Watsco, Inc.
Q1 2008 Earnings Call Transcript

Published: 20 Apr 2008

[Operator:]

Good morning. My name is Tasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Nahmad, you may begin your conference.

[Albert Nahmad:]

Thank you, Tasha. Good morning, everyone. Welcome to our First Quarter Conference Call. This is Albert Nahmad, President and CEO. With me on the phone is Barry Logan, Senior Vice President, and Paul Johnston, Vice President. First let me read a cautionary statement. A reminder that conference call has forward-looking statements as defined by SEC laws and regulations and are made pursuant to the safe harbor provisions of these various laws. Ultimate results may differ materially from the forward-looking statements. Now for the highlights of the first quarter. Sales results came in at about as expected. The first quarter is a seasonal low point for the replacement market and therefore new housing in the general economy has disproportionate impact on sales. This normally balances out as we move into the replacement season during the second and third quarters. As we discussed in our February conference call, we have taken action to improve gross margins and reduce SG&A. We estimate approximately $5 million of pretax earnings were contributed during the quarter as a result of these taxes, and there’s an additional $25 to $35 million of earnings that can potentially be realized during the next several quarters. We generated record operating cash flow of $21 million during the quarter; and over the last 12 months, we have generated cash of $122 million. It’s as well in excess of established goal of cash flows exceeding net income. In per share terms, this represents cash flow of $4.41 per diluted share over the last 12 months. Gross profit showed further improvement in adverse market conditions reflecting the success of a number of initiatives to enhance margins. Same-store SG&A declined 5% during the quarter, a sequential improvement over the fourth quarter change in SG&A indicting our initiatives are also working a lower cost. Watsco’s dividend, which we paid at the end of this month, represented 12.5% increase in our dividend rate to $0.45 per share. This shows our confidence in the Company’s ability to perform and generate cash flows in the future. It is also important to note that sales of higher efficiency systems, that it is to say products above 13 SEER, continue to grow this quarter, both in absolute dollars and as a percentage of the sales mix. The richer mix helps explain sales and margins and it’s speaks to the importance and relevance of these products as we moved into the replacement season. We also saw continued growth in sales of systems that are used, that use ozone friendly R410a refrigerants. In 2010, the Montreal Protocol will become effective for the equipment manufactured in the United States. This means that 410a products will become the standard of the industry. The product transition is already underway and we have been actively training our customers and the merits and benefits of replacing systems with the 410a products well before the mandate takes effect. As we head into the replacement season, these two aspects, high efficiency and concern for the environment can provide higher price points and margins, margin contributions for us in our contractor customers and delivery long-term value to end users who see an immediate reduction in their electrical bills. Now for the specifics of the first quarter performance

[Operator:]

(Operator Instructions) Your first question comes from the line of Curt Woodworth.

[Curtis Woodworth:]

In terms of thinking about the revenue outlook for the remainder of the year on a same-store basis, given that this quarter obviously has a high proportion of residential new construction in the next several quarters do you probably take it a little easier in obviously the replacement market kicks in. I mean is it pretty logical affair to assume that this quarter should be your worst in terms of a same-store number for the year?

[Albert Nahmad:]

I would say that’s correct.

[Curtis Woodworth:]

Then in terms of the $5 million cost reduction achieved this quarter, was that mostly in the gross profit area, and if you can just delineate where that was achieved?

[Albert Nahmad:]

Barry.

[Barry Logan:]

It’s really truly equally spread, and you can see the gross profit is up 30 basis points and kind of do some of the math there with the quarter. The run you saw in SG&A in the fourth quarter, which was down 1% same-store, is now down 5% same-store. So again, you get a sense of some of the two sides of that equation.

[Curtis Woodworth:]

I mean if your same-store revenues are down ten and your S&GA is five, I mean that under normal scenario, that’s probably what it should look like, though, right on SG&A?

[Albert Nahmad:]

Well this time of year, Curt, is when the fixes costs are also at their highest level. For instance, it didn’t happen January 1st. It happened during the course of the quarter. But there are ten fewer branches at the end of March than there were in end of the year so it is a fixed cost achievement, not simply adjusting to sales.

[Curtis Woodworth:]

The incremental 25 to 35, which you seem to have [inaudible], can you comment on how the breakout of that is going to look and where, kind of where the conviction lies in giving that number of the next couple quarters?

[Albert Nahmad:]

Well this is what we discussed in the last conference call. This is a series of actions taken by each of the individual subsidiaries, and it’s very difficult to group them into generally speaking things. These are specific actions or specific subsidiaries and so we are unable to give you general guidelines of where they’re coming from. Other than, we’re pushing to improve gross profit margin and reduce S&GA.

[Curtis Woodworth:]

Great. Just lastly, on commercial refrigeration, the growth rate had been slowing there. Do you think that market can continue to stay positive for the remainder of this year? Do you see any evidence of…

[Albert Nahmad:]

We like what we’re doing there and we believe we can continue growth in it.

[Barry Logan:]

There’s certainly a large component of replacement there which is seasonal also, Curt, so I wouldn’t think the trend should be any different in refrigeration as we get into the replacement season.

[Curtis Woodworth:]

What’s the replacement percentage for commercial refrige?

[Barry Logan:]

That’s the hardest number to give you, but it’s primarily an aftermarket business. It would probably look like our air conditioning business.

[Curtis Woodworth:]

Great. Thank you very much.

[Operator:]

Your next question comes from the line of Matt Duncan.

[Albert Nahmad:]

Hi Matt.

[Matt Duncan:]

Good morning, everybody. A couple of questions

[Albert Nahmad:]

Well, we’ve said that our goal is to achieve it’s aggregate amount, $25 to $30 million over a period of quarter some time through the first quarter of next year and we didn’t make it or design it to happen quarter-by-quarter. These are not things that just happen periodically. These are initiatives that are taken, many, many initiatives are taken at the subsidiary level and our goal is to achieve the 25 to 30.

[Matt Duncan:]

If I look at the branch closings, I guess, is that a net ten branches, Barry?

[Barry Logan:]

That is… No, there are also two openings, so net is eight.

[Matt Duncan:]

The net is eight. What was the impact of those closings on revenue? Is there any way to look at how much revenue you forego by closing those branches in the quarter?

[Barry Logan:]

Most of those activities were year by branches basically taking over customer basis, taking over service to customers, so it’s not something that is that kind [inaudible] displaced like that.

[Matt Duncan:]

Fair enough. Barry, looking at the gross margin for a minute, I know last year the high water mark for the year in gross margin was the first quarter, that was the highest quarterly gross margin you had for the year. It sounds like from your guidance, is that the same expectation you would have for this year as well, or kind of what should we think about with these cost cutting programs, how your gross margin should progress throughout the year?

[Barry Logan:]

Well I think this 20/30/40 basis point improvement is that kind of inherent in the numbers if you were to extrapolate what you saw in the first quarter out towards the year is the goal for the year. It really is not as something that you can calendarize. It’s something that happens every day at a sales counter. But in terms of the goal, if you will, what you see in the first quarter is what we want to see for the rest of the year.

[Matt Duncan:]

Fair enough. Can you comment at all about the replacement market? Do you feel like your sales to replacements were up and the same-store sales being down was really a commentary on new construction?

[Barry Logan:]

Yes, the stats say in our markets, new housing is down about 40% and that would certainly explain the same-store sales decline for the quarter and replacement is probably fairly neutral looking in what is an off season quarter.

[Matt Duncan:]

So it was probably roughly flat year-over-year is probably the right way to think about that then?

[Barry Logan:]

That’s correct.

[Matt Duncan:]

Then last couple things here and I’ll jump back into queue. Can you talk about the acquisition landscape a little bit, kind of what you guys are seeing out there? Obviously your cost of borrowing is pretty low right now, you’d like to take advantage of that. Are you close to anything? Is there anything we should expect to see in the next quarter of two?

[Albert Nahmad:]

Well I’m pretty excited. I think that some of these companies that we have been pursuing for some time are… Because we created such a positive reputation for what happens after acquisition, we seem to be having a larger number of conversations but nothing that you should bet on that I can report to, but I just like the atmosphere.

[Matt Duncan:]

Then last thing, just a couple housekeeping items, what was depreciation and amortization in the quarter, Barry, and then also cap ex?

[Barry Logan:]

Hang on one second. DNA was 1.8 and cap ex 600,000.6

[Operator:]

Your next question comes from the line of Jeff Hammond.

[Albert Nahmad:]

Good morning, Jeff.

[Jeffrey Hammond:]

Hi. Good morning, guys. Hey just want to get a better sense of in terms of demand trends what you saw in terms of progression in the quarter and just maybe just demand landscape in the more important March as you segue into the selling season?

[Albert Nahmad:]

Well I would comment on March as being industry-wide a pretty weak month.

[Jeffrey Hammond:]

So I guess back to your earlier comment, what gives you confidence that 1Q is kind of the low mark in terms of the same-store sales?

[Albert Nahmad:]

Because of the seasonality. As you know, Jeff, we enjoy increasing demands as the weather warms up and the air conditions require, they start them up and they require either a repair or replacement. Plus, you have these very high efficiency products that we’re selling now and they conserve energy and reduce electric bills, so these kind of forces are out there in addition to the weather. That’s why I’m pretty positive about the replacement market.

[Barry Logan:]

Jeff, another comment I would add is that we saw pricing in the quarter especially in our unitary business up 5%, and that’s both price increase and sales mix so really in a competitive environment and an off season environment to have positive pricing like that and we’re getting into the meat of the season, I think that’s a nice positive as well.

[Jeffrey Hammond:]

Maybe just further comment on that, what are you seeing from the OEMs in terms of price increases given the inflationary environment?

[Albert Nahmad:]

Paul, let’s get you into the call.

[Paul Johnston:]

We’ve seen a couple of… We’ve had a couple of announcements in price increases to date. I know Trane published theirs that they were going up 4% to 6%, a couple other manufacturers have moved. But what’s announced and what’s actually being realized in the marketplace has been two different things. I think a lot of it, a lot of the pricing that Barry references is actually a mix change that we’re seeing as we move into more 410 and above 13 SEER product sales which continue to accelerate. I think we haven’t seen a lot of the flow through from some of the commodity spikes I think that you’re all familiar with, with copper going above $4.00, aluminum moving up. We haven’t really seen a lot of that rollback down into distribution yet as far as price increases.

[Albert Nahmad:]

On equipment.

[Paul Johnston:]

On equipment.

[Jeffrey Hammond:]

Good. Then shifting gears back to the cost savings, and I think in the recent presentation you laid out some of the initiatives, can you maybe just speak to what in your mind is maybe working out particularly well or getting better traction and what’s been maybe a little more of a challenge, if anything?

[Albert Nahmad:]

Barry, you want to take a shot at this?

[Barry Logan:]

Sure. Well, Jeff, again, there are really three kind of pictures that I think could be painted. First is variable costs that obviously is compensation and commission programs, things like that, and those adjust themselves accordingly. There’s no… That’s just something that is tied to sales. In the presentation I said that kind of fun phrase of “Greater discretion over discretionary costs” and culturally throughout the organization there is very intense focus on spending, and of course there always should be. In planning this year and in getting it through this year culturally it’s that much more intense and we’re seeing the benefit of that. The hardest thing obviously is pricing, which is a day-to-day discipline branch-by-branch, counter-by-counter. When Al talks about this is a very local business and a very local initiative, pricing ultimately is at a very disaggregated point of view; but we are seeing the benefits of it. It’s something that’s been more systematic and is probably the greatest variable still, but we certainly did see progress in both the fourth and the first quarter and so far so good.

[Jeffrey Hammond:]

Then just final question

[Albert Nahmad:]

I’ll take a stab at that. It seems like in the fourth quarter we still had some runoff with some of the new construction projects which had started earlier, and I think a lot of that tapered off in the first quarter this year. That would be my estimate of what happened.

[Jeffrey Hammond:]

Thanks, guys.

[Operator:]

Your next question comes from the line of Michael Cox.

[Michael Cox:]

Good morning. Thanks a lot for taking my call. My first question, if I heard you correctly, it sounds like that…

[Albert Nahmad:]

What firm are you with, Michael?

[Michael Cox:]

I’m with Piper Jaffray.

[Albert Nahmad:]

Thank you.

[Michael Cox:]

Yep, thank you. If I heard you correctly, it sounds like the high-end of your earnings guidance was brought down a little bit, and I’m just trying to reconcile this change with the comments that sales were basically in line with your expectations. It sounds like the margin enhancement initiatives are tracking to plan. So if you could provide a little color on that that would be helpful.

[Albert Nahmad:]

Barry.

[Barry Logan:]

Sure. Mike, how are you?

[Michael Cox:]

I’m good.

[Barry Logan:]

Just wanting to be a little smarter about going through the process that we go through each quarter when we do our guidance and something we do from the ground up and just wanted to refine the range. There’s not a hidden message or a hidden agenda. It’s simply wanting to refine what is probably a bit of a broad range as we started the year.

[Michael Cox:]

That’s helpful. Should we expect to further branch closures through the balance of the year, and if so, or even looking at the first quarter, were those ACR branches versus your existing legacy branches?

[Albert Nahmad:]

Well there are a few ACR branches, a few meaning three that were in the plan as we started the year. The rest are throughout Watsco. Most of the heavy lifting is done for new branches, and it’s not something we wanted to worry about as we got into the season and disrupt the daily activities of what’s a much busier time of year. So the heavy lifting of closings is finished.

[Michael Cox:]

Thank you. Then my last question, you had mentioned that March was overall a tough month and I would imagine that had something to do with the cool weather. I’m curious if April has bounced back, if you’re seeing any up tick?

[Albert Nahmad:]

That’s a very good question. I would say it’s early to tell but no.

[Michael Cox:]

Thanks.

[Operator:]

Your next question comes from the line of Holden Lewis with BB&T.

[Albert Nahmad:]

Good morning, Holden.

[Holden Lewis:]

Morning. Thank you. Can you give a little bit more clarity in terms of this price mix? I mean kind of what I’ve heard is on the one hand it’s not largely been price, it’s mostly because of this mix but you keep using the comment about capturing price and that sort of thing, so maybe we’re just sort of muddling terms. But I mean are you getting actual price or is that 5% you’re referring to primarily just mix. How should we be looking at that?

[Albert Nahmad:]

We’re getting actual. I can’t split out how much of it is price and how much of it is mix, but we are in certain parts of the country our subsidiaries are actually working hard to change their price matrixes in order to get actual pricing into the marketplace. The mix change is certainly there, which we’ve seen with the higher efficiency equipment and the 410a equipment. So I think it’s still a combination. I don’t want to muddle it up anymore, but I think that’s a combination of both still.

[Paul Johnston:]

Holden, when we talk specifically about pricing of unitary products being up 5%, that’s only equipment. When we talk about our initiatives throughout the Company, it’s all of our business, all of our lines of products across the whole board. Unitary equipment is only about 40% of what we do so I’m really speaking a little bit to the OEM side of our business when we speak that way. But the initiatives are through Watsco and there certainly are price increases and better margins in all the other product lines.

[Holden Lewis:]

Then can you give a little bit of color also about the impact of both the mix as well as the R410. I mean what’s the mix of 13% in better machine now versus where it was a year ago and what’s the mix of sort of our 410 sales now versus a year ago, and what’s the margin discrepancy between those categories?

[Albert Nahmad:]

That’s about seven questions in one question, I think.

[Holden Lewis:]

There all good ones.

[Albert Nahmad:]

I’ll take a simple shot at it. In 2007, the trend above 13 SEER was around 10% of our unitary sales. It’s tracking now about 15%. In absolute dollars, it’s up quarter-over-quarter about 25%, if I look at year-over-year trend from last year to this year. So 25% growth obviously is meaningful in terms of a real trend. 410a is a much smaller percentage. It only really entered the mix as we got out of 2007. It’s populating our inventory now and it’s not a… I wouldn’t throw out numbers to you yet other than to say it’s more than doubled, to impress you, but it’s still a small percentage.

[Holden Lewis:]

As the mix shifts towards the 13 SEER plus in the 410a, I mean is that a margin positive event and to what extent?

[Albert Nahmad:]

Well [inaudible] it’s a unit price event. The equipment cost more on average. I think it’s difficult to tell you. I don’t think the margin will get any worse. If I was to… As I said, we’re just starting on these trends, I would say it’s probably going to be a positive.

[Barry Logan:]

I would say more so, Holden, on the above 13 SEER. It is for the [inaudible]…

[Albert Nahmad:]

[inaudible]…, yeah.

[Barry Logan:]

For the industry it’s a higher margin. It’s not just Watsco.

[Albert Nahmad:]

It’s industry-wide, right.

[Barry Logan:]

410a tends to be the same, relative the same margin but a slightly higher price.

[Albert Nahmad:]

The reason for that is that the higher efficiency does produce a better result for the end customer in terms of energy conservation, so the market will pay more for the equipment.

[Holden Lewis:]

Great. Thank you.

[Operator:]

Your next question comes from the line of David Manthey.

[Albert Nahmad:]

Hi David.

[Dave Manthey:]

Hi Al. How are you?

[Albert Nahmad:]

Fine thanks, and how’s Tampa?

[Dave Manthey:]

Tampa is nice, but I’m in Milwaukee today. Thanks for asking. Can we talk about repair versus replacement on the equipment side, any concernable trend you’re seeing?

[Albert Nahmad:]

Paul or Barry, you want to pick that up?

[Barry Logan:]

That’s something that we’ve been tracking right along trying to identify what the repair versus replacement is. There’s been a lot of noise around that subject I guess for about the last 18 months to 24 months. From what our sense is

[Dave Manthey:]

That’s encouraging. In terms of the impact from copper and steel and other commodities prices, you said you’re not seeing an impact yet but given the major…

[Albert Nahmad:]

Let me give you a little clarity on that. We’re not seeing too much of an impact at the OEM changing of equipment prices other than what Paul mentioned. But in terms of the copper products that we sale directly to the market, we have been reacting to the rising prices of copper and steel and so forth.

[Dave Manthey:]

As it relates to the equipment, though, do you expect that as we move through the year, prices will gravitate higher? It just seems the moves have been so dramatic that [inaudible] trying to get that back through efficiency that at some level they’d have to raise prices.

[Albert Nahmad:]

Well, probably a better question for the OEM, there’s so much capacity out there, the industry is certainly performing below last year and whether they want to, if the OEM wants to take that risk as they try to pass that on, they may lose share; I don’t know. But so far we haven’t seen too much of that because of the excess capacity that’s around.

[Dave Manthey:]

Then final question

[Albert Nahmad:]

I think it’s too early, that’s why we haven’t really changed much in our outlook. We’ve gotten to the lower end of the outlook just because we’re conservative, but it’s too early to tell. I am hopeful that we’ll get a normal summer pattern in the weather and that replacement business will be strong. Plus, I like what we’re looking at in terms of investment opportunities, and I like the debt market for us are very good. I mean we have a lower cost of borrowing money and we have a very clean balance sheet and we have lenders that are there to support us if we choose to take on some of these larger acquisitions, which I’m very hopeful for.

[Operator:]

You have a question from Ian Zaffino - Oppenheimer & Company.

[Albert Nahmad:]

Sure. Hi Ian.

[Ian Zaffino:]

Hi. How you doing? I think most of my questions have been answered, but I was just wondering if we could get into a little bit more of the ACR transaction, how that’s panning out? Any surprises there or any positive developments or anything else you could allude to?

[Albert Nahmad:]

Very good people waiting for a good market should give you a summary on that, very pleased with it.

[Ian Zaffino:]

So if you were to look at some of the accretion metrics that you have provided or alluded to initially, were those contingent upon the current conditions you’re seeing right now or conditions gotten worse or…

[Albert Nahmad:]

Well whatever they are, we’ve got it considered in the estimate, the guidance that we’re providing you. We believe that ACR will be accretive and all of that is included in the estimates for the year, the outlook for the year.

[Ian Zaffino:]

All right. Thank you.

[Operator:]

Your next question comes from the line of Keith Hughes with SunTrust.

[Albert Nahmad:]

Hi Keith.

[Keith Hughes:]

My question has been answered, thanks, guys.

[Operator:]

Your next question comes from the line of [Ryan Marcel] with William Blair.

[Jeffery Germanotta:]

Hi, this is actually Jeff Germanotta at William Blair.

[Albert Nahmad:]

I know you’re in Chicago or Milwaukee, one or the other.

[Jeffery Germanotta:]

I’m in Chicago, and it’s a beautiful day. What I want to do is drill a little bit more on the cost saving program. If the bulk of the branch closures are done, does that also mean the bulk of the headcount closures are done?

[Albert Nahmad:]

I would say that the bulk of the headcount reductions are done. Now have we had the impact in the first quarter? No, because much of it occurred in March.

[Jeffery Germanotta:]

But if we take the 5 million that you achieve in the first quarter, we should at least be able to analyze that so can we say that round numbers 20 million of that 30 plus million program…

[Albert Nahmad:]

Oh, I don’t know. That’s the second question we sort of got before. Barry, do you have…

[Barry Logan:]

Yeah, I would say, Jeff, the trend would be slightly higher with that for the rest of the year for two reasons that are logical, not accounting reasons but logical reasons. First, the gross profit improvement obviously will be in a higher sales base as we get into a much, being a larger business sales-wise as we get into the season. Secondly, something like closing a branch or reducing headcount, as Al said, happened largely late in the first quarter and will be a large component of the savings going forward. So I think what we have felt is most of this activity was a Herculean effort during the first quarter and then it slips into the…

[Albert Nahmad:]

Late in the first quarter, yeah.

[Paul Johnston:]

Said another way, a good part of the implementation is done and now the profits will flow through from that the remainder of the year.

[Barry Logan:]

And some into the [inaudible] obviously.

[Albert Nahmad:]

I mean they’ll be implementing these changes. There’s so many numerous, I mean we keep a whole record of them. So there’s so many and I think it’s ongoing effort. Except for the headcount, I think you nailed that one. I think there would be implementation going on during the year.

[Jeffery Germanotta:]

Of that 5 million, can you differentiate how much came from ACR versus the core business?

[Albert Nahmad:]

Oh, I don’t think we want to publish that.

[Jeffery Germanotta:]

Thanks very much, and keep up the good work.

[Operator:]

The next question comes from the line of David Cohen with Midwood Capital.

[David Cohen:]

Hi there..

[Albert Nahmad:]

Hi.

[David Cohen:]

I’m in Boston. I just wanted to clarify the comment in the press release on the incremental cost savings impact over the next several quarters. That does include extending into 2009 is that…

[Albert Nahmad:]

It does, yes. As much as we can, it should go through the first quarter in ’09.

[David Cohen:]

So it puts it in your earnings guidance, what is the aggregate 2008 effect that you guys are incorporating?

[Albert Nahmad:]

Well that’s the same question that we’ve gotten before. Barry, do we have an answer to that one?

[David Cohen:]

I got on a little late; I apologize.

[Barry Logan:]

Again, I think it’s, it’s not something we’ve given out quarter-by-quarter cuts of the cost saving program. Again, you could almost kind of model… We started the year was talking about 35/40 million in total. You can somewhat look at our seasonality and model it that way if you’re trying to do a model, but [inaudible] model in the first quarter of ’09.

[David Cohen:]

I don’t even care about the quarters, I just was an aggregate ’08 potential savings is what I was after.

[Albert Nahmad:]

It’s somewhere around 80% I would say is in ’08.

[David Cohen:]

Just doing, I know it’s a seasonally slow period, but given the same-store data that you do provide, it looked like your brand new or the non-same-store branches were just about breakeven in the quarter. Is that an accurate reflection of their performance?

[Albert Nahmad:]

Yes, it is; and by the way, sequentially an improvement from the fourth quarter.

[David Cohen:]

Yeah, I did see that too. Then implicit in… I heard you say that you thought that the 10% same-store sales fall in Q1 would be the low point for the year. Can you give us a ballpark around, I mean maybe not a specific number, like a sort of a sense of how much better in order to drive your earnings forecast, how much better comp sales need to be in the balance of the year than versus a 10% low point?

[Albert Nahmad:]

It’s nothing something we furnish in terms of guidance, and I wouldn’t want to start today answering a question. We give annual guidance on earnings. It’s built on reading and reacting to everything that’s going on in the market and we’d rather just stick with the earnings guidance.

[David Cohen:]

Thank you. .

[Operator:]

You have a follow-up question from Holden Lewis, BB&T.

[Albert Nahmad:]

Hi Holden

[Holden Lewis:]

Hello. Thank you. Back to the ACR question, I know that that was I think diluted by three pennies in Q4. Was it diluted in Q1 in the seasonally tough quarter or was it accretive or how’d it play it on Q1?

[Barry Logan:]

Similar to the question you just asked, the new branches which obviously is almost entirely ACR was neutral to the quarter holding.

[Holden Lewis:]

Fair enough. Was there one fewer day this quarter versus last year? How did the days play out?

[Albert Nahmad:]

I think because of Leap day there was the same number of days.

[Holden Lewis:]

64 in both quarters?

[Albert Nahmad:]

Yes, one less day in March, one more day in February.

[Holden Lewis:]

Is it going to be 64? Do you happen to know what the quarterly days are for the year?

[Albert Nahmad:]

I don’t, but I can tell you. I mean I can get it to you. I don’t have it off the top of my head.

[Holden Lewis:]

All right, thanks, guys.

[Operator:]

At this time, there are no more questions.

[Albert Nahmad:]

Thanks, Tasha. Thanks, everybody; we’ll speak to you next quarter. Bye.