Q4 2022 Franklin Electric Co Inc Earnings Call
Speaker 1: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11.
Speaker 2: Good day and welcome to the Franklin Electric Report's fourth quarter 2022 Sales and Earnings Conference call. At this time, all participants are in a listen-only mode.
Speaker 2: Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer Jeff Taylor.
Speaker 3: Thank you, Ed Ruub, and welcome everyone to Franklin Electric's fourth quarter in four year 2022 earnings conference call.
Speaker 3: On the call with me today is Greg Singhsack, our chairperson and chief executive officer.
Speaker 3: On today's call, Greg will review a fourth quarter and four year business highlights. This goal 2023 guidance progress today on our long-term strategy and our latest global secular trends.
Speaker 3: I will provide some additional detail on our financial performance. We will then take questions.
Speaker 3: The four would begin, let me remind you that as we conduct this call, we will be making forward-looking statements within the meeting of the Private Security's litigation reform act of 1995.
Speaker 3: These statements are subject to various risk and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the company's annual report on form 10K and today's earnings release.
Speaker 3: All forward-looking statements made during the call are based on information currently available and accept this required by law. The company assumes no obligation to update any forward-looking statements.
Speaker 3: With that, I will now turn the call over to Greg Sinchak.
Speaker 4: Thank you, Jeff. We delivered a strong finish to 2022. All three reporting segments set forth quarter sales records and both water and fueling systems set records for operating income over the same period.
Speaker 4: During the quarter, we delivered operating margin expansion in our water and fueling businesses driven by customer demand, pricing sufficient to offset inflation and effect headwinds, and a steady operational execution.
Speaker 4: We experienced solid end market demand throughout 2022, which continued through the fourth quarter, driving top-line growth across each business.
Speaker 4: Our supply chain continued to recover with past due shipments down 50% from last summer's peak. At the same time, due to continued strong order flow, backlog increased to 260 million or up $10 million sequentially.
Speaker 4: Turning to our segments, water system sales were robust across all end markets, with overall revenue growth of 9% and operating income growth of 23%.
Speaker 4: pricing actions and offering leverage more than offset inflation challenges driving operating income margin to 15.9% an increase of 180 basis points compared to last year. Fully systems delivered another record quarter with top line growth of 8% crewed by solid sales in the US and India and offering income growth of 9%.
Speaker 4: Favorable price and mix contributed to Fueling Systems' fourth quarter operating margin of 28.4%, an increase of 30 basis points compared to the prior year quarter.
Speaker 4: While delivering record sales in the quarter, the distribution segment was impacted by normal seasonality and unfavorable weather at quarter end. Revenue increased by 27% while operating income decreased by about 50% due to a significant decline from the price of certain commodity-based products. Operating income margin decreased 290 basis points compared to the prior-
Speaker 4: a lot of work over the last five years to drive increased profitability within the distribution business and our confident and our plans for 2023 and beyond.
Speaker 4: This leads me to our 2023 guidance.
Speaker 4: I am mindful that a number of economists are forecasting a slow down or recession in the back half of 2023 leading to a wide range of forecasted potential macroeconomic outcomes.
Speaker 4: However, I am confident the foundation we build across each of our segments will enable growth in 2023.
Speaker 4: In fiscal 2023, we expect further supply chain improvements, easing foreign currency exchange headlands, stabilization of inflation, and productivity improvements within our operations that supply delays and uncertainty to clients.
Speaker 4: We expect the man for a groundwater pumps to benefit from a large installed base driving a large replacement business as well as a favorable concentration of activity across a strong agricultural, industrial, and mining markets.
Speaker 4: and only a modest exporter to new construction in U.S. housing.
Speaker 4: We expect this favorable demand to similarly benefit our distribution segment. Our U.S. residential specialty pumps and water treatment product lines may face head ones with greater exposure to new home starts.
Speaker 4: Although supply constraints in 2022 will make comparables easier.
Speaker 4: We expect our large pump business will benefit from significant demand across all end markets.
Speaker 4: Outside the U.S., we expect to see growth in all geographic regions as well, based in part on the IMF's small but upper revision in its forecast for 2023 growth.
Speaker 4: In our fueling business since last quarter, major fueling marketers in the US have signaled the plan to maintain and in some cases increase their investment plans.
Speaker 4: Outside the US, we expect the business to perform well across all regions with significant growth in India.
Speaker 4: Included in this segment are small but rapidly growing plot-acquine focused on the monitoring critical infrastructure assets.
Speaker 4: These devices monitor and test electric utility grid assets as well as telco, data center, and a real way of backup battery systems.
Speaker 4: With all these telewins, we are initiating 2023 guidance with full year revenue expected to be between 2.1 and 2.2 billion dollars and diluted EPS to be between $4.10 and $4.30.
Speaker 4: I'd also like to briefly touch on the considerable progress we've made on our strategy over the past few years.
Speaker 4: Turn the clock back to the summer of 2018 when we set our long-term strategic and 2023 financial objectives.
Speaker 4: We set a 2023 revenue goal of $2 billion.
Speaker 4: an operating income goal of $250 million and a pre-tax return to an invested capital goal of 20 percent.
Speaker 4: All those were achieved in 2022 a full year ahead of plan.
Speaker 4: One leg of SRADG was entered the war treatment business in the US, which we did in 2019.
Speaker 4: Last year we integrated all the water treatment acquisitions onto the same ERP platform. Based on our experience integrating the distribution businesses we acquired over the last six years, we expect to see a meaningful improvement in offering leverage within our water treatment product line.
Speaker 4: Water treatment is a new run rate is approaching $200 million and operating income growth is now double digits.
Speaker 4: Over the long term, we expect water treatment revenue to grow at or above the overall water system growth rate.
Speaker 4: Another leg of that strategy was to build a profitable national groundwater distribution business. In 2022, the distribution segment again exceeded our goal of 5% to 7% operating income margin that we established in 2017. Being a natural extension from our leading U.S. groundwater market position, our distribution business now has a total of more than 400 warehouse and remote inventory low-
Speaker 4: We are the dry powder necessary to supplement organic growth, the strategic and or transformational M&A.
Speaker 4: Our strong financial performance, balance sheet, and earnings growth have enabled us to announce a 15% increase in our dividend earlier this year. We have now increased our dividend in each of the last 31 years, resulting in a compound annual growth rate of 12%.
Speaker 4: With that, I'm going to hand the call over to Jeff to review our financials in more details.
Speaker 3: Thanks, Rick, and good morning, everyone. Overall, it was a solid quarter for Frank the Electric.
Speaker 3: We established new fourth quarter records for consolidated sales and operating income.
Speaker 3: and fully diluted remains for sheer or 84 cents for the fourth quarter 2022 versus 85 cents for the fourth quarter 2021.
Speaker 3: Work noting the company's fourth quarter 2021 results included a 6.5 million or approximately 12 cents earnings per share. Morgan Purchase game which I called out last year is a one-time event in non-operational related agency for or with nature.
Speaker 3: On a pro forma basis, if you exclude the bargain purchase game impact from EPS, our current quarter EPS would be up 15% over the prior year of quarter.
Speaker 3: Fourth quarter 2022 consolidated sales were a record 489.4 million a year over your increase of 13%.
Speaker 3: Organic growth was 13% in the quarter. While acquisition related sales and in 5% offset by a 5% decline due to foreign currency translation.
Speaker 3: Water system sales in the US and Canada were up about 15% compared to the fourth quarter 2021.
Speaker 3: Due to price, volume, and acquisition related sales. In the fourth quarter 2022, sales from business has acquired since the fourth quarter 2021 were $3.5 million.
Speaker 3: Water system sales in the US and Canada grew 13% organically in the fourth quarter.
Speaker 3: Sales of groundwater pumping equipment increased by about 1% and sales of all surface pumping equipment increased by about 28% all do destroying the market demand. Water system sales decreased by 18.2 million or about 7% in the fourth quarter of 2022 due to foreign currency translation. Outside the US and Canada, water system sales increased by 18.2 million or about 8% in the fourth quarter of 2022 due to foreign currency translation. Outside the US and Canada, water system sales increased by 18.2 million or about 7% in the fourth quarter of 2022 due to foreign currency translation.
Speaker 3: About 8.2 million or about 23% versus 4th quarter 2021.
Speaker 3: Operating income margin was 15.9%. You're over your increase of 180 basis points.
Speaker 3: The increase in operating incomes primarily due to higher sales.
Speaker 3: Operating income margin improves due to fixed cost leverage from higher sales, price realizations and cost management.
Speaker 3: Overcoming weather-related headwinds at the end of the quarter, distributions fourth quarter sales were a record 148.9 million versus fourth quarter 2021 sales and 116.9 million.
Speaker 3: In the fourth quarter 2022, organic sales increased 12 percent compared to the fourth quarter 2021.
Speaker 3: And sales for businesses acquired since the fourth quarter of 2021 were 17.5 million.
Speaker 3: The distribution segments operating income was 2.9 million for the fourth quarter, a year over your decrease of 2.7 million dollars. Operating income margin was 1.9% of sales and distribution in the fourth quarter 2022 versus 4.8% in the prior year.
Speaker 3: Distribution segment income was negatively impacted by weather, as colder weather and rain were more prevalent in 2022 compared to 2021.
Speaker 3: Income was also negatively impacted by margin compression from lower pricing on commodity-based products, sold through the business, and higher operating expenses as the business invested in future growth with six new branch locations. Building system sales were a fourth quarter record of 85.5 million in 2022 and increased 3% percent percent of the fourth quarter.
Speaker 3: sales decreased by 1.5 million or about 2% in the fourth quarter 2022 due to foreign currency translation.
Speaker 3: The fueling system sales in the U.S. and Canada increased by about 14% compared to the fourth quarter 2021.
Speaker 3: The increase resulted from strong, broad-based demand across most chronic lines. Outside the US and Canada, fueling systems revenue for a flat with sales growth in India offsetting lower sales in China.
Speaker 3: Fueling systems operating income was $24.3 million, a fourth-order record driven by higher sales, compared to $22.2 million in the fourth-order 2021. The fourth-order 2022 operating income margin was $28.4% compared to $28.1% of net sales.
Speaker 3: was 24.3 million, a fourth-order record driven by higher sales compared to 22.2 million in the fourth-order 2021. The fourth-order 2022 operating income margin was 28.4% compared to 28.1% of net sales in the prayer year.
Speaker 3: Bracken Electrics Consolidated Gross Profit was 166.2 million from the fourth quarter 2022, a 14% year-over-year increase. Gross Profit as a percentage of net sales was 34% in the fourth quarter 2022 versus 33.6% on the prior year.
Speaker 3: The gross profiting freeze on the dollar basis was primarily driven by higher sales.
Speaker 3: In the fourth quarter, 2022, gross profit margin was up 40 basis points.
Speaker 3: by realized price connections more than offset inflationary cost increases. Supply disruptions caused unfavorable absorption variance is an entire inbound rate cost.
Speaker 3: No to a lesser degree than in previous quarters in 2022. Telling General and administrative expenses for 109.7 million in the fourth quarter 2022, compared to 97.7 million in the fourth quarter 2021.
Speaker 3: S-GNA expenses from a barbed businesses were about $5.1 million. Excluding acquisitions, S-GNA expenses were higher by $6.99.
Speaker 3: As a percentage of sales, total SG&A costs were 20 basis points lower than the prior year quarters.
Speaker 3: Consolidated operating income was 56.2 million in the fourth quarter 2022 up nine million dollars or 19 percent from 47.2 million in the fourth quarter 2021 despite an unfavorable foreign exchange translation headwind of approximately 3.2 million dollars.
Speaker 3: The increase in operating income was primarily due to higher sales.
Speaker 3: The fourth quarter 2022 operating income margin was 11.5% versus 10.9% of net sales in the fourth quarter 2021. The increase in operating margin was primarily due to leverage on higher sales volumes and cost controls in S-GNA spending.
Speaker 3: Other non-operating expenses were higher in the fourth quarter compared to prior year. First, interest expense was higher due to higher average debt outstanding and higher interest rates.
Speaker 3: Or an exchange losses we're higher primary due to our operations in Turkey and Argentina.
Speaker 3: The effective tax rate was 18% through the quarter compared to 21% in the prior year quarter.
Speaker 3: The company purchased about 135,000 shares of its common stock in the open market for about $10.8 million during the fourth quarter 2022.
Speaker 3: At the end of 2022, the remaining share for repurchase authorization is approximately 288,000 shares.
Speaker 3: On January 23rd, the company announced a quarterly cash dividend of 22.5 cents per share, representing a 15 percent increase from the prior quarterly dividend.
Speaker 3: With that, I'll turn the call back to Greg to highlight some of our latest global secular trends.
Speaker 4: Thank you, Jeff. In addition to our track record of successful execution, our growth prospects are also supported by tailwinds that will propel the business forward over the long term.
Speaker 4: For example, the growth in remote work, particularly in the U.S., and the need for more affordable housing will likely lead to increased demand for homes that may be beyond the reach of existing municipal water systems.
Speaker 4: amplifying the need for and use of groundwater problem systems. And whether one is on a municipal water or a private water system, greater awareness of water quality is driving demand for water treatment. Changing weather conditions across geographies, like extended periods of drought, require more frequent replacement of current groundwater systems and the need to drill deeper than before.
Speaker 4: For these deeper sets, contractors are even more focused on high-quality pumping systems as the cost of pulling and replacing the filled pumping system is considerable. Flood events, like what occurred on the West Coast last month and the coastal flooding from hurricanes, increases demand for a line of large dewatering and surface pumps.
Speaker 4: Elevated metal prices and demand for rare earth metals should also drive additional demand for industrial pumping systems.
Speaker 4: We are intentionally expanding our industrial pump offerings and our global manufacturing, assembly and distribution facilities to provide the foundation to supply this increasing demand.
Speaker 4: Often, these applications require higher cost materials and construction for the pumping system, increasing our revenue and margin. And as the cost of electricity to operate the pumps is often many times the cost of the equipment, operators are looking for high efficiency systems to lower their total cost ownership.
Speaker 4: Further, with continued uncertainty around the cranes, grain exports, we believe that reasonable to expect that increased focus on food security will lead to accelerating growth in irrigation and other regions of the world, leading to additional demand for groundwater pumping systems.
Speaker 4: Turning to our fuel business, while we recognize the world's fleet of liquid fuel vehicles is forecasted to peak around 2030, liquid fuel vehicles will be around for decades.
Speaker 4: In the US, major fueling marketers are consolidating the market, upgrading existing sites and investing in new locations.
Speaker 4: These operators understand the need and are willing to invest in new four-court equipment that is safer, cleaner, and provides the lowest total cost of ownership.
Speaker 4: Internationally, with global growth, particularly in developing regions of the world, we expect continued interest in our comprehensive line of fuel delivery and management systems, as well as installing vapor recovery and management equipment to improve air quality.
Speaker 4: For example, in India, we're seeing significant multi-year investments in gas station infrastructure and vapor containment and control across the country.
Speaker 4: Anticipating increased focus on electrification and electrical infrastructure resiliency, our team and Madison have been investing in development and sale of devices that monitor transformers and high voltage circuit breakers, as well as devices for the testing and monitoring of backup batteries for telecommunication and rail.
Speaker 4: And most recently, in response to the multibillion dollar National Electric Vehicle Infrastructure Program, our team has developed the Charger Agnostic Next Phase Switch Gear. This switch gear can also be used by automobile dealers to satisfy manufacturer's requirements for on-site level 3 charging.
Speaker 4: In short, all three of our segments are well positioned to benefit significant global trends, and our track record gives us confidence and our ability to successfully us to well into the future.
Speaker 4: We're entering 2023 with a strong foundation. We're focused on driving value for our shareholders. We attributed our record results for 2022 to the continued execution by the Franklin team globally. I want to thank each of my colleagues for no year of operational strategic and financial success. This concludes our prepared remarks and we will turn the call over to Andrew for questions. Thank you.
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Speaker 2: Our first question comes from the line of Mike Halleran with RW Beard.
Speaker 5: Hey, good morning everyone. Good morning, Mike.
Speaker 5: Hey good morning everyone. Good morning Mike. So you know Greg you talked a little bit about.
Speaker 5: expectations from economists, back half weakness, maybe talk about what embedded in your guide into your work of the year. Is there a slowdown expecting the back half from a conservative and prospective? How does that layer in or how does that look by the various product categories or segments that you have?
Speaker 4: any kind of direction of health, which you're embedding in guidance as far as that goes. Sure, Mike. I'm not sure my crystal ball is any better than yours, but see, I suspect yours might be better because you've seen talk of more companies. Yeah, as we see it, Mike, we got a strong backlog coming in the year, which we've talked about now for the last couple of years and being unusual for us because we kind of sell out a stock.
Speaker 4: you know, you anticipate that will be kind of filling, you know, we'll be taking that down kind of about throughout the year. And so that's why we're mindful that maybe the back half of the year might be not as strong as the first half because of what people are saying. That said, you know, the seasonality of our business.
Speaker 4: We're very strong in Qs 2 and 3. If there was to be stocking or maybe going back to normal order patterns in the US in particular in the back half of 2022, we'll be lapping those. And so that will be a reasonable comparison. Fundamentally, in the field business, again, we see it being steady. It is a little bit seasonal because of the construction of storage Another question is for 22, Transformation partners with N previews, will richer and will pay transmission cost? 20% and 30% in scene, but first, in La voilĂ certainly will zero it.
Speaker 4: say that we thought through that and this is how we developed our guidance for the year.
Speaker 5: You know, that's helpful. On the pricing side of things, you look at how things are tracking.
How much price is embedded in that power process? Are you seeing that pricing hold as you look across your product segments? Sure, I sure will, Greg. Good morning, Mike. I would say that our pricing is going to vary a little bit by product and by region mic, but in general.
I think consistent with our overall guidance, it's going to be in that kind of low and low to mid-single digit range where you're going to see it kind of in the mid-single digit range as we're also seeing currency impacts and we're attempting to recover the impact of foreign currency. So in general, it's going to be more of a return to normal.
In 2023, versus 2022, which was really characterized by high inflation, high pricing to recover inflation. You know, significant supply chain challenges, I think in general, we see 2023 returning to be more normal. And not necessarily saying that that looks like kind of pre-COVID years, but certainly. Certainly.
less inflation, a little better over the pricey and continue to improve in supply chain as we move through 2023 overall. I answered a little more than just pricing there, but I wanted to give some. Yeah, but that helps. And that's when I did a inventory for me. It doesn't sound like there's access to channel inventory, whether it's at headwater or
wouldn't say it's exaggerated. I mean you're gonna have places where you have some higher inventory and some places where you have a lower inventory but overall I think it's it's in pretty good shape.
in the supply chain and that will pull through demand. I think Greg mentioned earlier that there was some heavy pre-biden in the fourth quarter of 21 due to really longer lead times for supply chains and challenges to procure materials. And so we're seeing a return to more normal biomeater and so we expect to.
Thanks, a couple questions. Maybe first with distribution. As we sit here today, given the seasonality in the business, given the piece that's being impacted by the rollback in commodity pastures, what would be a realistic kind of margin bandwidth you would suggest?
to improve our margins on a go-forward basis. And the headwater distribution business has really done a nice job over the last five years of building and growing their gross margin as well as operating margins.
They had a really nice performance this year. Having said that, they also had the benefit of a strong inflationary environment, which was giving them a margin boost in 2022. We think that returns more to normal, so they won't have that margin boost in 2023.
I would say that, you know, our range is still that 5 to 7% range, but we certainly expect them to perform near the higher end of that range.
How much of the distribution revenue so you did 670 we'll call it last year. How much of that 670 is impacted by commodity driven adjustments? And how often are those commodity driven adjustments?
made, if you will. Yeah, so in terms of their overall business, I would say that, you know, depending on the next it's 40 to 50 percent commodity-based products and the remainder is non-commodity-based products.
And, you know, the commodity adjustment really is, you know, it's the flow through of the inventory from the time they purchase it to the time they sell it. And so, you know, they're able to price more dynamically. So, when, you know, costs go up, they're able to price that immediately into their products that they sell. And that's what gives them a little margin boost.
And then maybe it's just a follow-up question. On the groundwater business, I thought you said in your prepare to mark Jeff. Jeff, the groundwater was up, this is US and Canada. Groundwater was up 1% in Q4. If I have that number right, then I could have jotted it down wrong. That would imply that volume was down. Can you guys touch on?
that, provide a little more colors, please. Yeah, let me take a quick look. I think that
Volume would have been flat, but possibly slightly down in the fourth quarter.
in the underground water business.
in the groundwater business.
I guess when I understand it's based on your kind of remarks and overall bullishness on the business, I guess I'm a little bit surprised to ground water was down, but maybe that was a pre-bite phenomenon on the prior year. Can you just kind of flush all that out? Yeah, I think that you hit the mail on the head there. Some of it was pre-bite earlier in the year.
challenges that are impacting us in various locations as well.
Matt, I would add that, again, a meaningful portion of that business, although sales are from the manufacturing segment or the distribution segment. And so as Headwater was looking at their forecast needs that they were able to turn down a little bit quicker on replenishment.
But they're out the door sales. We're still very strong. So that's where we get the information of why we think the market is strong is we have that level of transparency at distribution level. But yet the inter company sales or inter segment sales can be more volatile because of the large component of that business going through headwater.
Understood. Thank you guys. Thank you. Thank you. And our next question comes from the line of Walter Littag. It's Seaport Global. Hi, good morning, guys.
Do we have one to ask about the 2023 price cost dynamics, understanding the things look like they're going to be normalizing? Are you in your guidance, is it largely volume, or could you give us an idea of how much you're expecting from price in 2023?
You know, is there some very over a price from 2022? Good afternoon, Walt. And you know, I would say in our guidance, it's really like we've talked about the business a couple of years ago. The overall guidance is kind of mid single digits overall that comprises.
price and volume and so we would expect you know a couple of points of price, a couple of points of volume, some growth from you know new products and market share in there but we also have built in there you know an offset for continued foreign exchange headlines in 2023.
And so that helps bring the average down overall. Okay, great. Okay. Okay, good. And you also called out a couple of things. I think right during your, some of your prepared remarks.
They sounded like growth investments going into industrial pumps and into fueling systems. And I wonder if you could just give us an idea of the market opportunities, the something that you expect to see revenue growth from this year.
You know how you know, is this a new initiative or is this something that the company tends to do? Sure, Walt. So I'll take the second one first. So embedded in our joint business, I guess we could describe more than energy business is that we have a a product line that we've been developing over the years that is used to, these are products are used to monitor the condition of transformers.
the electric utility space as well as high and now medium voltage circuit breakers as well as backup systems for, you know, for Intelco, like think about cell tower backups and railroad crossing backup power and also for server farms. And regardless of where you land on the demand for liquid fuels going forward.
There's no question or in my mind that we're going to see an increase in man for electricity and I think it's already been pretty well documented in the United States about some of the challenges with the electrical grid. You know, they just can do the grid, the creakiness I'll call it the grid and the need to monitor assets more discreetly across that grid. And so given our experience in critical asset monitoring that we developed in the fuel unit.
space, we've used that capability and we pivot it to focusing on more broadly monitoring critical assets in an area that we expect to see growth. And so we're going to continue to invest there. And again, it's a small part of that segment, but we think it's growing 25% a year and we are looking forward to continued growth. One of the challenges we've been actually hampered by over the last...
a couple of years more than that small product line than in the other areas is the build-ability chips That should improve more in 23 and we should see less constraint on top line activity because of that
Industrial pumps, Walter, what we're seeing again is that we've been growing up the primary brand product line. That business was actually started by its founder 25 years ago with sales and zero. And now that's a business that is well north of $100 million. It's more diverse than the customer base than in the past where you may recall back in it.
the last decade we had some volatility there with the low price collapse really impacted the pinder brand. And that, you know, we have a much more diversified base both in end markets and also in geographies with pioneer and other similarly situated industrial pumps. And given our extended presence in areas of the world, we're, you know, middle extraction is a strong part of the economies.
South America, United States. We're building a brand, we're building a position for people recognizing Franklin.
As a residential and ag submersible motor producer, when I started with the company over 30 years ago now, we've extended that quite a bit into mining and municipal and industrial applications. And so as we continue to develop our brand and people begin to get greater awareness of us in those channels, we expect to do well. So we're going to continue to look at pump line acquisitions.
product line developments, product developments in that space as well. Okay, great. Great. Thanks for that detail. And then maybe a last one for me. I think in the prepared remarks you guys talked about how through productivity and other things you've increased your operating leverage. I wonder if you could tell us, you know, what's embedded in the 2023 guidance.
Well, we met that out with our cost increases. So we're looking to offset at a minimum of piece of the overall inflation that we see in our cost piece. I don't have a specific number for you in terms of the...
the impact there, but you know, we're always looking to draw productivity improvements. I would comment that you'll notice on the statement of cash flows that for cash tax, we've invested in 2022. Just more of the $40 million that's an increase from approximately $30 million in the prior year.
That's really driving those productivity improvement projects as well as bringing capacity in house and helping to improve the resiliency of our supply chain. And so we're focused on investing CapEx to drive that improvement annually year over year.
And it's intended to improve our margin but also offset inflationary pressures.
it's intended to improve our margin, but also offset inflationary pressures. Okay, great. All right. Thank you.
Thank you. I'm Shilmo for their questions. So with that, I'll hand the call back over to CEO Greg St. Stat for any closing remarks.
Thank you Andrew and we thank you all for listening into this morning to our fourth quarter earnings conference call. We look forward to speaking to you after the first quarter with our first quarter results. Have a good week.
Thank you for participating. This concludes today's program. You may now disconnect.