Premium Brands Holdings Corporation (PBH) Earnings Call Transcript & Summary

Good morning and good afternoon, ladies and gentlemen, and welcome to the Premium Brands Holdings Corporation Third Quarter 2024 Earnings Conference Call question-and-answer session. [Operator Instructions] This call is being recorded on Wednesday, November 6, 2024. Our speakers today are George Paleologou, CEO and President of Premium Brands; and Will Kalutycz, CFO of Premium Brands. I would now like to turn the conference over to George. Please go ahead.

Good morning, and welcome, everyone, to our 2024 Third quarter conference call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to our prerecorded call posted on our website this morning. We will now take your questions.

Your first question comes from Martin Landry with Stifel.

My first question is on the delays in onboarding your new clients. I'm just trying to understand and just confirm, has there been cancellation of programs? Or has there been renegotiation of terms, has there been reduction in volumes? Or is this just again, just normal lengthy on-boarding procedures. Any color would be helpful to understand what's going on.

Yes, Martin, there's absolutely not been any cancellations at all. As you know, we've included the business development pipeline in the deck. We've actually launched some programs later on in the quarter, launching some in the fourth quarter as well. As we mentioned in the last conference call, some of the onboarding times take longer because the customers are so large. So again, nothing unusual. The pipeline is as robust as it has ever been.

Okay. And it's a good segue into actually that slide that you're referring to Slide 14 on your U.S. pipeline. I thought it was very interesting. So you are highlighting the business opportunity of $704 million that could be completed in 2025. That's obviously an annual revenue run rate. So for us, it's a bit difficult to then put this into our forecast. Just trying to understand if you would be in our shoes and looking at modeling '25, like how much of that number could boost your revenues for '25?

Again, Martin, it's a tough -- a difficult question because of the whole timing issue we've been facing. And the reality is all those first columns with numbers in them, totaling $1 billion. All of those are active and all of those could potentially hit 2025. It's not just the $700 million in the first column. But the way we look -- just to give you a bit of background and color around those columns, that highly likely column, those are initiatives that when we sit down and go through them with our businesses, they're 80% to 100% probability. So very, very confident in achieving those, and it's just timing versus the likely are a little bit earlier, they're probably 60% to 80% probability range. So when we look at that in rough terms, in terms of modeling, maybe 50% hitting by the middle of the year. And the vast majority of those hitting at a run rate by the end of the year. But again, the challenge we've been dealing with for the last several quarters is the timing around these initiatives. As George mentioned, very confident we're going to get there. We're in great discussions with the customers. Nothing has been canceled. It's just been one of working through the process, figuring out the listing structure, figuring out the right launching time and dealing with the processes in these large customers we're dealing with.

Okay. And then maybe last question for me. In the Specialty Foods segment, when you exclude your large client that has had some softness in its sales, you said that your volume growth is up 2.3%. And it does look a little weak, and you're calling out, a couple of items you're calling out beef jerky weakness of the sales increases, you're calling out delays in product launches and you're calling out a weak spending and in the convenience store segment and food service. So maybe with beef jerky and the weakness in food service and convenience store. Just again, for modeling purposes, when did that happen? And how long -- like are we -- is this going to be something that's going to be with us for the next year? Just to understand a little bit what -- like is this a recent impact? Has that been going on for a long time? Or any color would be helpful.

Yes. So in terms of -- I'll start with a bit of the positive. In terms of the Canadian portion, which in the quarter, as we talked about, generated that is roughly stable, a little bit up year-over-year in volume terms. So we do expect that to continue to increase, improve over the coming quarters. In terms of the economy factor for Specialty Foods, because I'm going to talk mostly about Specialty Foods first, and I'll give you some general comments on premium food distribution group. In terms of the economy, it's really been the C-store sector that's been challenging for us. Because the reality is we're generally dealing with -- particularly in our U.S. initiatives with these large customers that are pretty resilient in the face of the economic challenges, being faced down there in the U.S. And so that is -- maybe there's one more quarter until we start lapping the C-store impacts that we've been seeing now for about a year. So that's really end of 2024 story and stabilizing in '25. That's the same with jerky as well. Jerky and a big part of the jerky story is the C-store channel. And so we'll start lapping that at the end of this year. And so yes, in 2025, those should be stable to maybe starting to see a little bit of organic growth from them. So that's not going to be the headwind it was this year. And Martin, I should comment, too, that we will -- we didn't give any specific guidance to the balance of 2024. But with our Q4 results, we expect to have better clarity particularly around the food service customer that we talked about for the impact on this quarter. And so our intention is to provide 2025 guidance with our Q4 results.

Your next question comes from Derek Lessard with TD Cowen.

So maybe, Will, I just want to hit on the last one on your last point there and talk about the larger client there. Is there anything to suggest there's a permanent impairment? And if not, do you have a sense of when that recovery would be?

Yes, Derek. I think overall, the QSR segment in the U.S. slowed down during the quarter. I think that a lot of large QSR players have reported. And again, there was a definite slowdown in QSR. With regards to our large customer, I think it's well known. It's well publicized in terms of the strategies they have in place to turn it around. And we're obviously supportive, and we don't think anything is permanent, as you say. We think that they're on the right track in terms of addressing their traffic issues.

Okay. And that's fair, George. So I guess if I can ask another question. And I know, obviously, I'm talking hypotheticals, but if it were permanent, do you think you could find a home with other potential customers to take up that capacity?

Well, I think that in the deck, Derek, we've included -- can't remember which page it was, but we basically have a breakdown of the different channels that we service now in our sandwich group basically 7 different channels now are being serviced by us, all developed more recently as we've added more capacity. And all I could say is that we have growth opportunities in each one. For 2025, we fully expect to be shipping product to the international markets as well. So there's a lot of growth initiatives with regards to the other channels other than the QSR channel. As I said earlier, there's no question that the QSR channel in general was slower during the quarter, but we have all kinds of other initiatives in other channels. For example, club was a very strong growth channel for us during the quarter, and we expect to see more growth there in the future as we've added capacity to the system.

And Derek, I would add, when we look at our 5-year plan, and we continue to remain very bullish on achieving that $10 billion sales target the growth in there related to our sandwich group and the capacity we put in place is about $1.2 billion rough numbers, and you can see from the slide that the opportunities in the channel, excluding any growth or impact from that large food surface customer $650 million. So just current initiatives get us halfway there today. And we have been -- one of our biggest issue in our sandwich group has been struggling with a lot of capacity. So now that, that capacity is there, we expect the pipeline to over the coming year or 2 to grow dramatically as they continue discussions with other customers.

As evidenced by the new channels we've opened up recently, again, outlined on Page 8 of the deck, Derek.

Yes, George. And one last one for me before I requeue. Can you maybe just talk about the international opportunity and what that looks like?

Well, again, over the last few quarters, we've made some progress in getting some listings with a club store chain, and we're getting more opportunities. We're looking at a number of sandwich SKUs with them for the Asian market.

Your next question comes from Kyle McPhee with Cormark Securities.

Just to talk a bit more about the U.S. growth programs turning on with all your new capacity. In Q2, you mentioned some of your color that you were having debottlenecking issues that some of the new U.S. facilities, the bakery, I think you cut protein are a couple of examples. Can you provide an update on the operational side of things that you now sorted through the issues into Q4 and beyond?

Yes. So on the bakery group, we are still in the process of -- it's one of our ongoing projects with the San Leandro plant, the new laminated dough plant. And you'll see from our CapEx slide, Kyle, that we still are investing. We've not yet completed that project. And a lot of the investment going on right now is around the automation of processes. So the basic capacity is in place. And the last part of the project is just investing in the efficiencies. And so that is not yet there. We do expect there. I think those projects -- that project is supposed to wind up or be completed by the end of this year. And so there's a little bit of investment still to go, and then there's still a bit of a learning curve with -- it's a new employee workforce and that takes some time bringing it up to speed combined with learning this new technology. So that was a -- that operation was a good portion of our restructuring costs in the quarter because of some of those inefficiencies.

But our newer Origin bread facility in BC here, Kyle, is running really well. And making a lot of progress in terms of opening up new accounts and new customers in the U.S., which is part of the growth that you saw, the organic growth you saw with our Bakery Group overall.

And is it fair to say there's no operational issues at the other new U.S. facilities as of now, aside from its bakery?

Well, the Hempler's expansion, we still -- there's a lot of new technology in that plant that we're still playing with and figuring out a bit. So -- but yes, we're close to completed that, but it's still not humming at 100%.

Okay. And on this -- your new slide about the U.S. sales pipeline, I noticed the bakery sales programs are mostly classified as early stage. What's happened there? I thought a lot of the bakery sales programs were pretty visible among some key clients of yours. But why is it now called early stage?

Well, if you look at -- for the last couple of quarters, if you look at our slide on the growth rates in the Bakery group, they've been like 20%, 25%. The reality is a lot of the projects have hit and they're now reflected. And this doesn't capture anything that was achieved by the end of Q3. So we'll still have the run rate benefit of a lot of those programs, but this is just new stuff. So there, we just had -- I think we've talked about this in the past, Kyle, a lot of their programs we're success with the customer in one region and expanding it into other regions with that customer. So that's why you're seeing a lot of this immediate growth, easy growth. And then these are new discussions on top of it. So if you look at the run rate growth of the next year, it will continue to be quite stellar.

Your next question comes from Vishal Shreedhar with National Bank.

Wondering about the Canadian conventional business. You highlighted that as a weak part in your Canadian business overall, the conventional segment of the supermarket. Wondering if there's things can turn around in that?

Vishal, I would say that we're seeing signs of consumer confidence returning in Canada. We're not there yet, but we are seeing signs of improvement in the sentiment of the consumer. And we think it has to do with the lower interest rate environment and obviously, the lower inflation as well. So we'll just keep our fingers crossed.

And with respect will to the balance sheet, how should we expect that to unfold given the speed bump associated with the large TSA customer and the delays? When do you anticipate you'll be back into your targeted time frame -- your targets to level?

Yes. It certainly -- the quarter did set us back a little bit. The reality is we still expect by the end of '25 to be within our targeted range. You'll see in quarter 4, there's going to be a lot of moving parts with the asset sales we talked about in the press release. And then as George mentioned in his comments that we are very close on completing a number of acquisitions this quarter. So -- but overall, you're not going to see much of a change in the balance sheet, assuming all that plays out like plan in Q4. But with Q1, Q2 next year, you should start seeing deleveraging and being back in our targeted range by the end of the year.

Okay. And with respect to the acquisitions that you aim to capture, I presume we should think of equity and how much equity should we be thinking? Is there a way for that -- for us to model it?

Unfortunately, it's not a big component of it. You'll -- again, we don't want to get into the details of it at this point, Vishal. But it's certainly not a big component. There's other components of contingent consideration, minority interest investment, those sites types of things as well built into there. It's not going to move the needle in terms of our outstanding shares.

Okay. That's helpful. And with respect to that large QSR customer, just to get your understanding on it. So they are embarking on strategy changes. And one of the topics out there is possible SKU rationalization. Wondering if that's been talked about on your side? And how should we think about the impact on PBH, if that manifest?

Yes, Vishal, we can't really comment on the specifics of the customer. I think you know that food is a big component of what they do. There's lots of discussions around innovations, new launchings timing of launching promotions, all of those things as usual with any sort of big partner customer. But we can't really get into more detail on that.

Your next question comes from Mark Petrie with CIBC.

I actually just wanted to follow up on that last topic. And hoping you could just help us understand the dynamics that you experienced in Q3 exactly. Was it -- was the sales slowdown for you just a reflection of sales slowdown at the customer? Or was there another factor in terms of destocking or issues with inventory levels or anything like that?

Yes. No, it's a great question, Mark, because absolutely, there was sort of some volatility to the ordering patterns. And so our expectation is some of it is just ordering patterns. But outside of that, when you look at the customers' units sold. Our decline was in line with it. So we're not exactly clear at this point, but we are sort of cautiously optimistic for Q4 that there is some volatility from the ordering patterns that will benefit Q4.

And I guess -- just going back to Q2 maybe, can you give us a sense of what type of growth you would have experienced or what type of performance there would have been in that period? Because my understanding was that some of their deceleration had already kind of begun in Q2 as well. So I'm just trying to sort of square all that up.

Not that we experienced, Mark. We were hitting our numbers, but our projections that they had given us by the end of Q2.

And some of that mark could be that volatility of ordering. Certainly, that could be a factor. Also, they launched a new product in quarter. And so there's a little bit of channel fill in Q2 that would have helped as well.

What I would also say, Mark, is that because we have other QSR customers in Canada and the U.S. Up to the end of Q2, customers were frequent in QSR, maybe the casual dining was slowing down, but QSR was certainly robust. And in the third quarter, we've seen a slowdown with regards to QSR in general. So I'm sure that there's a little bit of that in what happened in Q3.

Okay. That's helpful. And then I also wanted to follow up on just the comments with regards to the Canadian market and your comments about recovering from the impact of a weaker consumer environment you said you're sort of seeing signs of consumer confidence in Canada. What are those signs? Like is that just sort of less trade down, less promo penetration? Is it behavior from the retailers? Like what are those signs?

I think it's a little bit of all of the park. It's tough to be specific. But anyway, we look at a lot of numbers in terms of demand that different channels, right? We sell to pretty well all the sales channels. And we're seeing a little bit of movement. We think that the Canadian consumer was very, very conservative for quite a while, mainly because of the high interest rate environment. and the high inflation. And we're just starting to see some evidence that things are improving out there.

Yes. Okay. Got it. And just last one on the distribution business and the volume growth specifically, could you just sort of help clarify the kind of performance by region? Because I think you said that Canada turned positive. And then it was the deterioration in international and U.S. a little less so? Or what was the dynamic there exactly?

Yes. No. The big story here is the big headwind in -- at least on the sales line for premium food distribution was our lobster business. It was -- the Canadian fishery, if you recall from last quarter, actually the Q2 fishery went quite well. And that positions us well with inventory going into Q3. The main fishery has been very poor again this year. And again, it seems to be because of water temperatures and -- which is creating lower catch rates for the fishers because the lobsters aren't moving around as much, and there's a whole story there. So what's happened is because of the poor main fishery the pricing environment has gotten quite high for lobsters. That's prevented a lot of promotion and obviously, less supply coming into the market. So that's hurt the top line of our Premium Foods distribution group. But the good news with the story is our group went into the quarter with some good inventory positions well priced and we're very disciplined in the pricing. So they actually made up for somewhat in their margins and what they could sell it for. But that was really the big headwind in Premium Food Distribution Group.

Okay. And just to be clear, that manifested in the U.S. and in international, but...

Yes. Sorry, yes, that was a North American international story. We saw that -- the retail story was a lot of -- it was primarily a U.S. story, but then our exports down to -- exports to China were down, again, a combination of high prices and the economy there. And similarly, our exports to Europe were down, again, high prices in the economy there.

Your next question comes from Chris Li with Desjardins.

First, thanks for the additional disclosure on the revenue contribution from that large U.S. customer. I guess my question is when I sort of do the math, it looks like revenues from that customer were around $196 million for the quarter or down around 6% compared to last year. Just wondering if that $196 million revenue is a fair run rate to assume for the next 2 quarters? Or do you anticipate maybe further contraction in Q4? And that's why you kind of refrained from providing an updated '24 outlook?

Again, Chris, because that large customer is a public company, we can't really speak specifically as to the volumes we do with that customer. But I would say that overall, if you look at other QSR chains and the declines in terms of the traffic and the revenues, you can come to probably the right conclusion in terms of the volume impact.

Got you. Okay. That's right. I'm just trying to figure out, George, just in terms of it was last quarter kind of the bottom in terms of all the transitory challenges that they face or -- or is Q4 or Q1 is still going to be more sort of pressure? Just trying to figure out from that side.

Yes. There's a lot of public disclosure on them, Chris. So I cannot refer you to [ disclose ].

Okay. No, that's great. And then I guess, maybe I want to just ask about if you can also talk a little bit more about just the revenue outlook for the other core U.S. Specialty Foods segment. As you noted in your press release, the organic volume growth rate, excluding that large QS customer was quite up 8% in the quarter. And I'm just wondering, is sort of high single-digit a good organic volume growth target for nature for that U.S. specialty food you exclude that large cost customer. Is that a...

So if you look at the quarter, Chris, and you look at the 3 product -- our business groups in that uses initiative slide. Those growth rates that we show for the quarter ex the customer we've been talking about should be stable to better going forward, again, driven by that pipeline of opportunities as things start hitting the road.

Okay. So in other words, we like if you did 8% in Q3, when you say stable better, you like it could be as good as or higher than 8%.

Yes. And I just want to add to Will's comment, Chris, is that, as we've said before, historically, the challenge for us has been capacity, right? We've got a lot of programs that are successful with customers in the U.S. In many cases, they want to roll them out to new geographic areas. And as we speak today, we are having to provide them with guidance as to when we will bring new capacity onstream -- some of it is organic, of course, capital investment that's organic, and some of it will come through acquisition. So again, there's a pretty good visibility with regards these opportunities.

Okay. That's helpful. And then just maybe still on the Specialty Foods Group. So when we look out to next year, assuming you can achieve that high single-digit or even low double-digit organic volume growth run rate. How should we think about just the margin profile? Do you -- is it fair to assume we can still expect EBITDA margin expansion next year in that segment, assuming that QSR customer remains a bit challenged, but you can offset that by other growth in other pipelines. Just overall, holistically, do you expect margin expansion mixture in the Specialty Foods Group.

Yes. A simple answer is yes, Chris. Again, we've talked in the past. The contribution margins on the growth coming out of those platforms are very strong. with the weakest being the sandwich group, which is the one that's struggling with that customer. So yes. But again, I don't want to get into specifics. We'll talk more next quarter when we release our '25 guidance.

And my last question, maybe for Bill, for you is it looks like for this year, your capital expenditures are going to be run rating around $350 million for the full year. I'm just wondering if you can share with us what's the outlook for next year?

Yes. So -- and I'm glad you asked that, Chris, because in the presentations on Slide 17 with the CapEx, there's actually a typo. The forward CapEx on those projects is only $160 million of the $230 million that shows in the slide. And so when you look forward, the reality of that $160 million remaining on our major CapEx, roughly half of that's probably in Q4 and the other half falling in '25. And then '25, in terms of planned CapEx, the balance will be maintenance CapEx of probably in that $50 million to $60 million range. And then general smaller CapEx, again, around $50 million a year. We tend to spend about $10 million to $15 million a quarter. So outside of any new projects, which would be incremental to our outlook, that's our look for next year.

Okay. So if I add the month, like it sounds like it's about $200 million in total. So the half of $160?

Yes, $150 million to $200 million, yes.

Okay. So that's a pretty big step down from the $350 million that you guys are spending this year?

Absolutely. And that's our expectation. We are coming to the end of this major capital investment cycle we've been in.

Your next question comes from Stephen MacLeod with BMO Capital Markets.

Lots of great color so far. I just wanted to clarify on a couple of things. Just with respect to -- you talked about it in the prepared remarks, just accelerated growth in the coming quarters, particularly in protein and sandwich as well. And I'm just -- both of those businesses, as you point out, operating below potential. Just when you put everything together with respect to your largest customer, some of the customer onboarding delays. I'm just trying to get a sense of like what's the visibility into that accelerated volume growth that you're calling out over the next several quarters?

Yes. I don't know if there's much more color we can add to what we said earlier, Steve. The fact is we've got that robust pipeline. But those -- that pipeline is based on a number of specific initiatives. And we do expect that to accelerate over the -- the number of initiatives won or launched to accelerate over the course of 2025. So -- but in general terms, I go back to that earlier comment, maybe 50% of them by the middle of the year and a good portion in the back additional portion in the back half of the year.

The only other comment I have, Stephen, is that the -- because of the nature of the customers, the lead time with these opportunities tends to be 1 to 2 years. So these are not new opportunities. These are opportunities that we've been working on for the last year or trying, obviously, to match the demand with the capacity coming on stream, right? So these long lead times in general when it comes to these type of launches.

Right. Okay. No, that's helpful. And then maybe just looking at sort of the quarter ahead, Q4, is it fair to say that Q4 might look a lot like Q3 or would you potentially expect it to be -- have more in the way in terms of headwind?

No. Again, on a year-over-year basis, we expect incremental improvement in Q4 as some of these issues are expected to hit in Q4, these new initiatives.

Okay, that's great. And then just looking at the stock, and it's obviously traded off and will you factor in today, it's sort of down 20% over the last 3 weeks. Just wondering how are you thinking about buybacks given where the stock and on valuation?

We're reviewing all options, Stephen.

Your next question comes from John Zamparo with Scotiabank.

I wanted to come back to the topic of customer onboarding. I wonder if you could say, is that primarily from 1 or 2 customers? Or is it broad-based among several? And are there any internal levers you can pull to move some of these forward?

Yes. Again, it's easier, John, to talk about channels, right? For example, we just did a major launch with a very large C-store customer in the U.S. We've launched our chicken bites with a very large customer in the U.S. So these launches are happening all the time. In some cases, it would be a club customer. Again, the club channel is the big -- our biggest channel that we service in the specialty group. In some cases, it's the traditional grocery retail channel. If you visit the U.S. and you visit all of these type of customers, you'll see a lot of our products. So it's happening all the time. We have a lot of things on the go. We're doing innovation sessions with all channels all the time. And anyway, it applies to all the channels. And again, if you know our products, you will find them in more and more places with more customers and more channels.

A follow-up on the seafood side. I think as of last year, and this relates particularly to the international comment, I think based on last year, your percent of sales coming from international as in Asia and Europe was just around 1% or so. Is that still roughly the case? You haven't seen any abnormal growth in that business or exposure to those regions in particular China?

It's definitely growing. Our international business is growing from a small base. So there'll be -- like for this year, I think, will grow substantially from a percentage point of view, but it's still relatively small. But again, yes, a big market, big opportunities there over the long term.

Okay. Understood. And then just one more on the M&A side. It seems like you have this long-term pipeline available. I wonder if you consider pausing or deferring some of those deals based on your prioritization of leverage and given you may not wish to effectively pay in equity, given where the stock is compared to historical levels.

Well, one thing I will say about the acquisitions that we're going to -- we've talked about for the fourth quarter, John, is that they will be neutral to our balance sheet or actually better than our current ratio. So they'll actually be slightly helpful to our balance sheet. We've been very careful to make sure that we're not burning ourselves with or hurting the balance sheet with these transactions. And the fact is liquidity has never been our issue. It's just been managing the leverage ratios. And so these transactions are actually going to be helpful to that process.

And in general terms, John, these types of acquisitions provide us with incremental capacity which we know we can fill basically relatively quickly as we continue to launch our products into the U.S. market. So really for us, it speeds up our access to capacity.

And corresponding. So you've got a situation, John, where it's growth a positive to our immediate balance sheet. And then like George says, through '25 as we execute on leveraging some -- because these are largely capacity plays in a unique part of the food industry. that's going to help accelerate the deleveraging of our balance sheet.

Next question comes from Derek Lessard from TD Cowen.

Just a few follow-ups for me. On the sale leaseback, you did note that you're in the process of completing 2 of them. I think, Will, if I'm not mistaken, you mentioned in the past that you had about $400 million. So are we to expect more sale leasebacks going forward?

Yes. So it's actually only one sale leaseback. We're currently finalizing at this point. The other transaction was the sale of a vacant piece of land that was an outright sale, no lease associated with it. And so -- and yes, for 2025, we still intend to do 2 more transactions. This transaction, the sale is for about 60 million -- USD 68 million. And for next year, we're planning on another roughly $250 million to $300 million in proceeds from sale and leasebacks, 2 more transactions.

And one final one for me, just on your working capital. How should we be thinking about that in Q4 and maybe 2025?

Yes. On working capital, we've seen to make 2 steps forward, one step back. Our working cap -- we're still working on getting it down the issue is there always seems to be something new coming up. So this quarter, our inventory levels are a little higher than we expect our plan just because there were some good opportunity buys in an imported beef that we could bring in under bond as well as our sandwich plant is making some product modifications one of our larger sandwich plants. And so it ramped up a bunch of finished goods prior to making that change. And -- so we seem to be hitting these bumps in the road, but we still are working on making incremental progress on a year-over-year basis of getting our days purchase and inventory down.

[Operator Instructions] Your next question comes from Kyle McPhee with Cormark Securities.

Just a follow-up on the leverage. Do you guys plan to revisit your total leverage target going forward after the deleveraging cycle you're starting to get into in 2025? Or the 4x total leverage always kind of going to be the ceiling for your comfort range as you look at investment opportunities. And as part of this, maybe can you speak to the refinancing plan for the convert due early the next year.

Yes. So our intention is, over time, to morph to just our senior debt to EBITDA range. Being our total debt-to-EBITDA range as the convertible, but debentures fall off. So longer term, our total debt to EBITDA range is going to be 2.5 to 3. That's kind of our longer-term target, Kyle. Currently, we have the extra term for our convertible debentures. In terms of the debenture coming out next April, our intention is just to use our senior credit facilities to pay that off.

Got it. Okay. Maybe I'll squeeze in one last quick one. Are you guys considering more asset sales to trigger more of a step-wise change down for your balance sheet leverage? Maybe asset sales bigger than the vacant land deal you announced this quarter?

The only specific initiatives in place at this point are the 2 sale leasebacks I mentioned earlier. So that's -- like I said, that's $250 million to $300 million in proceeds.

And no further questions at this time. I will now turn the call over to George for closing remarks.

Yes, I just would like to thank everybody for attending today. Thank you very much.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.