Richard Dearnley: Right. Right. Do you have a feel for what — where the headcount was at the end of ’22?
Paul Driscoll: 2022 or 2023, you mean?
Richard Dearnley: No, 2022.
Paul Driscoll: 2022, it was 620.
Walter Johnsen: 620, and we’re at what about — I think we’re at about 650 right now or at about something like that.
Paul Driscoll: Yes.
Richard Dearnley: That’s close enough. Now on the — if the sale of Cuda and Camillus was $19.8 million, and the taxes were $2.9 million. That suggests proceeds of $16.9 million, but you said the net proceeds were $13.0 million. Where’s the other $3.9 million go? Or is my math go wrong?
Paul Driscoll: The taxes were $3 million. But there’s a holdback of $1.5 million that we haven’t received yet, that we’ll receive at the end of this year at November 1.
Richard Dearnley: All right. But there would still be another $1.5 million missing.
Paul Driscoll: No, I don’t think so. But what — sorry, what was that math again?
Richard Dearnley: Could that be — well, the $19.8 million was the sale taxes.
Paul Driscoll: Yes. Well, we had the expenses associated with this now.
Richard Dearnley: Okay. Okay, that would account for that. All righty. And then the sales mix between Westcott and First Aid, and you might want to break down the pro forma as you leave ’23 if it’s significantly different. But for the fourth quarter and the year.
Paul Driscoll: Are you asking what the percentage of the First Aid business was?
Richard Dearnley: Yes, first aid — yes, the mix — sales mix between the two pieces.
Paul Driscoll: It was 60% for the year. It’s 54% last year. The fourth quarter, I’m not sure I would think it would be like 62% maybe.
Richard Dearnley: Okay. And ex without Cuda and Camillus, we can just adjust the math for one month in the fourth quarter and.
Paul Driscoll: Yes. Two months, right.
Richard Dearnley: Right. The share count, is the bump in the share count from the third quarter to fourth quarter fully diluted? Is that because you closed the year at a high?
Paul Driscoll: Absolutely. It’s the stock price.
Richard Dearnley: Yes. And then in October, you mentioned that the sales had started strong generally. And so it looks like the fourth quarter tailed off. Am I reading that correctly?
Walter Johnsen: Well, we sold 6% of the company. And the sales were a little softer in November and December. But I mean, I guess there’s waves in an ocean too. So January and February really strong.
Richard Dearnley: Yes. And do you have a feel some folks said they were expecting back-to-school to be down in ’24. Do you have any advanced feel given the over-inventory situation as you got into back-to-school in ’23, it would seem like things should be more “normal”?
Walter Johnsen : Yes. I don’t know what somebody else has experienced. But we’re expecting a good back-to-school. And the orders that are coming in are solid. And as far as inventory reduction, if there are customers still out there with inventory reduction programs, then they have a problem.
Operator: [Operator Instructions] Our next question comes from the line of Sam Namiri with Ridgewood Investments.
Sam Namiri: Great year. I like the free cash flow generation. I had a question about that. It was on the press release, you wrote $24 million of free cash flow with the $5 million reduction. So I just wanted to make sure that was cash flow from operations. Is that right?
Paul Driscoll: No. It’s free cash flow. It’s cash flow from operations less the capital expenditures.
Sam Namiri: Okay. But that doesn’t include the Cuda sale?
Paul Driscoll: No, it does not.
Sam Namiri: Okay. Okay. And then — so I mean, that’s pretty solid. And then the other question I had was, so with the expansion plans, are you, I guess, you’re going to see spending some CapEx on that. Do you have a sense of how much CapEx you’re going to spend on that and the timing of that as well so we can think about cash flows?
Walter Johnsen: Yes. We’ll be spending about $6.5 million this year on CapEx. And our depreciation and amortization is somewhere like $5 million.
Paul Driscoll: $5 million.
Sam Namiri: How much did you spend last year on CapEx for ’23?
Walter Johnsen: It’s about $4.3 million. I think this is just from memory…
Paul Driscoll: $4.7 million. .
Walter Johnsen: $4.7 million.
Sam Namiri: Okay. Okay. So not really much more than normal.
Walter Johnsen: No, but it’s impactful spending. For example, in Canada, that HawkTree acquisition is bringing a lot of business, and there’s no place to put it. I mean it’s a good problem. But you got to do it.
Sam Namiri: I get it. So I mean like if I back out the $24 million minus the $5 million of reduction inventory, I get like $19 million. And then assuming everything even stays flat, which I assume won’t because you guys seem to have some nice business. I get to like $17 million of actual free cash flow and on $154 million…
Paul Driscoll: No, the thing is we’re not going to drive down inventory the way we did in 2023. So inventory is going to grow based on our sales growth. So you’re not going to get — that impact is going to go the other direction.
Sam Namiri: Got it. Okay. But then you should have impact of growth from the demand you’re seeing as well.
Paul Driscoll: Yes.
Sam Namiri: Okay. And then another question I had was you’ve reduced your debt quite a bit. If you make an acquisition, I assume you’re going to use debt to finance? What you had in the past.
Paul Driscoll: Yes.
