SpartanNash Company
Q3 2014 Earnings Call Transcript

Published: 6 Nov 2014

[Operator:]

Good day, and welcome to the SpartanNash Company Third Quarter 2014 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like turn the conference over to Ms. Katie Turner. Ms. Turner, the floor is yours, ma'am

[Katie M. Turner:]

Thank you. Good morning, and welcome to the SpartanNash Company's Third Quarter Fiscal 2014 Earnings Conference Call. By now, everyone should have access to the earnings release for the third quarter ended October 4, 2014. For a copy of the release, please visit the SpartanNash website at www.spartannash.com under For Investors. This call is being recorded and a replay will be available on the company's website for approximately 10 days. Before we begin, we'd like to remind everyone that comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates and projections that might involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that may cause such differences 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 with SpartanNash's forward-looking statements can be found in the company's third quarter earnings release, fiscal annual report on Form 10-K and in the company's other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on any forward-looking statements. SpartanNash disclaims any intention or obligation to update or revise any forward-looking statements. This presentation includes certain non-GAAP financial metrics and comparable period measures to provide investors with useful information about the company's financial performance. These non-GAAP measures include financial terms identified as adjusted and earnings and net long-term debt. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and the other information required by Regulation G is included in the company's earnings release, which was issued after market closed yesterday. And it's now my pleasure to introduce Mr. Dennis Eidson, President and CEO of SpartanNash Company, for opening remarks.

[Dennis Eidson:]

Thanks, Katie. Good morning, and thank you for joining us for our third quarter fiscal '14 earnings conference call. With me this morning are Dave Staples, our Executive Vice President and Chief Financial Officer; as well as some other members of our executive team. Today, I will begin by providing you with a brief overview of our business and highlights of our financial performance for third quarter and Dave will share some additional details of third quarter financial results and our outlook for the remainder of fiscal 2014. Finally, I'll provide some closing remarks, and we'll open up the call and take some questions. Let me start off by saying really how pleased we are with the third quarter results. Our legacy retail division achieved another quarter of positive transfer of sales [indiscernible] last 5 quarters and consolidated earnings again exceeded our expectations as a result of our cost reduction and integration initiatives. Through the merger, we've strengthened our strategic and competitive position, which is allowing us to develop impactful solutions for our existing customers and partners and to secure new business. Our team also continues to successfully work together to complete our integration activities and to position SpartanNash to take advantage of the growth opportunities in our industry. And speaking of our team, I am pleased to announce that we promoted Larry Pierce to the position of Executive Vice President, Merchandising and Marketing. Larry joined SpartanNash in 2008 from Coca Cola, where he served in a variety positions including Vice President of sales for the supermarket, Mass and Convenience channels. Larry's been instrumental in leading the merchandising and marketing team through merger and integration activities and demonstrated his ability to work collaboratively across all functions of our company. We are committed to promoting from within and think we have a great executive team in place as we embark on the next phase of our transformation. Now, reviewing our food distribution segment results, we posted another quarter of significant growth over the prior year period primarily as a result of the sales contributions from the merger. We continue to feel good about how Spartan and Nash Finch are operations are coming together and have been encouraged to see new business gains and opportunities as we are putting significant efforts into filling our sales pipeline. During the quarter, we began rolling out a number of our most successful merchandising programs to the legacy management [ph] customer base. These programs have been instrumental in driving sales in our legacy business and they are well received by customers in markets where they have been introduced today. In addition to these merchandising initiatives, we continue to focus on improving operational efficiencies and are developing and activating solutions for our distribution customers across the network. We've also recently held a number of fresh and center [ph] store food shows for our independent retailers across the entire network, and we're pleased to see the strong attendance and the energy and the commitment displayed by our customer base. These shows were very successful and enabled us to demonstrate our points of differentiation to our partners. And sales in our retail segment were also up significantly in the third quarter due to the merger as well as sales growth due to new and remodeled stores. Outsource sales in our legacy retail operations, excluding fuel [ph], increased 24% from the prior year. We've made meaningful progress in executing our integration plan for the retail segment. During the second quarter, we completed the remodeling and conversion of 3 North Dakota stores acquiring the merger of the Family Fare banner. Additionally, the remaining 3 North Dakota stores were remodeled and converted to the Family Fare banner early this fourth quarter. In fact, the ribbon cuttings for those stores were held just last week and we are very pleased with the [indiscernible] and customer response to our offer. Additionally, we began to roll out some of our merchandising plans to the Western store base and look forward to fiscal year '15 when we can augment these programs with additional store remodels. We're committed to creating both [ph] a shopper experience that embraces locally-grown and produced products. Those that are [indiscernible] commitments to these communities and delivers freshness and value. These merchandising and facility initiatives will definitely enhance the experience of our consumers. Regarding our loyalty analytics, we are moving into additional test categories and we remain on track to roll out the program across all of our categories in the Michigan market in 2015. We continue to leverage our consumer-centric marketing by engagement with our customers, and we'll begin displaying [ph] some of these programs to our Western stores over the course of fiscal '15. We're also beginning to build a more robust shopper marketing platform that will allow us to leverage key channels such as e-mail, social media and digital coupons. On the product side, we continue to drive both retail and food distribution sales through the expansion of our private brand program. During the third quarter, we added approximately 55 net new products and expect to add approximately 300 unit guidance for the full year. At the end of the third quarter, private brand hit [ph] penetration of Michigan retail operations was 23.8%, which continues to place us above the national average. Sales in our military segment exceeded the prior year for the first time this year as we segmented the majority of the impact from the government sequestration and the inventory commissary closures last year. While the commissary system remains challenged, we are more optimistic and hopeful that we will see sales trends closer to the prior year levels as we move forward. We also remain encouraged by the reception we received from customers where we have opportunities to expand our business, and I am pleased to have expanded the number of customers choosing us to be their worldwide partner. Moving on to your capital plan during the third quarter, we completed 2 major remodels and opened 1 new store. Additionally, 1 supermarket was sold to a distribution customer, and 1 underperforming supermarket was closed. This brings our store count to 165 supermarkets and 30 fuel centers at the end of the quarter. During the fourth quarter, we plan to complete 3 major remodels and [indiscernible] and close 2 stores as part of the ongoing evaluation of our store base. We are also continuing construction on 1 new store that is scheduled to open in North Dakota in early 2015. With that overview, I'll turn the call over to Dave for more details on the financials and an outlook for the remainder of fiscal '14.

[David M. Staples:]

Thank you, Dennis, and good morning, everyone. Before I start, in the third quarter of fiscal 2014, the company established post-merger methodologies to the allocation of profit and corporate level expenses between its food distribution, retail and military reporting segment to better reflect Spartan stores' and the Nash Finch Company's merged operation. There is no impact to our consolidated financial results, but the segment -- but the operating segment results for the first and second quarters of fiscal 2014 and all quarters in fiscal year 2013 have been revised to reflect the new allocation methodologies. A recap of the effects of the restatement of segment results for previous quarter will be included in our third quarter Form 10-Q filing. Consolidated net sales for the third quarter increased 187.2% to $1.81 billion compared to $630.1 million in the year ago quarter. The increase is primarily due to $1.2 billion in sales from the merger with Nash Finch. Consolidated gross profit margin for the third quarter was 14.4% compared to 20.7% in the prior year and primarily reflects the change in segment mix due to the merger and the impact of higher LIFO expense and continued low center store inflation. Third quarter operating expenses would have been $227.7 million, or 12.6% of net sales compared to $113.5 million, or 18% of net sales last year if the charge related to merger, integration and restructuring were excluded in both periods. On an absolute basis, the increase was due to the inclusion of the Nash Finch operations partially offset by our work on cost control and synergy realization. The decrease in rate was due primarily to the change in the segment sales mix as a result of the merger and the previously noted cost containment and synergy realization efforts. These results exclude $1.4 million in expenses related to merger integration and $1.3 million in restructuring gained in the current year's third quarter and $4.6 million in the expenses related to merger in the prior year third quarter. Adjusted EBITDA for the third quarter increased 103.6% to $55.9 million, or 3.1% of net sales compared to $270.5 million or 4.4% of net sales last year. Adjusted earnings from continuing operations for the third quarter was $17.2 million or $0.46 per diluted share on approximately 37.8 million shares outstanding compared to $9.3 million or $0.43 per diluted share on approximately 22 million shares outstanding last year. These results exclude expenses related to the merger of $0.03 per diluted share, offset by net asset impairment restructuring gains for store closures of $0.02 per diluted share. For the prior year, third quarter, adjusted earnings from continuing operations exclude expenses related to the merger of $0.14 per diluted share and a tax benefit of $0.01 per diluted share related to the favorable settlement of an unrecognized tax liability established in the prior year. These better-than-anticipated results were driven by our continued expense control efforts and exceeded our merger synergy realization expectations partially offset by incremental LIFO expense and lower inflation-related gains. Turning to our operating segments. Third quarter net sales for the food distribution segment were $764.3 million compared to $270.2 million in the year-ago quarter. The increase in sales is primarily due to $493.5 million sales from the merger with Nash Finch. Third quarter operating earnings for the food distribution segment increased 153.5% to $15.2 million when adjusted to exclude $1.4 million in expenses related to the merger integration versus $6 million last year excluding $4.6 million in merger expenses. The gain from the sales volume of Nash Finch's food distribution operations were partially offset by $800,000 in higher LIFO expense and lower inflation-related gains. In our retail segment, third quarter net sales were $521.7 million compared to $359.9 million last year. The increase in sales was due to $179.2 million sales from Nash Finch and a 0.4% increase in comparable store sales excluding fuel. These gains were partially offset by $19.5 million in fewer sales due to store closures and lower retail fuel prices compared to the prior year. Retail segment operating earnings for the quarter increased 16.8% to $12.9 million when adjusted to exclude $1.3 million in asset impairment and restructuring gains versus $11 million last year. Improvement in adjusted operating earnings was due primarily to the positive effect of the store closures as well as favorable expenses due to merger synergies. In our military segment, third quarter net sales of $523.6 million and operating earnings were $5.7 million including 400,000 in LIFO expense. From a capital perspective, our current year-to-date period operating cash flow was $117.4 million compared to $56.1 million for the comparable period last year. The increase was the result of contributions from the merger and favorable expense reductions. As a result of our strong cash flow generation, during the third quarter, we repurchased 121,000 shares of our common stock for a total of approximately $2.5 million. As of the end of the third quarter, we had $23.8 million available to share repurchases under our $50 million repurchase program. Total net long-term debt was $548.8 million as of October 4, 2014, versus $146.9 million at the end of the third quarter last year due to the incurrence of $436.1 million in debt as a result of the merger. Net long-term debt decreased $47.6 million from $596.4 million at December 28, 2013 as a result of strong cash flow driven by the summer sales season. [Indiscernible] to say to the debt balance will increase slightly through year end due to the increased funding for holiday inventory requirements. We remain committed to reducing our leverage towards the 2x multiple of our EBITDA. With $372.6 million of availability under our credit facility as of October 4, 2014, our capital structure comfortably supports our continued growth initiatives, including potential acquisitions. I will now provide further detail on our outlook for the remainder of fiscal 2014. Based on our strong third quarter performance and expectations for the remainder of the year, we are maintaining our full year sales guidance, but are raising our earnings guidance for fiscal 2014. Although the economic environment in our markets remains challenging for those receiving SNAP benefits, on average it appears to stabilize. We continue to anticipate cost pressure associated with the minimum wage increase in Michigan and Minnesota, as previously discussed, but continue to believe that our favorable expenses and merger synergies will more than offset this increase. For the 13-week fourth quarter, we expect the net earnings from continuing operations per diluted share will be in the range of $0.34, $0.44 per diluted share, excluding merger integration costs and other one-time expenses. For comparative purposes, similarly adjusted earnings per diluted share were $0.31 in the comparable 11-week fourth quarter fiscal 2013, recap to the company's new fiscal year format and with approximately 7.6 million less in weighted average shares outstanding. On a full year basis, we continue to expect fiscal 2014 consolidated net sales to increase to between $7.9 billion to $8.04 billion, but we are tightening the range of adjusted EBITDA to $232 million to $239 million, and we are raising the range with adjusted earnings per share from continuing operations to approximately $1.75 to $1.80 excluding integration costs and other one-time expenses. We expect the capital expenditure for fiscal year 2014 will continue to be in the range of $77 million to $82 million, net of anticipated sale leaseback proceeds related to in-store [ph] location, with depreciation and amortization now in the range $87 million to $89 million and total interest expense still in the range of $24 million to $25 million. This concludes our financial discussion, and I will now turn the call back to Dennis for his closing remarks. Dennis?

[Dennis Eidson:]

Thank you, Dave. In the summary, we're really pleased with the solid execution of both our operating plan and the integration activities that are encouraged by our positive comp store sales trends. As we look to the remainder of '14, we remain focused on furthering our integration activities and positioning the company to realize the long-term opportunities for growth in our retail distribution and military segments. During the fourth quarter, we plan to continue introducing new merchandising, pricing and promotional programs to stores acquired in the merger with Nash Finch and will continue to enhance our efficiencies and expand our full [ph] distribution programs and services for our entire distribution network. Additionally, we'll continue to position the company to engage its strategy of being a participant in the further consolidation of the industry and believe that our strong capital resources and disciplined management will enable us to execute this strategy, increasing our sales and cash flow thereby creating a significant value for our customers and our shareholders. With that, we will open up the call for any questions.

[Operator:]

[Operator Instructions] The first question we have comes from Chuck Cerankosky of Northcoast research.

[Charles Edward Cerankosky:]

Dennis, could you discuss a little bit some of the sales building strategies you will be going after the next 12 to 24 months, especially in SpartanNash's retail and grocery wholesaling operations?

[Dennis Eidson:]

Sure. Well, I would take on the retail side first. First of all, we're pretty encouraged. We had another positive comp sales quarter. I know the number wasn't spectacular in terms of signs of 0.4, but we're feeling a little better. Q4 has clearly started better. Actually, the first 4 weeks, we're at about a 1.5% comp rate in our legacy Michigan business, but I do want to remind everybody. At end of this fourth quarter, I think, in the last 2 weeks we're going to have legacy Nash comps coming into the reportable comps for Q4. So there will be some mitigation of what's going on with comps. And so we're feeling a little bit better. I think the consumer maybe is feeling a little bit better notwithstanding with the food stamp customer, I think is really challenged. I think the more advanced prices more recently feels like there's been a correlation to being able to drive some top line sales at retail across the network. We continue to feel very bullish about the work we're doing around direct consumer marketing and the new tool we have in place, [indiscernible], to help us better understand some of the details of what drives consumers to make decisions on purchasing certain skews. I think it's going to help us not only with assortment but also replacement, and it really has a pretty big tail on it because it has also benefits to the distribution segment as well. So we're feeling good there. And the legacy Nash retail, I would -- we talked about this since we did merger, probably, better capitalized, would be a fair term for that business. And so we're deploying some capital back in those stores. We've done a lot of work in North Dakota; Moorhead, Minnesota, we kind of consider part of the [indiscernible] market. We have 6 stores in that market. We remodeled them extensively. In the last couple of quarters, we've re-bannered them to Family Fare. We relaunched them, and we're really encouraged by the early results. So I think that's a little bit of a template you can expect us to see use going across the Nash Finch portfolio of legacy retail. I think there are plenty of opportunities there. And you can't do that all in 1 year. It's going to take some time. But some of the assortment work and even reflowing stores before we re-banner them, is going to pay dividend. So we see upside there as well. Turning to the distribution segment, we had the opportunity to spend quality time with most, if not all, of our large independent customers and even some of the balance [ph] and we've been communicating around how we would like to go-to-market as SpartanNash as a little bit more of a virtual chain approach. And that doesn't mean we are going to have 2,000 stores doing everything exactly the same way. But it does mean that I think there's consensus among the group. [Indiscernible] leverage the $8 billion of revenue that we have [indiscernible] with the supplier community, our partner retailers to drive a better value to the end consumer than we've historically been able to drive with 2 smaller companies. And so I think there's real gold in that mine, and on top of that, I will tell you that the business we make to independent retailers across the geography that we're in that are supplied by other wholesalers have been well [ph] received and we continue to feel bullish about being able to fill our sales pipeline that way as well.

[Charles Edward Cerankosky:]

If you look at CapEx for next year, any thoughts on how it will compare to the dollars this year and the number of projects?

[David M. Staples:]

It will be pretty much in line, Chuck.

[Charles Edward Cerankosky:]

So flattish sort of element program?

[David M. Staples:]

Yes, I mean, so we have a -- so if you are talking -- are you talking about new stores?

[Charles Edward Cerankosky:]

Well, the CapEx program both in terms of dollars and where it impacts across the segments, but the number of stores involved new, remodeled, re-lo's?

[David M. Staples:]

Yes, I think if you look at the capital plan, the total dollars will be relatively consistent, the allocation will be relatively consistent and I would say the remodels will be relatively consistent.

[Charles Edward Cerankosky:]

Okay. And then, finally, Dave, anything to talk about regarding a share repurchase policy at Spartan since you nibbled at that a little bit in the most recent quarter?

[David M. Staples:]

Yes. I mean, as you know, we had share repurchase. This program has been in place for a number of years now and has a couple of years left on it. I think we'll -- we've always been somewhat opportunistic at share repurchase, and I think we try to manage dilution somewhat with share repurchase. As we said, typically our priorities are growth and are continuing to position the balance sheet in the right position to allow us to continue to further our growth. And so share repurchase will be a small component, probably, of our ongoing capital strategy.

[Operator:]

Next we have Mark Wiltamuth of Jefferies.

[Mark Wiltamuth:]

I wanted to get some feedback on how far through the synergy totals do you think you are and how many years out you think that extends and then how that's going to flow into the different segments. It seems like it will be a little more focused on distribution and retail, but maybe not so much on the military side, a little color there.

[Dennis Eidson:]

Yes, we -- [indiscernible] early that these synergies were $52 million and we anticipated that we'd get those in a 3-year period. We do believe that the number is going to be greater than $52 million. We also, in terms of pace, had identified year 1 of being around $20 million. We will clearly beat the $20 million synergy target this year. And the assumption, with regard to synergies by segment, right, there's virtually almost none, Dave, in the military. If there is -- De minimis, if there is any. So it is -- it's spread between the retail and distribution segments.

[Mark Wiltamuth:]

Okay, and what areas are you finding that you're doing better than expected?

[David M. Staples:]

Well, there's probably a number of that areas, but I think probably the biggest by far would be just in our ability to combine programs, whether that be product procurement, nonproduct procurement, services and really just realize pretty substantial benefits out of that. And so it's not just any 1 area, but it, really, when it to comes to the combination of the different services and products that we buy, I think that is really has been a real plus for us, and that ranges from benefits to product to services. And I would say that, by far, has been maybe a little bit more beneficial than we thought.

[Dennis Eidson:]

I think personnel costs have been a little better than we thought. And I just want to pause to say we're putting together these 2 companies and it's not easy. Any merger is not easy, but our associate base has taken the challenge head on. And we're asking people to do more than I have a right to ask them to do, because sometimes we have some people leaving spots, but we're asking people to do 2 jobs. And I'll tell you what, I couldn't be more proud with the effort that the associates of SpartanNash have put forward as we hope to get close to the 1 year anniversary of the merger, which is November 19.

[Mark Wiltamuth:]

Okay, as we're looking forward into that retail segment, should we be thinking about a negative comp for the fourth quarter and into the next year as the Nash Finch operations start to show up there in the comps?

[Dennis Eidson:]

You should not be speaking about a negative comp in the fourth quarter. The legacy Nash Finch now will fold in, I think, only 2 weeks, that last 2 weeks in the quarter.

[David M. Staples:]

And one of which is the 53rd week.

[Dennis Eidson:]

And one is the 53rd week. So we have [indiscernible], right? We're going to be challenged with reporting on a 53rd week, but it will not go negative in Q4. Q1, I think I would rather, Mark, let us kind of get through Q4. We will give you some guidance at the end of fourth quarter where we think comps are heading next year.

[Operator:]

The next question we have comes from Scott Mushkin of Wolfe Research.

[Brian Cullinane:]

This is actually Brain on for Scott. Just I wanted to start on the -- I mean, you said 2 store closures in this fourth quarter coming up and as it's part of like an ongoing review. I just wanted to see how far along you guys were in that process as you kind of keep looking at the stores and where you're set up.

[David M. Staples:]

Well, I think we're pretty far along. I think we have a pretty clear view of where we want to go with that. And so this will run about the current year, and then I think you will see a few more next year and then, I think, that really, what I would call, finalizes our plans as we finalize our plans for all of the retail division. And so next year, you're going to see continued investment and remodel effort in that retail group along with the reflows and resets that Dennis talked about. You're going to see a lot of the positives going in, and then there will still be a few more closures, but a lot more of the beneficial aspects will be going in as well.

[Brian Cullinane:]

So as you kind of turn the page and become kind of a net new store builder rather than shutting, is that right?

[David M. Staples:]

Well, not into next year.

[Brian Cullinane:]

Not next year, but as you move after that, yes, okay. And then, I just wanted to touch -- I know the price of gas, you talked about how it helps -- you've seen some help from the consumer as the price of gas falls. Can you remind us how it helps your distribution business, the fuel surcharges, how the lags work there within how it helps -- the falling price of gas?

[David M. Staples:]

We work on a fuel surcharge basis with our independent customers in the same program we have with our retail stores. So as the cost of diesel fuel comes down, we reduce the fuel surcharge, which, of course, financially reduces their cost of goods delivered and there's potentially a little bit of a margin benefit on the retail side.

[Operator:]

[Operator Instructions] Next we have Karen Short of Deutsche Bank.

[Karen F. Short:]

I have couple of questions on your comps. You've, in the past, kind of given some color on D&W comps. I'm wondering if you could give some color on how they were comping this quarter. And then you also gave some color on the acceleration that you saw into the fourth quarter. I'm wondering how D&W kind of -- if they followed the same trend by the same order of magnitude, et cetera, into the fourth quarter?

[Dennis Eidson:]

D&W continues to be the best comping brand that we have, and we were .4 [ph] in the quarter. D&W was positive 1.7. We don't always get the raw number. That was the number. Once Michigan -- we have digested -- we have 4 non-cycle Walmart supercenters in the market, which is part of the reason why we fell a little softer here on the comp. We talked about that last quarter. D&W, as we look forward, I would suggest will continue to be the best comping brand that we have.

[Karen F. Short:]

Okay. So but I guess what I am wondering is with lower gas prices, obviously that's benefited and contributed to the acceleration in the fourth quarter. Is D&W even more levered to and even greater benefits from that or less?

[Dennis Eidson:]

I think less. Karen, we run a lot of aggressive fuel promotions and we monitor those results. And in fact, last week, we ran if you spend $100, we'll let you fill your tank for $1.99 a gallon. And we have some technology that enables us to do that, lots of competitors can't do. And if we're very successful, [indiscernible] D&W seems less responsive to the gas promotions than the core middle consumer does. They still respond. I don't want you to misinterpret my remark, but not quite as strongly.

[Karen F. Short:]

Okay, and obviously that -- your comment on gas promotions, just curious what gas margins were looking like in the quarter and if that was a benefit. Obviously, with prices coming down, I would have thought there would have been a benefit.

[Dennis Eidson:]

Gas margins in the quarter were a little bit better in margin per gallon. I think we're about $0.025 and cents per gallon margin...

[Karen F. Short:]

Year-over-year?

[Dennis Eidson:]

Year-over-year, yes. Quarter-over-quarter, right. Year-over-year, quarter 3 a year ago.

[Karen F. Short:]

Got it, okay. And then, I guess just bigger picture. I know when the merger was initially announced, we talked just loosely about some of the opportunities you thought you could have with the military, like logistics side of the equation just in terms of expanding product offering in customer base, like I think even potentially tobacco distribution came up. I am just wondering if there is an update on that.

[Dennis Eidson:]

Yes, we touched on it a little bit here in the remarks this morning. We're continuing to work hard on that business. The [indiscernible] business continues to be negative. Now the third quarter, I don't have [indiscernible] numbers for Q3, but we cycled all of the bulk of the sequestration [ph], the one we closed [ph] domestic commissary, so the comp is going to be positive for that, hence [indiscernible] in the third quarter compared to the legacy [indiscernible] business a year ago. It's been challenging I think for the whole system to kind of reboot after that sequestration a year ago. We think that we're going to see some better numbers, although we've got all of that behind us and we've anniversary-ed. We're getting good reception from suppliers around MDV and our relationship with Coastal Pacific in our worldwide partnership network. I think in the third quarter, we added 5 to 10 worldwide customers to the network. So what I mean by that is, they signed up between us and Coastal and the only -- we're the only distributors that deliver their product to any U.S. commissary in the world. And so, like I said, we had somewhere between 5 and 10 new partners in Q3. We've got -- there were 50 partners of that nature across the whole enterprise, including some really familiar names like [indiscernible] and Diamond Foods and [indiscernible] and P&G, which is the biggest. We think, strategically, we're in good stock [ph] with the model and the business strategy there.

[Operator:]

Next we have a follow-up from Chuck Cerankosky of Northcoast Research.

[Charles Edward Cerankosky:]

Dennis, any new retail channels that you are about to enter that you could talk about or new product lines to better leverage your distribution capabilities?

[Dennis Eidson:]

I would say there's nothing that I am prepared to discuss.

[Operator:]

Well, at this time, we are showing no further questions. We're going to conclude our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

[Dennis Eidson:]

I'd like to thank everybody for their participation today, thank all our associates again for their hard work and our valued consumers, independent retailers, suppliers and shareholders for their continued support. That concludes our third quarter conference call, and we look forward to speaking with all of you again at the end of next quarter. Thank you.

[Operator:]

And we thank you, sir, and to the rest of the management team for your time today. The conference call is now concluded. At this time, you may disconnect your lines. Thank you and have a great day, everyone.