Matthews International Corp (MATW) 2017 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the second quarter financial results conference call.

(Operator Instructions) Also as a reminder, today's teleconference is being recorded.

At this time, I'd like to turn the conference over to your host, Chief Financial Officer, Mr. Steve Nicola.

Please go ahead, sir.

Thank you, Tony.

Good morning.

I'm Steve Nicola, Chief Financial Officer of Matthews.

Also on the call this morning is Joe Bartolacci, our company's President and CEO.

Today's conference call has been scheduled for 1 hour and will be available for replay later this morning.

To access the replay, dial 1 (320) 365-3844 and enter the access code 421642.

The replay will be available until 11:59:00 p.m., May 12, 2017.

We have posted on our website, which is www.matw.com, the second quarter earnings release and financial information we will discuss this morning.

The earnings release can be found on our homepage.

For the quarterly financial data, on the top of our homepage, under the Investor tab, click on Investor News, then click on Financial Reports to access the information under the section Matthews International Quarterly Reports.

Before beginning the discussion, at the advice of legal counsel, I have been advised to read the following disclaimer as it pertains to forward-looking statements.

Any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results in future periods to be materially different from management's expectations.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct.

Factors that could cause the company's results to differ from those discussed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SEC.

To begin the conference, I'll review the financial results for the quarter.

Joe will then provide general comments on our operations.

Following that, we will open the discussion for questions.

For the quarter ended March 31, 2017, the company reported earnings of $0.46 per share compared to $0.43 per share a year ago.

On a non-GAAP adjusted basis, earnings per share for the fiscal 2017 second quarter were $0.84 compared to $0.75 a year ago, representing an increase of 12%.

The significant factors in the year-over-year improvement in earnings per share included the impact of higher sales of Memorialization products, including cemetery memorial, caskets and cremation equipment.

Sales growth in our U.K. and Asia Pacific brand markets, continued synergy realization from the SGK and Aurora acquisitions, and the benefits of ongoing productivity initiatives.

For the 6 months ended March 31, 2017, the company reported earnings of $0.74 per share compared to $0.57 per share a year ago.

On a non-GAAP adjusted basis, year-to-date earnings per share at March 31, 2017, were $1.45 per share compared to $1.35 per share a year ago.

The significant factors in the year-to-date improvement in earnings per share included an increase in sales of cemetery memorials and cremation equipment, higher sales in our U.K. and Asia Pacific brand markets, continued synergy realization from the SGK and Aurora acquisitions, the benefits of ongoing productivity initiatives and, with respect to GAAP earnings per share, a reduction in acquisition integration costs.

Year-to-date earnings also reflected a significant increase in stock compensation expense.

As we noted last quarter, as several members of our management reached retirement eligible status, the accounting rules require accelerated expense recognition of awards versus an amortization over the stipulated vesting period.

This change had an unfavorable impact of $0.07 on the fiscal 2017 first quarter compared to a year ago.

Excluding this impact, our year-to-date non-GAAP earnings per share increased 12.6%.

Consolidated adjusted EBITDA for the quarter ended March 31, 2017, was $58.3 million compared to $56.1 million a year ago, representing an increase of $2.2 million.

Consolidated adjusted EBITDA for the 6 months ended March 31, 2017, was $109 million compared to $103.1 million a year ago, representing an increase of $5.9 million.

A reconciliation of non-GAAP earnings per share and adjusted EBITDA were provided in our press release yesterday, which has been posted to our website.

A significant portion of the non-GAAP adjustments continues to include costs and other charges in connection with the integrations of the acquisitions of SGK and Aurora, including our ERP integration and implementation.

In addition, acquisition-related costs included charges incurred related to our recent acquisitions, including assets step-up expense.

Acquisitions completed during the fiscal 2017 second quarter, included A+

E Ungricht GmbH, Equator and BCG Group in our SGK Brand Solutions segment and RAF Technology in our Industrial Technologies segment.

Consolidated sales for the quarter ended March 31, 2017, were $380.9 million compared to $367.2 million a year ago, representing an increase of $13.7 million.

The improvement reflected an increase in sales of Memorialization products, including cemetery memorials, caskets and cremation equipment; higher sales of marking products for the Industrial Technologies segment and the benefit of recent acquisitions.

In addition, SGK Brand Solutions sales in the U.K. and Asia Pacific markets were higher for the recent quarter.

Changes in foreign currency exchange rates had an unfavorable impact of $5.6 million on the company's current quarter consolidated sales compared to a year ago.

The company's consolidated sales for the 6 months ended March 31, 2017, were $729.9 million compared to $721.4 million a year ago.

The growth in year-to-date consolidated sales resulted primarily from an increase in sales of cemetery memorial products, higher sales in the U.K. and Asia Pacific brand markets, an increase in merchandising sales and the benefit of recent acquisitions.

Changes in foreign currency exchange rates had an unfavorable impact of $10.8 million on the company's current year-to-date consolidated sales compared to a year ago.

Sales for the SGK Brand Solutions segment were $190.1 million for the current quarter compared to $184.4 million for the same quarter a year ago, representing an increase of $5.7 million.

The segment reported sales growth in U.K. and Asia Pacific markets and an increase in merchandising sales in the U.S. These increases were partially offset by lower brand sales in North America and Europe due to continued slow market conditions.

Currency exchange rate changes had an unfavorable impact of $5.1 million on the segment's sales for the quarter compared to a year ago.

Sales for the SGK Brand Solutions segment for the first 6 months of fiscal 2017 were $365.9 million compared to $362.7 million a year ago, representing an increase of $3.2 million.

Currency exchange rate changes had an unfavorable impact of $9.9 million on the segment sales for the current 6-month period compared to a year ago.

The SGK Brand Solutions segment reported operating profit of $4.4 million for the current quarter compared to $5.5 million for the same quarter a year ago.

Charges related primarily to the acquisitions and acquisition integrating activity were $6.9 million for the current quarter compared to $7.6 million last year.

Unfavorable changes in product mix and currency rates were the primary factors in the year-over-year reduction in operating profit for the quarter.

These changes were partially offset by the realization of acquisition synergies and other cost reductions.

For the 6 months ended March 31, 2017, the SGK Brand Solutions segment reported operating profit of $8.6 million compared to $8.3 million a year ago.

Charges related primarily to the acquisitions, including asset step-up expense and acquisition integration activity were $13.1 million for the current year compared to $14.9 million last year.

Memorialization segment sales for the fiscal 2017 second quarter were $162.1 million compared to $157.4 million for the same quarter a year ago.

The segment reported higher sales volumes of cemetery memorial products, caskets and cremation equipment in the current quarter.

For the 6 months ended March 31, 2017, Memorialization segment sales were $307.7 million compared to $305 million a year ago.

The segment reported higher sales of cemetery memorial products and cremation equipment, which were partially offset by lower casket sales, reflecting an estimated decline in U.S. casketed deaths during the 6-month period.

Operating profit for the Memorialization segment for the fiscal 2017 second quarter was $22.9 million compared to $19.5 million for the same quarter a year ago.

The increase reflected the impact of higher sales and the benefits of acquisition synergies and ongoing productivity initiatives.

In addition, charges primarily in connection with the Aurora acquisition integration and ERP integration and implementation were $2.6 million for the current quarter compared to $685,000 last year.

Operating profit for the Memorialization segment for the 6 months ended March 31, 2017, was $37.3 million compared to $27.2 million a year ago.

The increase reflected the impact of higher sales and the benefits of acquisition synergies and ongoing productivity initiatives.

Charges primarily in connection with the Aurora acquisition integration and ERP integration and implementation were $4.7 million for the current year compared to $7.9 million last year.

The prior year also included the impact of inventory step-up expense.

The Industrial Technologies segment reported sales of $28.7 million for the quarter ended March 31, 2017, compared to $25.4 million for the same quarter last year.

The current quarter reflected higher sales of marketing products and the benefit of recent acquisitions, offset partially by lower sales of fulfillment systems.

For the 6 months ended March 31, 2017, the Industrial Technologies segment reported sales of $56.3 million compared to $53.7 million last year.

The Industrial Technologies segment reported an operating loss of $471,000 for the current quarter compared to operating profit of $1.5 million for the same quarter last year.

For the first 6 months of the current fiscal year, the segment reported operating profit of $35,000 compared to $3.1 million last year.

The benefit of higher sales for the current year were offset by the impact of an unfavorable change in product mix and higher product development cost.

Product mix was impacted by the delay of a significant fulfillment project originally scheduled for the fiscal 2017 second quarter.

In addition, the segment incurred acquisition-related charges of $142,000 and $444,000, respectively, for the current quarter and 6-month periods.

Consolidated adjusted EBITDA as a percent of sales was $15.3 million for the fiscal 2017 and fiscal 2016 second quarters.

Consolidated adjusted EBITDA as a percent of sales was 14.9% for the first 6 months of fiscal 2017 compared to 14.3% last year.

The year-to-date adjusted EBITDA margin improvement primarily reflected the impact of acquisition synergies and other cost reduction initiatives.

A summary of operating results by segment, including non-GAAP adjustments for the quarter and 6-month periods are posted on our website for your reference.

Gross margin for the quarter ended March 31, 2017, was 36.3% of sales compared to 37.5% a year ago, primarily reflecting the impact of acquisition asset step-up expense for the current quarter.

Gross margin for the 6 months ended March 31, 2017, was relatively consistent at 36.4% of sales compared to 36.6% a year ago.

Selling and administrative expense for the current quarter was 29.3% of sales compared to 30.3% for the same quarter last year.

Year-to-date, selling and administrative expense for fiscal 2017 was 30.1% of sales compared to 31.3% last year.

The decline primarily resulted from synergy realization and a reduction in acquisition integration costs.

Investment income for fiscal 2017 second quarter was $780,000 compared to $235,000 a year ago.

Investment income for the first 6 months of fiscal 2017 was $1.1 million compared to $936,000 a year ago.

The year-over-year change represents investment performance on assets held in trust for certain of the company's benefit plans.

Interest expense for the current quarter was $6.6 million compared to $6 million for the same quarter last year.

Interest expense for the 6 months ended March 31, 2017, was $12.8 million compared to $11.9 million last year.

The increase resulted primarily from higher average interest rates this year and additional borrowings, as a result of the recent acquisitions.

Other deductions net for the fiscal 2017 second quarter were $153,000 compared to $192,000 a year ago.

For the 6 months ended March 31, 2017, other deductions net were $708,000 compared to $1.1 million a year ago.

Other income and deductions generally include, among other items, banking-related fees and the impact of currency gains or losses on certain intercompany debt.

The company's effective income tax rate for the 6 months ended March 31, 2017, was 28.9% of pretax income.

This rate reflects certain favorable tax benefits and utilization of certain tax attributes specific to the current year.

The effective tax rate was 30.5% for the fiscal year ended September 30, 2016.

At March 31, 2017, the company's consolidated cash was $43.6 million compared to $55.7 million at September 30, 2016.

The decrease primarily resulted from cash used for the company's recent acquisitions.

Accounts receivable at the end of the current quarter approximated $303 million compared to $295 million at September 30, 2016.

Consolidated inventories at March 31, 2017, were $175 million compared to $162 million at September 30, 2016.

Long-term debt at the end of the current quarter, including the current portion, approximated $947 million compared to $873 million at September 30, 2016.

The increase primarily resulted from additional borrowings for the company's recent acquisitions.

Outstanding borrowings on the company's domestic credit facility at March 31, 2017, were approximately $885 million.

Total borrowing capacity on this facility was increased to $1.15 billion in fiscal 2016, $250 million of which was in the form of an amortizing term loan.

The facility has a maturity date in April 2021.

Additionally, as we previously disclosed, we received a claim in September 2014 seeking to draw upon a letter of credit issued by company of GBP 8.6 million with respect to a performance guarantee on a project for a customer in Saudi Arabia.

We assessed the customer's claim to be without merit and accordingly initiated an action with the court.

Pursuant to this action, a court order was issued in January 2015 requiring that, upon receipt by the customer, these funds were to be remitted by the customer to the court pending resolution of the dispute between the parties.

As a result, the company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer.

The customer did not remit the funds to the court as ordered.

On June 14, 2006, (sic) [2016] the court ruled completely in favor of Matthews following a trial on the merits.

However, as the customer has not yet honored this court order and remitted the funds, it is possible the resolution of this matter could have an unfavorable impact on our results of operations.

The company had approximately 32.2 million shares outstanding at March 31, 2017.

Year-to-date, the company has purchased a 135,147 shares under its share repurchase program at a cost of $9.2 million.

At March 31, 2017, approximately 1.9 million shares remained under the current share repurchase authorization.

Depreciation and amortization expense for the current quarter was $17.1 million compared to $16.4 million a year ago.

Year-to-date, depreciation and amortization expense was $32.3 million for the current year compared to $32.2 million a year ago.

Capital expenditures for the quarter ended March 31, 2017, were $8.2 million compared to $9.8 million a year ago.

For the 6 months ended March 31, 2017, capital expenditures were $13.3 million compared to $23.9 million a year ago.

Finally, the board, last week, declared a dividend of $0.17 per share on the company's common stock.

The dividend is payable May 15, 2017, to stockholders of record May 1, 2017.

This concludes the financial review, and Joe will now comment on our operations.

Thank you, Steve.

Good morning.

Our second quarter was another good quarter for our businesses.

Strong performance from our Memorialization segment, where each of our businesses delivered revenue and operating profit improvement, good synergy capture in funeral home products and continued revenue improvement from SGK in the U.K. and Asia and our merchandising division, helped offset slowness in other parts of our business.

During the quarter, we continued to deliver strong synergy capture and improved our cost structure in many of our businesses, further positioning us to meet our expectations.

Our automations business struggled to deliver expectations, largely due to the delivery -- deferral of a large project that we had anticipated would add to the quarter and the segment.

But the other portion of the businesses contributed nicely to offset that challenge.

Regarding our 2 acquisitions, we are approaching the end of our initiatives on SGK, and we expect integration expense to be substantially complete in the next quarter or 2.

Aurora, on the other hand, is expected to continue to incur integration cost through early 2018.

Both integrations continue to go well, on track, both in terms of integration costs and synergies.

And we expect the remaining synergies to be in the range of $15 million to $20 million.

With regard to our brand business, we're in the process of implementing our final phase of the ERP solution, which continues to go well and is expected to deliver the remaining piece of our synergy estimates.

Our North American business is finally starting to see some ordering of new labeling requirement projects but packaging innovation has been light, and marketing dollars remain constrained by zero-based budgeting focus in our clients, which has dampened our North American revenues.

We expect this trend to challenge our traditional packaging business in the near term, as our clients look for ways to meet changing consumer demand, but should be mitigated by the labeling requirement going forward.

Moreover, we continue to expand our product and service offerings by adding marketing communications, design adaptation and Internet marketing solutions to the SGK portfolio, where you already have seen growth in some of our markets.

Also during the quarter, we acquired several small businesses, each of which should have a positive upside to our business.

Although, each is small relative to our overall business, we expect these acquisitions to be very positive to our overall strategies in the longer term.

As we look at our businesses, we continue to see strong cash flow performance, with depreciation and amortization exceeding our capital expenditures by almost $20 million on a year-to-date basis.

Similarly, our EBITDA margins in each of our segments on a pre-corporate allocation basis continue to be in the mid- to high-teens or better, showing the strength of our operating performance throughout the businesses.

We believe we see a path to continually improve those margins and advance our businesses, as our ERP implementation is completed.

As mentioned above, our Industrial Technologies business had a difficult quarter but saw strong equipment and ink sales reflecting the innovation and product developments with the pass of this business.

The overall performance of the group, as discussed above was challenged by $7.5 million project in our automation division, which is deferred and $1.6 million of R&D spending for a new product, which we continue to have great promise.

The new development remains on track both in terms of timing and total investment, which we expect to be around $7 million this year.

We expect to have the new product in the market by 2018 and should see -- begin to see the benefits of that in early '18 and '19.

Looking at the balance of 2017, we remain confident in our ability to achieve our goals and deliver our non-GAAP EPS in line with our expectations.

We remain cautious, however, given the uncertainty around death rates, which have been choppy of late and continued sluggishness in North America and European brand markets.

Nonetheless, we remain pleased with the direction of all of our businesses as the investments -- and the investments that we have made.

With that, let's open it up to questions.

(Operator Instructions) Tony?

(Operator Instructions) At this time, our first question will come from Dan Moore with CJS.

It's actually Chris Moore for Dan.

The Memorialization revenue was up across the board.

Can you give us a sense of the relative organic growth rates for memorials versus caskets?

Sure.

We also have the environmental businesses, which are cremation equipment principally, and that had a very strong quarter as well.

So we are seeing better backlog ordering in that business and continue to see strength in both North America and elsewhere in the world.

When it comes to the Memorialization business on the Cemetery Products side, we had good revenue on that business, largely driven by some COP, which are Certified Ownership Programs on pre-need basis on some of our larger accounts, as well on the funeral home side, we saw -- as you heard we mentioned some choppiness in the death rates, we saw a very, very strong month of March and slower months in January and February.

So there's still some choppiness in there.

I would tell you that the relative growth in the 2 businesses is about the same.

Some price and some organic, but at the end of the day, we were -- we are real pleased with the direction on that business.

Got you.

And just one more before I get back in line.

How much of an impact did rising copper price have on margins in Memorialization?

For this quarter, just because of the -- our purchasing patterns and the fact that we've -- we were bought out to some degree really didn't have a significant impact this quarter.

The next question will come from Liam Burke with Wunderlich.

Joe, when you're looking at expense -- synergy expense realization on the SGK side of the business, I know you have an objective for 2017.

Looking at the first half of the year, how much has been realized?

Are we looking at something that's more backend loaded?

For the year alone, we probably realized on a year-over-year basis somewhere around $5 million left in the first half of the year relative to the prior year, another $5 million or so coming out of the balance of the year on a year-over-year basis.

We don't have a lot left in that tank, as it relates to synergies to be driven from SGK.

We are pretty much in line with what we had expected coming out, I would say, by the end of '18 we will realize everything, Liam.

Okay, great.

And just quickly staying with SGK.

The -- there have been articles discussing the CPGs revenues are down about 3.5% in the first quarter.

How much different -- I mean, obviously, when you're managing the business, you got the fair labeling marketing act coming to help partially offset that.

But do you have to manage business any different than you first anticipated?

Absolutely.

We have -- there was a recent article in the paper that talked about the impact of certain CPGs.

I mean, for better or worse, we do work with all of those, those are our clients.

And we're seeing revenues challenge in each one of them, nothing that we have done, just less marketing dollars and innovation being spent.

As a result of that, what has traditionally been a more reprographic service function.

You saw us pull a couple of small acquisitions, one of which we are very, very positive about, that would take us further into the adaptive art.

Meaning, going upstream not to the initial creation to the package as much, but further into the adaptive creation.

And more importantly, going into the private label sector specially, as it relates to retailers specifically.

So we're managing to move the business in other directions, all in the digital content management side.

But at the end of the day, we're going to have to expand our product and services to continue -- services to continue to grow that business.

(Operator Instructions) Next in queue is Scott Blumenthal with Emerald Advisers.

Gentleman, looks like the next couple of quarters is setting up to be pretty nice for the business, overall.

Since 60% of the business is now kind of project-based SGK in your Industrial Technologies business.

Maybe you can give us some insight into the outlook with -- for each one of those, particularly on the SGK side, as it refers to what you talked about with the food labeling act coming through?

I mean, I can give you a perspective.

One of our recent acquisitions, a little company by the name of Equator, which has been a great add, is a business that principally work through private label for retailers around the world.

Names that you'd be recognizing as you walk down the streets very clearly, here and in Europe.

All the services that they performed for those retailers will require FDA labeling in North America.

So as it relates to that business, sometime over the next 18 months, we expect that business to do substantially better than it already has prior to the acquisition.

I would tell you, FDA labeling requirements, right now, are expected to be implemented by end of July of 2018, unless we see some deferrals on that, there is lot of work yet to come.

We probably do about 15% to 20% of our business at least in the food business in North America.

So we would expect to see volumes start to grow, as we go forward in the next 18 months or so.

Couple that though, we're seeing less new packaging innovation in general, as those retailers -- excuse me, as those CPGs start looking for ways to address changing consumer demand and reformulating product, repackaging product will be something that I think will come back to this business over time.

But as we go through this turbulent time of addressing consumer demand, we're going to see little bit of challenges on the marketing side.

Okay.

And with regard to Industrial Technologies, may be some insight into what your outlook is there?

Obviously, you mentioned you have the fulfillment project that got pushed out a little bit.

Should we expect some of that in the current quarter Q3?

And maybe the outlook for that business, maybe you can give -- at least give us some comparison to maybe where we were last year with regard to project pipeline and those types of things?

We're real comfortable with the space in which we operate.

I mean, the automation side, the fulfillment side of the business where we had the challenge from a revenue standpoint, really focuses on e-commerce, which all of us would agree, is where we need to be focusing on, as we move into that side of the business.

Unfortunately, those projects are bigger.

And in this case, $7.5 million project on a business that might do $30 million to $40 million worth of revenue on an annual basis will impact it in any given quarter.

Our backlog today would tell us that, that particular project is not going to hit until latter part of the fourth, maybe into the first quarter of '18, they pushed it out.

But nevertheless, we continue to sell.

We're -- I would tell you relative to prior year, we are tight, but we expect that team -- and will continue to move forward, a couple of nice little additions to the business will continue to grow its offerings.

So we're comfortable that we're in the right space and that we'll meet our year pretty close to it next year in that business.

(Operator Instructions) And a follow-up from Scott Blumenthal.

Joe or Steve, are you feeling any rising commodity impact at this point?

Joe, I know that you have a particular love for the steel guys.

So maybe.

(technical difficulty)

(Operator Instructions)

Scott, are you there?

(Operator Instructions) Mr. Blumenthal, that line is back opened, please proceed.

Steve or Joe, are you feeling any impact at this point rising commodity costs particularly steel and the casket business or maybe your Industrial Technologies business?

And then maybe some talk about -- some discussion on what's going on in the bronze side of the business, too?

So we are feeling the impact particularly on the steel side.

As -- I mean, as you might expect, as we've grown our Funeral Home Products business, we sell a lot more steel than we do bronze.

And steel has grown significantly and it's flowing through our P&Ls at this point in time.

So the results you are seeing are being impacted by that.

We've been successful in both reducing our costs and trying to pass through those costs to our customers and got a little extra volume as well.

So that's a positive.

On the Memorialization side, we've mentioned in the past that we were going after and recovering some of the past customers we had lost in our cemetery products side.

And we're seeing the benefit of that.

We're seeing a more aggressive stance from some of our larger accounts, as they focus more on pre-need sales.

Those pre-need sales ultimately end up in early order of markers for us.

And frankly, our stone business, as we told you in the past, albeit small at this point in time, it has significantly improved year-over-year on the year-to-date basis, and we think that continues to be an opportunity for us to grow.

We don't call that out separately out of cemetery products, but we're seeing good, good performance in all of those segments, and environment as well.

You touched -- I know that years ago, when Matthews was a little bit of a different business.

We started to experience some price sensitivity particularly, with relate -- as related to bronze memorials.

Are you seeing your customers as price-sensitive these days or has some of that alleviating and maybe getting that business back to the type of growth rates that we had seen maybe a decade ago?

What we're seeing, Scott, a decade ago, when I took over as the CEO, copper was about $0.75 to $0.80 a pound.

Today, almost $3.80 -- $3 -- $2.80 to $3.

What you saw in the early part of that decade was rapid increases in copper price.

We're not seeing that kind of rapid increase.

Secondly, and therefore, we are not having to pass that kind of pricing through to try to recover.

Secondly, I would tell you that business has done a great job becoming far more efficient in the delivery of product and services.

We're having to respond in different way than we did in the past.

And it's a different business today than it was in the past.

Regarding growth, it's a different world than 10 years ago.

Cremation rates are substantially higher than they were back then.

I would tell you that we continue to hold firm on our customer base, and we'll see whether or not our response, which is to add the stone part of the business is able to offset any kind of fluctuation either way.

So far that business has been a nice add for us, despite some early challenges.

(Operator Instructions) And next in queue is David Stratton with Great Lakes Review.

I just want to kind of piggy back on the back of Scott's question.

And when we look at price increases and pass-throughs, what's your lag time approximately?

Is that something that can be realized immediately or does it take a while for that to kind of percolate through the system?

We generally raise our prices, unlike in the past where we've learned our lesson by alienating few customers earlier on.

We go out with price increases once a year, generally around the beginning of either the fiscal or the calendar year.

So what you're seeing right now is the impact of both the commodity increases and the benefit of this -- of the price increases that we made in the early part of the year.

Great.

And then, that actually dovetails into my follow-up.

And what does the competitive landscape look like in regard to price increases?

Are you seeing everybody in the industry trying to make those moves upward or is there anybody holding back trying to gain share?

We're pretty much all on the same platform at this point in time.

I mean, the markets have got a little tighter in terms of suppliers.

There's plenty of capacity in the marketplace.

But price competition is always going to be a factor, but I would tell you it's not as aggressive as it might have been 10 years ago.

At this time, I'll turn the conference back over to our presenters for any closing comments.

All right.

Tony, thank you.

We would like to thank everyone for participating in our call this morning.

And we look forward to our third quarter earnings release and conference call in July.

Thank you, and have a great day.

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