The Middleby Corporation (MIDD) Q3 2013 Earnings Report, Transcript and Summary

Welcome to the Middleby Third Quarter Conference Call. Management will open with remarks, then we'll turn the call over for a question-and-answer session. [Operator Instructions] Please note that today's conference is being recorded. With us today from management are Selim Bassoul, Chairman and CEO; and Tim FitzGerald, CFO. Mr. FitzGerald, please go ahead with your opening remarks.

Okay. Good morning, and thank you for joining us today on our Third Quarter Conference Call. Net sales in the 2013 third quarter of $360 million increased 39.7% from $257.7 million in the third quarter of 2012. The third quarter sales reflect the impact of acquisitions completed in the past 12 months, including Viking, Nieco and Stewart Systems. These acquisitions are not fully reflected in the prior-year comparative results and accounted for $71.8 million in sales or 27.9% of the sales growth in the quarter. Excluding the impact of these acquisitions, sales increased 11.8% over the prior-year quarter. This increase reflects an organic sales increase of 11.7% at our Commercial Foodservice Group and 12.2% at our Food Processing Group. At the Commercial Foodservice Group, we continued to realize growth driven by increased sales to restaurant chains looking to upgrade equipment and adopt new technologies to improve efficiency of store operations. Sales in international markets remained strong, with overall growth approaching 10%. A strong sales in Latin America, Middle East and Europe continued to be offset by slower sales in Asia, impacted by a temporary slowdown in store openings with a major restaurant chain customer in China. We expect continued growth in the Commercial Foodservice segment for the fourth quarter, although the growth rate likely will moderate from the third quarter, as the third quarter was particularly strong with chain rollout activities. Sales in the Food Processing Group continued to also realize strong growth, reflecting demand by Food Processing customers looking to modernize existing production operations and new customers developing operations in international markets. While we anticipate continuing strength in demand and the outlook at this segment, we anticipate a decline in the fourth quarter in comparison to a very strong quarter in the 2012 prior year, which had grown 30% and included several large customer projects. Sales at Viking amounted to $58 million during the third quarter, reflecting a general improvement in industry conditions. We expect that revenues will continue in the fourth quarter in the $55 million to $60 million range. However, it will continue to be difficult to predict due to the impact of distribution changes that we continue to implement. Gross margin for the second quarter increased to $141.4 million from $100.4 million in the prior year, and the gross margin rate was 39.3%, as compared to 39% in the prior-year quarter. The gross margin rate reflects the impact of lower margins at the recent acquisitions in the Food Processing Group and Viking. However, the dilutive effect of Viking significantly lessened during the quarter, as the gross margin at that business improved to 37.9%, as compared to 28.5% in the first quarter and 30.7% in the second quarter. The improvement in the gross margin rate at Viking reflects the benefits of purchasing savings, SKU simplification actions and restructuring of distribution channels. We anticipate the gross margin will continue to remain above 35% for the remainder of the year, but may not necessarily be as strong as the third quarter due to impact -- the continuing impact of distribution changes in the fourth quarter. Selling and distribution expenses during the quarter increased $15.8 million to $41.8 million. $13.2 million of the increase was attributable to expense from the recent acquisitions, with the remaining increase associated with direct costs and higher sales volumes. General and administrative expenses increased by $5.1 million to $32.2 million. The increase in G&A expenses for the quarter was primarily attributable to incremental cost from the acquisitions. The tax provision in the third quarter amounted to $20.9 million at a 33.9% effective rate as compared to the prior-year provision of $11.9 million at a 28.6% effective rate. The prior-year third quarter provision reflected favorable reserve adjustments for reduced state tax exposures, and as a result, the third quarter provision in the current year increased in comparison. And we -- however, we estimate that the effective tax rate will continue to be below 35% for the remainder of this year. Cash flows for the third quarter from operating activities were $59.6 million, as compared to $39.7 million in the prior-year quarter and reflect the strength in the third quarter earnings. During -- noncash expenses added back in calculating, operating cash flow has amounted to $11.9 million for the quarter, including $4.7 million of intangible amortization, $4.2 million of depreciation and $3 million of noncash stock-based compensation. Total debt at the end of the quarter was reduced to $537.4 million, as compared to $618 million at the end of the second quarter, reflecting the repayment using operating cash flows. And as a result, the company's debt-to-EBITDA leverage ratio for the quarter dropped below 2x. As it relates to the Viking acquisition, we're pleased with the continuing progress made during the quarter to reduce operating costs, improve product quality and customer service and realize synergistic opportunities with our Commercial Foodservice business. We anticipate EBITDA margins, which improved from 12% in the first quarter to 15% in the second quarter and now 18% in the third quarter, will continue to progress as we move into 2014. And we remain confident in our initially stated expectation that we will achieve EBITDA margins in excess of 20% for this business in 2014, ahead of our initially -- our initial stated expectations. Karen, if you could now open the call for questions and answers, that would be great.

[Operator Instructions] Our first question comes from the line of Peter Lisnic from Baird. Joshua K. Chan - Robert W. Baird & Co. Incorporated, Research Division: This is Josh Chan, filling in for Pete. I just wanted to ask about the Viking margin improvement, very impressive there. As you think about moving the EBITDA margin to 20%-plus, I was wondering, is that improvement going to come from the gross margin line like it has been? Or would you need some sales leverage to work on the operating expense to get to that margin target?

Well, I think we expect some continued improvement, both in the gross margin, as well as kind of from leverage of the business. But the targets that we have of 20% or better are driven by efficiency, so it's not necessarily sales growth. So improvement in both SG&A, as well as gross margin, but not all driven by sales growth. Joshua K. Chan - Robert W. Baird & Co. Incorporated, Research Division: Okay. That makes sense. It's more structural. I got you. And then on the Food Processing side, I appreciate that on quarter-over-quarter you had variability because of the type of the projects. Could you give us a sense of what the order environment is like, maybe not even in this quarter, but what it has been? And were you expected to be sort of like on a book-to-bill basis? I guess, longer-term, how does the outlook look like at this point?

So Josh, it was hard to hear, but I think you're asking about the overall environment for Food Processing. So assuming that's the question, the environment remains consistent. I mean, we've seen a lot of activity with customers, particularly in international markets that are looking to open new processing facilities, and definitely a lot of upgrades to existing plans as well. So I think the overall market remains pretty strong. I mean, that business has always been a little bit more lumpy in nature, just given the size of the large projects, which were overcoming kind of in the fourth quarter and early part of next year as we had a particularly large project. But from a macro standpoint, that business segment, the outlook remains very positive. Joshua K. Chan - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then last question from me. Just wondering about the Celfrost acquisition. Do you expect that those products to remain sort of in the Indian market? Or do you anticipate export opportunities from that business?

Well, at this moment, we're expecting 2 things. One, first our penetration in the Indian market because we've become a leading player between MWW India and Celfrost, where we've become one of the best platform in India for not only selling equipment, but for servicing our chains in that market. Number two, down the road we do expect export opportunities from India to other emerging markets, specifically in the Middle East where we just came back literally from the Milan show, and there was a lot of interest in the Celfrost refrigeration technology to be exported into the Middle East.

[Operator Instructions] Our next question comes from the line of Tony Brenner from Roth Capital Partners.

I'm sorry, Tim, did you mention what the increase in international sales was for the third quarter in total?

Yes, I mentioned that it was about 10% for the Commercial Foodservice Group.

Okay. And was there any pickup in Europe in that figure?

Yes. Actually, there was. And in fact, Europe was actually our strongest increase in the quarter, so we're starting to see some improvement in those markets. Particularly, the U.K. was strong for us.

Okay. And back to Celfrost. Selim, are there value-added opportunities on the cold side in products like cold rooms, and ice-making machines and freezers?

Yes. I think Celfrost provides -- it's a very micro, micro manufacturer of refrigeration. I don't want to say that we're even a player yet at this moment, but it's our first entry into refrigeration in terms of two things. One, a broad line and a value offering. I think what Celfrost provides is significant technology by being able to create an entrée into walk-in coolers and refrigerator and freezer and end of counter. Very attractive to that part of the world. So the Indian Ocean continent being India, Pakistan, Sri Lanka, Bangladesh, a lot of hotel facilities being built there. And as I mentioned previously, extension -- expansion into the Middle East. So we look at that as a future expansion for us with good margins because our ability to produce a low-cost and well-featured product has a lot of attraction to many of our chain customers in that part of the world. I think also the Celfrost acquisition, Tony, provides a significant service upgrade for our existing customers in India. Now the combination of our Indian operations that has been in place for over 10 years and Celfrost makes us as leading platform for servicing chains in that market.

Okay. A quarter ago, assuming you talked about intending to consolidate your 3 bakery Food Processing businesses. What kind of time frame are you thinking about in terms of doing that?

Well, we have started the process. I think that there's been some movement between our 3 baking platform. I think it will be in full swing. We should see the benefit of that, most probably, in the fourth quarter of 2014. So we're basically -- you will see some benefits of that in 2014 and full benefit in 2015. And we're talking, this will drive multimillion dollars. It's a multimillion dollar initiative in costs, so we'll see some of it in the fourth quarter of 2014, and most of it in the first and second quarter of -- in 2015.

How big is that bakery sector in terms of revenues? Is that a $65 million or a $70 million business now? Or what's different in that?

Yes. It's about $50 million to $70 million is kind of the range.

Okay. Last question, your warning about fourth quarter comparisons on the Commercial Foodservice side and the Food Processing side. You gave the same warning a quarter ago, and you had a sequential increase in organic growth. And here you're saving a 30% year-ago pop in organic sales on the Food Processing side in the fourth quarter, but in the third quarter a year ago, organic sales were up 40%. And I'm wondering, is there anything new? Or why should we take these warnings seriously?

Well, I can answer that briefly. First, we were overlapping. We were overlapping the Chili's, basically. And we were able to overcome the remaining of the Chili's order, of the Brinker order of $10 million, so we're able to offset that. And luckily, the timing of the waterless steamer rollout offset that. What is different in the fourth quarter is we basically picked up a turnkey project of Food Processing, which is, at that time, was over $50 million, which is -- it came into the fourth quarter, so it's much bigger. And the time frame of that rollout or that installation is a lot shorter. So it was much more condensed than the Brinker rollout, which basically took 18 months to occur. So basically, we're going into Einstein where everybody is saying, "Okay, are we sandbagging here?" So maybe that's a good word to say that. It's not true. It's all timing. So we were concerned about the Chili's ending, and we're able to get a rollout with our waterless steamers that offset that. We're talking about offsetting $10 million. In the fourth quarter, it's difficult to offset $50 million that's rolled out basically, fourth quarter and first quarter of 2015, a much bigger installation. And that's where, I think, we're having a serious warning for the fourth quarter in terms of being able to overlap that installation. Now it's basically timing. I'm not saying that fundamentally we will see anything wrong. It's just a timing issue, as we've seen a big order come in, in one -- in basically 2 quarters.

Yes. And Tony, just somewhat repeat and further that, some of that rollout is the waterless steamer, but there was a few others as well. They accelerated into the third quarter. They were kind of pulled in, so I think we didn't expect that it was going to rollout so rapidly. So I think that was on Commercial Foodservice. And the warning we gave on Food Processing was kind of on the second half as a whole as we knew it was going to start to ramp down as we exited Q3 into Q4. So Q4 is where we really get hit on...

Tony, I need to hit on something more important that just Tim mentioned. The two rollouts that we just did having to do with water steamer and dry well. The success of how well those technologies have been accepted by our customers, in that case, two different customers, have basically expedited the rollout. They were in enamored and so excited about the results, not only in terms of savings, but also in the quality of the food that the rollout took place. We're supposed to roll out the water steamer literally through the first quarter of 2015, and it got so expedited because they love the results.

Are there additional customers yet signed up for the waterless steamers?

We just presented it. Remember, it's a technology that was developed and worked with a specific seafood chain. And we basically launched it to general market. Initially, as we've always done, we always wanted to have a customer, a large customer attached to our technology. So we've worked with that customer to tweak and make sure it works. They are a large user of steamers, and we made sure that it worked for them. So as we rolled out, in fact, we could not accept any -- we could not take any other customer on the waterless steamer because they expedited the orders and their installations. I think you'll see a significant response. I just came back again. I just mentioned I just came back from the show in Milan, the HOST show, which is held every 2 years. And the waterless steamer was a hot, hot topic, especially in emerging markets where drains and water is difficult. The water quality is very bad, and many people shy away from using steam. And they need steam because the product menu offering demands steam, and they were excited about that waterless steamer. We had people in line to watch it. And I think the other thing that we exhibited -- what we did not exhibit was a specific chain that we did in the U.S., which is mostly seafood and vegetable. We're able to demonstrate at the show a steaming rice with no water. It was amazing. People saw dry rice being steamed without water and coming up to phenomenal rice quality. And we tasted it. We basically demonstrated different types of rice. We demonstrated Basmati rice. We demonstrated long-grain rice like the Uncle Ben's. And we demonstrated European rice and Chinese rice, which is sticky rice. And people was amazed by all the different types of rice that we demonstrated at the show.

And can you -- you indicated that organic growth for the Food Processing year-over-year would be lower in the fourth quarter. Is that right?

That's correct.

And our next question comes from the line of Joel Tiss from BMO Capital Markets.

This is actually Richard Carlson in for Joel. Just an easy question from sort of just looking at the balance sheet. I guess this is more of a working capital-type question. But it seems like typically your inventories and accounts receivable kind of peaked in the third quarter. I just want to see how -- what the kind of jump is now, and more on a normalized basis and how you see it finishing the year.

Yes. That's right. So it usually peaks in the third quarter. I would expect to see some of the same trends, although as we're making the distribution changes with Viking, there are still continuing investments there. As we own more of our own distribution, we'll have more inventory that's out there, and our own warehouse is in the field. So that is some of an offsetting impact that we'll probably continue to see, which is a little bit difficult to predict exactly the impact of that right now.

All right. So the chance it won't completely fall off in the fourth quarter, as we normally would see, so it could carry out a little bit into next year?

That's correct.

And our next question comes from the line of Greg Halter from The Great Lakes Review.

Regarding the distribution change, any distributors purchased in the third quarter?

Yes. There was 2 additional markets that were added in the third quarter.

And how many more do you have to address before the end of the year? I guess, that's your goal.

Well, we're kind of focused on the East Coast at the U.S. right now. So we're essentially from kind of the Midwest, Chicago, Dallas, on through the Western part of the United States. That's all run through Viking-owned distribution now, so we're kind of need that -- we're kind of focused on the Eastern part of the country now.

Okay. And your debt level has come down significantly from the second quarter and the first quarter. And just wondered what the outlook is for the debt going forward.

Well, we continue to generate a lot of cash flow, so I mean, I would expect that we will continue to have debt repayment in the fourth quarter, barring any other acquisition-type activities. So I mean, the cash flow in the second half of the year is typically stronger than the first half, which is even probably more accentuated this year, given that we had a lot of work in capital investments related to the Viking this year. Although we continue to make some investments there, I think, as I mentioned that other previous question, we'll probably see on the other piece of the business, working capital level start to come down a little bit so that will -- we should still have a pretty good fourth quarter cash flow.

And when do you expect to file your 10-Q?

That will be filed at the end of the day on Thursday.

And any thoughts on additional opportunities on the acquisition side?

Well, as a general question out, the pipeline remains strong. I mean we're focused on acquisitions in really all 3 business segments, so we see good opportunities in Commercial, Foodservice, Food Processing, and we're obviously working on distributor acquisitions, but also developing a pipeline there of other complementary brands and products.

Okay. And I know you have your own new products in Viking, which we saw at the Investor Day. I believe I think Thermador, I think that's what it is, has been having full-page ads in the New York Times. I do know if you have seen those, maybe in other papers. How would you view that? I mean, is that their response to your new products to just make sure they're out there, or what's going on in that regard?

Well, I will answer that, Greg, please. Viking is the leader in cooking. There is no doubt that even before we bought the company, Viking created that segment. And I will tell you that when you think about Viking in terms of cooking, specifically, in ranges and ovens and cooktop, they have a fantastic position. I had a chance to visit many of our dealers overseas. I just came back on Sunday, and I visited many, many of our distributors overseas. And the excitement about Viking has come alive with the acquisition. And the reason has been the fact that Middleby is known to be innovator. Middleby is known to be very strong on customer service. So I don't think that we are affected by what the competition is doing. I think Viking has its own place. People will know Viking brand and, in addition, I think the technology that is associated with Middleby. We've been at this game for a long time. I think -- I will tell you that one of the things that I've heard from distributors as their customers have come back to ask for Viking has a lot to do with Middleby acquisition. Think about us. Today, Middleby has very strong, strict adherence to quality. A customer like a pizza chain will rely on our oven. If that oven is down, they cannot run pizzas. They can't make pizzas. They can't bake pizzas, period. And they can sell Cokes and sodas, but they can't make pizzas. So literally, what we brought is a huge discipline on quality that Middleby has established over the years in a much stricter environment. I will give the example of Starbucks. If our TurboChef oven goes down, or at 7-Eleven, they are out of business for breakfast, or SUBWAY, they can't toast sandwiches. So the question has been literally, how do we take our discipline and embrace it at Viking? And I think that has been very well welcomed by our competitor -- by our customers. And I think our competitors now have become maybe aware. I don't know if that's a stretch to respond to us or not, but at this moment, I'm very excited about Viking. The brand is strong. I have been out there meeting with the distributors and getting them very excited about all the new technology. They understand the Middleby No Quibble Warranty, which has been now established out on the West Coast with Viking, so we're very excited about that brand and its potential.

Okay, sounds good. And I wonder if you can give a quick word on what's happening with the test kitchens in some of the chains that you've been working with, as well as the new products.

Well, we continue to work with many, many chains and on many, many platforms. I think our innovation going from waterless steamer to dry well to ventless to Kitchen of the Future to hydrovection to 30-second toaster. I can name just a few. I can keep on going and going and going. I think all of those technology are being tested. I think our test kitchen -- our labs are busy. We're testing is a lot. And I can answer telling you that every almost restaurant in 2013 has strived to update many offerings and raising average check through product mix rather than price increases, which makes Middleby in the heart of this. So you update your menu in order to raise your average check through product mix because they can't raise price. So everybody is looking at that, and they are working with us to look at menu offerings that are consistent, that are fast, and they don't take much labor. Because as you increase the kitchen -- think of it as a factory. You keep on adding SKUs in that kitchen, it becomes very complex, especially if you are a chain of 200 stores, 500 stores, 1,000 stores or 5,000 stores. And that's where Middleby continues to work with many, many on introducing concept that reduce labor, improve speed and improve quality.

Our next question comes from the line of Schon Williams from BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Maybe just a quick housekeeping question. Tim, could you just -- since we don't have the Q, can you just give the EBIT margins or the EBITDA margins by segment?

The EBITDA margins overall were about 22%. As I mentioned with Viking, we were at 18% for the quarter. Commercial Foodservice was in the 26% range, and Food Processing was in the 16% to 17% range. Christopher Schon Williams - BB&T Capital Markets, Research Division: All right, that's helpful. And then kind of bigger picture here, I wondered if you could talk a little bit about what's happening with some of the Western QSRs in Asia right now. I mean, if there've been some -- couple of missteps, and even one customer talking about maybe pulling back a little bit in Asia. Can you just give us an update on kind of where you see that market, maybe near-term and then kind of more medium- to long-term?

I can answer that question. What happened, Schon, in that market is the fact that there has been unreliable suppliers of chicken. Let's just call it of protein because it's not only chicken. And what happened is it affected some of our customers. And it's not the fault of the restaurant or the operator or the chain. Certainly, there has not done nothing much regulation, legislation in those markets the way we have it in the Western world in terms of legislating the food chain, the food supply. And that's a great opportunity for us because on the Food Processing side, we're seeing significant interest in food processor or our customers asking their supplier to look at better food safety in the way they are whether handling the chicken or handling the meat or the pork. And I think that's going to be a good interest for us because we're partnering with some of our customers, who have faced significant supply challenges to work with their suppliers. In many instances, for example, in Thailand, we just had worked with several large food processors to upgrade their food safety in pushing new equipment, so they can go back and become a strong contender for those U.S. chains and, say, listen, I'm certified, I'm using Western equipment. I'm using similar equipment that is Smithfield or Maple Leaf [ph] or a Hormel or whatever we'll use or craft we're using in the United States. And that has been a big boon for us for our Food Processing in those emerging markets. What's going to happen in the long term? I think Asia will continue. And not only Asia, I think across India, I think the chains, both U.S. and local chains, will continue thriving. I think unit expansion will continue. I don't see that abating at all. I think what happened in China was specifically a little bit of a setback, but I think I see no pullback. I will be surprised if there's any pullback in Asia or in the Middle East. I just visited the Middle East after I've been in Europe. And I have to tell you, you see not only any more QSR, you're seeing traditional casual dining being welcomed. I was just there. A Cheesecake Factory has just opened up in Dubai. It opened up, I think, in Kuwait, now opened up in Lebanon. P.F. Chang's just opened up in Lebanon. It's exciting to see, and just to let you know, when I was visiting the Middle East, those chains are packed. People are waiting 45 minutes and hours, similar to the way people used to wait in the heydays here on getting into a casual dining chain is happening in the emerging markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: All right. That's good color. And then, could we go back to the Celfrost acquisition? Because I'm still having a tough time wrapping my head around it. I mean, it's the cold side of the kitchen, a product line that you haven't traditionally been involved with. And when I hear some of your competitors talk about walk-in freezers and that sort of things, they don't seem them as excited as you are, can you just -- can you help me understand, is there something about the product mix at Celfrost or something about that geography, the emerging market opportunity that's different than some of the traditional competitors out there?

So Schon, I mean, the focus is -- I mean, Celfrost is a leader in India. So I mean, this was primarily a strategy to become the leader in that market. They're very strong with the U.S. chains, as well as the local chains. They've got 15 sales offices throughout India, and their products are highly complementary to our cooking products. When we think in that market, cold is a good strategic play alongside hot, so we really can penetrate our customers further in a fast-growing market. So that -- I mean, we want to be the market leader there, and I think that that's really the primary strategy. But opportunistically, those products have a good fit in other emerging markets. Selim mentioned the Middle East, for example. So we do see that the strategy that we're going to implement will have some carryover in other markets as well. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And maybe if I could sneak one more just kind of housekeeping question. The $13 million that you mentioned on the SG&A side, acquisition-related, kind of barring any more acquisition activity in Q4, does that go away? Or do we still hold a little bit of a lingering effect?

Okay. Sorry. Well, the increase is driven by the acquisitions we bought, right? So it's kind of incremental just because of the business operations we have. So I mean, we will continue to have a run rate that would be similar in Q4 to Q3.

And we have run out of time for any additional questions. I would like to turn the conference back to management for any concluding remarks.

Well, thank you. Again, as you've been part of the Middleby family for a long time, both as an investor, as an analyst, as a shareholder, or if you're new to the story, Middleby is not ordinary industrial company. We are high-tech firm with focus on energy, speed, ventless and water saving. Our customers are unlikely to abandon products like our TurboChef ovens, our Blodgett hydrovection, our Alkar RapidPak processing equipment, once they have convinced they actually enhanced their food preparation and save them a lot of money. So we're taking that same high-tech approach to Viking. As we basically have purchased Viking for the last 10 months, we have worked with their engineering team to produce innovation that creates a virtuous cycle in which consumers are curious about new products, and retailers are happy to see them come through their doors. So as we are launching over 50 new products in 2014, our retailers and our distributors, who would have the chance to peek on those new products, have become very excited. Let's talk about innovation that are -- among many projects, that has a potential to be a game changer is our IMC waste management. It's taking food waste and turning it into compost or biofuel, basically pellets, at an affordable cost with a payback of less than 14 months. The other project that we started in 2011 was to address water usage and water consumption. The food and beverage sector is a huge user of water, and also one of the first segment to invest in water footprinting. Our dry well technology and our waterless steamers are just 2 example of our push into investing in a basic natural resource such as water. If you remember in 2000, we were the first to address utilities, meaning gas and electrical consumption, and we became the leader in energy savings. We are today a leader in cooking equipment that basically reduces water consumption. The third initiative is to integrate several of our patented technologies to work together. What is unique is our waterless steamer is also ventless. Our 2-minute pizza oven is also ventless. Our dry well is also ventless. And we see the emerging markets as a principal driver of opportunities in those technologies. As I mentioned, I just came back from our Milan -- or from the Milan show, and we just started showing those technologies. And it was exciting to see local chains and Western chains in markets such as U.K., France, Germany, the Middle East, Saudi Arabia, Kuwait, U.A.E., India. Markets as far as Malaysia got so excited about our technologies. Talking about emerging markets. We already -- Middleby already generated over 26% of its revenues from outside the U.S., and this is growing at a double-digit growth. With the acquisition of Celfrost in India and our opening of our Brazilian office, and our Philippine and China manufacturing, and our U.K. and Germany and France and Denmark and Australia, we have a best-in-class international footprint among any foodservice or food processing company. This platform will provide strong future growth. We also see Viking benefiting greatly of our Middleby worldwide infrastructure. What's happening to our customers? In 2013, our chain customers faced strong headwinds from food cost, beef and seafood inflation, labor cost, and some uncertainty in the marketplace, given some legislation that were enacted in 2013 and 2012. So as I mentioned, many of our chain customers are updating their menu offering and raising the average check through product mix and not through price increases. The fast casual segment where we have a leadership position continues its unit expansion, both in the U.S. and overseas. I believe that in 2014, our restaurant customers will face a better year than 2013 in the U.S. The restaurant industry will gain in both traffic and ticket. Internationally, the restaurant industry will continue to aggressively open stores in emerging markets. So I can assure you that most restaurants today are making technology investment in their back kitchen to reduce labor, to provide consistency, quality and speed to table. The other thing what I think is a trend where people are saying similar to the Brinker, allow me to automate my kitchen, so I can move people from the kitchen to the front of the house, so I can improve my service levels to my customers in the front of the house. And that's becoming pervasive through many casual dining chains that have approached us to emulate what Brinker has done is take people out of the back and put them in the front to service their customers even better. This ends my comments, and thank you for attending our earnings call conference. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.