J M Smucker Co (SJM) 2014 Q4 法說會逐字稿

Good morning, and welcome to the J.M. Smucker Company's fourth-quarter 2014 earnings conference call. at this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company we will open the conference up for questions and answers after the presentation. Please limit yourself to two initial questions during the Q&A session and re-queue if you then have additional questions. I will now turn the conference over to Sonal Robinson, Vice President of Investor Relations. Please go ahead, Ms. Robinson.

Good morning, everyone, and welcome to our fourth-quarter earnings conference call. Thank you for joining us today. On this call with me our Richard Smucker, Chief Executive Officer; Vince Byrd, President and Chief Operating Officer; Mark Belgya, Chief Financial Officer; Steve Oakland, President International, Foodservice and Natural Foods; Mark Smucker, President US Retail Coffee; and Paul Smucker Wagstaff, President US Retail Consumer Foods.

Our prepared comments this morning will be organized as follows: Richard will begin with an overview of our fiscal 2014 performance and initial thoughts as we head into 2015, Vince will then provide additional color on our fourth-quarter results and Mark will close with a few comments on 2014 cash flow followed by a discussion on our outlook for 2015.

Before I turn the call over to Richard, let me mind you that we may make forward-looking statements during this call that reflect the Company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates and actual results may differ materially due to risk and uncertainty. I encourage you to read the full disclosure statement in the press release concerning forward-looking statements.

Additionally, please note the Company uses non-GAAP results for the purpose of evaluating performance internally. Discussion on non-GAAP information is detailed in our press release located on our corporate website at JMSmucker.com. A replay of this call will also be available on the website.

Finally, I would like to share that this will be my last earnings call serving in an Investor Relations capacity as I will be assuming a new role within Smucker's. It has truly been a pleasure working with all of you. Should you have any follow-up questions or comments after today's call, please continue to reach out to me over the next few weeks as I transition my responsibilities to Aaron Broholm, a current member of our finance team. Let me now turn the call over to Richard.

Thank you, Sonal. Good morning, everyone, thank you for joining us. We are pleased to have concluded another successful year for the Company as we overcame a number of challenges to deliver our 13th consecutive year of non-GAAP earnings per share growth. Let me begin by providing a few highlights for fiscal 2014.

First, volume gains for the year were achieved in both of our US retail segments. In coffee the Folgers brand grew 3% driven by mainstream roast and ground. The Dunkin' Donuts brand continued its strong momentum with volume up 7%. Within consumer foods our largest brands, Jif and Smucker's, grew volume 2% while key categories, including Crisco oils and Pillsbury frosting, were also up.

Planned business rationalizations in our International, Foodservice and Natural Foods segment impacted total Company results. Overall lower net price realization in our two largest categories of coffee and peanut butter primarily attributed to the pass-through of favorable commodity costs and resulted in a net sales decline of 5% for the year.

Second, our strong innovation pipeline enabled us to launch over 100 new items this year spanning our key brands and categories including items such as Jif Whips, Dunkin' Donuts bakery series, new varieties of K-Cup's and existing flavors of Pillsbury mix -- and exciting flavors of Pillsbury mixes and frostings. Looking back we launched more than 250 items over the past three years which contributed over $425 million or approximately 8% of net sales in 2014.

Third, brand building efforts included our inaugural sponsorship of the US Olympic team. Our analysis confirmed that our activation around the participating Smucker's, Folgers, Jif and Uncrustables brands not only resonated with our core consumers but, as expected, expanded our reach with millennial's and other consumers, garnering over 1 billion impressions.

And relationships with key retailers strengthened as we partnered with them for shopper marketing implementation. Activities around our sponsorship of the 2016 Summer Games are underway applying learnings gained through this initial effort.

Fourth, cash from operations allowed us to execute on all four components of our cash deployment strategy. To that end, in 2014 we completed the enabling acquisition of Enray and its TruRoots brand, providing further growth opportunities for our Natural Foods business. And we invested $280 million in capital expenditures including capacity expansion projects at our Scottsville, Kentucky and Toledo, Ohio facilities.

We completed the new fruit spreads plant in Orrville, Ohio and started construction of our peanut butter facility in Memphis, Tennessee. We also increased the annual dividend paid per share by 11%, representing our 12th consecutive year of dividend growth, and continued payments of dividends for 55 years since we went public -- repurchased nearly 5% of our shares utilizing approximately $500 million in cash.

Finally, we were able to realize record non-GAAP earnings per share of $5.64, an increase of 5%. Our 2014 results were achieved despite challenges in the current operating environment that included a sluggish economy, heightened competitive activity in several key categories and foreign-exchange headwinds.

While these challenges are expected to continue into the new fiscal year, history demonstrates our ability to manage near-term issues while continuing to position the business for long-term success. Which is why we remain confident that 2015 will represent another year of profitable growth.

Mark will provide details on our guidance for the year, but before he does I will briefly summarize the key areas of focus for 2015. These include furthering our brand support with continued innovation, we anticipate launching over 225 new items this fiscal year; capitalizing on growing opportunities within the digital, social media and e-commerce space; continuing to support supply chain and growth initiatives including expanding the operational footprint for the Jif brand; responding to consumers' needs for transparency of information and the desire for simple ingredients and clean labels. And lastly, focusing on cash flow generation to support our cash deployment strategy.

In summary, we were pleased with our 2014 performance. Our results would not be possible without our employees' perseverance and commitment to aggressively pursuing new opportunities for growth. And as always, we thank them for their efforts.

Looking ahead we remain confident in our long-term strategy, in the strength of our brands and our ability to deliver ongoing profitable growth year after year. With that I will now turn the call over to Vince to provide additional commentary on our fourth-quarter performance.

Thank you, Richard, and good morning, everyone. We delivered a stronger than anticipated earnings per share result for the fourth quarter primarily due to higher than expected volume in our US retail segment, managing our SD&A expenses and the benefit of onetime non-operating items and share repurchases. This was achieved while continuing to manage many of the same challenges discussed on our last call.

My comments will provide additional commentary on the quarter as we overview our three business segments. Beginning with US Retail Coffee, we achieved an eighth consecutive quarter of year-over-year volume growth despite lapping a strong period prior year comp. Volume gains in mainstream roast and ground coffee led to the Folgers brand being up 1%.

Dunkin' Donuts volume also increased 1% coming on top of a 29% volume comparison in the prior year's fourth quarter. Pricing actions taken in the quarter to reflect lower green coffee costs recognized earlier in the year accounted for the net sales decrease.

The results of our K-Cup business have exceeded our overall expectations since we entered the market in fiscal 2011. This year the business fell short of expectation, reflecting the continuation of the competitive dynamics discussed previously.

However, we remain pleased with the volume growth we experienced on Folgers Gourmet Selection K-Cup which were up 10% in 2014. This was mostly offset by significant declines for the Millstone branded varieties.

As we start the new fiscal year we remain optimistic about the overall K-Cup business for several reasons including: our partnership with Keurig Green Mountain which remains strong as evidenced by our recently amended agreement; the introduction of three new varieties including our initial launch of Cafe Bustelo K-Cup's; the restaging of a few existing Folgers Gourmet Selection items to the iconic Folgers brand name; the expansion of our K-Cup business into new channels; and the launch of the new Keurig 2.0 system.

Given the rapidly changing dynamics in the short-term, we expect our K-Cup to achieve modest volume growth in 2015. Pricing investments are expected to limit year-over-year sales growth and, combined with higher costs, are expected to cause margins in our K-Cup business to fall below the overall segment average in 2015. Our focus in coffee remains on competing and growing all key segments.

Turning to coffee costs and segment profit. Overall we are pleased with the 6% segment profit growth achieved for the full year driven by higher volume and the price to cost relationship during the fiscal year. We continue to manage the business with an annual perspective and the price to cost timing impacts have and will continue to occur from quarter to quarter.

As noted during our last call, fourth-quarter segment profit declined from the record prior year level primarily due to timing of the net price realization versus cost. Our ability to effectively manage this business through periods of significant commodity inflation or deflation has enabled us to deliver segment profit growth each year since acquiring the business and we expect to continue growth in 2015.

Earlier this week we announced a 9% price increase on the majority of our coffee portfolio reflecting sustained increases in green coffee costs. Lastly within coffee, we expect to complete the consolidation of our Miami coffee operation into our New Orleans footprint later this year. We anticipate modest cost savings from this transition mostly beginning in fiscal 2016.

Shifting to consumer foods, the segment had a strong finish with fourth quarter volume of 3% and a segment profit growth of 6%. Looking at our key categories, peanut butter volume was comparable to the strong prior year fourth quarter. While we realized somewhat lower peanut costs, we believe our competitors maintained their temporary cost advantage during the quarter resulting in continued competitive activity.

As we enter the new fiscal year we believe we are no longer at a cost disadvantage and our peanut butter business is positioned to compete responsibly. Our optimism going into the year is further supported by the expected contributions from innovation. We look for momentum to continue with Jif Whips and we are introducing Jif To Go dippers, a convenient snacking option which pairs our popular Jif To Go product with pretzels.

While peanut butter is expected to be the key contributor to segment profit for the consumer foods in 2015, profitability will be somewhat impacted by overhead costs related to the capacity expansion in our peanut butter facilities.

Our fruit spread business continued to be affected by the factors discussed on our last call. Our focus remains on growing our fruit spread business through innovation while also extending the reach of the Smucker's brand into new categories. To that end we are pleased with the initial performance of Smucker's Fruitfuls, an all-natural line of fruit pouches.

Volume for Smucker's Uncrustables frozen sandwiches grew 23% in the quarter, completing a consecutive year of US retail volume growth in excess of 20%. While growth rates are expected to moderate slightly, we anticipate another strong year in 2015 particularly given our expanded manufacturing capacity.

For our overall PB&J business we have solid programs in place for the upcoming back-to-school promotional period and expect to be well-positioned to compete in these categories. Lastly within this segment, our baking and oils business had a solid year and we look forward to continued growth driven by innovation.

Turning to International Foodservice and Natural Foods, a weaker than anticipated fourth quarter concluded a challenging year for the segment, primarily in our Foodservice business.

The three key drivers of segment profit underperformance in the quarter were: first, increased trade spending in Foodservice including an additional $7 million adjustment this quarter; second, our Canadian business had a solid quarter and year, the weaker Canadian dollar remained a headwind; and third, the lapping of our Foodservice, Beverage and Uncrustables business rationalizations continued to impact top- and bottom-line performance.

As we move into fiscal 2015 we recognize some of these headwinds will persist, yet overall we remain optimistic about this segment and expect to achieve sales and segment profit growth for the year.

Looking at some of the key opportunities and challenges beginning in Foodservice. We acknowledge but coffee trade spending will be higher than originally estimated when we purchased the business impacting run rate profitability. Cost-saving opportunities to mitigate this impact are being pursued.

Also, while lapping the recent business rationalization is expected to reduce in 2015 net sales by approximately $40 million, we are encouraged to have the related activities behind us. This allows us to focus on growing both branded roast and ground and the liquid coffee concentrate business along with our portion control and other Foodservice categories.

Turning to our Canadian business, based on our current outlook we expect currency will negatively impact profitability in 2015. This primarily reflects approximately $15 million of higher cost of goods sold expected next year as a significant portion of our Canadian products are sourced from the US. However, the underlying business remains strong and we look forward to build on volume and market share gains achieved across most of our categories in our Canadian portfolio in 2014.

Lastly within Natural Foods, the Enray acquisition and its TruRoots brand provides entry into the rapid expanding ancient grains category. Behind our scale and go-to-market capabilities we are gaining new distribution and anticipate strong growth for TruRoots and our overall natural food business in 2015.

In summary, we are encouraged with the overall performance for the year and are positive about the initiatives lined up for the new fiscal year. While we expect the challenging operating environment to continue, we remain confident in our team's ability to navigate through this environment and deliver another year of growth. I will now turn the call over to Mark.

Thank you, Vince, and good morning, everyone. I will begin with a few comments on the 2014 cash flow. Cash provided by operations was $856 million for the full year. Free cash flow of $577 million fell short of our target of $600 million due to higher CapEx in the fourth quarter as substantial work commenced on the Jif capacity expansion project and the consolidation of our Miami coffee operations. This resulted in a full-year CapEx spend of $280 million.

At year end we had nearly $250 million borrowed against our revolving credit agreement. Proceeds were used to fund over $280 million in fourth-quarter share repurchases.

We will further borrow against the revolver in the first half of fiscal 2015 as we repaid $100 million in long-term debt earlier this week in accordance with the required maturity and to fund seasonal working capital needs. Excluding any acquisition or share repurchases, we expect to pay down revolver borrowings by the end of the fiscal year.

Turning to our 2015 outlook, we anticipate volume growth and commodity driven pricing actions to result in net sales growth. This, along with incremental productivity savings, is expected to offset higher commodity cost and marketing investments resulting in operating income growth with all three segments expected to deliver increases in segment profit.

Combined with lower interest expense and a reduced share count we expect non-GAAP EPS in the range of $5.95 to $6.05 for the year. Excluding amortization expense of $100 million or $0.65 per share, the corresponding guidance would be $6.60 to $6.70. The combination of segment profit growth and the fact lower interest expense and reduced share count primarily benefit the first two quarters, we expect EPS growth to be mostly front half loaded.

Specific to the year we expect net sales growth of nearly 5%. This includes the impact of the coffee price increases announced earlier this week and modest volume growth anticipated in US retail segments. In International Foodservice Natural Foods volume growth in the core business is expected to be more than offset by the impact of lapping in 2014 business rationalizations. These numbers also include 125 new items for next year to be introduced, not 225.

Overall commodity costs are expected to increase at significantly higher cost on coffee [to] offset declines in peanuts, oils and sweeteners. The weakness in the Canadian dollar is also expected to result in higher cost of goods sold.

Incremental supply chain savings of nearly $10 million are expected reflecting the consolidation of our fruit spreads operations in Orville. This would bring the total run rate savings associated with our supply chain initiatives to just over $60 million for 2015. While this is slightly behind our original schedule, we continue to anticipate total annual savings of nearly $70 million once fully realized.

For SD&A we anticipate an increase of 4% with all major components increasing at approximately the same rate. Below operating profit net interest expense of $65 million to $70 million is anticipated including interest associated with short-term borrowings and the full-year benefit of the rate swap entered into last year. This range reflects our current expectation of interest rates.

The effective tax rate is expected to be in line with our 2014 rate of 33.5% and, lastly, a weighted average account of approximately 102 million shares was used for our guidance reflecting current shares outstanding.

The 2015 guidance range reflects our change in treatment for gains and losses on certain derivative contracts beginning in the first quarter of this fiscal year as referenced in this morning's press release. Later this quarter we expect to issue an 8-K to recast quarterly and full-year segment profit and non-GAAP earnings per share on a similar basis for the past two fiscal years. This will not result in a material change to the $5.64 non-GAAP earnings per share reported for fiscal 2014.

Turning to cash flow components, we anticipate depreciation and amortization expense of $280 million including share-based compensation expense; capital expenditures of $240 million including the continuation of supply chain projects we have referenced today; and lastly, special project costs of nearly $25 million with most having a cash impact. This is expected to result in free cash flow of $625 million to $635 million for 2015.

In closing, we are pleased with our 2014 performance and we look forward to delivering sales and earnings per share growth in 2015. Before I open the call for questions I would like to take this opportunity to thank Sonal for all her contributions over the past six plus years leading the Investor Relations area. To our Investor and Analyst Day she has always tried to be responsive, transparent and fair.

Internally she has provided keen insight, counsel and leadership and for all that we thank her. While we will miss her as part of the IR team, I know she will continue to contribute to the success of our Company in the future. Best wishes to Sonal in your new role. And with that we will open up the call to your questions. Operator, please queue up the first question.

(Operator Instructions). Eric Katzman, Deutsche Bank.

I guess my question has to do let's say to start with the pricing on coffee. It sounds like Starbucks is pretty well hedged, our restaurant analyst was out there earlier and it didn't sound like they were really interested in moving on pricing -- not at their stores but in grocery.

So do you see the pass-through mechanism as still being kind of fairly efficient and I guess last time we had to raise prices a lot based on the back of Arabica costs going up, the volume elasticity was pretty tough, so maybe you could just kind of comment on those two things.

Sure, Eric, this is Mark Smucker. Yes, so, the short answer is we do feel that our ability to pass through is efficient. I guess maybe as by way of grounding just to rewind the clock three years, the last time we took an increase was May of 2011. And since then we took essentially six -- or excuse me, three list price declines and then this past year we chose to use another lever which was promotional spending to continue to bring our pricing down to remain competitive.

So we did take a 9% increase earlier this week, we did feel that as we have seen sustained increases or realized cost increases in our costs that we needed to do that. And we felt that taking a list price decline in this instance was truly the best lever to pull being more transparent with our customers and we don't think there is really any change in how we've managed the business historically.

And if you look at green coffee costs versus six months ago, Arabica prices are still up about 6% -- or excuse me, about 60%. So just on where the futures are at, costs are still up.

Eric, this is Vince, I would just build one thing on Mark's point, when we were dealing with the issue a couple of years ago we are talking about Arabica that peaked up well over -- nearly over $3, and of course we are not at that level today. But your point is well taken.

And then I guess just as a follow-up to either Richard or Paul, I guess I had heard that from various sources that Easter season really wasn't as strong as a lot of companies had hoped for. And it seems like your -- at least the Consumer Business did fairly well. A lot of that came from a Crisco, I'm not really sure why.

But maybe you could just talk a little bit about the environment, the Easter season and I guess specifically for you the Crisco jump of 20% and then I will pass it on. Thank you.

Sure, high, air, this is Paul Wagstaff. And actually for us the Easter season was pretty good kind of across our brands that we promote during that time. On the baking side we didn't promote as heavily as we had in past years during that Easter season, but our seasonal did actually very well during that time.

The Crisco business actually has had a very solid year overall and we've been up about 11% for total year and we're up 20% in volume for the quarter and we were just frankly hitting on all cylinders with our customers and with our promotions and with merchandising. So frankly we just had a really good season.

Andrew Lazar, Barclays.

Richard, as you mentioned, you amped up a little bit around some of the promotional programs in the quarter, but you seemed to get a nice volume lift as a result. So I am trying to get a sense, did the volume lift come in as you would have hoped based on some of the programs you ran? Or frankly, did you get a little bit better lift than you might have thought?

And I'm trying to sense whether some of those programs were in response to what you are seeing out there and what you've kind of talked about even on the last call. Or if you were trying to lead in that regard just may be given where the input cost outlook is and the need to try and get volume moving in the right direction?

I will start with this, Andrew, it is Richard, and I will turn it over to the team. But we did see better results because of some of the pricing actions which we have taken. We know we pull all the levers that we can whether it is promotion or pricing activities or merchandising activities. And they all work pretty good.

I mean we came out of the third quarter. We were a little discouraged, if you remember, at the end of the third quarter. And so, we basically went back to our teams and said, we need to do whatever we can to make the numbers and both for the short and the long term. And I would say the team delivered and we've just seen good merchandising in the trade. So I don't know if the team wants to answer that or add to that.

Andrew, this is Vince. I think also we had good sell through from a number of our top 20 accounts as a result of our Olympic activity. And so, since we got good consumer takeaway from those accounts due to our merchandising, I think we benefited for some about of that in the fourth quarter as well.

But as you indicated -- or it was because in our scripted remarks, we did have better than anticipated volume in our -- not only actually in our US retail, but also in our Canadian retail business as well. So overall we are very pleased.

And then Mark, how should we think about gross margin as we look out for the full year in 2015? Given some of the obviously pricing actions that you are taking and things of that nature obviously impact the percentage. But trying to get a sense of expectations around that versus the gross margin dollar trend.

I think in terms of the profitability, Andrew, if you take what we've provided and then work up, you are going to see gross profit gains in dollars of about 4%, which is pretty much in line with the sales growth. Obviously our coffee pricings, we are covering cost so there is a little bit of slippage there.

But I think what you will see as you work the P&L, we will get about a 4% gross profit. And we will pretty much hold that through net income and then we pick up a couple of points of growth due to buy back effect.

Great, that is very helpful. Thank you. And good luck, Sonal, and thanks for all your help.

Thank you.

Chris Growe, Stifel.

I actually had a follow-up to Andrew's question and then one other question if I could. I wanted to be clear, Mark, this is getting back to the gross margin here, if I heard you correctly, is pricing going to outstrip cost inflation in fiscal 2015? I thought heard a comment about that, I want to be clear on that.

And then just to be clear overall, do you expect cost inflation in fiscal 2015 due to the coffee prices being up so much or with peanut costs being down as well is that offsetting that?

We do expect to see overall cost inflation as the cost of green is outstripping all the decreases in the sweetener, oils and peanuts that I noted. In terms of margin percentage we will have a favorable price to cost which is contributing to the gross profit. And then the margins are going to be relatively comparable.

Obviously we are moving the top-line a lot, so I don't think you are going to see significant changes in the margin percentage. But just to underscore, we will see 4% gross profit gains for the year.

Yes, okay, that is helpful. Thank you. And maybe just a bigger picture question perhaps for Richard. But there's been a lot of acquisition activity, some really -- a lot of press around one in particular. But I just want to get a sense of how you see the acquisition environment today.

It seems like, at least for certain assets, multiples are up quite a bit. And then maybe related to that, your appetite -- not only for acquisitions, but maybe for share repurchase activity in fiscal 2015? Thank you.

That is a good question. And you are right, there is more acquisition activity than there has been in the past couple of years. I think that is related to two major factors. The industry is not growing as rapidly as we would all like it to grow, even though we have had some growth we would still like it to grow better. And so we are looking for, like many other companies, looking for brands to join us and companies to join us, and so is everyone else.

And the second reason is just the low cost of the interest rates, and the Fed's policy of having low interest rates allows companies' cost of capital to be lower and so they can pay higher prices. And that is true for us also. And we said before we are willing to pay up where it makes sense.

But we still have a very firm discipline and some of the multiples we have seen are in areas that we don't think long-term would be good for us. And so, we still have that discipline, but with the interest rates where they are our cost of capital has come down also.

So, we are still out there, we are still looking for the best fit for Smucker's and we are still willing to pay a fair price for it. But we are not going to go beyond paying the old cost of capital. We are in Warren Buffet's camp on that.

Okay, thank you.

David Driscoll, Citi.

First off, Sonal, thank you for all of your help. You have been terrific over the years and wish you the best on your new endeavor.

Thank you.

Want to start off with going back to coffee. So you made some comments here, but what do you expect in terms of profitability on coffee in 2015? Typically I believe that operating income profit generation has been around 5% to 6% annually. Is there any reason to think that that is not going to be about the output in fiscal 2015?

David, this is Mark Belgya. I guess the way I would answer your question is, as I said in my scripted comments, we expect all three segments to garner growth in segment profit. And if you kind of look at where we are seeing basically 4% profit growth, that is kind of spread reasonably equally across the group. So you can do your own math, that will get you some sense.

Okay, my second and final question would just go to the Foodservice operations or really the entire segment because I think there might be other pieces in here. Frankly, this is a very confusing segment. There are a lot of things going on here and, Steve, maybe I was hoping you could talk a little bit about why was there a trade adjustment again in the quarter?

Kind of what is the plan to get this coffee operation going? Why are you guys are positive that this thing will move forward? I think in the fiscal year profits were down like $30 million on the segment, which is an enormous percent decline. So just give us some understanding as to why you are confident that this thing will move in the right direction and then please address that trade accrual adjustment. Thank you.

Certainly, hi, Dave, Steve Oakland. Let me talk a little bit about it in two ways. Let me talk about the trade adjustment and the complexities in the Foodservice trade environment. And then we will talk about the business and why we think the business is still strategically the right thing for the long-term.

In the Foodservice market the trade spent equation is very complex. And the reason for that is the multiple layers involved in trade spend in Foodservice. Typically with a large national account you have got a distributor and at least one GPO, in some cases two GPO's. So they are layered between those two businesses.

And then the coffee business in particular is very strong in those segments of Foodservice that use GPO. So the coffee business we bought is layered in these different things and there is a long lead time lag between when we ship this product, who we ship it to and then when we get invoiced and who we get invoiced by for those trade spends.

So just for definition purpose, GPO is group purchasing organization, so to make sure everybody on the call knows what that is, which is a phenomenon in food service basically to help food-service operators be effective procuring goods across the industry.

So with that complexity to be effective there you need a couple of things, you need process, you need systems and you need people. And we moved that team last summer from Sara Lee's office in Chicago and we rebuilt both the process and the team. The key to that is we now have the history to overlay on that. So we feel comfortable that we can now, given all of those lead-times, we can make proper trade accruals, we can manage that deduct system.

So that is why we feel good about it today. We are not good about where we are and how we have accounted for it this year. We think the numbers are right, but we're disappointed to bring them in the way we have. But the team feels they have their arms around it.

Now with regard to the business, there are two real business segments here. There is the gem in this, the core liquid coffee business. That business at close came under a tremendous amount of competitive pressure and the good news there is it has never declined, right.

Although we had a lot of pressure from large competitors and small competitors we fended that off, that business was flat the first year we had it, has been up slightly this year and we think with the Folgers brand and the new equipment it's positioned well to grow. So that is the gem in that business.

The other side of that business is the roast and ground, cappuccino, cocoa, tea business. And quite frankly that has been the most challenged piece of that business. The volume we have lost there was due to the inner dependencies that those segments had with the private label contracts that we exited.

So now that those contracts are gone we can start to rebuild those one at a time. Those contracts come up annually, semi annually, etc. So that is going to take some time. But we feel like we have the right brands, we have the right products, we freed those now from those private label contracts, we can go back and cherry pick those products that make sense and those segments that make sense.

So it is a lot of work, that team is not happy with the results, but they are convinced that they've got the tools, the brands and the products to make it work. And they are working really hard and we are all working really hard to make it happen.

The $17 million accrual this year will not be a reoccurring expense in fiscal 2015, true or false?

50% of that will recur, 50% will not.

Thank you, I will pass it along.

Jason English, Goldman Sachs.

And let me just reiterate what many others have said. Sonal, congratulations, best wishes, we will miss you.

Thank you, Jason.

You bet. On to the business. I guess you have anniversaried all the list price reductions in coffee I think in February, so this was a clean quarter in terms of list prices. But pricing mix down 12%. Can you parse out how much of that was mix, how much of that was price?

And then on a go-forward you have announced a 9% list price increase, should we expect this thing to turn on a dime and go from down 12% to plus 9% or will it take time to retract some of that heavy promotional spend?

Jason, this is Mark Belgya. Just to your first question on the breakdown of the 12%, it is predominantly price. About 11%, a couple points of mix [unfavorable] and then a plus 1 on the volume side.

And, Jason, this is Mark Smucker. As it relates to pricing and what you see in the marketplace on shelves, generally speaking you would start to see retailers reflect pricing very quickly. So there will be some reduction out of the gate on trade, of course, we will continue to support our brands, but we feel very comfortable with our marketing investment as well and making sure that we continue to support the consumer.

Okay. So some reduction of trade spend. Is that -- should we interpret that to be the 9% list price increase will actually be enhanced by lower trade spend, so this could be a double-digit net increase for the year?

I think you will see some pullback on trade, but, again, I don't think we disclosed specifically what that is. But there always will be trade and there always will be customer and consumer support as we support our business.

Okay, that is helpful. One last question and then I will pass it on. The Dunkin' Donuts K-Cup retail opportunity, if you listen to Dunkin' Donuts and their public comments they are certainly singing a slightly different tune in terms of the opportunity.

So I was hoping you could comment on what if any tests are underway to test that opportunity now? And then confirm also that were that to go to traditional retailers such as groceries it would have to go through you? Thank you.

Jason, this is Vince. We really don't have anything to report on that front. Obviously we continue to work with the Duncan organization but there is really nothing new at this point. And I really don't want to comment on the contract -- I mean other than to say that if it was ever to be launched, obviously we would believe that would go through us.

Great. Thanks a lot, guys.

Ken Goldman, JPMorgan.

Good morning and, Sonal, thanks for all your help over the years, you have been a class act. Getting back to the subject of promotions, a couple follow-ups. Number one, I am curious how permanent do you expect the shift toward promos to be? I think there was a comment that you decided to do whatever it took to make your numbers. So I am not quite sure if that implied the shift will be more temporary in nature.

Second, historically promotions include -- you've done a great job sparking one-time volume lifts, but then of course those volumes tend to erode as competition matches the deal back. So I'm interested what your expectation is for the competitive response?

And then I guess lastly, I am curious if you expect both total marketing and brand building spending to grow in line with sales next year? I am sneaking in a third one there.

So, Ken, I will start and then we will turn it over to Mark Belgya and the team. Let's again reinforce what we said, in the coffee and specifically we chose not to take a list price decrease primarily on the back half of the year and using another lever we passed those cost savings on through promotional spending.

So if you would look at our statement those promotional spendings would have been higher. Now that we have taken a price increase effective this week, those dollars would I will say go away for the most part to maybe a more traditional level. But again, that really depends upon where our -- particularly in coffee, where our green position is versus our price to.

So, it is just a mechanism. So, yes, it was higher in the fourth quarter, again, how we chose to pass of those costs along and then how that was recognized in our statement.

I apologize, I wasn't clear, I was talking more on the consumer food side than coffee (inaudible). I apologize.

Well, so, hi, Ken. Paul here, Paul Wagstaff. Overall, no, we feel very good about our balance and how we promote compared to the marketing spend and price declines or increases, etc. So in the fourth quarter we didn't spend deeper to get more volume, we had solid plans for Easter, as I mentioned, and our business came in a kind of as expected, nice and solid for the quarter.

Ken, this is Richard. Just -- you made one comment there, I just want to make sure that you understand. You used the term, we'll do whatever it takes to get the volume -- we will do whatever it takes to hit our profit margins as long as it is good for the long-term growth of the business. But we want to make sure whatever we do is responsible.

So when we go to our team we don't say do whatever it takes. We go to our team and say do whatever makes sense for the business long term.

And then finally, Ken, I think your question on the marketing -- that was for the total Company, correct, for next year?

Yes, thank you, Mark.

Yes, that would be growing pretty much in line with the (inaudible). In my scripted comments I said sales growth about 5%, marketing basically in line at that point.

I missed that, okay. All right, thanks, everyone. I appreciate it.

Robert Moskow, Credit Suisse.

This is a question about how to evaluate the year versus your internal targets. I guess you did lower EPS guidance for the year and you came in at 5% growth. I think the guidance originally was 7.5%. This will be in your proxy, but I wanted to clarify. That is pretty much in line -- is this below what you had expected in the beginning of the year?

And if so, I would imagine executive comp is probably lower year over year. Your accruals for executive comp are lower year over year and maybe that is why your op expenses are not as high this year as originally expected, is that true?

Rob, this is Mark Belgya. Yes, generally that is true. I think you are probably aware our bonus structure varies a little bit depending upon if you're in a business unit or in corporate, but there is certainly is a margin or an EPS component. And again, depending upon if you look at the business side where the respective businesses finished, some were under, some were over. And in corporate we finished below our overall expectation.

So the adjustment over the year to the accrual would reflect a lower bonus and long-term compensation expense. That will be reinstated next year for planning purposes obviously. So there is an incremental impact that is in the guidance range that we provided.

Can you tell me about what that incremental impact is and my math indicates that your EBIT guidance here is probably only up about 1% or 2% for fiscal 2015. Is that -- are those assumptions correct?

No. No, we would say that -- again, it is more in line with the gross profit growth, sort of that 4%, again depending on how the rounding and what part of the range you use. In terms of the compensation increase, I would say it is probably about, I don't know, $0.03 or $0.04 maybe.

Okay, I will follow up off-line, thanks.

Alexia Howard, Sanford Bernstein.

So can I ask about competitive dynamics in the different parts of the coffee segment. I am thinking within K-Cup's are we through the worst? In premium costs, obviously ramped up on Gevalia and working on the McCafe project, how is that developing? And then in the mainstream coffee, are you still gaining share from the private label area? Maybe you could talk that through for me. Thank you.

Thanks, Alexia, it is Mark Smucker. Why don't I take it -- I will do K-Cup's last and just start with the core roast and ground business. Again, as we have said, we have been very pleased with our performance in both of those segments.

We have seen, given the deflationary environment that we have been in, the branded businesses are doing very well versus store brands. And then doing also very well versus our competition and that goes back to both the support that we have had in place from a marketing perspective as well as managing our pricing, the gaps to our competitors and so forth.

So on the mainstream side, if you are looking at our recent share, you would see maybe a little decline. But what I would tell you is that the interaction we have been seeing with our primary competitor in the mainstream segment has primarily been against our opening price point, where our core red can businesses, our complements, our Colombian items have all been doing very, very well. And that looks to continue.

And then of course Dunkin' goes without saying, that has done very well. Our Folgers Gourmet, sort of our lower tier in the premium segment, has also been doing very well. So we have been very pleased with our results and we continue to grow our share.

One comment as I reflected on Jason and Ken's earlier questions just on trade. As we talk we do use different levers to make sure our pricing is right. But I guess I would just like to say that we have to be a little careful of what we say publicly just from a competitive standpoint. We want to be sensitive to make sure that we are not divulging our strategies.

And then finally on K-Cup, we have been just a little disappointed this quarter because it is the first time we have seen some declines in our K-Cup business. That said, our Folgers brand has done very well and most of the declines have been driven by Millstone.

So looking forward we do feel that we have to continue to invest in that business, there continues to be a lot of noise and we need to make sure that our pricing is right, we need to make sure that we are -- our marketing is right and that we are investing there.

And then we still feel confident that we can grow it with the introduction of our Bustelo K-Cup's, we are restaging a few of our Folgers items and as we go through this summer and early fall several of our customers are actually going to be resetting or restaging their shelves. And given the performance of licensed brands versus the unlicensed, licensed tends to have better turn rates. So we do feel that coming through those shelf resets that we will fare well.

Great. I will leave at that. But thank you, Sonal, for all your help over the years. We will miss you and good luck with the next step.

Thank you very much, Alexia.

Akshay Jagdale, KeyBanc.

Good morning and congratulations, Sonal, and thanks for all your help and good luck, you will be missed.

Thank you, Akshay.

I just want to follow up on coffee, my favorite subject. But can you, Mark maybe, maybe talk a little bit more about what you just mentioned in terms of the shops resetting at large customers? Obviously I am guessing at these particular ones that you're talking about you are the category leader.

So can you give us some insights into the type of data that is perhaps leading to these decisions? And what are we actually saying in terms of turns so that we get a sense as to the magnitude of some of these changes perhaps? That is my first question.

Well, Akshay, first I would say the category leader is clearly Green Mountain. I mean they developed the system, they clearly have the largest share. So being partnered with them is something we have always been very grateful for and they have got a couple other very good partners.

And so, as a whole for those of us, as you know, we have talked before, that are licensed, we do feel we are at -- we have advantages, we are in (inaudible), we recently got access to new channels and so forth. So that is why we continue to be optimistic.

I mean the partnership is really better than ever and we do still believe that the quality in those products continues to be strong and superior to many of the unlicensed.

Typically in coffee a lot of new items across the entire coffee category are accepted and cut into the shelves at this time of year whether it is small or large customers. Some customers have acknowledged that their sets maybe got too big and there were too many brands there, others not so much.

And so, it is usually this time of year as we go into our first and second quarters that retailers, small and large, are sort of having a reckoning with this category. And so, this is a time when we would think that we would have potentially some wins and as it relates to the data it is multiple sources.

We have a strong shopper insights team in category management, so we would be pulling data from IRI, among NPD and many other sources from that perspective. So what we are seeing continues to be encouraging.

Okay, and just as a follow-up on the partnership itself. You don't typically make these things public, but you decided to in this case. And there are a lot of good things, right? You are getting channel expansion, you are getting three new SKUs, you are restaging your current lineup part of it. And then I am guessing you are going to have a carafe cup, if not one, multiple.

So help me understand a little bit better why we are going to see margins dip below the segment average and how does that sort of compare year over year? Like were margins in line with segment average this year? You mentioned I think specifically investing in pricing but also higher cost. So help us understand that in light of the renewal of your relationship with Green Mountain and the expansion?

Okay, actually, it is Mark again, of course. So first of all, the expansion in the contract that we typically haven't disclosed, this time we felt it was a big enough deal, it was important to do that and to emphasize that it is consistent with other partners.

So dollar channel, online, some more flexibility in the club channel and so forth, those are some of the things that we were able to gain and obviously Green Mountain felt that was a win-win as well.

And then in terms of margin, yes, in the past year that we just finished they were in line with our segment. But going forward, as we said in the script, they will be below our segment average for a couple reasons. As you know, we did not take a price increase this week on K-Cups and we have seen some cost inflation overall in that area.

But the primary reason is that although we feel that our Folgers brand still commands the price that we have been seeing on shelves, we do feel that we have to continue to invest to protect our franchise. And by invest we mean in marketing to the consumer as well as continuing to support our promotional activity at the shelf.

Akshay, this is Vince. I just want to maybe summarize a little bit what Mark was saying and to answer your question. You are right that we typically don't to go public with elements of our agreement, but we felt that we were being maybe disadvantaged that we weren't moving along with Green Mountain as maybe some of their other partners who tend to be more public.

And so, that was a reason why we felt that it was important that we communicate that externally. As Mark said, we believe our relationship with Green Mountain is as good as it has ever been since its inception.

And then the other thing as I think you allude from Mark's comments is that this segment is going through transition. And we just felt that we needed to continue to invest in it as we work our way through this transitional period of the new 2.0.

As you know, Green Mountain is signing up several retailer brands. There is a little bit of in some accounts where there are some underperforming SKUs, etc. So our bottom-line conclusion is we are going to continue to invest in it, take a little margin hit to make sure that we are competitive during that period.

Great. And just one last one, this is just more for the overall Company. So if you look at your guidance, obviously you are guiding to I think mid-6%-ish EPS growth, 4% or 5% EBIT growth, which is generally in line with your long-term algorithm. And that is generally what you delivered this year despite a much more favorable cost environment than you are going to see next year.

So wouldn't you say there is a little bit more risk to your outlook going into this year compared to last? Or how should we think about that? Because we came off of a year where obviously in light of all of the challenges in the industry the result was good but still below your initial expectations.

And now we are going into this year where costs are certainly rising and competition is still pretty intense. So is there more risk to earnings guidance this year given the commodity increase or is there something controllable in your P&L that gives you more confidence this year?

Akshay, this is Mark Belgya. Let me just start and then, guys, jump in as you feel necessary. I think if you take a look at some of the items that hit our P&L in 2014, as Steve alluded earlier, whether it is the trade spend or some of the operational issues we had during the middle of the year, some of the disadvantaged cost positions that are in peanut butter.

Those are items that we firmly believe that they're either turning completely or turning in the right direction for us. So that is one reason we clearly feel more confident in terms of the numbers. The numbers for 2015 are predicated on some volume growth. So to the degree you want and the degree we want to put risk assumptions around that we feel pretty good about the marketing, the promotional plans and new products.

So we feel good about it, but, again, depending on your perspective you could have some different views on risk in terms of volume growth. And then kind of below the EBIT line, obviously the interest rate for the most part, and certainly the shares are locked in, so that is 2-plus-percentage points of growth that there is certainty.

So when we develop our plans, as I'm sure every company, you try to get the most reflective plan with the most current assumptions in it and thus we feel good about it. Are there risks? Certainly. I would not say there is any more risk this year than in any other prior year.

Great, thank you so much.

This is Richard. I think, Mark, you answered it very well. So I won't add to that.

Thank you.

Matthew Grainger, Morgan Stanley.

Just two things. First, you called out a favorable impact during the quarter from some of the specialty alternative Jif line extensions. So there seems to be some momentum on those products. Can you talk a bit more about the efforts that you have planned there during 2015 and how input cost dynamics could impact your ability to invest (inaudible) in the near-term?

Hi, Matt, this is Paul Wagstaff. And a couple things just on peanut butter in general. As Mark was mentioning here a second ago, our higher peanut costs we do feel are behind us, so going into 2015 we feel we are priced very well, closer to what the more normal average has been.

Actually, in fact, the crop looks great right now, our coverage we are very pleased with, and we feel we're going to be in line cost wise with our competition. So we feel very good about the peanut butter business overall.

When you look at some of the innovation that we have coming out in that area, we have Jif Dippers, which is a snack type item, and we know snacks is growing, growing category and segment doing well. Our Jif Whips continue to do well and we are pleased with that. The Jif Hazelnut, we are re-launching that product in a plastic jar at a similar size to our competition, we are investing behind all of these.

So, we feel very good and comfortable with our peanut butter business and where it is heading in the fiscal year coming up. So, we are pleased with that.

Yes, Matthew, I will add just to that. In peanut butter just in general there is a real emphasis today in the marketplace on plant-based protein. And a lot of companies are focusing on that area and peanut butter is probably the largest plant-based protein in the marketplace.

And so, I think we will continue to get some benefit from that. And our acquisition of Enray foods and the quinoa leadership that they have is another plant-based protein that we are riding on in the health food area. So we are excited about being in those categories.

Okay, great. Thanks, guys. And just one more on input costs. I am not sure if this is something you can address in specifics or generality, but can you give us a rough sense of what type of expectations for green coffee or Arabica prices you have incorporated into your outlook? And just given how volatile it has been recently, does your guidance really capture the impact of some of the very recent pullbacks we have seen in futures prices?

Matt, this is Mark Belgya. We really have stepped away from commenting on position and coverage and how that plays. I would you say that we feel comfortable -- I mean you saw what we did on price and you can do some math around that, but we feel comfortable that the costs that we are built in our guidance are reflective of where we are.

Okay. Thanks again, everyone. And good luck, Sonal.

Farha Aslam, Stephens.

First question is on your operational focus, this year you were very internally focused with a lot of transition in your plant networks. Could you just update us on where we stand with all of those projects? And are you now positioned to launch new products much more actively going into 2015?

This is Paul Wagstaff. And first off, starting off with our fruit spreads project, that will be completed this year. So as you know, we combined a couple of our facilities into our Orville brand-new facility and that plant is up and running and doing well, so we are pleased with the performance.

We are also kicking off the production or the construction of producing peanut butter in our Memphis facility in Tennessee and that is on track and on budget as we speak. And it should be producing peanut butter by the fourth quarter of this year so we feel pleased there.

And we've also made some additional capacity investments in our Toledo facility for our frosting line and that is up and running and doing very well. So on the consumer food side we have made some significant investments, continue to do so and they're on track.

Steve Oakland. As I think you know, we have invested over the last couple of years in our Scottsville, Kentucky plant for Uncrustables, we've seen nice growth in our Consumer Business there. And we sell or manufacture and sell on average over 1 million peanut butter and jelly sandwiches a day across the country. So, we are excited to be able to raise that number over the next year or two. So, that plant has been invested in as well.

And, Farha, this is Mark Smucker. In coffee we are largely through all of our supply chain projects and have realized the savings. The one outstanding is the consolidation in Miami into New Orleans which is on track for later this calendar year. And then just total Company, as Richard mentioned and Mark, we are basically on pace to introduce more than 100 products again this year.

And, Farha, just finally concluding -- this is Vince. Having said all that, we continue to look at the entire supply chain to make sure it is most effective and efficient as possible. And as we have added acquisitions over the last 18 months, we will be looking at the entire distribution network to, again, see if we can find some additional savings.

All right, that is helpful. And now when we look forward to M&A, Richard, you mentioned a little bit that you are looking at M&A in this environment. But could you just spell out Smucker's criteria, particularly how you feel about your balance sheet today, what leverage level you will be willing to take Smucker's and what ROIC discipline you are just putting around acquisitions in this environment?

Well, I will start with the last one. We usually don't share our ROIC numbers other than that we definitely want to more than cover our cost of capital with a little risk factor in there.

As far as all the acquisition activity, if you look at our criteria, our criteria is center of the store number one or two brands. And we like to make sure that you get to number one brands but we don't necessarily have to buy the number one brand in the category.

And center of the store allows us to play not only in the dry but also the frozen category. And the fact that there's a lot more activity out there means that there are more brands and companies coming to the market. And so, it gives us more to look at and we look at them either enabling acquisitions like an Enray foods, the bolt-on which was Cafe Bustelo, and then transformational. And we still look at them in those three buckets.

And so, there is more coming across the transom. Prices, as I said, are higher, but we have the balance sheet -- I will let Mark comment on that next -- but balance sheet to really do a sizable acquisition if need be. But, Mark, do you want to talk a little bit more about that?

Yes, Richard, thanks. I guess the only other point on the leverage is if you look, we have a leverage ratio out there about 3.5 times. So our EBITDA is about $1.2 billion. So we are sitting at roughly 1.5 times levered. So we can borrow up to $4 billion-ish, so a couple billion dollars just to do a cash and debt finance transaction. So I'm not saying we are looking at that necessarily, but that kind of frames what the possibilities could be.

And any reason that Smucker's hasn't done a large transaction over the last two to three years? What is -- is it that you didn't find the opportunity, was it valuation?

It was primary valuation. We have looked at a couple and we have been participating but some of these multiples have been paid just don't seem to be, at least for us, the right ones. So we are still looking.

Great, thanks for the added color.

Chuck Cerankosky, Northcoast Research.

I would like to talk a little bit about trade spending in two forms. On the consumer products side what you might be looking at this year away from -- directly to the trade but more consumer promotions? Our work suggests you have slowed down a little bit on some of the consumer stuff. Not a lot but some, how that might pick up.

And then how trade spending works on the Foodservice side since the ultimate consumer there going to a restaurant doesn't necessarily see what brand of coffee she is drinking. And I am wondering how that fits into some of the accruals, etc., going on there.

Hi, Chuck, Paul Wagstaff here. First off when we talk about marketing investments and programs we have going into this coming year, we feel very well positioned in all of our brands. We have kind of a couple three key time frames.

One is back to school, we feel very well-positioned with our spreads business, peanut butter and fruit spreads; our promotion not only with in-store activities but also on TV. We have a lot of TV coming out on our brands.

And then the fall bake time period, it is a little early but we are in the process of starting to work with our retailers to lock those time frames up as well. And so far we feel pretty good, there is always some pits and falls when it comes to the oil business and that area. But on the baking side and some of the other categories we feel good about that.

And then of course for the rest of the year, Easter time period being one of the biggest in the fourth quarter, it is too early to tell at this point. But we feel good in what we are investing as far as marketing is concerned and we would anticipate that delivering some good results.

Will we see some increase year over year in some of the consumer promotions?

Yes, we should.

Okay.

Hi, Chuck, Steve Oakland. You are right, in Foodservice trade spend is really a different lever. Let me talk about when you talk about the back of house versus front of house brands.

Our core portion control business, those things are tabletop front of house, our relationship with Cumberland Foods, Sweet 'n Low, Sugar in the Raw, those products are tabletop and front of the consumer. There is an enormous coffee business away from home. So when you segment that there are a couple of key segments where brand is important whether that be office coffee or there are a couple where our Folgers brand plays well but they are small.

Now the Douwe Egberts liquid coffee business is strong in the most high volume of segments which are healthcare, lodging, conventions, places where -- a tremendous amount of casinos, where a tremendous amount of coffee is served at one given time. And what we are selling there is brand, yes, but it is technology. And the Douwe Egberts system is the best in the world at high-volume, high quality coffee at a predictable cost.

And so, we are selling a different customer value experience in that environment. And the trade spend there is really program spend, it is really not passed on to the customer, it is purchase contract, rebate type stuff.

All right, thank you. That is helpful.

John Baumgartner, Wells Fargo.

Mark, just again in terms of the K-Cup's and the single serve category, into some clarity there. I guess given the pressure from that pricing you are expecting in 2015, does that suggest kind of a change in price dynamic underway in terms of maybe a greater emphasis on promotion and managing price gaps given that private label has achieved such a meaningful share right now? Or do you see it more as kind of a temporary phenomenon?

I think, John, this is Mark, of course. In this most previous year we did see a little bit more frequency of promotion and that will continue through this coming year. But pricing dynamics are generally consistent and we have seen that the price gaps versus both private label and competition have remained more or less constant, but you are seeing a little bit more frequency of promotion.

Okay. And then just in terms of the Folgers K-Cup brand, it sounds as though your assessment of that brand is maybe better than the measured channel data would suggest given that I guess sales declines have been accelerating the past couple of quads. So is there another component to that maybe in non-measure performance doing better?

Well, let me -- we have to look at both dollars and volume. So when you look at dollars, clearly there has been a decline, that has been driven primarily by, again, some of the frequency of promotion just making sure that we are supporting our brands.

But if you look at the Folgers Gourmet Selection, that is the brand we have been using for the last three years, we are still up in this quarter 25% over two years ago. So the numbers are pretty good and for the full year the Folgers brand is up 6% on dollars and 10% on volume. Does that help?

Yes. Thanks, Mark.

Robert Moskow, Credit Suisse.

A quick follow-up. You bought back a lot of shares this year, if there is no M&A activity in 2015 can I assume that share count will be down again in fiscal 2015 maybe 2% or 3%?

Yes, Rob, this is Mark Belgya again. I think if you look the last three years we've actually exceeded 2%. We sort of have a standing 2% goal for plan which we don't include it, but certainly if there is no M&A opportunity I think the recent history shows that repurchases is a viable use of our cash.

Great, thank you. And thank you again, Sonal, good luck.

Thank you again.

There are no further questions. I will now turn the conference call back to management to conclude.

I want to thank everyone for being on the phone today and I also again want to reiterate Mark's comments about Sonal and all your wonderful comments about Sonal. We made not let her leave her position. So, Aaron, you have big shoes to fill. I want to thank everybody for being on the call and have a good week.

Ladies and gentlemen, if you wish to access the rebroadcast of this live call you may do so by dialing 888-203-1112 or 719-457-0820 with the pass code of 713-0736. This concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.