Zebra Technologies - Q4 2013

Transcript

Operator (participant)

Good morning, and welcome to the Zebra Technologies 2013 fourth quarter earnings release conference call. Joining us from Zebra Technologies are Anders Gustafsson, CEO, Mike Smiley, CFO, Mike Terzich, Senior Vice President of Global Sales and Marketing, and Doug Fox, Vice President of Investor Relations. All lines will be in a listen-only mode until after today's presentation. Instructions will be given at that time in order to ask a question. At the request of Zebra Technologies, this conference call is being recorded. Should anyone have any objections, please disconnect at this time. At this time, I would now like to introduce Mr. Doug Fox of Zebra Technologies. Sir, you may begin.

Doug Fox (VP of Investor Relations)

Good morning. Thank you for joining us today. Certain statements made on this call will relate to future events or circumstances, and therefore will be forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Words such as expect, believe, and anticipate are a few examples of words identifying a forward-looking statement. Forward-looking information is subject to various risks and uncertainties, which could significantly affect expected results. Risk factors were noted in the news release we issued this morning and are also described in Zebra's latest 10-K, which is on file with the SEC. Now, let me turn the call over to Anders Gustafsson for some brief opening remarks.

Anders Gustafsson (CEO)

Thank you, Doug, and good morning, everyone. Zebra achieved record financial results for the fourth quarter of 2013 on strong sales and earnings growth. For the quarter, earnings increased 20% to a record $0.82 per share, including acquisition, exit, and restructuring costs that reduced earnings by $0.09 per share. Quarterly sales increased 12% over the fourth quarter of 2012 to a record $284 million. Growth was broad-based across virtually all dimensions of our core business. Supported by this performance, I am proud to report that Zebra surpassed $1 billion in annual sales for the first time in the company's history. For the quarter, sales increased in three out of our four geographic regions, with North America and Europe setting new records.

Run rate activity through distribution partners across all regions remained firm and large deal business improved. Sales in all product categories, hardware, supplies, service, and software, grew more than 10% year-over-year, with sales of all printer lines increasing as well. Fourth quarter growth was virtually all organic, with the Hart Systems acquisition in mid-December, contributing less than $400,000 to sales. Even though some areas of weakness remain, most notably in parts of Southern Europe and Latin America, Zebra's broad success reflects continued improvement in business conditions in many of our verticals and geographies. The record volume supported solid gross margins, operating income growth, and free cash flow. Our results demonstrate the effective execution of our proven strategies that have enabled us to, first, penetrate targeted industries such as retail and healthcare, more deeply with solutions that offer a compelling value proposition.

Second, expand into new markets. Third, intensify innovation around products and processes. Fourth, maximize operational effectiveness. And lastly, inspire our people and culture. Investments and a steadfast focus on execution of these strategies have further enhanced the diversity of our business across geographies, solutions, and customers. They will continue to strengthen our core business while positioning us with initiatives that align Zebra with prevailing technology trends such as the Internet of Things, big data, and cloud computing. In North America, sales increased 16%, fueled by a strong run rate business and an improvement in large enterprise deals, in part from refresh cycles. In addition to retail and transportation and logistics, healthcare remained a solid contributor to growth, with momentum continuing within our wristband product lines. Our patient identification solutions improve hospital efficiency, patient safety, and enable electronic health record systems.

Supplies had an excellent quarter in the region, with sales increasing more than 15%. Thus far, in 2014, Zebra's strong core value proposition has led to further opportunities in North America. In addition, the acquisition of Hart Systems and the formation of our retail solutions group to deliver a broader range of solutions to our retail customers add to our optimism for continued growth in the region. In EMEA, positive trends continued during the quarter, with growth in 9 out of 13 subregions. An ongoing challenge to business environment in part of Southern Europe, partially offset solid growth in the U.K., Benelux, and Spain. Large deal activity improved, along with a strengthening run rate business. During the quarter, we shipped mobile and RFID printers to retail customers, card printers for a variety of personal ID applications, and a broad range of supplies.

For the first quarter of 2014, we have a firm pipeline of business, including orders that we will be fulfilled for postal applications in Italy and rail applications in Hungary, among other deals. In Latin America, economic and political challenges and the shipment of a large deal last year restricted growth in the region. Card printer shipments remained strong as our refreshed product line continues to gain popularity for use in applications such as driver's licenses, student IDs, and bank credit cards. Strength in Mexico from a rebounding manufacturing sector partially offset sales declines in Brazil and other South American countries. In Asia Pacific, sales increased 29% and exceeded $40 million for the second consecutive quarter. The return of manufacturing in the region led to higher shipments to customers in China, India, and South Korea.

Broad improvement across Asia Pacific also included sales to customers in retail and healthcare. Shipments of card products continued to gain momentum as well. Also, in Asia Pacific, the power of Zebra's brand helped to drive strong growth in supplies. The growth is a direct result of our investments in regional supplies, product managers, and highlights how our customers value the quality and consistency of our supplies for their mission-critical labeling applications. Overall, Zebra's record fourth quarter results demonstrate the strong global demand for our products and solutions. Companies worldwide rely on Zebra printers, supplies, and other products to identify, track, and manage their assets better across their supply chains. Ongoing competitive forces continue to drive our customers to invest in core bar coding solutions, in addition to emerging technologies such as passive and active RFID, to improve business execution and deliver better customer service.

Zebra is leveraging its competitive advantages, including scale, install base, and global go-to-market channels, to help more customers achieve their goals. Our success is extending our leadership in a fundamentally attractive industry. We are confident in our ability to continue to diversify our business across multiple dimensions to drive further growth and enhance shareholder value. Now, our CFO, Mike Smiley, will provide a detailed review of fourth quarter results and guidance for the first quarter of 2014. After Mike's remarks, I will return for some brief closing comments.

Mike Smiley (CFO)

Thank you, Anders. Let me highlight some of the key components of Zebra's fourth quarter results. First, sales increased broadly across all dimensions of Zebra's core business. Hart Systems was not a material contributor to performance in the quarter. Second, gross margin improved primarily from the increase in volume. And third, operating expenses included higher marketing, professional services, and employee compensation costs. Now, let's take a look at sales. For the quarter, sales increased 12.4% from $253 million last year to a record $284.5 million. The high pace of business was sustained through the entire quarter. Foreign exchange had a positive impact on sales of $2 million, net of hedges. Sales for North America increased 16% from a year ago, with strong growth in hardware, supply, service, and software.

Within North America, desktop, mobile, and kiosk printers were top performers. In EMEA, sales increased 6.4%, also to a new record. 9 out of 13 sub-regions had year-over-year growth. The region had strong growth in RFID, mobile, kiosk, and card printers, as well as supplies. Latin America sales declined 3.5% against record sales a year ago. Higher shipments to customers in Mexico, Argentina, and Colombia partially offset declines in Brazil, Chile, and Peru. In Asia Pacific, sales increased 29%, with growth in nearly every sub-region. Tabletop printers supported customer expansions and manufacturing. In addition, we have strong shipments of desktop, mobile, and card printers to customers in retail, healthcare, and government, as our marketing activities further diversify our business in the region.

We're very pleased with the success of our desktop printers that are designed to meet the needs of customers in developing regions. Underscoring the diversity of Zebra's business by product category, sales of hardware increased 12% and supplies advanced 13%. Services revenue grew 19%, primarily from investments we made to expand the number of repair facilities around the world and a greater emphasis on sales and marketing. Software revenue was up 72% on a small base. For the fourth quarter, gross margin was 49.6%, up from 49.2% a year ago. As I mentioned, higher volume was the primary reason for the improvement. Net of hedges, favorable currency movements increased fourth quarter gross profit by $1.7 million. Sales and marketing, engineering, and administrative expenses increased 9.4% from a year ago.

The growth is primarily related to higher marketing, professional services, and employee compensation costs. Total operating expenses, which are up 14% over a year ago, included $3.3 million in acquisition costs as we picked up the pace of M&A activity. Part of the quarter's expenses related to the completed Hart acquisition. Exit restructuring costs totaled $2.4 million for the quarter. The expense primarily relates to actions we are taking to redirect more location solutions resources to sports and other motion management opportunities. Quarterly operating income of $49.1 million, plus depreciation and amortization of $8.8 million, totaled $57.9 million of cash earnings, or $1.14 of cash EPS on a pre-tax basis. The effective income tax rate for the third quarter was 17.3 %.

The rate reflects the impact of a greater proportion of our income that is generated in regions with lower tax rates, plus some one-time benefits from certain tax filings. Earnings totaled $0.82 per share, including a reduction of $0.09 per share for acquisition expenses and exit restructuring costs on 50.7 million average shares outstanding. At the end of the fourth quarter, we had 50.3 million shares outstanding. For the fourth quarter, inventories increased $14.4 million from the third quarter to further improve customer service levels and reduce freight costs. Net receivables are up $1.3 million from the third quarter. Quarterly inventory turns held steady from the third quarter at 5 times. Days sales outstanding declined from 61 days to 56 days. During the quarter, we generated $51 million in free cash flow.

This amount brought full year free cash flow to $175 million. We deployed approximately $100 million for the quarter, with $95 million for the Hart acquisition and $5 million for the buyback of 88,100 shares of Zebra stock at a weighted average price of $52.70 per share. For the full year, we returned $63 million to Zebra shareholders in the form of stock buybacks. We ended the period with $416 million of cash investments, with approximately 60% held in foreign accounts, all of which are invested in US dollar-denominated securities. Now, let's look at our 2014 first quarter forecast. We are forecasting first quarter sales in the range of $276 million-$286 million.

The forecast contemplates continued organic growth, plus the revenue contribution from Hart Systems. In 2013, Hart had annual revenues of approximately $21 million. About half of its revenues occur in the first quarter, with the other half spread somewhat evenly across the subsequent periods. Because of the large effect Hart has on first quarter revenues, we expect the typical sequential increase in Zebra's consolidated second quarter sales to be more muted on a go-forward basis. The expected sequential growth in core printer and supply sales will be offset by seasonal reduction in Hart's revenues. Hart will be immediately accretive to Zebra's earnings. First quarter earnings are expected in the range of $0.77-$0.87 per share.

Our forecast assumes a consolidated gross margin in the range of 49.5%-50.5%, which in part, is benefited by higher gross margins associated with Hart. Operating expenses for the first quarter are forecast between $88 million and $90 million, in part due to the usual increase in first quarter benefit costs and Hart operating expenses. The forecast also assumes an effective income tax rate of 19.5%. That concludes my formal remarks. Thank you for your attention. Now, here's Anders for some concluding comments.

Anders Gustafsson (CEO)

Thank you, Mike. Zebra's record fourth quarter results underscore the global strength of the Zebra brand and the value of the diversity of our business. The underlying drive of companies to gain greater visibility into their extended value chains continues to create abundant opportunities for us. Looking ahead, Zebra is well positioned for further success by leveraging our considerable competitive advantages and focusing on those activities that extend our leadership over the long term. Our core business continues to hold multiple avenues for growth and high returns from further vertical and geographic expansion. Greater business diversification offers considerable opportunities, particularly with customers in retail, healthcare, and government. To achieve this goal, we are building on our industry-leading channel partner network by adding new partners to reach customers in more geographic regions and emerging technology areas.

We are also optimistic about further growth by increasing our annuity attach rate in services, software, and supplies to complement our leading industry position in thermal printers. In retail, Hart has given us greater critical mass for delivering a broader suite of solutions that address vital customer needs in a rapidly changing business environment. Our high-value portfolio now includes software and hardware solutions for inventory management and pricing, mobile point of sale, and a broad set of applications for personalized customer engagement to deliver unique customer insights and efficient retail operations. It enables us to sell more deeply across a wider range of customers. Product innovation continues at a brisk pace at Zebra. In 2013, we introduced 17 printer-related products. In the fourth quarter, we introduced the ZD500R RFID desktop printer.

Its high performance and cloud connectivity in a compact package are attracting attention from new customers in retail and healthcare. For 2014, we are scheduled to release other RFID printers, in addition to exciting new products in other categories. In the fourth quarter, we launched Zatar, an open, cloud-based service platform to connect and control devices, including Zebra printers. Since its launch in October, we announced a partnership with an RFID middleware provider. We also demonstrated Zatar at the NRF show and how it enables retailers to build iBeacon applications to identify customers and deliver customized in-store marketing programs. Finally, we are optimistic about the growing opportunities for our location solutions business. Active RFID is capturing greater attention as customers see the benefits of managing things in motion. During the fourth quarter, the pipeline of orders grew for yard management and other industrial solutions.

We also entered into a pilot with a large airplane manufacturer to improve worker health and safety, as well as engaged with a regional hospital for improving care in cardiac centers. We are optimistic about the future for our Zebra MotionWorks and other LS solutions. All of these initiatives are helping to build an even stronger Zebra that is well-positioned to take advantage of the Internet of Things, big data, and other important technology trends. They differentiate us further from our competition and will generate greater software and service content to our offerings over time. As we pursue our growth goals, we will continue to strive for greater operational excellence to improve efficiency, optimize costs, and deliver better customer service. At the same time, we will invest our resources in those activities that will deliver the highest returns for the long-term benefit of our shareholders.

Thank you for your attention today. I would now like to turn the call back to Doug for Q&A.

Doug Fox (VP of Investor Relations)

Thank you, Anders. Before we open the call to your questions, let me ask that you limit yourself to one question and one follow-up. In addition, Mike and I will be available after the call for any further discussions.

Operator (participant)

Thank you. We now begin the question-and-answer session. If you do have a question, press star, then one on your touchtone phone. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you do have a question, please press star, then one on your touchtone phone. Our first question is from Brian Drab from William Blair. Please go ahead.

Brian Drab (Partner and Equity Research Analyst)

Good morning, and congratulations on a great quarter.

Anders Gustafsson (CEO)

Thank you, Brian.

Brian Drab (Partner and Equity Research Analyst)

One question, one follow-up, and I'll stick to that. You mentioned in North America the refresh cycle, and could you talk a little bit more about that? And what is that going to be primarily a fourth quarter phenomenon, or is how will that impact 2014?

Anders Gustafsson (CEO)

I'll start, and then I'll ask Mike Terzich to also give some color on that. So, you know, in North America, in the fourth quarter, it was really a very broad-based search in the business, and that gives us a lot of confidence for how we enter 2014. Now, we feel that our strategies are working, and we do expect a very strong continuation of the run rate business. Now, there was really a run rate business quarter in Q4, but we did see a return of large deals in retail, T&L, and healthcare to more natural levels, I guess, more normal levels.

But, we also see, we are also seeing a higher level of refresh, and we expect that to continue for some time, but it is a more definitive period for that. So, you know, normally, we'd say we have, you know, good visibility for one or maybe two quarters, and we feel good about certainly the first quarter as you see it here, and we expect that we will have a good year. The comps in the first half are, you know, much easier, certainly than the comps we would have in the second half. Mike?

Mike Terzich (SVP of Global Sales and Marketing)

Brian, just a couple added points here. I do think that in North America, particularly, on previous calls, we've talked about some of the challenges with some of the retail, the broader retail market, sweating the assets and kind of holding onto more aged equipment, if you will. So we started to see some relief from that in the context of the fourth quarter. A lot of that business was actually at the tier two and tier three retail account base, so it's reflected in the strong run rate business that we saw through the distribution channel, as Anders noted.

Yeah, historically, it's kind of hard to predict where it all lands, but you know, our visibility is always a quarter or two max out, and as things look at today, we're seeing that surge continue into the first quarter.

Brian Drab (Partner and Equity Research Analyst)

Okay, thanks, Anders. Thanks, Mike. And, maybe one quick question, probably for Mike Smiley, on Hart. Can you talk a little bit about the gross margins, operating margins at Hart, if you're able to? And, would I be very far off the mark if I guessed that maybe Hart could be $0.04-$0.05 accretive in the first quarter of 2014?

Mike Smiley (CFO)

Well, I think the way we'll describe it is, you know, the gross margins are higher in that business, as you would expect, being more of a software as a service portion of that business. We'd also say the margins on the total business are a little bit higher than the corporate average. And so I think you can triangulate knowing that, roughly, you know, half of that revenue that we will get in a year will come in the first quarter. And historically, that business has had, you know, mid-teens growth rate. So if you triangulate, I think you can come up with the answer you're looking for.

Brian Drab (Partner and Equity Research Analyst)

Okay. Thank you.

Mike Terzich (SVP of Global Sales and Marketing)

Uh-huh.

Operator (participant)

Our next question is from Keith Housum from Northcoast Research. Please go ahead.

Keith Housum (Senior Research Analyst)

Good morning, guys. Again, a great quarter. Good to see it. As I look at the supplies and the software and services segments, obviously, those have been some great drivers of growth for you here. Is there a level of, like, recurrence that you see on a regular basis from this? Or every quarter, do you have to really, you know, each way you kill here?

Anders Gustafsson (CEO)

Well, the, it's a little bit of both, I guess. We have, supplies tend to be a more, of an ongoing attach. You know, the, we tend, we try to pursue customers that have more of an ongoing need versus individual project-based business. So the, there is a, you know, higher level of stability to our supplies business. And, you know, I think our supply strategies have worked really well over the last couple of years. We've increased our supplies revenues, you know, very consistently, for 2, 3 years now. And, I think we, our channel partners, our end user customers, they know we want their supplies business also, that we're not just looking for the printers, but we really want their supplies business.

We've stepped up our game when it comes to providing, you know, good quality products and, you know, short lead time for deliveries and, and be competitive in how we quote.

Mike Terzich (SVP of Global Sales and Marketing)

Keith, this is, Mike Terzich. So let me just add a point or two to Anders' comments. The, we've talked previously on the call about where we tend to focus our supplies business, which is in the higher value specialty solution space. We tend to stay away from the commodity paper business. The commodity paper business is more in line to your comment, which is, it's kind of a fly-by-night business. It's a hit-or-miss business. We tend to be stickier, no pun intended, in the space we play, because we are more engineered into the longer term solutions that our customers are looking for.

Keith Housum (Senior Research Analyst)

Okay, so if I think about this a little bit further, we shouldn't expect to see, like, a dip necessarily, because this business is, you know, as you said, a higher attach rate,

Mike Terzich (SVP of Global Sales and Marketing)

It is. It is. And I think, you know, for us, I think it's been. We look at it like an annuity business. We're certainly very interested in expanding that business, and we have international opportunities to get closer to that customer base. But generally, we hold on to the business for longer periods of time. We get into less pricing events, off-cycle events, and we like where we're positioned today.

Keith Housum (Senior Research Analyst)

Okay. Can you elaborate on your I think I heard your comment saying that you have an Asian supplies manager? I previously thought you guys didn't do much supplies business in Asia.

Mike Terzich (SVP of Global Sales and Marketing)

We still, you know, it's been a very interesting story. I think Anders' comments earlier about the power of the Zebra brand on supplies is a very relevant one. In Asia, because of the heavier manufacturing base that we have, that's again a profile of a higher quality supply play for us. And what we've been doing is we've added some people to carve out some strategies there, and we've been effective at actually producing supplies in bulk, believe it or not, from the United States, moving them in container load and selling them effectively to end users in Asia.

Keith Housum (Senior Research Analyst)

Okay. Appreciate the color. Thanks.

Operator (participant)

Our next question is from Michael Kim, from Imperial Capital.

Michael Kim (Senior Research Analyst)

Hi, good afternoon, guys. Just turning to gross margins, and you talked a little about the increase in scale, but are you also seeing a shift in the mix, especially towards the higher performance products, with you know, maybe a pickup in manufacturing?

Mike Smiley (CFO)

You know, good, good question. When you look at this, year-over-year, mix has not been a big player year-over-year. It is really driven by volume, and I would say management of our cost structure in that area. So, I think we, year-over-year, it's not really a mix issue benefiting our gross margins.

Anders Gustafsson (CEO)

We had more in the middle of 2013, a period where we had weaker mix, but, you know, we would consider the Q4 to be more of a normal mix for us.

Michael Kim (Senior Research Analyst)

Got it. Great. And then just, as a follow-up, on a higher level question, you know, it looks like to be a, you know, an expansion in potential sales opportunities. How are you guys thinking about balancing near-term growth versus, perhaps a ramp in investments in sales and marketing and, really, expanding your ability to capture more deals?

Anders Gustafsson (CEO)

So we balance that very carefully. You know, we spend a lot of time trying to figure out, you know, what are the top priorities for us, and how do we make sure we resource those priorities appropriately. But we also spend a lot of time figuring out how do we now, you know, drive efficiencies or, you know, stop doing some other things to free up investment capacity to make the necessary investments in the, you know, the biggest growth areas. So we're trying to make sure we can really get the most impact for our investment dollars possible.

Michael Kim (Senior Research Analyst)

Great. Thank you very much.

Anders Gustafsson (CEO)

Yep.

Operator (participant)

And once again, if you do have a question, press star then one on your touch tone phone. Now we have a question from Jason Rogers from Great Lakes Review.

Jason Rogers (Analyst)

Hello. What is the-

Anders Gustafsson (CEO)

Go.

Jason Rogers (Analyst)

What, what is the estimate for CapEx for 2014?

Mike Smiley (CFO)

You know, we don't give that out, but I would say if you look at our K, we're in the, you know, historically been around 20-ish or so like that, and I think that's sort of consistent going forward. Our business doesn't drive a lot of need for CapEx. It's primarily driven out of sort of IT and some of our manufacturing, but it's pretty low.

Jason Rogers (Analyst)

Okay. And then looking at the RFID business, is that still less than 5% of the corporate total? And what areas in that whole area do you think hold the greatest potential for 2014?

Anders Gustafsson (CEO)

So yeah, RFID is still a small part of our business. It is less than 5%, but we've seen. I think 2013 was a good year for RFID overall. You know, passive RFID on the printing side saw a lot of interest from retailers, primarily in North America and in Europe, as well as in the extended, you know, retail supply chain. So all the way back to garment manufacturers in Asia. And we participated nicely in many of the larger deals in 2013, and we expect that passive RFID will continue to be a nice growth area for us, although from a smaller base. Then on the active RFID side, you know, we've had a strong position in industrial manufacturing applications for some time.

You know, we are seeing some-- we're shifting a little bit of our focus to, instead of tracking just location, we're now tracking motion, so we can actually, you know, keep track of things that are moving in a different way. And that expands our opportunity into more sports verticals. But also, we've seen great wins from this with in a lot, you know, we talked about on the script, a large airplane manufacturer for a health and safety application, and also in healthcare to track people moving in hospitals.

Jason Rogers (Analyst)

Thank you.

Operator (participant)

We do have a question from Michael Kim, from Imperial Capital.

Michael Kim (Senior Research Analyst)

Just a quick follow-up question on channel inventory levels. And, you know, if your sense is, you know, relative to kind of what we saw maybe a year or two ago, if that's, you know, normalized levels or, you know, with the expansion sales, that maybe it's thinned out a little bit relative to historical norms?

Mike Smiley (CFO)

A good question. I think, when we look year-over-year, we look at our channel inventory, it's actually down about 5% from the beginning of the year. If you recall, in the first quarter, we mentioned that some of our sales decline was, is because of sales out needed to. They had larger levels of inventory at the beginning of the year, and we see them at a, at, I'd say what are good levels. And as I think we talked about before, we've done a lot of work with the distributors and such to make sure that those inventory levels are really appropriate for the level of business that they're seeing today.

Michael Kim (Senior Research Analyst)

Okay, great. And then just, one other follow-up was, Latin America is sort of a little bit an outlier geographically. Yeah, is it your sense that, you know, that area should stabilize, or is Brazil maybe one of your larger country markets? And, you know, any color you can provide on regional, changes in that business?

Anders Gustafsson (CEO)

Yeah, we expect Latin America to improve in 2014. You know, for us, Mexico is the largest country, and there's been a peaking of steadiness for us. You know, Brazil has been more, you know, a bit more choppy. We've had some great quarters and some not so great quarters with Brazil. And then, you know, other countries like Venezuela and Argentina have historically been good countries for Zebra. But, so there's more variability, I think, to the, you know, the outlook and the results for Latin America based on more political and macroeconomic situations. But our position competitively in Latin America, I think, is very strong, and we have a very good team, and we don't believe we lost share in any way.

On the contrary, we believe we actually gained share, even though the market was, or our revenues were down some.

Michael Kim (Senior Research Analyst)

Hmm. Okay, great. Thank you very much.

Operator (participant)

We also have a question from Keith Housum from Northcoast Research. Please go ahead.

Keith Housum (Senior Research Analyst)

Thanks, guys, for the follow-up questions here. You know, earlier in the year, you guys announced the restructuring your supply chain over in China. Has all those benefits come through in the gross margins already, or should we expect any more benefit in FY 2014?

Anders Gustafsson (CEO)

We're scratching our heads here a little bit. I don't recall that we announced a large restructuring, did we?

We did for the overhead.

Mike Smiley (CFO)

We did, but you know, effectively, the value of that restructuring is pretty much our margins right now.

Anders Gustafsson (CEO)

Yeah.

Mike Smiley (CFO)

So I wouldn't. Going forward, we're not really projecting any big change year-over-year because of the restructuring in our margins. In other words, we've already realized the benefit of that.

Keith Housum (Senior Research Analyst)

Okay, fair enough. That's what I was looking for. Then, you guys had mentioned in your press release this morning, the expansion into new geographical markets. Perhaps if you could expand a little bit there, I guess, what markets you're looking at there, and, you know, how much of your sales last in the fourth quarter came from, I guess, any of those efforts?

Anders Gustafsson (CEO)

So the expansion we're thinking about now for entering new geographic areas is you know, much more modest, say, than the programs we had in 2010, when we put real effort and real investments into some of the larger markets. So now it's more, you know, infills in other markets. You know, Southeast Asia would be one of those markets we believe still has lots of opportunities for us. You know, Africa is turning out to be a stronger one, but that's you know, small, small investments to help drive that. We're still continuing to grow in China, so that's a you know, a big market for us, and we see you know, India coming back in a in a pretty good way.

But, you know, overall, though, I would say the investments are much more modest than what we did a couple of years back.

Keith Housum (Senior Research Analyst)

Okay, thank you.

Operator (participant)

We have no further questions. I will now turn the call back over to Doug Fox for closing comments.

Doug Fox (VP of Investor Relations)

Once again, everybody, thank you for joining us today. I just want to let you know that our next regularly scheduled conference call for our first quarter earnings will take place on May sixth. Until then, have a very good day. Thank you.

Operator (participant)

Thank you, ladies and gentlemen. This concludes today's conference. Thank you.