Flowers Foods Inc (FLO) 2017 Q1 法說會逐字稿

Welcome to the Flowers Foods First Quarter 2017 Earnings Call and Webcast. My name is Ellen, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to J.T. Rieck, Vice President, Investor Relations. Mr. Rieck, you may begin.

Thank you, Ellen, and good morning, everyone. Our first quarter results were released yesterday evening, and you'll find the earnings release on the Flowers Foods website. You can find the slide presentation that supports our discussion for today posted on the conference call page in the Investor Center at flowersfoods.com.

Our 10-Q was filed with the SEC yesterday evening as well. Before we begin, please be aware that our presentation today may include forward-looking statements about our company's performance. Although we believe those statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially. In addition to matters we'll discuss during the call, important factors relating to Flowers Foods business are fully detailed in our SEC filings.

Now let's get started. Participating on the call today, we have Allen Shiver, Flowers Foods' President and Chief Executive Officer; and Steve Kinsey, our Executive Vice President and Chief Financial Officer.

Now Allen, I'll turn the call over to you.

Thank you, J.T., and thank you for joining our call today. I'll begin the call with a category overview, and then we'll discuss our key initiatives. Our CFO, Steve Kinsey, will follow with greater detail on the first quarter results as well as provide our current outlook for fiscal 2017. Then, we'll open up the call to your questions.

When we consider the broader trends in the packaged foods, we're seeing multiple factors at play that reflect changing consumer taste and preferences. In short, brands that deliver innovation and unique products were the point of difference of growing sales. In the bakery category, the marketplace remains highly competitive as retailers and bakers find a balance between improving margins and building market share. We believe Flowers is well-positioned to navigate this challenging environment. We know where to focus our attention in order to drive sustainable, profitable earnings growth and create value for our shareholders. For example, we see opportunities to improve our return on trade investment, and so we're in the process of rationalizing our product assortment and investing in tools to better manage our promotional spend. The fall shelf resets will reflect elements of our streamlined assortment, and we expect our improved promotional management tools to be online in early 2018.

Also a priority is to better align our Nature's Own brand, which is the #1 brand in the bread category with the growing number of millennial families. Through research and innovation, we are working to enhance the brand's consumer appeal. Already underway, are efforts to improve the efficiency of our bakeries. We are scrutinizing cost and enhancing processes in order to improve productivity and product quality. Importantly and as we'll discuss in more detail, we're also building capabilities to drive innovation and better anticipate and respond to changing trends through Project Centennial.

Looking more closely at the category in line with broader food trends, the fresh packaged breads category was down 1.1% this quarter. The growth segments during the quarter were white loaf, organic breads and dinner breads. Excluding the divestiture, our reported sales declined 0.9%. We did outperform the category with share gains in the white loaf, soft variety buns and rolls and specialty premium segments. Organic breads drove our sales this quarter, and I'll touch on that more in just a minute.

The bread and commercial cake categories continue to be challenging. Sales of soft variety and nonorganic wide pan breads in particular have been impacted by consumer trends and competitive activity. The cake category was down 20 basis points in the first quarter. A positive is our share of the category has been stable for the past 2 quarters after being under pressure during the reentry of a competitor. Tastykake remains a high-potential brand, and we have a strong lineup of new products in the pipeline to drive brand excitement and sales.

Organic breads, which are squarely aligned with today's consumer trends, are clearly the highlight of the bread category, and we are very excited about the opportunity we have with Dave's Killer Bread and Alpine Valley. DKB is the leading organic bread brand in the U.S. Early in the second quarter, we launched DKB into the breakfast category with 4 items. We're just a few weeks into the launch, but the response so far has been very strong, and we are working on other opportunities to grow this dynamic brand. Our work to refocus the Alpine Valley brand on the store perimeter, freezer case and in-store bakery continues. We've updated the brand and packaging. We've introduced new items, and we have invested in additional sales resources. We're gaining traction, and we're encouraged by the progress being made.

Organic bakeries are running more efficiently, and the margins in this business are in line with expectations. Product quality is high, and utilization rates continue to increase. Now that we're producing the vast majority of our organic products in-house, we have reduced outside purchases from comanufacturers, enhanced profitability and improved product consistency and quality. Company-wide, production costs as a percent of sales were down this quarter, which partially offset increased cost for distribution recognized in SD&A. While lower organic products cost was one factor, we also improved manufacturing efficiencies and productivity across the company.

Please keep in mind that these are early wins, but they do indicate some of the progress being made as we introduce continuous improvement programs in our pilot bakeries. As we get further into Project Centennial, we'll be implementing other initiatives to improve manufacturing operations and drive additional productivity savings. We're well underway with Project Centennial. You'll find the road map for the project, which we introduced on the fourth quarter call on Slide 9.

Our focus for 2017 and 2018 is to generate cost savings and reposition the organization for future growth. As we move into 2019 and beyond, we'll begin to leverage our new capabilities and use a portion of the savings achieved to drive long-term sales growth in the range of 2% to 4%. To drive earnings, we expect to deliver net of investments back into the business at least 250 basis points of EBITDA margin expansion by 2021. We have already made solid progress on key 2017 Project Centennial objectives.

Earlier this month, we announced our plan for an enhanced organizational structure. This new structure will better leverage the experience and strength of our team, emphasizing brand growth and innovation, drive accountability and deliver a lower-cost operating model.

We're also deep into creating a more centralized purchasing function that we expect will generate $45 million of run rate cost savings by 2018. To achieve the targets we've laid out for 2018, '19 and beyond, we still have a lot of work to do, but we're on schedule, and I'm encouraged by the passion and the commitment Flowers team members at all levels are bringing to our Centennial work.

With that, let's have Steve review the financials.

Thank you, Allen, and good morning, everyone. Since the detailed financials for the quarter are available in the release and the 10-Q was filed last night, I'll focus my comments today on the key variances, cash flows and our outlook for the remainder of fiscal 2017.

As Allen mentioned, category trends in the first quarter were softer than expected. On the top line, the primary factors impacting sales were lower volumes of branded snack cakes, lower volume and negative price/mix of our conventional branded breads and the divestiture of the mix business. These declines were partially offset by growth in organic breads.

Production cost as a percentage of sales declined 40 basis points, resulting in higher gross margins. We did lap roughly $2 million of cost associated with the Tuscaloosa plant conversion a year ago. But when considering that throughput volumes were less than expected due to lower sales, we are pleased with how production costs were managed in the quarter. Relative to the prior quarter, we produced a vast majority of our organic items in-house, which reduced outside purchases significantly. Improved manufacturing efficiencies also contributed to the reduction in production costs as a percentage of sales.

Adjusted for items affecting comparability, selling, distribution and administrative expenses as a percent of sales increased 70 basis points; the main driver being higher distribution -- distributor distribution fees. This was anticipated due to more sales going to the DSD system as a result of the rollout of DKB, which began in the second quarter of fiscal 2016. Reflecting the net of higher gross margin and SD&A as a percentage of sales, adjusted EBITDA decreased 30 basis points to 11.2% of sales.

I'll quickly comment on a few items affecting comparability during the quarter. As we previously communicated, we sold our mix business, which resulted in a $28.9 million gain. Project Centennial costs were $15.4 million. There was a $250,000 legal settlement related to a misclassification lawsuit and net charges associated with lease terminations of $565,000.

GAAP earnings per share for the quarter was $0.29, up $0.01 from a year ago, due primarily to the gain recognized on the sale of the mix business, offset primarily by Project Centennial costs. Adjusted EPS in the quarter was $0.25, down $0.03 per share compared to the prior year. In addition to the decrease in sales on adjusted EBITDA margin, adjusted earnings per share were impacted by higher depreciation and amortization, higher interest expense and a higher tax rate.

Depreciation and amortization increased $3.7 million, primarily due to the additional amortization of certain trademarks and accelerated depreciation associated with the lease terminations previously mentioned.

Net interest expense increased $2.3 million, due primarily to a higher average interest rate, offset by lower net borrowings. As you may recall, in the third quarter of 2016, we reduced our exposure to rising interest rates by fixing -- by issuing the fixed rate 2026 notes. The proceeds from the offering were used to reduce borrowings on our floating rate credit facilities.

Changes in the accounting rules for stock options drove the higher tax rate in the first quarter. The tax rate actually came in below our expectations due to the timing of certain option exercises.

Turning now to cash flow. Operating cash flow during the quarter was $76 million, down $42.8 million from the prior year. Operating cash flows during the quarter were reduced by 15 point -- roughly $15 million in Project Centennial costs, a net change in hedge margin year-over-year of approximately $21 million and the additional cash interest associated with the 2026 notes. Capital expenditures were $17.5 million in the quarter as compared to approximately $24 million a year ago. Cash proceeds from the sale of the mix business were roughly $41.2 million. During the quarter, we did pay down debt of approximately $64 million, ending the quarter with roughly $886 million in net debt. Our net debt to trailing 12-month adjusted EBITDA is 2x.

Regarding our outlook for the balance of fiscal 2017. As Allen mentioned during his comments, category trends are softer than we expected and competitive activity remains elevated. We began the year expecting the category to be roughly flat, and now we see the category trending down approximately 1%. As such, we now see our trails trending towards the lower end of the previously issued sales guidance of flat to up 2%. This guidance does include approximately 50 basis point impact from the divestiture of the mix business. Given the sales trends, we now expect adjusted EPS to fall in the midpoint of the previously guided range of $0.85 to $0.95 per share. We continue to see Project Centennial consulting cost in the range of $25 million to $30 million for the full year.

As Allen mentioned, Project Centennial is well underway, and we are beginning to see meaningful progress to better position the company going forward. Evidence of that progress can be seen in some of the items we -- I've called out earlier today in the call. The divestiture of the mix business is one example. This business which primarily met our internal needs was noncore and did not offer opportunities to grow national consumer brands in line with our long-term strategy. By divesting this business, we unlocked substantial value and improved our financial position.

The lease terminations were another example of actions being taken today to lower our costs going forward. By these terminations, we have lowered our future lease obligations by approximately $30 million over the next 20 years or roughly $1.5 million per year.

We are starting to see momentum build through the company. We continue to realize the benefits of the initiatives that we talked about in the fourth quarter of 2016. And now that the transition to the new organization structure is underway, we will begin to implement additional initiatives and look forward to reporting on additional cost savings going forward.

Now I'll pass the call back to Allen.

Thank you, Steve. Before we take questions, I want to stress my confidence in the Flowers team and our ability to achieve our long-term potential and create value for our shareholders. With underdeveloped categories and new markets, we have plenty of opportunity to grow in our core business and in adjacent categories. Even though we're only a few months into the implementation phase of Project Centennial, I see evidence of us becoming a more effective and efficient company, able to meet the needs of the evolving consumer and deliver enhanced profitability to the bottom line.

Thank you for your attention, and now let's begin the Q&A.

(Operator Instructions) Our first question is from Farha Aslam with Stephens.

Just a quick clarification on your comments about the category. You highlighted that you now expect the category to decline about 1%. Could you -- is that by volume? And is that just in bread? Or does that include the whole entire sweet baked goods category?

Farha, we're looking at the entire fresh packaged bread category to decline 1.1%. And again, this trend is very consistent with what we've seen in the past few years. But we're not predicting any significant change in category trend.

And that's by volume, not price or mix?

Mostly volume.

Okay. And then just as a follow-up, could you share with us as you go through Project Centennial that you were rethinking your brands and how in particular you're thinking about DKB versus Alpine and kind of the branded portfolio going forward in bread?

Farha, I think one of the exciting changes with Project Centennial is really focusing on becoming a national-branded company as opposed to the regional company that we've been. So naturally, to do that, certain brands are going to take priority. And the great news is that we have a wonderful assortment of strong brands that can fill that need. The Dave's Killer Bread certainly is very exciting in terms of the -- not only the reception that the trade has given us but also the reception that we're seeing from consumers. Dave's Killer Bread is very much on target with the organic trends that we're seeing in the food business in general. So overall, we will be focusing more on becoming a national-branded company. We will have certain brands that will be priority, that will be national brands. But at the same time, in certain markets, our regional brands are still strong. So we'll be very careful to make sure that our branded plans going forward are such that we grow the overall sales. But we are focused on becoming a national-branded company.

Okay. And perhaps my final question is on the DSC (sic) [DSD] segment versus the Warehouse segment. The Warehouse sales just came in far below our expectations and consensus. But in the press release, you did highlight that some of the sales of product baked in Warehouse is captured in DSD. How should we understand that trend?

We're still very committed to our DSD model. Again, the success of Dave's Killer Bread as we've rolled it out on DSD really shows the strength of DSD and what we can do with a brand like Dave's. At the same time, we continue to grow in our warehouse model. We're looking at other portions of the supermarket, the perimeter of the store, the bakery, deli that really lends itself to a different form of distribution. So we do have some significant test markets underway there. Steve, anything you want to add?

Yes. I mean when you look at the intercompany sales, our Mesa facility produces quite a bit of the Dave's Killer Bread product. So a lot of those sales are captured in DSD. And the vast majority of the pressure in Warehouse, obviously, is the loss of the mix business, and we also continue to see some pressure in the cake business, whether it's branded cake or store brand cake.

The next question is from Akshay Jagdale with Jefferies.

This is actually Lubi on for Akshay. Just wanted to ask firstly on Project Centennial. Can you comment a little bit on when you expect to begin to see sort of a meaningful impact on the P&L related to Project Centennial? And then also related to that, as you've begun to implement the program, have you identified any incremental areas of savings that maybe you didn't see before?

Lubi, we have -- we feel very confident about the $45 million of run rate cost reductions that will be achieved by 2018. Again, on the longer-term, we're still focused on the 250 basis points of improved margin over the 3- to 5-year period. Steve, anything?

Yes. I mean, Lubi, in the quarter, we did see savings of roughly $4 million on continuing the initiatives we had begun in the fourth quarter. Those were around primarily travel, entertainment and in certain corporate-type events, where we've eliminated any unnecessary travel or unnecessary events or unnecessary things like subscriptions. And it's amazing. As you add all that up across the company, it helped the total. But with regard to the -- kind of the run rate, as Allen said, we're still looking at the purchase goods and services $45 million savings by 2018. We're in the middle now across several work streams, the RFP process. So we hope to have that completed by mid- to late summer, and then we should begin to see some of those savings roll in during the fourth quarter and really start picking up in 2018. But a lot of that rolls into purchase goods and services. We've announced some structural changes with the organization. So we'll continue to work on that. And I think when you look at the project road map that's in the deck, you can see 2017, '18, we're still very focused on capturing our savings initiatives. So we can begin to really invest in growth initiatives in '19. That's not to say that we're not working on growth initiatives currently, but '19 is when we expect to see the meaningful bump within the project.

Got it. That's very helpful. And then if I could ask a question just in terms of your guidance. So it does seem like you've tempered your guidance somewhat. But on our math, your outlook still implies a decent acceleration in sales and EBIT growth relative to what we saw in the first quarter. Now I know that -- the top -- for the top line, the comps do get a little bit easier in the balance of the year. And then in terms of EBIT, we'll probably see some more savings related to Project Centennial come through. But can you just talk a little bit about what gives you confidence that the guidance that you've laid out there is achievable?

Sure. I mean when you look at the remaining 3 quarters, we have seen some improvement in trends coming into the second quarter. Q2 and Q3 are typically stronger because of some bun seasonality for the summer months. So we feel like we're positioned really well this year. For the bun season, we've had some wins across the company as far as shelf space from a bun position that was not there last year. So we feel like that gives us some confidence when we look at our outlook for the rest of the year. And then we're starting to see -- we have some business wins on additional business. And we also -- we did have pretty heavily -- heavy promotional activity in the first quarter. So we -- as Allen said, we are focused on being more targeted with our overall promotions for the rest of the year. We won't be eliminating them because the category operates with a certain level of promotional activity to remain competitive. And then from a cost perspective, we have been pretty conservative from including any savings from the project from the back half. I do think the initiatives that we've implemented in Q4 '16, we'll continue to see those benefits. And then as we complete the RFP process, we should begin to see some of the benefits of the other work streams from the project. We look at production costs, and we're very focused on production efficiencies. We have begun some pilot work at a couple of plants around continuous improvement. We believe that's going to give us some savings from a production perspective. And then from a cost perspective, we're pretty much covered on our input cost for the rest of the year. So we feel like we have good visibility there. So I think that's where we -- from a confidence perspective in the range and where we've guided to today, we feel like things were achievable.

Yes. And Steve, I'd just add that as we look at new markets where our share is lower than our core markets, it's exciting to see the support that we're getting with the introduction of Dave's Killer Bread. Along with Dave's comes our full product line as we're expanding our space and improving our position, especially in new markets. So I think that will also be a factor as we look at the rest of this year.

The next question is from Brett Hundley with the Vertical Group.

Can you guys hear me, okay?

We can.

All right. I'm sorry. I'm in a bad spot here. So I'm going to ask my questions real quick together. Did you guys give a mix impact to margins in DSD from greater private label sales relative to branded? And then secondly, with 2017 really being a year of transition, significant amount of change going on, obviously, a lot of this is happening against a really tough backdrop that is having an effect on all the U.S. food companies. With your balance sheet where it is and your valuation where it is relative to peers, would there be more of an appetite in a year like this to elevate share repurchase, just given that a lot of forward earnings improvement can come from internal improvement and not necessarily [up in there]?

When you look at the mix, we did not give a mix breakout on the increase in private label versus the impact of the branded product. DSD was slightly up, but we do not -- private label typically carries a lower margin, and it covers a lot of overhead from a production standpoint. But we do not break out the mix impact there. When you look at the relative valuation, again from a capital allocation standpoint, again, there's a -- we'll remain prudent. I don't think you'll see us step outside the bounds of anything from a normal historical perspective. When you look at -- there's a lot of opportunities coming out of the project. So from a capital perspective, we'll be focused on Project Centennial and the value it drives longer term. We did -- from a share repurchase perspective, you'll continue to see us behave opportunistically. And if the cash flow warrants, we'll be in the market.

Our next question comes from Brett Andress with KeyBanc Capital.

I have a question on your fall reset comments. I'm assuming that that's factored into your updated guidance. But I mean, should we expect more sales pressure now in the back half because of that and some of the rationalization? And do these resets apply to both your DSD and your Warehouse segments?

Primarily, the resets apply to our DSD business. And we're looking for the resets to be positive in terms of overall growth. Many of the retailers only reset their bakery departments once or twice per year. And with the opportunity in the sales that are being generated by Dave's Killer Bread and the turns that it's generating on the retail side, we expect the resets to be very favorable in terms of our overall product line.

Brett, when you look at the guidance, however, we have factored in down about 50 basis points. You should begin to see that in the fourth quarter and potentially you'll see some of that in Q1 of 2018 as well.

Got it. And I had a question on the performance management changes that I think you guys have been making. Can you comment on maybe how you're adjusting to hold the team accountable for Project Centennial? And maybe what metrics you guys are using to measure performance across the enterprise?

Brett, overall, I mentioned earlier the strength of our Flowers team. And I think that's really where you start. If you look at the confidence that our team has in each other, that is -- even though the structures are being adjusted and changed, there's still tremendous confidence in our leadership team at all levels. We are focusing on developing much deeper levels of accountability so that we can measure performance down to the lowest level. And it's not that we have not measured performance in the past, but we've never taken it down to the levels that we're looking at. And performance will be rewarded and lack of performance will be addressed. And it's exciting to think about what can be accomplished with everyone focused on the same goals going forward.

Brett, when you look, I mean, specifically to that, we just announced the change in the org structure. So we're still in the middle of developing the overall performance metrics. But historically, the company has been on one goal, EBITDA. But now as we're moving to a more brand-focused company, we'll begin to set specific targets based on functionality. So if you're in sales, you'll have some component of a sales target. Manufacturing will have some component of manufacturing KPIs, plus probably an overall company goal. But we're not ready to announce or discuss those today.

Got it. And then I just had one last one. Can you give some more detail on the lease termination costs during the quarter? I guess what were those related to? Was it a certain facility? Did you renegotiate new lease terms? Just some -- any more color you can provide there.

Yes, the primary savings there was, if you recall, when we made the acquisition of Tasty Baking back in 2011, they had -- they were a publicly traded company. So they had a corporate headquarters facility as well. So we've been able to exit that. We were able to exit that lease this year. So that's the primary -- that's the vast majority of all the savings.

The next question is from Tim Ramey with Pivotal Research Group.

It sounds like your payments or your costs relative to Project Centennial are pretty heavily weighted to the first quarter for a $25 million to $30 million for the full year. And should we expect the costs relative to Project Centennial to be mainly a 2017 item? Or will some flow into '18 as well?

Yes. The vast majority of the cost for the project will be in '17 and -- 2017 the first half. You will see those start to temper in the back half. There could be some in 2018, but we are not anticipating anything of the magnitude we're seeing this year.

The next question is from Amit Sharma with BMO Capital Markets.

Allen, just wanted to go into your category growth outlook, right? So you went back to maybe negative 1%, and that's more consistent with how it's been over the last few years. Just wanted to know so why did we start with a higher expectation when you gave guidance earlier? And what has happened in the last 3 months that compels you to going back to where the historical performance of the category has been?

Amit, this year, if you look at the total category -- actually, if you look at the total food business, the food business and the bakery category has really started out slow. We are encouraged looking at sales the last several weeks that we're seeing that, hopefully, the sales trend is changing, and we're optimistic, as Steve mentioned earlier, looking in the back half of the year. But there are some things that are taking place I think with today's consumer that are influencing the overall category. And we're addressing those, especially with brands like Dave's Killer Bread as well as looking at different opportunities in the perimeter of the store, the bakery, deli and elsewhere. So it's very much of a changing category and a changing marketplace. So we feel like we're in very good position to take advantage of it. It's still -- if you look at the overall fresh bakery category, it's still a $31 billion category, which is the #3 category in the entire supermarket. So even though the category is relatively soft, it's still extremely large and there's a lot of opportunity for us to grow this business as we look forward.

And that's really helpful. And I think that's well answered. Just -- I was just trying to get like between the guidance given earlier to where we are. Some of these are fairly longer-term plays, right? But what has happened in the last 3 months or last 4 months where -- is it the competitive environment? Is it you're seeing a little bit more promotion? Or you're seeing more softness in the takeaways? What has happened for your outlook for the category to be a little bit more negative now?

Again, the category trends are pretty consistent with what we've seen in past years. It did start out slow and sluggish. In terms of category promotional activity or any major changes, I mean, there's really nothing you can put your finger on in the last 2 to 3 months. It's simply been a slow start to the year. And hopefully -- looking at the last few weeks, hopefully, we're seeing that turn to a more positive trend. But it did require us to -- basically where we are at this point required us to adjust our guidance to the low end of the range.

Got it. That's helpful. And then just 2 more for me. In this revised guidance for sales, any sense for how much is coming from DKB versus the rest of the core fresh bread category or portfolio for you, guys?

When you look at the performance of organics together, I'd say we're still trending with what we were seeing when we made the acquisition. So you're seeing the organic -- I'd say our brands are trending in line with the category as far as growth because Dave's is driving the vast majority of that. We haven't given that specifically. But when you look how our overall organics are performing and we look into the full year performance, right now, we are trending in total ahead of our plan.

Got it. And then last one for me, Allen, a little bit longer term. Like, so you're outlining pretty large changes toward the organization. And it looks like the end of that will be in a much better place from a company margin perspective. But is there any risk? Or how are you mitigating that risk that between now and, let's say, end of 2018 or early 2019 -- the company is so focused on Project Centennial that this is still a tough category to operate on a day-to-day basis. How do you ensure that actual operating focus remains on that and not get distracted by all these changes that you're putting in place?

Yes. I mentioned earlier what gives me confidence is the strength of our team. I've said it many times. We have the best team in the food industry. Our team understands that the category continues to evolve, and our company must evolve and change with the category. So very confident that all of the adjustments that we've laid out so far are going to be implemented properly and as we go look at the next 2 to 3 years. That implementation has always been our strength. And I feel like that we've done a very good job of laying out a multiyear improvement to our overall organization. We had our entire team together, the senior leadership team just a few weeks ago. And I've never seen so much support from all levels of the organization against Project Centennial. So we're focused on building this company for the long term, and we've got the team in place to do it. So again, I'm very confident. But it is very critical that we do a great job implementing Project Centennial. But at the same time, we've got to stay on top of today's business today. And we're also focused on doing exactly that. But it really all comes back to the strength of our team.

The next question is from Bill Chappell with SunTrust.

Just trying to understand the comments on the category. If we go back from what we've heard from most food companies, it was that consumer takeaway in general in January and February was pretty weak. It got a little better in March, and it's gotten better in April. But you gave kind of guidance, I think updated guidance in mid-February, and now we're kind of talking about it being even worse. So is that the way to look at it that things were holding up okay for at least the bread category for the first 2 months and have gotten worse since then? Or is there something I'm missing?

No. I think when you look generally coming out in February when we gave guidance, we were seeing kind of a sluggish start. But that's -- typically February has been a slow month in our industry, but we are beginning to see some trends pick up but because of the -- where the quarter came in, what you had to make up to get back into the upper end of your range would be pretty significant for the rest of the year. So, I don't see the category -- from a category perspective, there would be no way to make up the loss that you had in the first quarter from a top line perspective.

So trends, as we look into March and April, are a little bit better. It's just you can't make up kind of the quarter in general?

Yes. March was better. We're actually seeing better trends April, May. But I don't see -- we don't see that there's the opportunity to make up the loss from the first quarter.

Right.

Okay. And just making sure I understood, if you're expecting the category to be down 1% and you to be just even though at the low end of 0 to 2%, what is that implying in terms of market share gains for this year?

From a share perspective, we did see growth in the first quarter from a share perspective. The big driver of our confidence has to do with the organic category and the performance we're seeing there. I don't have the specific share number with me, but we are anticipating share growth just like we saw in the first quarter.

Okay. And then last question. And sorry if I'm just a little confused. But if I'm looking at last year, you didn't -- there were some consulting charges throughout the year for Project Centennial that were not excluded. And this year, we are kind of excluding everything. So how should I look that on a year-over-year basis? I mean, is there any Project Centennial that is not excluded this year or last year? I'm sorry for the confusing question.

Yes. I mean so far, we did not have any costs in the first quarter. So as the year progresses, we'll -- we had roughly little over $6 million last year. I think it was roughly $1 million or so Q2; $1.4 million Q3 and about $3.7 million Q4. So we'll call those out as we -- as the year progresses. So it was about $0.02 last year.

Okay. And that wasn't excluded last year?

No. Because of the magnitude but now that we're well into the project. If you recall, in December, we actually finished up our diligence phase, and we made the decision to move forward. So once we made that decision to move forward with all the -- with the project, that's when the costs really ramped up.

That concludes our question-and-answer session. I'd like to turn the call back to Allen Shiver for closing remarks.

Thank you for your attention today. We're excited about Project Centennial, and we're very excited about the plans we have laid for the -- not only the rest of this year but looking forward in the next 2 to 3 years. Our leadership team is 100% behind the initiative, and we look for plans -- we will continue to keep you current in terms of plans and potential benefits. Thank you for your attention today. This will conclude our call.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.