY15, we expect continued margin improvements -- we do expect continued improvements in gross margins, albeit at a rate lower than what we achieved in the current year.

Operating expenses as a percentage of sales were favorably leveraged during the quarter as selling expenses were lower, while G&A expenses increased only modestly despite higher revenues and, therefore, contributed 50 basis points to the improvement in operating income.

For the full year, the Company saw an 80 basis point contribution to the improvements in operating income margin as a result of leveraged, selling, general and administrative expenses.

Moving to receivables, which increased $13.4 million year over year in the FY14 fourth quarter, I mentioned a moment ago, this relates to several hundred units in transit and not yet on the dealers lot at August 30.

Not withstanding the increased receivables, we still generated $13 million in operating cash flow during the quarter as a result of strong earnings and positive changes in other working capital categories.

During the quarter, we repurchased approximately 84,000 shares under our board authorized share repurchase program for an average price of $23.81.

Collectively, for the full year of FY14, we repurchased approximately 1 million shares.

Also during the first quarter of FY15 we continue to repurchase stock under SEC rule 10b5-1.

As of October 14, 2014, we purchased an additional 150,000 shares.

Approximately 10.2 million remain on our share repurchase authorization plan, which has no expiration.

Moving to backlog, our motorized backlog stood at 1,899 units at the end of the fourth quarter, lower both year over year and sequentially.

On a dollar basis, motorized backlog at the end of the quarter was $172.6 million and implies an AFP of approximately 90,900, primarily a result of higher percentages of new products with lower ASP's.

We continue to believe that our motorized backlog level is both healthy and robust, reflecting the overall growth of the RV industry, positive dealer responses, increased registration that Randy highlighted, as well as the new products that we've introduced.

The decline in backlog at August 30 is largely due to our increase production rates, which have allowed us to satisfy demand, particularly for some of our newer products.

We also had an adequate supply of chassis from Ford over the past two quarters, which has allowed us to work through backlogs.

Therefore, we believe our current backlog level demonstrates our ability to more timely provide our dealers with products and to capitalize on potential retail sales opportunities.

Also, at this point in our cycle, we believe we may be entering the environment we saw prior to the recession where our backlog levels for motorized approximated a good portion, but not all of the next quarter shipments.

As a result, as we move forward we believe that backlog could represent between 70% to 90% of the next quarter shipments.

The tax rate for FY14 was 30.3% and we anticipate taxes to be in the 32% to 33% range for FY15.

Capital expenditures for the full year of FY14 were $10.5 million, primarily from manufacturing equipment, facilities, and IT upgrades.

We anticipate CapEx in FY15 to be the range of $15 million to $20 million as we continue to make similar investments this next year.

In closing, our fourth quarter results provided a nice finish to the year where we saw revenue growth of 18% and earnings per share growth of 45%.

With continued industry projections for motorized growth, a strong product lineup and opportunities within our improved towables business, we will strive for additional growth as we move forward.

With that, can you please open the line for questions?

Your first question comes from the line of Kathryn Thompson from Thompson Research Group.

Please proceed.

Thanks for taking my questions today.

Thanks for the clarity on the motorized inventories at the dealer level.

And when you discuss the relative increase, could -- are you able to quantify new products versus core demand driving that relative increase?

Because in the motorized side it is a bit higher than we would have expected.

And so we're just trying to get a sense of how much is core demand versus new products, which you discussed.

Thank you.

Good morning.

So if we look at the dealer inventory, maybe looking at a similar percentage I highlighted, we have consistently in the last few quarters been shipping product in the range of 20% of our overall shipments, that is entirely new.

So it is a fair question, because the percentage of the new product in our dealer channel is going to really reflect what we have been shipping this last year.

And it started in the first quarter with the Fords and the Salle and then the Trend and Viva and Travado was more of a second quarter and on dynamic of new product.

So there is a good percentage in that similar range of dealer inventory -- that new product that would not have been in the channel a year ago.

So it sounds like a well over half -- just rough ballpark, at least, would be attributed to new products?

It's actually kind of hard to define what new products would mean in that context, Kathryn.

I mean --

In terms of like the new Ram chassis products and those type of things that are -- and the Brave and Tribute products.

Okay.

Brand new series.

Series, correct.

Okay.

Do you have a quantification of it in that context, Sarah?

I don't.

Yes.

I will pull that out here.

We can maybe continue with another question and I will circle back to that.

Sure.

Okay.

And then if you look at the -- you've done a really nice job of coming up with products in Class C and Class B. But when you look at the end-market consumer and just look at core demand with your class, different price points, what price points are selling best, and how has this changed over the past 12 months to 18 months?

Even beyond just maybe new products, but are you seeing any change, in other words, in consumer sentiment and they're willing to pay for certain price points of RV product?

Thank you.

Well, I think the low price point products have been very successful and continue to do so.

And in part we've brought to market a product that -- just because of the chassis platform it's built upon, as we discussed this earlier, it's at a lower price point because of that, and so that has been very successful.

From the standpoint of Class A diesel, retail demand, and maybe you are alluding to that, which is really the highest price point product out there.

We have seen success for our lineup entering in an a new lower price point in that category as well.

We have talked every quarter about the shift in the last year or two -- maybe two years, to lower price point products.

I guess you know it's something we have to generalize on.

But I'm going to say, I think it has kind of held pretty steady at where it has been.

I haven't seen any market shifts in that buyer behavior in the last year or half year like I did in the years leading up to this year.

I think it's kind of stabilized at where it is at, at least from our perspective.

And then to follow-up with the earlier question you posed.

If we look at dealer inventory this year versus last year at this time, and in the context of what we have and the channel that is entirely new, which is quite a few different kinds of products that crosses almost every category.

It's equivalent to 25% of our dealer inventory is new in that regard.

That's very helpful.

And then finally, this is just really more on consumer financing trends.

It has always been a point that we had focused on, both in the downturn and as we've seen improvements in the recovery.

What type of feedback are you getting from your financing partners about the quality, the pace, of consumer financing?

And particularly, if you can focus on if there is any change in credit quality as a type of consumer that is dipping their toe back in the market.

You know, I haven't heard anything specific from -- I guess normally when I hear, it is more of a challenge or a concern.

When we talk to the key lenders that have the retail financing book of business, we haven't heard any dramatic shift that is impeding sales at the dealer level.

Granted, there is a really big event going on this week out in Pomona, so there will be some new data points available coming out of that show.

I hadn't heard that was a challenge from a Hershey perspective, which is in September.

So I don't have any new information to share in regards to that question, Kathryn.

Sometimes no news is good news.

Yes, I agree.

That's all I have for today, thank you.

Thank you.

Your next question comes from the line of Craig Kennison from Robert W. Baird.

Please proceed.

Good morning.

Thanks for taking my questions as well.

I would like to follow-up on some of Kathryn's questions and start with, I think, Sarah, you mentioned that dealer count was up 12%.

Can you give us a hard number and tell us whether that is dealer points, dealer locations or just total dealerships?

We had 274 physical door locations from a motorized standpoint at the end of the fiscal year, compared to 245 last year.

So that is on a year-over-year basis, the growth that I mentioned.

It's a very good question that you pose, because there is a lot of ways we look at that.

And looking at it just from the standpoint of one physical location isn't necessarily telling the full picture, because we have dealers that carry a full complement of our product, and maintain and stock a lot of inventory.

And then we have some dealers that might be dedicated to a type or a product class.

So then when we look at it from a brand standpoint, or a point to distribution by all of the various products, that is a much larger number.

We are looking at it in that 2,500 to 2,600 range of points of distribution.

But it is a number that we, even internally, want to ensure that we have a good definition as to what that relates to.

And as we finalize our K, we will be disclosing a little bit more information than that in the coming weeks.

That is kind of a new way for us to look at our distribution system.

Sarah and I just talked about it before the call.

We are going to start defining that more clearly.

We just are not quite prepared to do that.

But it has grown proportionately with the number of doors.

That is very helpful context.

And then as a follow-up to that, if we look at your inventory, just on the surface, the headline metric would be that inventory increased 50%.

But clearly your traditional, your core dealers, are more capable of sustaining higher inventory levels.

What I'm interested in is, since you added these new dealers, those dealers have to stock up initial levels of inventory.

So are you able to look at your inventory and do the math to figure out how much of that 50% increase is really tied to just new dealer wins, as opposed to elevation and inventory levels relative to demand?

Yes.

We definitely have that visibility from the standpoint of monitoring performance and looking at the partnership as we sign new dealers.

So much of what has happened in this past year is also a story of new products, and having existing dealers stock more of the product offerings that we provide if they have the financial ability to do so.

So in this past year, I would look at it -- a very big driver, is because of what we have introduced.

And our strategy is to ensure that's incremental, and it doesn't just take up floor space that was previously utilized for a different product.

That's helpful.

But with respect to some of the new dealers -- some of those -- it looks like incremental 29 new dealers.

Do you have an idea, or can you quantify the inventory that went into that network?

Assuming that is all incremental?

Well, we wouldn't specifically break out that data point.

Are those -- on average are they smaller dealers incrementally or larger dealers?

It covers the whole range, Craig.

And they are not likely to carry our full line, either.

So there is a lot of moving pieces to that.

Got it.

That's helpful.

I'm just trying to put that 50% inventory growth metric in some context, because I don't think it is as large as maybe it appears on the surface.

And then on the rental side, can you give us some context for how that flowed through the income statement?

Well, in the fourth quarter, it's a function of just the operating lease revenue that we would have recorded.

All of the units for that particular transaction were delivered inside of the third quarter.

So inside of Q4, there was approximately $500,000 of rental income associated with that.

Now as we move into the next fiscal year here in Q1, the focus is on the whole process of moving those units back into the marketplace after they come off of the rental side, and so we will talk more about that in the next quarter.

But inside of the fourth quarter, there wasn't a lot of really new activity on that front because all of the units were out in service and being rented.

Got it.

Thanks very much.

You're welcome.

Your next question comes from the line of Greg Badishkanian from Citi Research.

Please proceed.

Good morning.

This is Travis Harbauer in for Greg.

Congratulations on the quarter.

Just a couple questions from me.

Specifically, what was your capacity utilization for the quarter?

And then just in general for the environment, how would you characterize the promotional environment right now in both the towables as well as motorized?

First, we would peg our capacity in motorized at approximately 80%.

We always, along with stating that, we always make it clear that is a capacity calculation based on the physical constraint of our factory.

There's other factors that do come into that like availability of labor and whatnot, but we are very busy.

As far as the discounting environment, I can't really speak for our competitors.

You get a lot of anecdotal information about that from competitive shows and hearsay.

But as far as our products -- and I think it shows in our results -- they're holding their value, their price quite well.

And we're in a very -- I would say we are in a robust market.

Perfect.

That's very helpful.

And then just going forward, when could we expect to hear some new announcement on the rental front?

New relative to incremental business?

Or the status --

Yes, incremental business.

Well, you know, one of the things we will be focusing on in the near-term is our new relationship with Apollo.

This is our first year in that relationship.

So renewing that business going forward will be the biggest thing on our plate.

Assuming that it went well for Apollo and that it went well for us, we will be wanting to pursue that.

We have another very large account in Alaska.

That is a partner that has been with us for many years and, naturally, we will want to focus on retaining that business.

So the first order will be in retaining the business that is working for us all now.

As far as pursuing additional rental business, I think we need to see what the -- what we believe the retail -- the open market is going to bring for us because it's likely that we'll want to prioritise the retail, the wholesale business, the normal wholesale business over certain pieces of rental business, just because the price points are so aggressive.

Does that help?

That helps a lot.

Thank you so much.

You're welcome.

Your next question comes from the line of Morris Ajzenman from Griffin Securities, please proceed.

Good morning.

Good morning, Morris.

Let's revisit the backlogs.

Sarah went through it very carefully on a dollar basis -- down 50% year-over-year, unit basis down slightly less than that but still down meaningfully.

Basically the statement was that the backlog is very healthy and robust, increased production, adequate supply in chassis.

I guess from our perspective, there is always some questions.

Is there some sort of weakness in the landscape as far as orders are coming in?

And maybe part of the way you can answer that -- if last year you had the same ability to get chassis increase productions, would that backlog, hypothetically, been very similar to this year if you were in the same position last year as you were this year?

Well, the one distinct difference I would draw -- at this point last year we were at the beginning stages of filling orders for the Fords and the Salle, so you had additional backlogs as the interest at the dealers to have that product was -- they had placed the order.

And that also is a similar dynamic you would have seen in the Travado Class B category backlog and then the C category for the trend in Viva.

So a year ago the backlog did have the -- kind of those initial orders placed for new products.

The production started inside of the year in various points and we got the product into the marketplace.

And so a year later, the biggest new introduction really was the Brave and Tribute that -- we started shipping that product inside of our fourth quarter.

So there is dealer inventory associated with that now in the marketplace, and at the end of our fiscal year, it was really at the tail end of our fourth quarter that started.

So there is the dynamic of new product introductions that really can move the needle on backlog at certain points in time.

And backlog and the order generation that we see can really change inside of a month or a quarter, depending on some of our large dealers and when they place their orders.

But big picture, we think we really have -- we have approached the time that we used to see as a pretty typical level of backlog prior to the recession, and this is going to be a reflection of a -- as I mentioned in my prepared remarks, 70% to 90% of the next quarter shipments.

And we have the ability to do more than what the backlog indicates in the next quarter.

Okay.

And just switching gears to the receivables in this quarter.

I think you mentioned $13 million of that was due to units in transit, a hundred units.

Overall, your DSOs, where they are now and going forward, are they in an improving manner?

Are they going to be staying flattish then?

How does that all play out?

Maybe just to ensure that the prepared remarks I provided in receivables are not a point of confusion, our receivables increased $13.4 million sequentially from Q3 to Q4, and are definitely at a high level at the end of fiscal year in comparison to where we were a year ago.

A component of that is associated with the change in terms.

When you look at a year ago, we had a different revenue recognition term change at the end of August of 2013 prior -- or compared to where we are now.

So we quantify, and this is an item we have disclosed in our Qs and it will be in our K here on a prospective basis once we file it, the impact of that in transit was $40.8 million at the end of the fiscal year.

So on a year-over-year basis, you can see that we have a substantial amount of product in the channel on the way to the dealers and it is reflected in receivables, and we typically collect that in approximately two business weeks, you would typically see the cash generation.

So inside of fiscal September, we would have collected the receivables that were on the books at the end of the fiscal year.

Okay.

Thank you.

You're welcome.

Your next question comes from the line of Gerrick Johnson from BMO Capital Markets.

Please proceed.

Good morning.

Getting back to inventory, I think Kathryn and Greg brought up some good points on the inventory.

And one added wrinkle I think would be good to relate to us would be, how much of that inventory is an increase based on gains in floor space and dealer space?

After all, you've gained 3 points of share in A and C and about 7 points in B.

So new products, new dealers and a gain of floor space at multi-brand dealers, I think would go a long way to explain some of this increase income -- I mean, sorry, in inventory.

So that's kind of a pseudo question.

But the other question I had was on variable expense.

If you could talk about the components there and how they are trending directionally?

And maybe a little magnitude.

So labor, materials and chassis.

Thank you.

Well, you are exactly right from a dealer inventory perspective that it is multifaceted, generating the increase year-over-year, and you hit exactly on all the points as we've discussed in some of the prior questions as well.

But we don't specifically break out all of the components in regards to what percentage each would have in the grand scheme.

But similar to probably the percentage I provided earlier, that there is 25% of our dealer inventory relates to product that we wouldn't of even had -- that was not in the channel a year ago.

An element of that is incremental floor space.

So it is a factor of all of those items combined.

Moving on to the variable cost question that you posed, from the standpoint of a full fiscal year, our variable costs were the same, at 83.7% year-over-year.

And that's a combination of materials, labor variable, delivery and warranty.

And so from an annual standpoint, the leverage and the margin basis point increase that we have seen has been from a fixed perspective.

Now specific to our fourth quarter, as I highlighted, we do have the dynamic that a year ago we had LIFO income recorded and this year we have LIFO expense.

We have had LIFO expense all year long on a quarterly basis, and we would expect to continue to have that dynamic in FY15.

It just did create a little bit of a tough comp for us as we look back to the end of the year a year ago.

So excluding that dynamic, we did see improvement in our variable cost inside of Q4, specifically, really attributed to towables, and that would have been in materials and in labor, and the variable overhead category.

So really kind of in most of the variable cost structure at that -- in that piece of the business.

And then on the other side of that, from a motorized standpoint, the positive movement was on the fixed side, still for motorized.

Okay, so labor then -- that's really what I'm getting at.

So labor was something that worked against you in the quarter.

And is that something we should continue to see going forward?

No, it was the opposite of that for the towables business for us.

That would have been one of the positive points, in addition to improvement with materials and on the variable overhead side.

So LIFO is the one item that really dragged it all down and, on a year-over-year basis, not comparable.

Okay.

Thank you.

You are welcome.

Your next question comes from the line of Mike Swartz from SunTrust.

Please proceed.

Good morning.

Good morning.

Just real quickly -- around the diesel Class A market, there's -- it's really been kind of slow this year.

And I did see that your unit volume was down 15% in the fourth quarter.

Can you just talk about that number in context?

Maybe what you're seeing in the broader market?

Have you maybe seen that higher-end Class A product pick up in the last couple of months?

And Sarah might have more details, but on a broader sense, I guess a perspective I would like to share is that coming out of the recession, really two years ago, early in the recovery of the RV markets, diesel became extraordinarily strong, unusually strong, and we really couldn't explain why at the time.

So I'm not sure the comp is real good.

I think it is still trying to find its place.

Yes, it is softer, I think, across the board for us in the market than it was a year or two ago, but it probably was unusually strong before, too.

So it is kind of hard to use those two kind of data points to predict where it's going, what is the new normal going to be.

But we are struggling with that a little bit, too.

But I think it is fair to say that it is softer than it was, but whether it's softer than normal is really the question we are trying to answer.

Great.

Thanks for the color, Randy.

And then just on the -- Sarah I think you made some comments around just directionally the gross margin for FY15 and how you're thinking about that.

Maybe you can give us a little more granularity with some of the puts and takes, in terms of maybe pricing or mix or just I guess your underlying cost structure, and how you think about it over the next 12 months?

Certainly.

We saw on an annual basis margins expand from 10.5 to 11.

And looking into the future, we are still working towards continued margin expansion.

But as I highlighted in my prepared remarks, it could come at a little bit of a slower pace.

In part, it is a function of the investments we're making because we do have a lot more investments from a CapEx standpoint to improve or expand upon our equipment in our facilities, which creates additional fixed costs associated with that.

But we have had a tremendous amount of improvement over the last few years.

Some of that flowing through at the variable cost level, and this past year it really was a story of fixed leverage at the GP line item, and we think that in 2015 there is still further opportunity, but it is planned where we anticipate it might be at a little bit fuller pace.

Okay.

And then I guess what are the implications even for product mix?

Do you continue to -- or expect to continue to see this kind of ASP progression or run rate that we're seeing right now over the next couple of quarters?

Or should that begin to stabilize, as we lapse some of the newer introductions from FY14?

Well, when you look at our ASP for the year, on the motorized side it was approximately $96,000.

But as I highlighted in our backlog, based on where we were at the end of August it was slightly lower.

But in that range, I think that is a reasonable and a fair ASP to think about on a prospective basis.

So it is a little bit lower than where we had seen our ASPs to be in 2013 at $105,000.

And it's a -- really it contributed to the new products.

Yes.

And that was, again, unusually high.

We had a rich diesel mix at some points.

It kind of overlaps with Kathryn's earlier question about do we see -- what do we see in the market trends?

Sarah's comment about a pretty steady ASP really, I think, parallels my perception that it seems pretty stable.

I -- we're just not seeing any dramatic movements in the market recently.

Okay, great.

I appreciate the color, thank you.

You're welcome.

Your next question comes from the line of David Whiston from Morningstar.

Please proceed.

Good morning.

Good morning.

A question on the dividend coming back.

In the past when I would ask about that returning, it always seem that the priority was going to be M&A and so you wanted to save some capital for that.

But now that the dividend has returned, are you thinking that you don't really have to choose anymore or is M&A a lower priority?

No.

I think it is a sign that we're -- we believe we will be generating enough cash going forward that we can do both.

Okay.

And continuing with the cash, CapEx spending in absolute dollar terms relative to historical terms is certainly getting a lot higher now.

I know you cannot give any guidance -- or specific guidance for FY16 and onward.

But should we start thinking about a much higher absolute dollar spend in the longer term, or do you think these recent few years are more of an anomaly?

2015 is probably a little bit outside of what would be typical.

Again, using the history we had prior to the recession, we had annual CapEx and depreciation more in that -- probably $8 million to $10 million range.

So the -- 2015 is a bit elevated in light of some specific projects planned for.

Some of this is just the result of us not really having any capital spending during the recession and just putting those expenditures off -- the eco-paint system, which is a big expense, was something that was in tough shape, even back in the recession.

We just couldn't take on that expense then.

So I don't think it should be perceived as the new normal.

Okay.

That's helpful.

And just finally, Sarah, did you say there's $10.2 million left on the buy back plan and tax rate was 32% to 33%?

Yes, I did.

Okay, thanks so much.

You're welcome.

Ladies and gentlemen, that concludes today's question-and-answer session.

I will now turn the conference over to Randy Potts for closing remarks.

Thank you, everybody, for joining our call today.

We think we had a very good year, and we look forward to visiting with you when we have our first quarter conference call in December.

Thank you.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect and have a great day.