B&G Foods, Inc. (BGS) Q1 2012 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Thank you for holding. Welcome to the B&G Foods, Inc. First Quarter 2012 Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to David Wenner, Chief Executive Officer of B&G Foods. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to the B&G Foods First Quarter 2012 Conference Call. You can access detailed financial information on the quarter and our earnings release issued today, which is available on our website at bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer all of you to our most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. We also will be making reference on today's call to the non-GAAP financial measure EBITDA. Reconciliations of this measure to the most directly comparable GAAP financial measures are provided in today's press release. We'll start the call with our CFO, Bob Cantwell, discussing our financial results for the quarter. After Bob's remarks, I'll discuss the various factors that affected our results for the quarter, selected business highlights and our thoughts concerning the next 9 months. Bob?

Thank you, Dave. Net sales for the first quarter of 2012 increased $25.9 million or 19.7% to $157.3 million compared to $131.4 million for the first quarter of 2011. Net sales of the Culver Specialty Brands, which we acquired at the end of November 2011, contributed $25.6 million to the overall increase. The remaining $0.3 million net sales increase was attributable to $2.5 million of price increases, largely offset by $2.2 million unit volume decrease for our base business. Net sales increased by $1.7 million for Ortega and $1.2 million for Maple Grove Farms of Vermont. These increases were offset by a reduction in net sales for Cream of Wheat of $1.5 million, and B&G of $0.7 million. All other brands decreased $0.4 million in the aggregate. Gross profit increased $11.9 million for the first quarter of 2012 or 26.7% to $56.8 million from $44.9 million for the first quarter of 2011. Gross profit expressed as a percentage of net sales increased 200 basis points to 36.1% for the first quarter of 2012 from 34.1% for the first quarter of 2011. The increase in gross profit as a percentage of net sales was primarily due to pricing gains of $2.5 million and a sales mix shift to higher margin products, primarily due to the Culver Specialty Brands acquisition, partially offset by commodity cost increases. Selling, general and administrative expenses increased $2.4 million or 17.6% to $16.6 million for the first quarter of 2012 compared to $14.2 million for the first quarter of 2011. This increase is primarily due to increases in consumer marketing and trade spending of $1.8 million, brokerage expenses of $0.4 million and warehousing costs of $0.2 million. However, expressed as a percentage of net sales, our selling, general and administrative expenses decreased 20 basis points to 10.6% for the first quarter of 2012 from 10.8% in the first quarter of 2011. Operating income increased 31.2% to $38.2 million for the first quarter of 2012 from $29.1 million in the first quarter of 2011. Net interest expense for the first quarter of 2012 increased $3.8 million or 46.4% to $12 million from $8.2 million for the first quarter of 2011. The increase was primarily attributable to additional indebtedness to finance the Culver Specialty Brands acquisition and an additional $0.8 million of deferred debt financing cost and bond discount related to the acquisition financing. The company's reported net income was $16.8 million for the first quarter of 2012, a 26.1% increase as compared to reported net income for the first quarter of 2011 of $13.3 million. Diluted earnings per share for the first quarter of 2012 was $0.35, a 29.6% increase as compared to diluted earnings per share in the first quarter of 2011 of $0.27. Our EBITDA increased 29% to $42.6 million for the first quarter of 2012 compared to $33 million in the first quarter of 2011. EBITDA as a percentage of net sales increased to 27.1% in the first quarter of 2012 from 25.1% for the first quarter of 2011. Moving on to the balance sheet, we finished the first quarter of 2012 with $20 million of cash compared to $16.7 million at the end of 2011. Our current dividend rate is $1.08 per share per annum or approximately $52.2 million per annum in the aggregate based upon our current share count. We finished the first quarter of 2012 with $717 million -- $717.9 million in long-term debt. Our net leverage based on the midpoint of our guidance is at 0.42x. Our expected cash interest expense for 2012 is approximately $43 million, our expected cash taxes for 2012 are approximately $22.8 million, and our capital expenditures for 2012 are forecasted at between $11 million and $12 million. I will now turn the call back over to Dave for his remarks.

Thanks, Bob. Good afternoon, again, everyone. This was another excellent quarter for our business. Perhaps the most single most important aspect of our performance for the quarter was the successful integration of the Culver Specialty Brands into the B&G Foods portfolio. That success paved the way for our record-breaking numbers in several important metrics, as Bob cited. Net sales for the quarter increased by 19.7% to $157.3 million. Net income increased by 26.1%. Diluted earnings per share increased by 29.6%, and EBITDA increased by 29% to a quarterly record figure of $42.6 million. Last but certainly not the least, as a result of our strong performance in fiscal 2011 and in anticipation of the performance of the Culver acquisition, our Board of Directors increased the quarterly dividend by 17.4% to $0.27 per share on February 15. As you can see from the numbers in our press release and in Bob's comments, the acquisition of the Culver Specialty Brands delivered the top and bottom line contributions that we expected when we made the acquisition. Net sales of the CSB portfolio totaled $25.6 million. While this number is well ahead of the roughly $90 million annual sales estimate that we modeled, there is modest seasonality to the business. When that is considered, the first quarter number is in line with our estimates. The first quarter number certainly reflects the fact that the overall portfolio is in generally good health. In fact, this portfolio is probably the healthiest we have acquired in terms of stability at the time of purchase. That's not to say there were no prompt issues that needed to be addressed, but the issues that we have encountered in the first 4 months of ownership were all very manageable. The transition of the business from Unilever went very smoothly, with the U.S. integrations integrated into B&G Foods by mid-January, and the Canadian portion completed in March. As a result of the integration of the Culver Brands, we now go to market directly in Canada, and have a sales and distribution infrastructure there that should help us build sales of our entire portfolio with Canadian retailers. Acquiring a business with minimal issues also allows us to concentrate less on the recovery and more on growing the business. To that end, we have identified numerous distribution opportunities across the portfolio, and are working to fill what we perceive are distribution gaps across all classes of trade. We have also secured additional distribution of several brands already in mass merchants, dollar stores and a number of supermarket chains. This distribution will begin to contribute to our sales in the second quarter. We are also hard at work identifying and sourcing new products over a number of Culver Brands, and hope to introduce some of them as early as third quarter. The integration also went smoothly on the manufacturing and distribution side of the business. All but one cofactor continues to produce the brands as before, and the single exception was replaced without incident. Having secured the manufacturing base, we are now identifying cost-reduction opportunities. An almost immediate cost benefit from the acquisition can be seen in our distribution cost, which declined 40 basis points as a percent of net sales despite higher fuel surcharges. We had anticipated dilution of this cost from the acquisition, but the effect is even more positive than modeled. All in all, with just over 4 months experience with the Culver brands, I can say that we are very pleased with their performance and are excited about their prospects going forward. Turning to our base business. The very good news is that the net sales increase we did see reflected price increases of $2.5 million, much in line with our expectations and also in line with our requirements to offset cost increases. The majority of the price-related net sales increase came from pricing announced last fall, but the figure also reflected the more limited price increases we implemented in February. You may recall that our overall increase was modest, roughly 2% on average, so we have seen very little consumer effect from the pricing. In general, we are not all aligned with our competition either. There was only one brand where competition did not follow, and we will require to adjust price to remain competitive. Given these assessments of our competitive and consumer positions, we expect that we will continue to see pricing benefit similar to first quarter until we lap the timing of the increases. Volume in our base business did decline a modest 1.7% for the quarter. While it would be easy to attribute this to the general weakness that seems prevalent in the industry, in our case, the reasons for most of the decline appear to be more specific. We believe the primary reason was the unusually warm weather across the country. This affected several categories significantly, and our brands within those categories to a lesser degree than the category. Hot cereal felt the largest impact. The category volume was down 11% for the 13 weeks ended March 17. Cream of Wheat, which accounted 2/3 of our volume decline, felt that category weakness even though it was less affected than the overall category. A similar effect was seen in the syrup category. Pancake syrups declined by over 8% in the 13-week period. Beyond the weather, we were affected by promotional dislocations similar to those we experienced in early 2009. Then, as in the first quarter, retailers chose not to run promotions on several brands where we raised promotional price points. The ultimate outcome in 2009 was that the new promotional levels were eventually accepted. And we expect that the same outcome will happen this time. Of these 2 phenomena, the weather effect was much more substantial and a bit surprising. Cream of Wheat has been growing steadily for a while now, so its decline was unexpected. Our sales trends in the quarter continued to follow the channel shifts we've seen for the past year or more. A substantial part of the sales decline we did see came from the supermarket part of the business, and again, from the -- generally, from the eastern half of the country. We speculate that this is partly due to several chains that continues to lose same-store business, and partly due to high sensitivity in that region to weather. In any event, the decline in this portion of the business was offset to a degree by growth in mass merchants, which grew over 9% for the quarter, and by warehouse club accounts up over 6%. Our sales to dollar in drug were flat versus first quarter of last year due to lower sales of hot cereal. Sales of all other products to these outlets were up 37%. Food service sales were flat for the quarter. Examining performance by tier, our Tier I brands in the base business grew by 1% despite the Cream of Wheat sales decline. Ortega continued to be very healthy growing by over 5% and Las Palmas grew by over 3%. We continue to make inroads and distribution on both brands across virtually all retail channels. We are also active on the new products front, launching new dinner kits and reduced sodium seasonings in the Ortega line, and rolling out the new chocolate-flavored instant product in the Cream of Wheat brand. Beyond the hot cereal decline, the remaining volume decline that we saw in the quarter, felt primarily in the Tier II brands, many of which declined very modestly. The comments right here was weakness with specific supermarket retailers. Sales of the Emeril line were down for the quarter due to a supply issue with one cofactor. That issue is now resolved and the business back on track. We have several new products planned for this line as well, most of them in the pasta sauce and seasoning categories. Tier III brand net sales in the base business grew by 1.4%, much of that, price. This tier's growth over the past few years has been driven primarily by the Maple Grove brand, and this quarter was no different, with Maple Grove net sales increasing by over 7%. The brand saw a slight weakness in maple syrup sales, though not nearly as much as seen in pancakes syrups, but grew strongly on the specialty side of the business, particularly in salad dressings. We have launched several new dressing flavors in our all-natural dressing line and 2 new organic agave syrups as well. Our company has had good success with licensing well-known consumer oriented names, the Emeril line and the Cinnabon flavor Cream of Wheat being prime examples. Following that path, we announced a few days ago that we've entered a strategic alliance with Jarden Consumer Solutions to launch a line of Crock-Pot seasoning mixes for using Crock-Pot and other slow cookers. The initial launch includes 3 mixes: Hearty Beef Stew, Savory Pot Roast and BBQ Pulled Pork. Response by retailers has been very enthusiastic. The products have been accepted in over 5,000 points of distribution in the very early stages of presentations to customers. As a result, we are very optimistic about the prospects for this line, which is yet another example of how B&G Foods looks to create products that will be immediately accretive to our businesses' top and bottom line. We are delighted to be working with Jarden to bring these products to consumers and to provide to those consumers with economical and delicious ways to feed their families. Moving to the operational side of the business, the cost increases we experienced in the first quarter were very much in line with what we had forecast. Given our long-term buying positions on various commodities, we are still not paying current market prices for these goods but commodity and packaging costs did climb in the quarter and will continue to increase into the fourth quarter, when we will finally reach current market cost levels. Our forecast for the total effect of increases in 2012 remains the same, slightly less than 2% of projected cost of goods sold. Virtually all of that increase is coming from agricultural inputs. Packaging costs are coming in neutral for 2012, and currency, a negative factor in 2011, appears to be slightly favorable. What's encouraging is that these agricultural costs appeared to have peaked and even back down somewhat in the 9- to 12-month timeframe. Our commodity cost positions for the first quarter of 2013 are generally lower, albeit very modestly lower than our fourth quarter positions. Further good news is that it would now appear that our single largest commodity expense, maple syrup, will be a relatively neutral factor for the 2012 crop year. The U.S. crop was only fair and was abbreviated by warm weather. But the more important Canadian crop, which is still coming in, is shaping up as average at worst. This outcome will leave Canadian fuel cost at a slight increase, which should be offset by a favorable exchange rate. The remaining wild card for cost this year is distribution, which of course depends on the price of oil and result in fuel surcharges. Higher oil prices in the first quarter meant that we experienced higher fuel surcharges than hoped in the quarter, but this additional cost was more than offset by cost dilution from the Culver brands, addition of volume shipping through our systems. As of today, fuel surcharges are roughly the same level as this time last year. If this continues, we will continue to see a net benefit from the Culver acquisition. As Bob mentioned, the SG&A expenses increased $2.4 million for the quarter, substantially, all of that increase spending related to the added volume of the Culver brands and the case of sales and warehousing expenses and the marketing expense related to the brands. This CSB acquisition has increased our marketing budget in support of our brands by 45%. We are actively reviewing the spending that we inherited for the Culver brands and identifying what is effective and efficient and what is not. Our intention is to redirect monies as appropriate to more productive support of the base business as well as the Culver brands. These various elements of the P&L combined to produce an increase in EBITDA of 29% to a record -- a company-record quarterly number of $42.6 million. The Culver Specialty Brands acquisition contributed as expected to this number and is on track to reach our estimates for the full year. Accordingly, we have reaffirmed our EBITDA guidance for 2012 of $166 million to $170 million. At the midpoint of this range, our full year EBITDA will increase by 28%, the result of successful acquisition -- execution on the Culver Specialty Brands acquisition and solid performance by our base business. At this time, we'd like to open the call up to questions. Operator?

[Operator Instructions] We will take our first question from Ed Aaron of RBC Capital Markets.

Maybe you should start with the Culver business. It sounds like you maybe gained some really sales synergies there. Can you maybe just talk a little bit about just order of magnitude, how much you picked up and what that could mean for in terms of sales contribution? And then also, as a follow-up to that, could you, if you have it, give the comparable Culver sales number from last year's Q1?

Well, as far as where it's going to go, it's too early to say. I mean, we are seeing, gaining distribution, but so far, it's a kiss and a promise. I mean, we have acceptances of the product, but to nail down a contribution number from a sales point of view, you really need to get to the timing of the shipment. And that's highly variable depending on the customer, and I can't say. But we do know that we have a significant number of promises to add distribution on this and we are seeing some orders already. And it's really going to depend on the timing. But we're very encouraged by the trend. As far as the prior year, the earlier number...

We're up a little over $1 million versus prior year same timeframe on Culver for the first quarter.

Okay, great. And then last year, I think you had a little bit of an impact in your first quarter from the Eater timing shift. Was that a benefit on the year-over-year basis in Q1 that will reverse out in Q2 this year?

We really didn't see volume move around Easter like we did last year. It was pretty neutral this year.

All right. And then one, last one for me is that I think you made a comment about inventory changes in the channel. Was that kind of specific to 1 or 2 retailers? Or was it something that you kind of saw more broadly speaking across the business?

I don't think I actually said anything about inventory in the channels. But we did see a couple of wholesalers we believe pull back on inventory at the end of the quarter.

And we will take our next question from Sean Naughton of Piper Jaffray.

So I think you had mentioned before the inflation in the cost of goods sold for this year x Maple syrup, it was going to be up around a little bit less than 2%. And given the fact that Maple syrup has come in maybe a little bit better than what people may be expecting. How should we think about the inflation and COGS for 2012?

Well, the number we talked about really ignored or set aside Maple syrup. And for it to come in neutral, which we believe it will, we're still around 2% cost increase.

Okay. And then given the fact that EBITDA looks like it was up about 200 basis points in Q1, is that a fair way to think about kind of the total for the year on a year-over-year comparison? Do you continue to expect to generate that kind of nice improvement year-over-year on the margin front?

Yes, I mean, the acquisition itself brings that mix of EBITDA or up about 200 basis points.

Okay, great. And then I guess just lastly, a couple -- the cash taxes, looks like it was up a little bit from what we talked about in Q1. Is there anything -- excuse me, on the Q4 call, is there anything that has kind of changed there or how should we think about that?

No, not at all. That's just a better reflection of where we expect to be. It's a pretty accurate number at this point of exactly where we'll be for the year.

Okay, fair enough. And then maybe one last question on -- anything on the negotiation's front in Portland, Maine, I know there had been some -- there's an agreement coming up I think at the end of April.

The contract goes for a vote on Saturday. So I can't, other than that, I really can't comment.

And we will take our next question from Reza Vahabzadeh of Barclays.

So on the acquired Culver portfolio, is it accurate to assess your comments that you haven't found any negative surprises since you've acquired it in numbers or essentially in line with your expectations?

Yes, I think that's a fair comment. There's no -- there's -- you always have a few little surprises, but nothing that I would call meaningful.

Got it. And then any positive surprises? Anything that maybe you underestimate as far as the potential for the portfolio?

Well, I think, as I said in the last call, we were very pleased with the Static Guard. It really was a little bit -- a little jewel in the portfolio and I don’t think we fully appreciated how good a brand that was. Speed to get into this transition has helped us significantly in terms of I think securing some things that otherwise wouldn't have happened. And the primary example of that is that Baker's Joy went into the baking aisle at Wal-Mart for the Easter bake season, and that helped Baker's Joy tremendously. And as I said earlier, we're really making a lot of headway in terms of going out there and pounding on the doors with the customers and pointing out distribution gaps, and as the year progresses, hopefully filling those gaps. So there's a lot of opportunity.

Right. And then as far as the -- you made some comments in the prior calls that consumer is showing some elasticity of demand as promotive price points go higher, and volumes have been on the soft side in packaged food. Are you still seeing that? Do you see any signs that maybe the consumer is adapting to the higher promoter price points?

It's very hard to say what's going on, whether it's price or what's going on with the consumer. I know everybody is very baffled by that, so I can't say it's push back on price necessarily, because the response -- the weakness in the industry seems to be very broad. I had a -- the latest run of all the categories we compete in the other day, and it -- as you would expect, it's a page-long list of all the categories, and anything that's negative is red. Well, it was a sea of red. There were literally 3 categories that weren't down in unit sales for that 13 weeks. So I think it's more than price. And I think everybody is seeing a general malaise in the industry from the consumer and of course, the overlying question is what are they eating. But it certainly, to me, is more than a push back on price. You see that in very specific categories, where the price increases are more substantial than our average price increase, but there's a broader trend than that.

Got it. And I'm sorry, I didn't -- can you just highlight some of the brands that were affected by, whether I think you mentioned Cream of Wheat? Anything else that may have been affected by the warmer-than-usual weather?

Well, we think our preserve business, our pancake syrup business, the maple syrup business to a small degree but not nearly as much as the pancake syrup business. Even recipe beans, which is all about making chili and things like that, even that was somewhat weak. But definitely, hot cereal was, by far, the worst.

Got it. And then do you have fuel cost inflation in your COGS inflation estimate for the year?

Well, we estimated that we would see an increase in the first quarter. And then, hopefully, it was going to be neutral for the rest of the year. The first quarter, our fuel surcharge number was probably -- and then we're talking hundreds of thousands of dollars here, it was probably couple of hundreds of thousand dollars higher than we expected for the quarter. But as I said, we saw more dilution of the cost as a percent of sales coming out of Culver. It didn't add the expense we thought it might, and so we ended up with a positive net affect there. For a lack of better information, we're forecasting that everything is going to be neutral for the rest of the year.

[Operator Instructions] We'll go next to Gary Albanese of Auriga.

I just wanted you to expand upon the Jarden alliance. I believe you mentioned 3 different styles by September, with plans to build out on that line in the future. Can you sort of quantify what your thoughts are and then how big that product is going to be?

Well, we really don't know how big it's going to be. That's the fun of doing new products, is you put them out there and you pray somebody buys them. But the first good sign is that retailers, as I said, are reacting very, very positively and we're starting to ship products here in the third -- in the first -- second quarter. So it's not going to happen in September, it's going to happen now. And we'll be shipping product in some quantity here next week. Could that -- it'll be $1 million, $2 million at the pace we're going right now. But certainly, that could accelerate. If it's successful, we will obviously look at expanding the offerings and trying to expand on the opportunity. But when you're just getting the distribution out there and you haven't got a clue whether the consumers are going to buy the product or not, it's very hard to make a forecast.

Okay. I know I'm getting a little bit ahead of myself, but I mean, is there a potential to expand upon the relationship with Jarden, either through stuff with the Coleman line or the Sunbeam line. I mean, there seems to be some pretty good overlaps that you guys could do with them.

No, there is a potential to do that. I mean, we have a number of products that are good for cooking on grills and things like that. Absolutely. We just thought this was the most obvious one because people know what to do with a slow cooker, and these are great recipes for that particular appliance.

Okay, okay. And then just lastly, I mean, the capital needs for this product, for these products, I mean, that's probably going to be fairly minimal to start, is that fair to say?

Oh, yes. Minimal inventory needs and we are not -- it's being co-packed, so that reduces your working capital needs substantially, no equipment, anything like that.

One question remaining at this time that comes from Andrew Lazar of Barclays.

Just a couple of things, I guess. First, and I'm thinking about your comment around some of the scanner data that you looked at across all of your categories and seeing all the categories are kind of a lot of them in the red and whatnot, have you seen any change in that data, if you think about it for the quarter versus kind of more recently? In other words, is there a sense there that there's been any real stabilization, potentially just things looking less bad? I know we don’t have a lot of great explanation for why vibes in the industry as a whole has been weak. But maybe I can just hang on to some comments from companies, let's say, it's the least, getting less weak for whatever reason?

Well, I don't have any more recent information, the latest 4 weeks hasn't come out yet. At least I haven't seen any yet, the one that would come out mid -- right about now, as a matter fact, or mid-April. So I don't have any more information beyond that. My sense is that we may start to flatten out some, once we get past this anomaly in terms of year-to-year, weather patterns and things like that, but that -- or we may not. I mean, I'm just speculating because, as you say, I'm not sure exactly what's going on. And I would say that the effect on most of our brands is very, very minor. But it certainly detracts from positive sales that would have helped you on something as clear as the hot cereal negative.

Right. And that was my next question. I was getting into this, kind of parse out what the issues were on your base volume versus those of the industry is seeing, and I guess you said in your prepared remarks, you really don't think your volume weakness has a whole lot to do with the broader sort of industry malaise. And I think you said you thought that, I mean, you may not have said this, whether your estimation is kind of hard, but was that the lion's share, do you think of your volume weakness as opposed to -- you do this, but as opposed to just kind of the overall industry piece?

I think it was the lion's share of the decline we saw. I think the overall industry piece took away from upside in other areas that wouldn't otherwise have been weather affected and kept us from compensating for weakness. One of the real strengths of our business, the way we look at it is, when we have as broad a portfolio over as many categories as we have, a specific category issue is one out of many, and is more than compensated for by the others assuming the others are performing normally. So when the whole world falls out of bed, which is very, very unusual, you just don't have -- you don't have those positives to pull the 1 or 2 real negatives up.

Yes. And then the comment around retailers' merchandise some of your items in certain categories are a bit less given the higher promoted price points. Is that -- was -- that sounds like it was something a more minor issue versus impacting your volume in the quarter. And has that pretty much now worked itself through the best of your knowledge?

I -- yes, I'm assuming it's going to be the same as it was in 2009. Everybody has a little -- it gets a huffy because what was $0.99 is now for 4 for $5. But when they realized, well, that's the game now because this cost associated with that went up 60%, then we get over it. And actually, the one brand B&M that was -- that had that kind of event actually was up a little bit for the quarter in dollar sales, even though we missed some pretty good sized promotions we would normally have done otherwise. And that's the brand that the same thing happened 3 years ago, and we all made up and moved on with the higher promotional prices.

And then maybe just 2 other things. One, last quarter, I think you had said that for the full year, you'd anticipate sort of base volume growth maybe in the -- up in the low single-digit range. Is the start to the year, if you will, around base volumes? Does that change that thought process, just the slower start on the base side?

Well, obviously, it's not a great way to start when you're trying to get to those kind of growth numbers. So it puts us in a little bit of a hole to get to those numbers. I think it's too soon to say whether we're going to be able to totally climb out of that hole fast enough with only 3 months under our belts.

Got it, okay. Last thing is the -- and I assume again this is somewhat more weather related, but when you reported your fourth quarter, it was about really like about 2 months ago. And at that point, you'd said, hey, the quarter is off to a really good start from sort of a volume perspective. Was it just obviously again from your standpoint, sort of the weather shift as happened later in the quarter that just impacted kind of Cream of Wheat volume primarily?

Yes, I was thinking, as I was rereading my remarks, I was thinking the same thing. Because we were having a very good January, had a very good January and had a decent December, and then it all fell out of bed on the hot cereal side in February, and then volumes firmed again some in March. So it's not a steady thing like it normally is. Usually, our business is very, very level, predictable. There is certainly more gyrations to it than there are normally and -- but I think the hot cereal thing, I think you may have had -- here is my speculation. The hot cereal thing, you may have had retailers ordering as normal, consumer sales didn't happen, now retailers have too much inventory, so you'd see a dramatic pullback in orders from the retailers, so you had January chugging along in good shape, and then February, you get that kind of a response. Everybody lowers their inventories and now you would go back to normal or more normal in March. That's very possibly what happened.

And at this time, there are no additional questions. I will turn the call back to our moderators for any additional or closing remarks.

Thank you, operator. As I said, our base business did better than most in first quarter. We're very encouraged by the fact that we got the pricing we needed to get to cover cost in the quarter. We will see what happens with volume, but the volume drop was fairly modest. But more importantly, the Culver acquisition, which is a substantial addition to our company performed as we expected it to, and really presents us with a lot of opportunities to improve performance as we go through the year and we're looking forward to executing on that. Thank you all for joining us.

And this does conclude today's conference call. Once again, we thank you for your participation, and have a wonderful day.