Middleby Corp (MIDD) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Middleby Corp Q2 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions)

As a reminder, this call is being recorded. I'd like to introduce your host for today's call, CEO and Chairman Selim Bassoul and CFO, Tim Fitzgerald.

I'd now like to turn the call over to Tim Fitzgerald for opening remarks. Sir, you may begin.

Okay. Thank you. Good morning. This is Tim Fitzgerald, CFO of the Middleby Corporation. I will make some initial comments about the quarter and then we'll open it up to questions.

Net sales in the 2014 second quarter of $424 million increased 16.8% from $363.8 million in the second quarter of 2013. The second quarter sales reflect the impact of acquisitions of Celfrost and Wunder-Bar completed in the fourth quarter of 2013 and Market Forge and Processing Equipment Solutions completed in the first half of 2014. These acquisitions were not fully reflected in the prior year comparative results and accounted for 5.8% of the sales growth in the quarter.

Excluding the impact of these acquisitions, sales increased $39.9 million or 11% over the prior-year quarter. This increase reflects an organic sales growth of 10.2% at our commercial foodservice group, an increase of 6.2% at our food processing group and a 20.6% increase in our residential kitchen equipment segment.

At the commercial foodservice group, sales amounted to $263.9 million. We continued to realize growth driven by increased sales to restaurant chains looking to upgrade equipment and adopt new technologies to improve the efficiency of store operations. Sales in international markets grew 16% in the quarter with double-digit growth realized in Europe, Mid-East and Asia.

Sales in China rebounded in the quarter following disruption in prior periods due to food supply issues at one of our major customers in (technical difficulty).

Sales at the food processing group amounted to $89.9 million in the quarter. Sales continued to benefit from expansion of food processing operations in emerging markets and adoption of newer technologies to improve operating efficiencies and address food safety. We anticipate that we will continue to realize similar growth in the second half of 2014. However, sales growth is anticipated to slow in the third quarter due to timing of projects that may shift into the fourth quarter. Overall, the demand and project pipeline for this business remain strong and we are realizing the benefits of expanded platform of complementary brands which allow us to offer a complete solution of technologies to our customers.

Sales at the Viking increased 20.6% to $71.8 million for the quarter and included the increased sales markup associated with newly added distributor operations. In comparison to the first quarter, the sales increase includes the seasonal benefit of increased outdoor cooking sales which are the strongest in the second quarter.

During the quarter, we made significant progress integrating the acquired distributor operations. We are largely complete with these initiatives and are now focused on the promotion of our new lineup of products, including investments made to distribute these products in dealer showrooms and training of our dealer sales representatives. We anticipate these efforts will be ongoing throughout the remainder of 2014 and early 2015 and we will be well positioned to realize the benefit of these investments in 2015.

Gross profit for the second quarter increased to $166.2 million from $136.6 million in the prior year. The gross margin rate was 39.1% as compared to 37.5% in the prior-year quarter.

The gross margin rate reflects the impact of increased margins at the food processing segment and also at Viking. The gross margin at Viking in the quarter improved to 33% as compared to 30.7% in the second quarter of last year. Although, as anticipated, margins in the quarter continued to be adversely affected by inventory acquired in conjunction with the distributor acquisitions, we anticipate that this margin impact will lessen in future quarters as we will have depleted much of the acquired inventory associated with the distributor acquisitions in the first and second quarters.

Selling and distribution expenses during the quarter increased from $38.6 million to $48.1 million. This increase includes $4.9 million in selling costs associated with the Viking distribution operations acquired in 2013 and 2014 and not reflected in the prior-year results. There were also $1.3 million in increased selling costs associated with the acquisitions of Celfrost, Wunder-Bar, Market Forge and Processing Equipment Solutions. Excluding the impact of these acquisition-related activities, increased selling costs reflect the impact of higher sales volumes and investments in international sales offices.

General and administrative expenses increased from $37.6 million to $42.3 million. This increase is primarily attributed to $3.4 million of incremental costs associated with the acquisitions. As compared to the prior-year quarter, expenses also increased due to $1.8 million of additional non-cash share-based compensation.

During the quarter, general and administrative expenses also included $1.3 million of non-recurring expenses associated with the integration activities of the residential kitchen equipment distributors. The provision for income taxes amounted to $23 million at an effective rate of 32.2% and reflects favorable tax reserve adjustments. The effective rate for the year is anticipated to range from 33% to 34% largely dependent on the mix of domestic versus foreign earnings.

Cash flows generated by operating activities amounted to $72.5 million for the quarter and $61.7 million in the first six months. Second quarter cash flows reflect the strong net earnings and favorable impact related to the timing of tax payments as advanced federal tax payments made in the first quarter were utilized in the second quarter.

We anticipate continued strong cash flow generation in the second half, which is traditionally stronger due to cyclical factors. Non-cash expenses added back in calculating operating cash flows amounted to $15.3 million for the quarter including $6.7 million of intangible amortization, $3.8 million of depreciation and $4.8 million in non-cash share-based compensation.

During the second quarter, the Company utilized $3.8 million to fund capital expenditures and $15 million to fund acquisition-related activities. Total debt at the end of the quarter amounted to $592.7 million as compared to $655.4 million at the end of the 2014 first quarter. Company's net debt-to-EBITDA leverage ratio at the end of the quarter was approximately 1.8 times.

That's all for the prepared commentary. Amanda, can you please open up the call to questions now?

(Operator Instructions) Tony Brenner, ROTH Capital Partners.

I have two questions. The first related to the statement regarding significant investments in marketing and training for Viking relative to the new products. Is that in the second half going to be an earnings headwind or will those outlays be offset as it presumably drives incremental sales?

They will largely be offset actually by some of the other margin improvements as we're seeing the impact of distributor inventories in the channel lessen as well as some of the cost efficiencies in the distribution channel will offset some of the investments that we make in the second half of the year.

Okay. You've talked about 15 new products being introduced. Have those all now been launched or will that be a gradual rollout?

Tony, this will be a gradual rollout. What's happening is we have launched our cooking platform. We're launching our new refrigeration in December and we are launching our new cooktops in October. So basically you have seen the WOW! Ovens and the new Range series out.

We are launching a lot of new products coming up between now and then albeit gradually. So, again, refrigeration coming up in September, cooktop in October and then we have what you call a new line for urban dwellers or city dwellers is coming up in October. It's a complete new line which is very, very in demand for our international markets and high-risers and builders who are doing multi-family unit. So this is totally new for Viking which they have never had. This will be coming up also in October, launching that new line.

Second question, Selim, you have been talking about multiple number of restaurant chains field testing kitchen renovation projects for a year. Have any of those chains now stepped up and are they ordering such a renovation or is this just an endless field test?

So let's separate the two. So we are getting interesting enough -- we are getting implementation of this on the small chains. So we are having many, many -- 20 to 50 store outlets adopting the Kitchen of the Future so they are rolling it out. So we are getting -- most probably we have installed literally close to 300 Kitchen of the Future in the past few quarters.

The big chains that are, what I call, 1,000-plus stores have been much slower. They are still being in test. The tests have been very, very positive. But I think it takes a big commitment. The way Brinker did it, Brinker went out and said, I am going to -- from corporate issue a check for all my stores and my franchisees to basically to roll out the Kitchen of the Future. So where we are getting a lot of success is what I call chains that are less than 100 stores and they are rolling very fast. But we are still in test with the big chains that are over 1,000 and more. The tests are going very well. But it's slower than we expected because it's a big commitment of money to roll out. So just to remind everybody, basically the rollout just in capital expenditure for Brinker for their 1,200 stores was over $50 million. So CEO has to decide to -- find the $50 million to decide to do this for 1,000 more store.

But now everybody is telling me that they would like to do it as we talk to people. They see the payback, but it's a big commitment that they have to do. Summarize your question because everybody is going to ask about this, the Kitchen of the Future is taking hold at the smaller stores and as those stores continue growing from 20 to 50, from 100 to 200, they are adopting that Kitchen of the Future a lot faster than the big ones.

Tim Wojs, Baird.

I guess, just turning back to Viking a little bit, I guess, you have talked about a 20% EBITDA target exiting 2014 for Viking. I guess, I just wanted to confirm that that's still the target even though you are talking about some of these investments in the back half of the year.

That is still the target is to exit this year at a 20% EBITDA and we feel we are on track for that.

Great. And then I guess just on the dealer network, you spoke last quarter about reducing some of the numbers of dealers that you had there and I guess just an update on the progress there, what you have been hearing from the dealer network and then maybe any impact that you might be seeing either positive or negative from a top line perspective there would be great.

So what we have done is we said that we would like dealers to commit to our displays, a much more bigger commitment with a exclusive display for us versus the dealers [who drove] Viking product among others. That has been one.

The second thing we ask dealers, which has been a big thing for us, is in order to make the true margins for us they have to basically grow their business. So from that perspective we've had, I would say -- we had a number of 1,500 dealers. That number now today is sitting at below 1,000 because we have cut off some, we have told others to not, so we have been a lot more selective. We are now working with -- most probably that number will go down to close to 700 as we go into 2016 and it's working well.

So the other dealers have stepped up. So we have seen dealers who commit to us. So I can talk about specifically the 250 dealers who have stepped up significantly their display and their orders with us and their commitment to us. So we are feeling very, very good and we are seeing that in orders coming through now (inaudible) literally.

Let me repeat it in a different way. The first quarter and second quarter was very disruptive for Viking, why because we ended up buying two of the biggest distributions in January and February. So we bought the East Coast and we have to integrate that. And shortly after that in the second quarter, we went out with a new dealer program that literally set a new stage of how we do business with Viking and it took the dealers time to absorb it. There were a lot of questions and answers for our sales people, for me, I had dealers calling me and what happened is now everything settled.

So the message was clear. We are not trying to take money away from the dealer. We are trying to say, if you grow with me profitably and you basically promote my new product, I will be willing to basically support you. You have to display our products, you have to be a true partner with us. And now that we own the distribution, we are able to service them better, we are able to train them better, but we are not going to train 1,500 dealers and we made clear as we went through which dealer is with us, which dealer we don't want, which dealer basically told us that they don't want to work with us. So that's all sorted out itself through the second quarter that I can truly say now that we got almost 80% of the dealers that have committed to us and committed to them. We still have 20% that are in flux and we will sort that out by the end of the year.

So a lot of stability has occurred. The programs are in place, the promotions are in place. I am glad that we did as well as we did given all the disturbances and the changes we have made in the first six months of the year between finishing completing the distribution buying the distributors. In fact, not only the year, I would say in the past year and a half, we ended up buying all the distributors, a lot of negotiations, a lot of inventories that was dumped in the marketplace, a lot of changes in terms of service, in terms of the way we sold, then we changed the program and now are in the process of finally launching the new product. The timing of launching the product was superb. Now we have the distribution in place and we have our dealers in place.

That's great. Now that's really helpful. I appreciate that. And then I guess, just in terms of in Viking, this might be a better question for Tim, but the $12 million year-over-year increase at Viking, is there a way to split out what was just organic growth and maybe what was the contribution from the distributor acquisitions?

I'll be honest with you, it's difficult. There is so many moving pieces right now that it's hard to get a real accurate number on that, but it's a combination of both obviously.

And then I guess just on commercial foodservice, my last question, you mentioned that China rebounded this quarter and I guess I was a little surprised that just given there's more headlines about some food supply issues there. So how do you anticipate seeing that play out as we go through the year? Do you anticipate any other kind of hiccups there as some of those bigger chains digest the supply chain issues?

I mean that's kind of early news. We really don't anticipate that it's going to have a significant impact. That recent issue is related not to our larger customer in China, but a different chain. So there's a lesser impact on our customer. So we feel that their store opening plans are intact for the back half of the year. So we'll feel fairly confident that we'll continue to see growth in China in the back half of the year.

I can answer that a little bit more because I think China is on the mind of a lot of our customers who are operating there, but I have to tell you I give them credit because they are acting very actively. So as they grow fast in China, and China is a huge market, our customers have come back and literally forced their supplier to start looking at more safety.

I think the last episode that we've seen at one of our customers in China is now putting all the supplier around -- in the emerging markets to come up and start looking at food safety. So on another hand, this is great for our food processing business as we are the leader in [clean] equipments for food processing company, we're going to see a big jump in people asking for or restaurant operator asking for safety from their supplier, not only in China. It's going to happen in the Middle East, it's going to happen in South Africa, it's going to happen in Malaysia, it's going to happen in Thailand, in Latin America. So I think we're starting to see some -- lot of increase coming into our food processing part from what happened because the biggest basically, other than supermarket, restaurants are the biggest users of food processors and they're not going to tolerate having a sloppy, unsafe supplier.

I can assure you that all the big chains we work with have been sending teams of people to make sure that their supplier is now audited and not going to incur anymore of those type of health hazards or safety procedures that's not in place.

Joel Tiss, BMO.

I guess you sort of answered the inventories and receivables mostly the receivables, why they were up so much. Is that most of it just from acquiring the distribution and some of the acquisitions?

Yes, that's correct.

Okay. And I just wondered if you could take a step back and give us a little color, everyone seems to be focused on your new chain initiatives, the Kitchen of the Future and Viking, but can you just give us a couple of sentences on what else is happening, like some of the other big pieces within Middleby, what's happening and what kind of initiatives you have to grow just so we get a little bit of a more rounded picture of what else you guys are working on?

Joel, I am glad that you asked that question because we talk about this Kitchen of the Future but we have a lot of other initiatives. So we have the initiative of what's happening in what I call the Drywell from CookTek which is getting launched now in one of the Asian chains. We started the rollout.

The waterless steamer has been also rolled out and we're in the final phase of that rollout in the waterless steamer. We just introduced at the National Restaurant Show the fire oven, which is a 90-second ventless Artisan pizza which -- Artisan pizza type of equipment that has been a huge hit. We've had more awards. We've had people lined up. I've never seen in any introduction of any products like this that people lined up. We have orders for it and the product is being launched now.

It's launching in September. We got orders when people just saw it at the show and [rose] orders. That's a very exciting product for us. On the food processing side, we have a lot of bakery, new bakery innovations coming -- taking place.

We continue innovating with respect of the protein side and the chicken side. There is a lot of equipment going on there. Then the most exciting product also that we introduced is our reduced oil volume product from Pitco that just basically not only is being tested extensively in the US but we just won an emerging chain in the Middle East that just adopted -- they basically compared ours and our competitors extensively and that team is made up of former KFC and McDonald's employees that started that chain and ultimately tested all the competitors and we came first in the reduced oil volume. And they placed -- they put food chain -- it's not a big chain, but it's a fast-growing chain and they've put all their units using the reduced oil volume fryers after testing our product extensively against the competition. So we have a lot of exciting products coming soon, very, very fascinating products that is taking place whether it's our TurboChef or CookTek or Blodgett the combi oven. We are up on combi oven in double-digit growth. We have the combi oven that's launched which is more energy saving, more water saving, a very fantastic control panel and we've been able to gain market share in that combi oven space after we introduced the combi oven.

So I'm glad that you're asking the beyond so we have big initiatives. The combi oven initiative is a multi-million dollar initiative for us. The reduced oil volume is multi-million dollar. The waterless steamer is multi-million dollar. The fryer oven will be multi-million dollar. The Drywell whether it's from that perspective now. The new line of ventless products in ventless foods is also growing double digit for us. So we have a lot of exciting products going through.

Beech oven, the Beech oven is also growing double-digit for us in terms of the wood burning oven. So as we look at that we have WOW!2 Oven coming onboard. So we are very excited -- or WOW!3, I can't -- I think it's WOW!2 coming up and that's exciting. It's being tested by major pizza chain and the results have been superb. So, Joel, we have a lot of initiatives. Very exciting times for us.

Great. Thank you very much. I don't want to take up everyone else's time.

Thank you. Thank you very much.

John Duni, BB&T Capital Markets.

More of a housekeeping item and I know the Q is going to come out later today, but I was wondering if you could walk through the operating margins and EBITDA margins for each segment.

The EBITDA margins in commercial foodservice were around 28%, so fairly consistent with where we've been in the past. The food processing segment which was -- last year was around 19%. This year has been north of 20%. So I think we were around 21% EBITDA in the second quarter. And then Viking, when you excluded the restructuring charges, was around 15% and that still would have included the impact of the lower gross margins on the acquired distributor inventory.

And then lastly, just want to get a sense of how the M&A pipeline is looking right now. Are you more interested in expanding in commercial or is it food processing and geographically do you see more opportunities domestically or abroad?

The pipeline continues remain strong, I mean very consistent really with the history of Middleby over many years. So we see opportunities in all three platforms, commercial, food processing and residential. So I would say we probably have a consistent pace of M&A moving forward.

It's a mix of both domestic and an international and we're really just focused on the best opportunities out there, again leading brands, leading technologies, things that complement and are synergistic to our platforms where we're positioning ourselves as market leaders in all three.

Jamie Clement, Sidoti.

Selim, I've got a question for you about longer-term product development or indeed that sort of thing at Viking. Let's say somebody, and I can't imagine who this person would be, but let's say they don't need 23,000 BTUs of power on a burner and let's say they don't need to be able to melt chocolate off of a paper plate without burning the plate. When does Middleby technology start to flow down to the customer who might have historically been more interested in buying a three series or a five series range?

A very, very good question, Jamie. At this moment, what we've done is we are taking some of the technology and we want to be more democratic about who can afford Viking and I think that's something that we've always been -- I've been interested. When I bought the brand I've been interested in doing that.

In many ways, there are a lot of people who go around and a lot of young couple say, I aspire to buy Viking, I aspire to own Viking in my place. And I think without literally disrupting the brand, without making sure that we affect our affluent buyers who wants to pay around $10,000 a range, I think our (inaudible) series now has become a very good platform to expand and a great technology. So I could tell you what's happening in both segments. So baby boomers are more looking at easy clean, quick heat, they are looking at making sure that the controls are easy to use, very much so looking at whether it's refrigeration that literally is easy to clean, easy to store stuff. Younger generation are looking at smart appliances, connectivity, they want to be able to control their appliances through their iPhone. They are more comfortable using their iPhones or their tablets or their smart phones, it could be not only an iPhone, but it could be any phone. So in that perspective what we've done is we've done R&D situation where we've seen significant investment in quality of construction to meet our baby boomers who are specifically demanding give me a range that looks fantastic, but easy to use, easy to clean, rapid heat, I want to be able to pre-heat, I have a entertaining, I want to heat quickly.

Our younger generation wants a connected kitchen and we're working on that and we've delivered that. Number two, take away -- [they are] inside of the house, let's take outside. Outside of the house, both young generation and baby boomers are all spending money on grilling outside. It doesn't matter if you're in New England and you have a short season or in Chicago or in California, people are spending money outdoor.

I know from my children as they've basically rented apartment they tend to spend money on their grill. They like to entertain people, they are in their 20s and they like to spend money on a good grill or a good refrigerator or whatever outside, and what we've done is we're investing a lot of R&D into the outdoor space and that outdoor space is shared commonly by the young and the baby boomer who would like to basically spend time and enjoy outdoor so they don't have to worry about spending on a grill and ending up cleaning the whole house. They wanted to grill correctly. They wanted to be able to be fast in quality construction. So that's the space we are going with Viking. So we're trying to target both and we spend a lot of energy on that.

Thank God that we come from the commercial space where in the commercial space we've learned how to deal with a chain, a big chain and a small chain. So the small chain doesn't really need all the features and benefits of a big chain because a big chain might have the resources of training and testing and the small chain doesn't have those resources.

So we've learned over the years at Middleby on the commercial side to feature our benefits accordingly, and that's why when you look at the cooking space, Middleby has been very successful in catering to young chaps for young emerging chain and well established chain whether in the mature business of the pizza business or the burger space but we've done a great job and we're taking that philosophy to Viking.

(Operator Instructions) Greg Halter, Great Lakes Review.

Good morning and congrats on very good results.

Thank you, Greg. Thank you very much.

Obviously, a fairly large significant reduction in debt in the quarter sequentially and your net debt is 1.8%. Just wondered what your thoughts are there if that's just timing on the M&A or if you're balancing that out versus share repurchase given the decline in the share price and just wonder if there were any shares repurchased in the quarter.

There was not any shares repurchased in the quarter. I mean our leverage ratio moves around from quarter to quarter and year to year just depending on the timing and size of acquisitions that come through. And it's kind of -- it's still -- it's within kind of that normal range of, I would say, 1.5 to 3 times leverage that we [get] on our balance sheet. But it was a very strong cash flow quarter.

The first quarter was a little bit weaker because of some tax payments that we made in advance which benefited the second quarter, but we're on track to have very good second half of the year. Last year, we had some investments or greater investments in distribution with Viking as we acquired the distributors and built some inventory in the channel there where now as we are kind of running that optimal levels some of those investments don't have to occur going forward. So we feel pretty good about cash flow this year.

And what's the average rate on your debt currently and how much is fixed versus floating?

It's roughly -- we've hedged about half of it, so it's about half fixed and half floating and we're paying LIBOR plus 1.75 on what's floating.

Okay. And any commentary on what you're seeing in terms of the M&A pricing environment?

Pricing has moved up a little bit from where we were a few years ago obviously in the downturn. So I would say that multiples are kind of back to -- they are kind of in a mid level, not completely out of whack, but they've moved up into the bottoms.

And one final one, what do you anticipate your capital spending to be for the full year?

We're always talking about that 1% to 2% of sales range. So I would say that's kind of where we will probably end up. We'll clearly be within that range, probably in the 1.5% to 2% range for capital expenditures for the year.

I'm not showing any further questions at this time. I'd like to turn the call back to management for closing remarks.

So I'm going to do some closing remarks please, Amanda. So for commercial side, literally restaurants are looking at growing same-store sales by expanding menu items and extending their hours of operation starting from breakfast to late-night day parts. What is the impact of this for Middleby, more equipment to accommodate new items that differ from just lunch and dinner.

The second impact in the commercial foodservice is to lower labor cost. With more chains open longer hours, cost of labor is higher. In addition, the impact of raising minimum wage will force operator to look for automation such as Kitchen of the Future, such as conveyors, such as reduction of equipment that allows less cleaning, less training.

Number three, cost of energy continues to be a big impact and we are the leader in energy efficiency, water savings. Our waterless steamer, our dry equipment, our combis that use less water than our competitors, reduced oil volume. We continue to look at the cost of ownership, the lifetime cost of ownership, reducing that lifetime cost of ownership. I think we've done a great job going back and looking at paybacks that are less than two years.

What's happening to the future of capital spending on commercial appliances, it looks very good. According to a survey by the National Restaurant Association, 62% of restaurant operators plan to make a capital expenditure for equipment extension or remodeling in the next nine months. Nearly two-third of restaurant operators reported that their same-store sales rose above year-ago levels. Most important, restaurant operators are increasingly optimistic about continued sales gain in the months ahead, a sentiment that is also showing up in their capital expenditure.

Looking at Viking, despite some headwinds such as economy improving slower than expected and home sales struggling to keep up with last year's pace, remodeling spending is expected to still be significant, which is a big important factor for Viking because Viking is the longest established brand in that high end and we benefit from remodeling more than our competitors.

International will add gross to Viking in 2015 and 2016. We are launching in the fourth quarter of 2014 cooking appliances specifically designed for city dwellers and high risers, a product basically needed in the international market and in urban cities in China, in Brazil, in India, in Dubai, in Malaysia and in cities in Europe.

We have started shipping our best range ever, the seven series. This range has the fastest boil time and the fastest pre-heat oven time. In addition, it's the first cloud-based home range that allows you to monitor your oven using a tablet, a smart phone away from the appliance. It is a true smart appliance but also easy to use, easy to program, it also syncs very easily. You don't have to be an IT expert to figure out how to sync this with largest cooking surface and the ability to heat up quickly.

We'll be launching our new energy-efficient refrigeration with our patented Plasmacluster in September and the most easy to clean refrigerators and in the same space it will hold the most cubic feet than our competitor and previous model.

Most important, we have been spending our R&D on beating up the quality of construction of our appliances across the board by taking products and features and parts from our commercial use which are being beaten up by our customers who are open and use those appliances almost 20 hours a day which integrated many of our feature and our part into our residential appliances, whether it's [interconnection fan from Logic] whether it's our burners, Range burner, whether it's our door hinges everything is being beefed up and the fit and finish is getting much, much better. That will affect down the road our warranty rates and the consumer confidence in our equipment.

Let's talk a little bit about builder confidence. The builder confidence has been in a holding pattern for the past three months. Looking ahead, I predict 2015 to be a strong builder year for homes of above $800,000 as home below that price will have difficulty why because builder will have hard time finding well-priced lots for that price range. The competition lots and lots sizes have increased and they are becoming a lot more difficult for houses that are within the $200,000 price range which bodes well for Viking because people are buying above or building above $800,000 home [operating] the high-end appliances, the stainless steel appliance in those homes.

We are very excited of what's happening in our dealer and distribution strategy. The early sign of the commitment of over 250 dealers to us has been fantastic. They like what's happening. We started basically shipping the new products and the reception of those new products have been very well received.

To that extent, we are very optimistic about our segments and the next three years of how we build -- continue building our innovation and getting closer to our customers, both in food processing and commercial and now with Viking.

This is the end of my comments. Thank you for joining us. I would like to leave you with the following notice. We have an Investor Day being held at Viking on November 18 and 19 and I urge all of you to come and visit us. So Darcy Bretz will be issuing a specific notice, but if you put on your calendar, November 18 and November 19 will be our Investor Day. It will be held at the Viking in Greenwood, Mississippi.

Thank you and have a beautiful day. Bye-bye.

Gentlemen, thank you for participating in today's conference. This thus conclude the program. You may all disconnect. Everyone have a great day.