Zep Inc (ZEP) Q1 2015 Earnings Conference Call Transcript

Mike Saison – Key Bank

Great. Thank you.

Operator
Our next question comes from Lee Amberk from Wonder Lake Security. Please go ahead.

Lee Amberk – Wonder Lake Security
Thank you. Morning John. Morning Mark.

John K. Morgan and Mark R. Bachman
Good morning.

Lee Amberk – Wonder Lake Security
John, I know the service wanted the [inaudible 00:36:58] initiatives but could you give a sense of where you are and the elimination of unprofitable, less profitable products and customers?

John K. Morgan
Yeah. And It’s more this time about the products and lacks about customers. The efforts that we made on the customers side most recently were really complete. Mark I am going from memory but over a year ago, a year and a half or ago, so I would think more about going forward and from a product perspective we still have quite a few thousand products, as measure by skew account. We have more than necessary. I think we made great progress in that area, in the areas of retail automotive retail and William and that kind of thing. I think there’s still a lot of work to be done in our direct sales business in our distribution business. There is a lot of work underway in that regard. If you think of a baseball analogy, I would say in about a third of our business, we are probably in the seventh or eighth inning in about two thirds of our business.

I think still in the second or the third inning. So the thing that I think about most is not so much the sheer direct margins on those items but the impact that those has on the supply chain particularly as we continue the transformation work on the supply chain trying to get to a more simplified and effective footprint. So that’s from a timing perspective why it’s concomitant with Jeff and his team are doing in supply chain transformation.

Lee Amberk – Wonder Lake Security
And John, you sort of slipped it now when you respond of the Jan/San was roughly over 60% of the product but now it’s less than, I would say roughly 35%. You are satisfied where you are and Jan/San distributions channels you have in place?

John K. Morgan
I am. The thing that had been happening and we had prognosticated this channel shift. Frankly, even I underestimated the rate of shift would take place in large distributors and large wholesalers, retailers, officer supply houses and even online are increasingly a factor in the center of Jan/San businesses. Now Jan/San product and I am extremely pleased that we find out way into those over the last couple of years. But while I think those forces on the market will continue to grow and will continue to being shared, I think we are largely now in the distribution now that we need for Jan/San products.

Lee Amberk – Wonder Lake Security
Great. Thank you, John.