Earnings Call Transcript - SPB Q4 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Q4 2020 Spectrum Brands Holdings, Inc. Earnings Conference Call. All lines have been placed on mute. After the speakers’ presentation, there will be a question-and-answer session. I would now like to turn the call over to your speaker today, Mr. Kevin Kim. Thank you. Please go ahead, sir.

Kevin Kim, Divisional VP of Investor Relations

Great. Thank you, Lisa. Welcome to Spectrum Brands Holdings Q4 and full year 2020 earnings conference call and webcast. I’m Kevin Kim, Divisional VP of Investor Relations and moderator for today’s call.

David Maura, CEO

Thank you, Kevin. Good morning, everybody. Thanks for joining us for today’s call. With the announcement of this quarter’s earnings, I’m pleased to tell you that our efforts to reinvest in and reignite growth across our business units are now driving real, tangible, impressive, and most importantly, sustainable results. Since we began these efforts, we have freed up investment dollars from our Global Productivity Improvement program and we have thoughtfully invested in our people, our research and development activities, our innovation capabilities and new marketing initiatives. This has reignited the flywheels of new product development launches and restored our topline growth, expanding our margins and driving much greater profitability and free cash flow generation to our bottom lines. These achievements are allowing us to continue to reinvest for even further growth in the future, on a sustainable basis, as we move our company forward. In short, I am thrilled with the resilience of our people and our businesses, and the financial results we have delivered in fiscal 2020.

Jeremy Smeltser, CFO

Thanks, David. Good morning, everyone. If we could turn to slide 13. I will start with a review of Q4 results from continuing operations, beginning with net sales. Net sales increased 17.9%. Excluding the impact of $4.2 million of favorable foreign exchange and acquisition sales of $3.8 million, organic net sales increased 17.1%, with growth across all four business units. Gross profit increased $88 million and gross margins of 36.1% increased 240 basis points, driven by improved productivity from GPIP, favorable pricing and mix. SG&A expense of $269.3 million increased 15.9% at 23% of net sales, with the dollar increase driven by improved volumes and higher marketing investments. Operating income growth of 245% was driven by improved volumes and profit margins, and lower restructuring spending, as well as no impairment charges in the current year period. Net income and diluted earnings per share were driven by the operating income growth and lower shares outstanding. Adjusted diluted EPS increased 52.2% due to favorable volumes, improved productivity and positive product mix. Adjusted EBITDA increased 6.3%, primarily driven by volume growth, as well as productivity improvements and positive pricing. Adjusted EBITDA also increased despite a change to our incentive compensation program, which resulted in a reduction of stock-based compensation expense and consolidated adjusted EBITDA of $17 million for the full year of fiscal 2020 and Q4 2020. On a comparable basis, adjusted EBITDA grew 16.7%. By business unit, the adjusted EBITDA growth was driven by HHI, Global Pet Care and Home & Garden. Turning now to slide 14. Q4 interest expense from continuing operations of $38 million increased $1 million over last year’s quarter. Cash taxes during the quarter of $7.4 million were $2.6 million lower than last year. Depreciation and amortization from continuing operations of $35.5 million was $6.9 million lower than the prior year. Separately, share and incentive-based compensation decreased from $14.9 million last year to $0.3 million driven by a change to incentive compensation payout methodology, which resulted in a reduction of stock-based compensation expense and consolidated adjusted EBITDA of $17 million for both the quarter and the year. Cash payments for transactions were $6.2 million, down from $6.7 million last year. And restructuring and related payments for Q4 were $10.2 million versus $9.5 million last year.

Randy Lewis, CRO

Thank you all for being here today. I'm excited to discuss our performance, focusing on each business unit's drivers and our Global Productivity Improvement program. First, I want to emphasize that employee safety remains our top priority during the pandemic. Our COVID-19 response team's diligent efforts have successfully implemented strict safety protocols to protect our workforce and comply with government regulations. Now, onto our business results. The operating environment has improved across all units, particularly in Hardware & Home Improvement (HHI). We saw net sales growth in all four business units, with enhanced output and fill rates. As mentioned, we are quickly bouncing back from previous supply challenges. Starting with HHI, in the fourth quarter, we reported an 18.9% increase in net sales and an 18.7% organic net sales increase. Strong point-of-sale performance and supply improvements fueled robust growth in security, plumbing, and builders' hardware. Adjusted EBITDA rose by 29%, driven by positive volume, productivity improvements, and favorable pricing, though slightly offset by higher tariffs and COVID-related costs. As we anticipated, we saw a considerable improvement in shipments due to our strong order position and factory output recovery from earlier disruptions. Looking ahead to fiscal 2021, we expect another strong quarter in net sales growth for Q1. Retail inventories are still below normal, and our backlog rose from $40 million to over $50 million by the end of Q4 due to strong consumer demand. We aim to significantly reduce the backlog by the end of Q1 through elevated production levels. Demand in 2021 will also be supported by new product launches and increased advertising, including plumbing and security orders from Clayton Homes. Next, in Home & Personal Care, we saw reported and organic net sales growth of 5.8% and 5.6%, respectively, but adjusted EBITDA decreased by 22.8% to $22.7 million. Growth was driven by small appliances and personal care, despite higher marketing investments and tariffs impacting margins. We anticipate growth opportunities in the second half for cooking, food prep, breakfast preparation, and grooming categories, supported by investments in advertising for products like the George Foreman Smokeless Grill. Inventory levels are improving, although they remain below normal, and we are optimistic as we head into the holiday season. In Global Pet Care, we achieved record revenue and profit in the fourth quarter, with net sales growth of 21.6% and adjusted EBITDA up 20%. Growth was driven by aquatics and companion animal categories, and the eighth consecutive quarter of topline growth reflects our strong market leadership position. We expect 2021 to benefit from continued execution of our global growth strategies and an uptick in consumer demand. Finally, in Home & Garden, net sales rose by 37.8%, and adjusted EBITDA climbed 60.7%. Growth was driven by strong point-of-sale performance in controls, insecticides, and repellents, reflecting a rebound from earlier supply disruptions. We plan to increase advertising investments for brands like Spectracide and EcoLogic to further enhance our market position. Regarding our Global Productivity Improvement program, we've raised our savings target to $150 million by the end of fiscal 2021, with approximately $90 million captured to date. This program is crucial for our transformation and long-term growth. Overall, I’m proud of our progress this quarter and want to thank our team for their efforts to improve Spectrum Brands. Now, I’ll hand it back to David.

David Maura, CEO

Thank you, Randy. Thanks, Jeremy, and everyone for joining us today. Given that we’ve covered quite a lot on today’s call, let’s conclude with a couple of takeaways. First, our fourth quarter financial results reflected a strong acceleration in sales, with exceptional growth across all business units. Second, momentum in the business remains positive, with continued strong demand in October, our fiscal 2021 is off to a great start. Third, actions from our Spectrum family to improve the business is nothing short of remarkable. We have embraced our position as a home essentials company and instead of pulling back in the face of the COVID-19 challenges, we’re continuing to lean in to improve our operating model to add talent, strengthen our brands through marketing, advertising and drive innovative product introductions. Furthermore, we raised our gross savings target to $150 million over the life of our global productivity improvement program, as we continue to improve our commercial and operating capabilities as a quicker, more globally aligned company. We believe we are well-positioned financially and operationally to continue to grow and we will continue to be laser-focused on our employees, our consumers, retail partners, and our shareholders over the long-term. I want to thank you for your time and your continued support. Before we turn to the questions, I again want to address our employees. I encourage you to keep finding ways to be part of our continuous improvement journey. Keep listening to each other, keep working together, collaborate and move quickly on ideas that will help us move our company forward, focus on the positive and drive innovation and insight wherever you can. Through your hard work we are building a better, faster, stronger Spectrum Brands and it’s an absolute privilege to be a part of this great team. Now, I’ll turn the call back over to Kevin to take any questions you may have.

Kevin Kim, Divisional VP of Investor Relations

Great. Thank you, David. Lisa, why don’t we jump right into Q&A.

Operator, Operator

Your first question comes from a line of Nik Modi with RBC Capital Markets.

Nik Modi, Analyst

Yeah. Good morning, everyone. Congratulations on a great end to the year. Dave, maybe you can just help frame how to think about, I mean, there’s so many moving pieces, you guys have been very active, a lot of initiatives. So maybe you can just talk about the results and kind of how you think about the guide as a result of the following kind of vectors, share gains, the organizational design changes that you made and maybe any specific examples of key wins that you had during the quarter? And then just kind of underlying category growth, so just we can understand how much you guys have underperformed relative to the overall category? Thank you.

David Maura, CEO

Yeah. Hey. Thanks for the question, Nik, and appreciate you joining the call. Let me just say, there’s no rocket science here. I mean, when you invest in people, talent, R&D, consumer insights, innovation and marketing, your inputs just lead to better outcomes. And at the end of the day, this quarter and this year end finish is really the amalgamation of a lot of hard fundamental work that we’ve done since 2018 and it all begins and ends with culture. I mean, we’ve got 12,000 employees now that not only are resilient, they not only get the vision, the strategy, they not only buy off on vision clarity, focus, the faster, smarter, stronger Spectrum. They’re seeing the tangible benefits in their day-to-day lives, in their business units from the productivity dollars that we’ve freed up from the Global Productivity Improvement program. They’re seeing the ability to reinvest those dollars and to really create exciting product for our retail partners for the consumer. But I would tell you today, we’re probably taking market share across the Board. I think we could do even better, quite frankly, in HHI. I mean, look, the good news that I have to tell you is, this isn’t just the end of the year or we did great for one quarter. What we’ve got today is our feet are on solid ground. We’ve got a sustainable model. We’ve finally achieved what I call escape velocity on the flywheel and now we’re plowing money back into continue to accelerate things going forward. So we just look, I hate guidance. We had a big debate over whether or not to give guidance. We do want to give you something for your models going forward. But at the end of the day, I think what we’ve given you is hopefully very achievable.

Nik Modi, Analyst

Great. I’ll pass it on.

Operator, Operator

Your next question comes from a line of Olivia Tong with Bank of America.

Olivia Tong, Analyst

Thank you. Good morning. Congratulations. Where should I begin? Your growth rates are impressive, so I hope you can provide more insight on a few points. First, where do you see your underlying growth rates and market share? Secondly, what is your assessment of consumption in these categories? Lastly, regarding sustainability, while not at these levels necessarily, could you discuss how much of this is a recovery? You mentioned the efforts that led to the additional $10 million. I'd appreciate your comments on these three areas. Thank you.

David Maura, CEO

I will now pass the call to others. My initial comment is that we aim to provide you with insight into what is fundamental and sustainable, along with guidance for 2021. Even if we consider the impact of COVID, I believe our growth rates remain very strong without that factor. Over the course of the year, we will continue to discuss this. We are aware that we faced supply disruptions in March and April, which have slightly persisted, but we are recovering fill rates and replenishing retail inventory. This has contributed to our growth rate being higher than what we consider sustainable, a point we reported today. However, moving forward, you can expect to see a robust business. My objective for the year is for all four business units to gain market share and grow at rates above the category average. Now, I'll hand it over to Randy for more details.

Randy Lewis, CRO

Good morning, Olivia. It has been somewhat challenging to determine the exact underlying growth rates and market share due to all the fluctuations in the macro environment. However, we are seeing an increase in our market share across nearly all our major categories, and we are focused on understanding the drivers behind this growth. The positive aspect is that, as David has highlighted multiple times during the call, we feel optimistic about the overall health of the business and our performance. We do not think our results are temporarily influenced by COVID. In fact, when we consider the full year, we believe COVID had a net negative impact on both our top and bottom lines. We are confident that our categories are unlikely to experience a significant decrease in COVID-related demand in the near future. Therefore, we think the underlying growth rate is well represented in the guidance we have provided.

Olivia Tong, Analyst

Got it. That’s helpful.

David Maura, CEO

Sure. So, Olivia, part of this was just making sure that we were conservative in our communications to you as we had internal targets to overdrive to the numbers that we were originally looking at. And as time has gone by, the organization has done a fantastic job of delivering on expectations, in many cases over-delivering, so this is about premium execution to most all of the initiatives and attributes within the program. So savings has come across, I think, we’ve shown you there are six major work streams within the GPIP program. The largest, of course, is in the sourcing and strategic purchasing areas. But overall, all of the work streams are delivering at or above the original expectations. And that’s what’s allowing us to have more and more confidence in our ability to deliver over the next 12 months to 18 months.

Olivia Tong, Analyst

Great. Thank you. Best of luck.

Operator, Operator

Your next question comes from the line of Bob Labick with CJS Securities.

Bob Labick, Analyst

Good morning. Congrats on a great quarter there.

Jeremy Smeltser, CFO

Good morning, Bob.

David Maura, CEO

Good morning.

Bob Labick, Analyst

Hi. I wanted to start with a question about operating leverage. It's clear that you're achieving significant cost savings from GPIP and reinvesting those savings, along with increasing your spending on R&D and advertising. When can we expect to see you reach your desired level of sustainable investment in the brand? When do you anticipate achieving that balance and returning to the expected operating leverage in line with revenue growth moving forward?

David Maura, CEO

We are observing operating leverage in the margin structure this quarter. In the first year of the program, we faced significant tariff challenges that hindered our ability to reinvest in the business as we had planned for 2019. However, this past fiscal year, we have significantly ramped up our investments and are seeing a quick return. It is our responsibility to continue this trajectory. Additionally, we have a few more years ahead to keep investing in areas that enhance our vitality, product mix, margin structure, and growth rate. I’ll hand it over to Jeremy and Randy to discuss this further. I anticipate solid growth for at least the next 24 months as we continue to innovate for our retail partners and consumers, which should lift our organic growth rate along with our margin structures. As long as we maintain strong performance in our supply chain, fulfillment, and productivity in our facilities, we should continue to manage our fixed costs effectively as well.

Jeremy Smeltser, CFO

I think if we take a closer look at both the 2020 and 2021 guidance, we can see significant leverage. In 2020, we faced an additional $65 million to $70 million in gross tariffs compared to fiscal 2019. We achieved considerable savings but also made investments. Our spending in IT, commercial operations, and advertising and promotions all increased year-over-year in fiscal 2020, and we still achieved growth, with an adjusted EBITDA of $597 million, demonstrating strong leverage alongside smart reinvestments. Looking at the 2021 guidance, which assumes growth in the broader environment, we see good leverage, including an incremental $25 million in net tariffs due to exclusions from fiscal 2020 that rolled off in August 2020. We also have a budget for increased spending in all the mentioned areas. These are decisions we will evaluate moving forward, measuring ROI to determine whether to ramp up spending or to moderate it, ensuring we have the right talent to drive that spending and deliver returns for our shareholders. Overall, while the planned spending in 2021 is a bit below our ideal level, it does reflect the largest anticipated increase in overall organizational spending focused on operational excellence and consumer insights.

Bob Labick, Analyst

Thank you for that information. Regarding your brands, I'm curious if the number of core brands you are currently supporting, which seems to be around 18 or 19, is optimal for effectively utilizing your advertising promotional dollars. If that's not the case, how do you plan to approach the numerous brands moving forward?

David Maura, CEO

Our top 15 brands account for approximately 80% of our revenue across the four business units. I’ll let Randy share his insights, as we have made significant progress in brand and SKU rationalization over the past couple of years.

Randy Lewis, CRO

Yeah. Bob, it’s obviously a great question, something we spend a lot of time on and it varies by business unit, as well as categories and channels. And so we play in a space where oftentimes, brands are very important to the identity of a particular product or to optimizing particular channels or customers. And so we’ve had substantial rationalization of the brand portfolio over the last two years during our improvement initiatives and we’re still in the process of continuing to do a lot of rationalization work. But the top brands are the ones that we’re currently very committed to and we’ll be putting most all of the drive behind.

David Maura, CEO

Yeah. I mean, look, let me just add, this may seem a little bold, but this company is no longer content to be number two or number three player. We want to be number one. And you’re going to see a lot of these brands over the next 12 months to 24 months become number one players across the Board.

Bob Labick, Analyst

Right. Sounds great. All right. Thanks very much.

David Maura, CEO

Thanks, Bob.

Operator, Operator

Your next question comes from the line of Faiza Alwy with Deutsche Bank.

Faiza Alwy, Analyst

Good morning and congratulations on the strong results. I have two questions. First, regarding your guidance, are there any specific segments you anticipate will exceed that guidance? I'm particularly interested in your outlook for HHI, especially considering the positive backlog for the first quarter. How do you envision that business performing in the latter half of this calendar year and into next year? My second question is about the progress the company has made in the past 12 to 18 months. David or Jeremy, could you share examples of actions you’ve taken and what new capabilities you now have operationally? For instance, you've mentioned advancements in IT, automation, and commercial improvements. What are some functions you can perform now that you weren't able to a year or so ago?

David Maura, CEO

Let’s start from the beginning, and then the team will provide their insights. This is the driving force we discussed earlier in the call, which has really excited us about the company’s future performance. We now have a new consumer operations team in place, along with solid consumer insights. We possess advanced e-commerce, digital, and AI tools that we didn't have before, enabling us to gather real-time data to better understand consumer needs. This enhances the efficacy, benefits, and convenience of our products, and supports our ability to develop these products through research and development and innovation. We have established entirely new R&D teams in specific areas, allowing us to take concepts, develop prototypes, test them, and bring them to market swiftly—something we couldn’t do previously. This process is driving our innovation pipeline and new product launches, which are boosting our top line and improving our margin structure. This is the overarching theme and the wheel that keeps turning. Additionally, this leads to increased cash flows and profitability, which will further empower us as we move ahead. That's a straightforward way to explain it. Randy?

Randy Lewis, CRO

Yeah. Faiza, I think, David’s comments are spot-on. I mean, we’re really focusing on creating business units that are challenged with understanding their consumers and their retail channels in a way that they can solve the problems for them and drive brand, product and channel growth. And then we’re taking all the ancillary, distracting, non-value-added activities that oftentimes businesses have to deal with and we’re centralizing those with people that are outstanding talent and proven leaders in the industry. So whether that be supply chain or whether that be transportation or whether it be demand planning, whether it be controller ship. These are things that used to be in our businesses and distracting day-to-day versus the efforts to create new products that consumers want to buy and retailers want to sell. And so as we strip away those non-value-added pieces and really get the talent in the businesses and say, spend as much time as possible on the innovation cycle, it’s really starting to pay off.

Jeremy Smeltser, CFO

In response to your first question, Faiza, we won’t provide specific guidance for each segment, but I can share some insights. We expect a growth range of 3% to 5%, with a positive bias towards Global Pet Care, as seen in the past few years, and also HHI, due to supply replenishment that Randy mentioned. However, we expect the lower end of that range to apply more to Home & Garden and HPC, considering the strong performance they had in fiscal year 2020 and the ongoing uncertainties related to the pandemic. Overall, this is a cautious yet sensible forecast. We will keep you updated as each quarter progresses throughout the year.

Faiza Alwy, Analyst

Great. Thank you so much. Very helpful.

David Maura, CEO

Thank you.

Operator, Operator

Your next question comes from the line of Ian Zaffino with Oppenheimer.

Ian Zaffino, Analyst

Hi. Great. A couple questions here. I guess the first one would be, David, you mentioned the tariff headwinds. If we’re looking at maybe potential softening of some of the stance on China, what’s the actual net benefit you could stand to gain, let’s just say, for tariffs do go away, because why if the tariffs, you’re also able to offset it with some pricing. So maybe help us understand what the net impact would be and what the puts and takes would be if that happens? And then I have a follow-up. Thanks.

David Maura, CEO

We expect to face more tariffs this year, but they will increase at a slower rate, which lessens the impact on us. However, it doesn’t mean the tariffs will be completely gone. As of now, we are not anticipating any tariff relief. Any comments, Randy?

Randy Lewis, CRO

Yeah. Early commentary from the Biden camp doesn’t indicate any early softening on stance with China and so to David’s point, we’re not going to plan for that. Does something happen in fiscal ‘22? Perhaps it does, but early indications are not headed that direction. As it relates to what happens in a theoretical, if they do go away, it would depend on how they go away and how it’s communicated? But the reality is that it’s been a shared challenge across POS, across suppliers, across retail partners and ourselves, and companies like us, and it would be a shared conversation around what happens with the unwind of that as well. Randy could probably give you a little more color. I don't think anyone would consider it a windfall if there was a reversal of tariffs. What excites us most is if those tariffs could be passed on to consumers, which could increase volume and provide benefits that way. However, as David mentioned, we’re not currently making any predictions based on the early information we have regarding this change.

Ian Zaffino, Analyst

Okay. And then, second question, I guess, or two other questions would be, what was the motivation in the change in the form of compensation? What drove that decision? And then also, what’s your decision on the leverage ratio change, you lower the low end of the range, while keeping that the high end at the high end? So just some color on that? That’s it. Thank you.

David Maura, CEO

Regarding the compensation adjustment, for several years, many employees relied solely on their base salary for cash compensation, as their annual Management Incentive Plan was always paid in equity. In our recent proxy meeting, shareholders expressed a desire for reduced equity issuance and dilution from the management team. Our compensation consultants indicated that it is quite unusual to provide one-time bonuses in equity, favoring cash payments instead. I believe this approach helps us retain and attract talent more effectively. Given our strong year-end performance, the Board of Directors found it appropriate to implement this change, aligning us with the practices of our peer group. This adjustment enhances our attractiveness as a company, supporting our goal of upgrading talent, which has been a key focus over the past two years, enabling us to draw in higher caliber individuals as we pursue our growth objectives. In response to your question about the leverage ratio, company prices are still high. We are focused on the hard work we've done over the past two years to improve our fundamentals. We are optimistic about our outlook. We believe it's time for our share price to start rising, and we aim to enhance our balance sheet while achieving higher growth rates and increasing free cash flow. By continuing to reduce debt, being careful with our balance sheet, maintaining significant liquidity, and generating higher quality earnings in the future, we expect our valuation multiple to improve, and that is our plan.

Ian Zaffino, Analyst

Yeah. Thank you.

Operator, Operator

Your next question comes from the line of Jim Chartier with Monness, Crespi, Hardt.

Jim Chartier, Analyst

Thanks for taking my question. You mentioned in the prepared remarks, expanding Remington into China. Just curious what potential you see for that brand in China. Are there any other brands where you see the potential for going to China? And then just more broadly, other opportunities to expand overseas and what you think the international penetration of the business could be? Thanks.

David Maura, CEO

Yeah. I think, look, the Chinese opportunity really follows, again, this new approach where we’re really advertising the brand Remington is one of our strongest global brands and with Manchester United Football team, they’ve got hundreds of millions of followers in Mainland China and so it’s just a natural extension of the brand to be able to launch it into China. Jeremy, Randy, any other color on that?

Randy Lewis, CRO

Yeah. Very consistent? No.

Jim Chartier, Analyst

That thanks. And then just on HPC, your margins were down, despite solid growth this quarter. You mentioned higher advertising, promotional investments. Were those a shift from earlier in the year in terms of timing or are those investments expected to drive growth next year? And then what do you see as the real margin potential for that business over time?

Jeremy Smeltser, CFO

Yeah. Jim, I think, you hit it. So in Q3 we were fairly restricted on supplies. So we pulled back on an awful lot of investment in that business. As we caught up in Q4, some of those expenses came back. But on top of that, we put substantial investments into Q4 in preparation for holiday in the current quarter. So a lot of what you see in the margin in Q4 of HPC is designed to benefit fiscal 2021.

David Maura, CEO

I think the longer term we’ve said many times, we’re working to get this business back to low double-digit EBITDA margin. We think that’s the right place for it to be given the current macro environment.

Jim Chartier, Analyst

Great. Thanks. Best of luck.

Jeremy Smeltser, CFO

Thank you.

David Maura, CEO

Thanks. Thank you, Jim.

Randy Lewis, CRO

Thanks, Jim.

Operator, Operator

Your next question comes from the line of William Reuter with Bank of America.

William Reuter, Analyst

Hi. Just one for me, you got the Armitage acquisition that you’ll be in the midst of integrating. I guess your outlook for additional M&A and I guess maybe how you’re thinking about the capital structure, you have the 2024 notes that are relatively small, but with a relatively large coupon. I guess thoughts on taking those out with cash versus refinancing? That’s it? Thanks.

David Maura, CEO

We have many options to explore. By focusing on the fundamentals of the business, we can create significant opportunities. We still believe our stock is undervalued. Accelerating revenue growth, improving margins, and reducing debt will lead to strong returns for shareholders over the next few years. That’s our main focus. We are open to small acquisitions that fit well with our operations and can generate synergies, while also promising long-term shareholder value. If you look back, my early years here were mostly about external capital allocation and significant mergers and acquisitions. However, over the last two years in my new position, I have concentrated on internal investments and capital allocation. We are currently focused on driving organic growth, achieving top market share across our business units, and delivering strong shareholder performance. This is the phase we are in now.

William Reuter, Analyst

Okay. And I guess with regard to the 2024 notes, any thoughts on that maturity specifically?

David Maura, CEO

It’s very expensive paper relative to where we can borrow or take it out with cash. We’ll let you know in the summer.

Operator, Operator

And we have reached our allotted time for questions. Are there any closing remarks?

Jeremy Smeltser, CFO

I know we have a couple of people left in the queue. We’ve obviously gone over the hour. But Kevin and myself will both be available to follow up anytime you’re ready. Thanks for your time.

David Maura, CEO

Thanks, everybody.

Randy Lewis, CRO

Thank you.

Operator, Operator

This concludes today’s conference. You may now disconnect.