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Edited Transcript of LANC earnings conference call or presentation 27-Apr-17 2:00pm GMT

Thomson Reuters StreetEvents

Q3 2017 Lancaster Colony Corp Earnings Call

COLUMBUS Apr 29, 2017 (Thomson StreetEvents) -- Edited Transcript of Lancaster Colony Corp earnings conference call or presentation Thursday, April 27, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dale N. Ganobsik

Lancaster Colony Corporation - Director of IR & Corporate Planning

* David A. Ciesinski

Lancaster Colony Corporation - President, COO and President of T. Marzetti

* Douglas A. Fell

Lancaster Colony Corporation - CFO, VP, Treasurer and Assistant Secretary

* John B. Gerlach

Lancaster Colony Corporation - Chairman of the Board and CEO

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Conference Call Participants

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* Brett Michael Hundley

The Vertical Trading Group, LLC, Research Division - Research Analyst

* Brittany Whitman

* Colin Radke

Wedbush Securities Inc., Research Division - Research Analyst

* Frank Anthony Camma

Sidoti & Company, LLC - Analyst

* Jeffrey Scott Thomison

Hilliard Lyons, Research Division - VP and Analyst for Consumer Staples, Entertainment and Leisure Industries

* Michael W. Gallo

CL King & Associates, Inc., Research Division - MD and Director of Research

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Presentation

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Operator [1]

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Good morning. My name is Scott, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation's Fiscal Year 2017 Third Quarter Conference Call. Conducting today's call will be Jay Gerlach, Lancaster Colony Chairman and CEO; Dave Ciesinski, President and COO; and Doug Fell, Vice President, Treasurer and CFO. (Operator Instructions) Thank you.

And now to begin the conference call, here is Dale Ganobsik, Director of Investor Relations for Lancaster Colony Corporation.

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Dale N. Ganobsik, Lancaster Colony Corporation - Director of IR & Corporate Planning [2]

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Thank you, Scott. Good morning, everyone, and thank you for joining us today for Lancaster Colony's Fiscal 2017 Third Quarter Conference Call. Let me begin by reminding everyone that our discussion this morning may include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Also note that the audio replay of this call will be archived and available at our company's website, lancastercolony.com, later this afternoon.

With that said, I'll now turn the call over to Lancaster Colony's Chairman and CEO, Jay Gerlach. Jay?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [3]

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Thanks, Dale. Good morning, we appreciate you joining us today. Our third quarter had one major unusual item, plus the impact of the Angelic Bakehouse acquisition, but first let me comment on the performance of the core business.

We were pleased to see both the retail and foodservice channels of the business grow in the quarter, with retail channel sales up just under 1% and foodservice channel sales up just over 1%.

The primary organic growth contributors for the retail channel were New York Bakery garlic breads, Reames homestyle noodles and Sister Schubert's dinner rolls. Continued softness in the refrigerated dressing and veggie dips and the loss of some private-label business partially offset these gains. We also feel the Easter shift to the fourth quarter was a $3 million to $4 million unfavorable impact on retail channel sales.

The Angelic Bakehouse acquisition provided about 2% growth to the channel, enabling it to reach almost 3% growth overall. Retail sales mix improved 50 basis points with the help of Angelic. From a retail sell-through perspective, based on IRI data for the 12 weeks ended March 19, 5 of our 6 key categories had overall sales declines.

Our branch had growth in 3 categories and market share gains in 4 of 6. We underperformed the category in refrigerated dressings, which saw continued competitive activity. Croutons also underperformed, with some of our sales in this category shifting to private label.

In the foodservice channel, we saw good volume growth from several of our national chain customers that more than offset the impact of our customer rationalization efforts and a cost-related deflationary pricing. Absent the $17.7 million multiemployer pension plan exit costs, segment operating income declined 160 basis points.

Compared to recent quarters, we lost the lower ingredient cost benefit with a flat comparison to last year, yet there was still foodservice channel price deflation in this quarter. Crate spend was generally flat and consumer spend was modestly favorable. SG&A costs for the quarter reflect the number of steps we've taken to position ourselves for future growth. These expenditures are a combination of onetime and ongoing.

We've expanded our team in retail sales, marketing and innovation to better drive growth for new products, more effective consumer promotion and marketing, and stronger category management.

We've also enhanced our capabilities in the areas of integrated business planning and sales and consumer data analytics.

In our planned operations, we've added several newly hired Lean/Six Sigma black belts. We've also launched our own training program to build this skill internally. We expect benefits from all these efforts to come in the near and midterm future through growth, sales mix improvement and reduced production and logistics costs. We ballparked the associated costs in the quarter for these initiatives to approach the mid-7 figure level, with about half that amount ongoing in nature. Also a factor in the quarter's SG&A cost is the additional amortization and related ongoing noncash expenses for the Angelic Bakehouse acquisition.

Let me now ask Doug to make a few comments.

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Douglas A. Fell, Lancaster Colony Corporation - CFO, VP, Treasurer and Assistant Secretary [4]

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Thank you, Jay. Similar to our past commentary, our balance sheet continues to remain strong. I will comment on some of the larger line items within our balance sheet that have changed since June 30.

From a high-level perspective, cash increased slightly, as our year-to-date cash provided by operating activities of $105 million was offset by cash paid for the Angelic Bakehouse acquisition of $35 million, as well as year-to-date regular dividends of nearly $44 million and property additions of $20 million.

In general, the increase in our accounts receivable and inventory balances reflect higher sales volume. The incremental receivable and inventory assets acquired from Angelic were not material to these working capital accounts. The agings of our accounts receivables remain very solid.

Cash expenditures for property additions totaled $8 million in Q3, with the largest amount spent on new packaging and processing equipment to accommodate growth and final build-out costs relating to the recent relocation of our company headquarters.

For fiscal '17, we anticipate capital expenditures to be approximately $25 million. For Q3 of fiscal of '17, depreciation and amortization expense, which includes the impacts of Angelic, totaled $6.4 million. We expect a similar amount for Q4 as well.

The increase in other assets of $40 million since June primary reflects the preliminary values assigned to the identifiable and tangible assets and goodwill relating to the Angelic acquisition, which are further detailed in our quarterly 10-Q filings.

The increase in accrued liabilities of $17 million reflects the liability relating to our withdrawal from the multiemployer pension plan, as indicated in our earnings release and 8-K filing in January. This liability was paid in early Q4. The increase in other noncurrent liabilities largely reflects contingent consideration relating to the Angelic acquisition, which is also further discussed in our quarterly 10-Q filings.

With respect to our balance sheet capitalization, we continue to have no debt and over $559 million in total shareholders' equity. We ended the quarter with nearly $125 million in cash and equivalents, and we have available borrowing capacity under our credit facility of nearly $150 million.

Our capital allocation initiatives remain consistent with that of past quarters, with focus on funding future organic growth initiatives, acquisition opportunities, continued dividends and opportunistic share repurchases.

Our overall effective tax rate of 34.7% for the third quarter was slightly higher than that of last year, as influenced by a higher effective state tax rate. At this time, we would expect an effective rate of approximately 34.5% for fiscal '17.

Jay, I will now turn call back over to you for your concluding comments.

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [5]

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Thanks, Doug. Turning to our fourth quarter, we expect near-flat pricing in both our retail and foodservice channels. Retail channel sales will benefit from the Easter shift and the addition of Angelic Bakehouse, with key category performance expected to be somewhat similar to recent trends. We are making some tactical adjustments in our refrigerated dressing plans, with the goal of returning to growth.

With no significant retail product introductions this quarter, we will have limited slotting expense. Our overall trading consumer spread -- spend are anticipated to be up slightly, due in part to the shift in Easter promotions.

Foodservice channel sales will be challenged by the impact from our customer rationalization efforts and the overall industry softness. We are fortunate to have a national chain customer mix that generally outperforms the industry.

On the foodservice innovation front, our branded distributor business is introducing a line of clean label Marzetti dressings that we think should be well received with certain customer segments.

Ingredient costs are expected to increase in the fourth quarter, with soybean oil, dairy and garlic costs moving up.

We will continue our focus on improving efficiencies in plant operations and throughout our supply chain. We remain active in our search for good-fitting acquisition opportunities, generally in the branded better-for-you space.

With that, we're ready to take questions, [Pete].

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Questions and Answers

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Operator [1]

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

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Michael W. Gallo, CL King & Associates, Inc., Research Division - MD and Director of Research [2]

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My question, just want to drill in on the gross margin line. Correct me if I'm wrong in terms of the magnitude, but it looks like you saw a little bit of flattening of ingredient costs and you had deflationary pricing in the foodservice channel, which is really what drove the majority of that margin compression. So first part of that question is, how much of the margin compression was because of retail, but particularly Marzetti being more promotional, and how much was related to just a sort of foodservice pension? And as you get into Q4, you'll have some commodity inflation, but you'll have flattish pricing. Would you expect on a year-over-year basis that gross profit percentage will continue to be down or continue to be impacted by the same phenomena of kind of having that spread not exactly where you want it? How long do you think it takes to kind of rectify that?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [3]

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Well, Mike, I guess, I'll start with -- tell you we can't really give any specific guidance on the fourth quarter, but the big driver here was the price deflation on the foodservice channel of our business. And as we move into the fourth quarter, we see that generally flatten out, yet ingredient costs moving up a little bit. The net result of all that and other initiatives, including some of the new things we're doing at the plant level, we would hope would enhance gross margins overall. Might benefit from a little bit of a mix shift again with the Easter move into the fourth quarter maybe driving a little bit higher retail mix than we would have seen in the year ago quarter.

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Michael W. Gallo, CL King & Associates, Inc., Research Division - MD and Director of Research [4]

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So it sounds like, though, the deflationary issue versus spread of pricing is something you would expect to kind of work its way out over time?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [5]

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Yes, I think so. Barring further changes as we get through the fourth quarter, hopefully, there isn't material mismatch between those, as we've been seeing.

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Operator [6]

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Your next question comes from Frank Camma with Sidoti.

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Frank Anthony Camma, Sidoti & Company, LLC - Analyst [7]

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Obviously, pleasantly surprised on the revenue here and some of the things you called out, in particular on the retail side, the strength in the frozen categories. Why do you think consumers are -- given that those are kind of off-trend, I mean, what do you think that you're capturing, what you're doing there? I mean, what in particular is driving that?

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [8]

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Frank, I think it's a combination of good innovation. If you look at both Bake & Break and Sister Schubert's Shareable, underpinned by just really good execution at the shelf. In both cases, what we're seeing is that they're driving share growth in the mid-single digits, and it's underpinned by household penetration. In the case of Sister Schubert, I would go one further. Actually, we've gone in and we've simplified the range of SKUs to really focus on what they call the [Sister's 7]. And in so doing, they've been able sort of clean up the shelf so that they have a better number of facings of the key items which has reduced out-of-stocks and just overall, generally, driven that business. That's one that -- we're bullish about it. We think about it -- strategy #1, you've got to win the key season, which it looks like we did again this year at Easter. Thanksgiving, obviously, and Christmas are the other big holidays, and then beyond that we're trying to figure out how do we continue to drive growth in creating new occasions. And that shareable platform is exactly what that idea is about, moving it from just the weekend dinner occasion or the holiday dinner occasion to an everyday dinner occasion. So it's -- that's just a combination of some good closing innovation and good execution at the shelf.

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Frank Anthony Camma, Sidoti & Company, LLC - Analyst [9]

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And where -- can you just remind us where Angelic is currently distributed?

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [10]

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So Angelic plays principally in the perimeter of the store, and that's been a big part of the strategy there. So although the product is made -- it's a very clean ingredient panel and it's shipped frozen. It's slacked out and then it's actually merchandised in the perimeter and specialty deli. What we like about that is that it doesn't bring with it the supply chain requirements of DSD, yet it allows us to play in that perimeter of the store.

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Frank Anthony Camma, Sidoti & Company, LLC - Analyst [11]

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And just a similar question for foodservice revenue. Jay, you mentioned at the end of the call, you expected a little bit of -- given what was going on with your customers, you expect -- it sounded like a little bit of weakness in the fourth quarter, yet obviously, you did better than we expected in the third quarter. And the press release says volumes. When you say volumes, do you mean that you didn't necessarily pick up any new customers, just to clarify that first?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [12]

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No new customers, but growth in unit volume of existing customers.

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Frank Anthony Camma, Sidoti & Company, LLC - Analyst [13]

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Customers. So obviously, either they're using more of your products in their mix or they're doing better than you expected. I just wonder if you can comment on that, like, is it...

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [14]

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Yes. It's a little bit of both, probably a little bit more that we've got some customers that are doing reasonably well. As I mentioned, we've had the benefit, I think, of a pretty decent mix of chain account customers for some time that seemed to outperform the industry generally overall, not wildly, but somewhat. So when you read all the negative publicity about what's going on in the restaurant business, it's certainly out there. But I think our mix of customers haven't felt it to the degree you might see from the overall industry.

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Frank Anthony Camma, Sidoti & Company, LLC - Analyst [15]

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Okay. Final question, just sort of on the acquisition market, if you could just update us. I mean, I know that's obviously important strategy. We know what you're looking at, but do you tend to see more or less deal flow now than, say, a year ago? Just wondering if you can comment on that.

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [16]

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Yes. I'd say maybe a little bit more. I don't know I'd say wildly so, but certainly a little bit, as I'm sure you've all seen recently. We're seeing maybe a little bit of uptick in potential divestiture activity from some of the bigger guys. So maybe there's a few more things to consider from that angle. But we do continue our search, looking for those branded better-for-you kind of opportunities.

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Operator [17]

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Your next question comes from the line of Brett Hundley with Vertical Group.

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Brett Michael Hundley, The Vertical Trading Group, LLC, Research Division - Research Analyst [18]

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I'm sorry if I missed it, but can you give us your pricing for the business as a whole for the quarter?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [19]

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I don't think we did comment specifically on that, what that was, but it's down in probably the mid-7 figures.

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [20]

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A mid-7 figure.

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [21]

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Yes, exactly.

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Brett Michael Hundley, The Vertical Trading Group, LLC, Research Division - Research Analyst [22]

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Okay, I appreciate that. And Jay, I appreciate the color you gave on your SG&A rise during the quarter. And it makes sense. I guess, I wanted to grab a little extra from you on just the why now question and see if it was something that is more externally driven in your view by perhaps what's happening competitively at the peer set level or what might be happening competitively at the retail trade environment. Is it more internally driven from just a timing standpoint? We'd love to just get some color from you on that.

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [23]

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Well, Brett, I'd say it's all of the above. Trends react to but also take advantage of some of the changes going on in the marketplace, particularly in the retail channel of the business, the changes that are going on there, the need for greater innovation, successful innovation. We think that there's opportunity for us to, over time, hopefully, drive the top line a little faster, shift the mix, but at the same time -- shift the mix to retail, but at the same time, hopefully, be working on the cost of sales side of things and find some efficiencies there that, combined, can drive some greater gross margin of the business that gives us a continued opportunity to not only invest in some of these gross -- growth initiatives, but also enhance the bottom line, the operating income side of things. Dave, would you add anything?

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [24]

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Yes. I think just to echo what Jay is saying, part of what we did, Brett, is we benchmarked ourselves over a pretty long period of time versus our peers. And what we found is, we've done well on top line. And really the investments we're making are only intended to continue to drive that and begin to shift the mix towards accelerating growth in retail, while maintaining growth in foodservice. And on the cost side, as Jay pointed out, we found that our gross margins are near the fourth quartile of our peer group. So the area where we feel like, as we look across the next few years, where there's a real opportunity for us is to provide for balanced growth, maintain strong top line, but figure out where we can strip out nonvalue-added costs and drive gross margin accretion. So the investments that we're making, particularly as were outlined by Jay, are in the area of what we're calling Marzetti operational excellence in Lean/Six Sigma, where we've developed our own Lean/Six Sigma black belt program. We're hiring black belts (inaudible) For green belt as a means by which to attack that gross margin line of our business and drive just structural improvement in that space. And then to that same end, improving some of our planning processes because we believe, across a range of time, there's also an opportunity to improve our working capital management. So these are (inaudible) quarter event. This is really -- this is a new way of life that we're planning for here.

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Brett Michael Hundley, The Vertical Trading Group, LLC, Research Division - Research Analyst [25]

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And I guess related to that, can we attach A&P spend and have a discussion about that, because it's good to hear all the things that you're mentioning, and then again, against that backdrop, you have retail partners pushing for price concessions. And you have an environment where, I think, you, yourselves and your peers want to stay in front of the consumer need to secure ongoing shelf space, and so A&P spend probably becomes as important as it's ever been in this environment. And so I guess related, it sounds like net-net, you still believe you'll be able to drive benefits to the bottom line. But can you just attach the discussion on A&P spend and where you think you are today on whatever metric, maybe as a percentage of sales and whether or not you're comfortable there, or if you think that larger increases are required relative to where you've been historically in order to continue to drive that top line growth, alongside some of the updates that you're making now?

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [26]

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Absolutely, it's a great question. So back to the framework we discussed where our growth agenda is really focused on accelerating the top line and the bottom line. As it pertains to the top line, we're making the investment in innovation, and the second area we're investing is in category management. So some of the costs that were included in this most recent quarter were for the purchase of tools from IRI for rational pricing. So really what we're bringing are a lot of the same tools that the big CPG folks are using as they're implementing revenue management to make sure that we're achieving optimal price points in terms of frequency, in terms of depth, et cetera, et cetera. So now we've purchased the tools, but we've been spending time training our team of marketers and sales folks to use those tools. So as we think about the algorithm longer term, what I would tell you is I don't see the need for a stepped-up increase. I think over a longer period of time what we'd like to do is figure out how we rework that mix, figure out how we can use the tools, the pricing tools, as a means by which to gradually pull back on trade and put that money against working dollars. As you look at it across the longer horizon of time, there may be a quarter-by-quarter period where we're bringing innovation to marketplace and we need the slot. But in terms of just working trade required to drive the business and advertising, I don't foresee a structural shift in the way we've invested in the past. Just a movement towards rebalancing that. And the tools and the capabilities that we're investing in today will enable us to do that.

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Brett Michael Hundley, The Vertical Trading Group, LLC, Research Division - Research Analyst [27]

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That's great. And if I can just sneak one more in, I just wanted to ask you a question about refrigerated dressings. So we've seen some of the actions that you guys have taken in the marketplace in order to protect or regain share. We've also continued to see a lot of competitive actions out there from some of your peers in securing new space and things like that. So as you pointed to, the space seems to remain competitive. You're out there with actions to try and regain that. Can you just update us on maybe where you think you are from an effectiveness standpoint? I know you've kind of told us to expect these changes to happen over quarters, and not necessarily months, but if you can just touch on that. It would be helpful as we think about that important category going forward.

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [28]

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Absolutely. It's also a great follow-up question.

So as you recall, a lot of this started because of increased competition driven by trade work. And as that started to happen, what you start to see is shares start to deteriorate and [TDPs] start to erode. True to what we told you about a few quarters ago, we'd use the tools to go in and optimize our trade. And what you're seeing is a movement towards a little bit shorter duration of events and a little bit deeper events, where we're able to get better execution. But long term, this isn't a strategy to grow the business. If you look at this category, refrigerated dressings, it's not an expandable consumable. This is really -- it's a short-term, intermediate-term holding position. And really what's ultimately going to restore the category for us and our retailers to growth is just good old-fashioned innovation. And what you see in the marketplace right now are those closed-in movements, where we're optimizing our trade spending to hold our place. And what you can expect to see come out into the marketplace into the remainder of the calendar year are going to be initiatives intended to turn around the category and restore the growth. I will mention, parenthetically, that as you look at some of the competitors that really catalyze this early on, we're starting to see their price movements back off. And if you look at the IRI data, you'll see that same thing. They've gone from very aggressive to less aggressive, and even walking away a little bit farther back than that.

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Operator [29]

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(Operator Instructions) Your next question comes from the line of Alton Stump with Longbow Research.

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Brittany Whitman, [30]

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It's actually Brittany Whitman, on for Alton this morning. I think I missed this at the beginning of the call. Can you just tell me what the percent of sales from retail was?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [31]

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The exact percentage, we're going to look for that. It was up about 50 basis points from the prior year.

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Douglas A. Fell, Lancaster Colony Corporation - CFO, VP, Treasurer and Assistant Secretary [32]

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Yes, 1.6% with Angelic.

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Brittany Whitman, [33]

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Okay. And then, I was wondering if you had any initial outlook as we move closer to fiscal '18, maybe for commodities or any other drivers of the business as a whole?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [34]

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Well, at this point, Brittany, the commodity side of things, we're seeing some, as you may have heard, I'm not sure when you got on the call, but we're seeing a little bit of inflation coming out soybean oil, dairy and garlic. We would anticipate, I think, that the garlic situation to carry through the calendar year. Dairy and oil, a little bit harder to predict, but at this point, don't see dramatic changes likely on the horizon. I think we'd probably say the same thing with the balance of our ingredient and packaging list.

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Operator [35]

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Your next question comes from the line of Colin Radke with Wedbush Securities.

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Colin Radke, Wedbush Securities Inc., Research Division - Research Analyst [36]

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Just a question on the foodservice. I know -- I think you're starting to lapse some of the customer rationalization initiatives from last year. At what point or at what pace do you think you can start to replace that lower margin business with some of the higher margin sort of national chain accounts?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [37]

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That's definitely a work in progress, and we are actively working day in and day out to do that. I think making some progress, but at the same time, I wouldn't want to put a specific clock on that. But I do think we're that moving forward. I think the impact -- the unfavorable impact of the rationalization starts to trail off pretty nicely in the fourth quarter. So hopefully, we've anniversaried the bulk of that at this point.

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Colin Radke, Wedbush Securities Inc., Research Division - Research Analyst [38]

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Okay. And then just in terms of Angelic. Looks like it's still running at a similar sales rate as when you initially acquired it. At what point could that start to ramp? Where are you with some of the bigger accounts, and just some update on how that integration is going?

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David A. Ciesinski, Lancaster Colony Corporation - President, COO and President of T. Marzetti [39]

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Sure. I'll start with the integration. That's going exceptionally well. The team in Milwaukee and our team here in Columbus have fused seamlessly. We went live from a systems conversion on April 2 and we really had no issues going forward. And all of our focus has been placed exactly on what you outlined, driving the top line and the business. So I won't go into specific accounts, but what I will assure you is that we had -- our organization goes through several rounds of training on their product portfolio. We've set up appointments. We've had some meetings. And without going into more details, that's exactly how we're looking to drive this business, just behind the [ECB bill], nationally. What I would also tell you is that we feel like our learnings in flat-out, and the fact that we're already there in that part of the store, has given us sort of a solid working appreciation for where to go and how to drive the business, which is helping.

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Colin Radke, Wedbush Securities Inc., Research Division - Research Analyst [40]

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Got it. Okay, maybe just lastly. In terms of the SG&A, I appreciate the detail in terms of the investments, the initiatives there. I just wanted to clarify in terms of the step-up in the spend. It looks like this quarter, that's around a $3 million range. I think you talked about maybe half of that being reoccurring going forward. So is that the right way to sort of think about SG&A? Are we talking sort of a $1 million to $2 million type of increase that's going to continue to flip forward? Or is it maybe more than that, just given some of the other moving parts in that line?

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [41]

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Well, from that initiative, I think that component of it, yes, I think that's a pretty good estimate. The other one of size is the amortization-related noncash expenses moving through the operating expense side of the income statement.

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Operator [42]

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Your next question comes from the line of Jeffrey Thomison with Hilliard Lyons.

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Jeffrey Scott Thomison, Hilliard Lyons, Research Division - VP and Analyst for Consumer Staples, Entertainment and Leisure Industries [43]

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My question actually was on Angelic, which you just answered. So thanks for that, and I will follow up later today.

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Operator [44]

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There are no further questions in the queue at this time. Mr. Gerlach, I'll turn the call back over to you.

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John B. Gerlach, Lancaster Colony Corporation - Chairman of the Board and CEO [45]

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Well, thank you, again. We appreciate you joining us today. We'll look forward to talking to you in August with our fourth quarter and full year results.

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Operator [46]

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