J M Smucker Co (SJM) 2015 Q2 法說會逐字稿

Good morning, and welcome to the J.M. Smucker Company's second quarter 2015 Earnings Conference Call. At this time I would like to inform you that this conference is being recorded and all participants are in a listen-only mode.

(Operator Instructions)

I will now turn the conference over to Aaron Broholm, Director, Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to our second quarter Earnings Conference Call. Thank you for joining us today. Here with me on the call are Richard Smucker, Chief Executive Officer; Vince Byrd, President and Chief Operating Officer; Mark Belgya, Chief Financial Officer; Steve Oakland, President International Food Service 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 second quarter performance. Vince will then provide an update on our business segments and Mark will close with additional comments on our financial results for the quarter and our outlook for the year.

During this conference call, we will make forward-looking statements 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 risks and uncertainties. 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. If you have any follow-up questions after today's call, please contact me.

I will now turn the call over to Richard.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. Last week we issued a press release previewing our second quarter results and revised full-year outlook. While our fundamentals remain strong, we were disappointed in the results for our second quarter. We have always managed our business for the long-term but our coffee business fell short of expectations during the second quarter.

During today's call, we want to make sure that we answer your questions, but also do not want to lose sight of the many positives in our business and why we're optimistic as we look ahead. The questions we expect to answer today are , what were the drivers of our volume shortfall in coffee for the quarter? Has there been a fundamental change to the coffee category? And more specifically, between roast and ground, premium, and single serve.

In addition to volume, are there other factors affecting the coffee segment profits? What are we doing to address the coffee issue experienced in the second quarter? And outside of coffee, how are the other business segments performing? This morning we will devote a significant portion of our scripted commentary to providing answer to these questions.

As we shared last week, second quarter non-GAAP earnings per share of $1.53 was the same as the prior year. However, this fell significantly below our plan. We are pleased with the performance of our Consumer Foods and International Food Service and Natural Foods segments.

As noted, the shortfall was driven by the US Retail Coffee segment. Specifically the consumer response to higher price points, reduced promotional effectiveness, and ongoing competitive activities all contributed to the decline in volume for the segment, resulting in lower net sales and segment profit for the quarter.

In the back half of the fiscal year, we anticipate coffee volume trends to improve compared to the second quarter, but to remain down from the prior year. This, combined with the relationship between price and green coffee costs, resulted in the lower full-year guidance that we provided last week.

Our teams have spent a great deal of time analyzing the recent results, allowing us to conclude that this performance does not reflect a fundamental change in the coffee category. We do recognize the need to continuously create value for consumers and have adjusted our tactics to address the current dynamics in the marketplace. Vince will expand on our near-term challenges and opportunities within the coffee segment shortly, but first I will address the macro view we have regarding the at-home coffee category and our outlook for it.

First, we believe mainstream roast and ground coffee will continue to be very relevant to consumers as the largest segment in terms of volume within the category. Despite the current higher pricing, at approximately $0.05 per cup, mainstream coffee continues to provide a strong value proposition for consumers. The modest volume declines in the overall mainstream segment for the last few years have been in line with our expectations.

Prior to this quarter, volume for the Folgers brand has grown in eight of the past nine quarters. Over this time, Folgers has also gained dollars share in the mainstream segment and remains the dominant brand in this space. We also see opportunities to innovate within the mainstream segment beyond new roast and flavors to provide consumers additional convenience options and grow our roast and ground share.

Second, with much of the category growth expected to come from the K-Cup and premium segments, we are well-positioned to participate in this growth. Within premium, the Dunkin' Donuts brand has strong equity and resonates with consumers. We have grown this brand consistently over the years, including volume gains in eight of the past ten quarters, increasing Dunkin' Donuts market share in the premium segment over this time.

Within K-Cups, our growth rates have slowed since we first entered the segment yet recently we have seen significant gains for our Folgers K-Cup and the initial contributions from our recently launched Cafe Bustelo K cups. We remain confident that our brands will continue to play a key role in the growth of this platform.

Third, we have demonstrated over time our ability to manage periods of higher green coffee costs while successfully growing coffee profits. In fact, we managed through even higher costs three years ago.

Lastly, we remain the overall leader in the coffee category with a wide market-share advantage. As a leading participant in all key forms of coffee and segments, we play a vital role for retailers as they look to us for insights on consumer trends and our overall perspective on the category. For these reasons, we believe our coffee strategy remains on point and we are confident in achieving our long-term growth goals.

Let me now return to our performance for the quarter. Overall, our remaining businesses performed well in the second quarter and remain on track to achieve full-year profit segment growth. Within the Consumer Foods segment, volume gains were realized in Jif peanut butter, Uncrustable frozen sandwiches and Crisco Oils during the quarter. Segment profit increased significantly year-over-year primarily due to peanut butter as we anticipated.

In our International Food Service and Natural Food segments, the underlying businesses performed well. Although the headwinds that we've spoken to previously, most notably foreign exchange and rationalized businesses continue to impact the reported results. But for this segment, we expect both sales and segment profit growth in the back half of the year.

As we look at the overall food industry, all the participants continue to navigate through a challenging environment. Two months ago at the Barclays back-to-school conference, we spoke to some of the current dynamics including that certain segments of the consumer base are financially pressed and remain cautious; that there are evolving consumer trends such as heightened focus on health and wellness, an increased desire for transparency and the growing impact of the social media and e-commerce on consumer behavior.

All of these factors are contributing to the center of the store volume trends that have been the subject of much discussion. Based on the latest scan data, whether you look at the 4-, 12- or 52-week period, the total food volume across measured channels is down approximately 1%. Partially in response to this, promotional activities have increased as manufacturers and retailers compete for share. At the same time, traditional promotional tactics are proving to be less efficient. We've seen this in our own business as well.

That being said, we see some positive trends starting to develop. Overall US retail sales, including all sectors, were up 0.3% in October. A major retailer recently reported their first comp sales growth in more than a year.

Energy costs are coming down, both in oil and natural gas, providing consumers with more disposable income. Commodity costs have, in many cases, stabilized with some at 5-year lows. The latest consumer sentiment numbers reached a seven-year high with consumers expecting lower inflation and due primarily to lower gas prices.

And lastly, the moderate economic recovery seems to be moving forward based upon strengthening consumer sector and increasing consumer confidence. To address the challenges and take advantage of the opportunities, we continue to focus on innovation with an increased emphasis on products that are consistent with evolving consumer trends. We are also accelerating our commitment to those areas of our business that provide the biggest opportunities for future growth, ensuring that our resources are aligned properly. At the same time, we are continuing to review all of our cost levers throughout our organization.

And lastly, we have the ability to leverage our balance sheet to support future EPS growth. We have through accretive M&A activity, or through share repurchases. While most of our remaining comments today will focus on the second quarter, and the balance of the fiscal year, we look forward to sharing more about these opportunities in the months ahead.

We have leading brands and a great team of passionate employees. We firmly believe that we are moving forward with the right approach and have the right actions in place to provide more upside potential for the remainder of the year.

With that, I'll turn the call over to Vince for an overview of our business segments.

Thank you, Richard, and good morning, everyone. Let me begin by reinforcing a few key points. First, the shortfall for the second quarter and full-year expectations are driven by the performance of our coffee segment. We believe that these are near-term challenges and remain confident with our overall coffee strategy.

Second, within our other two segments, most of our brands and categories performed well in the quarter and the segments remain on track to achieve our full-year segment profit expectations.

And third, as the overall operating environment remains competitive, we will maintain a disciplined approach while continuing to focus on tactical opportunities to address the current landscape.

With that, let me provide some additional color on our three segments starting with US Retail Coffee. Volume declined 18% in the second quarter reflecting greater than anticipated elasticities from recent pricing actions for our Folgers roast and ground business.

Our analysis of the second quarter has led us to a few key conclusions. First, the key driver behind the volume decline was consumer reaction to higher pricing for branded roast and ground coffee offerings in general and our Folgers brand in particular. We believe this resulted in consumers temporarily delaying purchases within the mainstream segment. And to a significantly lesser extent substituting private label.

Second, while single-serve coffee continues to grow, including strong growth for our Folgers K-Cup offerings in the quarter, this did not drive the mainstream volume declines over this period. And finally, this is not a fundamental change in the at-home coffee category or our coffee business.

During the second quarter, consumers saw significantly higher promoted pricing for the Folgers brand. This resulted from a reduction in promotional spending from the first-quarter levels and the reflection of our list price increase that was effective in June. Promoted price points on our core red can offerings increased by $2.00 in many markets, representing a nearly 30% increase. Historically promoted price points have been more gradually stepped up in smaller increments over time.

The rapidness in the pricing combined with the reduced promotional efficiency and competitive activities resulted in consumer takeaway being much less than we anticipated, most notably during the latter half of the quarter. As a reference, IRI data indicates volume within the overall mainstream segment was down 9% with our brands down 13% during the latest 12-week scan period. Private label fared much better and was up 3% over this period.

While we expect these challenges to persist in the near-term, we are optimistic as we look ahead due to several factors. We are beginning to see competitive price gaps narrow. We anticipate the market will ultimately adjust to higher prices. Our price-to-cost relationship for everyday shelf pricing is consistent with historical norms. We are tactically adjusting all of our levers, including price. And as previously stated, our research indicates the recent price declines were not driven -- I'm sorry -- the recent declines were not driven by fundamental shift to single-serve coffee.

Turning briefly to the rest of this segment, the Dunkin' Donuts brand was less impacted by higher pricing as volume declined 3% against a plus-11% comp in the prior year. For K-Cups, we are pleased with the sequential improvement in volume trends with a 15% increase over the prior year driven by a 23% increase for the Folgers brand. K-Cup net sales were up 12% for the quarter. Looking ahead, we anticipate there will be a heightened level of competitive activities in the premium and K-Cup space reflecting a new competitive launch.

Finally in regard to green coffee costs, we began to recognize higher cost during the second quarter as expected. While there continues to be speculation and volatility in the green coffee markets, we have taken steps to provide good visibility into our cost structure for the remainder of the fiscal year.

Turning to US Retail Consumer Foods, we were pleased with the strong segment profit performance for the second quarter. Volume was flat compared to the prior year as gains in several key brands and categories were offset by declines in baking which has a significant impact on our tonnage-based volume metric due to the higher weight. Looking at the performance within the spreads categories, the back-to-school promotional period came to a successful conclusion during the quarter, reflecting solid merchandising support and consumers desire for more low-cost premium options -- protein options.

Volume for the Jif brand was at 2% with strong growth from Jif natural peanut butter. Our Jif To Go offerings also grew significantly up 21% driven by our recently launched Jif To Go dippers. Smucker fruit spread volume decreased 3% in the second quarter as we experienced declines in traditional varieties against a strong prior-year comp. And continued softness in our sugar-free and reduced sugar offerings. Partially offset this with the continued growth of Smucker Natural Fruit Spreads which more than doubled year-ago volume.

Momentum continued for Smucker's Uncrustable frozen sandwiches. With volume up 22% over the prior year, this represented an 11th consecutive quarter of double-digit growth in retail channels. Combined with our food service Uncrustable business which has been impacted by planned rationalizations we have discussed previously, companywide Uncrustable volume was up 16% in the quarter representing the strongest quarter of growth in the past two years.

Turning to the bake aisle, the Crisco brand performance was solid with base oil volume growing 4%. As expected, net sales for the brand decreased due to a price decline we announced in the fourth quarter of last year reflecting soybean oil futures being near 5-year lows. Within the Pillsbury brand, volume trends improved from the first quarter but remain down year-over-year, reflecting softness in the category and increased competitive activities.

Our overall baking business is in the midst of the fall bake promotional period. We are encouraged by the merchandising plans we have in place and the anticipated contribution of new items but expect a heightened level of our competition to remain. While consumer takeaway will ultimately be key to our results for the period, we are optimistic for a solid holiday period.

Segment profit for the second quarter was up 17% over the prior year with much of the increase driven by improvements in peanut butter profitability. As a reminder, the prior year segment profit was negatively impacted by two factors. Temporary incremental costs occurred at our Orville and Scottsville manufacturing facilities and the timing of a peanut butter price decline taken in advance of recognizing lower peanut cost. Effective earlier this month, we took a 7% price decline on the majority of our peanut butter products, reflecting our lower peanut cost position.

Finally, in Consumer Foods we completed the acquisition of Sahale Snacks during the quarter. We continue to project net sales contributions of approximately $25 million in FY15 with an immaterial bottom-line impact in the first year. The integration work is going well and we remain excited about the growth opportunities this business presents in the snacking arena.

In International Food Service and Natural Foods, we continue to see the sequential improvement in underlying trends that was expected for this segment. Our topline performance, compared to the prior year, continued to be impacted by the rationalizations in our food service hot beverage business which we expect to fully lap at the end of the third-quarter. For segment profit, the items we discussed on our last call, a weaker Canadian dollar and a higher run rate on trade spend in the US Food Service coffee, continue to impact second-quarter results.

The currency impact is expected to remain a headwind through the end of the fiscal year and into FY16. However, we will lap the trade-spend adjustments recorded in the back half of last year which will provide year-over-year benefit for the next two quarters. While these items have led to a lot of noise in this segment, we are encouraged by our recent performance and are focused on our key growth opportunities as we move ahead.

These include, in Canada, building on the recent market-share gains we've achieved across nearly all of our categories, including expectations for a strong conclusion to the fall bake period. Within Food Service, we are gaining momentum in our portion control business and in the conversion of the customers to our Folgers brand liquid coffee offering. Further as we leverage the capacity investments made over the past few years in our Scottsville facility, we are looking to regain much of the exited school Uncrustable business. This reflects recent changes to the USDA program which will allow us to manufacture the peanut butter used in the sandwiches for this channel. We expect a related sales benefit to begin in FY16.

In Natural Foods, our newly integrated sales organization is aligned to take advantage of the continued growth in the natural and organic offerings in both traditional and Natural Food channels. This drove a strong quarter performance for our R.W. Knudsen brand and we look for this momentum to continue. Our truRoots brand has been challenged by higher quinoa cost since its acquisition a year ago, primarily driven by higher demand. With cost moderating and anticipated distribution gains, we look for a stronger back half of the year for this brand.

In closing it's important to note that since acquiring the coffee business in 2008, we have successfully navigated through many business climates including changing consumer habits and fluctuating green coffee markets. During this time we have been able to consistently grow earnings in the coffee segment and our brands continue to lead in market share by a wide margin. We remain confident in our coffee strategy and the long-term prospects for this business.

I'll now turn the call over to Mark.

Thank you, Vince, and good morning, everyone. I will start by briefly summarizing our second quarter results. The remainder of my comments will then focus on a revised Outlook for the full year including additional color around the back half. Net sales decreased $78 million or 5% in the second quarter reflecting lower overall volume, most notably for coffee, along with unfavorable mix. The impact of net price realization acquisitions and foreign exchange was nonmaterial.

GAAP earnings per share were $1.55 this quarter, up 6% from $1.46 in the second quarter of last year. Included in this year's GAAP earnings were $8 million in unallocated derivative gains compared to a loss of $2 million in the prior year. Including certain items affecting comparability, as defined in our Press Release, non-GAAP EPS was $1.53 in line with the prior year. Non-GAAP gross profit decreased $27 million or 5% in the second quarter with gross margin remaining flat to the prior year at 35.7%.

The lower gross profit resulted from coffee-driven impact on volume and mix being only partially offset by an overall favorable price-to- cost relationship during the quarter. A 7% decrease in SG&A expense, primarily driven by a reduction in marketing, helped offset some of the lower gross profit. Other items that contributed favorably to year-over-year EPS comparisons were lower interest expense, as we benefited from a reduction in outstanding long-term debt and last year's interest rate swap, and a decrease in the number of average shares outstanding resulting from share repurchase activity in the prior fiscal year.

Turning to cash flow, cash provided by operations was $92 million for the quarter compared to $86 million in the prior year. This quarter's cash generation turned the year-to-date total to a positive $84 million, compared to $168 million for the first half of last fiscal year. This decline, primarily attributable to a greater current-year use of cash for working capital needs, reflecting higher green coffee costs in the inventory as well as certain timing factors.

With capital expenditures of $65 million in the second quarter, free cash flow was $27 million for the quarter but $30 million negative for the first half of 2015. While we expect significant cash generation during the third quarter as we complete the fall bake and holiday period, we will not achieve our original free cash flow guidance range of $625 million to $635 million. We now anticipate 2015 free cash flow will approximate $500 million. This reflects the effective decrease in net income as well as an increase for working capital.

Along with the working capital factors I noted previously, we expect a temporary decrease -- I'm sorry, temporary increase in our days of inventory on hand as we manage industry-wide risk related to the increased demand for transportation providers and other initiatives. During the quarter, commercial paper borrowings peaked at approximately $650 million, reflecting the closing of the Sahale acquisition and seasonal working capital needs before declining to the end of the quarter at $546 million outstanding. We expect to pay down much of the remaining borrowings by the end of the fiscal year, assuming no share repurchase or M&A activities.

Let me conclude with our sales and EPS Outlook. We now anticipate 2015 net sales will be down approximately 1% compared to the prior year reflecting lower volume expectations, most significantly for US Retail Coffee. Overall this revised guidance implies a modest year-over-year increase in net sales for the last six months of 2015.

In the coffee segment, we anticipate volume trends to improve from the second quarter but to remain down year-over-year in the back half, with declines expected in the mid to high single-digit range. However, higher net price realizations and favorable mix are anticipated to result in segment net sales growth for the last two quarters of the year.

Within Consumer Foods, we anticipate the first half trend to continue through the remainder of the year with lower price realization impacting net sales. This reflects the recent price decline taken on peanut butter and the Crisco price decline taken in the fourth quarter of last year.

Finally in the International Food Service and Natural Foods segment, year-over-year trends are expected to improve sequentially in the last two quarters as higher price realization and favorable mix more than offset lower volumes.

Turning to EPS, we now expect 2015 non-GAAP earnings per share to be in the range of $5.45 to $5.65 [ridging] from our original guidance range of $5.95 to $6.05 relates to the coffee business. The midpoint of our revised EPS range forces the back half of the fiscal year is approximately 6% below the prior year. Looking at the puts and takes for the last two quarters of 2015, the primary year-over-year headwind is expected to be lower coffee profitability. This will be driven by the anticipated decline in volume as well as sequentially higher coffee costs that are not expected to be fully offset by net price realizations and mix.

Our profitability expectations for the other two segments have not changed significantly as we continue to expect and to achieve full-year segment profit growth in 2015. We previously indicated segment profit growth for the Consumer Food segment was anticipated to be significantly front-half loaded, reflecting the timing of recognizing lower peanut costs. While we expect to continue recognizing lower costs, the year-over-year impact will subside in the back half of 2015 and will be more than offset by the lower peanut butter pricing over this period.

That said, Consumer Food segment profit for the back half of 2015 is expected to increase slightly over the prior year. We continue to anticipate back-half segment profit growth for International Food Service and Natural Foods. This reflects the lapping of the food service trade spend adjustments recorded in the second half of last year, as well as growth in Natural Foods including incremental contribution from the Enray acquisition.

We now expect total SG&A spend for the year will be down slightly from the prior year reflecting a reduction in marketing expense for the full year along with lower incentive compensation expense. This compares to our original 2015 expectations of a 4% year-over-year increase.

Related to the reduction in marketing, it is important to reinforce that this is not a shift in our long-term strategy of investing behind our brands. With approximately $275 million in planned spending, we remain satisfied with the level of brand support in place for the year, including a strong [on-year] presence while continuing to execute on our digital initiatives and largest opportunities. In addition, last year's back half included marketing support for our sponsorship of team USA in the 2014 Winter Olympics.

Our revised 2015 guidance continues to reflect approximately 102 million shares outstanding. No shares were repurchased during the Company's second quarter and the Board recently increased our share repurchase authorization to 10 million shares.

In closing, let me reiterate that we firmly believe we are moving forward with the right approach to overcome short-term challenges. And that when we make decisions with a long-term perspective, growth will naturally flow. With that, we will now open up the call for questions. Operator, I ask you please queue up the first question.

(Operator Instructions)

David Driscoll of Citi.

Thank you. Good morning.

Good morning.

I wanted to start off in coffee. Certainly a fairly startling event here in the second quarter. I appreciate all the comments that you made in your prepared comments. But maybe I'd like to ask simply, do you believe that Smucker's was over-earning in coffee in FY14 and that the FY15 correction is just a normalization? And then basically to that, how do you know either way?

David, this is Vince.

I think it's a very fair question. We obviously finished last year very, very strongly and would say that our margins last year were in very good shape compared to historical levels. The only thing you have to keep in mind on a margin percent basis, that's going to fluctuate depending on where green is at any particular time. Again, we managed the business to try to grow segment profit year after year. I think, again -- I think your comment is fair, but certainly we think that we can continue to grow the segment profit of this business, but clearly we're not going to do that this fiscal year.

All right. My second question and final question is just on Pillsbury in the baking mix category. A category certainly under some pressure. General Mills has announced an earnings problem because of it and some other factors. Have you accounted for significant promotional activities in baking mixes in your guidance? Can you give us some thoughts and color there?

Yes. Hi, David. This is Paul Wagstaff.

Yes. We have accounted for all of the different promotional activity we are seeing in the baking category. And I think overall what's doing well for us is we have some new innovation with our bold-colored frostings and cakes. Those continue to do well; our seasonals do well.

We are seeing competitive challenges and we expect that. When you think about our fall bake, as we mentioned in the script, we feel that so far we're seeing some good consumer pull-through and things look to be solid. So we would anticipate having a good year. That said, we know there is competition that continues to increase and we have accounted for that.

Okay. I'll pass it along. Thank you.

Thanks, David.

Andrew Lazar, Barclays.

Good morning, everybody.

Good morning.

I had thought it might be somewhat easier to manage through the price increases this time around compared to the last round of inflation, if for no other reason than you were dealing with $3.00 coffee cost last time, and didn't need to raise the absolute price of coffee at retail as much this time around. So I'm just trying to get a sense of any perspective on that would be helpful.

And then is your sense of why there was some wider price caps than maybe you'd anticipated in the quarter in coffee -- do you think just purely based on where certain folks were hedged versus you? And as opposed to there being anything more structural? Thank you.

Hi, Andrew. It's Mark Smucker.

Hi.

Thanks for the question.

So the first thing I would say is if you do rewind the clock back to those higher Aribica costs, from May 2010 to May 2011, we took -- that's a 13-month period. We took four price increases in that period and they were much closer in succession. In this particular case in the quarter, it is true, of course, we did take a price increase. But because we felt that we had to honor some of our promotional commitments in the first quarter, we continued to basically investment spend on some of our promotions to protect those promotions with our customers.

And so list price aside, when you look at how our promo prices moved going into August and September, that significant jump was somewhat unique to what we've done in the past and so the consumer did sort of experience some sticker shock. And I think that if there is somewhat of a silver lining in this, it is that not a fundamental change in the category, we do feel that many of our loyal consumers took pause, chose not to purchase, in most cases chose not to switch to other brands and so that we do feel if we get into the back half, we should see some of those loyal consumers come back into the mainstream segment.

Got it. That's helpful. And then --

The second part of your question was, do we think our competitors may have been in a better position? Obviously, we don't know specifically what their positions are, although we have a pretty good idea what type of hedge they've taken. And in some cases we believe the competitor could've been in a better place. But by now all that has probably washed its way through most of the system. So I think if not now, very shortly we'll probably all be in a similar position.

Great. Thanks for your clarity.

Eric Katzman, Deutsche Bank.

Hi. Good morning, everybody.

Good morning.

I guess coffee is the question of the day. But can you just talk about the shortfall in the quarter and maybe is it possible to break it down in terms of -- at least in terms of Folgers? But maybe just more broadly on the segment, how much was due to elasticity? How much do you think was due to competition? And was there -- I guess, some kind of trade loading and did that have an impact? Where are your inventories now? And then I'll follow-up.

This is Mark Smucker again. I'll start with the last one. The trade loading and customer inventories was not material. And so as a factor we view that, there may have been some puts and takes, but overall not material. Again, it really was delayed consumer purchase in the segment that was the vast majority of the volume decline. To a much lesser degree, there was some competitive switching, but as you can probably see from the shared data, where there was switching, it went mostly to store brands. And really insignificant amount of switching going into the single- serve category.

Okay. Thanks for that. And, Vince, I think in your prepared remarks you mentioned something along the lines of seeing potentially increased competition in the premium segment. Can you talk a little bit more about that? What are you seeing? Why are you saying that?

Well, I think you're well aware that our main competitor has entered into a relationship with a national food service operator and will be launching their brand or have launched their brand in both premium -- and again that would be the bag segment as well as in the K-Cup segment. And there was a small test done earlier this year and we are anticipating a national launch of that as we speak. And given their typical pricing strategy, we anticipate that there will be heightened level of competition.

Okay. And then just last one to Richard, just a broader question, you've -- during your tenure as CEO you've created a tremendous amount of value mostly through using the Reverse Marsh Trusts with Proctor in the various deals. Your scale now is at a point where it's probably a little more difficult to do that.

So do you see -- do you see the M&A environment as, I guess, a little more conducive? Have bid ask spreads narrowed a bit? And does the fact that you're more likely to use a debt-financed transaction, do you see that as maybe less compelling than an RMT or equal? Kind of how do we think about that and I'll pass it on.

Yes. That's a good question, Eric. And two things. It will be a little more difficult to do an RMT because if we did an RMT today, the transaction value would roughly have to be about a $10 billion transaction. There aren't a lot of those out there. I wouldn't say never.

But we have a great balance sheet. And we're not afraid to use it for the right transaction. So even though some of the prices are high out there right now in the M&A area, we do think that there are some opportunities. So we're still in the hunt.

Okay. Thanks. That's all.

Jason English, Goldman Sachs.

Hey. Good morning folks.

Good morning.

Thanks for the question. I apologize if I missed this in prepared remarks, but can you comment on what you expect your marketing budget to increase or decrease for the year?

Yes, Jason. This is Mark Belgya. We said that for the year originally we were going to be up about 5%. And as we look at the back half, we think that the spend will basically be flat with last year. So we took roughly $60 million marketing reduction from where we thought we'd be in the first half and we'll be about flat to prior year in the back half.

Okay. So that brings us to around down 6%, versus coming in up 5%. Last year you came into the year looking for 10% increase and it came in down 1%. So this leads to really my real question of are we just deferring some expenses into the out years by cutting marketing, probably cutting or keeping incentive compensation subdued. So clearly we have some problems this year. Do we have an expense problem leading into next year?

I'll start and then I'll just ask anyone else who wants to jump in. I think in my prepared comments we tried to address the reduction that -- when you look at marketing -- to the outset, I think when we talk about marketing, the natural reaction is we're cutting advertising. And I think we feel comfortable with what we've done to date on the advertising support across the brands. There's obviously a multitude of things that go into the marketing expenditure categories; so to some degree, yes, we are deferring a little bit. But we feel those are clearly discretionary spend that will not have a long-term impact on the quality and the equity of the brands.

So each team looks within their spend. But again, I feel pretty confident that whether it's digital or any support of the major brands, anything we've done around, obviously, fall bake is in place. We feel pretty good about what we have out there. And don't feel that we've been overly negatively impacted by the reductions.

Okay. Thanks a lot. I'll pass it on.

Ken Goldman, JPMorgan.

Good morning, everyone.

Good morning.

Just a quick quest for Mark Smucker first and then I have a second one. I thought your answer to Andrew Lazar's question was helpful. I just wanted to ask a follow-up. As you think about maybe coming off some of those promotional commitments and ripping that Band-Aid off a bit more quickly than usual, can you talk about why that took place? What learnings you had from it going forward? Because Smucker's has always been, in my view, very smart about pricing. So I was a bit surprised to hear you may have come off deals in this kind of environment a bit more quickly or meaningfully than usual.

Sure, Ken. Thanks for the follow-up.

Yes. I think we did learn something. I think we learned that we wouldn't rip the Band-Aid off as quickly again in the future.

And quite frankly as we went into the first quarter we felt that our outlook for the remainder of the year allowed us to continue to honor those commitments. But clearly we do feel that it was a bit of a misstep when the consumer looked -- went to the shelf and their last can of Folgers was at $6.99 and now they're saying, Wow, it's $8.99, maybe I'm going to hold off for a couple months. I think I can make this last can work and I'll come back and check again in a month or so. But we truly believe that's what's going on in the marketplace.

That's helpful again. And then just a general question for anyone who wants to ask -- or answer rather. It's been over a year now that packaged food companies in general have been pointing to reduced promo efficiency as a driver here of topline disappointments. So I'm just curious from your point of view, what does the food industry in general need to do to stop the bleeding? We've heard about some of the issues. I guess a lack of attractive display space. But how does the problem ultimately get fixed, do you think?

Ken, I'm not sure -- this is Vince. I'll try to answer your question. I think as Richard noted in his comments, we are basically dealing with a flat industry. And as we -- if you are growing -- if you're not going through innovation, you're taking share of market from your competitors. There tends to be a lot of trade money in the system today. And I think we're all finding that we are not getting the lifts that we did historically.

In our case because of coffee prices being higher, we naturally know we're not going to get as high as lift as we would at a lower price point. But as Mark's indicated a couple times, they were even below our expectations. I think ultimately it's going to be a return of the economy that's going to need to improve so we can get back on track. Having said that, innovation is very, very key to all manufacturers and retailers. And we continue to focus in that arena.

The only thing I would add -- I would support Vince's comment on innovation, because the more and more we look at products that really are true value to the consumer, we can price for those. Uncrustables is one of them. It's an outstanding one. It's grown double digit. So we really see that that's a great area. So we've been looking for more and more innovation that really is true innovation and it's not just another me too.

Great. Thank you.

Akshay Jagdale with KeyBanc Capital Markets.

Good morning.

Good morning.

So just on coffee what -- how much was the volume off by relative to your expectations?

I mean, we would have expected it to be at least in line with our prior year, so it was off significantly.

Okay. So if consumers are just sort of pausing, that would imply that at some point they'll come back and you'll get this volume back, right? So is that factored into your back-half guidance or not?

Yes. It is, Akshay. This is Mark Smucker. And we have factored in some recovery as was in the scripted comments. We won't get back to prior-year levels. There's a couple factors I could speak to. Typically in the mainstream segment, given the size of the containers and so forth, the purchase cycle is roughly about three months. And then as it relates to promotional effectiveness, typically when you see two or three promotional cycles pass, typically the market tends to adjust to new pricing. And so as we get into the back half of the year, we would expect for some of those things to lapse. And that's driving why we believe consumers will come back into the segment. Does that help?

Yes. That's helpful.

And then just on single-serve, can you talk about what drove the volume growth in that business? I mean, sequentially clearly an acceleration and a growth; you haven't seen double-digit growth now in a bit. So can you talk about what drove the growth and then just more broadly how -- what's your read of the 2.0 launch and the category resets that have happened? How do you see the dynamics from here?

Okay. So let me take your first one first. So in our K-Cup business, the Folgers brand did very well. We actually grew the Folgers brand in line with the category growth. We think that our marketing activities, as well as our pricing activities were right, and that really helped, and then also very much helped by the launch of new items. In that would be some new Folgers items, as well as our Cafe Bustelo brand, as well, which is also new in the marketplace. So all of that helped on K-Cup.

As for the 2.0. It's still very early, as you know. It's going to probably take, I think we talked last time, 18 months to two years until those brewers are seated sufficiently in the marketplace. We're still optimistic about the consumer benefits that the 2.0 brewer provides and clearly our partner in that space has signed up a lot of new partners and so we think that's going to help the system, as well. So there has been some settling out in the category itself.

I think one thing we can point to is that there are a few customers that have still trying to figure out the right mix between roast and ground and K-Cup. And our actual roast and ground business may benefit a little bit going forward as the customers reconfigure their coffee sets.

That's helpful. I'll get back in queue. Thanks.

Chris Growe with Stifel.

Hi. Good morning.

Good morning.

Hi. I had just one coffee follow-up and one bigger-picture question if I could. So on the coffee side, you've indicated that there will be an imbalance between pricing and cost. I think there was here in the quarter, and I think you said that for the second half of the year. So I'm just curious, is that due to any adjustments you are making in promotional spending? Is it that you do require to take more pricing, but you're not going to do it because of the elasticity? I'm just trying to understand that in balance that you expect for the remainder of the year.

Sure, Chris. It's Mark Smucker again.

There's a few factors. The first is volume. As we've said, we don't expect volume to get quite back to our prior-year levels and that is clearly going to have an impact on our profit dollars. There may be some additional promotional spend that we are looking at but we're trying to be laser focused and very disciplined in how and when we execute promotions in light of, obviously, the recent results.

But we do feel that overall our pricing is right versus our costs. And it's right going forward versus competition. Then the only other factor that we've spoken to previously, which is a less of a factor, is that we have seen some margin compression on K-Cups and that will continue through the back half of the year.

Okay. Thank you for that. And then just maybe an overall question on sales growth. Being down 4% year-to-date, obviously, requires a stronger second half performance to get to your negative 1% for the year. I'm just curious in relation to that with the peanut butter price decline in place right now, is it mostly all contingent on the performance in coffee, the better, let's call it, balance, if you will, and between pricing and volume in that category that will dictate that ability to meet that full-year guidance?

Yes. I think that's right. This is Mark Belgya. I think that the fact there will be coffee. We're gaining on it in price because we are going to recognize the year-over-year price increase on coffee and that will more than offset the effect of the peanut butter pricing and then we'll also have favorable mix will come into play. So any shortfall or, quite candidly, any gain over estimate year-over-year increase would probably lie in the volume of coffee.

Okay. Thank you for the time.

Alexia Howard with Sanford Bernstein.

Good morning, everyone.

Good morning.

So two quick questions. The share repurchase increase, can you make some comment about what motivated the need to [off bright] to share repurchases? Does it mean that it's less likely, perhaps, that you'll find a larger scale deal out there? And also can you confirm whether incremental share repurchases are embedded in the guidance for this year?

And then my follow-up question is simply around the food service coffee business. That exit seems to be -- or the impact of that exit seems to be dragging along. When do you expect that effect to be behind you? Thank you.

Hi, Alexia. This is Mark Belgya.

Just a couple comments on share repurchase and the additional authorization by the Board. I don't think I would read anything that it's trying to drive either more or less opportunity in M&A. It's not totally uncommon for us to have anywhere between 5 million and 10 million shares authorized. We do typically tend to be more around 5 million, so some of it is just in the ease that we can go into the market and not have to worry about running short on the authorization. So, I wouldn't read anymore into that.

In terms of what's included in the guidance, obviously we have a fairly significant guidance range. I think as we made in the comments that it does assume the 102 million, which is our current amount. If we were to go in the market, as you know, just because of the nature of the weighting, it would not have a material impact on the rest of the fiscal years, but clearly, if we did, it would push it north of the bottom part of the range. And again, obviously, it would affect quarter and quarter, but not have a major impact on the full year, because of the weighting.

Hi, Alexia. It's Steve Oakland. I can comment on Sara Lee. If you remember in our third quarter last year, the largest food service distributor in the country was a Sara Lee customer, private label customer. And it took them a long time to replace Sara Lee as a national vendor, and so that business -- we agreed to help them get into January and that business dribbled into the third quarter. But I can tell you the amount of effort for the team -- yes, the exits are still lapping in the financials but not in the effort.

That team is now -- has integration well behind them, and it's focusing on optimizing that business and we've seen significant improvement in quality, in margin, in the roast and ground, and liquid items that we have in the portfolio. And I think that bodes well for the future of our food service away-from-home, liquid business and roast and ground business.

Thank you. I'll pass it on.

Jonathan Feeney, Athlos Research.

Good morning. Thanks very much.

Good morning.

A couple questions on coffee.

The first is the economic environment interplay. You mentioned this a little bit in the preamble and even in answer to a question about hoping a better economic environment would make things better for packaged food broadly. And it stands out to me that it was a much tougher economic environment in those four staged significant price increases you took in the 2011 and early 2012 timeframe.

If you could just first maybe contrast what happened this time, what's been happening this time with this price increase and versus back then when it was pretty clearly a worse economic environment. And maybe since you had some different outcomes, what would make you think that that gets better with a better economy going forward? It didn't really help that much year-over-year. Maybe it did at the category level.

And the second question I had was, you made the comment a couple of times that you don't think that coffee category has fundamentally changed. And in a given quarter, I'm sure that's right. But you've seen over the past four years this single-serve coffee phenomena go from nonexistent to over a third of the category sales now. And I wonder, what would be signs that the category's changed? When you make that statement, is it household studies you've done? Is it focus groups with consumers? Is it conversations with retailers? What makes you say that the category hasn't changed in a way that permanently sort of hurts roast and ground coffee and it declines from here? Thanks very much

Sure, Jonathan. Mark Smucker again. The first part of your question, just going back three years, if you recall again, as we did see volume impacted significantly, but it was over several quarters. It was over three or four quarters as opposed to over a single quarter.

And so, if you do rewind the clock back to 2011 or so, we did see those significant volume declines. And since then when our growth restarted, in total our coffee business in the last ten quarters has grown in every of those ten except for this last one, so the tenth one we're down. As it relates to the category as a whole, you're right. It has evolved significantly. There's absolutely no question.

Single-serve has brought over 2 billion Single serve has brought over $2 billion new into the category in terms of spend and so we've seen, if you will, the bedrock of the category -- the roast and ground has remained relatively strong. We've talked in other calls about the mainstream segment and the roast and ground total declining overall in very modest terms, low single digits. And that has come true.

And so there's no question that the category has changed significantly. But we do still believe that roast and ground serves as a bedrock and K-Cup and single-serve really has brought a lot of new dollars into the category.

And we participate in all those.

Yes.

So we participated in each of the areas of growth and the mainstream still stays very -- as we've said, the bedrock is still very relevant.

Great. Thank you very much.

Robert Moskow, Credit Suisse.

Thanks. Just wanted to end with a peanut butter question. Did you consider holding price on peanut butter? This category tends to be pretty inelastic. I guess I was a little surprised to see a 7% price cut in reaction to lower peanut costs. Was that part of the plan all along? Or did you consider maybe keeping prices a little higher?

Hi, Robert. This is Paul Wagstaff. Good question.

And we look at the peanut butter price decline that we took into effect, I think the first thing we always do is make sure that we're passing along the lower commodity costs to our customers and to the consumer and we felt that was prudent to do in the case of Jif. I think when you think about the Jif sale versus some of our other brands, a significant majority of the Jif sales are sold at everyday prices.

And with the cost situation we were in, we were having to do more discounting and promotions which isn't typically what we like to do. And so we felt by passing along the price decline to the consumers, it really achieved the two objectives of getting the right costs on shelf and also reducing our need to do deeper promotional pricing.

Okay. So, Paul, it wasn't part of the original plan for the year but you came to that conclusion?

No, no. We plan -- we figured that we were going to be taking a price decline this year.

Oh, you did. Okay. That's great. Thanks.

John Baumgartner with Wells Fargo.

Paul, just wanted to come back to peanut butter pricing here. Just in the context of the weak category in the volume sense, and then consumer weakness how confident are you that promo or price cuts won't end up deeper in the back half than maybe you think? And if they do, is that embedded in your updated guidance?

So, John, first off I'd say the first comment about the weaker category, it's actually a strong category. It's been growing. It's up. It's really taking advantage of the consumer trend of looking for lower cost proteins, which peanut butter is about the lowest cost protein out there. So we feel we're right on trend with the consumers and that category, actually, volume-wise has done pretty well. So we are confident in the back half of the year and we feel that we'll continue to grow. That's all.

Okay. Just a follow-up in terms of just bigger picture strategic questions about coffee. You've been there for about six years now. You have a nice business; there's some M&A over the years, but in terms of how the business has evolved, the food-service profits haven't really evolved as you expected. K-Cup growth has slowed, as you mentioned. Roast and ground still primarily a pass-through business, and you've also referenced McCafe coming in in January, impacting the Dunkin' that business going forward.

So as you step back and look at your categories, could you address maybe whether the landscape has kind of changed competitively versus a few years to when you came into the category? And maybe does that lead you to think more about doing something more transformative in terms of adding on business or more growth so you're just more stable in terms of cash generation?

Hey, John. This is Vince

Let me take a step back and we can talk about the history of the category, then maybe Richard can talk about how we think about other categories going forward. First of all, I would submit that it's been a tremendous success that we have added to the Company. If you think about when we acquired it -- at that time K-Cups or single-serve was virtually unknown, although it was beginning. The primary driver at that time was the premium or bag coffee segment. And at the time the relationship was entered into between the two parties, it was anticipated that would be about a $50 million business and it's now a $350 million business.

Secondly, it wasn't too long into the owning that business we knew we needed to look at our supply chain and our teams did a tremendous job of, quite frankly, rationalizing our facilities and getting into a strong footprint primarily within the New Orleans area.

Thirdly, we knew that this single-serve area was evolving and you had three or four players. And, quite frankly, all of the major players in the coffee category were not successful at that time and you had the emergence of Green Mountain. And we quickly aligned with them and we were the first national brand to be part of that system.

And then when the Sara Lee food service opportunity came up, we felt that that was a technology and a capability that we would like to have in our arsenal, being the liquid coffee technology. But as stated and as Steve has mentioned, it was probably a little more challenged than what we thought. But it gets back to our overall premise of wanting to compete in all forms and segments. And up until this quarter, we been successful in growing the segment profit year on year. So I guess I'll stop there with a little bit of a historical perspective.

I'll add two things to that. One to Vince's comments. We really like the coffee category. One of the only categories that has actually grown in dollars and this a lot has to do with K-Cups by $2 billion. It's gone from -- I don't know, a $6 billion category to over an $8 billion category and we've been able to participate in that.

There's almost no other food category certainly in the mainstream sections that have grown that much by that innovation. Now would we would have liked to have created the K-Cup category? Sure. But we participate in it and we are great partners with Green Mountain.

But on acquisitions, let me speak to that in just a minute. We look at acquisitions in three areas. Enabling acquisitions, we've done two there and those are things that just get us into new categories or new areas, which is Enray and Sahale. So it's helped us in the snacking area and the ancient grains, which is Enray Foods.

On bolt-ons, which is Cafe Bustelo, which was a great acquisition for the coffee category.

And then there's strategic acquisitions. Obviously the Jif and Crisco and the Folgers are strategic and we still see a couple of real opportunities in the strategic side to get some -- basically, as you commented, to get us into another area in the food business that would be very important for us. So we're still looking at those and still think there's a couple good opportunities out there.

Okay. Thanks for your thoughts. Appreciate it.

Farha Aslam with Stevens.

You highlighted that innovation is going to be critical for Smucker's going in to drive future growth and that you're looking for more differentiated and transformative innovations. Could you go through your portfolio and highlight to us where your team is working and the initiatives and the timing of those initiatives?

Farha, this is Paul Wagstaff. I'll go through my area and then turn it over to Mark or Steve. But I think when you start with peanut butter, we're looking at, again, the protein trends that I spoke to earlier and we are in the snacking area, so our Jif To Go Dippers, our Jif To Go products, those have done very well and we continue to push out new items there.

And there some other areas that we won't speak to; on peanut butter we think there's some great opportunity with. On Uncrustables we continue to really drive that business. In fact we sell about 300 million peanut butter and jelly sandwiches a year and that's growing at double-digit rates and we think there's some opportunity to continue to push out on some new innovation in that category.

On the fruit spread side, we've launched our Fruit-Fulls which is 100% fruit in a pouch which is really on trend with the pouch type packaging that's out in the marketplace as we speak. There's no sugar added and no other -- all ingredients are natural, et cetera. That continues to do well and we have some other items coming out on that front.

On the baking side, we talked about we have a lot of new innovations coming out with our seasonals and some of the [bold products] that we've spoken to previously. And so I think from the Consumer Foods side -- and then Sahale, with the new acquisition, again, that's right on trend with the protein and snacking and we think there's great new knowledge distribution opportunity to gain for that product line, but also for some new product opportunities and concepts we have that will be coming out here over the next 12 to 18 months.

Farha, this is Mark Smucker. In the coffee area, as you know we've done a nice job with just on an annual basis with new products. There are some bigger ideas that we've been working on behind the scenes that I'm just not able to share at this point. But hopefully in the next year or two, we will be able to bring to market some things that everyone, including the consumer, most importantly, will find interesting.

Farha, Steve Oakland.

I think if you look across our IFNF businesses, the Canadian businesses innovative in the baking category with Nutriflours and a number of new items. In our Natural Foods business the opportunity to take ancient grains to both mainstream and natural retailers, and then sprouted grains. I think the next wave of that is yet to really hit the mainstream, which is the benefits of sprouting and from a convenience standpoint and a health standpoint, et cetera. So the Enray acquisition brought us sprouting technology, as well, that's really new. And then in Santa Cruz we have got a number of new items, whether they be nut butters or applesauces or those things which are getting tremendous acceptance across both mainstream and Natural Foods, so --

Farha, this is Richard. I might just comment that we look historically to grow -- of our growth, 1% of the growth if we're going to go 5% -- 20% of that would come from new products. We've upped that to 2%. We are actually overdelivering on that.

But we just upped that last year because our success rate's been pretty good. And the other thing is our success rate is good in the sense that when we introduce a new product, most of those stay in the marketplace. We have a few failures, because we know you're going to have that, but most of ours have been successful and stayed on shelf.

Farha, this is Mark Smucker again. I was remiss in not mentioning one thing. We've been so focused on our roast and ground business, obviously, for the last several weeks that I think it's -- I need to do justice to the team. Our team has done a fantastic job, not only dealing with the current situation, but continuing to focus on the new products we do have out in the marketplace.

And I should mention our liquid items. We've recently come out with a flavor enhancer under the Folgers brand for coffee, basically flavoring and sweetener in a liquid form, in a very small liquid container. And in the next couple of months you'll be seeing an iced coffee execution in the same type of container. And we think those are great new products and they are gaining some relevancy with their millennial consumers. So I should have mentioned that earlier.

That's helpful. And then just as a follow-up regarding the promotions. The center of the store is very promotional. Have you reassessed how Smucker's goes to market manages promotions and thinks about promotions within the mix, given that the economy may be improving but it might be a sluggish recovery.

Farha, this is Vince. I would say we are evaluating it daily. I mean, honestly, we like most CPG companies have a very sophisticated trade marketing group and we evaluate pre and post every promotion of -- major promotion that we do. And I think you do see changing tactics, not only by our competitors, but by ourselves. And so, I mean, it is a daily activity that group is working on.

And perhaps some learnings on how you're going to market differently as a result of those learnings?

I guess I really don't have anything to add in terms of how we go to market differently. We work with our major retailers in joint business planning out as far as they want to plan. But I really can't say that there's been any major change in our go to market. Again Mark and Paul spoke at the price point things that we've looked at from time to time, but we would consider those to be routine activities we would do every day.

All right. Thank you.

David Driscoll, Citi

Thank you. I realize the time and I do appreciate the follow-up. A couple of questions here. On coffee, the Maxwell container was downsized, I believe, in 2012. That represented a difference from the 2011 period when we had the $3 green coffee costs. Do you think that that's a significant issue here on the promoted price points when you talk about this, I think you said $2 on the increase in the promoted price points. Is this Maxwell lower can size exacerbating the shelf perception from consumers?

Great question. Basically I would say that over -- since Maxwell house downsized, I would point to our share gains. And we've actually performed extremely well despite the variance between the competitor and our net weight in the cans. I think time has proven out that we can perform. Given the current environment, will we continue to evaluate? Absolutely. And so I can't -- there's nothing new that I can share with you at this point, David, but it's certainly something that is top of mind and as we have hiccups like this one, we certainly will go back and reconsider.

But I think, David, the answer is yes to your question. We haven't quantified it, but, yes, you can't ignore the fact that that pricing gap, half of that was probably driven by the size. And very specifically it probably did have an impact.

Yes. It seems logical. McDonald's in this craft launch, I find it fascinating that McDonald's has franchisees, they are going to go with K-Cups in grocery stores. Is there any movement on this Dunkin' K-Cup issue? And frankly I just asked the question, where are these people?

There's nothing to report, David. We continue to have a great relationship with Dunkin' and Green Mountain and continue to work the issue, but nothing to report.

Good question though.

Good question.

Yes. We get it all the time. Final thing for me and I'll end it. Things go wrong. It's part of life. But in your judgment, do you think the team reacted fast enough to this decline in the Folgers' volumes? Kind of -- if not, what can you do to speed your reaction to such a dramatic decline in volumes?

Well, I think -- this is Richard. There were learnings from that. The way we handled our pricing increase this time, especially on the promotional site. Mark said that earlier and we've learned from that. You can't -- when you go to the marketplace, you can't turn that around in one month or two months; it takes a couple quarters to do that because you have prices out there in the marketplace. But we had some learnings and we are adjusting because of that. And I think you'll see that in the back half of the year.

It truly did occur in the back half of the quarter.

Right.

So it would've been very difficult to respond anything, given what we were seeing in October.

Okay. Thank you very much.

It appears there are no further questions at this time. I'd like to turn the conference back to Richard Smucker for any additional or closing remarks.

Just want to say thank you for your interest in this Company and for being on the call and asking all the intelligent questions and I'm sure we'll have some follow-up answers later today for individuals that call in. So thank you very much.

Ladies and gentlemen, if you wish to access the rebroadcast after this live call you may do so by dialing 888-203-1112 or 719-457-0820 with a passcode of 586-0677. This concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.