Q2 2020 MGP Ingredients Inc Earnings Call
[music].
Welcome to the second quarter 2020 results conference call.
Oh sure tends to be unless there.
Assessments. Please said no conference specialist persistent starchy followed by.
After today's presentation are we in opportunity to ask questions question. My Press Star then one on your touched on some.
Well charter your question. Please press Star then too.
Please note this event is being recorded.
Now, let's turn to comps or might you assume a fiber and company. Please go ahead.
Thank you Ian.
Good morning, everyone and thank you for joining the MGP ingredients conference call and webcast.
Discussed the Companys financial results for the second quarter 2020.
I might Houston with Laminate company Mgps Investor Relations firm.
Joining me today are members of their management team, including Dave CLO, President and Chief Executive Officer.
Brandon call, Vice President Finance, and Chief Financial Officer.
We will begin the call with management's prepared remarks, and then open the call up to question.
However, before we begin today's call. It is my responsibility to inform you that just called me involve certain forward looking statements such as projections of revenue earnings and capital structure as well statements on the plans and objectives of the company's business.
The company's actual results could differ materially from any forward looking statements made today due to a number of factors, including the risk factors described in the company's most recent annual and quarterly reports filed with the Securities Exchange Commission.
The company assumes no obligation to update any forward looking statements made during the call.
If anyone does not already have a copy of the press release issued today.
You can access at the company's website www dot MGP ingredients dot com.
At this time I would like to turn the call loved it and you piece, President and Chief Executive Officer, They called Dave.
Thank you Mike and thank you all for joining us.
On this call we will provide an overview of our results for the quarter updates on key financial performance metrics.
And the discussion of progress against our strategy.
Then we will take your questions.
Turning to the results for the second quarter, we remain encouraged by the demand for our products. They improved financial result, as well as a strong balance sheet with ample liquidity to weather the challenges and uncertainty related to the covert 19 pandemic.
We saw improved results across most parts of our business this quarter, including the solid sales growth of age kaweske stronger sales for white beverage and industrial alcohol products as well as solid gains in both revenue and gross profit for ingredient solutions segment.
Both of our business segment showed topline growth over the prior year and as a result, our consolidated sales for the quarter increased more than 2%.
On a separate note this quarter MGP was the targets have a cyber attack that temporarily disrupted production at our assets in facilities.
We have sensed resumed normal operations and while there was no evidence that any sense it ever confidential data breach occurred.
We take this issue and the integrity of our data in our systems very seriously and have sense implemented a variety of measures to further enhance our cyber security protection.
And minimize the impact of any future attacks.
We estimate that the ransomware attack had a negative impact to gross profit of approximately $1.7 million, primarily as a result business interruption.
The majority of the negative gross profit impact affected our ingredient solutions business segment during the quarter.
We have insurance related to this event and are seeking to recover a portion if not all of any profit impact, including the profit associated with any loss of revenue, resulting from this of that.
Looking at each segment individually and our distillery products segment sales finished the quarter EUR, 1.6% to $75.2 million, while gross profit declined slightly $16 million or 21.3% of segment itself.
We're very pleased with improved performance of our age the whiskey cells this quarter, representing strong double digit revenue growth as compared to the prior year period from a diverse group of customers.
This growth in age for whiskey reflects strong pricing margins and demand.
As we continue to provide structure to this unstructured market. It is clear that MGP has a unique competitive advantage.
Our diverse page to whiskey library, along with a solid sales team and our ability to support a brands growth regardless of its size offers the position of strength as we sell more east whiskey in the future.
Despite the uncertainty caused by the pandemic at the retail level and potential challenges to specific customers. We believe the underlying macro consumer trends supporting the ongoing growth of the American whiskey category remains strong.
These encouraging macro trends provide confidence, it's some new distillate customers to work through elevated inventory levels during the quarter, reflecting a year over year decline in new distillate brown goods cells.
Demand for industrial alcohol remains strong during the cold and 19 pandemic as we continue to help customers navigate the challenges they are confronted with during these difficult times.
Sales of industrial alcohol also increased for the quarter up 11.2% on increased volumes.
While we have experienced increased demand related to covert 19 over the past several weeks, it's important to point out that a significant portion of our industrial alcohol and premium beverage white goods production was already crop contracted for a set price last fall.
Improved demand for industrial alcohol has come into play in the near term, but we do not viewed as pandemic has an opportunity to maximize short term financial results on this product line. We believe the increased demand for industrial alcohol products will continue throughout the balance of the year and into 2021.
The increase production of industrial alcohol at our Kansas and Indiana facility reflects our commitment to continuing the legacy MB MGP was founded upon more than 75 years ago as a supplier of industrial alcohol for the U.S. War effort.
The increase sales a premium beverage white goods and industrial alcohol for the quarter had a dilutive impact on gross margins for the distillery product segment.
Also of note sales of dry distillers grains, or Ddgs increased 9.7%, primarily due to favorable average selling prices during the quarter as compared to the prior year period.
The gains this quarter were primarily driven by decrease ethanol production across the ethanol industry, which reduced supply and drove DDG prices up over the short term.
Turning to ingredient solutions sales grew 5.4% to $17.4 million, while gross profit increased to $4.7 million or 27.1% of segment sales.
This reflects a significant increase in gross profit margin as compared to the prior year period.
We are pleased with the continued strength of our ingredients solutions segment this quarter and remain encouraged by the robust gross margins as a result of our ability to focus production and sales mix on our highest margin products.
Specialty weeks start sales grew 26.5% this quarter, while our specialty we protein sales grew 14%.
Both primarily driven by increased volume.
Our arise specialty week protein and fiber some specialty wheat starch product lines are well positioned within the baking pasta and snacking categories to leverage the ongoing consumer desire to increase the amount of plant based protein and dietary fiber in their diets as part of an overall healthier lifestyle.
We feel very good about the robust project pipeline for these products as well as our recently rebranded Proterra line of textured proteins and remain confident that they will drive long term growth for this segment.
Overall, both of our business segments continue to benefit from favorable consumer trends and why we have maintained our position against providing 2020 financial guidance at this time, we remain confident in our long term strategy.
This concludes my initial remarks, let me now turn things over to brand involve for a review of the key metrics and numbers branded thanks, Dave for the quarter consolidated sales increased 2.3% to $92.6 million, reflecting growth in both the distillery products and ingredient solutions segments.
Consolidated gross profit increased 6% to $20.7 million as a result of increase gross profit in ingredient solutions segment, partially offset by $1.7 million impact of a cyber attack that temporarily disrupted production at the Atchison facilities consolidated gross margin increased approximately 80 base.
This points to 22.4% of sales up from 21.6% in the prior year quarter.
Corporate selling general and administrative expenses for the quarter were $9.4 million up 8.3% versus prior year due to higher personnel and incentive compensation costs inclusive of certain incremental costs incurred related to transition at the CEO position, we're focused on effectively managing SG today.
While still investing to grow.
Consolidated operating income increased 4.3% to $11.3 million compared to $10.9 million during the prior year quarter, reflecting the increased gross profit in ingredient solutions segment, partially offset by decreased gross profit in the distillery product segment.
Further offsetting the increase in operating income for the impacts from the aforementioned cyber attack and increased corporate selling general and administrative expenses non-GAAP operating income increased 11.5% $12.1 million exclusive of CEO transition costs.
Our corporate effective tax rate was 23.1% in the current quarter compared to an effective tax rate of 25% in the prior year quarter.
Net income for the second quarter increased 7.3% to $8.5 million and earnings per share increased four cents per share that 50 cents non-GAAP EPS increased to 54 cents per share from 46 cents per share in the second quarter of 2019 these increases from prior year or premiere.
Early due to improved operating results.
We've discussed a strong fundamental cash generating capability of our business, which allows us to provide positive operating cash flows even as we invest in other parts of the business year to date cash provided by operations totaled $6 million accounts receivable and days sales outstanding experienced a slight increase of $1.7 million and five days.
During the quarter, respectively. This increase is consistent with the development of new long term supply agreements with large customers. The increase is also a result of continued consolidation of smaller prepaid customers by larger national and multinational customers with payment terms.
Because we are selective in the customers extend credit too they are mostly large in nature and all have a combination of strong balance sheets, along payment history has been GP.
As a result were not experiencing issues with collections.
During the period, we also invested a net $1.7 million and our barrels to slip inventory for aging. Despite the uncertainty related to the pandemic. We believe our library of various Nashvilles and vintages will continue to contribute strong levels of profit for the company going forward. It's important to note that passed or even recent quarters are not necessarily indicative.
A barrel disciplined investment in subsequent quarters fluctuations in our quarterly investment can be impacted by number of factors, including customer demand for new distillate production efficiencies mixing capacity warehouse capacity and sales of aging whiskey.
Our balance sheet and access to capital continue to be strong while we continue to optimize cash management. During this pandemic, we remain well capitalized and pay down approximately $30 million on a revolving credit facility during the quarter. While also maintaining a conservative cash position. We remain confident that we have sufficient liquidity in the event of the pandemic directly impacting our.
Operations as such we ended the quarter the debt balance of $66 million in a cash balance of $11.7 million as of June thirtyth, approximately $275 million remain available under the 300 million dollar revolving credit line.
Our leverage continues to be very low and we havent experienced any significant economic hardship on our business today as a result of the cobot 19 pandemic recently the board authorized a second quarter dividend in the amount of 12 cents per share, which is payable on September 4th to stockholders of record as of August 21.
This marks the 10th consecutive year that MGP has paid a dividend. The board continues to view dividends as important way to share the success of the company with shareholders. Let me now I'll turn things back over to Dave for concluding remarks.
Thanks Brandon.
Now I'd like to touch on some additional initiatives that support our long term strategic plan.
The headwinds we identified last quarter have persisted with varying impacts on our financial results.
During the quarter, the first headwind related to the initial pantry loading that occurred during the first several weeks of the pandemic, which caused off premise sales to significantly spike.
While these elevated growth comparisons began to taper in the back half of the second quarter the demand for distilled spirits, including American Whiskey remains strong.
We are unsure how long these purchasing behaviors will continue and what potential impact they might have on future off premise sales. We believe this spike in off premise sales during the pandemic have partially offset declines in on premise cells across the nation.
As more bars restaurants, and tasting rooms reopened we expect the off premise sales to normalize over time.
As you would imagine the closures of bars restaurants, and tasting rooms had an immediate impact on our craft customer sales the past few months.
Even as some states implemented phase to reopening plans, we would anticipate these trends to improve as these establishments reopened but it is difficult to predict when that might occur in a meaningful way.
Third we began to see some of our multinational customers conserve cash this quarter, which had an impact on new distillate sales results.
While most have strong balance sheets and access to capital. It is unclear how their conservation of cash may introduce additional quarterly sales volatility, which could impact our brown goods sales throughout the balance of the year.
Lastly, international export sales did not meet pre pandemic expectations as travel has been dramatically reduced and terrace in key international markets persist.
We continue to believe that our investments to expand international sales will provide long term shareholder value.
We continue to closely monitor each of these potential headwinds and we will provide additional updates on future calls.
Despite the continued uncertainty surrounding the cobot 19 virus and the diminished visibility of a possible macroeconomic recovery in the back half of the year Im very pleased with the continued execution of our pandemic response plan, which focuses on protecting our employees and doing our part to help stopped the spread of the virus.
The investment spend related to our warehouse expansion plan with substantially completed during the quarter and totaled approximately $49.8 million.
We anticipate additional investments in warehouse capacity to continue over time as needed to support the growth of our customers.
Additionally, our investment in aged whiskey inventory grew slightly to $113.1 million at cost as we reduced our incremental investment in aged whiskey inventory during the quarter versus prior quarters.
As we've previously stated our growth in sales of Brown goods over the past several years has outpaced the broader market. This was due in part to the subset of the market, we serve growing faster than the overall market.
While the consumer trends for American Whiskey remain robust, we now believe that the underlying growth rate for our target market is gradually slowing to come more in line with a long term trend for the overall category.
As a result, we plan to reduce our overall, aged whiskey inventory levels over the balance of the year as we believe we have adequate inventory to meet both our customers and our own needs.
We continuously evaluate our aged whiskey inventory levels, and we'll make adjustments to these levels system support demand as needed.
In addition, we believe the continued strength of the American Whiskey category through this pandemic has confirmed confirmed the long term value of our aged whiskey inventory.
Furthermore, we are continuing to assess M&A opportunities to strengthen our position in growing markets in concert with our financial position in the coming quarters.
Turning now to our brands, we were pleased to announce the release of remiss retail Reserve series four straight Bourbon Whiskey in September 2020.
Now in its fourth year, our Remus retail reserve program has exceeded expectations and this early fall release allows us to showcase the brand during national Bourbon month in September.
Our George agreements Bourbon and Rossville Union rise single barrel programs, which were launched in the first quarter of this year. We're in high demand is pre sales exceeded our expectations.
Offered only once a year MGP is in a unique position to provide a variety of mash skills to our trade partners and we're proud to aid some of the finest whiskey barrels in the country at our Lawrenceburg facility.
The addition of Green had Gen. Two our award winning brand portfolio continues to progress despite on premise closures due to the pandemic.
To mitigate the effects of on premise closures, we have leverage social media and virtual tastings to keep each of our brand spreading center for consumers.
Our premium beverage brands were not immune to the decrease on premise activity. This quarter, while sales activity has increased in states that have undergone partial reopenings.
Uncertainty persists as states determine how and when full reopenings of bars restaurants, and tasting rooms will occur.
However, we will continue to invest in our brands portfolio as we consider this initiative and important driver of long term growth.
We were also proud to support the industry and our communities that have been hardest hit during these difficult times.
With donations to the United States of Bartenders skill the restaurant workers Community Foundation Emergency relief fund and the World Central kitchen.
Before we open the call up for questions I would like to reiterate our continued confidence that focusing on our key strategies will drive superior long term shareholder value.
Both of our business segments continue to be well positioned against strong macro consumer trends and we continue to believe that our strategy will drive long term sustainable growth.
Operator, we're now ready to begin the question and answer portion of the call.
We will now begin the question answer session.
Next question. Please press Star then one touch Samsung.
Peer used in speakerphone, please pick up your handset before press and the keys.
Charger question. Please press Star then too.
At this time, we'll pause momentarily to assemble roster.
First question comes from gone and begin.
Mickley preparing burden Kong. Please proceed.
Hey.
The just kick things off when and if you could talk a bit about some of the product characteristics that differentiate the specialty ingredients products from the commodity products and what market salesmen leasers.
Yes sure so.
Let's start with the markets I mean, we sell.
Primarily in two basic baked goods pasta and snacking categories.
As far as.
The product lines, there, let's start with.
Specialty starch and particularly fiber some.
It's basically.
Allows for.
Formulators to introduce.
Fiber and as a result result in and net carbon that finished product. They had also because it's a week based fiber it.
Blend extremely well with other rebased proteins such as arise.
So you're getting the the benefits of a high fiber.
And high protein combination, which results in lower lower net cards. So.
Both of those product lines are on trend as consumers continue to try to find ways to increase protein increased fiber and reduce carbs. So those are the primary drivers of what's what's driving the increase demand we see in those two particular product lines.
Okay. That's really helpful. And then switching to the Capex guidance. So first question could you talk a bit about the pacing of that $20 million. So capex in the back half a year and then as a follow up how much of that that Capex is maintenance choice expansion.
Yes.
Hello, and welcome to the call. Donald This is branded I'll take that one so we are still guiding off for your capex to be 19.6 million.
So year to date that number is is coming in right around 6 million.
So you can expect the lion's share that night and six to come in the back half.
Our projects do range between maintenance and growth.
As long as environmental type projects and safety so beyond that that we don't give further breakdown in detail as to how much in each bucket.
I just know that we are always looking for ways to invest capital to better position our company within industries, we serve.
Okay and then just the last one from me could you talk a bit Archie provide some color on how the U.S. spirits market share how that's trended year to date within the overall beverage alcohol category admitted disruption of Coca 19.
Yes, I think that what that trends have been playing out during co. It is the off premise sales.
I've been us significantly versus prior year early in the pandemic, let's call. It. The first two months spirits in particular were trending up 30 plus percent.
In the last few weeks.
Some partial reopenings have occurred in on premise.
Off premise spirits sales are continuing to be up about 20, 20%.
So overall with on premise being off substantially off premise up.
It's almost a net position for growth in the overall spirits category year to date.
Okay perfect. Thanks, Thats all my questions.
Okay. Thanks Donald.
Our next question comes from Bill Chapman assumptions. So please proceed.
Thanks, Good morning.
Good morning, one bill.
Rapid fire just kind of go around on on on the few issues I guess, one on the new to still its sales in the quarter that were hit by.
Customer shutdowns or just delays have you seen any of that come back has it gotten worse as you went through the quarter have yeti indications from from the customers as to whether they will come back.
Yes, Bill I think what we two things we saw kind of impacting that in the quarter was one cash conservation by customers and I think thats driven just by the uncertainty of.
The the situation, we're in with with co bid.
So that was definitely a significant contributor and then the other thing I would say is again, just some customers working off some inventory.
During the quarter.
As far as what we would expect going forward I do think that as long as co heads around it's going to continue to put people in a position where they're going to be conservative with their cash.
And then if demand stays relatively flat in the market with the on premise offsetting.
The off premise gains I would anticipate it's going to take a while to work through inventories as well, but long term I think we still feel very good about.
New distillate cells.
Is there anyway to quantify what the impact was in the quarter for that.
Yes.
We did share Bill that's a new digital sales volumes were down whereas age on the others on the other side.
What was in very strong double digit growth territory from a percentage basis.
Another thing I think worth highlighting on that is that although total brown sales were also in half percent.
Total gross profit and gross margins were up for for total brown. So.
This quarter I think is a really nice example off.
The fact that even our diversification within the Browns product category total brown product product category.
Really letting a hand to our ability to to meet our customer needs in a shifting environment like we're seeing now.
Got it and then switching over to the age said anything thats, great that things are continuing to be.
Positive momentum there, but I guess, Dave on your comment that you want to meaningfully get down to the aged inventory on the balance sheet, which is probably I guess about 113 million you know that that would imply you have a home or potential home for some of this inventory in the back half of the year.
Otherwise.
I guess, it would just contingencies and hopefully it at reasonable prices. So can you maybe talk about that of what's your visibility is into getting the inventory level down.
Yes, I think you know as we as we spoke about this I think at the inventory levels. We're at now we feel pretty good that we've got.
Adequate vintages, if you will and different mash skills.
To support the demand that we see it out in the near term for both our customers as well as our own internal use.
So I think you know it'll be a combination of.
The demand for the product that will bring the inventory levels down as well as our put away.
Scaling that back a bit so the that those two factors I think will contribute to the decline in the overall value of our aged whiskey.
So if you feel comfortable that you can.
In places in the back half despite customers being a little tighter with their cash.
I think we we saw a pretty good demand here in Q2 and.
As far as what we're seeing going forward I say with the craft distillers, we did see softness in Q2.
Some of the partial reopening start to occur that has a positive benefit on gone the craft players. So we're hopeful that we'll see some improvement in demand with craft and then ongoing demand with the national and multinational customers and then of course as things open up internationally.
We would hope that our export sales opportunities come to light as well.
Got it and then switching industrial alcohol.
I mean, I know things are contracted out you are running at 100% utilization, but volumes seem to pickup sequentially, implying that you sound a little more capacity is that a good number two kind of use for the remainder of the year.
Terms of Exar extra volume or can you find even more from here.
Yes, I mean, the way what we're trying to do there Bill is basically meet the contractual volume obligations that we have with key customers as well as I think we spoke about this on the last call. Those those long term customers also came in for some incremental demand.
So we're also trying to make sure we can support the incremental demand as much as possible. We're fully booked for the balance of the year and we're just trying to meet.
Those contractual commitments for the balance of the year.
But it sounds like you are you finding some excess capacity.
Thats Fair, Yes, yes, I think if you know basically the distilleries or are running very very well very efficient and we've been able to pick up some capacity as a result of that.
And do you still think you can get some.
Pricing.
So as we move into 2021 its demand remains as strong.
Yes, I think thats definitely a pattern that we're saying.
We anticipate that obviously the demand is staying strong for the balance of this year.
Based on what we know now we think that the demand will stay elevated as we go into 2021, and we are seeing prices reflect that as we're coming into the new contracting season here in the back half of the year.
Great and then last one from me on ingredient solutions just.
You talked about focusing more on the higher higher profit is it the type items is it safe to say that that I guess profits for this division will grow faster than sales at least for the next few quarters.
Yes. Thank you know the the team has done a really good job on selling the specialty we'd proteins and starches and minimizing the commodity products. So if that if that trend continues then your statements fairly accurate that that should.
The what kind of plays out here in the back half.
Great. Thanks, so much.
Thanks, Phil Excel.
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Our next question comes from Alex Fuhrman of Craig Hallum Capital Group Alex. Please proceed.
Hey, guys. Thanks for taking my question.
As a follow up on the plan to reduce your your aged inventory levels. Obviously, it was never the plan to grow those forever, but it sounds like just from your commentary on the call that that maybe there's a little bit of extra.
Motivation to reduce those level than than we've seen earlier in the year to can you talk about maybe some of the trends you're seeing.
About the category, perhaps starting to normalize that have caused you to reach the determination that that you want to start to be reducing your aged inventory level demand.
Bigger picture.
I imagine you still want to be I'm, having a portfolio of age with yet as part of your library and your and your business is there a certain kind of dollar level, we should be thinking about bad kind of a minimum level that you need to have it in order to be a significant player in that state than and have a good assortment of Nashville than vintages.
Yes, yes, great questions as far as the you know why do we feel like we can start scaling back if you will the amount of aged inventory I think as we spoke in the prepared remarks that you know the.
As we were putting away product five six years ago and even over the last few years.
The category growth in the particularly in the customers that we were building this in Tory.
Before we are growing.
Mid double digits.
We see the trends kind of slowing down a bit and becoming more inline with the overall category growth. So that I would say that's the primary reason why we're scaling back we will always.
At least at this point time, we will always put away whiskey each year to make sure that we've got the proper vintages as well as the proper.
Nashville's to meet our customers' needs going forward given the fact that we have put away a lot of whiskey. We're just basically kind of normalizing those inventory levels based on what we know today going forward as far as what's what's the sweet spot with that number and the amount of inventory that's a.
Hey, honestly, it's something that we evaluate quarter to quarter, it's going to be a dynamic number.
If we see growth projections, increasing and we'll probably put away more if we see growth projections decreasing will probably put away less that type of thing. So I don't think theres, a hard and fast number Alex I think it's going to be dynamic enroll adjusted.
Based on what we see going on in the market.
Okay that makes sense. Thank you for that.
And then if I could also just asked on.
Cyber attack I think you mentioned the impact to gross profit on the quarter was $1.7 million can can you just walk us through the specific to that that number of units that lost sales does that increase production costs or having to move inventory around and Jim should we expect that to kind of come back in the back half of the year.
Just any any color on how we can think about that from a modeling perspective would be helpful.
Yes, good question Octopuses brand and so.
As Dave mentioned on the.
The call ready.
The majority of that $1.7 million impacted the ingredients solutions business.
And and you hit it right on the headed it was largely if not entirely attributable to business interruption.
Including reduced sales as well. So we are we are in the process. We weren't we are insured in this type of event and though we are really we're trying to get some if not all that $1.7 million reimbursed back to the company.
We're very hopeful that it will be by the end of the year and potentially even within the third quarter.
Okay. Thank you very much appreciate that.
And final reminder, if you have the question. Please press Star then one.
Our next question comes from Vancleve of National Securities Corp. Please.
Please proceed.
Alright, Thanks for taking my questions I'd first just a couple of follow on questions regarding the cyber attack first sorry to hear about that.
How long was production shutdown as a result of that.
Yes, we didn't share that it was.
It wasn't up to our cause disruption to our business and.
And at Afek customer orders.
As you can as implied by the 1.7.
<unk> million dollars DAF that we identified.
However, we are up and running we have made a lot of positive adjustments as we go forward from a remediation standpoint, and as and we ended the quarter in great shape on effected by the impact.
Okay, and I think you might have just answered my next question, but that.
So it sounds like Adam as of July 1st that the impact of that was within the path. So third quarter should be should not be impacted measure as a result of that is that correct.
That's exactly right.
Okay.
Perfect and then just just one other question for me here.
As you look at the.
Well look at the potential for M&A.
They've now that you've been here for four.
I guess nearly a full quarter now at this point on you know given everything that's going on in the in the world and especially I would especially impacting on the.
The foodservice industry, how are you looking at.
M&A in the branded branded spirit market and how how has that your thought process here Oh vault over the past three or four months and on what kind of how what are your expectations on the M&A front.
Over the next few quarters.
Yes.
We still view excuse me branded spirits is a.
Great space long term.
There is some choppiness in the short term obviously in just about every food and beverage category due to due to the pandemic, but I.
I think the way we look at M&A is much more long term and what do we think that long term trends are going to be and thats, what gives us confidence that to as we evaluate M&A and particularly M&A and branded spirits, we do think Thats a.
An excellent category to participate in over over the longer term. So it doesn't really deter us.
Per se based on the current conditions.
And so where we continue to actively look at potential opportunities and.
He'll it'll be a great addition, overall to the company if we can be successful.
I have very guide on all right I think thats. It for me. Thanks for taking my questions and I'll get back in Q.
Thank you.
Thank you.
This concludes our question answer session.
Okay as Tom ill turn the comp thats over.
David Cohen.
Any closing remarks. Please go ahead.
Thank you for your interest in our company and for joining US today for our second quarter. Paul We continue to make progress toward implementing our strategic plan and remain confident that will provide us the resources, we need to deliver long term sustainable growth.
We look forward to talking with you again after the third quarter.
The conference and sounds included thank you for attending today's presentation you may now disconnect.