Flowers Foods, Inc. (FLO) Earnings Call Transcript & Summary

Hi, everyone, and thanks for joining us to go over Flowers Foods’ first quarter 2021 results. I’m J.T. Rieck, SVP of Finance and Investor Relations. Just a reminder that our first quarter results came out on May 20, 2021. You can find the earnings release and the related slide presentation, along with the transcript of these remarks from our CEO and CFO, in the Investors section of our website. Everything is posted in the Investors section of flowersfoods.com. Before we begin, please note that what’s presented here may contain forward-looking statements regarding the company’s performance. While we consider those statements reasonable, they carry risks and uncertainties that might make actual results differ materially. Beyond what you’ll hear in these remarks, important factors concerning Flowers Foods’ business are fully detailed in our SEC filings. Speaking today are Ryals McMullian, President and CEO, and Steven Kinsey, our CFO. Ryals, over to you.

Thanks, J.T. It's great to have everyone join us for this first quarter call. I'm glad to walk you through our Q1 results today. This quarter was truly exceptional, especially when you factor in that our first quarter spans 16 weeks and we had to lap the pantry-loading weeks from the start of COVID a year ago. Our company has never been stronger, and we're eager to keep building on what we've accomplished over the past couple of years. The business climate right now brings certain difficulties, but it also brings significant opportunities. We'll go over our plan for grabbing those opportunities and easing the difficulties, all seen through our four strategic priorities: building up our team, concentrating on our brands, putting margins first and going after smart M&A. Beginning with building up our team, I want to express again how thankful I am to everyone at Flowers for their continued dedication to producing quality products for our consumers and serving our markets dependably. The dedication, enthusiasm, and effort of our people are what directly drive our strong results. We've discussed on prior calls the actions we've taken to make our team stronger, and we remain committed to developing an exceptional leadership bench—one that adds new skills, creates real value, and helps push our strategic priorities ahead. Our second strategic priority centers on brands. With our top brands performing so well and the level of investment we're making in them, we've never been in a stronger position as a company to win. Building on our #1 share in low organic and gluten-free, we've successfully expanded our product lines into neighboring categories, including breakfast as well as buns and rolls. We've been seeing a move in the category away from traditional loaf and toward specialty products such as breakfast items and buns for some time now. We think we're positioned very well to take advantage of that shift by keeping on innovating with new items that deliver a distinct point of difference, such as our perfectly crafted Brioche buns and our DKB breakfast and bun offerings. As we work to fully stand up our agile innovation function, we're aggressively developing new and innovative products to capture greater wallet share from consumers who already enjoy many of our existing products. Recent introductions include both Dave's Killer Bread and Nature's Own Perfectly Crafted Rye breads. We're bringing out Nature's Own Perfectly Crafted flat breads and Wonder English muffins to build our position in categories where we don't have much presence. By entering rye and flat breads, we're going after markets worth $300 million and $228 million, respectively—spaces we simply weren't in before. We've also increased what we spend on marketing to support these launches. E-commerce is a big priority for us; our share there is 17.9%, a bit higher than the 17.7% we hold overall. Online sales represent 9.6% of our retail business now, compared with 4% a year earlier. The renewed curiosity about bakery items that the pedantic generated gives us a rare opening, and we're working hard to attract and retain these additional shoppers, with those efforts producing results. Despite difficult comparisons against last year's pandemic-driven peak demand, tracked-channel sales for Canyon Bakehouse and Dave's Killer Bread climbed, up about 14% and 7% respectively versus the same period a year earlier, while Nature's Own declined only 3.5%. When you stack our Q1 numbers against where we stood before the pandemic in 2019, Canyon is up roughly 101%, Dave's Killer Bread about 42%, and Nature's Own around 16% — and that lines up precisely with how we've designed the portfolio, since our goal is to keep tilting the sales mix toward a bigger share of branded business. That share reached 66.1% in Q1, compared with 66% a year earlier and 59.9% back in the first quarter of 2019. To put it in context, during the opening two months of 2021, branded retail held up strongly, much like the levels we posted throughout the second half of last year; then, as we moved through the last month of the quarter, branded retail eased a bit but still sat comfortably above where it was in 2019. During the opening weeks of Q2, we're still observing high demand at branded retail even though foodservice has improved noticeably, and that reinforces our belief that the portfolio strategy is delivering results. Shoppers' growing inclination toward brands aligns with broader industry patterns, since store brand share has kept shrinking over the long term—dropping 40 basis points to 20% across the trailing 12 months, compared with 26% back in 2015. Looking at how we did this quarter, what stands out to me as remarkable is that total sales rose 3% versus the first quarter of 2019. When you factor in the foodservice sales decline, the SKU rationalization we completed across those two years, and the private label decrease, it really speaks further to our portfolio strategy and how our team has performed. Margins are our third strategic priority, and that emphasis clearly showed up in the first quarter, when sales fell 3.5% compared with the prior year's pandemic-inflated quarter. We managed to raise EBITDA margins by 30 basis points, reaching 12.4%, largely because of better pricing and mix. We've already noted that we expect $30 million to $40 million in portfolio optimization savings for 2021, which comes on top of the $22 million delivered in 2020, and we continue to be on track to hit that target. We've observed improvement at certain underperforming locations, including Navy Yard, and anticipate further gains as the year unfolds. I'm aware that commodity inflation is a key concern for numerous food businesses. Everyone knows that costs for transportation, labor and commodities have risen considerably; over the near term, our procurement approach has helped lessen the impact of inflation. Should these elevated prices continue over a longer horizon, we'll tackle them through the tools available to us. Pricing is plainly the most powerful of those tools, and we've been effective in deploying it to lessen the burden of increased costs. Trade spend efficiency is another lever, and it has gotten better over the last several years as we've taken advantage of new trade promotion management tools. And naturally, whether or not inflation exists, it's always our duty to keep enhancing our own efficiencies. Smart M&A is our fourth priority. We have a lengthy and successful record on that front, and our strong balance sheet gives us the flexibility to act aggressively wherever we hold firm financial, commercial and operational conviction. With the economy reopening, transaction activity is accelerating, and we remain on the lookout for possible deals, as ever, while sticking to our disciplined approach. I'll now pass it to Steve, who will walk through the quarter's specifics and cover our 2021 guidance. After that, I'll come back to share our view of the current business environment. Steve?

I'd like to echo Ryals' remarks and express sincere gratitude to our incredible team, whose efforts have been outstanding. Turning now to the quarter's performance: as Ryals noted, the pandemic continues to influence our results, though certain indicators of mix reversion are emerging. Because our first quarter covers 16 weeks, comparisons with Q1 2020 could be more impacted by the pandemic-driven demand spike from March through mid-April than has been true for our competitors. That said, we're pleased with overall sales and mix in Q1 2021. Because that year-over-year comparison is unusual in some ways, we'll also provide comparisons to the pre-pandemic results from Q1 2019. Sales overall dropped 3.5% from the same period a year earlier, but they climbed 3% compared with the first fiscal quarter of 2019. The decline came from lower volumes, which fell 6.9%, reflecting difficult comparisons to the prior year across most channels apart from foodservice. Partially offsetting those volume decreases was a 3.4% increase in price/mix across almost the entire business, divided roughly evenly between price and mix. Throughout the quarter, results were strong relative to pre-pandemic levels, except for Easter timing, which caused a temporary headwind in April that reversed during the second quarter. Turning to channel-level sales performance. Our branded retail business posted a decline of $29.1 million, equivalent to 3.3%, bringing it to $861.4 million. Ryals mentioned this before — even with those robust figures from a year ago, Dave's Killer Bread along with Canyon Bakehouse each expanded substantially, which helped partially counterbalance volume softness across other branded retail segments. Even so, measured against Q1 of 2019, branded retail sales climbed 13.7%, since our top brands continue gaining from elevated pandemic-driven demand and from programs we've launched to accelerate growth. Items like additions to the Nature's Own Perfectly Crafted lineup and DKB buns stood out as particularly strong performers. Store branded retail sales slipped $27.9 million versus the prior year, a 14.6% decrease, down to $162.9 million, reflecting shoppers' ongoing preference for branded offerings that stand apart more clearly. Store-branded sales fell 14.7% compared with the first quarter of 2019. Nonretail and other sales increased $9.8 million, or 3.6%, reaching $277.9 million, as we lap meaningful pandemic-driven declines from the prior-year period. Nonretail sales gained from better price mix, partly reflecting internal initiatives aimed at improving profitability in this business. Foodservice recovery stood out in particular, while institutional and vending sales were softer. Overall, nonretail and other sales remained under pre-pandemic levels, running 11.8% below the 2019 first quarter. Fast food, however, is the exception and is above 2019. With nonretail sales still recovering, we believe our efforts to boost profitability in that business will result in the returning volume carrying a better margin than it did previously. Gross margin as a share of sales for the quarter, excluding depreciation and amortization, climbed 30 basis points. Higher ingredient and packaging costs relative to revenue were offset by lower short-term incentive compensation and greater efficiency throughout our plants overall. In Q1 2020, we also recorded $1.7 million of start-up costs related to turning the Lynchburg, Virginia facility into an organic bakery. Outside product purchases were also reduced, which mirrors our push to streamline SKU count. In Q1, selling, distribution and administrative costs dropped 20 basis points as a share of sales. Excluding the comparability-affecting items spelled out in the press release, adjusted SD&A expenses were flat year over year, as lower bad debt expense and distributor distribution fees were partly offset by higher e-commerce and marketing costs plus weaker sales. GAAP diluted EPS was $0.34 per share for the quarter. Excluding the comparability-affecting items laid out in the release, adjusted diluted EPS for the quarter was $0.41 per share, matching the prior year period. Now turning to our balance sheet, liquidity and cash flow. During Q1 2021, operating cash flow decreased by $8.2 million, reaching $98 million compared with the same period last year. Capital spending increased by $5.6 million, totaling $27.3 million, while dividend payments went up by $2.2 million to $42.5 million. Our balance sheet is still solid. When the quarter closed, net debt relative to trailing 12-month adjusted EBITDA stood at approximately 1.2x, down from 1.3x at the close of 2020. As of quarter end, cash and cash equivalents came to around $251 million, and we had about $671 million left available under our credit facilities. Notably, we issued $500 million of 2031 notes. Part of those proceeds went toward redeeming our $400 million in notes originally due in 2022. The pricing of the notes pleased us, especially considering their long-term maturity. In our view, the robust investor demand for the offering shows that the capital markets have confidence in our company and our strategic plans. Now, moving to our adjusted outlook for 2021: we forecast sales declining between 2% and 3.5% versus 2020, compared with our previous guidance of down 2% to down 4%. Against 2019 results, our guidance implies top line growth of 2.7% to 4.3%. On earnings, we are lifting the low end of our guidance range to adjusted EPS of $1.10 to $1.17, versus our prior guidance of $1.07 to $1.17 and 2019 adjusted EPS of $0.96. Our revised guidance range now sits entirely inside or above the long-term financial targets we've set: sales growth of 1% to 2% and EPS growth of 7% to 9%, both measured from the 2019 base. That holds true even after absorbing the $0.05 headwind tied to our digital ERP initiatives. Keep in mind that 2021 returns to a 52-week year, which is one week less than 2020. That extra week in 2020 added 1.8% to full-year sales and roughly $0.02 to EPS. Having closed out the first quarter and entered quarter 2, conditions in the operating environment have come in stronger than our original forecast. Actually, branded retail made up 66.1% of total sales in Q1, versus 66% during Q4 of 2020 and in the first quarter a year earlier — a period that captured the height of pandemic-fueled buying. Even with nonretail and our other operations bouncing back, branded retail has held onto that sizable share of overall sales. Among the things we weighed in setting guidance were how the pandemic affects the speed of reopening and inflationary commodity costs. Our 2021 plan did anticipate a degree of inflation, yet markets have proven far more volatile than we expected. Where we could, we locked in input costs through the rest of 2021. Cost inputs for which forward buying isn't available might create inflationary pressure during the second half. With a fair amount of 2021 still ahead, if commodity prices hold where they are now, we'd anticipate significant inflation in 2022. Shortly, Ryals will offer more detail on the factors we're monitoring in 2021. We expect free cash flow generation to be robust, and our priorities and philosophy for capital allocation stay in line with our emphasis on maximizing return on invested capital and building shareholder value. That said, our Q1 CapEx spend of $27 million came in a bit under our full-year run rate. We anticipate that our investment tempo will pick up during the remainder of 2021, since we are supporting our supply chain optimization and digital transformation efforts. For the full year, capital expenditures remain forecast at $140 million to $150 million. Thanks — I'll turn things back over to Ryals now.

Thanks, Steve. I'm pleased with the start to our year, and I feel confident about the steps we're taking to continue succeeding well into the future. Steve walked through our 2021 guidance in detail. I'd like to share more perspective on how we see the remainder of the year unfolding. Last quarter, we highlighted a number of factors that could affect results within our guidance range. Those factors include the timing of when pandemic-related demand returns, cost inflation, the pace at which we make our long-term growth investments—digital among them—and whether we manage to deliver operational improvements at a few of our lower-performing bakeries. On the digital front, we're off to a solid start. Our digital programs are proceeding as planned, and with our strategy becoming clearer, we anticipate providing additional information toward the end of the year. Regarding guidance, we highlighted three specific factors to monitor: mix reversion, commodity inflation, and the promotional landscape. Let me give you an update on where each stands. On mix reversion, as noted previously, branded retail has remained robust thus far, comfortably exceeding 2019 figures, whereas foodservice is bouncing back but remains below 2019, and store-branded retail continued the soft patterns that emerged long before the pandemic. We are monitoring intently the changing conditions we foresee in the latter half of the year when children return to school. Commodity inflation is clearly accelerating, and our response mirrors what we have consistently done to counterbalance it—savings on costs, gains in efficiency, our portfolio approach, and adjusting pricing and trade spend where needed. As mentioned before, through pricing we have managed up to now to reduce the effect of rising costs, and we anticipate being able to continue that practice as required, because our brands are strong and the whole industry recognizes that these higher costs must be offset by everyone. Lastly, the promotional landscape has remained steady to this point. Naturally, we will monitor it carefully, and I have confidence that our improved capabilities will let us get the most out of our promotional strategies. To wrap up, I want to point out that this company has operated for nearly 102 years now. I'm fully aware that the inflation signals everyone is observing are top of mind for all of you. Still, it's worth keeping in mind that we have faced comparable stretches on numerous occasions in the past. We have gone through times of rising prices, times of falling prices, economic downturns, and even depressions—and we have come through every one of them. Staples of the American diet are what our core products are. People buy them every week, and that reliability has helped generate our robust cash flow across many years. We acknowledge and value how inflation could affect our results in the near term, but we think our 2021 guidance already reflects that. Shoppers have shown they clearly favor brands that stand apart, and we feel our powerful brands put us in a stronger spot than at any point in the past to handle the current climate. So regardless of what conditions we face, we are dedicated to getting the most out of our results through pushing revenue growth and widening margins. With our top brands and a team that performs at a high level, I am very confident that we are headed in the right direction and positioned well to produce outcomes consistent with our long-term financial goals. I really appreciate the time you've given us. That brings our prepared comments to a close. Thanks, and be well.

Thanks, this is Jefferies. Look, it was a solid quarter. You seem to have reasonable confidence in the revenue guidance. It also appears that those consumers who've been eating at home—or keep eating at home—with retail brands are still at elevated levels, which is great. One thing I'd like to raise, because I believe this is truly the central issue on many investors' minds at the moment: the prepared remarks contain a line stating that commodity inflation appears perhaps somewhat manageable during this year, yet in the following year, assuming prices stay roughly at current levels, somewhat greater pressure could emerge. So any further detail on that would be welcome, perhaps regarding some of those offsets, including what pricing might be possible in the latter half of this year. That's everything from me.

Thanks, Rob. This is Steve. As you'd expect, there's a great deal of turbulence in commodity markets right now. Our 2021 guidance already accounts for what we expect to happen; and as you're aware, we do hedge, and we typically secure coverage over a 7- to 9-month window and usually remain at the longer end of that range; so we do think we have solid visibility for the remainder of 2021. There are a few items we can't cover. They're somewhat shorter term, some in packaging, and you're seeing considerable volatility and inflation in packaging, especially in corrugated and arena. But as I mentioned, we do feel we have reasonable visibility. Ryals noted that there are multiple levers available to us, and pricing is one of them, though we're also examining efficiencies throughout our bakeries along with other cost programs. So I feel fairly confident about the guidance range we've put forward. And of course, given the volatility and the speed at which conditions shift, we'll be in a position to revise any guidance as needed during the year; but based on where we stand today, we're quite comfortable with it. As for 2022, we're clearly not ready to provide guidance for that year; however, the fact is that when you consider what's behind the commodity inflation, much of it isn't necessarily weak. The wheat harvest looks reasonably good, though the real story is with other grains—corn and soybeans—and those trade in a more worldwide market. China has re-entered that market aggressively. Once you move into feed grains and supplies get tight, the effects spill over into wheat and other grain crops. Honestly, if we had to go buy coverage at current prices, commodity inflation would be substantial, but we still have a fair amount of room left on corn and soybeans, and we'll roll through a wheat crop as well. Even so, we thought it was worth disclosing that for transparency.

Rob, let me tack on a couple of things there — Rob, two more points on top of that. Steve is exactly right on every front. But as you're aware, we've gone through stretches like this on numerous occasions before. Yes, over the years we've managed to cover most of the inflation we've faced, and cover it adequately. What I'd say is that I believe we sit in a better place right now, maybe, than at any point previously, simply given — when you consider how strong our branded portfolio is at present and the attention we give it, and how clearly consumers want branded products that offer something different. That, I think, puts us in an even stronger position when you weigh some of the levers available to us from the standpoint of an inflationary environment.

All right, that's clear, and I have one quick follow-up. As you mentioned, shoppers keep zeroing in on brands. Your branded segment is performing really strongly, correct? In the prepared remarks you highlight the overall growth from DKB and Canyon, which has been outstanding. And even when compared with 2019, revenues are still higher; so I suppose the bigger question is, as consumers begin shifting back, are you seeing one of those 3 things you're watching, basically channel reversion, play out? Is there anything you'd point to now versus 12 or 18 months ago that has shifted how you think about serving certain channels? For instance, are there advantages to not reverting quite as much — just saying, fine, we'll use some spare capacity here, a bit in private label, a bit in foodservice? We understand what we've learned during the pandemic — or not? Or is it simply a matter of returning to business as usual? That's all.

Yes. Thank you, Rob. No, I don't believe it necessarily returns to business as usual. As we've stated previously, I do think a few of these patterns are likely permanent. Yet we've also said consistently that we expect some shift back toward prepandemic levels; so I don't think it will fully return. I do believe that when school begins in August, that ought to provide a clearer long-term signal of where these trends will ultimately settle. That said, regardless of how that environment looks, we feel we're very well positioned with our branded portfolio, as I noted. But also, when you consider foodservice. Returning, which already happened to some degree in the quarter, we began seeing some increases in foodservice. And the positive story there is that through our customer strategy work, it's coming back with better margins. So as that mix reverts and foodservice begins to recover, the impact won't be as significant as it would have been before that strategic work was executed.

First, one more question about pricing. Has anything shown up on the pricing side — in the competitive landscape? I believe we heard the other day that, say, Little Debbie and the cake side had already taken some pricing. I imagine not every one of your competitors is kind of moving in the same direction as you. So they could be feeling the squeeze sooner rather than later. So I didn't know whether you've seen anything there or expect to follow it from that standpoint.

Yes, nothing really significant, Bill. The one remark I'd offer about pricing in this competitive environment concerns the promotional cadence. Consistent with prior quarters, promotional activity has remained essentially flat and is still considerably below normal levels. Base sales are doing the heavy lifting, although they are naturally lower versus a year ago because of those pantry-loading months—nothing dramatic, though. We're aware that certain regional competitors may not hedge the way we do, or at minimum not as far into the future, which leaves them somewhat more vulnerable to spot-market swings and similar factors, yet so far we haven't observed anything meaningful. Bill, it might also turn out to be—much as it could for us—more of a second-half phenomenon rather than something spanning the entire half.

Yeah. Absolutely. And turning to private label, I mean, it's frankly remarkable that it has dropped from 26% of the category to 20%, which has to rank among the lowest levels in years. And I believe I've raised this point on an earlier occasion, but given that you supply such a large share of the private label, I mean, when can you step in and get more of your branded items onto the shelf and demonstrate that, "Hey, this really isn't a smart use of the space." I mean, because you handle it with DSD, I'd imagine that's something quite clear to the retailers and to the industry as well.

It certainly is. Yes, that's correct. We've touched on this somewhat during earlier calls, but I mean, I think retailers are recognizing the value in our category and others, honestly, of consumers' preference for brands. So we've managed to grow our shelf space, especially with Dave's and Perfectly Crafted's and Canyon, a few of those top items that we have, once again, simply underscoring how important the portfolio strategy is overall; but I share your view, it is quite striking to see how far down it has gone, yet I think that reflects consumer behavior more than anything else. And I'm sure the retailers are very attuned to that.

Sure. Then this is my last one. Looking back twelve months, you had roughly 40 bakeries that managed, within a brief window, to achieve an enormous sales spike. And now that we've come down — or are coming back down, or normalizing — I mean, do you reflect and think, "Wow, the supply chain and the count of facilities we run might be trimmed down even more? We're actually far more efficient than we were, or could become more efficient, and could get even more efficient by eliminating a plant here or there?" Or is that not the situation? Is it instead, "Hey, let's simply keep operating and expand along with it?"

No. Quite the opposite — look, network optimization, as you're aware, has been among our central focus areas. That Lynchburg bakery was converted by us. We have additional projects underway this year. And with the higher CapEx figures you've seen this year, it remains very much a focal point for us. As we frequently put it, there are plenty of levers available to pull in an inflationary environment, but it's always on us to ensure we're operating as efficiently as we can. So from that perspective, we continually assess our network.

Understood; but more along the lines of the usual process, I mean, would you — I suppose — sorry, should we anticipate CapEx staying elevated as we head into 2022? Or is this truly the major year of transformation?

Well, Bill, this year the emphasis is on the digital initiatives, as we've mentioned; digital is a 2- to 3-year initiative. So although we aren't ready to provide guidance on 2022, I would anticipate that you might see CapEx somewhat elevated over the next 2 to 3 years, be it digital or be it work on our portfolio and optimization, some of those projects.

I wanted to ask a bit more about inflation, and I'm not sure whether you can address this. But what I'm wondering is whether you're still hedging into 2022. Because it sounds like you expect prices on wheat and so on to decline into '22? So you'd prefer to keep positions open? Or are you continuing your programmatic hedging at today's prices?

Yes. I mean, we wouldn't speak specifically about 2022 right now. But we generally adhere to our overall hedge strategy, which spans 7 to 9 months. So we do have some visibility into the first quarter of 2022, but the reality is it remains quite volatile. And past that, I probably wouldn't say much about our particular coverage as it relates to the long end of our coverage range. But we do — we are starting to consider what we'll do for 2022.

Okay, that helps. And second, you mentioned making the nonretail segment more profitable. I know you've brought this up before. But I'm curious whether you can add more detail. Can you attach any figures to it? Just additional specifics on how big an effect this might have down the road or has already had.

Yes. Well, Faiza, clearly, foodservice is still fairly weak on a relative basis, especially if you look back at 2019. So it's only beginning to bounce back. Quick-serve has recovered the quickest. I believe that part is actually slightly above '19, while the rest of foodservice is still a little below. We haven't put a number on it publicly before, but it is something we track internally. We've established fresh margin thresholds for our foodservice operation; and our approach is that if we can't bring a given piece of foodservice business up to that acceptable margin threshold through pricing, our own efficiencies, or whatever other levers we have available, then we have a decision to make about whether we want to keep that business; and so far, we've done pretty well at lifting a good chunk of that business to those margin thresholds. That said, we're not finished. I mean, there's still a long way for us to go. We've only been at this for about 9 months, but the early returns have been really good. And as I mentioned, as that business has recovered, it has recovered at a higher margin level overall; so going forward, I expect it to contribute meaningfully to the whole; we've said before that foodservice will never reach the margin level of branded retail, but there's definitely plenty of room to improve. And I think in prior years, our foodservice team — and I believe we have the best one in the industry — had a somewhat different strategic vision for foodservice, one grounded more in volume and sales gains than in margin. But that team has now been given the green light, so to speak, to pursue that margin even if it means walking away from some business now and then. Not everything will fit, but there's a great deal of opportunity in foodservice that we believe can add nicely to the overall. Hopefully, that gives you a bit more color.

Yes, absolutely. Then only one more from me. Regarding the digital initiatives, have any of those investments been made by you so far? Because my takeaway from what you said was that you're kind of — you aren't there yet, but you remain committed to that $0.05 of spending you've mentioned. Are those more — should we expect them to show up more in the back half? Or have you already begun making these investments?

Yes. No, we've already begun. I mean, much of it early on involves working with our outside partners during the planning and design phases; but the $0.05 is still good for the year, though it will be somewhat more heavily weighted toward the back half as we begin executing the plan, and at that point also, later this year, we'll be providing you guys with some additional detail on where we're headed from a digital strategy standpoint.