McCormick & Company, Incorporated (MKC) Earnings Call Transcript & Summary

Good morning, everyone. This is Kasey Jenkins, Vice President of Investor Relations. Thank you for joining us on this morning's call to discuss McCormick's acquisition of FONA International LLC and certain of its affiliates. To accompany this call, we've posted a set of slides at ir.mccormick.com. We'll begin with remarks from Lawrence Kurzius, Chairman, President and CEO; and Mike Smith, Executive Vice President and CFO, followed by a question-and-answer session. During our remarks, we will refer to certain non-GAAP financial measures. These include adjusted EBITDA, adjusted EPS and our net debt to adjusted EBITDA ratio. Please refer to Slide 14 for a more detailed discussion of these non-GAAP financial measures. As a reminder, today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. As seen on Slide 2, our forward-looking statements also provide information on risk factors, including the impact of COVID-19 that could affect our financial results. We would like to also note that we will limit our comments to a discussion of the information related to the FONA transaction. We will not be able to answer any questions that would involve providing additional financial information about our fourth quarter or fiscal year. It is now my pleasure to turn the discussion over to Lawrence.

Thank you, Kasey. Good morning, everyone, and thank you for joining us. I'm extremely pleased to announce that McCormick is reinforcing our position as a global flavor leader through the acquisition of FONA. As we build the McCormick of the future, with our overarching focus on growth, this acquisition is an important step in the execution of our growth strategy, adding scale to our global flavors platform and accelerating its growth. Starting on Slide 3. FONA is a privately-owned leading manufacturer of flavors, providing solutions to a diverse customer base, including many of the largest food, beverage and nutritional companies across various applications. We are increasing the scale of our global flavors platform with the addition of FONA's highly complementary portfolio, McCormick's Flavor Solutions segment expanding our breadth and accelerating our portfolio migration to more value-add and technically insulated products. The acquisition extends our technology platform and capabilities as well as strengthens our leadership in clean and natural flavors. Together with FONA, we are uniquely positioned to provide our customers with an even more comprehensive product offering to meet the growing demand for clean and flavorful eating, drinking and nutrition experiences. We acquired the strategic asset for $710 million in cash. FONA is expected to generate sales of approximately $114 million and adjusted EBITDA of $30 million in 2020. FONA has an attractive margin profile, which is expected to be accretive for our Flavor Solutions segment and total McCormick gross margins, and with robust sales growth will drive further margin expansion. Moving ahead to Slide 4. FONA was founded more than 30 years ago and is well-known in the market, in part because of its strong customer engagement platform, talented employees and investments in its future. Importantly, FONA has proprietary technologies and capabilities across a broad set of applications with a focus on nutritional and natural products. FONA develops flavors for attractive and fast-growing categories, including performance nutrition and health, which are incremental to McCormick. Additionally, FONA has a wide range of capabilities that augment McCormick's strong foundation, particularly in beverage as well as Bakery & Confectionery applications. FONA has cultivated long-standing relationships with a diversified and attractive base of both large and mid-tier customers. These partnerships have driven growth for both FONA and its customers. FONA has approximately 220 experienced employees, including top flavor talent which when paired with the capabilities of our equally impressive team, will provide new opportunities to strengthen our global flavor leadership. FONA's state-of-the-art manufacturing facility and technical innovation center in Geneva, Illinois, outside of Chicago, adds capacity and greater scale to accelerate the realization of our growth ambitions. Finally, and critical to McCormick's culture and core values, FONA shares a deep commitment to doing what is right while driving industry-leading financial performance. We are excited about the value we can unlock by bringing FONA's portfolio of flavor solutions, technology and expertise under the McCormick umbrella. Turning to Slide 5. I'm excited to share with you how the acquisition of FONA fits with our vision of being a leading flavor company, meets our financial thresholds, and, we are confident, will drive shareholder value. Our growth strategies are designed to win with leadership, and we will win with FONA. As we shared at CAGNY this past February, we plan to accelerate our global flavors platform, advanced health and wellness and strengthen our customer intimacy. This acquisition executes on each of these growth strategies. Now on Slide 6 and how this transaction reinforces our focus on growth. First, the acquisition of FONA broadens our product offering. The combination of the 2 portfolios and infrastructures adds greater scale and flavor and accelerates our global flavor growth. Second, it expands our technology platform and capabilities, including expertise in health and performance nutrition, which advances our health and wellness portfolio and adds a new set of customers in this space. Third, our combined portfolios strengthen our clean and natural leadership and position us well to meet the growing demand for clean and flavorful eating, drinking and nutrition experiences. Fourth, FONA has an industry-leading and customer centric culture, very similar to ours. The combined power of our organizations will enhance our customer intimacy and partnerships and enable us to collaborate with an even wider range of customers. Finally, as I mentioned a few moments ago, with FONA's attractive margin profile, it is expected to be accretive to our Flavor Solutions segment and total company gross margins. Turning to Slide 7. This acquisition executes on our strategy to migrate our flavor solutions portfolio. FONA's product offering advance our most technically insulated and value-added category, flavors as well as our flavor customers and competitive position. FONA's portfolio was concentrated in flavor encapsulation, modulation and liquid flavor products. Notably, the addition of FONA advances our global flavors platform and increase scale in these products, which are the most value-added and technically insulated within the flavors category. We are accelerating the strategic migration of our portfolio, which is accretive to Flavor Solutions gross margin. FONA's customer base and competitive set is similar to McCormick's for flavors, with the addition of consumer health companies as a new end market. The combination of our portfolios broadens our already comprehensive range of flavoring solutions and enables us to collaborate with an even wider set of customers and channels, accelerating our flavor growth. Slide 8 illustrates the combined power of McCormick and FONA's diverse portfolios. FONA's portfolio of flavors broadens our value-add offerings with highly complementary products to our existing portfolio. McCormick's strength in Snacks and Savory is paired with FONA's depth in fruit and sweet flavors within the Bakery & Confectionery application, highlighting the complementary fit of our portfolios. Expanding the breadth of our beverage application, a high-growth opportunity has been an area of focus for us. With the addition of FONA, our portfolio now includes flavors for Performance Nutrition, a fast-growing beverage category. Not only does this increase the breadth of our portfolio, it increases our reach with new customers. A meaningful addition to our portfolio of customer applications is health. FONA brings expertise in developing flavors for this application, such as for various over-the-counter products. For example, flavors for chews, liquids, drops and tablets focused on pain relief, allergies and digestive health. By expanding our breadth and depth in developing flavors while also combining our infrastructures to provide greater scale and increase our manufacturing capacity and technical bench strength, we are providing our collective customers with a more comprehensive product offering, bolstering our competitive position and creating more opportunities for growth. As highlighted on Slide 9, we're advancing our health and wellness portfolio. We're expanding our research and development capabilities and technology platform with additional proprietary encapsulation methods, including expertise in flavoring health and Performance Nutrition products across a variety of applications. FONA brings unique flavor technology solutions to McCormick, which we're excited to add to our own innovative capabilities and leverage for our customers. For example, their true taste encapsulation technology delivers dry flavor that closely represents a true to nature sensory experience of liquid flavor. This application is highly important to applications in the citrus and fruit flavor space. Additionally, FONA's Optify is a portfolio of taste modification flavors, which is pivotal and health applications. McCormick's clean and natural platform is meaningfully enhanced with the addition of FONA's portfolio as well as with their expertise, particularly in citrus and fruit flavors. McCormick's leadership position in clean label, organic, natural extracts and better-for-you solutions is bolstered by this addition. Overall, these valuable additions position us well to further capitalize on the increased consumer interest in better-for-you products and to strengthen our clean and natural leadership. The combination of our technology platforms and capabilities will provide a long runway for growth, enabling us to remain at the forefront of flavor development and expand our ability to create consumer-preferred flavor solutions across a diverse range of applications for our customers. Turning to Slide 10. With the combination of McCormick and FONA's shared passion for servicing our customers, we're enhancing our customer intimacy. McCormick's focus on best-in-class customer collaboration is a differentiator and drives winning results for both McCormick and our customers. FONA brings a proven customer engagement platform. Its high tech, high-touch approach provides fast, easy access to experts and personalized customer service and is well-respected in the flavor industry. We are both known for building exceptional and sustainable customer partnerships, which makes FONA a natural fit for McCormick. We are confident we will drive innovative solutions. The key enablers that have driven our success in the past, such as our culinary foundation, consumer insights and applications in applied sites, combined with photos, high tech, high-touch customer engagement approach will further differentiate us and drive greater success in developing winning flavors for both McCormick and FONA customers. Our complementary customer base of global and mid-tier customers will provide growth opportunities for both portfolios. With our combination, we are well-positioned to reach a broader customer base, deepen existing customer relationships by cross-selling and establishing inroads with new customers while driving innovation. Our customers will also now have access to a wider array of solutions, whether it be a new citrus flavor for a McCormick customer or a snack seasoning or vanilla extract for a FONA customer. We look forward to enhancing our customer value proposition. Now turning to Slide 11. Before Mike provides more detail on the financial impact of this transaction to McCormick, I would like to briefly comment on our acquisition strategy and track record. Successful acquisitions are a key part of our long-term growth strategy. Importantly, we have a proven track record of driving value through acquisitions and increasing the performance of acquired businesses, as seen by many of our brands on this slide, and we expect FONA will add to that history. We use a disciplined approach to identify and investment potential targets, filtering the opportunities against our acquisition pipeline strategy, strengthening our leadership positions, expanding our capabilities in categories and driving scale and globalization as well as evaluating them against stringent financial criteria. Our commitment to this discipline is evident in the acquisitions of both Cholula and FONA, 2 fantastic businesses, which align with our strategy, meet our financial thresholds, and we are confident will create value for our shareholders, similar to past deals. Now I will turn the call over to Mike, who will provide more details regarding the financial impact of the acquisition.

Thanks, Lawrence, and good morning, everyone. I will now provide an overview of the key financial highlights of the transaction, which you can find on Slide 12. We are very excited about the acquisition of this strategic asset, as it supports our strategy to accelerate our flavor growth, driving both scale and meaningful accretion in our Flavor Solutions segment. McCormick paid $710 million in cash for FONA, which represents an approximate multiple of 23.5x FONA's estimated 2020 adjusted EBITDA pre synergies. The transaction will be structured to allow for a step-up in the tax basis of the asset, which will provide future cash tax savings that we estimate at a net present value of approximately $93 million. In addition, we expect to achieve run rate cost synergies of approximately $7 million, which will be fully realized by fiscal year 2023. When factoring in the tax attributes acquired as part of the transaction and anticipated run rate cost synergies, the multiple was approximately 16.6x. This does not include any potential revenue synergies, which represent additional upside. We expect mid- to high single-digit sales growth from this strategic acquisition, which will be accretive to our long-term organic sales objective as we build upon FONA's successful track record of growth. I would also like to note that FONA has experienced limited business disruption from the COVID-19 pandemic thus far as their portfolio primarily falls into the at-home part of our flavor solutions portfolio. As Lawrence mentioned earlier, this asset has an attractive adjusted EBITDA margin profile and with this anticipated sales growth rate, will further drive our portfolio migration to a higher-margin mix. In fiscal 2021, we anticipate the transaction to be accretive to gross margins for both McCormick and the Flavor Solutions segment. Once the majority of cost synergies are realized in fiscal 2022, we expect it also to be accretive to Flavor Solutions operating margin. We expect transaction and integration costs will dilute McCormick's earnings per share in fiscal 2021. Excluding transaction and integration cost, we expect the transaction to be neutral to our fiscal 2021 adjusted earnings per share. And once the cost synergies are fully realized, we anticipate the adjusted earnings per share accretion to increase to approximately 1%. These estimates include a 2% dilutive impact to adjusted earnings per share from approximately $17 million of ongoing amortization expense. We expect to achieve cost synergies of approximately $7 million, which will be fully realized by the end of fiscal 2023, with anticipated synergies in selling, general and administrative expenses and cost of goods sold. For instance, we expect synergies and sourcing as we leverage our global sourcing expertise. We will leverage the proven processes from our comprehensive continuous profit program, or CCI, to ensure we achieve these cost synergies. We expect to incur approximately $30 million of transaction and integration costs, with the majority to be incurred in fiscal 2021, this will include noncash charges related to purchase accounting. In terms of our capital structure, we expect near-term financing of the transaction to consist of a combination of cash-on-hand and commercial paper. While the longer-term financing structure will be optimized as we evaluate our 2021 bond maturity. Following the acquisitions of Cholula and FONA, our net debt-to-adjusted EBITDA ratio will increase, and we expect to delever to approximately 3x by the end of fiscal 2022. Based on our demonstrated track record of debt paydown from the Frank's and French's acquisition and our anticipated strong cash flow generation, we are confident that we will deliver on our plan. We are committed to a strong investment-grade rating and paying down debt as well as continuing the curtailment of our share repurchase program and growing our dividend as we have for the last 35 years. We will continue to focus on our credit ratings targets and expect to continue exploring future acquisition opportunities, which are a key part of our long-term growth strategy. Finally, we are confident FONA is a great strategic addition to the McCormick portfolio, which will help us drive accelerated flavor growth while expanding margins as well as generating increased cash and creating additional long-term shareholder value. I'd like to now turn the call back to Lawrence for some closing comments before we move to your questions.

Thank you, Mike. To conclude, I'd like to recap the key takeaways as seen on Slide 13. We believe our combination with FONA will reinforce McCormick's position as a global leader in flavor by broadening our portfolio, extending our technology platform and strengthening our capabilities. By combining portfolios and infrastructures, we enhanced the scale of our flavors platform and accelerate our flavors growth. Additionally, with the strategic migration of our portfolio, we will generate gross margin and earnings accretion. We're excited to welcome FONA into our family and are confident that our shared passion for flavor and our customers will remain a key differentiator in the industry. We have a proven track record of creating value through acquisitions and are confident we will do so with FONA. Finally, as we continue to highlight, we're building the McCormick of the future with an overarching focus on growth. The recent acquisition of Cholula and today's acquisition of FONA will continue to support differentiated growth and performance, listing McCormick for success in 2021 and beyond. And now I'd like to turn to your questions.

[Operator Instructions] Our first question comes from the line of Robert Moskow with Crédit Suisse.

I had some questions about the asset. Can you give us the historical growth rate of FONA and the EBITDA margin progression of the business? Have margins been expanding? Has growth been accelerating? How would you describe it? And then another question is, how long have you been engaged with the owners of this asset? You've talked for a long time about strengthening your positioning and business-to-business flavorings. Have you been engaged with them for a while? And was there an auction process for the business?

Okay. I'll speak to some of that, and I'll let Mike comment on the EBITDA and margin portion of it. But FONA has had a very long stretch of mid- to high single-digit, occasionally into double-digit growth. That's been pretty steady for a long period of time. So I can't say that it's been accelerating, just the law of numbers, being what it is, is that those increases are bigger and absolute with the passage of time, but its growth rate has been pretty steady. We've been engaged in conversation with the owner of FONA for a long time. We had a very friendly conversation with them that started about 3 years ago and really turned to a serious discussion of this transaction earlier this year. So it's been something that's been in the works for a while. As the companies got to know each other, and it became clear that we would be a good fit for each other together. There was -- it was not an auction process, though, this was a bilateral negotiation for -- that spanned the last several months. Mike, do you want to comment on that?

Yes. And then regarding your question about EBITDA, similar to sales, I'd say, remarkably consistent, really, the hallmark of a well-run business is these EBITDA margins have been consistent over the years. So we expect to do the same.

Got it. And one follow-up. You said that customer relationships is at strength. Do you think you need to take extra steps to retain the employees who hold those customer relationships? And -- yes, go ahead.

Yes, that's a great question. So we are -- we have a pretty low synergy number. And for this. We're buying this asset for growth. It is our plan and desire to retain the employees of FONA. There's -- in addition to the customer relationships that they have -- they've got tremendous technical expertise that we have a very high respect for and operate together as a team in a way that's really positive. So it's our -- and I'm hoping that they're listening to this call. It's our intent to retain them as much as possible retain the facility, actually, would be our expectation to invest in the facility. This is really a growth asset for us. And actually -- and I'll just -- and I'll go a step further, as I said in the prepared remarks, now we see FONA as the cornerstone for accelerating our flavor growth in North America.

Can I ask one follow-up question? You mentioned revenue synergies, and you talked about revenue synergies for other transactions in the past, like Frank's and Cholula. Where would you rank this one in terms of revenue synergy potential compared to the others?

Well, I think that there's -- it's hard to do a ranking, Rob, but because there are different businesses. And our modeling and our financial justification for the business. We have a financial discipline that's pretty strong. And we don't -- we actually didn't include any revenue synergies. We have a growth expectation for the business. The synergies that we have modeled to make sure that we have a good solid return case for the business or really around cost synergies from -- primarily from sourcing and that -- and it's -- and other than that, it's really hard to tease out the revenue synergies. There's a clear opportunity. I mean we have -- our customer base has a really small overlap, only about 5% overlap. So a lot of new customers for both companies. They have some different technology than we do. And so there's an opportunity for us to use our technology for further wins with their customers and vice versa. But we didn't explicitly model anything more than continuing that run rate of growth.

Our next question is from the line of Adam Samuelson with Goldman Sachs.

So I guess, just thinking about kind of how this fits from a customer perspective. One, I presume this business is most entirely North America centric. So if I'm thinking about your kind of higher value-added flavors business like Giotti, it's more European centric. So as part of the kind of aspirational growth to bring some of these capabilities overseas? Or just help me think about the geographic overlap? And how complementary it is to the existing portfolio?

The business that we're acquiring is primarily a North American business. They do have some overseas business locations. But it is currently overwhelmingly a North American-centric customer base that -- and we would look to grow that globally. I mean I think this is one of the great opportunities for us. This is -- our aspiration is to build a stronger, more global flavor business. This will fit into our global flavor and extracts group within our flavor Solutions segment. And you're right, we would expect to take these technologies to customers around the world. Mike, do you want to elaborate on that?

Yes. I think also, they're in places that we are, too, like China and the U.K, so we think we can utilize each other's infrastructure there also.

Okay. That's really helpful. And just from a customer set perspective in thinking about -- I understand kind of why legacy McCormick businesses wouldn't have gone after some of those health and consumer nutrition applications, but beverage and bakery confectionery. What was it within legacy McCormick that you kind of didn't have the capability on to unlock that you think FONA now brings to -- can bring you guys to the table. And then just what is the -- what's the R&D sales in the business?

Well, all of the flavor companies have technology that is uniquely there's either in the area of trade secret or patented intellectual property, FONA has -- as things that they bring to the party, their true taste encapsulation technology is uniquely theirs. It's patent pending. And it works and it works well in applications where our technology might not. And so they're very complementary to each other. And the whole taste modification technology around Optify is a new area for us.

Okay. Great. And just to confirm, the deal has -- it's closed already, correct?

Yes, that's right.

Our next question is from the line of Andrew Lazar with Barclays.

Two things for me. One would be, it's always hard to assess sort of market share in the flavor solutions space and kind of where these capabilities sort of get you to. But if you had to say in the -- specifically in the clean and natural sort of arena within flavor solutions in North America, where does this acquisition sort of put you there? Does it sort of -- you talked about as a cornerstone of the North American flavor Solutions strategy. Does it give you sort of like a wide leadership position there? Or does it just get you now more into the game where maybe you weren't as strong before? I'm just trying to get a sense of where this puts you from a sort of a share or leadership perspective and specifically in clean and natural?

Right. I'm not sure that -- I would again say that share is -- I agree with you that share is hard to measure in this space. We are already ourselves pretty significant in that clean and natural space with a group of customers and FONA even for its size, I mean, this is almost all that they do. And so they are one of the, I'd say -- if they're one of the largest and not the largest remaining private independent in this space. So it's a meaningful increment. I'd really be getting speculative if I started talking about a specific share. Within their customers, they have a very high share. And so customers, specifically, have -- they've got some customers where they've got 70 or 80 different flavors, and it worked in the customer system. But I'm not sure how to comment on overall market share. It definitely is a step change for us, though, in the Americas.

That's helpful perspective. And then it stands to reason that as a higher-margin business and with more technological capability within flavor solutions that as that business grows more rapidly, right, there's still some margin opportunity coming from that in terms of the mix contribution in flavor solutions. Does -- and that's very much a part of your sort of stated strategy. A big chunk of the margin improvement over the last couple of years has also come from either getting out of or just making more profitable through whether it be pricing changes or what have you, some of the, let's say, non flavors part of flavor solutions and making sure those businesses are sort of carrying their weight, and where they don't some of that business maybe didn't make sense to continue on with, and you've done a lot of that. I'm just trying to get a feel for maybe how much of that is left? And does adding higher-margin flavor solutions business like FONA, maybe bring on a little bit more of an aggressive posture with some of the non flavors pieces that say, you know what, there's more margin here. This is a business that maybe is -- not as high-return and we can get a little more aggressive with it. I'm just trying to get a sense of where you are in that sort of prospect.

I don't want to get too specific about 2021, but I will say that, that is part of the strategy. I mean, as we increase our emphasis on the more value-added and more -- frankly, more technically insulated and -- flavor solution spectrum that goes with a reduced emphasis and a pruning of the other end of that business. And that is certainly something that is part of the strategy of migrating that portfolio. And you should -- it's a reasonable expectation to think that, that will continue.

Yes, Rob, it's Mike. It's a nice long runway of opportunities. But also we can use FONA's as well as our own internal flavors to help optimize margins on these lower end things by adding flavor to those formulations potentially. So that could help us from a revenue synergy perspective or a cost perspective, too.

Our next question is from the line of Peter Galbo with Bank of America.

On Slide 8, you guys had a helpful breakdown here of kind of the additive categories that FONA offers. Just wondering if you could kind of give us a breakdown, even just broadly of how they're exposed, is health, 50% of the portfolio, just anything there? And then maybe on top of that, for health, a new category that you're entering. Just what's different about operating in that category, either from an operational standpoint or a regulatory standpoint versus your traditional kind of food and beverage areas?

I think from a -- I'm going to let someone else take the business split question. But from a regulatory standpoint, in this area, these are -- that generally -- this is an area that we've got a pretty good understanding of it and with the FONA business, of course, we're getting their existing regulatory talent as well. And so I think that we're well prepared to handle that. Many of those products that are listed under health. There's a bit of overlap between what's in health and what's in beverage, but would include things that are generally over-the-counter products, but also include things like protein drink supplements and other kinds of supplement product. So I think that -- I think we're well-prepared for that. Mike or even Kasey, do you have the business split information?

Yes. I mean, we're not going to be given it. I don't want to get real numbers rolling here. But obviously, the beverage, which we referenced on the call, is a significant part of the business. And in the healthcare, we talked about growing very rapidly. So those 2 areas are a good chunk of it. But it's right where we -- you can see the complementary portfolio on both sides. And these aren't exact charts, but they give you kind of an idea.

Got it. Okay. So just kind of rank order beverages and then how is helpful context.

Well, look, I'd be careful. A lot of those have overlap, too. I mean there are things like Lawrence said, what is health, what is beverage, sometimes they're the same. So...

Right. Right. Okay. Okay. That's helpful. And then just historically, I guess, thinking about the 2 acquisitions, right? Cholula maybe gave you a little bit more exposure to away-from-home channel, just versus your existing portfolio. Maybe this kind of brings it back more so just because it's more in the CPG companies and the like. I mean, the bar hasn't moved dramatically, I guess, post these 2 acquisitions in terms of you're like away-from-home food service exposure of 20% company-wide?

No. I don't think that's really moved it in a meaningful way in that way. I mean I would think of these a little bit differently than that. Cholula is a great consumer brand that is well-recognized for household consumption and in restaurant. And we've done a number of acquisitions in the consumer-oriented space with Cholula, of course, and the Frank's and French's before that, that have skewed us in that direction. And I think we've said several times on calls, if we were designing the ideal next target, it would be in the flavor space to balance our growth in our consumer segment and our Flavor Solutions segment and add to our that migration strategy -- portfolio migration strategy that we were talking about a few minutes ago. And this clearly fits right into that.

Ladies and gentlemen, we are nearing the end of our question-and-answer allotted. And I will now take a final question from David Driscoll with DD Research.

Just have a few questions here. On the customers of this business, are they really concentrated? Or are there many, many customers that FONA has? Can you give some detail on the customer concentration?

There are many customers. They have a broad base of customers. And there are some that are large global companies. There are many medium in the mid-tier, what we would think of as mid-tier sized customers. So yes, it's a very broad customer base.

Okay. And so that would make me think that there's not unbelievable risk to any one customer on this acquisition, would that be fair?

I wouldn't think that that's a significant risk issue. I mean, there's -- I mean, I would say that there's a fairly normal level of commercial risk as there would be on any change like this.

Okay. And then one just -- I love all the descriptions. I find all the flavor comments on all the companies that talk about it. They're always a little bit difficult to understand when you can't call out end products. Is there any way to get us excited here? Can you say, hey, look, they sell up -- they put flavors into this product, which is growing very rapidly and this gets you really excited about it. Are you allowed to say that at this time?

Yes. We really can't -- we really -- I wouldn't talk about specific customers for this business any more than we do for hours. I mean, we mentioned a couple of customers because they're large enough that we have to disclose them. But generally, our customers don't like us talking about their business. And so I'm going to duck that one from you, David. I'm sorry. I can tell you, we're excited about the categories. And so we've tried to get -- convey some of that. Beverage is an area that we have a focus on ourselves and growing, and this adds to that. And this whole area of whether you want to call it health or performance nutrition, this whole health and wellness space is an area that is fairly fast-growing, and they play in it pretty meaningfully with some of the supplement companies, some of the -- like the powdered protein products, the plant-based proteins. But I can't really get more specific than that.

Hey, David, I think gummy vitamins for your kids, things like that.

There you go. Plant-based protein shake maybe.

Clients are always asking us about this and like, what is it, and I'm like, well, all right, they don't really say. So it's tough. Last question, Mike, is share repurchase implications. So you've got 2 deals now. You've said you now are going to go over that target debt-to-EBITDA of 3x, and you'll have to pay down debt over time to get there. It won't take you too, too long. But would it be fair to say that share repurchase then is not going to happen until you get back to the 3.0 target level?

Yes. I mean, we're -- as we said, we're committed to investment-grade credit rating. And the end of '22 is not that far away. It's next fiscal year for us. So it's a quick turnaround on paying down to get back to 3x EBITDA. So yes, in there, we'll continue paying a dividend, will increase, will be a dividend aristocrat. We'll continue curtailing our share repurchase, as we've talked about and really focus on paying down that debt, like we've done with Frank's and French's.

Thank you. At this time, I will turn the floor back to Kasey Jenkins for final comments.

Thank you, everyone, for your questions and participating in today's call. I apologize to those who we did not get to today. If you have any further questions regarding today's information, please reach out to me. This concludes our call. Have a good day, and we wish everyone a safe and happy new year.