Marzetti Co (MZTI) 2019 Q2 法說會逐字稿

Good morning. My name is Denise, and I will be your conference call facilitator today. At this time, I'd like to welcome everyone to the Lancaster Colony Corporation Fiscal Year 2019 Second Quarter Conference Call. Conducting today's call will be Dave Ciesinski, President and CEO; and Doug fell, Vice President and CFO. (Operator Instructions) Thank you. And now to begin the conference call, here is Dale Ganobsik, Vice President of Investor Relations and Treasurer for Lancaster Colony Corporation.

Thank you, Denise. Good morning, everyone, and thank you for joining us today for Lancaster Colony's Fiscal Year 2019 Second Quarter Conference Call. Let me begin by reminding everyone that our discussion this morning may include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of the risks and uncertainties is contained in the company's filings with the SEC. Also note that the audio replay of this call will be archived and available at our company's website, lancastercolony.com, later this afternoon.

With that said, I'll now turn the call over to Lancaster Colony's President and CEO, Dave Ciesinski. Dave?

Thanks, Dale, and good morning, everyone. It's a pleasure to be with you today as we review our second quarter results for fiscal year 2019. Doug and I will provide comments on the quarter and our outlook. Following that, we'll be happy to respond to any of your questions. For the quarter, we are pleased to report that consolidated net sales increased 9.4% to a second quarter record $349.6 million versus $319.7 million last year.

Excluding acquisitions, consolidated net sales grew 7.3%. Retail net sales increased 3.9% to $186.3 million. Excluding net sales contribution of $800,000 from the Bantam Bagels acquisition, organic net sales increased 3.5%, led by volume gains on shelf-stable dressings and sauces sold under license agreements, caramel dips and frozen garlic bread.

Retail net sales also benefited from higher net pricing. Bantam Bagels' net sales were impacted by relatively significant product placement cost and trade spending in support of new and expanding distribution with retailers.

Foodservice net sales increased 16.3% to $163.3 million with organic net sales up a notable 12.2%, driven by higher demand from our national chain restaurant accounts; incremental sales resulting from continuation of service issues with some of our foodservice competitors; and pricing actions we implemented in early January 2018 in response to higher freight and commodity costs. Foodservice net sales attributed to Bantam Bagels totaled $1.9 million.

Incremental net sales resulting from the interim supply agreement related to the Omni Baking acquisition totaled $3.8 million for the quarter. And consolidated gross profit improved $7.5 million to $91.4 million.

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Program. Partially offset by higher warehousing cost and onetime charges resulting from our decision to discontinue the Marzetti Simple Harvest line of refrigerated dips.

SG&A expenses increased $3.5 million to $39.8 million, primarily due to transaction expenses incurred for the Bantam Bagels and Omni Baking Company acquisitions. And separately, higher severance costs associated with leadership changes implemented in our retail segment in late October.

You'll note in the financial tables for our earnings release today that we've included a line item for the change in contingent consideration that is now separate from other SG&A expenses. We added this line item to provide more transparency and clarity for our acquisition-related earnout arrangements. Specific to our current quarter, this line item includes the favorable impact of $9.7 million noncash reduction to the fair value of the contingent consideration for the future earnout payment for Angelic Bakehouse. Excluding this $9.7 million adjustment, consolidated operating income increased 9.2% to $51.5 million from a prior year total of $47.1 million, while consolidated operating margin was unchanged.

In the Retail segment and excluding the adjustment, operating margin declined from 20.8% to 18.8%. The Retail segment margin was impacted by costs resulting from the discontinuation of our Marzetti Simple Harvest dips, the severance charges and increased product placement costs and trade spending to support the expanding distribution for Bantam Bagels.

The Foodservice segment operating margin improved from 9.6% to 11.9% driven by higher organic sales volume, a more favorable organic sales mix and higher pricing. Net income was $47.9 million or $1.73 per diluted share compared to $45.9 million or $1.67 per diluted share last year. In the current quarter, the fair value adjustment increased net income by $7.4 million or $0.27 per diluted share.

The prior year taxes [of only] $1.8 million include a onetime benefit of $8.9 million or $0.32 per diluted share, resulting from the remeasurement of the company's net deferred tax liability under the Tax Cuts and Jobs Act of 2017.

The regular quarterly cash dividend paid on December 28, 2018 was $0.65 per share, an 8% increase over last year's $0.60 per share.

Turning our attention to retail sell-through data from IRI for the 13 weeks ending December 30, 2018, we maintained our leadership position in 5 of our 6 key categories. We came up just short of the top spot in the Flatbread category due to the exit of unprofitable promotions. We increased our share position in 3 of the remaining key categories. For the 6 months ended December 31, 2018, net sales increased 7.7% to $666.2 million, compared to $618.6 million a year ago. Net income for the 6-year period totaled $86.9 million or $3.15 per diluted share versus the prior year amount of $75.3 million or $2.74 per diluted share. [Consistent] with the impacts of the Fair Value Adjustment increased net income by $7.4 million or $0.27 per diluted share.

The prior year net income value includes the onetime benefit of $8.9 million or $0.32 per diluted share, resulting from the remeasurement of the company's net deferred tax liability under the Tax Act.

With regard to the Fair Value Adjustment, I'd like to take a couple of minutes to share the Lancaster Colony's use of earnouts. It's an important part of our acquisition strategy, as we pursue smaller, founder-owned food businesses. We acknowledge that this strategy comes with the potential for future adjustments up or down to the estimated earnout payments. We believe it's inevitable. Particularly in small businesses where forecasted results can change notably with the addition of 1 or 2 customers. The changes to the contingent consideration for future earnout payments may be needed. To be clear we remain committed to earnouts as a part of our go-forward acquisition strategy for smaller, founder-owned food businesses that fit our criteria for fit and value, and where we wish to keep the founders actively involved in growing the business.

Now specific to Angelic Bakehouse, over the course of the past year, we've launched a new strategy with greater focus on premium sprouted grain wraps and less emphasis on certain other products, particularly private-label loaf bread. This strategic shift has created some short-term underperformance, which contributed to the reduction in contingent consideration for the earnout payment but we remain very positive about the future of Angelic Bakehouse and the opportunities that lie ahead for that business. I'd like to note that the actual earnout payment for Angelic Bakehouse will not be made for over 2 years and will then be based upon fiscal year 2021 results. With that, I would like to turn it over to Doug to make some comments on the balance sheet and related items.

Thank you, Dave, and good morning, everyone. Consistent with our past commentary, our balance sheet remained strong. I will make a few brief comments on the more meaningful changes in our balance sheet, since June 30. From a high-level perspective, the decline in our cash balances reflects cash paid for our 2 acquisitions during our second quarter. More specifically, nearly all of the decrease in our cash balances of $11 million since June 30 can be summarized as follows: Cash provided by operating activities of $113 million offset by cash paid for acquisitions of $58 million; regular dividends of $34 million; and property additions of $28 million. In general, our accounts receivable balances remain in-line with sales volumes and our expectations. Consistent with past quarters, our [agings] remain solid. Trade receivables related to our 2 acquisitions totaled nearly $4 million at December 31. In addition, inventories related to our 2 acquisitions totaled nearly $2 million at December 31. Adjusting for this, our inventory balances were essentially flat from that of June and are consistent with our expectations in inventory plans.

Regarding our recent acquisition of Bantam Bagels and Omni Baking, we expect their impact on our total net working capital requirements to be relatively minimal throughout this fiscal year. As I mentioned, first half cash expenditures for property additions totaled $28 million. We continue to anticipate capital expenditures to be in the range of $60 million to $80 million for fiscal '19, and consistent with our past commentary, we'll focus on projects to increase capacity and productivity. We have broken ground on our Sister Schubert's capacity expansion project and it is planned to be in production roughly a year from now. Our innovation center continues to proceed as planned and we anticipate it to be completed in Q4.

We have various packaging and end-of-line automation projects, also underway. As we conveyed in our last earnings call, given the timing of our projects we anticipate our cash outflows for CapEx to increase as we move through the second half of fiscal '19.

Depreciation and amortization expense totaled $7.5 million for Q2 including the impacts of our 2 acquisitions. Adjusting for these 2 events and other capital projects, we anticipate our depreciation and amortization to be nearly $8 million per quarter for the second half of fiscal '19.

As expected, the increase in our other assets reflects the addition of intangible assets and goodwill, related to our 2 acquisitions. These amounts, along with the entire preliminary purchase price allocation, will be further defined within our Form 10-Q that we will file in early February.

Consistent with our past commentary, the increase in our accounts payable since June, largely reflects continued emphasis by our procurement team to extend payment terms with our vendors. Additionally, the total accounts payable related to Bantam and Omni transactions totaled $5.7 million at December 31 and consequently also contributed to the increase since June.

With respect to our balance sheet capitalization, we continue to have no debt, nearly $705 million in total shareholders equity and nearly $195 million in cash and equivalents. Borrowing capacity under our credit facility remains at nearly $150 million.

Finally, and broadly speaking, as expected, our income tax provision for our second quarter was favorably impacted by the Tax Cuts and Jobs Act. Our blended effective tax rate for our second quarter was estimated to be 24% yet our actual tax rate was 23%. Consistent with our first quarter, the favorable difference of 100 basis points, largely reflects the accounting treatment of employee stock option exercises within our tax provision. Looking forward, at this time, we estimate our effective tax rate for the second half of fiscal '19 to be approximately 23.5%, however, the timing and magnitude of employee stock option exercises may, again, favorably influence our ultimate effective rate. As always, we appreciate you joining us this morning. I will now turn the call back over to Dave for his concluding comments. Dave?

Thanks, Doug. We were pleased to finish our fiscal second quarter with record sales in organic growth of 12.2% in our Foodservice segment and 3.5% in the Retail segment. While we incurred acquisition-related expenses during the quarter and some onetime charges in other areas of the business, we continue to make great progress in positioning our business for future growth. We're excited to have successfully completed 2 acquisitions in the past quarter, with Bantam Bagels providing us an entry into the large and fast growing frozen breakfast category and Omni Baking offering us much improvement -- much improved control over the supply and production of our frozen garlic bread products.

Looking ahead, it's worth noting that we've identified opportunities for meaningful improvements at Omni Baking. While we begin implementing these improvements over the second half of the fiscal year, we will begin implementing these improvements over the second half of our fiscal year. As a result, we expect some modest near-term headwinds to our financial results as our supply chain team works to fully integrate our facility.

Overall, our core strategic plan remains the same: To grow our base business; to simplify our supply chain and achieve cost savings; and to selectively identify good fitting acquisitions that will drive us forward.

Beyond our successful Lean Six Sigma program, we've other initiatives underway to reduce our input costs such as our new transportation management system that went live earlier this month. These initiatives should help us offset the modest inflation that we expect to see persist through the remainder of the year. That concludes our prepared remarks for today, and we'd be happy to answer any of your questions.

(Operator Instructions) Your first question comes from Michael Gallo with CL King.

Just wanted to take a few minutes to unpack the retail margins. I think when I look at the quarter, it's down about 200 basis points than last year, if I recall with the fire in your bakery, it was down about 270 basis points. I was wondering if you can parse out some of the onetime versus ongoing items between severance, the discontinuation of the Simple Harvest line and then also, trade promotions, new shelf space around Bantam, which I assume there'll be likely some continuation of that. So I guess, first question would be, what of that's ongoing? And what are each of those buckets? And then as we sort of think about retail margins going forward, obviously, you're going to lack the price increases that were taken. And generally, given the holiday quarter historically, this is a pretty good quarter for retail margins.

Yes. So why don't we -- we'll just dive into the question, Mike. As you noted in the commentary and the release, we were off about 200 basis points in retail and really 3 items drove that. The first was the discontinuation of Simple Harvest Dips. The second of that was the severance cost that tied into the announcement that we made back in October. And the last was the heavy trade spending that we had with the Bantam acquisition. You take those 3 items out and essentially the margins were flat versus [flat] prior period. It's probably the easiest way to think about that. 2 of those items clearly were transitory, the severance and Simple Harvest Dips. And I would submit that even the heavy up spending that we had on Bantam was unusual just in this particular period.

Could you speak to the discontinuation of Simple Harvest Dips? I mean, you really didn't have it launch for very long. So one, sort of, what drove that? Two, would you kind of be able to put other products in its place as you discontinue it? Or is that sort of shelf space that you'll lose and it doesn't come back? And then three, how much should you have in sales in subsequent quarters or in this quarter from the sellout of that product?

Sure. So I got to screw it right into the basis of the question, what drove the decision to pull the product from the marketplace. It was essentially just the velocity of the item on the shelf and we watched it closely. If you remember, it was launched at the very end of the last fiscal year or Q4 and really didn't account for much if anything in Q4 and was a modest contributor in our fiscal first and second quarter. And we can try to get you more specific numbers on that, but I think it's going to be a low 7-figure number in the aggregate. As far as why the decision to make -- why the decision to pull it from the marketplace and relatively quick, Mike, I would tell you that my lessons on these things is that discretion is the better part of valor, when the product isn't performing well in the marketplace, you're better off to be decisive and pull it. We don't expect it to cost us net any space on the shelf. We have a hardy pipeline of other products that we're looking at behind it. But I'll tell you sort of the mechanics of what leads me that usually encourage the team when we have a dog that won't hunt and just to pull it off the field is that in this case, what we had was cost tied up in raw materials and packaging and as painful as it is to pull that off the marketplace, or to pull that. Once you convert that to finished goods, you take something that could be a potential write-off of x and you could take -- if you could turn it into a write-off of 3x. And I've seen it before in my career and honestly, I swear to myself I didn't want to do it again. And good for our team and to their credit. I think we all just squared up honestly and said the thing isn't performing the way we want. Let's not compound this by doubling down and investing against it, so honestly we just made the decision to pull it and move on.

Okay, great. And then a final question on Omni. You noted some changes you're going to be making to upgrade the operation. I was wondering if you can give us some more color on that? Speak to, I think you mentioned that there'd be some modest headwind as a result of that. So I guess more specificity on what we should presume to be modest? And then when do you expect those kind of lines to cross and you start to see some incremental benefits from them?

Yes. No, great question. I would say, this is going to be very low 7 figures that you can expect in terms of a headwind. It's going to be encountered in the first 6 months. And really, the nature of the expenses that we're putting into the place are a heavy up in maintenance-related costs. So as you might imagine, you buy a new -- you buy an old house and you're going to fix it up, it takes a little bit of energy particularly in the upfront period. And as we go in and we do this, we made a master list of the things that we wanted to address that we believe will ultimately help drive better throughput in cost. Some of these expenses can be capitalized over a longer period of time, but some of them, honestly, you just have to expense in the period. All of them are tied ultimately to strengthening the facility and giving us a flexibility we need. But from an accounting perspective, as we look at it, some of it, they're just going to be have expensed in the period because of the nature of what we're doing. One if I may before we leave the point, we continue to believe that, that acquisition is going to really pay as dividends downstream. One, it's going to help us control our output but I think of equal importance, we feel like over the intermediate term, it's going to give us the ability to bend the cost curve on that important garlic bread business.

Your next question comes from the line of Jason Rodgers with Great Lakes Review.

Could you quantify the acquisition related costs and the onetime charges from the discontinued product in the quarter?

The transaction cost in broad figures, Jason, would be in the mid-six-figure, upper six-figure range. And then, the second part of your question.

The discontinuation of the item, Harvest Dip.

And that would be a low 7-figure digit -- number.

All right. And how much did price contribute to results by segment?

That's a great question. Why don't we maybe take them by segment. On the Foodservice side, I would say it's quite modest. We're at the point now where we're lapping that. So of the organic increase of, let's call it, 12%, it was probably 2 points. On the Retail side of the equation, if you look at the total growth probably, it was a little bit bigger component overall, but I would ascribe that to the fact that we're making a trade-off between going after net price by trade reduction, which is going to cost us volume so that naturally is going to put downward pressure on the volume of the business.

And then you did this last quarter, but as far as the foodservice organic growth, if you could just parse out how much was higher consumer or customer demand versus those ongoing issues with competitors which I'm assuming are pretty close to coming to an end?

Yes. So I would say organic volume and mix was the overwhelming majority of the changes that happened there, I'll probably put that at let's say 7% of that total 12%. I mentioned that 2% of that or 2.5% was price and then the remainder is our competitors.

And then, just looking at the Foodservice segment, obviously some very strong growth here. And given the difficult comparisons you'll face in that segment starting in the fourth quarter, do you think you can still grow foodservice on an organic basis?

I'll tell you that the businesses is galloping at a pretty rapid rate. What we would expect to see is the business normalize probably more into the mid-single-digit range with maybe some upside to do a little bit better depending on how things fall into place with some new business but I think -- if where we sit today, I see line of sight. The team sees line of sight, Doug sees line of sight to a mid-single-digit growth rate, which is still quite exceptional considering the peer group and the segment but certainly not the sort of numbers that we're carrying off now.

No, I think if you can grow that rate on top of what you've done, I mean, that's pretty impressive. Then just finally, if you could provide just more information on the new Transportation Management System and the automation projects, maybe how much you're looking as far as potential savings and the timeframe there?

Yes, absolutely. Well I'll start with the TMS project. I guess, starting -- probably 7 months ago we launched this initiative to look at our transportation capabilities end-to-end. Parenthetically, it started just around the same time that we started to see transportation costs run out of control. Essentially, what we've done is implemented a package by the name of Manhattan which is a top tier TMS package and it's automating all of the routing and the planning that we're doing. We expect it to certainly help us bring down those costs in the long term. We have 5 principal sites, 3 of which are already up and running. The next 2 sites are going to be up and running by the end of February, so by the end of February we'll have 85% of our business on the system. I think that's when we'll really start to see the benefit from the initiative. I -- maybe we're just stepping back for a 1.5 seconds here at Lancaster Colony, this is probably the most significant IT endeavor that the team, both IT and supply chain have taken on in recent history, at least a decade and the team's done really a tremendous job of bringing this to life. I'm going to knock on wood here on the desk without any disruption to our customers and -- so we're super excited about that. The other projects that we referenced, I would think of them in terms of several tranches. There is the normal sort of smaller Lean Six Sigma projects, those things continue to run at sort of the ordinary rate. Matter of fact, in the conference room behind us, we have another class of greenbelts that are undergoing their training and sharing their projects. Then what we're looking at are also some bigger more capital-intensive projects. One of which is beginning to come online where we're automating broad swaths of our manufacturing facilities, particularly the end of line by putting in place robotic palletizers. And that will continue to run, that particular project I'm thinking about through the remainder of this year and into early next year.

(Operator Instructions) You're next question comes from Brian Holland with Consumer Edge Research.

So forgive me if I misheard this. We talked, Dave, at the beginning about -- in Michael's question about kind of the bucket of things that were impacting negative growth margin in the second quarter. Did you say that absent simply -- excuse me, Simple Harvest warehousing and I forgot what the other one might have been -- the gross margin will be flat for the quarter year-on-year?

Brian, what we said is if you pull out Simple Harvest dips and the severance expenses and the expenses associated with Bantam that the retail margins would be flat. We would go from essentially -- it'd be a 200 basis points swing and bring us flat with prior period.

Okay, got it.

Let's further clarify I think, what Mike was trying to understand is what in those costs would we sort of characterize as transitory? We sort of -- clearly the severance and pulling the item off the shelf was transitory, and I would view the level of spending that we had on that particular product in that particular period as transitory as well.

Okay, yes, that's perfect. I just -- I misheard where that impacts is on. That makes a lot more sense. Go on, I'm sorry.

I'm sorry, Brad. I was just going to note too -- then for those. I know all of you guys have sort of models, you break it down by segment. And the other thing that is we're saying is as our foodservice grows at the rate at which it is, that also creates sort of downward pressure on our consolidated margins and as you work your way through the model, you'll see that, that's probably 40 or 50 bps on a consolidated basis as well.

Okay, perfect, I appreciate that. Most of my questions have been answered, so I -- but I did want to ask about kind of the margin trajectory going forward. So you called out, you highlighted Omni Baking, so appreciate that. As we start to think about what else is there, so obviously you start to lap pricing in this quarter. Freight I think, beginning right around now you start to get past -- you start to get into the lapping the toughest compare, so then a moderating headwind, if you will, maybe a tailwind, I don't know. You can let us know how you think about that. And then aggs I think helped maybe this past quarter so just curious as we think about the input cost backdrop and we think about the balance of the year, the puts and takes, how we should think about your gross margin?

Sure. No, I would say in the aggregate, I continue to see room for us to extend our margins. On the input cost front, we're seeing the inflation moderate. I would say on a gross basis, I'd call it and 1, 1.5 points just depending on how things work out. What comprises that inflation is shipping. What we're seeing are things like corrugated resin cost going up, transportation cost also, if you include fuel and that continue to be up a bit of a headwind, but we are seeing tailwinds in some of the commodity classes. But if you put all of that together and you aggregate it, it still nets out to low single digit, let's call it 1% to 2% gross inflation. Having said all of that because of the six sigma initiatives that we have. And even notwithstanding this price changes, I think there's opportunities for us to continue to modestly to grow our margins and offset that headwind. And Doug, I don't know, I'll leave to you to see if you had any other color you'd offer to that?

No, I think you covered everything there, Dave. Thank you.

Okay. And then just quickly going back to the foodservice catalyst there. Again, just tremendous organic growth on that business. I was a little bit surprised to see that the competitor supply disruptions were still a catalyst. I guess, if I recall last quarter you said that was about 1/3 of volume growth. So I guess first question there would be where does that stand as a catalyst relative to last quarter, and how do we see that sort of tapering off over the balance of the year? And then, how much of that organic growth -- forgive me if you've mentioned this and I've missed it. But how much of that growth, and I appreciate if you don't want to get into too many specifics. But the pace at which you're picking up new accounts, I think you've highlighted that the past few quarters. I'm wondering if there's any sequential uptick in maybe those success stories that are worth highlighting?

I think the way I would probably characterize it, Brian, first and foremost is the food service space is all benefiting in the current economic environment and I would say we're disproportionately benefiting because we're winning with winners. Some of the new business that we have ticked up and we usually don't mention them by name are the national chain accounts out there that are also benefiting from organic growth. So that's a big part of what's going on. And that's a big part, honestly, why we could look into the future and feel relatively comfortable for the intermediate period of time around that growth rate. We're -- it's constantly a battle back-and-forth, because there's other guys sitting in another conference room that are trying to figure out how to take it from us. But if you look at where we are today, that is sort of what we see. In terms of that, the supply disruption that we're seeing, it did in fact moderate versus the prior period. We think it's essentially run its course at this point. But I think I probably said it the last time, characterize it as a competitor stubbing their toe. We can't necessarily predict when they're going to stub their toe but we're not necessarily unhappy when they do. We're just not banking on it on a go-forward basis, and that's why we come back probably to the mid-single-digit range.

Yes, that's helpful. Curious with some of those new account wins. Again, acknowledging that you can't be too specific, how much of that is kind of around your dressing and dips, versus may be -- I mean, are you seeing any wins on the foodservice side at this point related to any of your sprouted grain or wraps products et cetera?

A lot of the growth has been in dips and dressings. We've also seen tremendous organic growth in Sister Schubert. I mean, that business is growing exceptionally fast. Faster than the average, honestly. So that's a part of it that has our industrial business in Foodservice was up quite high as well. So we are seeing it. It's sort of broad ranged and across-the-board, but just in the law of large numbers, what is moving that thing the most continues to be the dressings and dips.

Okay, and then last question for me, maybe a little bit high level. And it doesn't appear as though it's impacting you at all, but we've had a few companies in the third [fold] space, highlight inventory or destocking issues there seems to be a little bit of noise around that. On the retail side, it's still kind of early in earnings season, so we'll see how broad based that might be. But just curious from your seat, from your perspective, what you're seeing there do you anticipate more pressures and kind of to the extent that you can comment on it, what do you think is driving that? Is it channel fragmentation or what other factors might be out there that might be worth highlighting?

It's a great question. Based on -- we saw some of the peer news that came out not too long ago. We saw the comment. And ironically we had our sales team together last week, and we posed the question to them. So each of the people that oversee our large accounts, including Walmart. And we posed the question directly to them. And they didn't see that necessarily as it pertains to our business. Now what we do seem to see is that we're seeing where we can, customers are preferring smaller orders and more frequent orders. They are certainly managing their working capital expenses and things like that. They're clearly focused on driving operational efficiencies and their supply chain, but what we couldn't necessarily point to anywhere was sort of an across-the-board destocking that was impacting our business. And it could be that if you look at our business, given that it's a refrigerated, a set of products and it's a frozen set of products, they just don't have the space to hold a lot of that stuff. There isn't the holding power in the back of the store. And they're -- I mean either the refrigerator or the freezer. And it could be that it's the -- maybe it's the dry categories. Obviously, [they may not disclose to all] of my peers since you guys maybe that are following them, but I don't know if dry categories are more susceptible to this than refrigerated or frozen. But I can tell you just in the direct question that we had with our own team to understand whether or not this was impacting us, we didn't walk away with the impression that it was making a material impact.

Okay, there are no further questions. We will now turn the call back over to Mr. Ciesinski for his concluding comments.

Well, thank you for joining us today. And we'll look forward to talking with you later this spring, as we share our third quarter results. I hope you guys have a safe and warm rest of the day.

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