Good morning, and welcome to the PFG Q2 Fiscal Year 2018 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by PFG's management and the question-and-answer session. I would now like to turn the call over to Mr. Michael Neese, Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you, Maria, and good morning, everyone. We're here this morning with George Holm, Performance Food Group's CEO, and Tom Ondrof, PFG's CFO. We issued a press release regarding our fiscal second quarter results this morning. The results discussed in this call will include GAAP results and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release. You can find our earnings release at the Investor Relations section of our website at pfgc.com. As many of you know, on December 22, 2017, HR1, the Tax Cuts and Jobs Act was enacted. We will refer to the Tax Cuts and Jobs Act throughout our prepared remarks as the Act. I would like to highlight 2 items on Page 12 of the earnings release. Here you will see the tax impact of the revaluation of net deferred tax liability of $0.36 per share. This represents the per share impact of $37.4 million net benefit to deferred income tax expense as a result of the changes in tax reform and the revaluation of the company's net deferred tax lability. The second item is $0.14 per share impact of the stock-based comp performance vesting. This represents the per share impact of $15.4 million excess tax benefit recognized as a result of the performance metrics being met for stock-based compensation awards triggered by the exit of the company's private equity shareholders. Our remarks in the earnings release contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from forward-looking statements and projections. Now I'd like to turn the call over to George.

Thanks, Michael. Good morning, everyone, and thank you for joining us today. Our second quarter results were strong and came in line with our expectation. Our team's consistent execution enabled us to generate total case growth of just over 4%. We continue to grow our top line with net sales growth of just over 6% and adjusted EBITDA growth of 12%. Second quarter top line results were again impacted, as expected, by the closure of our distribution center in the Customized segment, and as we've mentioned previously, this impact is expected to continue for the next 2 quarters. Focusing on our segment results for a moment. Performance Foodservice continued to execute on their strategic initiatives and delivered strong top line growth of 7.5%, independent case growth of 6.5% and EBITDA growth of nearly 10%. In the early part of our second quarter, we faced some softness in the independent channel as a result of the 2 hurricanes, however, we recovered in December, and independent sales were robust. It was the strongest month of this fiscal year. Vistar had a strong top line quarter, with a growth of nearly 14%. Our theater business performed very well, driven primarily by significant strength in the box office attendance with the release of Star Wars. For the first half of 2018 fiscal year, Vistar's EBITDA was up over 9%. Turning to Customized. Net sales decreased 4.9% due to softness in the casual dining environment and the closure of our Georgia facility. Excluding the impact of the Georgia facility, net sales would have increased slightly. EBITDA was down nearly 12%, in line with our expectations as higher operating expenses did not fully offset our increase in gross profit. For the first 6 months, Customized EBITDA is up nearly 5%, driven by higher gross profit. We'll…

Thank you, George, and good morning everyone. Let me take you through our second quarter financial results, including some detail on operating expenses, cash flow and tax reform changes as they relate to PFG. On the top line, net sales increased 6.4% over the prior year to $4.3 billion due to strong case growth in Vistar and PFS, along with benefit from inflation and prior year acquisitions. Food cost inflation was approximately 2.5% during the quarter, driven by the meat, eggs, produce and dairy categories. Gross profit dollars grew nearly 10%, resulting in a 40 basis point expansion of our gross margin from 12.8% to 13.2%. The gross profit increase was fueled by an improved sales mix of customer channels and products, primarily in the independent channel, procurement gains and pricing initiatives. Operating expenses grew 11.3% in the second quarter to $518.5 million. The increase was primarily due to growth in case volume and the resulting impact on variable operating expenses as well as one-time charges totaling approximately $18 million, acquisition integration costs within Vistar and an increase in the number of sales personnel. A significant majority of the one-time charges, most of which were noncash, related to the exit of the company's private equity shareholder during the quarter. Excluding these nonrecurring charges, operating expenses would have increased approximately 8%. Our adjusted EBITDA increased 12.2% to $105 million, in line with our expectations, and reflects the solid -- the impact of solid growth in PFS and Vistar as well as continued strong control of corporate expenses. Net income grew nearly 241% to $78 million in the second quarter of fiscal 2018 compared to the prior year period. The increase was driven by a $59.2 million decrease in income tax expense due to the recently enacted tax legislation. Diluted earnings per…

Thank you, Tom. I'd like to get to your questions, but I thought I would briefly highlight 2 topics, the state of the independent restaurant industry and our MarketWatch innovative technology. From our perspective, total independence stores continue to grow in the low single digits. This is encouraging, as our goal is to grow independent cases at approximately 6% to 10%, with most of our growth coming from new customers. We believe we are taking our share and continue to grow in this profitable segment. To support our future growth, we are growing our sales staff in the mid-single digits, and we will continue to consistently add experienced sales personnel. As we look at the independent restaurant same-store sales, it's very difficult to tease out the growth. Certain industry sources suggest a slight increase, while others suggest a decrease. I believe same-store sales among independents were down slightly in fiscal 2017 -- or calendar 2017, although we saw a slight improvement in our business during the month of December. But remember historically, same-store sales is not the primary driver of our revenue growth. As we outlined at Investor Day, winning new accounts creates the vast majority of top line growth. That is why we are and have been so committed to hiring, training and rewarding our world-class sales force. Turning to MarketWatch. Performance Foodservice continues to invest in technology to enhance customer experience and sales force effectiveness. We're developing ways for our sales force to be more effective in the field, while providing them with tools to identify critical insights, product voids and opportunities to grow our profits. We have rolled out MarketWatch to nearly all of Performance Foodservice and the early read on this initiative is very positive. To wrap up, we feel really good about our first half results. All of our segments are focused on executing their plans for the year. Our newly added specialty companies are ramping up and are adding to our growth. The M&A pipeline remains strong. We are in dialogue with several companies, and we are assessing how the recent act will inform our decisions and their decisions. I'm very proud of our associates for their unwavering commitment to grow this great company. We have so much runway in front of us. And I've never felt better about our future than I do today. With that, let's get into the question-and-answer session.

[Operator Instructions] Our first question comes from the line of Karen Short of Barclays.

It's Ryan Gilligan on for Karen. Can you just talk about what drove gross margins higher year-over-year in the quarter, especially in light of accelerating inflation and higher freight cost?

Well, part of it was just the change in customer mix as our independent has outgrown our national business. And then within Vistar, it's been our higher-margin channels where we've been growing the fastest. And our brand growth. Our brand growth has continued to help us, because that's much higher margins than selling national brands.

Got it. So obviously, freight wasn't as big of a deal for you as everyone feared. What was the impact on gross margins from freight? And can you talk about why you're more insulated than maybe everyone thought?

Well, it wasn't real material for us but definitely an issue. I mean, freight rates are up, and drivers are harder to come by. But it's just something we feel like we're managing through fine and just not overly concerned. It's just not a huge part of our profit.

Our next question comes from the line of Vincent Sinisi of Morgan Stanley.

Just wanted to ask about the investments in the sales staff. I know, George, you said a kind of mid-single-digit range. Can you just give us a little bit more color in terms of kind of how you foresee the roles developing and if those investments are just kind of across the board or in any particular area specifically?

Well, really they were all in Performance Foodservice. That's where we're investing in sales people. Our other businesses, the way they're structured, we don't really need to do that right now. And we are back up to running mid-single-digit increases in sales people. We got behind there for a couple of quarters. And our biggest challenge there is just making sure that we get them trained real well, that we retain them and that we send them out there equipped to get their job done.

Okay. And just to clarify, so within PFS, that's just kind of across the board, no particular geographies or anything there, right?

No. Yes, it's very widespread. Very similar market [indiscernible].

Okay. And then just a quick follow-up, if I can. I know you said kind of continued softness in the casual dining. Anything kind of quarter-to-date that you can speak to? I know that was kind of for the fiscal 2Q. But are you seeing any change? We've just been kind of hearing rumblings that maybe things are slightly better.

Unfortunately, we have not seen that. I think a lot of it's weather related. If you look at where our Customized facilities and where our big broadline ones are, for that matter, they're pretty much up and down the East Coast. And there's been a lot of bad weather. So we've actually seen more softness in the fiscal third quarter than we did second. But I do suspect that's probably weather related.

Our next question comes from the line of Edward Kelly of Wells Fargo.

George, just a quick follow up on freight. So the inbound side this quarter certainly sounds like it was manageable. Do you expect that to continue? I guess question one. And then just bigger picture question about freight. Does any of this work its way into what you need to pay your own drivers going forward and overall level of inflation on the cost side there?

Well, we feel like we've made those moves with our drivers to get them to where we make sure that our pay rates are competitive for each one of the marketplaces that we're in. As far as the freight situation getting better, I think it will. We've moved some loads back to the suppliers to manage it instead of us, and they really don't like that. So they're working on finding ways to alleviate the problem. We continue to control as much as of it as we can through backhauls. I just think it's one of those things that's definitely a problem, but it's getting better and should continue to get better.

Okay. And then just a question on the competitive front and what you're seeing there. So your largest competitor seems a bit more interested in top line growth. They've mentioned hiring salespeople. That's obviously something that you've been doing very successful as well. Have you noticed any real change in the landscape there? Obviously, the large players are all taking share. And can everyone continue to win profitably against that backdrop?

I believe so. Obviously, there's a tremendous amount of focus on the independent operator. And -- but it's always been very competitive. I wouldn't say that I see it really any more competitive right now than it has been, but very competitive.

All right. And just -- the last question for you is just on Vistar. Can you talk a bit more about the cost headwinds that surfaced within the business this quarter? I mean, you had a really strong quarter from a gross profit dollar growth standpoint. EBITDA was weighed down a little bit by the cost side. And I just want to better understand what we saw this quarter from a cost perspective that was a bit more nonrecurring, how quickly it abates and how we should just think about all that going forward?

Yes, it's a good question. We made an acquisition early in the fiscal year. And typically, we do these integrations over about a 12- to 18-month period of time. And we made the decision to step that up and to do it quicker, and we still have a lot to do. But we've got a lot of it done late in the -- well, early in the fiscal second quarter and late in the fiscal second quarter. We can tell that it was going to be a great month for theater and we just moved a good bit of that theater business into our existing facilities. So when you do that, I mean it's change, and change is always an expense. And you've got the employees that you're training to handle that business within the Vistar companies, and you got that expense, but you still have the employees that were at the company that we acquired that are continuing to handle the business. And then once we got it converted over, then you had severance and you had all that to deal with. You also took some leverage out of those smaller facilities that the acquisition had. So it was just a myriad of things. It was a good decision. We're very glad we did it. We see, the next 2 quarters, things abating quite a bit. And then by the beginning of the fiscal year, we'll be pretty much clean with that integration. And that's when we'll get the benefits from that acquisition, because it was a very synergistic acquisition.

Our next question comes from the line of John Heinbockel of Guggenheim Securities.

So George, first thing on -- or a couple of things on the hiring of the sales people. Are we up to kind of that 5% level yet? Is that kind of where you want the run rate to be [indiscernible] side?

Yes, we are. Yes, we really stepped it up in this last quarter. And we are back up to that 5% level.

And that, in theory, right, when you think about the leverage, the historical leverage with those hires, you should be able to get back to 9% to 10%, or the high end of your independent case growth goal, when? Middle of next fiscal year or sooner?

That's a great question. I'm not sure it's one that we can answer, but I can do my best job at it. We went through a long period of time where we were growing our cases at about twice the rate that we were growing our number of people. And like any business, when you get pretty mature and your average sales person is going significantly more business than they were doing a few years ago. Our thinking today is it's going to be more like 50% better. So with 5% more people, we should be able to grow our case to 7.5%. Now obviously, these people are new. Some are dealing with noncompetes. So it's going to take some time. I think that middle of our range, we should be able to get to sometime during next fiscal year. But that takes a crystal ball to really know that. And obviously, we're counting on the marketplace continuing to show growth.

And then two things related to tax reform tangentially. Back to the hiring, how does that -- the fact that you're hiring as much as you are, more than your peers, how does that help you on the M&A front getting maybe a private company wanting to sell to you versus the others? Is that a big deal? And then you also talked about CapEx. What's the state of the physical plan today, right across, I guess particularly Foodservice and Vistar. Where do you need to make investments? I don't think it's new facilities, is it more expansions?

It is more expansions. In the case of Vistar, probably, one new facility. I would say that we have some capacity constraints in both of those businesses. Probably, a little bit more in Vistar. We also have places where we have excess capacity. So we're just trying to balance that. I would suspect that you'll see us with a higher CapEx numbers. We felt like we would already be spending a bit more. It just isn't as easy as it sounds to do. Some of these facilities have taken much longer than we thought to get the additions done. But the CapEx is a very important part of our future growth.

Our next question comes from the line of Bryan Hunt of Wells Fargo Securities.

I was wondering, when you were talking about new facilities, can you talk about the efficiency gains that you've experienced over the last couple of quarters on your automated distribution center? And is it to the efficiency point that you originally targeted at the date, given the CapEx spend and ROI implications that you had rolled into your plan?

Yes, we've had continuous improvement. We're very pleased with it. It's not at the level of profitability that we would like, but it's quite profitable. We want to move on with a couple more facilities. We understand that we need to go back and do some retrofitting and make some changes to the initial one. But at this point, we have a level of confidence where we feel we should be moving on because there's business that we can garner by having the better coverage out of an automated facility that we have today.

Great. My next question is, when you look at mix, which was discussed slightly earlier, and the Performance Brands mix, where does that pipeline stand in terms of rollout? And where do you think the mix of Performance Brands can go?

Well, it's another great question. We've been able to get ourselves into the high 40s. We do have a couple of our distribution centers that are 60. So can they all be like those two? I don't know. But we certainly feel that we can get closer and closer to 50. And we're not against selling national brands by any means either, so we feel like that part of our business is going to continue to grow. If we can stay in that 1% to 4% better growth in our brands than we do kind of in our total independent cases, I think that's a sweet spot for us. And we can support our national brand partners and still grow our brand.

And then my last question is, you talked about the rebound in December after hurricanes. Do you believe that rebound is a trend? Or do you think that it was restocking, I mean, based on what you're seeing in the current quarter?

Well, the restocking would have happened long before December. And December was the month that was the better month. It's hard to tell if that was a trend because the weather's impacted January to such a degree. I do feel in December that the calendar fell better, where the holidays fell. So I think we got some benefit from that. So I think that's probably a better question for when these weather events are behind us. But I think it's kind of partial, partial calendar and partial just a little healthier business.

Our next question comes from the line of Andrew Wolf from Loop Capital Markets.

George, between what you said today and I think [indiscernible], it sounds like the independent channel is kind of shifting from same-store sales growth more to new unit expansion but still generating sales growth for distributors. Just want to check that I'm understanding that right. I also want to get your sense, is that kind of typical for a maturing economic cycle? And lastly, do you think it's sustainable? For example, is it like new units being added by existing restaurant tours, which probably I, would think carry less risk than sort of someone just planting a restaurant out there and hoping they can make a go on the business. If you could sort of give us a sense of that, that would be helpful.

Yes, I do believe that we're continuing to see these new units open. I was just with a group of customers and asked them about their same-store sales and actually there was only one that was running same-store sales, but what I got -- growth. But what I got from them was there used to be 4 restaurants on my street. Now there's 6, type of thing. And I think though that, for the most part, as far as getting financing to do a restaurant seems to be easier to do than certainly it was a few years ago. But they seem to be good operators. A lot of it are people that are putting up a second or a third unit, maybe not the same name, but I still feel very good with the independent operator. And there's going to be casualties anytime you get overbuilt. But I think for the most part, there's good operators out there. And I just really like the independent part of the restaurant business right now.

Okay. And just back to your sales force build. Was this coming off flat or just a lower than normal growth, number one...

No, we had actually got to where we were flat in number [indiscernible]. So it was a pretty significant ramp-up.

And what -- how is the profit build versus the expense build? For -- how should we think about it given that we can -- pretty much you're going from 0% to 5% right around now? Does it take the full year or so of their noncompetes? Or I assume it's less time than that, but if you could give us a sense of that, that would be helpful for modeling [indiscernible].

Yes, it's all over the board. And we have some people that come in and they can't call in existing accounts. And they do really well in their year ends, and they don't even want to go to old territory, they're just fine, all the way to others that are good salespeople. And they have a great book of business that follows them. But that first year is pretty close to dead cost for us. So it really varies. But it is definitely an investment. I think it was a good time for us to do that. We're doing pretty well. We've got the tax act that will help us as far as cash flow goes, and it just a good time. And I would expect that before it has a real material impact, it's probably going to be a year. But we'll get some benefits before then.

And just lastly, is there a vulnerability in certain markets? Like I think Sysco said they were doing it more surgically than across-the-board, [ whereas ] you're just more a go-to market strategy and it's more of a generalized approach?

Yes, I mean, I would say we're probably more generalized. But we don't have the kind of share and maturity that they have. So it's probably different for us. Where we can get good people, we need them. And we don't pass on the opportunity to get someone that's talented.

[Operator Instructions] Our next question comes from the line of Karen Holthouse of Goldman Sachs.

A couple for you to -- kicking things off. When you brought down CapEx guidance for this year, noted that there was a timing issue -- or that was largely due to the timing of spending. Should we think of fiscal '19 then of -- as having a little bit higher than usual CapEx, as you sort of catch up on that?

I think that's right. A couple of them -- not a couple. The majority of the major projects this year fortunately or unfortunately are in California and New York. And so those bring their own set of challenges. So I think it is timing. And I think you'll see a bit more in '19 to sort of make up for that timing difference.

And then you confirmed a couple parts of guidance but not necessarily all of the underlying drivers. And sort of focusing in on organic case growth, which year-to-date is running right around 2% versus guidance of 3% to 5%. Should we think about sort of the composition of getting to guidance as maybe changing a little bit versus the original plan?

No, I don't think so. The guidance always contemplated a bit of M&A. And certainly, we're in that range in the 3% to 5% with the M&A. So the components are pretty, I think, pretty consistent between organic, M&A, price mix changes and inflation.

And then thinking about the acquisition side [indiscernible] it was from a case growth perspective, it looks like a little bit higher this quarter than what we've seen. Is that something you can hold going forward? Or was there -- when do you sort of start to roll off things that are benefiting this quarter?

Well, in terms of, Karen, overlapping the prior year acquisitions, 4 of the deals were done in the first half, 4 of the 7 last year were done in the first half. So we pretty much lapped all those. Two more in middle of the third quarter, and then one right at the tail end of last year. So we've lapped well over half of what we did last year.

Our next question comes from the line of Bill Kirk of RBC Capital Markets.

In your prepared comments on the uses of tax benefit, there was no mention of price. So I guess, how did you get comfortable that the other uses, whether it's CapEx or labor are better than price investment?

Well, we think that's the key to our growth is people and making sure that we have the capacity to grow. And we don't see price as something that's -- we need to grow. Certainly, in the national account area, but that's just not the emphasis. It just doesn't make sense for us to do brick-and-mortar for that type of business.

I think I'd add that given the fragmentation of the market, I mean, again, 31% market share from the big 3, and you see all of them growing this quarter as, I think, should be the case. The pressure to price is not particularly there because of that fragmentation.

Okay. That's helpful. And then more housekeeping on the tax rate. Why doesn't it step down to 27% beginning January 1. Or I guess other -- asked a different way, why is it 33% for the next 2 quarters?

Because of our fiscal year. Yes, if you look at the chart, our -- we're a June year-end. So we have a 28% blended for this year, and then it steps down the following year.

So 33% -- in the press release, I think it says 33% for 3Q and 4Q. Is that -- does that mean blended -- the full year's blended to 33%?

It is. Well -- and then you've got the state rate on top of it. So that's our full effective rate. So 40% is a full effective rate for state and federal for last year. This year will be 33% state and federal.

Our next question comes from the line of David Lantz of BMO Capital Markets.

When was the last time you felt like you saw negative comps in the independents? And why do you think it was negative in 2017? Was it possibly because of too much new capacity being built? And then just a little further on that, does it make you rethink investing in growing the sales force in light of these comments on independents at all?

Well, I'm going to once again stress that there's people that put different numbers out there, okay, with independents. So we're giving you what -- as a company, as Performance Food Group, how we look at it. And we have seen when you look at our account base that the same-store sales growth has not been there in 2017, but we've also had a robust independent business. And we've been able to do that growth more through new accounts than through penetration, and we see it. I mean, we just see the number of new units that are opening. And I think as far as growing our sales force, I think that's more important when there's more units. You have more people to call on, and you got to have your people out there doing that.

Okay, great. And just one other follow-up. Was the comments about softness into 3Q just on casual dining? And is there any weather weighing on independents?

Weather doesn't differentiate. I mean, when it's bad weather, it affects everybody. But yes, the Q2, it was more of the casual dining that was slow. We had a bankruptcy of one of our accounts. And we saw a lot of store closings and some same-store issues. So it was pretty widespread issues when it comes to casual dining. We didn't see that in the independent at all.

Our next question comes from the line of Ajay Jain of Pivotal Research Group.

First, I had a housekeeping question. I wanted to ask if you could confirm the Customized revenue figure without the impact of the closure of the Georgia facility. I know, George, you mentioned that it was slightly positive. But can you confirm the actual figure?

No, I mean, it would have been slightly positive. But yes, we're not -- we didn't want to strip out that specific opco and identify it. But it would have been slightly positive.

All right. Fair enough. And then as a follow-up, I thought expense comparisons were supposed to be very favorable in the first half, especially as it relates to Customized. So I'm just wondering was there any aspect of the latest results that you think fell short of what you were expecting a few months ago based on the mid-teen EBITDA guidance for the first half? And that question is specific to Customized. I'm just trying to figure out if the recent softness there was expected, or were you not contemplating all of those expense pressures with Customized in Q2?

Well, when you go -- well, first of all, the driver issue is the real issue. So we've addressed driver compensation where we've needed to. And then when you have a change in your customer base in a business like that, and you have a bankruptcy to deal with and a lot of store closings, it changes all your routing. In many cases it changes your slotting. And it just adds, layers in a lot of expense to kind of rework the business and get it back to the efficiency that it typically runs. It's a very well-run business. And when the current balls come, it just takes a little bit of time to adjust to it. And that's what we needed to do.

Okay. So would you say the EBITDA decline in Customized was an isolated event to 2Q? Or would you expect that trend to continue in the back half?

No, I think we expect it to pick back up in the second half. I think the only thing I'd add to George's comments were the fuel increases sort of in the back half of the quarter, and there's a lag effect for that to recover, pricing to come back to equilibrium on that. But we expect it to come back in the second half.

Yes, the only caveat I would give to that is weather has a big impact as well. So January, although we haven't seen the numbers, will be a high expense number just because of the weather issues in Customized. But that aside, we expect to see the Customized business get better.

Okay. I just had one final question. I know George, you mentioned that in-bound freight costs were not that big of a deal for you as compared to some of your competitors. But I was still surprised by the growth in gross margin. I just want to confirm that inbound freight costs are reflected in gross margin and SG&A, and in SG&A on the outbound side. Am I right? Is that how you allocate the inbound, outbound freight cost?

That's correct.

Yes, that's correct.

Our next question comes from the line of Edward Kelly of Wells Fargo.

Just a quick follow-up on the inflation front. What's the expectation here over the next few quarters? I mean, it does seem like you're going to starting to lap some of those costs. I don't know if sequentially you're still seeing growth there. And then obviously, with freight and just kind of like overall labor pressure in the system, I'm just curious as to how we should be thinking about the expectation around inflation going forward.

We're thinking that inflation's going to stay in that 2% to 2.5% range that it is now. We just don't see anything that would change that.

Our final question comes from the line of Bob Summers of Macquarie.

I wanted to come at the tax issue from a different direction with two questions. First, just -- are you aware of what the tax structure of some of your private competitors looked like and whether you now have an advantage on that basis? And then second, how -- now as you look at M&A, does it change your approach, acknowledging that, look, the EBITDA numbers of acquired -- or potentially acquired targets doesn't change, but you have a widening gap between that and potential earnings accretion. Does it change how you look at potential transactions now?

Well, Bob, we'll definitely continue to look at our deals as we've -- sort of the metrics we've talked about before, where they're accretive in the initial year and then cost of capital over the sort of a 3-year period. It does raise the bar a bit. Obviously, with the math. So that'll be the change but it will be the same metric. Just a slightly a higher bar. In terms of the targets that we look at in their tax structures, the vast majority, I don't know if George has talked to over the years, he's in conversations with our family-owned businesses, privately held.

[indiscernible]

Yes, they minimize tax. They run it to not -- pay as little taxes as they can. So I don't know yet, particularly if it's going to be a big driver. Tax has never been a driver in my experience for whether people sell or don't sell. So given that, I'm not sure this will have a big impact.

Okay. And then let me reask the second part again. Because you said it raises the bar. But to me, it would open up the landscape more, or am I thinking about it wrong? Either you can now get to accretion a lot easier than you could before?

No. But -- we can take this offline. But I think cost of debt goes up as well, because you don't have as big of tax yield. So your accretion bar goes up.

And that was our final question. I would now like to turn the floor back over to management for any additional or closing remarks.

Thank you, everyone. Have a wonderful day.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.