Lancaster Colony Corp (LANC) 2011 Q1 法說會逐字稿

Good morning. I will be your conference operator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation first-quarter fiscal 2011 earnings conference call.

Conducting today's call will be Jay Gerlach, Lancaster Colony Chairman and CEO, and John Boylan, Vice President, Treasurer, and CFO.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Now, to begin your conference, here is Earle Brown, Lancaster Colony Investor Relations.

Good morning. Let me also say thank you for joining us today for the Lancaster Colony first-quarter fiscal 2011 conference call.

Now please bear with me while we take care of a few details. As with other presentations of this type, today's discussion by Jay Gerlach, Chairman and CEO, and John Boylan, Vice President, Treasurer, and CFO, will contain forward-looking statements of what may happen in the future, including statements relating to Lancaster Colony's sales prospects, growth rates, expected future levels of profitability, as well as the extent of share repurchases and business acquisitions to be made by the Company. These forward-looking statements are based on numerous assumptions and are subject to uncertainties and risks. Accordingly, investors are cautioned not to place undue reliance on such statements.

Factors that might cause Lancaster's results to differ materially from forward-looking statements include, but are not limited to, risks relating to the economy; competitive challenges; changes in raw materials costs; the success of new product introductions; the effect of any restructurings; and other factors as are discussed from time to time in more detail in the Company's filings with the SEC, including Lancaster Colony's report on Form 10-K. Please know that the cautionary statements contained in the Safe Harbor paragraph of today's news release also apply to this conference call.

Now, here's Jay Gerlach. Jay?

Good morning. Thank you for joining us.

Our first-quarter 2011 results were challenged by rising raw material costs and other costs not fully offset by price increases or growth. We were encouraged to see our Food segment growing again, although the growth came from our food service channel, not retail. Candle sales had another strong growth quarter as a couple of new customers added to solid growth from our existing base. Our net result was sales up over 4% and earnings per share of $0.81 versus $1.01 last year.

Share repurchases for the quarter totaled 219,850 shares for $10.7 million. With just over 80,000 shares repurchased so far in the second quarter, we currently have actual outstanding of 27.867 million shares, and 129,000 shares authorized for repurchase.

Capital expenditures for the quarter totaled $6.7 million with over half of that amount going to our Sister Schubert's plant expansion project set for completion July 1 of next year. We estimate this project will increase our overall frozen dinner roll capacity by approximately 60%. We continue to estimate full-year capital investment of about $45 million.

Turning to our Specialty Foods segment, we saw sales growth of almost 2% driven by food service channel growth. A couple of new programs were the primary contributors to that growth as the channel in general remains sluggish. Growth in retail produce dips and our overall sales of croutons were offset by sluggish frozen demand, particularly frozen garlic breads. Texas Toast crouton sales continued strong, as did our Marzetti Caramel dips. Our new Marzetti Otria Greek yogurt dips began shipping in the quarter, and Marzetti Simply Dressed refrigerated salad dressings did not start meaningful shipment until October.

Current IRI data for our key categories in measured channels shows the following for the 12 weeks ended October 3 -- refrigerated dressing, category up mid-single-digit; Marzetti brand up low single digits. We are number two in the category in that period. Refrigerated produce department dips, category download single digits; and Marzetti down low single digits. We are number one in that category. The overall crouton category, up mid-single-digit; total Marzetti brands up midteens and, again, number one category position. Frozen garlic bread category is down low single digits -- were down low single digits, again number one category position. Lastly, our frozen dinner rolls category is up upper single digits, and our Sister Schubert brand is up low double-digits, again number one category position.

Operating margins decline to about 17.2% from last year's 20% and last quarter's 17.6%. Material costs were up about $2 million or so, primarily from dairy, eggs, sugar, packaging. Pricing was a bit negative in the quarter as well. Our ongoing investment in consumer marketing was a factor, as was higher freight costs. Our mix was slightly less favorable as our retail share slid to about 51.4% in the quarter from 53% the prior year.

Turning to candles, in addition to the new customers and new product with existing customers, we also saw seasonal shipments get started a bit ahead of last year. While we had some pricing go into effect in September, we also met some competitive challenges that generally offset any benefits. Our biggest cost challenge in the quarter was wax costs, estimated to be up about $2.5 million in the quarter despite our aggressive and ongoing efforts to blend alternate waxes in our final formulas.

Now, I'd like John to make a few comments relevant our cash flows and balance sheet.

Let's first review some of the more notable line items within our September 30 balance sheet. Our Accounts Receivables totaled $82.927 million, which was approximately $15 million higher than at June 30 and also nearly $5 million more than our receivables as of last September. With respect to the increase since June 30, as typically occurs in our first quarter, receivable levels were strongly influenced by seasonal sales experienced within the Glassware and Candles segment. Relative to the year-over-year increase, our higher sales level in the quarter influenced this fluctuation.

With respect to our inventories, the September 30 total of over $131 million compared to roughly $122 million at June and $111 million last September. Seasonal aspects contributed to the increase in the quarter. The year-over-year fluctuation was primarily due to higher levels of candle-related inventories, although we also have a larger prebuild of our frozen rolls for the holiday period. We expect the year-over-year difference to diminish as we approach the end of our second fiscal quarter.

Finally, on the other side of the balance sheet, our total accrued liabilities decreased somewhat on a year-over-year basis, largely reflecting the higher level of accrued corporate income tax present as of September 2009.

Overall, we retained considerable operating flexibly as a result of our balance sheet continuing to have no debt outstanding. Further, our cash and equivalents exceeded $87 million at September 30, and shareholders equity at September totaled over $489 million.

Turning to cash flows for a moment, cash flows provided by operating activities for the quarter totaled approximately $9.3 million, which compares to $18.9 million provided a year ago. Our lower net income contributed to this decline.

One specific component of the quarter's cash flows that you may find of interest is depreciation and amortization that totaled $5 million, which is similar to the $5.4 million recorded a year ago. Other items of note for the quarter include shareholder distributions comprised of share repurchases of $10.732 million and regular dividends of $8.409 million. We have been pleased to have been able to increase our regular dividends for 47 consecutive years now, and it would be customary for our board to consider another increase at its upcoming meeting in November.

I appreciate your attention this morning. I'll now turn the call back to Jay.

Looking to the holiday season influence second quarter, we are optimistic that we have good placement of both food and candle products, good marketing and promotional plans in place, and only need the consumer to provide the takeaway.

Sister Schubert's frozen dinner, rolls including the recently introduced soft multi-grain rolls, have the best distribution and inventory position to serve this important period since we have been in the business. Our new Marzetti items of Otria dips and Simply Dressed salad dressings, and our new New York brand ciabatta roll will be on many store shelves for the holidays as well.

We are maintaining our consumer promotion plans despite the impact of increasing raw material costs, which are likely to be a bit more unfavorable as we will start to see some impact from higher soybean oil costs in addition to still higher dairy, sugar and eggs and packaging. We will likely be implanting pricing, as appropriate, early in our third quarter. So no material price benefit in this quarter.

We anticipate our new foodservice program should continue to grow, and hopefully the channel in general may show some growth.

Acquisition growth continues to be of great interest to us and we continue to look for opportunities. Our cash dividend, as John mentioned, will be reviewed at our upcoming board member meeting, as will our share repurchase status. While a slow economy looks likely for some time, we are actively pursuing potential growth initiatives, including product innovation, geographic expansion, and enhanced consumer messaging.

We're ready to take questions.

(Operator Instructions). Alex Bisson, Northcoast Research.

Good morning. Thank you for taking my questions. I guess my first question is you talked on the foodservice side about new customer programs. Can you give us a little bit more detail about what that means, and does it include any actual new foodservice customers?

In one case, there is a new customer involved. In another one, it's a new program with existing customers. We are the two primary ones.

Okay. Could you break out, particularly on the Food segment, the benefit or the hurt from price, and the same for raw materials?

Alex, I think raw materials in the Food side was up about $2 million in the quarter. Pricing was actually down a similar amount, around $2 million.

Got you. I noticed that your corporate expense was up $600,000 or $700,000. What was the main driver behind that?

This is John. The drivers behind that increase included some costs related to some of our industrial real estate properties related to closed or sold operations. We also had some unallocated general liability insurance costs.

Okay. Got you. Finally, as you look kind of broadly across your categories on the Food side, can you talk about -- I know you said your couponing and promotional schedules stay where it is, but could you talk more broadly about what you're seeing in the channel?

I think not a lot has changed in general. What I think we did see in the first quarter was, particularly in that frozen garlic bread category, some more aggressive promotional activity by competition that we only moderately reacted to. But in general, I don't think we are seeing a dramatic uptick in that. In fact, our outlook on the trade spend side is relatively comparable to what we would have been doing about a year ago.

All right, thank you very much.

Alton Stump, Longbow Research.

Good morning. On the pricing front, obviously that's a big question across the food space right now as to the receptiveness of retailers in coming quarters. If you could just maybe give some color, what sort of feedback that you have gotten at this point to date with what you have taken on the pricing front, and if you expect that to change, either for the better or for the worse for the retailers over next quarter too?

Our pricing generally has been, on the food side of the business, has been very selective, where we had some particular ingredient costs we thought we needed to reacted quickly. More broadly, as far as pricing plans there, we anticipate being out in the not-too-distant future with pricing that should go into effect as we get into the March quarter, so after the first of the year. I think the industry in general is seeing the input cost pressure, I think the support is there with the commodity cost increases, so I would anticipate that while not a lot of excitement about receiving price increases, that we will be able to get those implemented.

We were able, back on the candle side, to get some pricing implemented during the first quarter, but as I mentioned, we did have a couple of competitive situations that had to be dealt with that mitigated the impact of that.

Okay, great. then just sticking on the pricing conversation, that is good stuff in terms of list pricing. But from a discounting standpoint, are you seeing retailers maybe come back a little bit on their demands for how much discounting they want you or for your competitors to do?

I don't think we've really seen a change in that at all.

Okay, great. Thanks Jay.

Greg Halter, Great Lakes Review.

Yes, given some of the increases we've seen from some of the restaurant chains in terms of their same-store sales growth, are you seeing any of that coming through on your foodservice side as of yet?

We've probably seen that maybe with just a couple, two or three customers maybe. In general, it still does seem to be pretty sluggish. I would say maybe there is a little bit more optimistic tone across that customer base, but still not a lot of evidence of things improving.

Is there any evidence that maybe they are cutting back on some of the sauces or dips or croutons or dressings or whatever that they may be offering their customers?

No, we haven't seen that.

Okay, good. Relative to the capital spending, you indicated that you started on the plant. I know it's early at this point with a completion date about nine months out there, but so far what kind of feedback have you received, given the progress?

I think it's, again, early in the process, but we think we are on schedule and cost-wise on target.

Relative to geographic expansion on the food side of things, can you give us any update there? I know it's -- you talked about it three months ago or so on the last call. But I'm just wondering if there's been any changes and any new areas that you may be going into out West or so forth.

I think the particular initiatives have been to move our New York brand of garlic breads more broadly into West Coast distribution, and also trying to push the Sister Schubert's brand a little bit out to the West. There, we've been a little challenged by capacity issues, so we are not pushing that too hard right at the moment. But we have added little bit of distribution further west with that brand as well.

Okay. Relative to the candle business with the continued Dumping Subsidy Offset Act, do you expect another amount to come in this year? I know if that's been delineated yet by the Treasury Department.

Go ahead.

This is John. There's been no formal announcement of a distribution this year. We would expect that announcement to be made in late November, early December. We'd anticipate some level of distribution. It's impossible to predict exactly how much that might be.

I think the preliminary amount is lower than it's been historically.

That is correct.

One last one for you. Relative to any forward buys you may have on the flower side or soybean oil, if you could update us there.

In general, our flower coverage is still just out through March. Soybean oil, we continue to follow our laddered coverage program with heavy -- relatively heavy coverage looking out six months that we obviously update monthly as the calendar moves out. So, we continue to follow that practice with soybean oil.

So at this point, you are still relatively covered despite (technical difficulty) there could be some -- if I'm hearing it right -- some increases going out later in your fiscal year but you're hopeful that pricing would do a decent amount of helping to offset some of that? Is that a good characterization?

That would certainly be our hope, but I didn't hear your full comment there. Something broke it up. But yes, we would hope that is the case. As we get into the second quarter, we would probably start to see a little bit of unfavorable soybean oil impact relatively small. But as we get into the second half of our year, the first half of the calendar year, it starts to get a bit more noticeable.

That's where the pricing that you're hoping to implement what help to offset some of that?

That's correct, yes.

Any idea in terms of magnitude that you can directionally provide? Are you talking 1% to 2% or 5% to 10% type price increases?

It's going to be low single digits, low to mid single digits.

Okay, thank you.

David Leibowitz, Horizon Asset Management.

Good morning. Several unrelated items -- first, Jay, during your remarks, you spoke about to something dollars invested in consumer marketing. Was that for the food side or the candle side?

That's the food business.

Could you give -- quantify the amount of money that's being invested?

Well, the year-over-year increase in the quarter was a little over $1 million, so kind of low seven figures.

Was this done in promotions? Was this done in couponing? How would you -- how does one try to figure out where the figures come from?

For us, it's going to a variety of areas. So yes, couponing, FSIs is a piece of it. Pure advertising, both print media as well as electronic media advertising, some spend on in-store merchandising signs right at the retailer level. Then there is a bit of expense around consumer research, that kind of stuff.

Okay. The next point -- the price increases that you just referred to being in the low to mid single digits. Is that going to permit you to head off the next round of raw material price increases, or will you continue to lag on that front?

We're hoping we're going to be able to recover that generally. Now, we obviously don't now exactly where all the raw material costs may end up as the year goes on. Soybean oil has, again, moved to a higher level than I think most anybody would've anticipated. I don't know if it's stabilized where it is now, but we hope that will be the case.

Would that mean, theoretically, if you are accurate on your projections, that second-half profit margins in the Food group will in fact revert to where they were last year?

Well, you know, David, we don't give guidance on specific margins. I guess the only thing I would remind everybody is last year we had some unusually high margins where not only did we have a positive price versus cost relationship going on, but very few other hiccups or unanticipated expenses in the business that is not often the case.

In terms of your share buyback program, have you utilized 100% of what's on the approval so far or when the Board meets in November, they would be adding to what is still unpurchased?

We will discuss that at the meeting in November. We do have a little bit of authorization left, but by the time we get to the November meeting, it will be a very small amount.

That being said, how many fewer shares will you be reporting on, on a fully diluted basis, in the next quarter versus a year ago?

It's a little difficult to predict the dilutive effect just because of the nature of the calculation and its dependency upon market pricing of shares. But it also depends upon the number of shares being potentially repurchased between now and December 31. But as Jay indicated, we have relatively few shares left to repurchase between here and December 31. So it would -- all else being equal, you'd expect weighted shares to be only slightly lower than a year ago. I think, in the current quarter, the differential is less than 1%.

Okay. The last question, is there any fixed ratio you try or the Board tries to attain in terms of dividend versus the actual earnings per share?

No, we have not had a targeted payout ratio. We talk about that, but don't have a set target.

Thank you very much.

A.J. Strasser, Cooper Creek Partners.

Hey guys, thanks for taking my call. Could you just talk a little bit about kind of the headwind that's coming from the soy costs? I may have missed it. Did you say that it's going to start hitting you in Q2 but Q3 it should hit you more?

Yes, that's correct. As we look out from where we are, we were still slightly favorable on soybean oil in the first quarter. It will adjust a bit unfavorable in the second, and then more so as we move into the second half.

I mean, then just if you could -- I know this has been asked before, but just to help us kind of understand some of the degradation that would happen to the margin, is it -- how big of your -- can you quantify a little bit just in terms of how much of your COGS are soy related and just give us a sense of how much margin degradation we should be assuming going forward?

I think, A.J., the rule of thumb we have talked out there before is that, for every $0.01 change in the market price of soybean oil, you might see a $1 million impact to our Food segment's operating income. So, if you sort of take that rule of thumb, recognize that we sort of have a laddered forward buy program, just take a look at the fluctuation in soybean oil pricing, you can get a general sense as to what the exposure might be, all else being equal.

Okay. Then lastly, nice quarter there on the candles. Should we be assuming that type of -- just help us kind of gauge how that growth rate should play out through the year. Is that something we should just -- and also if you could give us a sense of whether or not you expect that business to be making money this year.

We do think it should make some money this year. As it relates to the growth rate, that was probably a pretty strong quarter. We did have some new business coming on in the quarter that helped with new customers that will start to -- now that they are up to speed from a pipeline-fill standpoint, that will slow down some. We probably had a little bit of our seasonal business maybe get shipped a little earlier in that quarter as well. So we wouldn't want to leave you with the impression that that's a growth rate for the coming quarters.

If it's coming from a new customer, shouldn't that impact the next few quarters to come? We're lapping easier comps.

It will help some, certainly, but there was a little bit of a pipeline fill getting the new customer started up. So dependent on what the more routine sellthrough is will dictate what kind of growth we might see.

Great. Thank you again for taking my question.

Mitch Pinheiro, Janie Montgomery Scott.

Good morning guys. So a couple of housekeeping things -- the tax rate, John, lower in the quarter. Is that what we will use for the year?

It's probably a reasonable proxy, in that 34% to 35% range is what we might expect.

Okay. As far as marketing, what was marketing spend in the quarter or relative to last year, up, down?

It was probably up just low seven figures, a little over $1 million.

Which is -- on a percentage basis, what do you think that is?

: I don't know if I've got the answer to that right here. It's probably up about -- getting close to 20%.

Does that marketing include -- that excludes promotion, or does that include?

No, that excludes any trade promotion.

On a trade basis, is that up or down year-over-year?

That's flat.

Flat? Okay.

Yes.

As you look forward, marketing spend, how do you -- you indicated in your comments that you have pretty good placement for the upcoming heavy cooking season here. Marketing, you like your marketing and promotional plans. Does that mean we are up or flat, or how would you describe that (multiple speakers)?

They will be up some as we go through the second quarter.

Okay. When you talk about you were encouraged with the good placement of things, what -- is there any strategy here that, underlying strategy that has changed, or you are earlier -- some of your I guess displays and things are out early ahead of where you were last year. Is that something you're doing? Is that something the retailer is doing? How would you describe that?

It's kind of a mixture. For example, on our caramel apple dip product, I think we did have some customers that are getting displays out a little earlier. This year, we've got, as we mentioned, some of these new items that are getting on the shelf for the first time; they will be there through the holidays. Then particularly and probably our most holiday-sensitive item is the Sister Schubert's product line. We -- in addition to having a bit greater distribution, we've got ourselves, we think, in the best in-stock position we've had going into the holidays. This typically has been a challenge for us to keep up with the seasonal spike in business. As John referenced, we've been building some inventory through the good part of this calendar year to prepare for this season. We think we are in the best shape we've been to service the business that we think is actually out there.

Related to that, you're increasing capacity in Sister Schubert's by 60%. That's a pretty big number. Is that driven by some geographic expansion strategy, the ability to handle seasonal spikes? That's a pretty large increase. (multiple speakers)?

That will do those things over time, a little bit like when we initially built that plant. We will be able to back away some from the heavy overtime production schedules, building as much inventory in advance as we've had to do this year, and the costs that are associated with that. But yes, over as we look out further, sure, growing geographically and having the ability to bring more product innovation to that product line is also part of how we see utilizing that capacity.

Does that have -- how will that be staged in, increasing the capacity relative -- in the higher -- your higher depreciation expense relative to overtime costs. Is it going to be a neutral impact on the income statement?

I don't think we can give you a specific response to that. We can maybe take a look at something like that, but that's not the way we've looked at that project right at this point.

So also, when you look at your categories, looking at refrigerated dressings for instance, how would you sort of describe the environment there? I see some -- when I look at IRI, some of the competition, there is a lot of big ups and big downs. I can't really make heads or tails of what's happening in the category.

Well, I think, as we look at it right now, it does seem like the category perhaps has settled down some from any particular aggressive promotional spending that's going on. We are trying to clearly impact the category, impact our position in the category with the Simply Dressed product line we are just bringing to market right today.

So is there any trade down to the shelf stable? Is there -- are you seeing any trend either way in that relationship?

I don't know that we would say we are seeing a trend or even have great visibility to specific trade down, but we have to believe there is some of that going on in the kind of economy we are in today.

Last question is the pricing that you're implementing. I know a couple of other people were asking about the same thing. But do you expect your pricing actions to be able to, for the most part, match closely the increases in commodity costs? A couple years back in the '07/'08 commodity spike, you certainly had a negative impact on a lag basis. But is there -- is this going to be more closely matched than last time, or --?

We hope it's going to be more timely than last time, and we would like to think it will offset most if not all of the cost impact we are seeing. However, I guess I would still remind you again that when we add a few quarters of 20%-plus operating margins, those were relatively short-lived. We continue to see this as a mid to upper teens operating margin kind of business.

This is the last question, but Foodservice -- how meaningful was the new program, new customers? I mean you had the channel fill or -- sort of happening there. So is that -- without the channel fill, does Foodservice still show improvement?

It would probably be pretty close to flat without that, I would estimate.

Okay. Thank you.

Seth Cohen, Valinor.

A quick question -- I'm just looking at some of the non-operating items [or more] the balance sheet items. I'm curious. Given what sales have done sequentially and year-over-year, cash is down, receivables are up meaningfully sequentially, inventory is up sequentially. What -- that all translates into cash conversion obviously deteriorating quite substantially quarter-over-quarter. What is going on in the balance sheet which is different from sort of what the income statement is telling us?

I think, as you look at the balance sheet, you have to consider seasonal factors between June and September, both for receivables and inventory. As I mentioned in my comments, between September and this past June, we have been doing some builds on our frozen rolls and candles for inventories, and also that would affect the year-over-year comparisons.

We'd like to think, with respect to inventories, that we would see the year-over-year differential by December, get back into the seven figures and in a perfect world into the low seven figures. I think receivables, the agings are very comparable year-over-year, and there is nothing of any great concern.

I guess the question sort of comes down to if I look back to sales growth, particularly on the Food side of the business, which is the largest portion, either sequentially or year-over-year, or you pick the time horizon, the number, the gross number of revenue is down, yet the balance sheet items for receivables are up meaningfully. I'm just trying to understand what's going on. I understand aging is the same, but the number is, it's up.

Remember, the growth is over on the Glassware and Candles side. Those receivables as well have slightly longer dating programs than on the Food side. So there is a bit of a mix issue as well.

In terms of just I know you guys don't give guidance, but if I look at blended operating income margin over the past, I don't know, you pick it, kind of six, seven quarters, it's just been like trying to catch a falling knife for me. Any sort of color you can give for the rest of the year? I know you've given specific numbers for the quarter historically, but the numbers -- it's hard for us to figure it out. You say pricing is coming in, but volume is weak and whatnot.

We don't -- you are right, we don't give guidance. I think as much we've said looking forward this morning is we do anticipate the candle business should stay profitable for the year. The food business, we've talked about these mid to upper teens operating margins is the range we anticipate being in. We are in a period of rising input costs, and there is a little bit of a lag going on here trying to get some pricing relief. It always remains to be seen how timely and effective you can ultimately get the pricing you go after. So that does remain to be seen.

Last year was, you look back the last probably four to six quarters, was somewhat of an unusual period of time where we had finally gotten some price relief, and input costs were in a declining mode, and there were a variety of other favorable cost things going on to a much smaller scale than the input costs. So we got some substantially higher margins than we have historically seen, and especially none that we've seen over a long period of time. So we continue to think that mid to upper teen operating margin range in the Food segment is what we ought to see looking out into the future.

The last question -- and maybe I'll take it off-line after this -- is just which year sort of '04, '05, '06, '07, '08 is the best sort of comp for the environment we're in today?

I couldn't give you a quick answer to that. Maybe we should take the off-line. I'll need to go back and look at those years.

I'm just saying sort of like [wouldn't] you remember sort of commodities going up and the environment you've talk about on the call today?

I hope we are in an environment today where we both are positioned a little differently as it relates to soybean oil, our biggest input costs from the standpoint of forward bias, and are reacting a little more timely to the cost increases we are seeing from the standpoint of trying to get pricing relief.

I'll take it off-line. Thank you very much.

Gregg Halter, Great Lakes Review.

Thank you again. (inaudible) discussion of the price (inaudible) I think last time you had a very rapid increase in soybean oil from something like $0.20 to $0.70 in a short period of time, which I don't believe you've seen yet this time. Maybe it will occur again. But that's just a more general comment I think, the price hikes that you saw back then.

We hopefully won't see that again, but we have seen in just this month probably close to a $0.10 hike, which is pretty quick.

Relative to pricing, this would include Wal-Mart as well and I presume any issues expected with that customer?

We aren't going to comment about specific customers, but we certainly would anticipate pricing impacting our entire customer base.

Okay. The Greek yogurt category has been booming over the last few years. I'm just interested in your new product, and how I guess more generally how your strategy works relative to picking up on that trend. Is that something you are doing inside, or was it conceived on the outside, or a combination? Or just if you could provide some input into that process, I think that would be helpful.

Well, yes, that was conceived internally, and unfortunately it's just been on store shelves such a short period of time, we really don't have any consumer data yet to give you any real quantitative or even qualitative comment as to how it's being received.

Okay. Again, the Greek yogurt in general, that category seems to be doing very well from really a very low base. It's growing very rapidly, and your product, it seems like it could be piggybacking off of some of that growth.

You are right about that. Yes, exactly, we are hoping we are on that trend.

Thank you.

(Operator Instructions). A.J. Strasser, Cooper Creek Partners.

Thanks again for taking the follow-ups. Just so I can -- I think a couple of participants have sort of alluded to this question. I apologize if it's repetitive. But just so I can have a takeaway point here, what makes this different than -- kind of in a rising cost input environment, what makes this different than 2006 to 2008? When your earnings power is a lot less, what's different about this environment that keeps you more optimistic?

This is Jay. I think, again, we are, again, positioned different than we were back then as it relates to our key ingredient, soybean oil. I think we are moving more timely to try to get price relief. Again, we are in an environment today where I think commodities -- farm commodities in many areas are moving up. I think the industry, not just the specific categories we are in but a lot of categories across the industry are going to be looking for price relief, which hopefully creates an environment where our category or our particular request for price increases is not singled out as something that is unusual. There may have been a little bit different scenario of that, but relevant to that going on back in that period of time.

Lastly, you said, on average, your volumes were up year-over-year versus last year?

I'm not sure what you're referring to.

Just within the different segments, I'm just wondering in which categories your volumes were up.

Well, in the quarter, we saw our growth on the retail side of the business primarily in -- I shouldn't say primarily, really the categories that were growing in that quarter from our standpoint were croutons and our various produce dips. The frozen side of our business was somewhat softer in that quarter. Then the Foodservice channel saw growth really driven by a couple of new programs.

This concludes the Q&A session. At this time, I would like to turn the call back over to Mr. John Gerlach for any concluding remarks.

We do appreciate you all joining us this morning. We'll look forward to talking to you late January and hopefully we will have a good fall season, good holiday season, to report at that point. Thank you again.

This concludes today's conference call. You may now disconnect.