B&G Foods, Inc.
Q3 2013 Earnings Call Transcript

Published: 17 Oct 2013

[Operator:]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the B&G Foods, Inc. Third Quarter 2013 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. David Wenner, Chief Executive Officer of B&G Foods. Please go ahead, sir.

[David L. Wenner:]

Thank you. Good afternoon, everyone, and welcome to the B&G Foods Third Quarter 2013 Conference Call. You can access detailed financial information on the quarter in our earnings release issued today, which is available on our website at bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. We also will be making reference on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. Reconciliations of these financial measures to the most directly comparable GAAP financial measure are provided in today's press release. We will start the call with our CFO, Bob Cantwell, discussing our financial results for the quarter. After Bob's remarks, I'll discuss the various factors that affected our results, selected business highlights and our thoughts concerning the remainder of 2013. Bob?

[Robert C. Cantwell:]

Thank you, Dave. Net sales for the third quarter of 2013 increased $27.2 million or 17.6% to $181.4 million from $154.2 million for the third quarter of 2012. Net sales of Pirate's Brands, which we acquired at the beginning of July 2013, contributed $16.5 million to the overall increase. Net sales of the New York Style and Old London brands, which we acquired at the end of October 2012, contributed $11.4 million to the overall increase. And net sales of the TrueNorth brand, which we acquired at the beginning of May 2013, contributed $5.4 million to the overall increase. Net sales for our base business decreased $6.1 million or 3.9%, of which $3.5 million was attributable to a net price decrease and $2.6 million was attributable to a unit volume decrease. Net sales decreased by $1.7 million for Ortega, $1.6 million for Mrs. Dash, $1.3 million for B&M and $1 million for Las Palmas. All other brands decreased $0.5 million in the aggregate. Gross profit for the third quarter increased $6 million or 10.8% to $61.3 million from $55.3 million in the third quarter of 2012. Gross profit, expressed as a percentage of net sales, decreased 210 basis points to 33.8% in the third quarter from 35.9% for the third quarter of 2012. The decrease in gross profit as a percentage of net sales was primarily attributable to a net price decrease of $3.5 million and a sales mix shift to lower-margin products. Selling, general and administrative expenses increased $6.3 million or 42.4% to $21.3 million for the third quarter compared to $14.9 million for the third quarter of 2012. This increase is primarily due to increases in consumer marketing and selling expenses of $3.5 million, of which $1.6 million is due to timing of our planned marketing spending and acquisition-related transaction costs of $2.4 million. All other expenses increased $0.4 million. Expressed as a percentage of net sales, our selling, general and administrative expenses increased 200 basis points to 11.7% for the third quarter of 2013 from 9.7% in the third quarter of 2012. We expect the marketing spending on our base business to decrease approximately $2.2 million in the fourth quarter of 2013 versus the fourth quarter of 2012. Operating income decreased 1.9% to $37.6 million for the third quarter from $38.3 million in the third quarter of 2012. Net interest expense for the third quarter decreased $0.9 million or 7.5% to $11.1 million from $12 million for the third quarter of 2012. The decrease was primarily attributable to the refinancing of our long-term debt during the second quarter of 2013, including our issuance of 4 5/8 senior notes, repurchased over a 7 5/8 senior notes and repayment of our tranche B term loans. Reported net income under U.S. GAAP was $15.4 million or $0.29 per diluted share for the third quarter of 2013. This compares to reported net income of $16 million or $0.35 per diluted share for the third quarter of 2012. The company's adjusted net income for the third quarter of 2013, which excludes acquisition-related transaction costs and loss on extinguishment of debt, was $18.7 million or $0.35 per adjusted diluted share. There were no adjustments to net income for the third quarter of 2012. Our adjusted EBITDA, which excludes the impact of acquisition-related transaction costs, increased 7.3% to $46 million for the third quarter compared to $42.8 million in the third quarter of 2012. We finished the third quarter with $864.6 million in long-term debt. Our net leverage was 4.3x pro forma adjusted EBITDA at quarter end. And following the Rickland Orchards acquisition, remains at 4.3x pro forma adjusted EBITDA. Expected leverage as of year end is 4.2x pro forma adjusted EBITDA. Earlier this week, our Board of Directors increased our dividend by $0.01 per share per quarter to $0.33 per share per quarter or $1.32 per share per annum. Based on our current share count, this is expected to result in an annualized dividend payment of approximately $70.5 million. We expect our cash interest expense to be approximately $37 million for 2013 and approximately $38 million for 2014. B&G Foods expects that effective tax rate for fiscal 2013 is 35.4%. Our expected capital expenditures for 2013 and 2014 are $14 million to $15 million per annum. On October 7, we acquired Rickland Orchards from Natural Instincts for a purchase price of approximately $57.5 million, of which approximately $37.4 million was paid in cash and approximately $20.1 million was paid in shares of our common stock. Natural Instincts will also be entitled to earn-out payments, if certain performance goals are achieved. We paid the cash portion of the purchase price for the acquisition and will pay related fees and expenses from borrowings under our revolving credit facility. I will now turn the call back over to Dave for his remarks.

[David L. Wenner:]

Thanks, Bob. Good afternoon, again, everyone. Third quarter was a very productive quarter for our business with substantial progress on the acquisition front and the associated growth of those acquisitions offsetting weakness in our base business. The performance of our base business reflected the continuing challenges in the food business, now extending back for the better part of 2 years. Our overall results for the quarter were very solid. Top line net sales growth of 17.6%, adjusted net income growth of 10.8% and adjusted EBITDA growth of 7.3%. Adjusted diluted earnings per share were flat at $0.35 per share. But I will remind everyone that at quarter end, we had over 9% more shares outstanding than at the end of the third quarter of last year due to our stock offering last October. The sales growth seen in the business was entirely the result of acquisitions done in the past 12 months. Base business volume was down 1.7%, with the remainder of the quarter's decline coming from lower prices. Our base business, which is very much concentrated in the center of the store product lines, experienced this general softness seen by most companies who compete in that area of the store and the associated product categories. For the most part, our sales trends track the experience of our customers. We typically saw gains in retailers who are winning share and declines in retailers whose sales are weak. As I said, our top and bottom line gains were from significant activity on the M&A front, including our acquisition of Pirate Brands, which we completed in early July. Following the end of the third quarter, we signed and closed on the purchase of Rickland Orchards on October 7. These acquisitions bring our acquisition total in the past 12 months to 4 in all. On a pro forma basis, we have added approximately $190 million to $200 million in annualized net sales to our business in the past 12 months. We have also added brands that compete in snacking, a segment of the food business that have seen above-average growth in the past several years. On the last call, I spoke to the critical mass that we were building in this portion of our portfolio of brands. Rickland Orchards adds to that critical mass and brings with it specific expertise in warehouse clubs, a channel where B&G Foods has been underrepresented up until now. I will speak more about this acquisition in a moment. Turning to our base business, the quarter was challenging, as has been seen in various other food companies and retailer results for the period. July and August were particularly weak. And although September sales were better than prior year for B&G Foods, the month was not strong enough to overcome the earlier softness. Sales by channel were generally soft. In supermarkets, we continue to have issues with several Northeastern retailers, as we have in past quarters. Sales in the remainder of the country were flat. Mass merchants were surprisingly soft, with sales down in major accounts, even though we increased points of distribution. This was a reversal of past trends for our business. We have grown steadily en masse as we gain distribution but in the third quarter, our 5% distribution gains could not overcome soft sales trends experienced by the customers. Dollar store sales were also soft for the quarter, primarily due to unique sales of Mrs. Dash product last year that did not repeat. Foodservice sales were down modestly for the quarter, mostly due to price competition from private label. The major foodservice distributors are all emphasizing their own private label sales over branded product, which is where most of our business lies in this channel. We have needed to offer discounts on several brands to offset this competition and maintain volume. We continue to work to build our business with end users by selling branded products specific -- specified for menu items in the various restaurant chains. This is one way to prevent private label conversion. Approximately half of the net price decrease we saw in the quarter occurred in foodservice product lines. The other half came in retail supermarkets, where we responded to enhanced promotional activity by competition. As I've mentioned in previous calls, this is not a broad phenomenon, but is isolated to a few of our brands that are sensitive to promotions at retail. We believe foodservice offers a new growth opportunity for the snack acquisitions, particularly Pirate's Booty, which we are now selling into school systems as a wholesome snacking choice. This effort is gaining traction and should help results in upcoming quarters. Brand sales by tier reflected the overall sales trends, of course, but varied by tier. Tier I sales were down a surprising 5.7%, most of that coming in Northeastern retailers and mass merchants tracking their own sales trends. This was unexpected in that new product activity and expanded distribution efforts have been successful on these brands. Ortega, for instance, had significant new product introductions, such as the new Fiesta Flats taco shells that are being very well received. Several category resets at major retailers were delayed until fourth quarter, which did defer some of the expected benefit. Cream of Wheat, which was flat for the quarter, has 3 new products going into distribution

[Operator:]

[Operator Instructions] The first question comes from Bryan Hunt with Wells Fargo.

[Bryan C. Hunt:]

Dave, I was wondering if you could look at the last 4 acquisitions, all mostly in snacking or on-the-go eating and give us an idea of how fast those businesses are growing relative to the revenues they were generating when you purchased them?

[David L. Wenner:]

Look, it's going to vary by brand and in some cases, we don't have much track record under our own ownership. But the businesses we bought from Chipita last October were actually declining pretty precipitously. So we think we brought it to flat at this point, and then we're very hopeful that the new packaging and racks and display pieces and all of that will turn it around. We've got those racks -- we tested the racks in 1 retailer, whose sales were declining on Nielsen, 14% a period. Every 4 weeks, going down 14%. With the installation of the racks, that trend flipped from negative 14% to plus 30%. So we're very, very encouraged by those results. And it proves out yet again that display activity works. TrueNorth was basically a very stable business. It really wasn't growing, and that's all about distribution gains, and we've expanded the club distribution of that business into new clubs. So we're growing much faster than the prior ownership was growing. It really wasn't growing at all. Pirates. Pirates was growing very quickly, and we hope to continue that trend. But as I said, we only have a few months of experience under our belt. So we're really working hard here to expand distribution on that and also launch new product lines next year and continue the double-digit growth that was experienced under prior ownership for the past few years. Rickland, we've owned for a total of, what, let's see...

[Robert C. Cantwell:]

A couple of weeks.

[David L. Wenner:]

Not even.

[Bryan C. Hunt:]

Full weeks?

[David L. Wenner:]

For about 10 days. So I really can't tell you how we're doing with it versus the prior ownership. We're just excited because we brought the key people on board who turned this thing from 0 to 50 in about 1.5 years. And they have a lot of expertise in innovation. They have very good strength in relationships in clubs, and they know how to create products that work in clubs. They've done it at Hain before this, and now they've come to our company. And clubs is probably the area that we are the least well represented by far. Clubs is not even 2% of our sales. So to us, that looks like a huge opportunity if we can pull it off, and so we're very, very excited about that.

[Bryan C. Hunt:]

And in your opinion, what should -- looking at your current portfolio or your legacy portfolio before the most recent 4 acquisitions, where should your club mix be as a percent of sales?

[David L. Wenner:]

That's a really tough one. I mean, if you look at clubs, clubs are not -- walk around warehouse clubs, and they're not focused on dry grocery products. There's a couple of aisles, that are the essentials. I mean, Heinz will have a ketchup in there and Smucker will have a strawberry preserve in there and things like that. But clubs are focused on snacks, they're focused on fresh. When they get to food -- beverage is huge, all those kind of things. Dry grocery is not the main thing that clubs do. Having said that, I think with the relationships and understanding of clubs that these gentlemen are bringing, we think we can work with the clubs to create products within the dry grocery brands that will sell in clubs and expand our base business in clubs, as well as snacks.

[Bryan C. Hunt:]

Okay. And then my last question is, I mean, you've obviously, been an acquirer, as long as I've been following the company. And you've seen some -- you're really moving the portfolio, if you will, with these last couple of acquisitions into several growth categories of snacking. Is there any thoughts, given where interest rates are or multiples have gone for some of these slower growth companies and canned food in center of the store dry, of selling some of your maybe slower growing items in the portfolio and margining out and raising the growth profile of the business?

[David L. Wenner:]

I think that really is a matter of several things. First off, where we are today, we have very, very good cash flow brands in the portfolio even if they aren't growing. And right now, investors are saying, "We like cash flow. We like yield." So I don't think we're excited about selling something that's a very good cash flow brand nor could we do it in a non-dilutive way. We've owned some of these brands 15 years or more. The basis in the brands is low and you're just not going to get the multiple net of taxes. That's not going to be dilutive, given where our valuations are. So that scenario says it's difficult and maybe not even wise to sell any brands right now. But circumstances change down the road and growth becomes more important, then we would adapt to those circumstances and make the decision in light of what investors are saying is important to them at that time.

[Operator:]

The next question comes from Sean Naughton with Piper Jaffray.

[Jared W. Madlin:]

This is actually Jared Madlin on for Sean. First of all, I just wanted to ask on the volume front, it seems like things, obviously, improved into September. Have we seen any continuation in that trend? Or how should we be thinking about that with the shutdown and all the uncertainty?

[David L. Wenner:]

It's very hard to see an effect of the shutdown. I think it's going to be -- there's going to be a lag there. So we haven't seen an immediate effect, except maybe with military, obviously, as they shut down or furlough commissaries and things like that. You're going to see an effect there. But that's 1% of our sales. I really don't know. And that's why we didn't expect the early part of the summer to soften like it did. We were very pleased to see September firm up. I think anybody who tells you they know what consumers are going to do in the next 3 months is -- well, they're either very smart or kidding themselves. I don't know which. But it's very, very hard to say.

[Jared W. Madlin:]

Got it. That's helpful. I guess, secondly, on the gross margins, down 210 basis points. Any additional detail you can give in terms of the contribution from mix and pricing? And then secondly to that is, are the mix declines all driven by the lower-margin snack business? Or are there also an unfavorable mix shift within the base business as well?

[Robert C. Cantwell:]

No, the mix declines is truly relating to the snack business, and that's about 110 basis -- about 120 basis points of the downside. The rest is related to pricing. And the pricing from our base businesses is what drove the rest of it down. But the mix shift on a go-forward basis, if pricing was flat, we'd be looking about 100 basis point change in gross profit year-over-year.

[Jared W. Madlin:]

And should we expect flat pricing? Or how are you thinking about that metric?

[Robert C. Cantwell:]

Well, we still are aggressively having to deal -- our few products that we -- that tend to be trade-driven, there's aggressive pricing out there, and we're being competitive. We expect to see a little bit of pricing shortfalls, at least for the next quarter or 2.

[Jared W. Madlin:]

And could you add which brands you are seeing that competitive environment most?

[David L. Wenner:]

It's the typical brands that are very, very promotionally-intensive, B&M beans, baked beans sell over half the sales on promotion. The promotions have just deepened. In Mexican, it's not everything but our friends at OEP have been selling taco shells at 10 for $10 for a good while now. So I'm not divulging any secrets to them. I think they know they're doing it. And they're being very aggressive on taco shells and kits. So we have to respond. And Europe is another area where it's very promotion-driven. It's the categories that spend a decent amount of money on promotion even in a normal environment.

[Jared W. Madlin:]

Okay. And then just lastly here, it seems like the warehouse opportunity is obviously very strong within snacks, maybe not so much within the base business to expand in the warehouse. Is that correct? Or do you have an opportunity with the base business as well?

[David L. Wenner:]

Well, we like to think we have an opportunity, and that's something we're going to work hard to do. I think we're going to have to do it with products that are not the same old products. So one of the things that snacks is bringing to the company is a revitalization of product innovation, aimed at driving sales through warehouse clubs.

[Operator:]

Next question comes from Karru Martinson with Deutsche Bank.

[Karru Martinson:]

When you talk about September firming up, was that across the country, including kind of the challenging Northeast? Or did you continue to see weakness in that market?

[David L. Wenner:]

In the Northeast there's a couple of retailers who have their issues -- have had their issues for quite some time now, and -- but are still decent-sized retailers to us, still are in our top 20 retailers. So as they continue to bleed down, we continue to lose sales, actually at a lower rate than they're losing sales. But it -- certainly, it's swimming upstream when you have that going on. And as I've said before, it's never a perfect translation. You can have their competitor gaining as much as they're losing, but you're not going to trade dollar for dollar in sales. It just doesn't work perfectly like that. So there are always is some friction, if you will, as the consumer moves their buying patterns to another. And that -- you have to then ask, "Well, when does that bottom out?" It hasn't -- we haven't seen those trends stop yet.

[Karru Martinson:]

Okay. And when we think about the pricing actions that we're taking, I mean, obviously, some of it is against branded competitors. But what's been the challenge from the private label side and where do you kind of see that price gap between branded and private label today?

[David L. Wenner:]

That really is happening in foodservice more than in retail. It's surprising. In a lot of categories, we are -- we're not concerned about private label. In some of these heavily promotional categories, private label, really doesn't play a huge role. Baked beans is a great example. There's very little private-label baked beans, because you can buy a branded product at a very good promotional price on a very regular basis. So there's really no role for private label to play there. So what -- where we have seen it is more on the foodservice side and it's the major foodservice distributors, with an initiative to replicate branded products, and through their distribution systems, push their private-label versions of those products. And they have the power to do that through their own systems because they are the ones making the sales to the restaurant chains and all that. So as I said, one of the solutions is you need to go to those restaurant chains and have your products spec-ed out as part of what they use in that chain for the food they prepare, and that doesn't give the distributor a choice on whether they can substitute their private label for your product or not.

[Operator:]

We'll move next to Andrew Lazar with Barclays.

[Andrew Lazar:]

A couple of questions for me. First off, I don't suspect I'm going to get a great answer to this, but I'll ask it, anyway. Do we have a good sense of where all the volume went in July and August because you're not the only one that talked about a pretty significant deceleration in those months. And I know this follows on with an ongoing deceleration and no great reason to where the volume has been going even before. But I don't know, was there something specifically or different you saw in July and August?

[David L. Wenner:]

Not really, Andrew. I think it broadened, if anything. We have retailers who have been very, very good, very successful in terms of gaining share in their markets. And the ones we're picking out is the winning retailer in a geography. And even they are -- for the first time, were saying center of the store sales were down. And so that's where you start going. I was kind of hoping you had the answer to that question. But I'm starting to come to the conclusion that it's not a tidal wave, but percentage point by percentage point, eating habits are changing and people are not eating the prepared foods for breakfast that they used to eat. They're eating a bar, those kind of things. And snacking is -- you read all the time, that snacking is more prevalent. People are eating snacks 5x a day instead of meals and things like that. I really do think, and I want to make sure I'm not overemphasizing this, incrementally, this is eroding that center of the store business to some extent, at least -- I mean, it's been going on for quite some time now. So it just -- it can't be -- the pantries are bare. If it's pantry de-loading, it has to be something else, and that's the best explanation I can come up with. And if that's the case, I think we've hedged our bet with these acquisitions.

[Andrew Lazar:]

Got it. You've held on to your full year EBITDA guidance even though the third quarter was a couple of million short of -- at least where most -- I think most Street models were. So I'm trying to get a sense of what makes up the difference in the fourth quarter because you need a pretty big tick-up. Is there any change to full year marketing plans that are making up the difference? Or is it just that you're starting to see better cash flow dynamics and contribution from the acquisitions that you made than you had originally built in?

[Robert C. Cantwell:]

Most of it relates to feeling better about the base business in the fourth quarter, in particular as we kind of tried to explain, is we front-loaded marketing on the base business for the first 9 months, a little over $2 million. $1.6 million of it was actually in the third quarter, which affected our third quarter results. We will -- on just a pure comparison basis, on the base side of the business, we're going to spend about $2.2 million less in the fourth quarter than the same time last year. And that's not a reduction to our overall marketing spending. It's really just how we've spread that spending throughout 2013. So that is a pure benefit to us in the fourth quarter kind of on a year-over-year EBITDA basis. And we expect and we hope here that we have better performance on the top line on the base business. We still have some concerns and some pressures in the market, but we expect to be better than where we were in the third quarter. But most of this is marketing-driven change in spending and where it got sense [ph] .

[Andrew Lazar:]

Got you. And then you talked a lot about the category slowdown in a lot of places. But where you calculate your sort of market share, has that generally tracked in line? Or even aside from sort of a category softness, have there been either overall losses or gains in overall share?

[David L. Wenner:]

That's really not an easy answer. We compete in about 30 different categories now. Some were up, some were down. I don't know how to give you an easy answer on that one.

[Andrew Lazar:]

Okay. And then with Rickland, obviously those results are now in-flowing through the P&L. So that's now in your sort of full year EBITDA guidance. But it sounded to me like it wouldn't necessarily be contributing a whole lot from an EBITDA perspective in the fourth quarter. So it's not like that's a real driver one way or the other of full year EBITDA. Is that fair?

[David L. Wenner:]

That's very fair. I mean, we were shutting down a full flown -- full-blown business here. And as just as we said Pirates was going to take till the end of the year to have full effect, Rickland will be faster than Pirates because it's a smaller entity. But at the same time, we won't see a huge benefit in the fourth quarter out of it.

[Andrew Lazar:]

Okay. And then last one for me just would be, as you're hedged, as you talked about going into a large part of next year for the reasons that you stated, is there a worry that others who are, perhaps, either less hedged or don't ascribe to that strategy start to benefit more intensely from potential deflation and are starting to and will continue to flow that through into lower price that you won't necessarily have the benefit of to be able to sort of match that, if we go there, because the volumes have been so weak? That's one of the, I think, overall lingering concerns from a group perspective.

[David L. Wenner:]

I don't think so in our case. I mean, when we look at our spectrum of costs, the commodity part of the costs is actually, if not the smallest, it's certainly one of the close to -- one of the smallest pieces of cost. Our factory costs are just as big, if not a little bigger, than commodity. And packaging is certainly bigger than commodity costs. So you don't have -- in the categories we compete in, you don't have a lot of -- a huge lump of cost, if you will, that you can leverage with cost declines into a significantly lower cost of products. So just as we never saw the huge price increases when commodities went up, I don't expect to see a lot of cost activity beyond what we're seeing now out of those cost declines.

[Operator:]

[Operator Instructions] We'll go next to Robert Moskow with Crédit Suisse.

[Robert Moskow:]

I don't know where the volume went either. So I don't know. But I would like to know for next year, Bob and Dave, like, I guess, you have good visibility into your cost line. I don't remember what kind of guidance you've given already, maybe it's kind of flattish or down. But does your model work okay in terms of EBITDA growth for the base business if, let's say, the year is just kind of a flattish year from a category perspective and commodities are down. I mean, can you grow EBIT in that kind of environment from a base business perspective, do you think?

[David L. Wenner:]

Our base business, generally, EBITDA growth tracks sales growth. We organize the brands and prioritize growth in the brands to try and grow our higher-margin brands. But to the extent that even if we're flat, if we're flat because of growth in higher-margin brands and the declines come in lower-margin brands, you'll obviously have a positive mix shift. But at the end of the day, you're talking that sales and EBITDA trends track pretty closely in the overall business. As we said, we expect the cost to go down next year, but not as high as 1% of sales. It'll be somewhere -- a fraction of 1% of sales. So it's not tremendously consequential from a margin point of view there.

[Robert Moskow:]

Okay. And the negative mix shift you experienced this quarter, is there any reason to think that you can kind of stabilize that next quarter and then next year? Or is that kind of a beginning of a trend as well?

[David L. Wenner:]

No, we don't believe think it's a beginning of a trend. Because as I said, we've put all our efforts behind the higher-margin brands. So it was extremely surprising to see some of our Tier I brands, that are higher-margin brands with a lot of effort put against them, it was very surprising to see them go down at all in the quarter. And to the extent we're successful with our marketing and our new product efforts, we certainly hope that we will not only reverse the trend but stop that decline, but get back on growth pattern.

[Operator:]

[Operator Instructions] It does appear that we have no further questions at this time. I'd like to turn the conference back over to Mr. Wenner for any additional or closing remarks.

[David L. Wenner:]

Thank you. As we said, challenging quarter for the industry and, certainly, for our business as well, but I think we've positioned the business very well to perform in the fourth quarter and perform going forward next year. The acquisitions we've done are certainly going to keep our overall growth pattern going through next year. And to the extent we can stop this pattern of decline in the base business, hold it flat to start growing it, that will just be an added benefit to the incremental growth out of the acquisitions. So we hold true to our model in terms of accretive acquisitions, strong free cash flow and generous dividend payments. Our board -- testimony to that is our board increasing the dividend yet again based on the anticipated benefit from the Rickland Orchards acquisition, and we intend to keep adhering to that model going forward. Thank you for your interest in the company.

[Operator:]

That concludes today's presentation. Thank you for your participation.