The Middleby Corporation (MIDD) Q4 2011 Earnings Report, Transcript and Summary

Welcome to the Middleby Corporation Fourth Quarter and Full Year Earnings Conference Call. We will start the call with opening comments and then open it up for questions and answers. [Operator Instructions] On the call from management, we have Selim Bassoul, Chairman and CEO; and Tim FitzGerald, Chief Financial Officer. Mr. FitzGerald, please go ahead with your opening remarks.

Okay. Thank you. Good morning, and thank you for attending today's conference call. I'm Tim FitzGerald, CFO of the Middleby Corporation. And joining me today is Selim Bassoul, our Chairman and CEO. The fourth quarter results reflected the impact of acquisitions completed during fiscal 2011, including the second quarter acquisitions of Beech and Lincat. The third quarter acquisitions of Auto-Bake, Danfotech and Maurer-Atmos, and the fourth quarter acquisitions of Drake and Armor Inox. The Drake and Armor Inox acquisitions were completed on December 2 and December 21, respectively, and therefore are only partially reflected in the results of the quarter since the date of acquisition. Net sales in the 2011 fourth quarter of $243.8 million increased 17.6% from $207.2 million in the fourth quarter of 2010. Sales growth from the acquisitions accounted for $24.3 million of the increase in the quarter. Excluding the impact of these acquisitions, sales increased 5.9% over the prior year quarter. This increase reflects a 15.7% increase in sales at our Commercial Foodservice Group and a 28.6% decline in sales at our Food Processing Group. At the Commercial Foodservice Group, we continue to realize strong sales growth in emerging markets resulting from higher demand levels and increased sales penetration as a result of investments made in our international selling organization. International sales for the Commercial Foodservice segment in the quarter continued to grow above 20% and for the entire year increased by approximately 30%. The quarter also reflected continued sales growth in chain sales, which were particularly strong in the fourth quarter, benefiting from several programs and rollouts, which we anticipate to lessen in the first part of 2012. The fourth quarter was also modestly impacted by some pull ahead of orders as customers bought ahead of anticipated first quarter price increases. The sales decline at the Food Processing Group reflects the anticipated slowing in sales after a record 2010, where we realized 35% sales growth, which reflected the realization of orders, which were deferred from the 2008 and 2009 periods. Despite the sales decline, we saw a rebound in orders during the second half and believe capital spending in the segment will continue to be strong in 2012 due to investment activities at our customers with the development of processing operations in the emerging markets. We anticipate the sales decline we saw in the second half will moderate in Q1 of 2012 with the first quarter relatively comparable to the 2011 first quarter, and we will begin to realize sales growth in the second quarter of 2012. Gross profit increased to $99.7 million from $83.1 million and the gross margin rate increased to 40.9% as compared to 40.1%. The gross margin rate reflects improvement at both the Commercial Foodservice and the Food Processing segments. The Commercial Foodservice segment benefited from higher volumes and the favorable mix of product sales, while the mix between the Commercial Foodservice sales and the Food Processing sales also benefited the rate as margins at the Commercial Foodservice business are comparatively higher. In the upcoming quarters, we anticipate the Food Processing business will represent a greater portion of the sales largely due to the recent acquisitions, which will likely impact the margins as we continue to integrate those businesses. Selling and distribution expenses during the quarter increased $3.1 million to $24.4 million as compared to $21.3 million in the prior year fourth quarter. Selling expenses in the quarter included approximately $3.6 million of additional expense from the current year acquisitions of Beech, Lincat, Maurer-Atmos, Auto-Bake, Drake and Armor Inox, not included in the prior year fourth quarter results. Excluding the incremental expense of acquisitions, selling costs were slightly lower with reduced commission expenses on higher sales volumes. General administrative expenses increased by $3.2 million to $30.3 million as compared to $27.1 million in the prior year fourth quarter. General expenses included additional expenses related to the 2011 acquisitions, which amounted to approximately $2.8 million. The remaining increase in comparison to the prior year includes $1.7 million of higher noncash stock-based compensation and other incentive compensation offset by $1.8 million in lower restructuring charges recorded in the prior year. Net interest expense and deferred financing cost increased to $2 million as compared to $1.7 million in the prior year quarter due to higher debt balances in 2011. Other income is primarily comprised of foreign exchange gains, which were largely related to the initial funding of the financing of the foreign acquisitions. Provisions for income taxes amounted to $9.6 million, at a 21.8% effective rate in the fourth quarter and $45 million at a 32% rate for the full year. The fourth quarter and full year tax provision reflects nonrecurring adjustments and tax reserves for reduced exposures related to quote statutes, state planning matters and nonrecurring form deductions. For the full year, the 32% effective rate compares to an effective rate of 36.2% in the prior year. As compared to the prior year, reserve adjustments benefited the effective rate by 1.6%. Additionally, the tax rate benefited from reduced state taxes, which benefited the effective rate by 1.1% in comparison to the prior year and lower taxes on foreign earnings, which benefited the effective rate by 0.9%. The foreign provisions include nonrecurring deductions associated with foreign acquisitions, which accounted for approximately 1/2 of this rate reduction. In 2012, we anticipate the rate will move higher due to the nonrecurring nature of certain items impacting the effective rate and anticipate the effective rate to range from 35% to 37% for the full year. However, this effective rate may vary from quarter-to-quarter. During 2011, the company also continued to realize a cash tax savings associated with the utilization of net operating losses acquired from TurboChef. This tax benefit amounted to approximately $6.4 million and is not reflected in the tax position and has been recorded as a utilization of an asset in the opening balance sheet of the TurboChef acquisition. The company will continue to realize a similar amount in 2012. Cash flows used for operating activities amounted to $64.7 million in the quarter and $130.4 million for the year. Consistent with prior years, the fourth quarter generated the strongest cash flows as working capital is reduced from its peak in the second and third quarters of the year. Noncash expenses, added back in calculating operating cash flows, amounted to $10.2 million for the quarter including $2.1 million of depreciation, $2.8 million of intangible amortization and $5.3 million of noncash share-based compensation. In the 2010 comparative quarter, noncash expenses amounted to $8.8 million, including $1.4 million of depreciation, $3.8 million in amortization and $3.6 million of noncash stock-based compensation. In the quarter, the company utilized $50.4 million of cash to fund the acquisitions of Drake and Armor Inox and made investments of $3 million for capital expenditures related to production equipment and facility enhancements. The company also utilized 2.6 million to repurchase shares of Middleby common stock in the quarter. Total debt at the end of the year amounted to $317.3 million and total cash amounted to $40.2 million. The company held higher cash levels at year end primarily due to cash acquired in connection with the Armor Inox acquisition, which was acquired late in the year. We anticipate the cash balances will decline in future periods as we utilize this cash to repay debt. However, since a component of the cash is overseas, the company anticipates retaining higher cash balances than in prior years. The company's current debt facility matures in December 2012, but we have initiated discussions with our current banking partners to enter into new facility with similar structure and terms and anticipate this to become -- this facility to be entered into or completed in the second quarter of the year. As it relates to our current quarter acquisitions, during the fourth quarter, as I mentioned, we completed the acquisitions of Drake and Armor Inox. Drake is the leading manufacture of automated loading and unloading systems with sales of approximately $15 million. The Drake equipment is highly complementary to our current brands and products in food processing and allows us to provide an integrated solution to our customers. The Armor Inox is a leading manufacturer of a unique water-based thermal processing equipment solution and has approximately $25 million in sales. The Armor Inox product is highly-automated and energy efficient, providing high-volume customers with significant advantages in capacity and throughput, resulting in lower operating costs. The Armor Inox product line is highly complementary to our existing equipment technologies of Alkar, Maurer-Atmos and Auto-Bake and allows Middleby to provide a broad variety of cooking, baking and thermal processing solutions in our growing Food Processing Group. Amanda, that's all for the prepared commentary. Could you please open the call to questions at this time?

[Operator Instructions] Our first question comes from Joel Tiss.

I just wanted to get a sense of where the outperformance in the growth relative to competitors. It seems like your volume growth is a lot better than what we're seeing from ITW and from Manitowoc as well.

Joel, I can address that. I think part of our success has been our national account team, where we've been literally very -- getting closer to the customer. We provide a very great service. And I think our innovation over the years has been a very big driver. And our relationship with our key dealers, if you look at our partnership with dealers, there are more solidified relationships. What differentiates us -- I will tell you the business model that differentiate Middleby than anybody else in the industry is that, that's all what we do. And ITW is a conglomerate. They do a lot of other things. Foodservice is not their core competency. Manitowoc, even though they -- foodservice is a big part of their business. They still do cranes and they do refrigeration and mixers and other stuff. All what we do is literally provide cooking equipment that offers features that nobody else can compete on. And that has been most probably the driver. Between our national accounts, our relationship with our key dealers and the leading innovation of product that make us better. I think also we have the longest warranties in the industry. We have premier brands. I think we have the best brands in the industry bar none when it comes to cooking.

And then I wonder if you could just spend another couple of minutes giving us what would you see as the opportunities coming up for the next couple of years? It used to be energy efficiency, and then it turned more in the direction of better efficiency in the kitchen and better throughput. And I just wonder if you look out over the next 3 to 5 years, what's the big opportunity that the customers are talking about?

Well, the biggest opportunity right now is literally, for a lot of people looking at 2 things. And one, how do I get the cooking speed? Everybody is looking at cooking speed. To turn the table around, to make it easier especially for lunch. I think adaptability to menu changes. I think when I start seeing people adapt their menu offering a lot faster, I think it's no longer we change my menu every 2 years. I think some chains, fast casual, especially in the casual dining. They're going to be adapting to menu changes a lot faster, which requires a lot more equipment. And I think the biggest, biggest thing that I am seeing is how do I offer a value proposition? How do I come in and reduce my cost? And this is happening at the QSR, at the casual dining and at the fast casual. How could you help me streamline my operation in the kitchen? So looking at this, I would say the next forte is, in addition to energy efficiency, dissimilar to what we've done with Chili's, is help them reduce their cost and upgrade their quality and reliability and consistency of the food offered. So you look at a chain that has over 1,000 stores. As the economy start picking up, and literally, employment start also picking up, they're going to have to be consistent in what they offer in terms of 1,000 stores. They want to be able to make sure that the same item offered in Chicago is offered the same way in Iowa. It's consistent. It's good. It meets their folks' group testing. It meets their quality standards. And I think that's where Middleby plays a big role. And then I'll talk about ventless. The ventless technology is most probably our biggest opportunity as we look forward into that. I look at it, and I say that people are looking at ventless because it's a huge cost saving for some. And I look at utilities. I continue looking beyond natural gas and electricity. Water is its next forte. Every chain is looking at a way to reduce their water bills. And that's where Middleby is ahead. We started in 2006 working on water-saving devices like waterless steamer. Now, we have waterless steamers that's patented, unique, being tested at many chains. So again to summarize what I see in the future: casual dining, fast casual are going to be most probably revamping their menu and their cooking speed. Number two, product innovation is consistency of food in terms of using more labor automation on which casual dining is very prone to, similar to what we've done with Chili's. I look back at ventless technologies because the saving are humongous, and I look at energy saving going beyond the traditional electricity and natural gas to water.

Our next question comes from Peter Lisnic.

First question, just on the -- Tim, on the base business order trends in commercial foodservice. Can you give us a flavor as to what the trends there are like heading into the first part of this year both in chains and then x the larger chains, if that's possible.

Well, we don't break it out with chains and non-chains. But as I mentioned in the fourth quarter, I mean it was particular strong. International continue to remain strong. We did have some rollouts with chains, and it was probably a little bit of pull ahead going into the year with -- as customers try to get ahead of price increases. But I mean the first part of the year, orders continue to remain solid. But there was some expected slowing because just the rate has suffered, the rollouts in the fourth quarter will probably lessen. We still anticipate that 2012 will continue to be strong in year with the chain business. But the fourth quarter was comparatively very strong.

Okay. Got it. And then if you look at that price increase that you put through, can you give us a sense as to how significant of an increase that is and probably a shot in the dark, but any chance of quantifying what the magnitude of the pull forward might be in the fourth quarter?

It's tough to quantify that. I mean I think we -- we think it's probably a few percent. It's always hard to measure that exactly on an order-by-order basis, but that's kind of a general sense. The price increases in the 3% to 5% depending on the divisions, but generally that's the range we've been going on.

Okay, perfect. And Selim, if I could just strategically, can you give as a sense as to what the recent acquisitions in the processing business mean for Middleby particularly, to use Joel's question, over the next 3 to 5 years?

Well, the Food Processing business is a great, great platform for us. Why? Because there are a lot of synergies between what we do in Commercial Foodservice and what we can do in Food Processing. Example, we're taking a lot of applications of energy savings that we've learned in the restaurant business to apply to our Commercial Food Processing platform. What is interesting is if you look back, Peter, at how we built that company, we focused on foodservice, most probably if I go back to 1999. So in the past 12 years, we created a number 1, number 2 platform in every market we serve. We focused on cooking only. We focused on a certain type of restaurant that you wanted to cater to, a certain type of clients. But when we started in 2006, with the acquisition of Alkar and RapidPak, we were basically one, a new player in a highly fragmented business. With all the acquisition we've done in the past few years, we're now playing #1 and #2 in almost every market we serve. You look at that, and I give you just a flair of where we've gone with this, along with just -- give you -- we have become, with the acquisition now of more Drake, Armor Inox, Auto-Bake, Danfotech, MP, in addition to our first Alkar and RapidPak, we are #1 in hotdogs, #1 in bacon, #1 in sausage, #1 in ham, #1 in chicken forming, #2 in industrial baking and #2 in meat packaging. So if you look in a matter of 6, 7 years, we have most probably created a similar platform to our Commercial Foodservice. I see that trend continuing. People are going to spend in 2 buckets. They're going to spend their food budget on either going out to restaurants or they're going to eat and get their food in the freezer. And I will tell you that everybody on this call, I do not know anybody on this call that does not have their freezer full. I will challenge that anybody will open their freezer, and they will see that they have more food than they can sustain. And I think that trend will continue. We have a tendency around the world as human beings to stock more food than we want. We go to a Costco or a Walmart now, supercenters or Safeway or Publix, and we tend to overstock on frozen goods. And we would like to play in that market. I think that market will continue to grow not only in the U.S., but in the emerging markets where we have literally a fantastic growth opportunity as we go to those markets -- with food processing.

[Operator Instructions] Our next question comes from Jamie Sullivan.

I wondered if you noticed any impact or any talk of whether accelerated depreciation helped in the fourth quarter as well.

Yes, Jamie. This is Tim. I mean I think there's probably some benefit in there. Again, it's hard to measure that. I don't think that it's a very material impact to the fourth quarter, but no question kind of on the edges. People do try to take advantage of the depreciation rules.

Sure, okay. And then in your prepared comments, did you mention that the pace of the rollout with Chili's would slow a bit in the first half?

Jamie, I'll address that. I don't think it will slow down much. I think it will remain consistent. But it will most probably pick up in the third and fourth quarter even more, but I think we continue accelerating the conversion of Chili's more and more. It's a huge undertaking for us and for some. But we're very excited about it, and I think it's gone very, very smoothly on both sides. So I would assume that it will be -- it will continue being stable and consistent in the first half of the year and picking up in the second half.

Okay, that's helpful. And then you've talked about having some additional customers kind of queued up once this project is completed. Just wondering what your capacity limitation is on executing these projects, and how would you scale that up if you wanted to do it?

Jamie, I think from a capacity standpoint, we're very geared up, and we can at least accommodate 2 or 3 other customers at the same time. But we made a commitment to Chili's that they would be our priority for the time being to make sure they were the first to get us to where we need to be. I want to make sure that they are literally taken care of. I think we are still in an early stage of that business, and we're going to most continue pushing very, very hard to this. We can continue pushing hard to making sure of that transition. I would say we would be a lot better in working towards the second integration or second customer integration mostly toward the latter part of the fourth quarter. Now just to answer the question seriously, we have a lot of interest in that conversion by other casual diners. In fact, Chili's other owned -- other concepts -- that too are interested in having us look at them and convert them. So I think we're going to start seeing the impact of our, what I call, casual dining revolution, if I call it this way, what we've implemented at Chili's in 2013, beyond Chili's. We'll most probably continue having Chili's through 2013, and then we'll most probably have at least 1 or 2 other conversion in 2013.

Okay, that's very helpful. And then just one on the Food Processing side. You've talked about the international markets, emerging markets being a big driver there, longer term. Just wondering, with the acquisitions that you've done, if you can give us a sense of the mix of international in that segment today and maybe the emerging market exposure as well.

Jamie, I'm going to answer that. I think it's too premature for us to tell you the mix. I can tell you we just made the acquisition in December of the couple of overseas companies. I think we have acquired -- well, I think in the second half of the year, let's put it this way, between Auto-Bake and Armor Inox and Maurer, who are all overseas companies, I think it will most probably shift our emphasis internationally on the food processing to become a very strong driver. It's tough to say right now exactly what the percentage will be. But if you go back to the acquisition of Maurer, Armor Inox and Auto-Bake, they represent, most probably will represent, at least, 30% to 40% of our sales now coming from overseas.

Yes, and Jamie, this is Tim. Of those companies, about 1/2 of their sales is in the international markets. Not necessarily where they're located though. I mean they are global companies that sell throughout the world.

Our next question comes from Gary Farber.

Just a couple of questions. Can you just talk about your own input cost, raw material costs? What kind of trends you're seeing there and then trends on freight as well?

Yes. So we do see a trend up in freight costs. That's one of the things that we're monitoring right now and looking at our -- passing that on to customers because we do anticipate that the delivery costs are rising as we move into the -- beginning of this year, both as we buy product and as we ship it to our customers. So that's a focus area. Material cost is relatively, I guess, it's stable right now. I mean there are increases, but they're more manageable than what they've been in the prior years. We're anticipating that steel may go up in the latter part of the year, but it's still early in the year. And we'll kind of moderate it, adjust to that as we progress through the year.

Okay and then just one last one. As you go through this year, integrating the acquisitions you've done, where do you think the greatest rate of margin improvement? Is gross margin going to expand faster, then the SG&A's going to come down or is it going to be the other way? How do you guys see it?

Well, I think we want to comment on that as we further get into these acquisitions. Some of these we're just observing now. And I do think that there's opportunities both at the gross margin line and the selling line. I think we're looking at opportunities to, I guess, leverage the selling organizations that we've got across these different business units. We think that's a good opportunity. And there's also, similar to what we've experienced, on the Commercial Foodservice side, there's opportunities to leverage our purchasing with -- as we buy similar components across many of these businesses. And perhaps also some manufacturing synergies between the different companies too. So that's something that we'll evaluate as we move through 2012.

[Operator Instructions] Our next question comes from Greg Halter.

I've been noticing at some of the Dunkin' Donuts there. They've received some new TurboChef -- the products. And I just wondered if you could comment on that possible new rollout if that's what it is?

Yes, I can address that, Greg. Dunkin' Donuts, has been a very strong partner with us for, not only the TurboChef, but other platforms that we do business with them. They've been -- they've worked with many of our other divisions, so we have a very close cooperation with them. We have been -- TurboChef has been in Dunkin' Donuts now for over, most probably, several years. And as Dunkin' Donuts continues to look at space optimization and increasing speed and menu offering, they have been working with us on implementing, introducing a new TurboChef platform, which is our new Encore oven, which is being placed there and in certain selection. The encore oven is 25% more energy efficient than our former TurboChef ovens, and they are basically almost 8 to 10 seconds faster. So it goes from a average of 30 to 40 seconds to now 20 to 25 seconds to cook and toast a product. So the biggest thing at Dunkin, they've been very interested in seconds and inches. And they've been working with us and talking with us on reducing seconds and reducing inches in the restaurant and in their kitchen. And TurboChef is one of the solution we provided. Blodgett is working with some on another oven introduction, too, for other applications. So you thought you're correct in seeing a new -- it's our new Encore TurboChef oven that is being launched in that application.

And is that the same one that's at the SUBWAYs? Because I've also noticed a bunch of new equipment at SUBWAYs as well.

That's correct. It's also at the SUBWAY. It's our new TurboChef generation of oven. It's a new technology. Again, it's 30% -- 25% to 30% more energy efficient, I think, or maybe 20% more energy efficient than the first one and 25% faster.

And also, any comments on the SPINFRESH product line?

Yes. The SPINFRESH product fryer is out of production. It's basically in. It's being tested at several chain locations, mostly casual dining chains. And it's now available for sale. We have not sold many units to Starbuck [ph]. I think that if you've been with Middleby for a long time, and I know Greg, you have been, and many on those call -- the analysts on the calls have been. We usually take 12 to 18 months to seat a disruptive product like this. So my feeling is the SpinFry is out. It's approved, it's AGA approved. It's all -- the kinks are out of it, and it's available for sale. And I think that I would like to temper everybody's expectation because our experience has been, it takes even a great product like SpinFry or a TurboChef product or a Blodgett oven. It takes us between 12 to 18 months for people to test it, to train people, to realize the payback they get out of it, to make sure that our claims are true. So I think the impact of SpinFry will most probably be felt in 2013. It's out, live, available. If you want one for your home, I'll -- can ship that one for you, so it's available. So now finally, people have been waiting for this for a long time. Before we go to another question, I would like to let everybody know that there is a brand new Investor Presentation that's out on the website. And it's on our website, www.middleby.com. And you go -- and it's under our Investor Section presentation. And it's our Roth. I am presenting at the Roth Capital this morning after this. So if you go in, it's our brand new investor presentation. It's -- you go to www.middleby.com and then you go to the Investor section. And it's under the Roth presentation, PowerPoint presentation.

And one other quick one for you, Tim, if I may. Any thoughts on what your capital spending for 2012 will be?

We've typically been in the 1% to 2% of sales. So I think I would expect that we continue to be in kind of that range for 2012.

That was actually our last question, so I will now turn the call back over to management for closing comments.

I would like to go on and conclude the presentation with a few prepared comments from me. I think it could be very helpful to mention that in 2011 and 2012, some of the key factors in Middleby's performance have been and will be driven by our national account team, literally our investment in getting closer to customer, a better service at the national chain rollout, like the Chili's rollout, and Iams [ph] and Dardens and Yum! and all our close relationships, SUBWAY, where our national account team has been very instrumental. In fact, we have just added 2 more great people to our national account team. And now we have one of the largest national account team in the industry. Second, our relationship with key dealers, I think there -- our distribution network has become more solidified. And just to attest to this, our relationship with the buying groups where many of those dealers have formed, is better than it's ever been. And we've trained the dealers. We've trained their sales rep, and we've had a great relationship together in servicing them and creating bonds that literally allow us to be -- to penetrate urban markets with the dealer network or to penetrate franchisees, who the dealers have partnered with us to go after both chains, institutions and casual diners. Our innovation of product, our energy-efficient product, and we have the most energy-efficient product in the industry. Literally, we have been very successful in delivering energy-efficient product similar to our ranges, Southbend and Jade Ranges, our Blodgett convection oven, our TurboChef ovens. And I can keep on talking about many, many innovative product in energy efficiency. Our ventless technology has become a big driver of our business. And I just been proud to give you some great highlight. We just equipped the Augusta National Golf Club for their golf club for their Master's with a ventless technology. And we've -- we just -- if you live in the Washington area, Costco just started to put in ventless fryer tech application in the Costco units. Those are just a few of many applications we've done, in military application, in institutional application, where we see our ventless to be in huge demand and a huge return on the investment and payback of our customers. The acquired companies and technologies continue to be natural choice for sellers. To work with us, we've been able to acquire privately held companies because we have a D&A that allow those companies to thrive, under the Middleby umbrella. Our ability to improve profitability and expand the customer base, especially using our emerging market infrastructure, where we've taken companies, including TurboChef, which was a large company. Our Middleby worldwide organization was able to take them places where they could not have gone independently. So just to give a few feeling about what happens since the beginning of the year. We are very proud to announce that Buffalo Wild Wings, one of the most respected casual dining and fast casual concept, gave us the Supplier of the Year award last week. It's the only equipment supplier to receive the Supplier of the Year award. I look at Domino's India, which 6 years in a row have given us Supplier of the Year. I look at Chick-fil-A, which gave us also this year one of their biggest award for our partnership with them. We looked at, of course, the Yum! Group, the Papa John's. And I keep on going to many, many awards that we've gotten over the years. I also, I'm proud to say that the restaurant business added 41,000 jobs in February and have hired more than 500,000 people since March 2010. In addition, many small and midsized chains have began to expand for the first time since the recession. So I feel very good where Middleby is positioned with restaurant concept, whether it's fast casual or casual dining or quick serve, with greater exposure to a low, midrange customer. Those concepts have more aggressive remodel initiatives. And I would still say that we are going to start seeing some of those remodel initiative start being more speeded up in 2012 and 2013. Internationally, we're seeing nice unit growth in emerging markets. Now, we also see a strong start to 2012 for casual dining. We see the store checks significantly up. Some of it might have been driven by weather, but I think that some of it is sustainable. We also expect that food inflation for most of our restaurant concept have likely peaked, which will help restaurant margin and investments. So we are very excited about what's going on in the market. However, I would like to say that there are challenges ahead of us in 2012. We are very concerned about fuel prices. I think fuel prices will impact not only Middleby because we do tend to ship around the world equipment, and we get materials from all over the world, which will impact slightly our margins. It will also impact the consumer spending and the income of the consumer as fuel prices tend to inch up. I also is concerned about some of the macroeconomic factor of the slower growth of the GDP in the U.S. and in Europe, specifically impacting our U.K. operations. I also see steel prices impact in the second half of the year to impact us slightly. However, as you've been following Middleby, we have been always faced with challenges. And we are geared to offset some of those challenges with some of our restructuring that we've done. The consolidation of Doyon, NuVu is going to help us. We are in the process of consolidating a couple of more plants in 2012. I also believe that our focus on some of our top customers, both in QSR, casual dining and fast casual, will help us continue rolling out some initiatives with them in 2012 and 2013. So we continue seeing our forecast for 2012 to be slightly impacted in the first half of the year by some of those challenges that I've talked about, which is slower growth in the GDP in the U.S., the impact of the dollar strengthening and the European slowdown that will impact our U.K. operation. But we believe that in the second half of the year, as we continue rolling out more product with our customers in the third and fourth quarter, we'll most probably alleviate the pressure on our first and second quarter. Thank you.

Ladies and gentlemen, thank you for your time and attention. That concludes this conference.