POOL
#Sure.
Overall for the year, I would expect very simi<UNK>r gross margins, 2017 versus 2016.
So I would say the likelihood range of variation would be probably plus or minus 10 BIPS.
A lot of that has to do with product mix first.
Vendor mix, second.
In terms of prebuy activity, really what happened there is that we had a little better than we expected fourth quarter.
So with that, that ate a little bit into our inventory year-on-year.
So therefore had we had our numbers come in as expected from a sales standpoint, our inventories would have been a shade higher.
But nothing material to report in terms of early buy activity, or anything along those lines.
Sure.
There's two factors there.
One factor is when you look at equipment, certain commodities that are heavily weighted towards energy, like for example p<UNK>stic pipe, there are certainly some inf<UNK>tion pressures there.
But on the other hand, you look at other product categories which are over supplied in the marketp<UNK>ce, like chemicals, which is our <UNK>rgest individual product category, and accessories, which is also very significant overall, and there is virtually no inf<UNK>tion there.
So I think overall ---+ and I would think at this juncture it will be 1% to 2% in terms of overall inf<UNK>tion, with perhaps it being 2% to 3% on items like equipment, for example.
Overall, although there's some equipment items that may go up more than that and some may go up less than that.
But overall probably overall increment 2% to 3%.
Some commodities probably a little higher.
Chemicals and accessories, f<UNK>t.
So probably on a weighted basis 1% to 2% which is consistent with our long-term average.
Last year I would say was probably closer to 1% than to 2%.
Well, certainly, as you've probably noticed from history, we don't buy shares on a consistent basis month to month and quarter to quarter.
We do that somewhat opportunistically.
But over the long-term we know it's very ---+ a beneficial way to return cash to shareholders through share repurchases.
So as we look at our cash flow and priorities for use of cash, that remains a significant use of cash for us in our priorities.
And we will continue to invest in shares on, again, an opportunistic basis.
So in terms of how you model that in, that's kind of up to you.
But I would expect to use in the range of $100 million, $150 million in cash for share repurchases in 2017.
Sure.
The blue business was up 6%, and the green business was modestly down.
This is base business.
And then for the year, the blue business was up 7% and the green business was a little less than that.
But not much less.
Tough to say.
Let me put it this way; We didn't do as well as we should have.
And there were certainly some execution issues.
Thank you, sir.
Good morning.
Just to make sure ---+ it's plus or minus 10 BIPS.
And that would be correct.
Number one factor there is product mix, and number two factor within product mix is vendor mix.
So there are products I'll use generically, low dol<UNK>r, harder to handle items where the cost to serve is higher.
You typically try to recapture that with higher margins.
On the other hand, higher value items that are re<UNK>tively small cube, that proportionate to sales, or sales dol<UNK>rs, are lower cost to serve.
And those generally are sold at lower selling margins, percents.
So that's the product mix component.
So we sell a number of items that are plus 40% margin that have a cost to serve that sometimes makes it marginally profitable, if profitably at all, even though you have a high gross margin, examples being products like sand and salt.
And although we're not at 40% on either sand or salt, the cost to serve there is very high as a percentage of the sales price.
On the other hand, there are some higher value products that are re<UNK>tively small cube, which are proportionately lower cost to serve, where we may be having margins that are less than half our company overall gross margins.
And in those cases, again, a much lower cost to serve, and even though they may be at half of our company overall gross margins, are still profitable.
No, not significantly so.
When you look at blue versus green overall, gross margins are very simi<UNK>r.
The mix ---+ within the green business there's the same mix dynamic as there is in the blue, as would be in just about every trade distribution sector.
And my perception also, industrial distribution sectors as well.
But no, no noteworthy differences between the two.
Sure.
So first part is we are a service business.
So our first bias is to make sure we provide the right level of service to our customers and fundamental to that is having the right inventory in the right p<UNK>ce.
So if we're going to error, we're going to error on the side of a little higher inventory to provide better customer service.
Now, having said that, could we improve our internal disciplines in terms of inventory replenishment.
Could we work better with manufacturers to make sure that we are communicating effectively and have the right parameters set in our system for replenishment.
Could we do a better job of managing the system prompts in terms of line items beyond order point and things of that nature.
The overriding answer is yes.
So while certainly first and foremost the bias is on the service to our customer, we can certainly make process and execution improvements to further improve our inventory turns, and therefore our gross profit return on inventory.
And those are drivers that's top of mind throughout the organization.
Thank you.
Thank you, William.
And thank you all for listening.
Our next conference call is scheduled for April 20th, when we will discuss our first quarter 2017 results.
Thank you and have a great day.
