Earnings Call: Q2 2014

May 5, 2014

Day, and welcome to the Scotts Miracle Gro Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Jim King. Please go ahead, sir. Thanks, Carrie, and good afternoon, everyone. Welcome to our Q2 call for fiscal 2014. With me here in Ohio are Jim Hagedorn, our Chairman and CEO Barry Sanders, our President and Chief Operating Officer Randy Coleman, our recently named CFO and several other members of the management team. We appreciate everybody adjusting their schedule for today's call. You might recall that we've released Q2 earnings after the market for the last few years now. The National Harbor Show is held right after this event and several members of our team are leaving to attend that. So we appreciate your flexibility. Given the hour, we're going to try to keep our comments concise today. When we get to the Q and A section, I'd ask that you have just one question and one brief follow-up. I've got follow-up calls scheduled with many of you well into the evening and will be available tomorrow as well to answer your questions if don't get to them in the time allotted for this call. So with that, let's get to the business at hand. As always, I want to remind you that our comments today will contain forward looking statements and so our actual results could differ materially from what we discuss. We encourage investors to familiarize themselves with our risk factors that can impact our business. Those could be found in our Form 10 ks, which is filed with the SEC. Finally, as a reminder, this call is being recorded and an archived version of the call will be remain available on the Investor Relations section of our website, investor. Scotts dotcom. With that, let me turn the call over to Jim Hagedorn to get us started. Thanks, Jim. Good morning, everyone. I'm going to be brief with my comments and keep things at a pretty high level. Then I'll turn it over to both Barry and Randy to get the details to you guys. As you can see from the press release, we had a great result in the Q2 as our retail partners in the United States took an aggressive stance in getting ready for the season and our European business got off to a great start. Gross margins exceeded our expectations and we continue to do a good job of managing expenses. I normally don't like to talk about the consensus, but the fact that our Q2 results were nearly $0.20 better than what Wall Street expected might cause some of you to take your numbers higher. Not so fast. There's no doubt that our retailers were in better shape entering the season than I can recall in a long time. However, consumers were understandably slow to get out of the gate due to an extremely long and harsh winter. As most of you know, there was snow in much of the Midwest and Northeast all the way through the 2nd week of April. So for us to have negative POS in March after last year's record poor weather is the last thing I ever would have predicted, but that's what happened. On a real time basis through yesterday, POS is still slightly down to last year after including the impact of acquisitions. The good news is now that the weather is broken, the consumer has been engaged. Our retail partners are also still engaged. So while there are some tweaks to our forecasted P and L, we feel that we have good control of the business. Our adjusted EPS guidance of $3.05 to $3.20 remains our best estimate to where we'll finish the year. I'm going to let my colleagues focus on the results and our outlook for the year. I want to spend my time updating you on the steps we've taken to position the organization for some of the long term opportunities we outlined in December. I also want to update you on where we stand in relation to our commitment to focus on shareholder friendly actions. When we met with you back in December, the theme of our Analyst Day event was pretty straightforward. Given the current environment, we'll continue to plan for growth in the existing consumer portfolio of 1% to 2%. We'll supplement that growth with acquisitions like Tomcat we also see incremental growth opportunities in areas like urban gardening, indoor gardening and organic products. We also also continue to see nice opportunities in Scotts Lawn Service. In addition to properly stewarding our existing brands, we also have to properly invest in these higher growing businesses. The goal is to make these investments without impacting the P and L. Do that, our leadership team has been developing a plan to redeploy assets and resources in an effort that we will likely be going through for the balance of the year. We know we're going to take some charges this year to make that happen. This quarter, we took a $4,000,000 restructuring charge related to some of those changes. By the end of the year, we expect that number to increase to about $20,000,000 Because of the approach we're taking, we consider this a one time initiative and we're excluding those charges from our adjusted EPS. The steps we've taken so far to begin that process of both streamlining and strengthening the leadership ranks of the organization. I believe we've greatly improved our probability for success as a result. Following the departure of Jim Liske in late January, we gave some expanded duties to Mike Lukemire. We've now taken Mike's role one step further as he's been tasked with overseeing the entire North American business. Mike came here about 15 years ago to run our Marysville manufacturing facility. He eventually ran supply chain, oversaw our R and D, our IT department and eventually was named President of our South Region in Palm Beach. His new role is one that I've had myself and I'm confident that he's well prepared. Mike says what I would expect from a leader. He immerses himself in the business. He understands the key issues and then he works with his people to help him succeed. When he first moved into sales, he visited practically every store in his region, met with almost every associate and quickly had a firm grasp on this side of the business. So I have enormous confidence that Mike will run North America in a way that allows us to be more efficient, more consumer focused, more responsive to our retail partners and therefore more profitable and predictable. The other benefit of giving Mike this expanded role is it allows Barry to change his role as well. Since he's taken over as Chief Operator, Barry has done an outstanding job improving our processes, our visibility into the business and alignment around what needs to be done. Our Our ability to over deliver on our numbers last year despite the extremely slow start was a testament to the groundwork that Berry had laid. While Mike will report to Berry, the structure now allows Berry to spend significantly more time working on all of the emerging channels. Our urban, indoor, organic, biotech and services business will report to Berry. So will strategic planning, M and A and international. There are 2 other structural changes we made in the quarter that deserve your attention. The first is in Scotts Lawn Service. Mark Wilhelmi is a name that most of you probably don't know, but he's been the Head of Operations at Lawn Service for 7 years and has a 40 year track record at Scotts. Mark has been an unsung hero in this business, but has played an enormous role in the successful turnaround of Scotts Lawn Service. A month ago, we named Mark President of this business. At the same time, we moved Jim Jimison from our Miracle Gro business to SLS. Jim has a proven history in leading field based organizations as well. His move to SLS gives us long term stability and a natural succession plan as Mark prepares for retirement. I want to provide some context about the changes at SLS. I want to stress that nothing at SLS is broken and you've been hearing me praise that team for years. In fact, we made these changes because we're so confident in the future potential of this business that we wanted to make sure we this business. The leadership changes we made in SLS, I believe, will increase the probability that we execute the vision of this business in a way that enhances shareholder value. The other obvious change we've made is by naming Randy CFO. As many of you know, Randy was a candidate for the job when we made the decision to go outside and hire Larry. That decision was never about Randy. Given the direction we're heading, my entire team as well as the Board believe we needed someone in this role who like to get his hands dirty and already had a deep understanding of the business. As we've evolved over the past year, we realized that we had created a structure that resulted in a corporate CFO, Larry and an operating CFO, Randy. It became clear that this was not a sustainable path, especially as we're looking to get leaner and redeploy assets. So we made a change. And if there's someone in the organization who likes to get his hands dirty, it's Randy. So much so that we will not backfill his previous role because he'll bring a lot of that responsibility with him the CFO's office. Many of you met Randy in the past and I know he's looking forward to getting engaged with our shareholders. He's a good addition to my team and our shareholders should be pleased. As I think you'll hear from him, Randy and I are aligned about what we need to do to manage for growth and create the type of long term shareholder value that I believe is achievable. And so that brings me to my final point, which is an update on our thoughts on uses of cash. Nothing's changed, but we are getting closer to the timeframe we announced previously regarding returning cash to shareholders. Our operating cash flow guidance for the year was $275,000,000 Our leverage ratio right now is 1.8 times and we've expressed a willingness to take our pro form a leverage as high as 2.5 times by the end of the fiscal year. When I exclude capital projects, Tomcat acquisition, shares we've repurchased throughout the year and the recurring dividend that leaves us with roughly $125,000,000 to $150,000,000 or about $2.50 per share available to us if the year comes together as planned. Later this summer, most likely in August, we'll make a decision about returning cash to shareholders. Numbers this year, we'd probably reevaluate how aggressively we'd attack this. This business has historically generated a lot of cash. Deploying that cash with discipline, combining it with reasonable assumptions for the core business as well as having confidence in the emerging I'm pleased with the overall picture that's taking shape here. We're taking a reasonable approach to the existing portfolio. We're investing for the upside where we believe it exists. We're focused on emerging areas that we believe has strong growth potential and we're using our capital structure in order to meet near term and long term needs of the business, while also sending cash to shareholders. So in my view, we're executing well against all the things that are in our 2nd quarter results and our view of the rest of the year. So at this point, let's switch gears. I'm going to turn things over to Barry to talk about the state of the business and then Randy will look at the numbers. Barry? Thanks, Jim, and hello, everyone. I agree with what Jim said. Our Q2 results were extremely strong and our retail partners have been supportive in both the U. S. And in Europe. If you exclude the Easter weekend, we have had a series of weeks in which consumer purchases were well above 100,000,000 and we had solid momentum as we enter the peak weeks of the gardening season in May. In the U. S, we have seen increased consumer purchases of lawn fertilizer, grass seed, spreaders and mulch. We've seen slight declines in plant food and soil and we've seen a larger decline in controls where the weather delay has been the most pronounced down. As you might expect, consumer purchases in our North down. As you might expect, consumer purchases in our North region have been the slowest to take off, but all of our markets are now in full swing. Across the board, the level of support we have seen from our retail partners is outstanding. Some channels have done better than others, but they have all been highly engaged. More importantly, they remain committed despite the fact that weather has caused us to have a late break to the season. In terms of specific product categories, we are pleased so far with the retailer support and consumer support for our new Roundup 365 product. The product not only kills weeds, but provides a residual benefit for a year. This means the consumer can apply just once a season and not have to deal with the problem until next year. In our Gardening business, we've seen a strong start to our Growables product line. For those of you who are unaware of it, the product is a compostable pot about 2 inches long. It contains soil, plant food and seed such as a tomato, green beans or a variety of other herbs and vegetables. All a consumer has to do is stick the pot into the ground, water it and then wait for it to grow. This product is still in its infancy stages and is a classic case of investing for the long term. If margin were the sole test for Growables, it would have never been launched. But with the long term vision of selling tens of millions of units a year and with the expectation that this product will be an entry point for new consumers, we are bullish what Globals can mean for the category and over the long term. So far this year, we've had almost a 50% sell through nationwide entering May. This is not only this not only has proven to be a great impulse buy at retail, but has been very strong online as well. E commerce consumers have been highly active both in making purchases and writing positive online reviews. Our natural and organic tests are also going well. We have seen the segment of the soils category outperform the rest of the business entering May. As you've heard us say repeatedly, we believe this business can be a significant one for us. This year, we are testing 2 different organic products under the Grow brand and one of them will receive nationwide support next year. Finally, in lawn fertilizer, we've seen some strong results, especially in the South. In that region, our most popular product, BoneAssess, is up 5% on a year to date basis. Recall that in two markets in Florida, we are currently testing a new formulation of Bone S S. This product has a new and better active ingredient that will result in a much better consumer outcome with a better environmental profile. In these markets POS of bonuses up double digits on average and retailer support remains strong. In the West, bonus S is up 18% bringing total bonus S up 11 percent. This gives us a great deal of confidence as we prepare to launch the new bonusess product in all the appropriate markets for 20 15. Let me move on to Europe. In our largest three markets, France, the U. K. And Germany, we have seen strong sales increases and the overall business has grown by more than 10% year to date. By category, we have grown across the board with the at the outcome so far. We still have a ways to go to get the business back to its historic levels of profitability, but we should beat our planned operating income targets this year and we will be well positioned as we prepare for the next year. As you might expect, Scotts Lawn Service is trailing our expectations right now as the weather has been a big impediment in many northern markets. While SLS has been enjoying some momentum in recent weeks, it is unclear whether they will make up the revenue weakness from Q2. However, the business has good contingency plans in place and I'm confident they will be able to hit their profit targets for the year. Many of you recall that a year ago, I was frequently using the phrase success equals predictability. We are in the lawn and garden business and things happen beyond our control. Like Jim, did I think that there was any chance that this March could be worse than last March? Not on your life, but it was and so we now move on. The good news is that the consumer trends we're seeing right now are positive. And just like last year, we have done some contingency planning in advance of the season in case we saw issues arise. So that phrase success equals predictability still applies to our team here even when outside forces get in the way of our results. This is why I'm confident that we will continue to see strong consumer response and retailer support through the rest of the season. And that is why I believe that the guidance range we outlined entering this season remains achievable. To be more specific about that, let me turn the call over to Randy. Thanks, Barry, and hello, everyone. I want to start by saying that I'm excited to be sitting here talking to you today. I appreciate the trust that Jim, my peers and the Board have placed in me and it's responsibility that I take seriously. For most of my career here, I view the operators of our business as my clients. But today, that's changed. As a CFO, I view our shareholders as my primary clients. And I'm focused on doing everything I can do to make sure we're executing a financial strategy that balances the short term needs of the business with the ultimate goal of creating long term value for all of our shareholders. I want to be respectful of everyone's time given the hour. But before I jump into the numbers, I want to spend a few minutes sharing a little bit about my background and my approach. I've been at Scotts Miracle Gro for 15 years now. I've led the operating finance group for the last 7 years, had a series of other finance leadership roles before that. Most recently, in addition to leading operating finance, I had responsibility for leading and shaping our analytics group. You've heard us talk about our efforts to better understand the data around our business. I'm glad to have been a key driver behind this effort. I can tell you that our use of data has made us a smarter and better informed company than we were just a year or 2 ago. In terms of my approach, you won't see or hear much different out of me than you did from my predecessors, especially Dave Evans, who I worked for directly during much of my career at Scotts. Dave and I saw the world in much the same way. You'll see me operate with the following 5 core principles. First, regarding short term growth, we need to establish reasonable expectations. I believe we can grow, but I agree with assessment that low single digit growth is our near term reality. So I don't want to spend money and sacrifice profit by chasing growth that isn't there. 2nd, regarding long term growth, we must maintain appropriate focus on the long term potential of our business. We must balance our plans for near term profitability with necessary investments in our brands and innovation pipeline, that we can achieve our long term upside. 3rd, a sound capital structure is critical. We don't need to swing for the fences to drive shareholder value. The combination of modest levels of growth and a smart and consistent capital allocation strategy will allow us to continue to deliver solid and consistent returns for our shareholders. 4th, I believe in frequent and transparent communication. You'll see Jim King and me out on the road a lot to meet with our resonate with our investors before we make them. Resonate with our investors before we make them. And 5th, I will be a hands on CFO, because I believe this is the only way to accomplish the first four principles I outlined. I'm a roll up your sleeves kind of guy and like my boss, I'm a straight shooter. I'm not a micromanager, but I do want to understand the details and nuances of our business. I've been here long enough to have a good head start in the CFO role and I'm fortunate be surrounded by exceptionally smart and experienced people who I know are dedicated to helping me succeed. Importantly, Jim Hagedorn and I are aligned on these five principles and this alignment was crucial to both Jim and me when we talked about me moving into this role. Ultimately, my success, Jim's success, the company's success and increasing shareholder value are all linked together. So enough about me. Let's talk about the business. I'm going to run through the numbers quickly, then I want to share some thoughts about our outlook for the year. Let's start with the top line where we had a solid 7% improvement in the quarter. That gives us a 6% increase through the first half of the year. The entire increase was driven by our Global Consumer segment, which was up 9% in the quarter and 7% year to date. Within this segment, we saw a 9% quarterly increase in the U. S. Driven by the acquisition of Tomcat, some pricing decisions we made entering the year and finally strong sell in getting the retailers ready for the season. The increase outside the U. S. Was 5% or 3% when you exclude the impact of foreign exchange. The season in Europe got off to a strong and early start, especially in the UK, where good weather contributed to a 6% year to date sales increase versus a year ago, excluding FX. Scotts' lawn service was down 12% in the quarter. This business had a tough start in many parts of the country due to same weather challenges facing our U. S. Consumer business, but the team is focused on making up ground quickly and remain bullish on the year. Corporate and other was down by 50% in the quarter. Recall that sales in this line are related to a supply agreement linked to the sale of our professional business from a couple of years ago. This is effectively a 0 margin business for us, so our margin rate improved slightly as our sales here declined. One point I want to make sure you understand, all of these numbers exclude our wild bird food business. As most of you probably have read, we sold the business in a series of transactions over the past 2 months. While we have budgeted for about $35,000,000 in sales from this business, exclusion of these numbers will not affect our earnings guidance as this business generated little profit. Within the next few weeks, we will file a separate 8 ks that will show 5 years of data excluding the Wild Birds business. The 10 Q filing will also contain quarterly information for the past 2 years. This should help you adjust your models, but if you have any questions, please give Jim Cain a call. Moving to gross margin, I'm really pleased with the improvement we're seeing here. We've been saying for 2 years that we're focused on driving this rate higher and we continue to see traction from our efforts. The rate improved 270 basis points in the quarter and were now 2.90 basis points better year to date. The big drivers of the rate improvement in the quarter year to date were product cost out initiatives launched in the second half of last year, targeted price in our U. S. Business and increased sales volume associated with the strong early season sell in, which drove favorable product mix and improved leverage on our fixed costs. We continue to do a good job with SG and A as well. The 3% increase is in line with the guidance we provided. Most of the increase is related to higher planned advertising expense for the full year, which we've talked about numerous times in the past. Company wide reported operating income in the quarter was 2 $17,000,000 compared with $172,000,000 a year ago. Year to date, we're at $127,000,000 versus $80,000,000 a year ago. By segment, global consumer operating income was up 23% in the quarter and 35% year to date. For SLS, the operating loss increased 3,000,000 dollars in the quarter to $20,000,000 and remained flat on a year to date basis. Interest expense was nearly $6,000,000 lower both for the quarter year to date due to lower average interest rate and lower borrowings. And on the bottom line, adjusted net income was $136,700,000 or 2.17 dollars per share for the quarter compared with $99,300,000 or $1.59 per share a year ago. Year to date, adjusted net income was up 130 percent $71,100,000 or $1.13 per share. I want to point out that the numbers in the quarter exclude $6,000,000 of costs categorized as impairment, restructuring and other. As Jim said, dollars 4,000,000 of that is related to severance costs. With that said, let me now transition into an update on our guidance. As Jim already pointed out, we're reaffirming our original earnings guidance for the year. Given the poor early weather and slower than expected POS, we ended Q2 with retail inventory levels that were higher than we planned. This situation has corrected itself since the end of March and retail inventory levels today are only slightly higher than a year ago. As in most years, the period between now and Memorial Day and into early June will be 100 basis point improvement. However, we will see a lot of pressure on the rate in the back half of the year due to the volume shift between Q2 and Q3 and the related fixed cost absorption, higher freight rates in early Q3, especially April and unfavorable product mix. As Jim also said earlier, we are moving swiftly to begin executing a plan to shift some G and A dollars around the organization. Executing this project is going to result in approximately $15,000,000 of additional restructuring costs spread out for the balance of the year, and we will exclude these costs from our adjusted earnings. Excluding restructuring, SG and A will likely be in the original 2% to 3% range provided, but it could swing a bit depending on our results and variable comp. We entered the year saying interest expense would be $5,000,000 to $7,000,000 lower. We'll probably do a bit better than that. So far this year, we have repurchased 1,100,000 shares of SMG, including almost 900,000 in the Q2. But given the timing of those purchases, it won't impact our EPS numbers until next year. So pulling it all together, we still expect adjusted EPS of $3.05 to 3.20 dollars per share. Overall, I share my colleagues' enthusiasm for the strong start as well as their confidence for the second half. Just as importantly, I'm pleased with our early efforts for next year. I'm glad to see us taking aggressive steps to set the business for even longer term success. With that, let me wrap things up and turn the call over to you. So operator, at this point, let's open up the call to questions. And we'll take our first question from Josh Boorstein with Longbow Research. Hi, good afternoon, everyone. Thanks for taking my questions here. Just on the guidance you reiterated it. I'm just curious has anything changed gotten either better or worse or offset by other parts of the business that's different from when you originally provided guidance? Sure, Josh. We've really confirmed our $305,000,000 to $320,000,000 earnings guidance for the bottom line. When you think about the pieces of the P and L, we do feel there's a little bit of pressure on the top line. But at this point, we're not willing to call that number down given how much POS is ahead of us. On the gross margin line, we think we'll do better than our original guidance of 100 basis points. But until we see how the top line plays out, reluctant to be too specific on what that might mean. And as I pointed out on SG and A, we right now would stick to the original range, but that could vary a bit depending on how the year plays out, again, depending on the top line and how incentives might line up. I mean, I'll just throw in there that I think the things we control, we're doing better than budget on pretty much everything we can control. The parts that we can't control is the top line. And so I think that the only thing I would add to what Randy said is that, I think we're pretty agnostic to sort of the top line. The top line, we're going to do the best we can. And I know the sales group is out there really pushing and getting and executing. And the weekends we've seen recently have been good. So that being said, I think that the one thing that we sort of are less in control of is the top line, but I think we're pretty relaxed about it and don't feel particularly exposed. I think that's the important part. Okay, great. I appreciate that. And then just one follow-up. Looking at 3Q, what things should we keep in mind from a modeling standpoint with respect to weather comps or other one off incidents? Thank you. I'm not sure. This is just a repeat of what I kind of say to every year, which is the thing that I would watch is look out the window. That's what's going to drive sort of ultimately what matters, which is if we're going to exceed guidance, it's going to be because we've got good weekends. And that's pretty much what I would say. That's the one factor that so that if we're comfortable with the consensus and or with the guidance I guess is the words, then sort of variations and theme will come out of top line growth and that's a matter of looking out the window. I don't think there's much more cosmic shift that will happen, excuse my French. And looking ahead at the months coming up, our biggest POS month of the year typically is April. But this April, we expect to be a little bit unusual. But after that, May is the 2nd biggest, June is the 3rd biggest and then March will be the 4th. So there's a lot of POS still ahead of us. So we're still optimistic and bullish, but realizing the weather has to come together and there's 6 big weekends between now and mid June. Terrific. I appreciate it. Thanks and good luck on the rest of the year. Thanks. We'll take our next question from Olivia Tong with of America Merrill Lynch. Thanks. Good afternoon. First question is just around the second half guidance. It looks like if you're sticking with your original EPS outlook that you're looking for a pretty decent sized deceleration in EPS in the back half. So I realize that a lot of the year is still in front of you. But what would get you sort of towards the top end of that range or potentially beat that range relative to the bottom end or getting in that range? Thanks. I'm sorry you're wasting one question on that. I'll say the same thing. And I know Barry was whispering while you were talking weather. Weather would get us over the top of the range. Yes. We've seen this is Barry. The South is in pretty good shape. The West is in pretty good shape. This is the latest spring we've ever seen relative to the Midwest and the Northeast. And so what Randy said is if we had a string of 6, 7 great weeks across the Midwest and Northeast that could push our numbers. But what we're not counting on is that happening. So we're planning for the worst and we're comfortable with where we're at. But if we had better weather, it could push us push it to the other end. Olivia is that it? Sorry, I put myself on mute. But just on gross margin, if clearly, this is the best gross margin you've had in a couple of years. But if you're even with presumably going above 100 basis points as you said, but even then you're probably looking for a fairly material deceleration in the second half. So first, where were the overages in gross margin relative to your expectations in Q2? And other than raw materials, what could potentially trip you up in the second half? When you think about where we are year to date, that's probably a little bit easier to explain. There's 3 big drivers why we're up almost, call it, 300 basis points. So pricing in our U. S. Business is roughly a third. Cost out from product changes that haven't decreased the quality of our products, but just improved our profit is worth about a third. And then a combination of favorable product mix and absorption from higher sales is about the other third. So that last third will more or less reverse itself in second half of the year. We continue to see the pricing impact. And on the cost out, while we'll continue to see benefits, it won't be quite as dramatic in the second half as what we saw in the first, because last year second half, we had ramped up and we were starting to already see some of those benefits. So the other factor that I referenced earlier was freight rates, which not even specific necessarily to our business, but just with the weather being so bad across the country in March, there was a lot of pent up demand for freight in early April. And especially around our growing media business and our malts business, we saw some freight rate impacts that hit us most immediately in the last 30 days. We'll still see a little bit of that in Q2. So all those headwinds will contribute to why we think we well, we know we won't be as up as high in the second half as we were in the first half. But given that, we still think we're going to finish higher than 100 basis points for the full year. Got it. Thanks. And then just lastly, can you call out maybe the growth disparity in a couple of regions maybe compare and contrast how you did in the West versus the Northeast and Midwest? Just Olivier, the question was business results how we did? Basically growth rates in like the South and the West compared to the North, right? Exactly. Sure. I think basically the South is flat, call it down 1%, 2 percent, the West is down 2%. And what we call our North region, which is the Midwest and Northeast combined is down about 5.5%. So it's down a little the North and Midwest is down a little more than double what the South and the West are. Got it. Okay. And that's year to date numbers? Yes. Okay. Okay. So that's still quite a bit below where and this is so this is inclusive of April as well? Those are numbers through April, but excluding Tomcat. Understood. If you were reporting Tomcat, it would be closer to flat on a year to date basis. Got it, versus your plus 1 to 3 outlook. So if we it's flat versus your plus 1% to 3% full year outlook? Sorry, Alethia, can you restate that one more time? Sure. So right now, the way that you're trending year to date through April is about flat and that on a like for like basis compares to your plus 1 to 3 top line outlook? Yes. That is right. Net 1 to 3 outlook company wide including our European business, which is going correct? Right, right. Right, okay. Okay. Thank you. And Randy, congratulations on your new role. Thanks, Olivia. We'll now move to Joe Altobello with Oppenheimer. Thanks. Good afternoon, guys. I guess in terms of the base period, could you remind us what kind of comps you're facing in or is facing April and then in May June versus last year? Because as I recall, it's pretty volatile from month to month last year. So I'm just trying to put your guidance in the context. That's all. To reference, whether it be April, May or essentially every month over the balance of the year, we're essentially facing double digit comps almost every single month. So recall, we started out last year in March, we were down 30% -ish and climbed out of that. So we're seeing something to a large degree that's similar to last year and expecting a lot of that to come together for us in May and into June, which are 2 of our 3 biggest POS months. Okay. So even on a double digit base period comp in April, you were still up on POS? No. We were down about 3% at the end of March and at the end of April, still down about 3%. Yes. I'm sorry, just for the month of April, you were up year over year? No. Okay. Sorry. Got it now. And in terms of the advertising, obviously, you guys are coming off of a pullback last year, expect the advertising to be up a little bit this year. If you talk about market shares, I think last year you held market shares flat despite the fact that advertising was down a little bit. So I would imagine given the increase in spending this year, you would hope to get a little bit of an uptick in market shares? Thanks. Yes. Market share, Joe, is about the same story this year. What we're seeing is when the markets are accelerating, we've seen good news in fertilizers and mulch and so forth. Where we've seen a little slippage is in the control products, but that business really hasn't started yet. And so overall, I think we're roughly flat. And but one of the things we have done this year is we have not pulled back our advertising like we did last year. So we've gone ahead and stayed consistent with the investment that we were going to that we said we were going to make this year in advertising. Okay, great. Thanks Barry. We'll now take Bill Chappell with SunTrust. Thank you. Yes, I'm going to just ask a question to clarify this one more time. Through March, it was down 3 percent. April was flat to down 3%. In May, we need to be up kind of mid single digits or higher for May, June to kind of get to your numbers. Is that the right to look at it? Yes, Bill. Okay. Thank you. Sorry. And then second just on the kind of EP I just want to be clear. This is why like I'm relatively chilled. We have good control of the bottom line of the business. What you just said is to get to our top line, the original top line budget, that's what we would need, okay? That's not the case to get to our earnings guidance. Yes. Okay. Correct, correct. No, I just want to make sure I got all the numbers. I'm looking at the right way. And then in terms of the non margin items, what are you expecting now for interest expense and for share count for the full year to kind of get to those EPS numbers? Share count will be roughly similar to our original guidance. On interest, we'll be a bit better so, call it a few $1,000,000 Okay. And then my last one. Europe, why is Europe on fire? I mean, I know this has been a struggle over the past, let's say, decade of good years and bad years. And I would think that the season is still early over there as it is here. So can you maybe help me understand that too? Well, I mean pretty simple. I mean good weather, excellent dispense control. The European business last year not only suffered crap weather, but went through a pretty dramatic change, particularly in France of effectively eliminating 1 half of the sales force. So we had 2 sales forces, 1 for coffee independent or the sort of mass merchant and then one for DIY. And we basically said that doesn't make sense. So we went through a lot of changes to enhance the profitability of the business and now they've gotten good weather as well. So I think it's really come together. And we're I can speak for all of us in the senior management team, we're all really happy with where the European team is right now. And they got a tailwind at their back with the weather. And I think an important part of the season is like they're in right now. So they continue to do really well and it's great for them. I wish we had the weather that they're having here. Got it. All right. I'll turn it over. Thanks. Thanks, Paul. We'll now take Connie Meneady with BMO Capital Markets. Hi. I have a question on the Q3 gross margin. Last year's margin went up 3.50 basis points. So it's pretty clear that there's a real tough comp there. But if retail inventories are equal to last year or just slightly above and you've got your biggest POS months ahead of you, do you have an unusual amount of inventory yourselves? Or just help me understand the pieces there, especially with regards to absorption. Right. When we Connie, when we ended March, our retail inventories were up 16% in our largest customers versus a year ago. So we were working collaboratively with our customers. We were all ready to go operationally, we were sound as I can ever recall. Now April PUS wasn't what we had expected. We continue to see bad weather and falling snow, etcetera. So April wasn't what we expected and wasn't as good as last year either. But we've been able to work through with POS to the point now retail inventories as we sit here today are only slightly higher than where they were a year ago. So for the rest of the year here on out, shipments and POS should more or less be in line and you won't see these aberrations and floods from quarter to quarter. That's speaking about our retail inventory. So how does that mean that if shipments in POS are going to be in line, why does that suggest absorption pressure? Or did I misunderstand you? Well, the fact that we had shipped in $70,000,000 more than last year approximately in our U. S. Business through March. We've gained a lot of absorption through our P and L, just fixed cost absorption in the month of March. And then as we shipped less in April and that inventory worked itself through the stores, we lost that absorption in our P and L. So more or less was just timing 1 month to the next. Okay. So it's an April issue. Got it. Yes. 1st April. I mean, I think that what people shouldn't do is overreact to what we've said. I think we Yes. Okay. I got that. The first half. Yes. Okay. I got that. Could I ask the outlook for urea pricing, I think, is starting to look quite favorable for next year. Have you started locking in yet? Or what's your view on that? At this point, we purchased about 15% or 20% of our expected quantities required potentially drop. We work ourselves into May June. So at this point, we're not out aggressively buying, but waiting a little bit to see Connie, this has been something we actually spent a lot of time talking about today, which is our outlook is favorable. I mean, I think other than a little bit of a flip up like last couple of weeks, I think we generally feel that the environment for urea purchases is pretty favorable. Personally, I would hedge harder on this. I think Barry is shaking his head. I think there's people there who believe urea could go down as over the summer down to like as low as $250,000,000 and that's kind of holding people up. I personally if we're kind of sub-three 100, I'm encouraging people. So this is an internal debate that continues. But the bottom line is whatever the number is, whether it's $290,000,000 or $250,000,000 or anything in between or sort of below anything below $300,000,000 it's pretty favorable to our strategic plan and where we think we are as far as standards that have been set for next year. So it's all that's good news for us. That's all I had. Thanks. You bet. And from KeyBanc, we'll hear from Jason Gere. Okay. Thanks. I have just two questions. So the first one, maybe if you could talk a little bit about the competitive environment. And obviously, you're saying from now until probably early June is when you really kind of got to get the consumer activity kind of going at this point. So are you seeing anything from your competitors that are getting maybe a little maybe they don't have the same scale that you have to kind of still hit their bottom line numbers, but obviously the top line needs to drive. So are you seeing anything unique coming in on the competitive side that as we get further and if POS is not improving as well as they need to that it might get a little bit more promotional. I'm just wondering if you're seeing anything out of context? Look, there's a lot in that question. First, I think we feel pretty good about our relationships with our major retailers. And by the way, the independent channel is doing really well also. When seasons don't perform and people start focusing on closing inventory, I would say we really want focusing on our stuff not on inventory problems they have, okay? So I think that can always drive discontinuities that are irritating as hell. I'm not suggesting that that's going to happen, but I think when weather is poor and people start shifting focus on what's my ending inventory going to be as a retailer, we want them to be thinking about us, okay? So we've got great tabs, really good programs, a lot of advertising dollars still ahead both with us and with our retail partners and we feel okay about that. If somebody would say who's impressing is it? I would say spec continues to be I think they had the benefit of going through a bankruptcy. But I think they know who they are and this is on the pesticide area. So this is a group of people who I think have competitive pricing, the ability to market, they're making us better. And so this is an area that within our Ortho business group, I think they really got to raise the game. And I think everything I know about where Mike is headed with that business, both on sort of the brand support, sales, programs, marketing, there's a lot of pressure to really up the game. But so I'm impressed with I mean, I would say on the competitive front that's what I would say. And I'm not saying they're whooping our ass, but I would say they're legit competitors and respect them. But within the guidance, I guess, I should talk about the gross margins and the tough the comparisons to last year. Are you building in maybe any shift of dollars from some of the pure advertising to a little bit more in store promotions that just to make sure that when consumers do buy, obviously, they're buying you guys just seems to be that right now you're waiting on the weather to be to work and then the consumer will come. But I think everybody is kind of looking at the same kind of dynamics that POS is not as strong right now. So just wondering if you built that in there that maybe It's a good question and I can answer that. Within Mike's P and L without affecting what he owes sort of Barry and Randy and myself, he has room built in. And I know Mike is every day working promotional support across all the brands given the year. So without increasing without decreasing the advertising, Mike has money, what we would call here walking around money to make things happen and he continues to exploit that. Any comment Mike on that? No. I think we'll respond to competitive pressures, but we it won't be additional funding. It be funding that we redeploy within our control. So Okay. I think the good news here is when you think about our category, the whole category through March was down, called mid single digits, where controls was down double digits. So we typically when the category is growing, that's when we tend to take share. When it's declining, we lose. So I think as we look forward, it's more recent props in that particular controls category also. Okay. And then the other question, just it's more of a longer term So I know that maybe it was 2 years ago, Jim, you were talking about trying to get those operating margins back to the 2010 level. And clearly, we've seen how you guys have progressed really well. So I guess once you kind of get to that level, what type of sales growth do you need to see going beyond that to kind of get more operating leverage in the model? Right now the 1% to 3% this year seems like it might be hitable it might be doable, it might not. It depends on how the weather plays out. But just wondering that once you get back to that margin that you got in 2010 that you've talked about to go beyond that to get more upside, what do you need to see? I know what I would say. I'm looking to see what my partners how they react to it. Slightly more growth than that. I think that would be extremely useful to us on sort of utilization of our assets. So I think absorption lots and lots good things happen. So I think that we are definitely on track or ahead of track on margin, okay? Okay. A lot of I just was pausing and thinking carefully about my words. A lot of the work we're doing here is to basically without promising you guys more growth, growth improve the probability that we get growth that is above that sort of 1% to 2%, which is kind of what we based our we crazy money like for us would have been a couple of years ago, but money that we've talked to you guys about as far as advertising or marketing to sales ratio relative to to sales ratio relative to kind of what we've told you and what other consumer marketers have done. So that we believe if we run the business properly, we steward the brands properly, we invest in sort of innovation, which we've got a pipeline that's starting to look interesting that and we maintain the margins that we've talked about, okay, which is sort of the subject of the question. If we can do that, it's growth that will make this and turn us go ahead, Barry. You can Yes. So without overpromising on the core business, we've talked about that we believe that there's adjacencies that we can acquire into. We're looking at new businesses. We're stewarding our existing business right. And we think Scotts Lawn Service is a tremendous growth opportunity for And so while we've been promising low single digits, we think we can get it up into the mid single digits. So a combination of getting that growth up 1 So a combination of getting that growth up 100 basis points to 200 basis points plus the shareholder friendly actions that Jim has talked about earlier that we can get total shareholder return on a consistent basis in the 15%, 16%, 17% and being able to predictable like we talked about earlier to them on a long term basis. Okay. No, no, that makes sense. And the last housekeeping. Just how much did Tomcat contribute to the quarter? In terms of the 9% that you had in consumer, can you break out like price volume in Tomcat like the acquisition? And then I promise I'll leave. On a year to date basis, I would tell you that the sales of that business are $20,000,000 and the bottom line impact would be about $0.03 Right. But in the quarter of the 9% growth, how much did Tom I mean, just for modeling purposes, because obviously, you'll still have it as an acquisition until it anniversary. So did it was it 3% of the 9%? And how much was price 2% or 3%? Just trying to figure out how much underlying volumes were just in the second quarter? What was it $13,000,000 in the quarter? $13,000,000 $13,000,000 $13,000,000 of sales in the quarter, so a couple of pennies. Is Tomcat? Tomcat. Okay. Okay, great. I'll pass on to the next person. We'll now take Jeff Zekauskas with JPMorgan. Thanks very much. Jim, I think 3 years ago, you were interviewed in The Wall Street Journal and you talked about the medical marijuana market as being interesting. And since then, marijuana has been legalized in Colorado and their initiatives in other states. Does cops care about this market? Or does it not care about this market? Pairs. Okay. What do you got? Look, I think that with AeroGarden was really the beginning of work in hydroponics. And I think broadly, if you look at sort of the West Coast business in particular, it's unique compared to sort of the organic and natural business on the East Coast is different than when you go sort of, I'm going to say Denver West. There I think it's a very interesting and dynamic market where I personally think it's the biggest change I've seen in sort of lawn and garden. And that it's not just sort of what I would call high value agriculture. I think that the business is interesting in a bunch of ways. Number 1, I think it's younger. I think it's we've been talking about this and part of it is just directionally. It's younger. It's more independent. It's more natural and organic. It's less brand focused. And I think that if you look at this business, just the entire dynamic, which is not just that part of the business that you mentioned. It's just in general, it's much more like what you're seeing in sort of beverages, I think, whether it's the Coca Cola business, where it's more sort of fruit drinks, energy drinks, teas, etcetera, but not the main brand. I think if you look into the beer business in particular, it's much more the craft beers. And I think there's a craft element of lawn and garden that is extremely active on the West Coast and really exciting. And it's an area of the business that we are what do we got? I would say we got the best brands in the business, but they are less important for the sort of people we're talking about out there, which is I this is a part of the business that like I could go on like prolong time on it. As the world went to crap sort of 'seven, 'eight, 'nine, The business of DIY and Scott's did okay. The people who frequent Lowe's and Depot, they didn't lose their houses most of them. They had above average earnings. They had kind of gray hair. They like spending time in gardening. And if you had to hang on to a constituency, the group of people we hung on when things got tough, our core consumer did pretty well considering. The question is, is there a lot of growth in that going forward? And we believe there is growth. And that's I'm going to say a little bit. And that's the core of the business that Mike runs. The part of the business, which is kind of craft, hydroponic, service, I mean all the things that are now direct reporting to Berry are like really different than that. It's like a different world. And it's not a world that we totally get yet, because we tend to be kind of the DIY big box that's kind of we represent that. But it's a little bit like the Republicans can you win an election here without young people, without women, without Hispanics, without gays? I think the answer is you can't. And for us to get the kind of growth that we believe is achievable, we want to invest in those areas where we get a much better not much better, where we get the growth that we think is available, the crafty part of the business. This would be and I don't think we're different than the sort of beer people. I think if you look at MillerCoors, where's their growth? It's in their Blue Moon and their craft labels. And we are going to develop and it reports directly to Berry sort of our craft lawn and garden business, where our main brands are less important. And there's a level of authenticity and energy and youth and sort of non core that's pretty important to driving that business. And so if you look at the things we talked about to report directly to Barry, you got Mike running the core, which I think we have very cautious sort of and that doesn't mean negative, because I think we all believe that if we do the right things and we take this mission we're on right now, we will get better growth than we're telling you we think. We're just not going to promise it and we're not going to base our forecast on that. But we believe that we do the right things, we can difference between like our forecast our sort of strategic plan numbers and if we can do a couple of percent better, the output from that economically is huge. So it's really good if we can do it. And probably half the benefit that we get through this project is going to go to the core. Plus you get core branded adjacent acquisitions that will go into Mike's business as well. And if you look at our sort of M and A dollars about a third of it will be toward kind of hydroponic e businesses, craft businesses, about a third of it will go to service and about a third of it will go to Mike's business. And that's kind of this becomes Berry's mission and I'm really excited about it and very enthusiastic. Long answer, but it's where we think there's above average growth rates. Okay. And for my second question, when I read your raw material slides, there's always a focus on diesel fuel. I forget why do you use so much diesel fuel? It's our Scotts Lawn service business with the trucks that we use to deliver the service. Okay. Okay. Thank you very much. Okay. We'll now take Eric Glasshard with Cleveland Research Company. Two questions. First of all, it sounds like you've got levers to pull on the margin line that as you said make you agnostic about sales. Can you just talk about what is playing out differently than when you started the year or what you're doing differently in regards to the margin performance for the year that gives you confidence on the earnings number regardless the issue of the sales? I'll let the sort of pros answer. I start with under promise and over deliver, so we don't get ourselves in a bind, number 1. 2, I think the things that we control, we're actually doing a pretty good job on. And as far as sort of negative in there, I think really the big one right now is just is freight. And I think we believe that there's fracking in a lot of areas that we care about that are mean that a trucker can get a couple of $100 more by delivering freight fracking crap and picking up our stuff. So where we have our freight contracts in place, we're doing pretty well. Where we're sort of buying on the spot market, it's just a little more competitive than we'd like to see, which is a little bit below standard. And I think that's the only significant negative that we see and that's not huge, but it just means that we do wouldn't have expected to be negative on freight at this point. And a couple of the upsides are the product cost out and basically management of commodities have gone better than we would have expected. And I referenced earlier about being operationally sound, but typically at this point of the year, we look back and there's a couple of hiccups that we point out and we kick ourselves about. At this point, there's really like fundamentally trying to scratch our heads, trying to come up with something to beat people up about. Now you probably jinxed us. No, I'm just saying, aside from the freight issue, which you could argue kind of Eric, what I say is that this has been a journey for us. I think where we're headed with the business and the way we're talking about, which is very consistent, there's no changes really as we've been talking about this shareholder friendly, what we talked about for the last couple of investor conferences. We are executing it and we're pretty well down the path. I think the lack of major hiccups, I think says that where we are in the journey is a pretty well controlled business, in spite of the fact that I'd say the weather has been a negative, obviously, has been a negative for us. But Barry and his team have done a really super job of getting it to the point where it's kind of no drama on the business side. And as we look forward to where we're going, it's to take that control of the business, now apply ourselves to saying what can we do to take a relatively low risk in the business and without swinging for the fences add like 1% or 2% more and that is really nice for us financially within the core, add some acquisitions to that and then focus on these areas, continue to get Europe where we want it to be. This whole craft hydroponic space, natural, organic, urban and then our service business. And we think that we can do this in a pretty low drama way. And so I think where we are in the journey coming out of sort of economic crisis globally and relative to other consumer companies is, I'm really pleased where we are right now and I'm really pleased with how the team is doing. So I'm pretty chilled. It's just everything right now is okay, except that I would say minor issues that and the biggest thing is weather. That's helpful. The second question I want to ask, I understand the North and the Midwest numbers being down. I think you said 5.5 year to date in terms of sell through. But South and the West being down a couple of points, can you give some thought or explanation around that? It seems like the weather has been okay there and you've had some new products there. Can you just frame how we should be thinking about the South and West declines year to date as well? Take it, David. Texas so that's Luke Meyer talking. Yes. This is Mike. Texas has been a little bit of struggle because of drought and that's been slower. And then the transition zone for the South and it's actually recovering. They were actually up this weekend. And so and Florida has actually been up a couple of percentage points as well. So but I would say Texas, California has had some drought issues, is a little slower and then the transition zone in the South. Transition zone, Eric, means like the Mid Atlantic states were slow to start. Great. Okay. And then one last one if I can. The $15,000,000 of charges for SG and A out that creates no benefit this year, but creates benefit next year. Can you just size the magnitude and timing of the benefit related to those efforts? So Eric, the right way to think about that is it's essentially a redeployment of SG and A. So we will not see necessarily an immediate benefit in our P and L in 2015 by taking that out. What we're going to do is relocate, redeploy, reallocate some resources across our P and L, largely to prosecute the ideas that the plans we have that Jim was referencing earlier about urban, indoor, lawn service and just growing the category in a lot of different ways. So while there will be the 15,000,000 charge this year that will exclude next year, we're not expecting to see necessarily a pickup from that, at least a direct pickup within SG and A. Blair, what I've asked people to do is this is not a way of taking expense out and building the P and L. This is saying, look guys, let's run the business. The benefit of the team we have in place right now, which is a I'm going to say a very combat oriented group of people who have sort of been through the wars with me. It's not driving money to the bottom line. It's basically saying to run the business properly, what do we need to do differently than what we're doing today? If we're going to steward the brands properly, how would you redeploy that money without putting money to the bottom line with the idea that if we start doing more and more of the right things and fewer and fewer of the things that you'd say, I don't know, I don't know if that's worth it. Without swinging for the fences, there's nothing huge here. About half of that money goes back to effectively brand support within the core within Mike's business and about half of that going to sort of these growth opportunities. And so we believe it's all part of what I would say is improving the probability that we can do better than what we said. That's how I would describe it to you. Okay. Thank you. And from William Blair, we'll go to Jon Andersen. Thank you. Hey, man. Most of my questions have been answered. Just one on use of cash. Jim, I know you mentioned you're evaluating that through August. Last year, you took a dividend up 35%. I think the yield now is closer to other CPG companies at about 3%. So as you evaluate returning more cash to shareholders, is it more likely to come in a different form, I. E. Not an increase in the regular dividend as much as maybe a special or more aggressive share buyback? Thanks. Yes. I mean, we just had a Board meeting last week. We spent a lot of time on this one. I think we believe that we've got a pretty good valuation going at this point. So I think for sure it would be 1 of the 2 of continued share repurchases or special. We'd like to get to the point and this is part of our planning that you're seeing small, but regular increases in the recurring dividend over the years. So but we're trying to balance that by saying we don't want to get in a position where we'd ever have to reduce that. So we'd like to be in a position to say small, but regular the excess cash and this is one of those things get back to sort of the pro form a 2.5 times leverage and look at our cash flow minus CapEx minus acquisitions with the 2 thirds, 1 third meaning 2 thirds going home, 1 third staying for the use of the company on average over the plan. So I think at this point, we're probably pretty highly focused on the special with the sort of the end of the fiscal year or very early in the first Scott's fiscal year quarter, but end of it. So I think we're seeing that we would make a decision on that probably in August and then execute that sometime before the end of the calendar year. Thanks for the color on that and congratulations, Randy. Thank you very much, John. We'll now move to Jim Barrett with C. L. King and Associates. Good afternoon, everyone. It feels like midnight to me. But hey, Jim, how are you doing? I'm doing pretty well. Jim, can you talk a little bit about Roundup 365? It would appear to be more proprietary. To what degree will it cannibalize the existing line as opposed to gain share? What is the objective in that area? Objective is to run them both and be successful with them both. I mean, this is something we're spending a lot of time on. I think we feel okay about it actually, but Yes. No, I think, Jim, first of all from a price point standpoint, it's higher, but the consumer is getting more value. And so this is a product that consumer. And we're seeing a little bit of cannibalization, but quite frankly it's better than what we thought it would be. So overall from a category standpoint, the tough thing to read right now is like we said the weed category is down, so it hasn't hit it yet. But what we are seeing relative to mix and what we expected that the advertising is working, the consumer gets it and it's driving it will drive the overall category growth. Good. That makes sense. So, boy, thanks for the answer. We'll now move to Alice Longley with Buckingham Research. Hi, good afternoon. Hi, I'm still having trouble with the numbers. Can you tell us what POS was for you in the U. S. Alone for the March quarter, for April and for May to date? And also could you tell us if those numbers include or exclude Tomcat and the wild bird food? Thanks. I think the easiest way to talk about this, Alex, is with Tomcat excluded. So for the quarter, I don't have that handy back. So year to date March, we were down 3% excluding Tomcat. We know year to date. We're looking just for the March quarter. Alex, what follow-up with you later to give you the details quarter by quarter? We've been much more focused on where we are year to date going into April and the outlook beyond that. So I'd rather just follow-up with you offline and have the real numbers. Okay. And then can give us April and May to date because supposedly May has gotten better? Right. So April year to date, we still down about 3%, if you exclude Tomcat, May, we're just starting. And looking forward, again, we have double digit comps, May, June, July, August, September. And to get back to the original guidance, we would need to be up, call it, 5%, 6%, 7% over the balance of the year to get back to that original guidance, which we don't need to do to hit our earnings guidance. Okay. I'll get the numbers offline. But also in those numbers you just gave me, what about wild bird food? Yes. All these numbers exclude Burford also. Exclude that. Okay. Thank you. And then I had a question about your comment about share buybacks. You said you bought back $1,700,000 to date $900,000 in the second quarter, but somehow that help you until next year. Why is that? So we bought back year to date about $60,000,000 There may be some more in Q3, just as we have a 10b5-1 and there's a purchasing grid depending on the day and the price what we buy. The reason why it won't have effect until next year is essentially because of the options that are granted and the buybacks more or less net out. We will see a slight improvement probably in the share count next year, but it's not really significant enough to talk about at this point. The number is 1.2, not 1.7, correct? Yes, it's 1.2. Okay. Okay. Thank you very much. You're welcome. And that does conclude the question and answer session. At this time, I would like to turn the call back over to Mr. King for any or closing remarks. All right. Thank you, Carrie. If there are still follow-up questions that we haven't gotten to feel free to give me a call directly 9375 785-622. Separately, we're going to be at 2 different conferences coming up here shortly in both mid May mid June. So you'll see press releases regarding those presentations. Otherwise, we will talk to you again in early August when we issue our Q3 results. Thanks for joining us. Have a great day. Once again, ladies and gentlemen, that does conclude today's conference. Thank you for your participation.