Welcome to the Flowers Foods Third Quarter 2014 Earnings Conference Call. My name is Helen, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Marta Jones Turner. You may begin.

Thanks, Helen, and good morning, everyone. Our third quarter results were released, and the 10-Q was filed earlier this morning. You'll find those posted on our website in case you need them. The PowerPoint presentation that supports our discussion is also posted on the conference call page on the website. You know that as I -- as we get started, it's important that I remind you, our presentation today may include forward-looking statements about our company's performance. Although we believe those statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially. In addition to matters we'll discuss during the call, important factors relating to Flowers Foods' business are fully detailed in our SEC filing. Participating on the call today, we have Allen Shiver, Flowers Foods President and Chief Executive Officer; and Steve Kinsey, our Executive Vice President and Chief Financial Officer. As Helen said, following our prepared remarks, we'll open the call for your questions. Now I'm happy to turn the call to Allen Shiver.

Thank you, Marta, and good morning, everyone. Thank you for joining our call today. During the quarter, we achieved margin expansion. We grew sales in new markets with the help of our new brands. In addition to growing sales, our team focused on profitability. In this quarter, we expanded our margins to achieve adjusted earnings growth of 16.7%. The 2-year perspective shows that we continue to maintain a strong market position in the face of intense competition for market share. We believe the brands that we acquired have helped us hold on to the share that we gained as consumers adjusted to the new competitive landscape caused by Hostess' bankruptcy. We remain committed to providing great service to our existing and new customers. And we continue to optimize our operations and strengthen our position as the low cost producer of quality bakery foods. Turning to the quarter. Our branded bread and roll business continued to grow, driven by sales of our acquired brands Wonder, Home Pride, Butternut and Merita, which were up about 8% sequentially from the second quarter this year. Our branded unit volume is encouraging. The pricing pressure has resulted in sales dollars growing slower than unit volume. As I've said in quarters past, the consumer remains pressured and competitors are relying heavily on price promotion to drive volume to their brands. Last quarter, we discussed our intent to realize a more normalized level of promotions by quarter 4 of this year. During quarter 3, we took action. And by the end of the quarter, we have reduced our promotional spending as a percentage of sales. Now that our acquired brands are back in the market, we are putting more attention on our core markets and established brands like Nature's Own. We're focusing on the fundamentals by strengthening…

Thank you, Allen, and good morning, everyone. As Allen discussed and our results show, we did experience a weaker top line this quarter. However, our efforts to drive margin improvement are paying off and we're able to drive significant margin improvement year-over-year. We completed the sale of certain assets from the Leo's operations during the quarter, and we continue to see improvement in those areas we focused on last quarter, such as improved manufacturing efficiencies, reduced carrying costs of the acquired facilities and improved results at our Lepage operations. As Allen said, sales in the quarter were down 3.3%. A positive net price mix of 1.1% was offset by decreased volume of 4.4%. The positive price mix was driven primarily by a positive mix shift, mostly due to the strong brand performance in our portfolio. Overall, pricing was down due to promotional activity. Volume declines were driven by declines in our branded and store-branded cake businesses, store-branded bread and rolls and foodservice, primarily our tortilla business. Despite strength in our expansion markets, our core market sales remained pressured by a strong competitive environment in bread, buns and rolls and cake. Our DSD business had mixed performance. Growth in our branded bread and rolls did not offset the decline in branded cakes and store-branded bread and rolls. Our expansion markets, representing 6% -- of roughly 6% of total DSD sales performed well and contributed growth of 2.2% to the overall DSD business. In our DSD business, sales of store-branded products were down 9%. Our Warehouse business sales declined 11.8% as compared to a year ago driven primarily by decreases in snack cake and foodservice. The Warehouse branded cake and store-branded cake business have both continued to be negatively impacted by Hostess Cake brands. Also during the quarter, we exited the less…

Thank you, Steve. Our company has been built over 95 years by the hard work of thousands of Flowers team members. There have been good years and there's also been lean years. But over time, we have consistently improved our quality, our sales and our profitability. As I look back over the past 2.5 years since the Hostess liquidation, I must remind myself how our company has taken advantage of the opportunities to accelerate both sales and earnings. We have truly taken our organization to a new level. For example, in the past 2 years, our sales have grown over 25%. Our EBITDA is up 37%. And our adjusted earnings per share is 42% higher. Not only did we add sales volume but we also leveraged our cost structure. Most important, as we look ahead, our acquisition of the Hostess bread brands and bakeries dramatically lowers our costs of entering new markets, and we will realize those growth benefits for many years to come. Thank you for your attention, and now we'll open the line for questions.

[Operator Instructions] The first question is from Eric Katzman with Deutsche Bank.

I guess, it seems like across your business, the real pressure came from some foodservice parts of the business, private label and more of the branded Warehouse snack cakes. If you -- is there a way to kind of quantify like how much of the business is, in terms of revenue, is underperforming versus what sounds like the -- a good chunk of the branded fresh bread and roll stuff is doing okay? Like how much of the top line is really challenged?

Eric, let me take a shot at that, and I'll ask Steve for help. If you look at really 3 areas, our decline in store brand or private label bread -- and again, those were bids that had significantly low margins, so we made the decision to exit that. The second area is store brand cake and also our branded cake. And that is directly tied to the reintroduction of Hostess Cake to the market. And then the third area is really the foodservice tortilla business. And Steve did a good job describing the exit with Leo's, and we made the decision to move away from that. So store brand private label bread, the cake business and then foodservice tortillas, really, those accounted for about 92% of our total decline for the quarter. And those are the 3 areas. Overall, in our branded products, we mentioned that we are working hard to reduce the amount of promotional activity. And I think that is also reflected in the improved margin that we saw during the quarter. Steve?

Eric, when you look at the various categories, obviously, store brand, as Allen said, is roughly 16% or so of the DSD business. But it was only down, as I said, about 9%, so it's fairly inconsequential. And then on the cake side, about 20% of our business, it's been tracking down half single digits this year. Hopefully, that should stabilize as we finish up the year. If you recall, even though Hostess reentered the market in July of last year, it was a staged rollout that continues throughout 2013. So we would hope that, as we go into '15, things begin to stabilize from a cake perspective.

Okay. And then, I guess, next question has to do with Allen. Your kind of strategy around snack cakes, obviously that's -- you kind of highlighted that you're better than where you were 2 years ago, but significant pressure. And I assume that, that is mostly a price-based competition as opposed to execution issues or something else. So is the only response from you really to kind of fight to the lowest common denominator and just cut costs and fight based on price? And do you see any signs of Hostess becoming more rational in the way they're promoting or marketing their brands?

Eric, really, the pricing is not a significant issue in the cake segment. If you look in the rearview mirror, we've been putting a lot of focus on reintroducing the acquired brands, Wonder, Merita and so forth. And not to say we've neglected the cake category, but we've probably had higher priorities. If you look in the past year, 1.5 years, never been more optimistic about the growth of our Tastykake brand. We continue to invest in improved packaging. We're developing new items. We have some really exciting seasonal items on the market right now. And we feel like the Tastykake is a great addition to our DSD structure. So still very bullish on growing our cake business over the long haul. There also is -- areas of the U.S. where we do not have DSD distribution that offer opportunities for expanding our cake business. So we'll do all the things you described in terms of controlling costs and making sure that we're efficient. But at the same time, we're very bullish about growing our cake business over the long haul.

Okay. Then, I guess, last question, Steve, last quarter, I think you had highlighted that in the DSD fresh bread and roll side of things, the growth in the business had also resulted in a much bigger hit from stale rates. And you didn't mention that as a -- I guess, one way or the other, and I'm just kind of wondering where that stands.

In overall, Eric, sale -- we have seen sales begin to trend more positively. It's not significant at this point, but we are pleased with the progress. We're taking steps to help from the ordering perspective. And the coming into the -- the third quarter was not that substantial. But coming into the fourth quarter, we have seen some nice trends that we feel really good about the direction we're headed there.

The next question is from Farha Aslam with Stephens.

Following on to Eric's question regarding cakes, one of the issues was trying to get features outside of the normal cake displays. Have you been seeing an uptrend in that here starting off in the fourth quarter in terms of display activity?

Again, as we're putting focus, I didn't say back on cake, but the -- we're putting significant focus on getting off-rack displays of our Tastykake. The seasonal items that I mentioned earlier are a good example, the single-serve Tastykakes are doing exceptionally well as we extend that into new markets. And it really works well with our independent distributor model because in many cases, these are incremental sales that certainly help their business as well as ours. So we're excited about the future for Tastykake.

Okay. And then in terms of commercial cadence, I think both you and Steve highlighted that the competitive environment remains very tough. But if you had to compare today's promotional activity versus maybe 3 months ago in the third quarter, how would you characterize it? And kind of what are the trends you see going into 2015 in terms of promotions on bread -- branded bread?

I think the best way I can answer that is really comment on our strategy and with our margin improvement this past quarter, obviously, we've taken action to reduce the amount of promotional activity that we're generating. It's still very much of a market-by-market situation in terms of competitive pricing. It's hard to say it's dramatically better, but I would not say that it has deteriorated. And I think the action that we're taking is extremely visible in the marketplace. And we're focused on building our brands for the long term. And we can do that through quality and great service without having to rely on price nearly as much as we have in the past part.

Great. My last question regarding M&A. Do you feel the Flowers organization is ready if acquisitions came up to add to your current business? Or and -- do you -- are you seeing M&A opportunities come up?

Farha, we're -- as I mentioned, we're always looking for the right acquisition opportunity. It's hard to determine exactly what the right time is. We have to be ready when the other company is ready. But if the right acquisition came along, we certainly would not hesitate if it was a good fit. One of the strengths of our company is our team. We've got the most experienced team in the industry, and we have the ability to handle an acquisition while we continue to keep momentum improving in other parts of the business. So I guess, the short answer is that if the right acquisition opportunity came along, we would certainly take a hard look at it.

The next question is from Brett Hundley with BB&T Capital Markets. Brett M. Hundley - BB&T Capital Markets, Research Division: Steve, I had a question on guidance, just to make sure that I'm understanding this correctly or thinking about it correctly. So your gross margins were indeed better than expected during Q3. It was nice to see that improvement. And when I look at your guidance, your implied guidance for Q4, it implies a scarier margin for DSD than what I would have expected. And I'm guessing that some of that is defending share amidst a more competitive environment. So maybe I'm wrong, but if you could address that and if it is, maybe defending share, is that the right call for Q4 and beyond?

No, I think when you look at the fourth quarter, we still expect margin improvement. And from -- as Allen said and I said from a competitive perspective, we were trying to pull back on promotional cadence. We think that it adds with [ph] the revenue and the top line. When you look at margin for the DSD group in the fourth quarter, overall, I would say it's not going to-- we don't expect much pressure. We expect it to continue to grow in our full year guidance on margin -- gross margin growth, it's still intact, being up in that 30 to 50 basis points. Brett M. Hundley - BB&T Capital Markets, Research Division: Okay, that's helpful. And then...

Brett, this is Allen. Before you leave that, also a reminder that if you look at the fourth quarter, we have 3 holidays that also have an impact on our operations. Brett M. Hundley - BB&T Capital Markets, Research Division: Okay. And I wanted to stay on pricing, particularly as it -- particularly as it relates to next year. And a couple of things that we're seeing right now are increases in freight. We're seeing some of that disconnect between wheat futures and flour costs. And I wanted to get your perspective on your ability to hedge today. Is it harder for you guys to hedge out because of that disconnect? And secondly, regarding that pricing outlook, because of some of these added costs and difficulties, do you think that the industry can be more rational and that you can see a more favorable price going forward because of that environment?

Sure. When you look at the outlook, obviously, we've seen a very nice pull back on wheat futures. And we still feel very strong about our strategy to hedge for the futures perspective and feel like we have gotten to a fairly -- fair value compared to where it has been. But we definitely have the same view as you do when it comes to the bases and freight. It seems that there hasn't been any relief on those components of the Flowers cost. And now that we've actually had some winter weather hit early, and then the forecast could be strong winter weather again in the North and Midwest, it does give me a little concern from a freight and bases perspective because we still had not straightened out the situation that had built over the last couple of years. So that -- so looking forward, that does cut into some of the tailwinds provided by the pullback on the wheat futures. Brett M. Hundley - BB&T Capital Markets, Research Division: And that's understandable. However, do you think that as a company and potentially as an industry that you guys can price that through, or is it just too difficult to call?

Brett, I would say it's probably too difficult to call at this point. But obviously, this industry as a whole deserves higher margins. And as we look at the years ahead, with the consolidation continuing, you would think that, that will come to pass at some point. There's a lot of -- a lot of work is taking place to make sure that the retailers understand the value of this category to their business, and it will be important for them to improve their margins, which, at some point, will improve the bakers' margins as well.

Brett, this is Steve. One final comment on that. I would say, we've talked about promotional cadence, and it's really about net getting price. So if you're able to pull back on promotional activity and see net price improve, that should -- that could offset some of the higher cost related to the bases and freight as well. Brett M. Hundley - BB&T Capital Markets, Research Division: Yes, okay. And then just my last question, just -- Allen, more of a high-level question for you. Just our opinion here is given some of the competitiveness and the moving parts within the broader fresh bread category, 2 areas that we really see that growth and maybe even potential for better margins over time is in premium bread and the breakfast category. And you guys have talked about Cobblestone, but I was wondering if you can lay out additionally, how and when Cobblestone can be meaningful for you guys there, your plan surrounding that, and then also what your strategy would be in the breakfast category as well.

Brett, you're exactly right. When we look at our opportunities to grow our top line, obviously, the specialty bread category is underdeveloped and also, our breakfast category is underdeveloped and those really underlying big opportunities for Flowers. Cobblestone Bread Co., we're very early in the game there. As I mentioned, the early indications are exciting. We continue to do extensive research so we better understand the consumer, both in the breakfast category and the specialty bread category. Those will be segments of the market that we'll be looking at as far as our long-term growth. I don't have anything to report today. But I can confirm that those are important segments of the market for us. And they're going to be more important as we look at the road ahead.

The next question is from Bill Chappell with SunTrust.

I understand you're not giving next year's guidance. But just trying to understand what you see today, continued competitive pressures, the expected kind of lag for the cake business, at least through -- until you lap it mid-next year, I mean, is it possible to grow top line next year, excluding the extra week that you'll comp against?

Bill, I think it's always possible to grow the top line. We're a -- I think if you look at our team, we have an aggressive team in place that is really focused on doing everything that we have to do to grow the top line. And it's -- the opportunity really in any one area. We talked a lot about new markets and the ability to grow our business and our expansion markets. Really exciting to see the work that is being done in that area. We also continue to look at our Tastykake brand, and the Hostess reintroduction now is about to cycle. And some of the activity, from a display standpoint, will start to go our way. We've got new items that are in the queue for our cake business, so we're excited there. And again, there's no reason that we can't grow our top line as we look at next year. But again, I want to be careful that we don't jump the gun and give guidance at this point. But just in general, our team is not satisfied unless we're growing the top line.

Okay. And then just maybe you can help me understand the dynamics then on the Tastykake business because it seemed like a real surprise came last quarter when they had won some new share and maybe you've taken your eye off the ball a little bit. Is that -- we don't really lap that until next June, or should we start to see the comps get easier sooner than that?

I think what I was really referring to is the activity in the marketplace, with Hostess tying up a lot of the off-rack displays. We're seeing more and more Tastykake displays coming back into play. And I think that the retail trade, we're really trying to do a better job, reminding them the benefits of DSD and how the cake business really fits well with Direct-Store-Delivery. So it's a category -- the good news is, and from a pricing standpoint, price really has a bit of a big issue in the cake business. It's all about merchandising, off-rack displays, availability, new items and creating excitement. And that's what we know how to do.

Okay. And then just kind of looking at -- you talked about retailers being more educated about the pricing promotion environment and you're continuing to kind of work through your promotions. I mean, is there any sign from the competitors that -- or from -- that we'll better by year-end? Or is it -- are you kind of assuming where this is, kind of where we're going to be, there's not much that can really move until your major competitor moves?

No. The process I mentioned with retailers is really a long-term educational process of how important the category is. So again, I don't see any dramatic changes in the near term with retailers' pricing strategy. What we are working hard on is the pricing environment that we see today. Our assumption is that's going to be the pricing environment that we live in as we go into next year. If the improvements happen, then that will be a good thing. But at the same time, we're making sure that our cost structure is in place. So that it -- not only that we can be competitive in the marketplace, but we can also hit our earnings number as we move into the new year. So my comments about improving pricing is more directed in the longer term.

Got it. And last one, just in regards to share repurchase, it looks like there was at least a step-up this quarter. It didn't show up kind of in the share count, so was that more towards the end of the quarter? And does that -- the signal that we're going to maybe see more like that in the coming quarters?

Bill, really, it was more opportunistic throughout the quarter. It wasn't a block purchase or anything at one time. But what I would say, share repurchase is always part of our capital allocation. We do consider that a great way to return shareholder value, and we'll continue to keep it up the top of the list when we think about excess cash and how we can return value to the shareholder.

But no change per se just at current levels?

It's hard to say what the cadence will be. We still have our strategy to buy in share to offset any dilution. We are currently lagging that over a 2-year period. So we want to get back in line with at least that strategy and then -- and look forward -- and then try to continue to think about excess cash and how we use that to create value.

The next question is from Tim Ramey with Pivotal Research.

I noted your comment on the acquired brands of 7.8% sequentially. Is there any -- can you give us any help on where the sales level for those acquired brands would shake out right now?

Tim, I don't -- we really don't disclose it. It's about...

Yes. For the quarter, Tim, it was roughly about $45 million.

About $45 million. Okay, terrific.

We've been doing that each quarter. We just put the percentage rather than the dollar figure this time.

Okay, terrific. And just to recap on the asset sales. I think you said it was 13 warehouses and 3 bakeries for $18 million in total, is that correct, year-to-date?

Yes, that's correct.

Okay. So it seems -- I haven't piled through every page of the 10-Q yet, but it seemed like earlier, there was maybe a plan to keep about 9 of the acquired bakeries and the remainder to be sold. Is there an update on that? And if -- I apologize if it's in the Q.

Really, what the plan was, we had 9 listed for sale. We said we had roughly 5 that we had future plans for and we had about 5 that was to be determined. And today, we're still evaluating those 5 to be determined, so there's really no change in our plans at this stage.

So 5 are likely and 5 are on the bubble?

Correct. What I would say though, what we have done is we have equipment that we can use in other locations, and we have some equipment around but we wouldn't disclose where publicly.

Okay. And just a random thing, I noted that the distributor notes were up about 9.4% year-to-date. I don't know, I can't think of any reason why there would be seasonality in those. And that sounds like it's bigger than the growth in new routes. Any comment on those?

Yes. I mean, we've actually sold quite a few territories with the new markets. We've sold some in California, and then we've also converted a majority of our Lepage distributors to distributors.

And next question is from Amit Sharma with BMO Capital Markets.

Steve, you provided sales breakdown for the cake business down 8.3% and DSD Warehouse. Can you do the same for us for the fresh bread business as well?

I'm not sure I understand what you're asking.

So you said cake was down 8.3%, it was down 7% DSD and down 10% Warehouse. If you look at your fresh bread business, can you say -- is it down? I think it's down 2%, but if you can say that, how much was it down? And then what was the breakdown of sales between branded and nonbranded business in the fresh bread?

Overall, the branded sales were up fairly nicely. The pressure on the bread business came in the store brand. We chose to not bid lower off a business that we did lose some units on the store-brand side, and that affected overall store brand. So what I would -- what I did say was store brand was down about 9%, so you should be able to tell from that, that branded was up pretty nicely.

Yes, Amit, our DSD business, branded bread, Nature's Own, acquired brands were up about 1.4%.

1.4%. That's perfect. That's what I was looking for, okay. And then you talked about starting to rationalize your promotional activity. Now are we seeing any volume impact from that so far? Are they -- is it getting worse? Or if you had modeled from elasticity impact from that, is that within expectations, more or less?

Amit, the -- it's really early to tell. Obviously, the reduction in promotional activity is reflected in our improved margins. But again, it is too early to tell. A lot of the changes in terms of promotional activity hit middle of the quarter. And they'll continue -- they're continuing now and we'll continue as we move in to the new year. It's really putting focus on -- when we have a promotion that we have an off-rack display so that we generate incremental sales, and that's really important. So that's what our team is focused on now.

Okay. And Allen, you mentioned, I mean, right now, you mentioned as well, about the off-rack display, then merchandise, especially on the cake side of the business having a bigger impact on underlying sales trend. So other than promoting or paying for those displays, how else can you get some of those displays back, especially on the cake side, which tends to be highly impulsive in terms of consumption?

The real key is all about service levels, and we -- it starts at the national account level, and it ends up at the individual store level. And our independent distributors do a great job of servicing their accounts. And basically, displays are approved usually at headquarter level, and then they're implemented all the way down to the individual store level, with our sales team asking for the display. And then once you have the display, it's your job to make sure it's well stocked and well maintained, and we do a good job of that. So that's how it works.

How long is the turnaround on that? So are you are starting to see some of the displays come back to Tasty yet or we're not seeing...

I've mentioned that our single-serve items are doing especially well on off-rack displays. And we're also -- a complement of that, with seasonal packaging on a lot of our Tastykake items that again are lending themselves to a lot of display activity. So even though the cake category, with Hostess back, continues to be crowded, I'm very optimistic with the strength of Tastykake, the strength of our sales team and all the marketing activity we've got behind Tastykake that, that brand is going to continue to grow.

And so the implication, maybe you're still happy with that brand and you don't need to add any large brand on the cake side to improve your positioning in that segment.

We are happy with our Tastykake brand. But again, we look at all opportunities as they present themselves.

I see. Just one more for me. If we look at the 2014 guidance, clearly, down a couple of times, if you look back, Steve, on both, I mean, what do you think are the issues? I mean, do you think it is just the competition that you probably underestimated? Or was it something related to expectations or execution? If you were to like put them into different buckets, how would you see it?

I mean, I would say generally, I would say that the issue really is top line and the pressure we've seen there. And also, we probably forecasted that we would maintain more cake business than what we've held on to from a volume perspective. So those -- so in general, it's really all about the top line. We need to generate stronger revenue. And with our cost structure, a significant part of that gets to margin and the bottom line and that's really what drives the earnings growth.

[Operator Instructions] The next question is from Akshay Jagdale from KeyBanc Capital Markets.

The question I have is related to one that was asked before about 4Q guidance. The implications are that you're projecting to get your EPS number for 4Q, you're projecting a sequential decline in margin. So 4Q margin, they're expected to be much lower than 3Q. What's driving that? Is that conservatism or is there something fundamentally different that's going to happen on the margin side in your business in 4Q?

I mean, Akshay, you could say it's probably being a little conservative because this year, even with the extra week, we have 3 holidays, and that seem to affect revenue and cost of oil. Coming out of the third quarter, we were seeing some softness that continued somewhat in the fourth quarter, although we've been -- in the last few weeks, we've seen some nice trends. So I'd say, generally, there's probably some conservatism in there, but I don't want to go ahead and say that we expected a lot of upside. But we're just continuing to see some softness coming into the quarter.

Okay. And then just a little bit -- take a step back longer term. I mean, if you look at what have transpired sort of this year, you were expecting significant top line growth. And what's transpired is we have no growth, right, in terms of organic growth. So from a long-term prospective, in my opinion, it might serve your shareholders better if you focus more on the margin opportunity, right, to get back to historical margins on DSD. There's still plenty of room to go there. Is that something you're considering instead of going after share aggressively and that's resulting in the sort of the year that we saw this year? Why not just focus on what you can control, which is -- and you've controlled really well over the years, which is the margin side? I mean, shouldn't we be switching focus a little bit? Is there a consideration for that?

I think that's a fair point, Akshay. And I think Allen did talk a lot about -- we're looking to rightsize the business with the growth we did, bring in a lot of production capacity. We've had a lot of costs in developing new markets. And now as things settle, we kind of see what the competitive landscape is. It gives us the opportunity, just like you say, to focus on cost management and really focus on growing margin, trying to move the margin needle the while maybe revenue has tempered a little bit. So that is a huge focus for us. And as we set expectations for next year, as we look at longer-term growth, as we meet with our board, those will be the kind of conversations we're having. And then in February, hopefully, we can set the appropriate measures, and you can see where the cost focus is.

Yes. And Akshay, while margin improvement is certainly a priority for the team, at the same time, we got to have a balanced approach and we've got to continue to grow our top line. And when you take a step back, the opportunities are really right in front of us in terms of new markets. We talked earlier about underdeveloped product categories that we're working hard on and continue expansion of our independent distributor model. So while increasing margin is certainly a priority for the team, continuing to grow our top line also is very important. So we've got to have a balance approach to both.

Yes. But to push back a little bit, that's helpful, but in terms of the sales opportunity, I mean, it existed this year as well. And you had additional brands in your arsenal, if I may, right, and strong ones at that, and yet we ended up -- or we're going to end up with a year that's significantly lower than what you had expected. So it's not like people are going to start eating a lot more bread next year, right? So gaining share, you still have the same DSD network, hopefully at lower cost. But why not make margin the #1 priority and market share gains, probably #2?

Well, again, Akshay, it's hard to understand your point. But if you look at our history, this company has done a very good job at both. And even though we did not hit the sales number that was our original target, we still have the ability to grow this company. And if you look at our history, that's exactly what we've done in the past. We've grown the top line and we've also had kept our focus on margin at the same time. And I'm confident we can continue to do that.

That's helpful. And just one last one, can you talk about just broadly -- in terms of rightsizing the business, can you give us some sense of what that means? Is that buckets in the SG&A? Is that cost that better [ph] relate to the plans? What are some things that you're considering when you think of rightsizing the business?

I'll take the shot, and then let Steve help me on this one. But Akshay, if you look at the -- and I went through growth numbers that we've experienced over the past couple of years, and we have added a dramatically large number of independent distributors in different territories across the company. In some cases, we are fine-tuning our sales networks to make sure we have the right number of wheels on the street. At the same time, our manufacturing plants have done a great job of meeting the needs of the sales department. And now we're going back and making sure that our manufacturing operations are in the right locations with the right number of lines, producing the right items. So there really is not any one area that I would say that costs have gotten out of line. But obviously, when you experience the kind of 2-year growth that we have, we've done a great job taking care of the market and growing the business. And now we're working hard to rightsize the company really across the board. And sales and distribution is one area. Logistics is another area, and manufacturing efficiency also is another area. This past quarter, we saw improvements in manufacturing efficiencies. Sale -- stale levels have come down slightly, we still have more work to do there. And we continue to really fine-tune our cost structure across the company. Steve, I don't know if you have anything to add?

Nothing. I mean, I think that really hit it. It'll be a balance and cost of good solds in SG&A. I mean, really, the focus is on all levels of cost.

And just one last one for you, Steve. You mentioned the promotional activity. You have reduced the percentage of sales. Where are we on promotions as a percent of sales for DSD? Can you give us the number for this quarter, maybe some historical perspective? And then just talk about how you -- what are the steps you're taking to increase promotional effectiveness? We're hearing that across the board from a lot of our companies. But certainly, it's a term being thrown around, but we're not seeing any results yet. So I'm trying to get a sense of what are you doing to improve promotional effectiveness.

We really get [ph] specifically 1%. I would say it's in the mid- to high-single digits [indiscernible] pretty strong. And as Allen said, I think I said from a promotional effectiveness it's really about making sure when you have an item on promotion, it's positioned correctly on the store so you get the most sell-through. Typically, from a promotional activity, you prefer that to be out of the main line bread aisle, and that's where some of our focus that has -- that's going too on cake as well as bread. And then also cutting back on some of the stronger items that may not need to have the additional promotional support.

We have a follow-up question from Tim Ramey from Pivotal Research.

Just reflecting back on Akshay's question a moment ago. I like your kind of balanced answer there. It seems like there have been times in the past wherein in a focus on maintaining price or margin has led to negative volume performance. You could argue that this period looks like that, the 3Q. And we've ended up seeing negative operating leverage from the lower volume feeding back through the P&L. That -- I mean, it seems like that occurs more frequently when input costs are going down rather than up, but I'm not sure about that. Can you comment on that?

Well, when you look overall at the cost, Tim, and the category and tie the price, I mean, historically, this category, I would say, do not behave that way. And traditionally, people tend to focus really on wheat, and that's not really the only cost element. So I don't -- there's not -- I would say, there's a direct correlation between promotional activity, I don't think, and overall input cost within the category. I'm not seeing anything that really indicates that. I think it's more volume driven and share driven.

Yes.

So promotions don't necessarily accelerate when input costs decline?

I'm not really seeing that, Tim.

Tim, I would agree.

We have no further questions at this time. I'd like to turn the call back to Allen Shiver for closing remarks.

Good. Helen, thank you very much. As always, we appreciate the participation on our call in support of our company. We appreciate your confidence in our team. And we will continue to deliver the sales and the earnings over the long term. Thank you very much. Have a great day.