Good day, and welcome to the Ingles Markets, Incorporated Third Quarter Fiscal 2012 Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Chief Financial Officer, Mr. Richard Freeman. Please go ahead, sir.

Actually, that's Ron Freeman. But good morning, everyone. Welcome to Ingles Markets Fiscal 2012 Third Quarter Conference Call. With me today are Robert Ingle II, Chairman and Chief Executive Officer; Tom Outlaw, Vice President of Sales; and Jim Lanning, President. Statements made on this call include forward-looking statements as defined by and subject to the Safe Harbors created by federal securities laws. Words such as expect, anticipate, intend, plan, likely, goal, seek, believe and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed on this call. Ingles Markets, Incorporated does not undertake and declines any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. For a description of factors that could cause the actual results to differ materially from that anticipated by forward-looking statements, you are referred to the company's public filings, including Form 10-K for the fiscal year ended September 24, 2011. In accordance with the long-standing company policy and in recognition of the extremely competitive nature of our industry, this call will not address individual competitors or Ingles marketing strategies other than what is included in the company's public filings. This morning, I'll provide you with a summary of our third quarter and 9-month results, followed by additional comments. After that, we will be pleased to take your questions. Our press release was issued this morning and is available on our website at www.ingles-markets.com. We will file our 10-Q for the quarter later this week, at which time it will be available on our website as well. We'll begin with our third quarter results. Net income for the third…

[Operator Instructions] And we'll take our first question from Damian Witkowski with Gabelli & Company.

Ron, the debit and credit benefit that you noted, you didn't quantify, but I'm also wondering, I assume that's just a Durbin Amendment. What about the most recent settlement with Visa and MasterCard? A, are you -- what do you think -- any financial benefit you might have from that, as well as from the $7 billion that they're going to pay out to retailers, as well as just the fees going forward?

Well, the proposed settlement certainly hasn't had an effect on our operations yet, and we're evaluating that right now to determine whether we'll sign off or not. I think there seems to be a lot of industry sentiment going both ways at this point. The debit card savings did come from the Durbin Amendment. We also entered into new agreements with some of our debit card providers and services there that also yielded some benefits to us.

And these -- I mean, have you -- the magnitude of these savings just from the interchange fees and such, how meaningful is it?

Well, as you'll see, when we file the Q next week, it wasn't meaningful enough to merit individual mention in the 10-Q. But after so many years of cost increases, we're just glad to have some savings.

Sure. And -- okay. And you also said gasoline gross profit was actually down in the quarter. And just a little bit more clarity on that. Is it just the gallons that are down? Is it the profit per gallon is down as well?

Well, gallons are down nationwide, so I don't think it's anything unique to us. And of course, when gas prices are high, I think things tend to be a lot more competitive. And we want to keep our prices as low as possible for our customers. Say you put all 3 of those things together, and you end up where you are.

All right. And then just looking at the -- have you -- can you remind me around how much of your real estate holdings have remained unencumbered by...

That number will, again, be in the Q as well when we file that later this week. But it's north of $800 million.

Okay. And as we sort of get closer to date you can actually call the $575 million and the 8 7/8 debt that you have outstanding out there. I mean, have you actually looked at using your vast real estate to sort of get -- lower your borrowing expenses, lowering your overall debt cost?

Well, we'll start taking a look at that in more detail after we pass that first call date next May. And we're fortunate enough to have a lot of options, including the available real estate.

Okay. Have you looked at using real estate in the past?

Yes. And there's been instances where we've actually done that.

[Operator Instructions] Next, we'll move to Bryan Hunt with Wells Fargo Securities.

This is Kevin McClure standing in for Bryan. Forgive me if you mentioned this, but now that the D.C. is open, can you maybe give us an estimate as to the run rate savings you expect? You said that it's performing well. I don't know if you could quantify that for us.

Yes, and we have never quantified our internal expectations on the savings ever since we announced the project. So I don't think we can do that now. But needless to say, it's a great project for us with long-term financial and operational benefits. And if anything, after a month or so of operation of that now, we've been very presently surprised with how that has all gone.

Got you. Okay. And then just moving on to just general commentary on the consumer. Have you noticed any particular areas where the pullback in consumer spending has been more pronounced? And what are you guys doing to maybe get in front of this expected wave of inflation in this department later in the year?

Well, I think you guys in the press are doing the best thing to get in front of the increases, with as much as you talk about the effects of the drought and what it might have. We're continuing with the programs that have been successful for us in the past. And please keep in mind, we're coming off a winter quarter that was down a little bit because it tended to be so mild, and that sort of affected our year-to-date sales increases. So we're pretty happy with what we've been going so far. We just want to do more of it.

Great. Okay. And then lastly for us. I know you probably haven't released any expectation for CapEx spend in the upcoming year. When -- do you expect to continue with the pace of your remodels out into the future? And are there a set number of stores that you hope to remodel in the upcoming fiscal year?

We're working on our 2013 project priorities right now, so it's really too early to discuss that.

And we'll take a follow-up question from Damian Witkowski with Gabelli & Company.

Ron, it's me again. I just want to go back on milk -- we didn't discuss it. Just want to know what's going on there in terms of both volume demand, as well as how are you able to pass along any costs? What's happening with the margins?

Well, overall, milk has had a fair amount of price volatility this year. And so it's affected both our sales and profits some. Also, it's been an unusually heavy year for a lot of contract renewals, so quite a bit going on in the milk space. Can you tell me again what your last question was?

No, I'm just wondering, I mean, from a profitability perspective, I mean, so as you renegotiate these contracts, are you actually maybe getting rid of some that are -- that have been unprofitable in the past?

Well, we have tried to avoid signing unprofitable contacts.

Well, less profitable, maybe.

No, it's a challenging time for the milk business. A little moreso than normal, but they're doing quite well.

Okay. All right. And then just lastly on the rent expense being down both in the quarter and year to date, is that just simply you moving more of your -- square footage has stayed the same year-over-year at 11 million square feet. Are you simply just using more of your own real estate?

Yes, to some extent. It's been pretty stable for over the last year or so.

Or is it -- I mean, are you renegotiating contracts at lower rate these days? Is that part of it?

No.

[Operator Instructions] And next, we'll take Roy White with PLMA.

I'm just kind of curious. I'm with PLMALive!. And what kind of role has your private label program done with the sales increases, particularly those for comp stores?

Sure. We've been very active in the private label area. We have more private label products in more areas of the stores, and it's been a positive contributor.

Okay. About what percentage would your private label be of total Grocery sales?

Yes, we typically do not disclose that number.

And at this time, there are no further questions. [Operator Instructions] Mr. Freeman, there are no further questions. I will turn it back to you for any additional or closing remarks.

Okay. Thank you very much. We appreciate everyone joining us on the call today. And we plan on speaking with you again in early December when we'll have our annual results. Have a good day.

And that will conclude today's call. We thank you for your participation.