奧馳亞 (MO) 2017 Q1 法說會逐字稿

Good day, and welcome to the Altria Group 2017 First Quarter Earnings Conference Call.

Today's call is scheduled to last about 1 hour, including remarks by Altria's management and the question-and-answer session.

(Operator Instructions)

I will now like to turn the call over to Mr. Bill Marshall, Vice President, Investor Relations for Altria Client Services.

Please go ahead.

Thank you, Krystal.

Good morning, and thank you for joining us.

We're here this morning with Marty Barrington, Altria's CEO; and Billy Gifford, Altria's CFO, to discuss Altria's 2017 first quarter business results.

Earlier today, we issued a press release providing these results, which is available on our website at altria.com and through the Altria investor app.

During our call today, unless otherwise stated, we're comparing results to the same period in 2016.

Our remarks contain forward-looking and cautionary statements and projections of future results.

Please review the Forward-looking and Cautionary Statement sections at the end of today's earnings release for various factors that could cause actual results to differ materially from projections.

Future dividend payments and share repurchases remain subject to the discretion of Altria's board.

The timing of share repurchases depends on marketplace conditions and other factors.

Altria reports its financial results in accordance with U.S. generally accepted accounting principles.

Today's call will contain various operating results on both a reported and adjusted basis.

Adjusted results excludes special items that affect the comparability of reported results.

Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release.

Now I'll turn the call over to Marty.

Thanks, Bill.

Good morning, everyone.

Thank you for joining us.

Altria is off to a solid start in 2017 despite some short-term headwinds.

We grew first quarter adjusted diluted earnings per share by 1.4%, against a difficult comparison in the year-ago quarter when we grew adjusted diluted EPS more than 14%.

The smokeable products segment continue to generate strong results, which offset lower equity earnings from our beer investment and the effect of the voluntary product recall in the smokeless product segment.

Our business fundamentals remain strong, and we believe we're well positioned for the rest of the year.

Earlier this morning, we reaffirmed our 2017 full-year adjusted diluted EPS growth guidance of 7.5% to 9.5%, and we continue to expect adjusted diluted EPS growth to be weighted to the second half.

Here are some color on the businesses.

The smokeable products segment grew its adjusted operating company's income by more than 8%.

PM USA estimates that cigarette industry volume declines were in line with the historical rate as the industry lapped the improving consumer conditions and benefits from lower gasoline prices.

Against this backdrop, the industry remains competitive and PM USA saw several competitive product expansions and promotional changes.

In this environment, PM USA remained focused on maximizing income while maintaining momentum on Marlboro across its measures of brand strength, which include equity, demographics, retail share and profitability.

PM USA implemented list price increases in March and continued to compete effectively at retail.

PM USA was steady in its strategy and execution resulting in strong smokeable segment price realization.

In the machine-made large cigar category, Middleton's focus on the more profitable tipped cigar segment continued to generate good results, and the business is performing very well.

The cigar category strength and trade inventory movements drove Middleton's reported shipment volume up over 12% in the quarter.

Turning to the smokeless products segment, it was a disappointing quarter resulting from the product recall caused by a product-tampering incident.

USSTC did the right thing by moving quickly to address the issue with consumers, the trade and other stakeholders, but the recall's effect shows in the numbers.

Smokeless segment adjusted OCI declined 7.8% and USSTC estimates that the recall had an approximately one retail share point impact.

The recall is concluded, and USSTC has now largely completed replenishing wholesale and retail inventories.

We expect that USSTC will recover the share loss over time.

Turning to innovative tobacco products.

Altria continues to develop a portfolio of products to meet evolving adult tobacco consumer preferences.

In April, Nu Mark announced the expansion of MarkTen to approximately 10,000 more stores and the availability of 3 more flavors for its adult papers: winter mint, summer fusion and smooth cream.

In heated tobacco, Altria continues to partner with Philip Morris International in seeking regulatory authorization to commercialize the ICOS system in the U.S., both the modified-risk tobacco product and premarket tobacco product applications for ICOS now have been submitted with the FDA.

PM USA's team continues to build its U.S. commercialization plan for ICOS.

So in summary, we believe that Altria remains well positioned for the rest of the year and thus, we are reaffirming our full year guidance.

Now here's Billy for more detail on our performance.

Thanks, Marty, and good morning, everyone.

Let me start with the smokeable product segment.

Adjusted OCI margins expanded by 2.9 percentage points in the first quarter to 51%, due primarily to higher net pricing and lower resolution expenses.

Smokeable reported cigarette shipment volume declined 2.7% in the quarter.

After adjusting for trade inventory movements and other factors, PM USA estimates that its cigarette volume declined approximately 3% in line with PM USA's estimate for the industry decline rate.

In addition, California cigarette SET, which went into effect on April 1, will also affect shipment volumes in the short term.

PM USA's first quarter retail share was 51%, down 0.1 of a share point.

Marlboro's retail share declined by 0.2 of a share point to 43.6%.

In smokeless, adjusted OCI margins decreased by 3.6 percentage points to 61.9%, driven principally by the recall impact, partially offset by higher pricing.

The recall drove USSTC shipment volume down 5% in the quarter.

USSTC estimates that smokeless industry volume grew at approximately 2% over the past 6 months.

It was a tough quarter for wine.

Ste.

Michelle's adjusted OCI of $21 million was 25% lower than last year, and its margins contracted 4.6 percentage points to 15.4% due to lower volume and higher cost.

Ste.

Michelle's lower volume was driven by wholesalers reducing year-end inventory and the timing of the Easter holiday, which occurred in the first quarter of last year.

Let's now turn to our beer investment.

As a reminder, ABI's fourth-quarter 2016 results are included in our first quarter results due to the reporting lag.

In the quarter, Altria's reported equity earnings from our investment in ABI were $23 million.

These results included net pre-tax charges of $73 million for ABI special items.

As ABI noted in its fourth-quarter earnings release, its underlying results were negatively impacted by a challenging environment in Brazil and mark-to-market losses related to ABI's hedging of its share-based compensation payment programs.

We, of course, continue to focus on our shareholders.

In the quarter, we returned a large amount of cash to them, paying nearly $1.2 billion in dividends and repurchasing over $550 million in shares.

As of March 31, Altria had approximately $1.4 billion remaining in the current $3 billion share repurchase program.

We continue to expect completing this program by the end of the second quarter of 2018.

As Marty mentioned, we continue to expect that our 2017 adjusted diluted earnings growth will be higher in the second half.

This is primarily -- this is due primarily to the financial effect of USSTC's recall this quarter and the benefit of reporting four full quarters of equity income from our ABI investment.

Lastly, a quick word on IRI's retail market share reporting.

As a result of IRI's most recent database restatement, cigarette and smokeless retail market shares have been restated.

Share information for each quarter of 2016 is available in our press release.

You'll remember that IRI uses a sample of retail stores and certain wholesale shipments to project market share and depict share trends.

Historical trends of restated numbers are generally consistent with those under IRI's previously reported numbers.

That wraps up our results.

Marty and I are now happy to take your questions.

While the calls are being compiled, I'll direct your attention to altria.com.

Along with today's earnings release and our non-GAAP reconciliations, we've posted for your reference a usual list of quarterly metrics, including pricing, inventory and other housekeeping items.

Operator, we're ready for the questions.

(Operator Instructions) Our first question comes from the line of Bonnie Herzog with Wells Fargo.

I actually have a question on Marlboro, and it looks like you've been losing slight share behind Marlboro over the past several quarters based on the adjusted data.

So I guess I'd like to better understand your current strategy with the brand and if some of the new SKUs haven't been as effective as you had hoped and what your innovation pipeline looks like for the remainder of the year behind the brand?

Bonnie, thanks for the question.

Listen, I think the best explanation of Marlboro was the one we gave at CAGNY just a little while ago.

As you know, Marlboro remains the strongest brand by far in the cigarette category.

It's the iconic brand in the category.

I think it's also useful to remember what our strategy is.

And our strategy in smokeable is to maximize income while maintaining momentum on Marlboro over time.

And so as we have explained, momentum is viewed by us across various metrics.

Let me just mention a few of them: one is brand equity, and brand equity from Marlboro has never been higher, indeed.

I think the number we gave was 14 points higher than the next nearest competitor.

Demographics are good.

As you know, we've stabilized its share among the important 21 to 29 cohort.

And actually, Marlboro shares are very good across all the rest of the cohorts as well.

Its profitability is undeniable.

I think the number we put up at CAGNY was $34 billion in retail share -- in retail sales in 2016.

And then we come to share.

And so which share, we look at it over time.

It's down 0.2 in the quarter to be sure, but that's why we look at it over time because promotions and the like come in and out of the quarter.

If you look at it over a longer period, I don't know, say, 2011, we've gained I don't -- call it 1.5 share point to 2 share points.

So the strategy hasn't changed at all, hasn't changed at all.

It's to be the leading brand in the category and to maximize its profitability.

Okay, that's helpful.

And then I wanted to ask a question on your wine business.

You mentioned it was certainly a tough quarter.

Your margins were very low, probably the lowest they've actually been for a number of years.

So I guess I was hoping you guys could drill down a little further in some of the things that hurt your business during the quarter.

You mentioned your volume was very weak due to the wholesalers reducing year-end inventory.

So more color on this.

And then any sense what your volume was excluding this inventory fluctuation?

And then finally, this begs a question, which I've asked you guys about before, but would love to hear any updated thoughts or plans that you might have for this business over the next several years in terms of further investments and if you need to actually increase your investments, possibly to turn the business around.

Okay, thanks for the question.

Listen, I think you have to put the wine quarter in context.

If you look at its income growth over the last 5 years, it's grown double-digit.

Call it, I don't know, 12%, give or take.

And so you have to place the quarter in context.

They had a tough quarter, there's no denying it.

There was inventory that got burned off from the end of the year and the Easter holiday was pushed back into the second quarter this year.

So that has the effect on all the numbers if you called out in terms of the volume and, obviously, in terms of the margin.

The wine company does a terrific job out there.

No quarter is perfect and this is ours, I guess, for the wine business, but they do a great job.

I don't see the need for anyone to think that we have to step up in any materially way the investment in the wine company.

It was just a tough quarter.

Okay, that's helpful.

Then just maybe one final quick question from me on your EPS guidance this year.

I just wanted to confirm that it does include any potential expense associated with the commercialization of ICOS this year in terms of any hiring you might need to do, marketing, store openings, et cetera?

Yes, it's all in.

Your next question comes from the line of Steve Powers with UBS.

So I want to pick up first just to clear -- to round out the Marlboro discussion.

Marty, you talked about, I think, in the response to Bonnie that share trends amongst the -- that important younger adult smokers segment had stabilized.

Just a little bit more color on - seems that you have the granularity, what the sequential movement in that cohort looks like over the last year plus?

Is there -- is it similar to the overall where the stable means down slightly, or is it actually truly stable?

I think the last time we looked at it, it was equal to or slightly greater than.

And actually, if you look at it, Steve, from when we implemented the architecture in 2012, that's when it really began to stabilize.

And obviously, with the implementation of the architecture, Marlboro Green and Marlboro Black, in particular, are helping in that cohort.

Okay, that's great.

That's great.

And then a question on ICOS and really it's a clarification for my benefit.

As I understand it, your joint efforts with PMI right now are based on a relationship whereby you'd effectively be licensing ICOS IP owned by PMI for commercialization in the U.S. Is that the correct understanding?

I might be a tad more precise in that if you let me.

They're sourcing the product to us, as you know.

They're licensing it into us for commercialization.

We just -- essentially, the inverse of the relationship we have on e-vapor, which is we source the product for them for e-vapor outside the United States, and we license the trademark and the IP to them.

The only distinction, of course, is that before the spin-off, there was IP under the Altria tent, which we retained at the spin-off.

Right, okay, that's clarifying.

And I guess the question I'm thinking about it, is there any reason -- I know this is hypothetical, but just any reason why we couldn't evolve to a structure in the future where you would end up taking outright ownership of ICOS IP at least as it relates to the U.S. market, is there anything to prevent that kind of outcome?

No, I would agree with you that it's hypothetical, though, I guess.

And there's nothing, I guess, that could foreclose the different arrangement being struck than the one that we have today.

But what I've described is the arrangement we have today with PMI.

Your next question comes from the line of Chris Growe with Stifel.

I just wanted to ask a question about the smokeless division.

And I just want to make sure I'm looking at it properly, if you kind of quantify the market share loss around 100 basis points of market share, your numbers you give in the press release says you lost 70 basis points.

Am I getting to like an underlying performance kind of X the recall of how you performed at retail?

Yes.

Chris, this is Billy.

I think that's the proper way to look at it, Chris.

What we quantified was about 100 basis points the impact of the recall, and you're right.

In the actuals, we were down 70 basis points.

And have you had any of the SKUs back on the shelf long enough to see how that rebuild is going of market share?

Yes.

As Marty mentioned, we are pretty much done replenishing the out of stocks that occurred because of the recall at retail.

And we are seeing share recover.

Now remember, whenever you have that consumer purchasing other products in the marketplace, it takes a bit of time for us to recover the share, but we're seeing promising signs.

Okay.

And just a quick question, if I could.

A bit of a follow-up on the e-vapor business.

PMI is launching a new form of their platform for their e-vapor product in the U.K. Is that technology that Altria has access to or has helped developed because you have access to that product for the U.S. market?

I can describe generally to you the way that we're handling it at vapor, which is in addition to the agreements that I described with Steve, I think you know, Chris, that we also have a technology sharing agreement with PMI to work on vapor products.

And the way that basically works at the risk of an over summary is technology that's developed under that agreement can be deployed by each of us in our respective geographies.

Your next question comes from the line of Matthew Grainger with Morgan Stanley.

Just a quick follow-up on cigarette industry volumes, which improved a bit sequentially versus what we saw in the fourth quarter despite the fact that retail consumption in measured channels appeared to slow.

We had some headwinds from slower C-store trends, difficult comp.

So how did that 3% compared to your expectations?

And are there any favorable dynamics at the consumer level, maybe consumer confidence that you point to as having helped support volumes in the short term?

I guess our view is that it's going back to about where we expected, Matt, is the honest answer.

If you look at long-term trends, call it, a 5-year trend for the industry, it's about 3%.

As you know, we were flatter there for the period that we've discussed previously.

Last year was a 2.5%, and now for this quarter we are back at about 3% as our estimate.

So our view is that the secular decline is what drives this, it has since the 1980s, and it looks to us like it's going about that.

In the quarter, there may be some movements in and out because we've got some excise tax activity, particularly in California.

But I don't think it's material over the course of the year.

Okay.

And on ICOS, are there any updates you can provide on kind of the level or pace of engagement at the state level as you're talking to legislators about tax treatment?

Any sense you can give on timeline and your level of confidence that you could potentially align those discussions with the outcome of the FDA's review of pre-market approval?

Yes, that's an interesting question.

We are talking to state legislatures about the policy issue of which ICOS is but a part of having differential taxing, obviously, on lower risk products, that would make good sense.

And tax policy gets changed over time.

So we're working on that, but I don't have anything new to announce on that, but it is one of the elements of our work streams.

Okay.

And if I could squeeze in one last one, sorry, just with the advent of deeming in the vapor space, just curious any observations on what the implications have been in -- at retail since August?

Have there been changes in retail or inventory levels in vapor?

Have you seen better flexibility in being able to secure and manage shelf space as a result of those rules going into effect?

No.

I wouldn't say that I distinguish probably how the dynamics with respect to our vapor business, which, as you know, is going quite well with MarkTen XL you saw a big boost in the number of stores that we're in.

We see very good consumer response to the new product.

I would say the thing to watch probably from an industry dynamic are the vape shops.

So I know you are familiar with that phenomenon, but they now have to deal with FDA regulation, where they didn't have to deal with any before.

So we have seen some evidence that there's been a reduction in the number of vape shops and that the volume is moving to more traditional channels, which would be a good development for our business, of course.

Your next question comes from the line of Nik Modi with RBC Capital Markets.

A couple of questions.

Just a -- Marty, maybe you can just comment on Nat Sherman and how that integration is going and if you're seeing more space -- more of your fair share of space in that higher end of the backbar?

And then the broader picture question is on ICOS.

And I guess as you guys think about your plans to invest ahead of the approval process, what kind of consumer work have you been able to do?

I mean, how do you know that the consumer is going to uptake on this product?

Because obviously, since you can't really launch it in the U.S. until you get that approval, I'm just curious on the science and the research that you're doing with the consumer to get a sense of what the uptake could be?

Sure.

So first on Nat Sherman, we're working through our plans now.

We closed in January, if memory serves.

And we're getting that ready to roll, so I don't really have a lot to tell you about Nat Sherman yet because we're just getting started.

On the ICOS consumer work, the situation, of course, which is you're right, we don't have the product in market, so we can't do any in-market consumer work.

But we certainly can do out-of-market work, which we are working on and, in particular, we are using the learnings from PMI, which I think we've discussed before.

So many of us have been in the international markets and our teams are working quite closely.

The idea basically is to try to extract trade and consumer insights and then try to apply into what we know about our market here.

And so we're working on all of that now.

And then when we get in the lead market, that's when we're going to learn more, once we have that product available for consumers.

So we're trying to do as much as we can to get a fast start.

But you're right to point out and we've pointed out, until you get it in the consumers' hands, you have to be careful.

Yes, and I guess, Marty, the follow-up to that is having been in the international business, are there any markets that you believe are analogous to the U.S. market?

Just in terms of consumer behavior, tax structures, demographics.

I think the better way to look at it, Nik, is that there's no perfect market, but that each of the markets, if you're asking the right question, can give you insights into the behavior.

So obviously, in terms of traditional cigarette markets, it's customary to compare the United States more to Western Europe.

But obviously, there are insights to be generated from seeing the uptake that's taking place in Japan.

So rather than to get it locked in on a geography, we're focused in on the insights.

Your next question comes from the line of Judy Hong with Goldman Sachs.

So I just had a few follow-ups.

One is just California and Pennsylvania, just kind of a color that any color you could give us in terms of the impact from the excise tax increase in those markets?

Our estimate is that it will have about a 1% impact on volume this year.

And that there's no changes based on what you've seen so far in those markets?

No, not so far.

Okay.

And then just in terms of guidance, I know at CAGNY, you talked about the potential recall-related expenses in smokeless.

And I think at that time it wasn't clear whether it was going to be included in the adjusted earnings growth numbers.

So now you're including it, but you didn't change the adjusted EPS number.

So does that sort of imply that maybe the underlying trends are actually slightly better than what you would have thought during CAGNY?

Judy, this is Billy.

As we answered that question at CAGNY, you'll recall when we provide guidance, we run a range of scenarios that are included in that guidance.

And so that will take into account these types of events.

And so we feel the same that we felt at CAGNY.

We feel good about guidance and that's why we were able to reaffirm today.

Got it.

Okay.

And then just lastly, Marty, on MarkTen XL, just in terms of the conversion rates that you're seeing on that product versus the prior versions, is there anything you can share with us on that front?

Yes, we've had much, much better return business on the new product than we did on the former product.

And so we can measure that by the number of cartridges that are purchased versus the device.

And they're much, much better.

Your next question comes from the line of Vivien Azer with Cowen.

Vivien, are you there?

I am.

So Marty, I just wanted to double click on your comment around promotional activity from competitors in the quarter.

Can you elaborate on that at all and perhaps contextualize it in the broader context of the competitive landscape over time because I know we see these episodes of competitive activity bubble up from time to time?

That's probably the best way to describe it.

Look, it's always competitive and we're always monitoring and we're always adjusting.

That's basically how it works.

We were trying to provide some color in the quarter about seeing some competitive product expansions and some promotional changes, and PM USA is adjusted appropriately as it always does.

So this is the sturm und Drang that goes on, I think, at retail and in competition, but we watch it carefully, of course.

But of course, if you look at net pricing for the quarter, you can see that PM USA's realization was still above 4.5%.

So that's what we were trying to convey, Vivien, which was some color about that.

That's helpful.

A bigger picture theoretical question, if you will.

Yesterday, President Trump noted that he would be open to a gas price increase, and we haven't seen one since 1993.

And I know there are a number of macro factors that you look at to determine kind of the health of the consumer and the potential impact on cigarette volumes.

But can you just offer any commentary on how you guys would think about a gas tax increase impacting cigarette volumes?

Yes.

Obviously, that announcement just came out yesterday, and so we're taking a look at what it might do to the C-store trade.

Obviously, gas is a big deal at C-store, and that's where most of our traffic runs through.

So I guess we'd have to -- we'll have to take a look and see what it is.

I know that there are sort of entrenched interests on both sides of the question about whether the gas tax should be raised.

So I'll have to wait and see, I guess.

That's helpful.

And then last one for me.

On -- from the FDA from a menthol perspective, any updates there?

None.

Your next question comes from the line of Adam Spielman of Citi.

So as I've looked back, as I think about the cost as a whole, you've had really strong growth in OCI in smokable against the raise of comp.

Smokeless segments, yes, you've had the recall, but excluding that, profit looks really strong as well.

On the other hand, I guess market share in cigarettes has been a little bit disappointing.

So the question is, as you look forward, is there any reason to suppose it won't return to a, let's say, a more normal pattern with perhaps less price realization, little less OCI, but equally a better market share trends in cigarettes?

That would be the first question.

Okay, well, let me respond to that.

It's always a balance is the honest answer.

The strategy on the smokable business as you know, Adam, is to try to maximize our income, and we try to do that and we have done that, I think, as you point out quite well over time.

At the same time, we want to make sure we have momentum on the key brands and we're mindful of that.

So the honest answer is it's a balance.

Fine.

Okay.

And then just turning back to the FDA, can you sort of -- at CAGNY, you get quite a lot of detail about the expense of putting in applications for authorization for your cigars and e-products of various sorts.

Can you just give an update about how those applications are going, whether you've had any response back from the FDA?

And whether there's been any news there, what news is there?

I would say it continues to be as we described it at CAGNY, which is there's much more activity in terms of the interaction between the agency and our operating companies about their applications as they work through.

And you're right, it's much more expensive than the FDA has estimated.

And so we're having to be mindful about which products we pick in order to put applications in because they come with an expense.

Look, our strategy is to engage constructively with the agency and to try to encourage it to make good policy decisions, and that includes on approval of our submissions.

We continue to believe that our submissions are well founded and in good form, but it's a process and you have to go through that with FDA.

So I would say, it's been more of the same since we last discussed this at CAGNY.

Your next question comes from the line of Michael Lavery with Piper Jaffray.

You mentioned in your release that your strategy on Middleton is maximizing income and, obviously, that didn't reference share momentum, I don't think that's new, but can you confirm that?

And then in either way, can you just think a little bit to your thinking there because certainly, the volume momentum in cigars broadly -- typically is a bit better than cigarettes, but is it just that, that the economics aren't as attractive or can you explain why share momentum there wouldn't be according to the strategy?

Sure, Michael, this is Billy.

Thanks for the question.

If you recall, when we look at the cigar category, you have it in basically 3 segments: you've got the tipped, where Black and Mild participates and has over about 90% of that segment.

You have the untipped, and then you have the non-cigarillo form.

We participate in the tipped and we have basically a large market share there.

And so that's why we're running for profitability.

That's where most of the profitability is in the cigar category.

In the untipped segment, there's a basically a price war going on where people are competing for volume, but at a very low profitability, and we are really not participating in that segment.

So it hasn't been a change for us, but I think that describes the strategy and the approaches we have in the cigar category.

Okay.

Yes, that's good context.

And then just one last one.

On Nat Sherman, I know you are still working on plans and working on the rollout and so it's still very small.

But in terms of the volume in the quarter, would that have had any material -- how much does that add?

Is it any amount of the volume there?

It's very small.

As you know, that brand right now is pretty much a boutique brand.

And so with this quarter, I wouldn't call anything out as material.

(Operator Instructions) And your next question comes from the line of Glenn Anderson with Navin Asset Management.

I wanted to go back to ICOS and your conversations with the States.

Have those conversations included how the ICOS would be measured as far as the MSA goes?

Are the sticks going to be counted as a regular cigarette?

No, but that's a good question as well.

Our operating hypothesis is that the definition under the Master Settlement Agreement would cover the heat sticks because they're tobacco wrapped in paper.

So it's a parallel definition.

It's not the same as the states, but it's parallel, you're right.

And they would count as a cigarette then?

For those purposes, yes, sir.

Our next question comes from the line of Nik Modi with RBC Capital Markets.

Marty, I was just wondering, or Billy, if you can comment on just the general feast or environment because most companies are suggesting it's been pretty tough from a traffic standpoint, but it looks like cigarette industry volumes actually came in a bit better than I think most folks were looking at.

So I was hoping to get your characterization on kind of how you see the environment right now?

Yes, it's a good question.

We continue to see at least our consumer who, of course, are moving to the C-stores, we think the environment continues to be largely constructive for them.

Nik, when you look at all the factors we've discussed, whether it's unemployment rates or housing starts or consumer confidence, we have been following carefully the commentary by others in CPG about perhaps some softening for their consumer set, which obviously overlaps with ours in some respects.

We just haven't seen it yet and we haven't seen that in the C-store trade for our category, not yet.

(Operator Instructions) At this time, I would now like to turn the call back over to Mr. Bill Marshall for closing remarks.

Thank you all for joining our call this morning.

If you have any follow-up questions, please contact us at Investor Relations.

Thank you.

This concludes today's conference call.

You may now disconnect.