SpartanNash Co (SPTN) 2012 Q2 法說會逐字稿

Good morning and welcome to the Spartan Stores second-quarter 2012 earnings conference call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Katie Turner. Please go ahead, ma'am.

Good morning and welcome to Spartan Stores' second-quarter fiscal 2012 earnings conference call. By now everyone should have access to the earnings release for the second quarter ended September 10, 2011. For a copy of the release please visit Spartan Stores' website at www.SpartanStores.com under For Investors. The call is being webcast and a replay will be available on the Company's website until November 3, 2011.

Before we begin we'd like to remind everyone comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates and projections that may involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements.

Internal and external factors that might cause such a difference include, among others -- competitive pressures among food, retail and distribution companies; the uncertainties inherent in implementing strategic plans; and general economic and market conditions.

Additional information about risk factors and the uncertainties associated for Spartan Stores' forward-looking statements can be found in the Company's second-quarter earnings release, fiscal 2011 annual report on Form 10-K and the Company's other filings with the SEC.

Because of these risks and uncertainties investors should not place undue reliance on forward-looking statements. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statement.

This presentation will include non-GAAP financial measures as defined in Regulation G. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and the other information required by Regulation G is included in the Company's earnings release issued after market close yesterday which has been posted on Spartan Stores website, www.SpartanStores.com under For Investors.

And now it's my pleasure to introduce Mr. Dennis Eidson, President and CEO of Spartan Stores, for opening remarks.

Thanks, Katie. Good morning and thank you for joining our second-quarter fiscal 2012 earnings conference call. With me this morning are members of our team including Executive Vice President and Chief Financial Officer, Dave Staples; our Executive Vice President of Retail Operations, Ted Adornato; our Executive Vice President of Wholesale Operations, Derek Jones; and our Executive Vice President, General Counsel and Secretary, Alex DeYonker.

I'll begin by providing you with a brief overview of our business and financial performance for the second quarter, then Dave is going to share some more specific details about the second quarter financial results as well as our outlook for the remainder of the fiscal year. Finally, I'll provide some closing remarks and we'll open up the call for questions at the end.

I'm pleased with our team's ability to increase sales in the current environment. We achieved year-over-year sales growth for the fourth consecutive quarter in our distribution segment, continue to enhance our value proposition to the consumer, and tightly manage the controllable aspects of our business. These efforts resulted in an increase in consolidated earnings from continuing operations, excluding unusual items and adjusted EBITDA as compared to the same period last year.

Now I'd like to provide you with some highlights on our distribution operations for the quarter. Our distribution segment sales increased by approximately 3% for the quarter as a result of new customer growth, an improvement in our pharmacy-related sales and increased sales to existing customers. I'm particularly pleased by our ability to continue to attract new business and I believe that our sales performance demonstrates that independent retailers appreciate our value added model.

In addition, the Company and union representing both our warehouse associates and distribution drivers mutually agreed to extend the terms of our existing contract to October of 2012. The previous contract would have expired in October of 2011 and we believe this extension will provide us with a sufficient time frame to have more clarity and further evaluate the state of the Michigan economy in order to ensure that we get a fair agreement for both the Company and our associates.

As you are well aware, we remain focused on enhancing our value proposition in both our distribution and retail segments by continuing to expand our corporate brand program through new product innovation. During the quarter we introduced 60 items across the store for a total of 190 new items year to date. We remain on track to add 300 new corporate brand items for the year.

Our new product introductions, along with our comprehensive packaging redesign that incorporates [facts] upfront nutritional labeling further increases the value offering to our distribution customers while providing the end consumer with even more choices in our stores.

Going forward our team will continue to work aggressively to increase sales penetration with our existing distribution customer base, seek new independent customers, enhance our value added service offering and further improve the efficiency of our distribution operations.

Net sales in our retail segment also increased approximately 3% due to an increased fuel retail selling price and increased fuel volumes. These gains were partially offset by a decline in comp store sales of 1.3% excluding fuel, which was slightly below our expectations.

The decrease in our comp store sales was due to a couple factors. First, a shift in the timing of food stamp distribution by the state of Michigan to the third quarter from the second quarter of fiscal '12, which we anticipated and had previously communicated to you.

In addition, over the Labor Day holiday selling period our sales were negatively impacted by unfavorable weather conditions and what appeared to be a slightly more cautious consumer. Prior to the holiday selling period our comp store sales were actually tracking ahead of our expectations.

While the Michigan economy has improved from its lows, overall consumer discretionary spending is still negatively pressured due to an increase in unemployment rates since last year end, higher fuel prices and an increase in food inflation. Therefore while we still expect the Michigan economy to grow it likely will be at a slower rate than we had originally anticipated.

We do remain confident, however, that as the economy does improve Spartan Stores is well-positioned for increased growth as we continue to execute our capital program and we benefit from the further acceptance of our now chain-wide loyalty program.

We remain excited about our loyalty program which was rolled out to the consumer in the third quarter for our Family Fare and D&W Fresh Market locations. The Yes loyalty program is now available to all of our consumers and the card is valid at any of our banners across the state.

To date we are pleased with the approximate 250,000 households that have signed up for a Yes card at a Family Fare or D&W Fresh Market and the approximate 720,000 households that we have registered for the program across all of our banners. We believe that participation will continue to grow in the coming weeks and months as more households realize the benefits and sign up.

As I mentioned before, our loyalty program will provide increased value to the consumer through point spaced awards, special clubs and our enhanced pharmacy program. Our new pharmacy program not only provides $4 and $10 generic offers, but also includes free prenatal vitamins, antibiotics and diabetic medications.

We believed our plan combines both of these elements in a way that provides the consumer with the best overall program available in the marketplace. Our improved connectivity with the 720,000 households will allow us to better target offers to their needs as we increasingly understand their purchasing behavior.

In fact, at our Glen's banter where the program has been in place for well over a year, we continue to see an increase in loyal households visiting our stores. While we will incur initial cost to launch the program during the third quarter, we expect the long-term top-line benefits to provide a positive return within the next 12 to 18 months.

Our efforts to continuously improve the consumer shopping experience are also paying off as we have seen increased scores on key drivers of overall customer satisfaction in the areas that focus on fresh excellence.

We are committed to providing the consumer with a high-quality perishable and our Fresh Experience initiative has focused on everything from the variety of product offered to its sourcing, enhanced training of our associates and improved fixturing and display guidelines. We believe this initiative is in line with the consumer's desire for healthier food alternatives.

We will continue to focus on our key initiatives in fiscal 2012 to achieve further improvements in our retail segment. Initiatives will include the ongoing development of the corporate brand program, our new loyalty program and better connect with the consumer instilling a culture of Fresh Excellence across our banners and continue emphasizing providing health and wellness solutions to the consumer.

In addition, we continue to invest in our store base as we completed two major remodels in the second quarter and opened one new fuel center. We will complete two more major remodels in this year's third quarter and have already opened a new fuel center early in the third quarter.

From a competitive perspective we expect one new supercenter opening in the second quarter and, as we previously discussed, this is the only expected supercenter opening against our corporate stores in this and next fiscal year. We will also cycle two prior year supercenter openings during the third quarter.

With that overview I'm going to turn the call over to Dave for more detail on our financial results and an outlook for the remainder of the year. Dave?

Thank you, Dennis, and good morning, everyone. I will now provide you with more details about our second-quarter fiscal 2012 financial results as well as our guidance for the third and fourth quarter of fiscal 2012.

Consolidated net sales for the 12-week second quarter increased 2.9% to $619.6 million compared to $602.1 million in the year-ago quarter. Both the distribution and retail segments reported increased sales during the quarter. Distribution and fuel sales represented 41.4% and 7.2% respectively of consolidated net sales compared to 41.3% and 5.1% respectively in last year's second quarter.

The consolidated gross margin rate for the second quarter decreased 110 basis points to 21.4% from 22.5% last year. The decline was primarily due to a higher mix of distribution and fuel sales, a lower fuel gross margin rate, and a LIFO expense of approximately $2.3 million this year -- an increased LIFO expense of approximately $2.3 million this year versus last year.

The increased LIFO expense was a result of higher inflation in this year's second quarter versus last year and a $1.5 million LIFO credit generated in last year's second quarter due to lower inventories from the warehouse consolidation initiative.

Second-quarter operating expenses were $112.8 million or 18.2% of sales compared to $113.1 million or 18.8% of sales in the same period last year. During the quarter our team continued to do a good job managing our controllable expenses.

Our expense leverage was approved by a shift in mix of sales towards fuel, productivity improvements in each segment, favorable healthcare expenses and general cost containment initiatives partially offset by a pre-tax charge of $1.2 million for unusual corporate professional fees. This charge was $700,000 on an after-tax basis. Adjusted EBITDA for the second quarter increased 3.8% to $31.1 million or 5% of net sales compared to $30 million last year.

Excluding the previously mentioned after-tax unusual charge of $700,000 in this year's second quarter and last year's second-quarter after-tax benefit related to our warehouse consolidation initiative of $700,000, earnings from continuing operations would have been $11 million or $0.48 per diluted share compared to $10.6 million or $0.47 per diluted share last year. Second-quarter earnings from continuing operations as reported were $10.3 million or $0.45 per diluted share compared to $11.3 million or $0.50 per diluted share in the same period last year.

Turning to our operating segments, second-quarter distribution net sales increased 3.1% to $256.2 million from $248.6 million last year. Excluding the previously mentioned corporate professional fees and warehouse consolidation impact versus last year operating earnings would have been $10 million in this year's second quarter compared to $9.5 million in the same period last year.

Operating earnings as reported for the segment were $8.8 million compared to $10.7 million in the same period last year. Second-quarter retail sales increased 2.8% to $363.4 million compared to $353.5 million in the same period last year. As Dennis previously mentioned, our comparable store sales for the quarter excluding fuel decreased 1.3%.

Retail segment operating earnings for the quarter decreased 1.3% to $11.2 million compared to $11.4 million last year. The slight decrease in operating earnings was primarily due to higher debit and credit card fees, incremental LIFO expense, higher incentive compensation costs partially offset by lower healthcare expenses and benefits from cost containment initiatives.

We continue to report strong levels of net cash provided by operating activities of $42.5 million for the year-to-date period ended September 10, 2011. Total net long-term debt was down $33.8 million or 23% to $115.4 million versus $149.2 million at the end of the second quarter of fiscal 2011.

I will now provide further detail on our outlook for the second half of fiscal 2012. We expect earnings from continuing operations for the remainder of the year, excluding the 53rd week and the prior-year unusual items, will approximate last year while adjusted EBITDA will exceed the prior year's levels.

While the second-half earnings from continuing operations will approximate last year's levels, as I just mentioned, we anticipate the third quarter will face several significant headwinds which will cause the quarter to be less profitable than a year ago.

First of these headwinds is a significant increase in our LIFO expense of approximately $1.7 million which is a result of the current year's inflation and a credit in last year's third quarter. Second, the launch of the Yes loyalty card in the third quarter is expected to negatively impact gross margins, marketing expense and store labor by an incremental $1.2 million. Finally, incentive compensation is expected to exceed the prior year by $1 million due to the timing of the prior year's provision.

We believe these headwinds will be partially offset by the continued impact of inflation and improved sales as comparable store sales become flat to slightly positive and distribution sales continue to grow versus last year, but at a lower rate than we have been experiencing. As a result of the net impact of these events we expect to report earnings per share from continuing operations in the range of $0.20 to $0.23 for the third quarter.

Now focusing on the fourth quarter of fiscal 2012, we expect our financial performance will offset most if not all of the third-quarter shortfall versus the prior year as the incremental LIFO expense will be less than the third quarter.

In addition, during the fourth quarter of fiscal 2012 we expect to realize further benefits from the Yes program without the incremental start-up costs and we will incur substantially lower incentive compensation expense than the prior year due to the timing of the prior year's provision and the cycling of a significant retirement payment.

We expect capital expenditures for fiscal 2012 to be in the range of $43 million to $45 million with depreciation and amortization ranging from $37 million to $38 million and total interest expense approximating $15 million. This concludes our financial discussion. I will now turn the call back to Dennis for his closing remarks. Dennis?

Thanks, Dave. So in closing, for fiscal 2012 we remain intently focused on continuing to improve sales growth and profitability in both the distribution and the retail segments, enhancing the value proposition to the consumer and achieving additional operating efficiencies while managing the controllable aspects of our business.

We believe that programs like our Yes loyalty program and Fresh Excellence will aid us in improving our top-line results and that we will see their impact starting in the third quarter. We continue to make fundamental changes and structural improvements to our operations in becoming a value-added partner to our distribution customers and have strengthened our position as the leading grocery operator.

As a result of the changes we remain confident in our long-term business strategy and we will continue to seek growth opportunities in our existing markets or other states through new customer development or acquisitions. Our experienced management team's consistent focus on disciplined and balanced growth has Spartan Stores well-positioned for increased success long-term. And with that we'll open up the call for your questions.

(Operator Instructions). Scott Mushkin, Jefferies.

Hi, guys, this is actually Bryan on for Scott. Just a couple quick questions. Actually roll out the loyalty cards into the D&W and Family Fare and I'm sure it's pretty early, but how have you seen the early adoption of your customers compared to maybe with the rollout of VG's was?

And have you seen any learnings that have helped the rollout and maybe how quickly do you expect to kind of makeup -- make up for the cost of the marketing expenses and all that? Any thoughts there from your learnings from VG's and how you're going to use them going forward would be great.

This is Dennis. One of the things we learned about rolling the card out is getting the Associates in the stores engaged very early, because it's new for them too. And this Greater Grand Rapids market of Family Fare in D&W was a very important aspect to a successful launch.

So we actually turned the program on for Associates only several weeks in advance of launching it to the consumer and had special rewards in place for our associates to get them accustomed to earning points, redeeming points, gaining rewards and it really turned them into aggressive ambassadors for the program. So I think that's a learning that really delivered for us.

We think that we're pretty much on track with the launch relative to the consumer and we have done a lot of homework in advance in terms of focus groups and market studies. I don't think we have many surprises here.

As we indicated, there is an expense in the quarter to launch, a lot of that is around -- we have a pretty aggressive TV schedule and a lot of print and billboards and those are, for the most part, incremental one-time expenses that will go away.

And with the lift we think we can generate and the ability to be more connected intimately with our end consumer, we strongly believe there will be a significant payback to the program going forward.

That's great, that's great color. Thank you. And then I think the national price of gas over the course of your quarter was down like $0.15. I just wanted to see what you guys saw specifically in Michigan and how that -- how the change affected any end spending, if it declined, did you see any trade-up activity? Any color on that would be appreciated.

Are you talking about from quarter to quarter?

From quarter -- sequentially, yes, sorry.

I think we were $0.22 from quarter to quarter reduced here, but still it's $0.84 more than a year ago. As you're comping up against those year ago numbers it's a 32% increase in the cost of a gallon of gas. So I think it's still stretching the consumer versus prior year even though there was a little bit of relief from Q1.

I don't think we saw a big change with that $0.20, $0.22. I think the consumer still remains relatively cautious. I will add on a different topic we're delighted with the kind of volumes we're getting in our fuel centers. Our comp gallons in fuel are running positive 6.5% and we indicated we've opened a couple of new stations in the quarter, our total gallons were up more than 13%. So we know we've got something working here with the fuel/supermarket combo and we're still learning how to best optimize that tool.

And I guess just to follow on with the consumer there, the unemployment rate [seems to have been like] 11.2%. And with the current rate of inflation are we seeing any slowdown or pickup in pricing movements or has it been pretty steady? And have you seen the consumer with the unemployment rate pretty high, have you seen any reaction there? And I'll yield the floor. Thanks very much for taking my questions.

You're welcome, Bryan. I think the unemployment rate at 11.2% in August, I think September came out last night actually, 11.1%. But at the beginning at our fiscal year we were at 10.3% in the state of Michigan. And I would say it surprised us a little bit that we've had the upturn in unemployment. We were kind of expecting that it would level off and probably get a little bit better. So that's been a bit of a negative to our business plan.

But I think the consumer has largely remained unchanged with respect to that still tough, very cautious value oriented. That's part of the reason we found fuel to be a relatively attractive way to drive value with our consumer base. The inflation piece is impacting the consumer spending and I would say that we've seen pricing continue to be rational, the competitors in the marketplace have all taken price from Q1 to Q2 at a fairly consistent level. So I think the [sweating] is tough, but I don't think it's dramatically different.

Great, thanks very much.

Karen Short, BMO Capital.

A couple questions. If you gave us what inflation was this quarter I missed it, where is it coming?

We did not. Our inflation is north of that 4% number. In retail there's a lot of different ways to track that, but I think that's our number based on the mix. So a little bit north of 4%.

And that's cost inflation?

That's retail inflation.

Okay. And what are your expectations for the year on inflation?

I think everybody is trying to figure that out, right. It feels like we may be getting pretty close to the top of that. And we may see a little bit more early here in the third quarter, but I think for the fourth quarter it would be our expectation that we think that is going to moderate and begin to decline. So that's kind of what we're thinking right now in our business plan and in our model.

And then can you give some color on what sales trends are doing at retail into the third quarter? I mean they must have improved a little bit because these (multiple speakers).

We've got a few weeks behind us and we're performing better in the Grand Rapids markets than the previous trend and obviously that has a lot to do with the launch of the loyalty card, so that's been a help to us. So the trend through -- I guess we're five weeks out into the quarter, is significantly better than where we ended the quarter, but I'm not sure how predictive that is. I think we guided here for the last half flat to slightly positive on retail comps and that's our belief going forward.

And then just to go back to the third quarter in terms of the retail operating profit. I mean generally the third quarter is a weak quarter from an operating profit perspective, but it's looking like you'll probably maybe kind of just be above breakeven from an operating profit perspective in retail given the $1.2 million in additional cost, is that fair?

Yes, I mean, I think as you look at retail I think you just have to continually put in the items we gave you. Clearly Yes impacts the retail side, LIFO will have a little bit of an impact on the retail side as well. But I think we'll still have -- we still expect to be profitable in retail, but it certainly will be pressured by those items.

Okay. And then just lastly, obviously you've called out this professional, corporate professional fee cost in the second quarter. I mean I don't necessarily know that it was in distribution versus retail or that you were looking at any acquisition in general. But just bigger picture, you have talked in the past about being interested in expanding in adjacent states through potentially an acquisition in distribution. Can you maybe just help me understand what the synergies would be from doing something like that?

I think the synergies of an acquisition outside of the state of Michigan on the distribution segment clearly would be dependent on who that acquisition, which acquisition that might be. I think to speculate probably isn't very helpful. But part of the strategy that the Company has outlined is to grow our footprint outside of the state of Michigan and we remain convinced that that's the proper course of action and we're looking for that opportunity to be able to do that.

Thanks, that's helpful.

(Operator Instructions). Chuck Cerankosky, Northcoast Research.

First question, guys, just -- can you talk a little bit about your retailer customers out of the distribution segment? What kind of storing activity are they doing? And it's actually pretty good to see that 3% revenue growth there. What's driving it besides inflation?

Yes, we don't have a significant amount of new stores being built. We have a couple. And matter-of-fact, in Metro Detroit we're going to have a new store open, Spartan operators, here in the next 30 days. So that hasn't been the primary driver.

I would say our new business team has been very active and I think our store count, Chuck, on independent customers is up about 19 from a year ago, it's 2 here and it's 1 there and it's 2 here and largely coming from the competitors in the marketplace. And as I indicated in the remarks this morning, I think the value added offer that we go to market with is really resonating and that's been the primary driver of our business growth.

What kind of comps are they running, if you know the answer to that?

It's harder to figure that out, really, Chuck, because we don't get firsthand their retail sales. We can look at their comp purchases and even they're a little murky. But I would say they're running flattish. Dave, do you have a different perspective -- maybe a little down. Some guys a little up depending on the region.

Yes, I think you see a pretty broad swing, right, some guys nicely up, some guys -- but I think it blends out (technical difficulty).

What do you think, Dave, I missed the end of that?

I think it blends out, like Dennis is saying. It's probably in that flattish range, maybe a little better depending on what area of the state you're in.

It is interesting though. You know, so many folks kind of write off the independent retailer, right. We have some great independent retailers that despite the environment, despite the unemployment, (inaudible) all of those headwinds we're all talking about that consistently post positive numbers.

And I tell you, it's because they are relevant in the marketplace with a neighborhood offer. They know their consumer and it's something that the big chain guys just can't harness. I think those who are just writing off the independent retailer are making a huge mistake.

Looking at that food stamp distribution item you called out in the press release, what kind of dollars are we talking about? And can you discuss the mechanics in a little bit more detail?

Sure. So at the end of the quarter it was roughly $1.5 million that we believe shifted from the second quarter to the third quarter. And it's fairly complicated, but let me try to walk you through how this has worked.

So in the prior year food stamps were distributed from the 3rd of the month to the 10th of the month and they were 20% distributed on the 3rd, 10% until the 9th -- or through the 9th, and then another 20% on the 10th. And what has been happening over the course of this year is that has been shifting to the food stamps being distributed from the 3rd and then on the odd days until the 21st is the end game.

And so this month the last distribution -- the month we're in currently will be the 20th. And so if I can do my math right, I think you were at the 19th and it would have been a quarter date that it was spread to. So in any given week, in the past if you had a week that included the 3rd and the 10th let's say, I mean I think you can do that with seven days, you had all the food stamps in that week and that's a substantial amount of money.

And so now that's gone from a one week concentrated disbursement to really three weeks. And so it really plays havoc with your performance from a sales line in each of those weeks as it changes. And then you're watching it as every period it goes out one more day, it spreads the actual spending of that expenditure over more and more time.

Which I think over the long term is great, right, because it doesn't have those crazy peaks that are driven by artificial measures. But until you get there it really does have an impact on your operations as well as obviously the sales that we report.

But in looking at the I guess sales dollar value of food stamp distribution, the shift from one quarter to the next is only $1.5 million?

Well, it was at the end of the second, which is about a half a point of our comps. And so it would have had about a half a point impact in our mind -- or half a percent I should say impact from on our second quarter.

And it will be a similar thing in the third quarter?

Yes, it should be somewhere in the same ball park. So much is dependent on upon what the exact date the period ended. And then we really don't cycle this benefit -- or this benefit -- this event until you really get through period 10 of next year will it be fully cycled -- or period nine I should say.

So you're going to continue to have some flux next year because as you round the Horne, right, it moved a day each period. And so you're going to have to continue to cycle that through the course of next year. But obviously the impact will be less and less.

Looking at the credit card and debit card fee increases, Dave, what kind of increase is it year to date versus last year?

It's pretty substantial. Off the top of my head what is that percent? I'm not sure I have that. But I would say it's probably been in that 5% to 10% increase I think pretty easily. And now the good news is, right, with the change in the law the second quarter should be the last quarter we've had that issue. So beginning October 1 with the debit fee reform laws we're going to see a benefit from that.

So if it was $2 million in the first half of last year it was up 5% to 10% of that amount this year?

Right.

All right. Now let's revisit the 53rd week. What would you say that's going to impact or how should we look at it as impacting the full year? And are we going to -- is it going to affect at all Easter? I don't have in front of me where Easter is falling in calendar '12 and how that might impact your fiscal '12 results.

So normally the way we look at the 53rd week, from a sales perspective it's pretty straightforward, right? You just add the week and that kind of rolls from the sales. From an earnings perspective, it's probably in that $2.5 million to $3 million range of a benefit for us.

And it's not equally split between the divisions, that's at an operating income level. It's more heavily weighted to retail. And so you're probably -- I'd say 60% or so of it goes more towards the retail side, 60% to 65%. And so I think that's how you would look at that.

But $2.5 million to $3 million of operating profit?

Right.

Okay. And then finally, what was your gross margin per gallon of gas?

Gross margin per gallon -- it was down nearly $0.02 from a year ago.

I think it was $0.18 -- it was 18 point some cents I believe.

Actually the gas -- gas actually hurt us a little bit on EPS in the quarter.

We lost about half of a cent.

And that -- half of a cent per share, right?

Right, yes.

But it was roughly $0.18 per gallon in this most recent quarter?

(Multiple speakers) $0.175. I think I was giving you more of a year-to-date number. I think $0.175 was the quarter number.

All right, thank you.

(Operator Instructions). I'm showing no further questions at this time, so I'm going to conclude our question-and-answer session. I'd like to turn the conference back over to Dennis Eidson for any closing remarks.

Thanks, Michael. I'd like to conclude our prepared remarks by again thanking our Spartan Associates for their continued hard work and focus on providing excellent customer service. We appreciate the continued support from our valued consumers, independent retailers, suppliers and shareholders. Going forward our executive team remains focused on managing the business to report improved financial results for our 2012 fiscal year. Thank you.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.