Central Garden & Pet Co (CENT) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to Central Garden & Pet's Third Quarter Fiscal Year 2017 Financial Results Conference Call.

My name is Manny and I will be your conference operator for today.

(Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the call over to Steven Zenker, Vice President of Investor Relations and Communications.

Please go ahead.

Thank you, Manny.

Good afternoon, everyone.

Thank you for joining us.

With me on the call today are George Roeth, Central's President and Chief Executive Officer; Niko Lahanas, Chief Financial Officer; Howard Machek, SVP, Finance and Chief Accounting Officer; J.D. Walker, President, Garden Branded Business; and Rodolfo Spielmann, President, Pet Consumer Products.

Our press release providing results for our third quarter ended June 24, 2017, is available on our website at www.central.com and contains the GAAP to non-GAAP reconciliation for any non-GAAP measures discussed on this call.

Before I turn the call over to George, I'd like to remind you that statements made during this conference call, which are not historical facts, including adjusted EPS guidance for 2017, expectations for new product introductions, future acquisitions and revenue and profitability expectations, are forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those implied by forward-looking statements.

These risks and others are described in Central's Securities and Exchange Commission filings, including our annual report on Form 10-K filed on December 2, 2016.

Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise.

Now I will turn the call over to our CEO, George Roeth.

George?

Thank you, Steve.

Good afternoon, everybody.

Central's third quarter was the most successful third quarter in company history from a revenue and net income perspective.

The quarter's total revenue growth of 12% was driven by strong organic growth and also aided by our Segrest and K&H acquisitions.

Importantly, our organic sales growth was a robust 8% and reflected market share gains driven by strong consumer takeaway of our products.

The favorable impact of the revenue growth and our realized cost savings more than offset an increase in demand-creation spending and cost to upgrade and expand the capacity and capabilities of some of our facilities.

The result was a record Q3 profitability and a gain in EPS of 22% over the prior year.

A strong Garden season was a key driver of our success in the quarter.

The season has exceeded our expectations.

We have driven market share gains and benefited from weather that was favorable for our grass seed business.

The Garden segment's strength, 15% sales growth, encompassed almost all areas, including our brands, private label and other manufacturers' products.

Innovation, new listings and successful demand-creation initiatives drove significant revenue gains, while earnings benefited from the operating leverage of higher volumes as well as from our ongoing cost savings initiatives.

The Pet side of the business posted its eighth consecutive quarter of organic sales growth, driven by our consumer brands.

The strength of our diversified portfolio was borne out by the fact that Pet delivered 2% overall organic sales growth, despite lower sales of our animal health business and other manufacturers' products.

Our new acquisitions helped overall total Pet segment sales grow 9%, but those additions did negatively impact our operating margin.

Niko will give some detail on that in just a bit.

We continue to make excellent progress on our strategic initiatives.

Our cost savings and productivity efforts are moving along nicely.

For example, during the quarter, we opened our new 550,000 square-foot packaging and distribution facility in New Jersey.

This services our Nylabone, Fore Paws and IMS businesses and will help these businesses operate more efficiently and support continued sales growth for the foreseeable future.

In addition, our Pet and Garden segments have a number of businesses that have lower cost as we continue to optimize our insourcing/outsourcing mix.

Moving beyond cost savings.

Our innovation activities are progressing as well and have played a significant part in this quarter's growth.

This year, we rolled out several new products in our Garden segment, which have helped grow sales significantly.

For example, an array of new private label offerings spanning several product areas and customers, have performed well.

We also added SKUs and saw increased sales in some of our branded products like our AMDRO Quick Kill line.

And finally, we continue to work on building our strong customer focus and advancing our key retailer partnerships.

Beyond the private label products which we have talked about, we are partnering in marketing, promotion and category management activities to help our retail partners expand their sales and profits.

For example, our Segrest acquisition, which has made Central Garden & Pet the only full-line provider of aquatics products, has afforded us the opportunity to have high-level discussions with our customers about partnering to drive store traffic and helped with penetration of aquatics.

On the acquisition front, Segrest continues to exceed expectations, and the K&H integration is on track although it is early in the integration process.

Importantly, we continue to evaluate a healthy pipeline of acquisition and joint venture candidates and are adding resources to continue to strengthen our team in this area.

Overall for Q3, I think it's also important to mention that our earnings benefited from an increase below the line in other income due to the seasonal nature of a JV we entered into this fiscal year.

In the fourth quarter, that benefit will be more than offset by a loss from the same entity as it will be out of season.

Next year, over a full year, as part of Central, we expect this investment to be accretive to earnings.

As we mentioned on last quarter's earnings call, certain nonoperating factors were expected to impact net income in the remainder of the year.

Those factors include the seasonal JV I just mentioned, along with a second JV and higher corporate expenses versus the prior quarter -- prior year quarter, which had benefited from lower insurance and payroll-related expenses.

We expect this impact to be felt in our fourth quarter, which we believe will cause our fourth quarter earnings to be below the prior year.

We spoke of this last quarter and it's playing out as expected.

Also keep in mind that the fourth quarter is relatively small for us from an earnings perspective.

So any spending for future growth has a disproportionate impact on the EPS number.

Net-net, in light of our strong third quarter performance and the factors I just detailed that impact our fourth quarter, we are raising our adjusted EPS projection to $1.44 or higher.

This includes any impact from our K&H acquisition.

Now before I turn it over to Niko, I do want to acknowledge his recent and well-deserved promotion to Chief Financial Officer.

Niko has tremendous operating knowledge of our businesses and the financial acumen that the role demands.

We're fortunate to have him in the seat and driving the business.

And with that said, I will now turn it over to Niko to go over the financials and give some more color on the quarter's results.

Thank you, George, and thank you for those kind words.

Good afternoon, everyone.

We issued our third quarter press release with our financial results earlier today.

I'd like to give you some more detail on the results and then we'll open it up for questions.

Earnings for the quarter of $0.62 per diluted share were up 22% from $0.51 over the same period a year ago.

Let me give you some color on how that played out.

Consolidated company third quarter sales rose 12% versus the prior year to $575 million, driven by organic growth in both our Garden and Pet businesses and enhanced by 2 acquisitions in the Pet segment, Segrest and K&H.

Quarterly organic growth was 8%, with Garden, the larger contributor, on the heels of a very successful season.

Consolidated gross profit rose $20 million, and our gross margin increased 10 basis points to 31.9%, due in part to cost savings, which helped offset less favorable mix compared to prior year.

SG&A expenses for the quarter increased 8% or $10 million versus a year ago and as a percent of sales, decreased 70 basis points to 21.8%.

Operating leverage from higher revenues and realized cost savings drove the improvement.

We've been making good inroads into our efforts to bring controllable costs down to 1% to 2% per year.

Operating income for the quarter increased to $58 million compared to $48 million a year ago in large part due to the strong Garden results.

Also keep in mind that in the third quarter of last year, we benefited by a $2.4 million gain from the sale of a manufacturing plant.

Operating margin of 10.1% was up 70 basis points on the lower SG&A expenses as a percent of sales and, to a lesser extent, our improved gross margin.

Turning now to the Pet segment.

Pet segment sales for the quarter increased 9% or $26 million to $313 million.

The company's latest acquisitions, Segrest and K&H, made up a good part of the game.

Organic sales increased 2% with the dog and cat, small animal and health and wellness categories offsetting weaker results in our animal health business as well as lower sales of our other manufacturers' products.

Year-to-date, our Pet organic growth of 3% is pretty much in line with our Nielsen POS numbers, which in most cases, are exceeding their respective category averages.

Pet segment operating income decreased $3 million or 7% compared to the prior year.

Almost all of the decrease is due to the comparison against the manufacturing plant sale I mentioned earlier that occurred in the third quarter of 2016.

Pet operating margin decreased 200 basis points to 11.5%, with the manufacturing plant sale accounting for 90 basis points of the decline.

Other factors, which contributed to the decline included unfavorable expenses to expand, move and consolidate facilities, sales mix and the company's recent acquisitions.

Now turning to Garden.

For the quarter, Garden segment sales increased 15% or $34 million to $261 million.

The strength was widespread with grass seed and private label products doing particularly well.

Initiatives around successfully launching new products, upgrading packaging and increasing promotions contributed to the strong performance.

Garden's operating income improved to $38 million from $26 million in the third quarter of last year and operating margin was 14.7%, up 310 basis points from the prior year quarter.

Higher volumes, which enable favorable operating leverage and benefits from cost savings initiatives, were significant factors in the margin expansion.

Moving back to our consolidated results.

In the third quarter, other income rose to $1.6 million from $300,000.

The difference reflects the contribution from a JV we entered this year.

As George mentioned earlier, since the business is seasonal, the benefit we derive this quarter will be offset next quarter.

2018 will be the first full year we've been in this JV and we expect it to be accretive for the year.

Net interest expense is flat at $7 million.

Our net income for the quarter was $32 million and diluted earnings per share were $0.62 compared to $26 million or $0.51 in the third quarter of 2016.

Adjusting for the manufacturing plant sale in the prior year, third quarter 2016 EPS was $0.48.

So on a GAAP basis, EPS was up 22%; and on a non-GAAP basis, up 29%.

Now looking at our balance sheet and cash flow statements.

For the quarter, cash flow provided by operations was $139 million, relatively unchanged from $140 million in the third quarter a year ago.

CapEx was $10 million versus $7 million in the third quarter of '16.

The increase was predominantly driven by investments in expanding and consolidating our facilities.

Depreciation and amortization for the quarter was $11 million, flat with a year ago.

Our total debt increased to $435 million from $395 million a year earlier.

The increase reflects higher borrowings on our revolving line of credit, necessitated by recent investments in JVs and the K&H acquisition as well as our higher level of sales, which has increased our accounts receivable balance.

Our leverage ratio at the end of the quarter was 2.1x compared to 2.5x a year ago.

We also had $360 million of availability on our credit line at the end of the quarter.

During this quarter, we did not repurchase any of our outstanding stock and approximately $35 million remains available under the board-approved stock repurchase program.

Now I'll turn it over back to George.

Thanks, Niko.

So to summarize, we are very pleased with our results and the strong momentum the company is demonstrating.

We will continue to execute on our strategic plan and the initiatives to increase sales and lower costs in an effort to drive sustainable profit growth in the years ahead.

So with that said, operator, please open the line for questions.

(Operator Instructions) Our first question is from Bill Chappell of SunTrust.

I guess first question on the Garden segment.

How much -- as we look at the gains and market share gains, is there a way to say that was largely due to like one mass player focusing on private label and you being well-positioned there?

Or did you see it kind of across the board in terms of market share gains?

Hi, Bill, this is J.D. I'll take that question.

Bill, we really saw strength across not just all of our segments of business -- all of our businesses, I should say, in the Garden segment, but also across customers.

So I can't point to one channel and say that one channel performed much stronger than others.

Our strength was really across the entire business.

Okay, great.

And then in terms of the Pet side, can you maybe talk about how much the channel pulled you back?

I mean, we've certainly heard plenty about both PetSmart and Petco, and Pet specialty remaining weak throughout the quarter.

Is that an increasing drag on your business?

Was it an increasing drag on the quarter?

And how do you see that going forward as we go into next quarter as well?

Hi, Bill, this is Rodolfo.

We do have significant presence in the Pet specialty channel, and we're committed to drive growth with our partners there in the channel.

As you mentioned, there have been some challenges, but we are gaining share in the channel.

We're partnering with our customers really well and that has allowed us to continue growing.

We're working on a number of ways through the channel, including the independents, to provide value and help them both drive category growth and foot traffic.

Just to name a few, we're leveraging Segrest to have different conversations in terms of how to drive that instant traffic.

We have increased investment in innovation, and we have established IMS qualities to safeguard the value proposition across channels.

So in general, we continue seeing growth in that channel for us.

Yes, I will just add that PetCo and PetSmart indeed have slowed down.

We've been able to compensate for that by driving our business with our other retail partners as well as trying to get the business online with them in the ways that Rodolfo has described.

I don't see that trend reversing in a quarter.

I know they're both very committed to getting store traffic up and improving the results.

I have every expectation they'll make efforts to do that, but that takes more than a month.

Yes, I imagine.

And then last one for me.

Just in terms of the margins, are we done largely with the New Jersey plant kind of consolidation -- facility consolidation?

Are there any other projects that are in the works at this point?

The bulk of it is done.

There is still a little bit of expense going on there, but I would say that the bulk of it is done as far as New Jersey consolidation goes, yes.

But I would add that our cost savings initiatives and capital spending will continue.

So while that project may wrap up towards the end of Q4, they will be up -- there are others and will be others in the pipeline to continue to drive the savings.

The next question is from Jason Gere of KeyBanc Capital Markets.

I guess, 2 questions.

One, just following up on Bill's question about the projects.

I guess I'm wondering, as you think about projects going forward, how much relates to acquisitions that -- future acquisitions that you're doing?

And I know a lot of the acquisitions you do are kind of smaller tuck-in.

But I was just wondering, a, your thought about maybe some larger bolt-on acquisitions or transformative acquisitions and how that would play into kind of rightsizing I guess, I would say, the footprint from a cost perspective.

That's the first question.

So from a cost perspective, I would argue, what we're doing is not acquisition-dependent.

So we're looking at optimizing our current footprint.

We've done that to some extent with our Garden distribution network with movement of some facilities.

As you know, we've done it in New Jersey.

But there's also projects around automation, there's projects around in-housing of certain products, driving best practices.

So I'll tell you there's a lot of initiatives on cost savings that are completely independent of M&A activity.

I'll tell you, our M&A pipeline is quite healthy.

We're looking at a range of sizes.

I wouldn't argue that something transformative is our highest priority.

There are plenty of tuck-in opportunities that leverage our capabilities in Garden and Pet.

Just the sheer fact that there's 1,400 pet manufacturers out there globally gives us a rich target field to go after.

And frankly, we can be patient and not overpay.

So we're feeling good about our M&A pipeline that will continue, and I would say that our cost savings initiatives are independent of that.

Okay, great.

And then I guess I know you guys talked about the market share gains that you saw in Lawn & Garden.

I guess I was just wondering how much you could talk about doing the private label side versus your own branded product in terms of some of that share gain and how much of it was incremental distribution at new points of retail as opposed to just expanding kind of the shelf space.

So I was just wondering if you could talk about that.

And then do you see more opportunities on the private label side out there with, obviously, the world is hearing about the invasion of Aldi and everything else out there private label.

Just what's the penetration opportunity for you for doing more private label with other retailers that are in the Lawn & Garden industry?

Sure.

Jason, it's J.D. I'll take that.

So private label is an important part of our business and it has been very successful this year as some retailers seek to differentiate their offering from other retailers.

It's always been important to us in that it gives us more critical mass with the retailer, gives us a bigger share of shelf.

It also allows us to run those products through our manufacturing facilities and those favorable variances that flow off of that have -- favorably impact our branded products as well.

And having said all of that, this year, our private label business, and we had 2 major private label relaunches with 2 major customers, so those have been successful, but our branded business has grown nicely as well.

So we believe that by partnering with the retailers on the private label brands, it creates a strategic partnership with that retailer and that you're jointly driving that brand together.

So it's been a beneficial relationship for us.

As far as the future and what that looks like, potential opportunities, we'll continue to pursue private label opportunities if it makes sense for us.

Yes, and the only thing I would add to that as well is our approach to private label I would argue is fairly unique in that we drive our retail partner's private label as hard -- or every bit hard as our own business.

So we treat it as if it's our own brand.

We want it to be every bit as successful, and you couldn't tell the difference in how we approach it relative to our own brands.

And I think that's unique in the marketplace.

Okay.

And then just the last follow-up.

Some of your competitors talked about the weather and some of the pushback on -- and again, everyone does something different within Lawn & Garden.

You guys are primarily grass seed fertilizer.

Just wondering if there was any delayed sales that you saw that came in from last quarter to the quarter just reported?

Or anything that you think that could be pushed off from the quarter you just reported, as strong as it was, into next quarter?

Anything that went into July?

Any late season?

So I was just wondering if any context around there.

Sure.

So I know that some of our competitors have talked quite a bit about weather.

I would say that weather for what I would call our traditional Lawn & Garden categories, you mentioned grass seed -- grass seed, some of our controls businesses, the fertilizer business.

The mild temperatures in the spring that carried into summer, it became a bit of an extended season.

So we've benefited from that.

That's been a tailwind for those businesses.

I failed to mention earlier, when Bill Chappell asked his question, but it's been a headwind for our Wild Bird business.

So that business typically benefits from harsher weather conditions.

Weather in general, though, if I had to summarize, I would say that it did not negatively impact our business as of -- as was reported by others.

I think that it was a benefit to us, particularly grass seed.

It's been an exceptional grass seed year.

As far as shifting between quarters, I would say that our POS, our consumption has been strong throughout the year.

It was strong in Q2 into Q3, and we're seeing that extend into July as well.

The next question is from Jim Barrett of CL King.

George, you touched upon POS.

Could you tell us what the POS growth was for Central in the quarter and year-to-date?

And if you have it, what the POS growth was for Pet specifically in the quarter?

Jim, this is Rodolfo.

What I -- I won't quote the numbers specifically.

What I can tell you is our growth is at least 300 basis points larger than the categories where we compete in.

It depends again on what channels are being measured (inaudible) gets a bit more complicated.

But of the channels we can measure via Nielsen, we're growing at least 300 basis points higher than the category.

Yes.

And to give you something on a directional sense, I would say low single digits is what we've typically seen.

I see.

And although you touched upon it already, George, could you talk about the demand-creation programs?

What were they and how effective were they?

And how much more opportunity is there in that area?

Jim, this is J.D. I'll take that question.

So we've talked a lot about our -- on previous calls, about our conversion model.

And that model relies on us to take cost out, operating costs, where we're taking some of those savings and reinvesting them back in demand-creation activities.

And that can take on a number of different forms.

It could be increasing our advertising on our products, and we've seen a big focus on digital this year in enhancing our digital presence.

It also is working with the retailers and reinvesting some of those funds back with the retailers to drive promotion of our products, get our products off-shelf.

We believe that if we can drive trial of our products and our products are excellent, second to none, that if the consumer tries our products, typically they have a favorable experience in terms of efficacy, that they will return and we've converted that consumer for the long haul.

So we've invested in demand-creation activities, both at the store level with the retailers as well as through media spend, et cetera.

The next question is from William Reuter of Bank of America Merrill Lynch.

You talked a little bit about how private label was certainly a driver of the Garden segment.

Can you talk about maybe how much of the growth that we saw in this quarter would have been due to private label versus branded, meaning just break it down in kind of broad brush strokes?

We don't break it out by certain segment.

We -- so we're not going to reveal that.

What I can tell you pretty definitively is we saw strong growth in branded, we saw strong growth in private label and we saw strong growth in other manufactured products across Garden.

So it's been all elements working to our advantage.

And across our entire portfolio, both Garden and Pet, private label is a little bit over 10% of our total portfolio.

Okay.

Earlier on in the call, one of your questioners asked about acquisitions and you said that they weren't necessarily going to be transformative.

Was this speaking to how large the size they were going to be?

Or was it speaking to the fact that they were not going to be outside of your existing categories?

I would tell you, when we say transformative, you're typically talking about the size of the acquisition.

But it also could be whether you added a major third leg.

I would tell you that that is not our strategic focus.

Our strategic focus is on Garden and Pet, leveraging our current capabilities, tuck-in acquisitions that we can drive value pretty quickly on and that we can fund through our cash flows and line of credit.

Okay, and then just lastly for me.

The New Jersey facility that's going to be completed soon.

Is there any way you can quantify how much of an impact we might see on your P&L from this coming online?

No, we wouldn't give away those specifics.

I will tell you any capital endeavor that we would drive would obviously earn well above the weighted average cost of capital, and we look at each project with that in mind.

The next question is from Karru Martinson of Jefferies.

Just a follow-up on the facilities question.

Once you're complete with this project, where do you see yourself kind of on a facility utilization rate?

I mean, how long do you feel you need before you need to make more investments in your facilities?

Well, that's a very situation-dependent question.

It varies across the company.

I would tell you, we have a comfortable demand and capacity ratio in most of our businesses.

Our dog and cat business have been growing quite rapidly and became capacity-constrained.

That's not the norm in the company.

In most parts of the company, we have the capacity we need.

And frankly, one of the reasons we like private label is when we're the lowest cost producer, and we often are, we have excess capacity we're going to aggressively pursue private label, and that's what we've been doing.

Okay.

And with the strong POS data that you're seeing, I mean how do you feel about inventories at retail kind of especially on the Garden side, in particular?

This is J.D. again.

I'll take that -- the Garden portion of that question.

In terms of retail inventories, I would say, in aggregate, we feel very good about the position.

Now there's puts and takes.

We did have a couple of major launches this year, so there might be a couple of spots where we have some heavier inventories than others.

But in aggregate, our inventories are below prior year and in good shape going into the next quarter.

Okay.

And when we look at that leverage right now in 2.1 and you guys seem to be signaling more of a patient wait for tuck-ins, how do you see that leverage trending over time?

And kind of longer term, where would you like leverage to kind of settle out?

This is Niko.

Yes, so we're -- our target leverage ratio is 3.3, so really in that 3 to 3.5 range.

As we look at acquisitions and the acquisition universe, for the right deal, we would stretch and go over 4x and hope that we'd get that back down to that 3 to 3.5 in short order.

(Operator Instructions) The next question is from Grant Jordan of Wells Fargo.

Most of mine have been asked already.

I guess just one kind of following up on capital allocation.

As you continue to do well and generate earnings, is there a thought given to ramping up the share repo activity as you wait on M&A?

I would simply answer that question as the primary use of our capital is against current operations to drive the growth and the cost savings that we have been talking about.

And the next highest priority is around mergers and acquisitions where we believe that we have a rich target field to go after.

Yes.

I mean, we -- the way we look at it, just to expand on George's answer is, we look across the entire spectrum as far as investments go.

And we're looking for the highest IRR.

Right now, we're still seeing very attractive IRRs internally as well as acquisitions that we can make that really pay out, that are still a little bit ahead of doing a stock repurchase.

So that's -- we're actually quite methodical when we look at that.

(Operator Instructions) Our next question is from Hale Holden of Barclays.

I just had 2 quick ones.

On acquisitions and your rich pipeline, I was wondering how you thought about rational multiples and if you were seeing sellers still with multiple expectations that you thought were reasonable or if there had been inflation over the last 6 or 9 months?

Yes.

I mean, I think absolutely there's been inflation.

We see it every day.

Money is still relatively cheap, so that manifests itself in higher multiples.

That said, we are very prudent buyers.

We typically do not get lulled into purchasing businesses for higher multiples.

That said, if we saw value somewhere and had to pay a premium for it, certainly, we're happy to explore that.

Got it.

And then my second question is back to sort of the question that Bill Chappell had on Pet superstores.

Part of your answer was going to independents and helping get the products out online whether it was with online specialty or retail brick and mortars online.

And I was wondering when you think about how you assist your retail partners, either with private label or the branded products, if you thought you had the right muscle skill set to really accelerate the online growth and help them with their online sales?

Or is that somewhere that needed further development?

Okay, this is Rodolfo.

Let me take the question on 2 different sides.

So can we help them drive instant traffic that will help them get people to the store?

The answer is yes and we feel we are more capable than most companies.

We have the ability to drive into theater.

We have -- as I said, figures allows us to do that.

Our presence across the whole store, not only in one category, enables to do that.

So when customers are looking for partners to say, okay, help me here, we are normally among the first calls.

So that's the first part of the question.

The second one, in terms of e-commerce and online.

We will follow the consumers whatever they want to follow or they want to buy and e-commerce is growing really fast.

For that, we're -- we have put more resources in the past, and we're committed to put more resources in the future.

Now if you see our position and see what we have done, we're committed to work with our partners in all channels, which means we are working with e-commerce pure players and we are working with our brick and mortars to also guide their online kind of business.

We have thankfully enough capacity to do both.

What I also think about it is it's our job to have the right policies, products and promotions and programs to allow each channel whether it's brick and mortar or omnichannel, which is brick and mortar plus e-commerce or e-commerce pure play to compete effectively.

The consumer will ultimately go where they're going to go.

And I will tell you, we've committed significant resources to making sure we're getting clarity around those policies and also doing things like product differentiation, SKU differentiation, allowing channels to compete with different products.

And we're making investments on that front as well as our digital communications.

(Operator Instructions) And the next question is from Carla Casella of JPMorgan.

I just have some -- a question on the Pet specialty and the Pet business.

How much of your business in the Pet is now sold through the specialty channel versus online versus mass?

And how do you see that changing over time?

This is Rodolfo.

We're not disclosing the sales by channel.

What I can tell you is thanks to the quality and the amount of brands we have and the categories we have, we do have strong presence on every channel that you mentioned.

We -- at the end of day, we mentioned before, it was total consumers.

And that has allowed us that, while Pet specialty is having right now a tough time, we have been able to more than gain in the other channels that long.

If or once pet specialty comes back, we will be ready to be there.

But all in all, we're growing obviously in all channels.

What I can add to give you some perspective, but J.D. alluded to it earlier.

For the -- in the Pet channel, about 10% of sales were e-commerce and we're a little bit south of that because it tends to be more food and we are higher in supplies.

So that gives you some perspective.

It's still largely a brick-and-mortar business.

It's just a lot of the growth is happening in e-commerce.

Thank you.

I would now like to turn the conference back over to Mr. Roeth for closing comments.

I would just want to say, thank you, everybody, for attending today's call.

Appreciate the questions, and have a great day.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time, and thank you for your participation.