Welcome to Post Holdings First Quarter 2019 Earnings Conference Call and Webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer; and Jeff Zadoks, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Time.

The dial-in number is (800) 585-8367 and the passcode is 8557859. At this time, all participants have been placed in a listen-only mode. It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of Post Holdings for introductions. You may begin..

Good morning and thank you for joining us today for Post's first quarter 2019 earnings call. With me today are Rob Vitale, our President and CEO; and Jeff Zadoks, our CFO. Rob and Jeff will begin with prepared remarks, and afterwards, we'll have a brief question-and-answer session.

The press release that supports these remarks is posted on our website in both the Investor Relations and the SEC Filings sections at postholdings.com. In addition, the release is available on the SEC's website.

Before we continue, I would like to remind you that this call will contain forward-looking statements which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements.

These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures.

For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Rob..

Thanks, Jennifer, and thank you all for joining us. We had a solid first quarter, with each business performing well; we modestly updated our adjusted EBITDA guidance as you could have seen in our press release.

Our consumer brands platform continues to perform well, with a strong consumption quarter, with dollar market share reaching 20.1%, although we did benefit from heavier trade activity in the first quarter versus our plans for the balance of the year. Within these solid results, we still have opportunities to improve.

We continue to see plant conversion costs run approximately 4% ahead of last year. In 2019, we are focusing on assortment simplification and improving overall supply chain execution.

Our internal focus on capability, development, and execution is the next step in the evolution from MOM Brands and Post Foods as separate businesses to a streamlined combined business to ultimately a sophisticated consumer brands platform well positioned for future acquisitions. I want to spend the most time on our new segment reporting.

When we acquired Bob Evans, we decided to create pure foodservice and retail channel businesses. This produced stronger, more focused organizations a key tenet to our operating model. We also sought to best leverage our cold supply chain across both businesses as appropriate.

Last year, we reported these businesses as one segment, while we work through integration. Commencing this quarter, we are reporting two segments. Under this structure our foodservice business co-manufactures some but not all of our retail products.

This has the effect of capturing margin in foodservice; the pre-acquisition would have been in Bob Evans. Once we cycle fiscal 2019, we will have comparability. This year I encourage you to analyze margin trends for these segments in total. To help you model the performance, I'm going to give you the baseline against which we measure 2019 performance.

In 2018, the reported refrigerated food segment had adjusted EBITDA of $442 million. The reported number excluded approximately $29 million of Bob Evans adjusted EBITDA earned during Post fiscal 2018 prior to the close of the acquisition.

Recall also that the fiscal 2018 reported number included $25 million of excess earnings from egg pricing as we discussed throughout last year. The net result is a baseline adjusted EBITDA of $446 million. This quarter the segment together earned $125 million and are tracking quite favorably compared to baseline.

Synergy delivery remains on track and the Bob Evans brand continues to perform well. Specifically this quarter, the Bob Evans brand side dish business grew volumes 12%. In our sausage business we reduced trade spending and consequently expanded margins while contracting volumes. Our legacy Simply Potatoes brand declined approximately 2%.

Blending the brand metrics may have contributed to misinterpretation of a slowdown in our sausage business. Meanwhile our foodservice platform continues to show strong momentum in value-added eggs and potatoes growing volumes 5.8% and 4.6% respectively. We executed well against all key metrics and are well positioned for the year.

In Active Nutrition we continue to navigate the capacity constraint ready-to-drink shakes. We executed exceedingly well to deliver a strong quarter. To refresh the context, having exited last year with essentially no inventory, our two flavor strategy was aimed at maintaining ACV and maximizing shake output.

With drawing five of seven flavors, maximized output for the remaining two, but have resulted in an intentional decline of 38% in total distribution price. Despite a 38% decline in TDPs, our shake volume grew 4% rather extraordinary outcome. We begun flavor introductions this month and we expect all flavors to return to market by the end of April.

The brand performance through this disruption gives us considerable confidence that the flavor reintroductions will result in a return to our historical growth rate. With respect to our announced IPO of the Active Nutrition business, we do not have much to update.

We continue to work on the registration statement and its financial statement precursors while we remain on track; we are no hurry to execute the IPO. We want to be ready and then allow the market conditions to develop.

Finally, we had a turnaround in our Weetabix promotional strategies and we are quite happy to report that the pricing volume dynamic is returning towards our underwriting case. While the work is by no means complete, this success is a real bright spot for the quarter as we re-establish the appropriate pricing structure to this valuable brand.

By the time we report next quarter, we should have more clarity around Brexit. Our contingency planning is around working capital as we are building inventory in event of port disruptions. There is a modest incremental cost surround additional storage facilities and inventory builds do come with a bit higher risk of subsequent write-offs.

We do not see the risk as material. Our exposure to Brexit lies mostly in currency translation. However we are hedged at approximately 60% of the free cash flow, we would expect to repatriate over the next three years. Our capital allocation strategy remains unchanged.

We continue to view through an opportunistic lens, the balancing priorities of share repurchases, deleveraging, and M&A. Before I turn the call over to Jeff, I have one quick housekeeping matter with respect to 8th Avenue.

This is our first quarter following its recapitalization; our practice will be to limit commentary to what is in our press release until a material change occurs in either the business compensation or its results. With that, let me again thank you for your support, and I will now turn the call over to Jeff..

Thanks, Rob, and good morning everyone. Adjusted EBITDA for the first quarter was $292.5 million with consolidated pro forma net sales growing 3% year-over-year. Post consumer brands net sales grew 5.4% with volumes and net pricing up 4.8% and 0.6% respectively.

Pebbles, other licensed products, and Honey Bunches of Oats, drove majority of the volume growth, while the increase in average net pricing resulted from favorable product mix and pricing taken later in the quarter. Post consumer brands adjusted EBITDA improved 8% compared to prior year.

Volume gains and reduced advertising and consumer spending drove the improvement, while meaningful year-over-year systemic inflation and trade commodities and wages persisted this quarter.

Weetabix sales were up 1% over prior year despite a three point currency headwind, year-over-year average net pricing improved 8%, while volumes declined driving a modest increase in margins and adjusted EBITDA.

Net sales in the foodservice segment increased 4% on a pro forma basis with volumes up 5% driven by strong growth in both eggs and potato products. Adjusted EBITDA for this segment was $77 million benefiting from volume growth and the Bob Evans acquisition.

In spite of tough comparison as the prior year included excess profit from favorable egg market prices, the legacy foodservice business was able to grow adjusted EBITDA slightly with higher volumes somewhat offset by mild freight rate inflation.

Pro forma net sales for refrigerated retail were flat with volumes up 3%, side dish volumes grew 7% driven by distribution gains and continued strength in Bob Evans brand side dish products. Adjusted EBITDA for this segment was $48 million. Net sales in our Active Nutrition business were flat year-over-year.

Short-term capacity constraints with our shake co-manufacturers cause us to limit production to two flavors and pull back on promotional and advertising activities. Despite these constraints, we achieve net sales growth for shakes of 3.8% for the quarter.

Adjusted EBITDA for the segment grew approximately 18% benefiting from lower raw material input costs and marketing expenses. Before we open up the call for Q&A, I would like to make a few comments on capital transactions and cash flow. Market conditions during the quarter created an opportunity to repurchase our shares and bonds at attractive prices.

We repurchased approximately 290,000 shares at an average price of $88.12 per share and $60 million in total principal value of our senior notes at an average discount to par of 7%. Our remaining share repurchase authorization is approximately $280 million. We expect to continue a balanced approach to share repurchases and leverage reduction.

Our net leverage at the end of the first quarter, as measured by our credit facility, was approximately 5.2 times, down two-tenths of a term from the beginning of the quarter. In January, we gave noticeable redemption of all outstanding shares of our Series C preferred stock with a redemption date of February 15th.

Preferred holders have the option to convert their preferred shares to common shares prior to the redemption date. Assuming holders convert their shares rather than redeem them; this event would have no impact on our fully diluted share count. This conversion will eliminate the annual dividend of approximately $8 million paid to the preferred holders.

Our first quarter cash flow generation was strong generating $239 million from operations. First quarter capital expenditures were nearly $80 million as expected a step-up from recent periods primarily related to growth in our egg business. With that, I'd like to turn the call over to the operator for questions.

Operator?.

Thank you. [Operator Instructions]. First question comes from the line of Andrew Lazar of Barclays..

Hey, good morning, Andrew..

Hi.

I guess first off it was I think our impression that that fiscal 2019 may be a bit more back-end loaded from an EBITDA growth standpoint, I think due to inflation being a little bit more front half weighted, I think pricing being a bit more back half weighted, saw the manufacturing nuances, Bob Evans synergies I think being a little more second half weighted, and obviously the year ago excess Michael Foods profit that might hit earlier in the year.

So I guess I was hoping you could comment on that a little bit in light of the first quarter over delivery. I guess I'm specifically interested in maybe the cadence of EBITDA build for the balance of the year, how much of the Michael over earning hit you took this quarter versus I guess if any will bleed into 2Q.

And then if you can the EBITDA contribution from Bob Evans this quarter?.

So when we gave guidance at the beginning of the year, we talked about it being back half pretty much exactly as you just described it. And I think in some meetings, we've talked about how if you just divide the midpoint of our guidance by four that the first quarter would obviously be below the average and we would build throughout the year.

So I think there were some difference of interpretation as to how severe that slope was. So the overall earning relative to expectation, I think varies by how significant different peers of that message interpreted the degree of the slope. It was a strong quarter but not a massively over earning quarter relative to our expectations.

So we continue to expect the cadence. So again depending on perhaps that slope is a less steep slope than listeners would have previously interpreted. Michael performed very strong. So in terms of the $25 million overhang from last year, roughly half and half in terms of the first and second quarter and we pretty much performed through that.

Your question about -- specific to Bob Evans EBITDA is a hard one to answer because we have now so reconfigured the business that we really can't give you a pure Bob Evans number anymore because it now shares a platform with the legacy Michael retail business which was almost as big as the Bob Evans business, so..

Right, right..

You can look at the reported refrigerated retail numbers and look at the size of the refrigerated retail platform relative to historical reports.

But I think that admittedly this will be a bit complicated from a comparability perspective throughout 2019 and what the comment I made in my prepared remarks was that the best way to look at the performance of Bob Evans is to say in combined 2017 pre-acquisition and our Michael Foods segment you had asked in 2018, we just went through we have $446 million and we had $125 million through the first quarter of that $519 million.

So you can see a pretty significant amount of EBITDA build in that aggregate progression. And I think it's fair to assume that in order to get to that level of EBITDA build, it requires the baseline Bob Evans business to be intact, the synergies to be intact, and growth rates to be intact..

Got it. Thanks for that.

And then one of the largest areas of outperformance, at least from our model, and I think consensus in the quarter was consumer brands EBITDA, and I know this is a segment where I think you're going to have maybe sort of a greatest amount of ingredient inflation and as you mentioned in your prepared remarks, you still had a decent slug of promotion and trade spending in the quarter? I know obviously the EBITDA still came in above where we sort of have that falling out.

So just trying to get a sense of what drove that and sort of how sustainable you see that going forward?.

Well we see it as sustainable and we expect that to be a component of the upward slope through the balance of the year. I suspect that the difference between expectation and what we delivered is more about again that same phenomenon on how deeply different people interpret the degree of the backend..

Got it. Generally I'm optimist in life but maybe I just got that a little -- a little wrong this time.

Last quick thing for me would just be regarding the separation of refrigerated foods into two segments, is there anything operationally that move be different that's an unlock from that or is it really more about just providing some additional transparency to each business, which in and of itself I think is a good thing?.

Well from a perspective of how GAAP requires us to report the nature of the way, we manage the business virtually leads to a requirement to report it that way. So we view the businesses as a standalone independent businesses that happen to share some common manufacturing and supply chain functionality.

But what we don't want to do is to conflate the different functions and strategies of foodservice versus retail; the whole purpose of the work to separate them was to give them distinct strategies that they could independently pursue. So by giving you the separate reporting segments, we achieved that.

The challenge in this particular process is that they do share supply chain and manufacturing and require some cost allocations to get to the reported numbers..

Your next question comes from the line of Chris Growe of Stifel..

Hi, Chris..

Hi, how are you Rob? Thank you.

Just a quick question for you in relation to from a high level, your gross margins a little stronger than I saw and your SG&A little less than I expected, I just want to understand there's some influence in there from Bob Evans and exclusion of 8th Avenue, I just want to get a sense of like the underlying performance or kind of what's behind those necessary, if you give your color on the gross margin and so the SG&A level overall for the quarter?.

Well, you just hit on the biggest contributor to the margin change year-over-year was that we added high margin business and took out our lowest margin business. Beyond that I suspect it's more about where you set baseline expectations because it was largely in line with our expectations..

Okay, that's helpful.

And then just to be clear on Active Nutrition and the IPO, it sounds like are you proceeding at the same pace is sort of keeping an eye on industry conditions to know like when it's proper to move on that IPO, is that the way to say that?.

Yes, we are doing all the work we expected to do which is getting audited financial statements that reflects Bob Evans allocations. We're getting the S-1 ready all the execution work. I think given that it's a long lead time process, one of the vagaries we can't anticipate is what the status of the IPO market will be when we are ready.

So what we want to do is have all of our ducks in a row and then if the market is ready, we go, if it's not ready we wait until it is..

Okay, thank you. And just if I could follow-up on Active, there was some concern that developed through the quarter about a slowdown in shake sales on which were pretty clear last quarter about that and the inventory situation you were in.

So what I'm really interested is kind of going forward from here, so we see sequential progress like in the second quarter as you build inventory, able to build inventory having more capacity, we should see stronger sales commence in 2Q or is it more second half, I just want to understand how that progresses through the year?.

Yes is the answer to your question.

We will -- we're going to start introducing reintroducing flavors in February but that we don't expect to see them completely back on shelf until early in April so our third fiscal quarter, it will build as we go through the year which is exactly in line with hopefully what we communicated in our last quarter call..

Yes, okay, that's helpful. Thanks so much for the time..

Thank you..

Your next question comes from the line of Tim Ramey of Pivotal Research..

Good morning, thanks so much..

Hi, Tim..

Rob, Jennifer. It seems like you built the balance sheet on the assumption of a fair amount of steepness and difference between one-month LIBOR and 10-years like 15 basis points right now.

I would think that I mean you talked about buying back bonds and you talked about reconfiguring the balance sheet but how is that playing out in your swap liability; I assume it's pretty good news based on what you have seen?.

So specifically with respect to our swap liability, it's negative news because as the 10-year treasury moves down that liability grows. But the reason it grows is because it's a hedge against our refinance risk. So as the 10-year stays down or goes down, our cost of refinancing also goes lower.

So those two are intended to match each other on a present value basis and they're doing so. We don't have as I think you know any near-term maturities. So that's a hedge against a longer-term action related to when we start to either have call dates or maturities..

Sounds good. And just to kind of better understand what you're talking about in terms of the Brexit risk I guess you summed it up and said it's basically currency translation.

But you're saying you don't really think that you have distribution channel risk in any meaningful way?.

Well the bulk of the Weetabix product is sourced within the UK. What is not sourced within the UK is mostly packaging and there are some vitamins and relatively small products and I mean small book physically and from a cost perspective and the reason I raise the physical is most of the cost is around storage space.

So what we're doing is attempting to make sure that if we are in a situation in which there is a port disruption that adds days, weeks, or even months to the supply chain that we're ready to -- we're ready to react to whatever reality develops.

Likewise where we have export business this quarter we're starting to build inventory outside of the UK, so we have the other side of that equation balance. So if you look at the operations and there's cost associated with all of those activities but they're relatively modest.

The way we report EBITDA is on a translated basis at an average spot rate through a quarter.

So to the extent that Brexit creates currency volatility, we could have some earnings volatility reflected in EBITDA but the actual flow through of the economics is that roughly 60% of our free cash flow that we do repatriate which is the real economic impact of the foreign currency is about 60% hedged..

Okay. If I could squeeze one more in on Active Nutrition I mean presumably we're past the worst of the supply chain tightness there in Tetra Pak.

How quickly do we think that things normalize?.

Well as I responded to Chris, we start this month, we continue in March, we should be fully on shelf by April, so actually getting a full quarter of performance of all flavors in all outlets is probably not going to be embedded in one quarter until the fourth quarter but we will be able to see progression very clearly along the way..

Your next question comes from the line of Bill Chappell of SunTrust..

Hey just a quick follow-up on Active Nutrition, you commented that there's no rush, is that implied that there is any change to the timetable of looking to built an IPO this summer or I mean would you be willing to wait till fall or early next fiscal year?.

So, I'm trying to go from memory, I think when we announced what we targeted was 2019, I don't remember if we were specific as saying summer or fall. So we still view it as a 2019 event. And nothing has changed in terms of the cadence of our work and expectations. If we're ready to go in July and the markets make sense for us to go in July, we will.

August is a bad month to transact in the capital markets. So we don't have July, we're looking at September and then obviously you have market dependency if we -- what we are not going to do is to transact because we said we're going to transact in 2019 or at somewhat arbitrary date.

What we're going to do is be ready and then address the market when the market is open to us..

But that the current undulation of the business, don't change the timeline?.

Not at all..

Okay..

I mean would not. We expected what happened in the first quarter to happen, I mean it almost happened exactly as we prescribed it, when we announced if we had had concerns about the undulation of the business, we wouldn't have announced the IPO at the same time we announced the flat quarter from a business that had been growing 20%.

So this is going exactly according to our expectations now the next part has to also go according to our expectations but nothing today has been a surprise..

Got it.

And then maybe asking Andrew's question a little different, looking at refrigerated you said the base business was $440 million of EBITDA, you did $125 million in the first quarter, so my math is still good that annualizes to $500 million and there is some seasonality, is that due to synergies coming in faster than expected or the business being more profitable than you thought or input cost what's driving that?.

Synergies and growth..

You want to be more specific or just sort of leave it at that?.

Well the challenge on trying to allocate synergies is between Bob Evans and Michael Foods is exactly what I talked about is you start to make some theoretical allocations and why I am trying to be somewhat high level on that answer.

We talked about $35 million of synergies over three years in our Bob Evans announcement, that's a goodly portion of it being delivered in FY 2019.

So I think I don't want to be more specific than to say that we are on track to achieve the $35 million, a portion of that flew -- flew flowed -- flowed through FY 2019 Q1 but we achieved or tracking to achieve well in excess of that. So it's a combination of the two. I don't know if I just gave the answer in more words. But it's a little helpful..

It is. Last one from me, just U.S. consumer I mean the cereal business was very strong performance.

You did say that there was a little more promotional or more activity this quarter but I mean is there any reason that this should -- should revert back to kind of flat growth over the next few quarters or it seems like it's in pretty good place?.

Well, I think both of those statements are true. It is in a good place but we don't, we don't want to plan to this kind of growth in a category that is essentially down low-single-digits. So I think we did benefit from the heavier trade that we would not expect to be repeating at least at the same level through the balance of the year.

So we're not -- we're not planning within our guidance continued growth at that level in cereal. We are looking at it more of a flattish business as we all go..

The next question comes from the line of John Baumgartner of Wells Fargo..

Rob, just wanted to quit consumer brands and I mean obviously clearly very strong growth and just to expand on your comments to Andrew about the slope in 2019, how are you thinking about the incremental growth in the license brands in building new distribution because from what we can see in the Nielsen, I mean ACV in the Mondelez portfolio are still far below your legacy business and now you're also layering on host SKUs, so just any context there would be helpful..

Yes, both are -- in both businesses we start with anchor customer who had a bit of exclusivity. And then once that exclusivity period runs the ACV builds and we are in that ACV build period with OREO and power patches lagging that by probably a year or so.

So I think they are both ACV and consumption opportunities in each brand, each brand are doing well. There is likely to be some interaction between the two that may cannibalize but right now both appear to be promising in both distribution growth and in velocity..

Okay.

And then on the foodservice segment, just maybe bigger picture question, in terms of how you think about the business scaling, building out going forward, I mean to the extent that you do or would engage in a further M&A, what shape do you envision that taking in terms of new categories or how confident are you that you can source assets and that kind of sub 10 times preferred level and how do you think about synergy capture with any deals in that space going forward?.

Well, it’s a highly situational answer to that question. I think that we have a terrific business model aimed at taking labor out of our operators' channels by moving up the value-added chain in currently two commodities and there is probably opportunity to do another commodity.

We are so strong well positioned in the category that the bar for M&A is higher. So whereas we have more consumer and secular challenges in the cereal and we want cereal to be positioned well to be an acquirer of a number of assets that we think will help supplement some challenges there.

Where the business is so strong in Michael Foods and our overall foodservice segment, we want to be a bit more deliberate with respect to M&A so not distract from the core focus of just doing what it's doing.

So we have M&A opportunities, we have M&A capabilities, but we have very high expectations for what that M&A must do in order to justify the risk of distraction from day to day execution against the many opportunities that organically face the business..

Your next question comes from the line of Ken Zaslow of Bank of Montreal..

Just two questions, one is what is the implication for profitability in 2019 and 2020 for the Weetabix pricing structure being re-established?.

Well in 2019, it’s embedded in the guidance and in 2020; we are not prepared to talk about, so I'm going to doubt your question..

Yes, let me ask you different way, does it get back to the base case by 2020, does it accelerated in this in line with what you thought last quarter and the quarter before or how you kind of re-established the pricing dynamics little bit earlier or later, just try to give me some color on that? How is that?.

So I would tell you that we had an expectation around volume and price and that we feel very encouraged on both sides of that equation vis-à-vis our expectations a year ago when we started this reset.

So I think what we are -- are takeaways right now are the brand strength is every bit as resilient as we expected going in and that much of this pricing phenomenon was simply a self inflicted room that has been corrected and will remediate.

So it has remediated faster whether it will get back to bright in 2020 or 2019 or a little longer we are not prepared to declare victory on, we don't want to spike the ball to 50 yard line here, but we feel optimistic that the bulk of these problems are first identified, second contained, and that the plan is working to correct them..

And now you prepared to accelerate your innovation in Weetabix in this case or do you just establish it, get the pricing structure and then work from here, just how that plays out?.

I think there is opportunities to start to look at innovation in Weetabix that I would call that a very modest contributor to 2019 but more sets up for potential in 2020..

All right.

And then my second question is you talked about the plant conversion cost being 4% higher than last year, what is the concept to which you can actually reduce that, what are the actions taken on and what is the timing of that and is this a surprise to you?.

Well it's not a surprise in the quarter, if you go back two quarters ago or so, we had a decline in gross margins that we talked about having a handful of positive aspects one of which was an additional complexity that we had built into our manufacturing system.

So as I talked about in my prepared remarks, one of the objectives for the year is assortment simplification and I think as we start to simplify our offering, we will naturally see some improvement in conversion cost that will return to where we were in 2017..

And what is the timing on that, is it a 2019 and when you will be realigned and what is -- will you be flat by the end of the year on a run rate basis, how would you think about that?.

I would think that approximately year-end, I wouldn't want to stick like too firmly in the ground but approximately year-end on a run rate basis we should have most of it corrected..

Okay.

And then in 2020 that would be an -- then you would continue to move on that in terms of the additional cost savings? Or is that once you get to flat you're kind of typical operation?.

No, we have a very rigorous continuous improvement program which I would expect to continue to yield results. I think the question that is an ongoing question and will always remain an ongoing question is the degree to which you reinvest that margin expansion in some other opportunity whatever that maybe versus bringing it to profit..

And the answer to that question?.

Ongoing debate..

And ladies and gentlemen, we have time for one more question. Our final question will come from the line of Carla Casella of JPMorgan..

Hi. I'm wondering if you could give us if there is any update in terms of your thought process use of proceeds from the IPO..

Well, initially it will be to retire term debt. But we would likely view that as a, just a transition spot..

Okay.

And on the M&A front, are you seeing more or less opportunities out there just given the markets and any particular areas that you would target meaning would you want to add another leg to the stool or more build on the existing businesses that you're in or is there any criteria around your selection process?.

Well, if you look at the marginal return on capital, it will tend to favor doing something in portfolio. By that I mean an acquisition that is complementary to a business we are already in.

We move outside of that there needs to be something different either a pricing opportunity, I mean M&A pricing or under pricing or a capability that we seek or a geography that we seek, something to spoke to the transaction but in market transactions are going to -- I mean in portfolio transactions are going to tend to have a higher return.

So we would favor those. And then we always have the use of capital share repurchases which makes the bar for new legs of the portfolio that much higher..

Right.

And then are there more opportunities or less just given kind of Brexit or other kind of macro trends?.

Well, I will say, there are neither more nor less. We had a constant flow of opportunities and what varies over time is the quality of the opportunities and I would say the quality of the opportunities is mixed.

We have many, many opportunities to look at highflying small businesses, fewer opportunities to look at quality large investments, kind of all over the board..

Okay, great.

And then one more just on the refrigerated the separation I'm sorry the foodservice separation to a new segment, should we read that that segment that could be separable from your other businesses like your Active?.

Well, I think you should read that all of our segments could be separable as there are inhibitors to doing that in capital structure and complexity across the portfolio, readiness for anyone business, but I think you should think about those as very long-term possibilities..

And that was our final question; I'll now turn the call back over to Mr. Vitale for any additional or closing remarks..

Thank you, all. Again I think it was a solid quarter. We feel good about how the year appears to be setting up and we look forward to talking to you in May..

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

Thank you..