JM Smucker Co SJM
Q4 2013 Earnings Call Transcript
Transcript Call Date 06/06/2013

Operator: Good morning and welcome to The J. M. Smucker Company's Fourth Quarter 2013 Earnings Conference Call. At this time, I would like to inform you that the 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 call over to Sonal Robinson, Vice President of Investor Relations. Please go ahead.

Sonal Robinson - VP, IR: Good morning everyone, and welcome to our fourth quarter earnings conference call. Thank you for joining us today.

On the call with me are 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, U.S. Retail Coffee; and Paul Smucker Wagstaff, President, U.S. Retail Consumer Foods.

Following this introduction, Richard will provide an update of fiscal 2013 and initial thoughts as we head into 2014. 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 2014. Before I turn the call over to Richard, let me remind 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 risks and uncertainties. I encourage you to read the full disclosure statements 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 website at smuckers.com. A replay of this call will also be available on the website. If you have any follow-up questions or comments after today's call, please contact me or Mark Belgya.

I will now turn the call over to Richard.

Richard K. Smucker - CEO: Thank you, Sonal. Good morning everyone, and thank you for joining us. This morning, we reported strong fourth quarter results that capped off another year of growth. We are pleased with our fiscal 2013 performance as we delivered record sales, earnings, and cash flow, while continuing to return cash to our shareholders. Vince and Mark will cover specifics of the quarter, so let me highlight a few of our many accomplishments during the past fiscal year.

Net sales increased 7% to nearly $5.9 billion for the year, reflecting solid growth across our key categories and brands. In the Coffee segment, volume for the Folgers and Dunkin' Donuts brands were up 3% and 11% respectively, while Cafe Bustelo and the Pilon brands both achieved mid-teen percentage growth.

In addition, K-Cups continued their strong performance, contributing nearly $290 million of the segment's net sales. Within Consumer Foods, volume for the Jif brand grew 8%, while Smucker's Uncrustables increased 23%. Innovation from Pillsbury continued to strengthen that brand overall position.

Finally, our fiscal 2012 foodservice acquisition accounted for a significant portion of the sales growth within the International, Foodservice and Natural Foods segment. Our Canadian and natural foods businesses also posted solid results for the year.

Non-GAAP earnings per share were $5.37, an increase of 14% with profit growth coming from all three segments. We also achieved another year of strong cash performance. Cash from operations increased 17% to over $850 million for the year, with free cash flow increasing over 40% to approximately $650 million.

Other key initiatives in fiscal 2013 included the launch of 70 new items including new varieties of K-Cups in both the U.S. and Canadian businesses, and our hazelnut Jif brand, also Smucker's natural fruit spreads and several new flavors of Pillsbury mixes and frostings.

In addition, we increased marketing by 10%, including the production of 25 new television commercials and the expansion of our digital marketing activities, which now represents over 15% of U.S. retail marketing spend. This, along with ongoing support of our customers through our category leadership programs, also contributed to the strong 2013 results.

Operationally, we completed the $70 million expansion of our two coffee facilities in New Orleans. We commenced the fruit spreads operation at our new manufacturing plant in one Orrville, Ohio. With 80% of the anticipated volume currently being produced at the new facility, the transition is expected to be completed by the end of the calendar year.

Finally, while investing in the long-term growth of our business, we also demonstrated our commitment to enhancing shareholder value by repurchasing nearly 4% of our shares utilizing approximately $360 million in cash. This includes 2 million shares repurchased during the fourth quarter. And we increased our annual dividend by approximately 9% continuing our steady history of dividend growth. We're proud of our team's accomplishments over this past year. With these results our five year compound annual growth rates of 18% for sales and 11% for earnings per share exceeded our long-term growth targets of 6% and 8% plus respectively.

This performance is a testament to our long-term as well as the hard work of our dedicated employees. And we thank them for their continued efforts. As we turn our attention to the new fiscal year, we are excited about our initiatives and plans, many of which are built on recent investments that we have made to grow the business. These 2014 initiatives include the launch of approximately 100 new items crossing all key brands and categories. At the same time, we project another increase in marketing and support, including new advertising and digital investments. Recently, we announced our sponsorship of the 2014 and 2016 U.S. Olympics and Paralympic teams, and we are proud to play a part in supporting these talented athletes.

Related initiatives will span TV advertising, retailer and consumer promotions, product packaging and digital support behind our participating brands of Folgers, Jif, Smucker's and Uncrustables. At CAGNY, we discussed our ongoing focus on growing these same key brands. With the coffee supply chain project complete and the fruit spreads activities concluding in the coming months, we have initiated capital projects to provide capacity necessary to support the additional growth opportunities of our Jif and Uncrustables brands.

This includes expanding our nut butter supply chain footprint, including converting our Memphis fruit spreads plant into a peanut butter facility. In addition, we are progressing on capacity expansion initiatives at our Uncrustables facility. In 2014, we expect to complete the installation of an additional sandwich line. This comes on the heels of recently doubling our bread baking capacity.

Finally, our expectations for continued growth and the ability to generate significant free cash flow provides flexibility to support our cash deployment strategy, be it acquisitions or returning cash to shareholders through dividends and share repurchases.

In a few minutes, Mark will share the details on our outlook for fiscal 2014. As we look ahead, we're excited about the New Year and remain confident in our long-term strategy, the strength of our leading brands and our employees' ability to execute with the operational excellence that the marketplace and our customers have continued to expect from Smucker's.

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

Vincent C. Byrd - President and COO: Thank you, Richard. Good morning, everyone. As we began fiscal 2013, we outlined several key areas of focus in response to a challenging economy, volatility in the commodity markets and increased competition. These included furthering our brand building efforts, demonstrating price leadership, continuing to optimize our supply chain and acquisition integration. The results we achieved for the year including a strong fourth quarter validate our commitment to these priorities.

Of particular note is our ongoing focus on innovation as products launched during the past three years represented $530 million of fiscal 2013 net sales. In addition, share of market remains strong across our businesses with increased dollar share in most of our key categories for the latest 12-week IRI scan period.

Let me now provide some color on each segments' results and highlight upcoming initiatives as we look to carry this momentum into 2014.

Starting with U.S. Retail Coffee segment, our fourth quarter performance was very strong with volume up 6% and profit growth of 18%, moderating green coffee costs provided the opportunity to lower prices during the year. These pricing actions along with our brand building initiatives contributed to the segment achieving year-over-year volume growth in each quarter of 2013, resulting in a 4% volume increase for the full year. Ultimately, volume growth along the continued benefits of profitable mix and restructuring savings help deliver 12% segment profit growth in 2013. Keep in mind because we took pricing down earlier in the fiscal year before recognizing lower cost our profit was back half loaded. Despite the timing impact this may have quarter-to-quarter, we continue to manage the price to cause relationship over a longer period and on a full-year basis the net impact did not significantly contribute to segment profit growth.

Looking at the key coffee categories, we are pleased with the ongoing growth of our K-Cup business. Sales increased 18% in the fourth quarter, resulting in full-year sales of nearly $290 million. While as expected, the growth rate has slowed, we remain bullish on K-Cups. New users continue to enter the category and our relationship with Green Mountain Coffee remain strong.

This year, we will launch two new varieties and we project net sales for our K-Cups to grow approximately 15% in 2014. Our premium coffee business also delivered a strong fourth quarter with volume of Dunkin' Donuts up 29%, reflecting a softer comp in the prior-year, our emphasis on better managing price gaps and our marketing support. In addition, our re-launched Folgers Gourmet Selections bag coffee performed well with 10% volume growth in the quarter.

In 2014, we'll expand our offerings in the premium coffee by launching Dunkin' Donuts bakery series, along with our new 100% certified line under the Life is good brand.

Consumer preference in the premium coffee continues to shift away from the bulk segment. Accordingly, we have decided to exit our bulk coffee business by the end of the fiscal year. In 2013, this business, which is primarily sold under the Millstone brand, provided $25 million in sales and did not significantly impact segment profit. However, we remain committed to the Millstone brand and will continue to support the Millstone K-Cups and bagged coffee business.

In mainstream coffee, we are encouraged by the results for the quarter. Volume for Folgers roast and ground grew 4%, benefiting from recent pricing actions and brand support. We are also pleased to note that Folgers has been named Coffee Brand of the Year in the 2013 Harris Poll rankings. This award speaks to the ongoing strength and relevance of the iconic Folgers brand.

Similar to coffee, the Consumer Foods segment achieved solid volume growth in the quarter, up 4% over the prior year. Although segment profit declined in the fourth quarter, it was up 6% for the full year.

Looking at our key categories, volume performance was led by peanut butter, reflecting 17% volume growth for the Jif brand. As noted in our release, the prior year volume was challenged due to a 30% price increase earlier in fiscal 2012. As previously discussed, a 10% price decline was taken in January in advance of lower recognized peanut costs. While our cost decreased somewhat in the quarter, the net impact of price to cost was unfavorable to segment profit growth and more than offset the favorable amounts realized earlier in the year. We expect peanut cost will show a more pronounced decline as we proceed to the back half of this fiscal year. Also within peanut butter, last month we began to downsize our core 18-ounce Jif by then to 16-ounces consistent with the other offerings in the space. In addition, we passed through a price decline that reflects the downside, anticipating an improvement in the competitive positioning of the brand.

Continuing our efforts to extend the Jif brand, we also look forward to the upcoming launch of the several new and exciting products including Jif Whips along with Jif almond and cashew butter.

Fruit spreads achieved a second consecutive quarter of solid volume growth including the contribution from our recently announced Smucker's natural fruit spreads offering. Our actions taken earlier in the year to narrow price gaps contributed to these results, supported by the expected incremental restructuring savings related to the new Orrville facility. We took additional price declines on selected fruit spread affective late April averaging approximately 11%.

Our Smucker's Uncrustables offering in this segment also achieved another strong quarter with volume up 22% and we look for this momentum to carry into 2014. Combined with spreads, our overall PB&J business is well positioned for the upcoming back-to-school promotional period.

In the baking aisle, the launch of six new summer seasonal items contributed to strong fourth quarter performance of our Pillsbury business. Volume was up 5% despite the fact of a previously discussed cake mix downsizing, as well as a change in our promotional strategy on cake. While both impacted year-over-year volume, these actions continue to improve the profitability of the Pillsbury business.

Let me conclude my remarks for the overall U.S. Retail business by reinforcing we are pleased with the fourth quarter performance. Combined Coffee and Consumer Foods segment delivered the highest year-over-year volume growth in the last 15 quarters.

Let me now turn to International, Foodservice, and Natural Food segment were net sales decreased 9% in the fourth quarter. This decline was due in part to the initial impacts of exiting both the private label roast and ground coffee business acquired in last year's Foodservice transaction, as well as a portion of the school foodservice business. Expanding on the coffee rationalization, volume has been impacted by the loss of the business for other related beverages due to the bundled nature of certain contracts and relationships. While we anticipate losing a portion of the more profitable business in the transaction, the extent is somewhat greater than initially projected and we now estimate a modestly higher impact on sales and profit from this exit. We expect to complete the rationalizations of the private label coffee and Uncrustables by the third quarter of fiscal 2014.

Recognizing these changes, we remain pleased with the performance of our core liquid coffee component of the acquisition. This summer, we'll be launching Folgers liquid coffee in the foodservice channel. As the brand the consumers know and trust we look forward to the growth opportunities this provides. The scale this acquisition created for our Foodservice business provided an opportunity to enter a new multiyear licensing and distribution agreement with Cumberland Packing Corporation. Next month, we will begin marketing and distributing Cumberland's branded tabletop sweeteners including Sweet'N Low and Sugar In The Raw in the foodservice channel in the U.S. and in the retail and foodservice channels in Canada, these products will serve as a complement to our foodservice beverage business, while also expanding our tabletop presence. The remaining portions of the segment delivered a solid 2013. On a full year basis, the majority of our categories in Canada achieved volume, sales and market share growth, with particularly strong contributions from the coffee business, including our K-Cup offerings.

Finally, our Natural Foods category realized a strong fourth quarter. This caps off another year of solid growth as consumer interest in the natural and organic food space remains strong. Overall, for this segment, with the expected contributions from the new products and increased marketing support in 2014, the businesses remain well positioned.

Looking back over the past year, we are pleased with the progress on the key focus areas I outlined earlier. Building on this momentum, we are excited about the investments, innovation and other brand-building initiatives planned for 2014, especially our sponsorship of the U.S. Olympic team.

I will now turn the call over to Mark to discuss our consolidated results for the fourth quarter and to provide details on our outlook for 2014.

Mark R. Belgya - SVP and CFO: Thank you Vince, and good morning, everyone. Let me begin with a few comments on fourth quarter results. Net sales decreased $16 million or 1%, reflecting a 5% impact of lower net price realization, primarily driven by price declines taken in coffee and peanut butter. A 2% increase in volumes and a favorable sales mix helped to mostly offset the price impact.

Non-GAAP earnings per share exceeded the high end of our implied fourth quarter guidance range by 13%. This outperformance is attributable to several factors, notably, stronger-than-expected volume across our U.S. retail business, favorable absorption of manufacturing overhead, a lower-than-projected tax rate and the purchase of shares under our buyback program. GAAP earnings per share were $1.22 this quarter and $0.93 in the fourth quarter of last year.

Special project cost, as defined in our press release continued to decline on a year-over-year basis as the underlying activities wind down. Also last year's fourth quarter included a significant portion of the merger integration costs associated with the foodservice acquisition.

Excluding special project costs, earnings per share were $1.29 this quarter and $1.10 last year, an increase of 17%. Operating income, excluding special project cost, was up 5% reflecting a mix-and volume-driven increase in gross profit. The favorable impact of lower manufacturing overhead caused by decreased costs and higher production volume also contributed to the higher gross profit.

SD&A expenses increased 9% for the quarter, resulting from a 17% increase in marketing, along with higher G&A expenses that reflect incentive compensation cost adjusting up. The income tax rate was 32.1% in the quarter, which was below our expectations with lower state income taxes being the largest contributor to the decline. This compares to a 36.5% rate in the prior year's fourth quarter. For the full year, the tax rate decreased from 34.4% in 2012 to 33.4%.

Cash provided by operations was $172 million in the quarter, and this brings the full year total to $856 million compared to $731 million last year. The increase primarily reflects the higher current year income and a net decrease in cash used for working capital. Capital expenditures were $60 million in the quarter and $207 million for the full year. This resulted in 2013 free cash flow, $649 million.

Let me conclude our formal comments by providing sales, earnings, and cash flow guidance for 2014. As noted in this morning's release, we expect non-GAAP income per share in the range of $5.65 to $5.75 compared to $5.37 this past year. This range assumes weighted average shares of 106.5 million. Excluding amortization expense of nearly $100 million or $0.62 per share, the corresponding guidance would be $6.27 to $6.37. Much of the year-over-year EPS increase is expected to come in the back half of 2014.

Net sales are anticipated to be comparable this past year. On the plus side, mix should remain favorable, driven by coffee and peanut butter in the U.S. retail segment. In addition, the new Cumberland distribution agreement is expected to add $35 million of sales all in International, Foodservice and Natural Foods segment. Offsetting these factors is the full year impact of price declines taken in 2013. We anticipate overall volume to be flat. U.S. retail segments are expected to increase approximately 2%, but the International, Foodservice and Natural Foods segment will be down, reflecting the incremental impact of the business rationalization. Combined, these reductions are expected to have a high single-digit percent impact on net sales for the International, Foodservice and Natural Foods segment, including these reductions the segment volume would be up modestly.

The net impact of lower commodity cost within our basket of goods will be favorable to COGS in 2014. Lower costs are expected for coffee, peanuts and sweeteners with flour and milk costs projected to be slightly higher. Favorable mix is also expected to contribute to gross profit growth.

Including the effect of pricing actions taken to date, we expect an increase of approximately 200 basis points in gross margins excluding special project costs, with contributions coming from all three segments. Incremental supply chain savings of approximately $15 million are anticipated as the projects are expected to deliver nearly $60 million in run rate savings for 2014. This is slightly ahead of our previous projections, reflecting higher than estimated savings realized in 2013. A majority of this year's incremental savings are being generated from our new Orrville facility, and as Vince noted, we plan to reinvest these savings in our Smucker's food spread business in part through the April price reductions and in increased marketing.

Overall, SD&A expenses are expected to increase approximately 8% over 2013. This includes an increase in marketing of 10%, along with costs associated with a significant information systems upgrade and other corporate initiatives. We expect much of the gross profit gains will lead to year-over-year increases in the coffee and International, Foodservice and Natural Foods segments. We expect Consumer Foods segment profit to be comparable to fiscal 2013 due mostly to increased marketing and distribution costs.

Further, it should be note that while peanut costs will be lower versus the prior year, the cost-price relationship will negatively impact margins in the first half of the year. Below operating income, net interest expense of nearly $93 million is projected including interest associated with anticipated borrowings on our revolver. Tax rate of 33.5% comparable to this past year is our current assumption.

Turning to cash flow, capital expenditures of $270 million are planned with $45 million related to restructuring projects, including our peanut butter footprint expansion. The increase in CapEx over 2013 reflects these investments to support the future growth of peanut butter, as well as, our Uncrustables business.

Also this year, construction will commence on a new innovation center located on our Orrville campus. That will enhance our ability to collaborate with the customers once completed in fiscal 2015. Special project costs of just over $30 million or $0.20 per share are expected with most having a cash impact. The remaining noncash charges primarily represent accelerated depreciation. Excluding special project costs, depreciation and amortization expenses should approximate $245 million. Factoring all of this in, free cash flow of $600 million is expected assuming a slight reduction in the use of cash for working capital. While free cash flow is expected to be down from the prior year, we remain on track to achieve our $850 million free cash flow target for fiscal 2017.

Finally, we felt it was important to point out a couple of key factors related to the first quarter. Last year's results included $20 million in favorable unrealized mark-to-market adjustments and significant timing-related effects from the price-to-cost relationships which negatively impacted coffee and favorably impacted Consumer Foods.

Taking these into consideration, and also factoring in our commentary for this year, the current estimate for our first quarter 2014 reported non-GAAP EPS is expected to be comparable with the prior year's first quarter. As I stated earlier, we expect much of our reported non-GAAP EPS growth will occur in the back half of the year.

In closing let me reiterate how pleased we are with this past year's performance with record level of sales, earnings and cash flow. We would like to thank our constituents for their continued support and we look forward to another successful year.

With that, we will open the call up to your questions. Operator, can you please queue up the first question?

Transcript Call Date 06/06/2013

Operator: Andrew Lazar, Barclays Capital.

Andrew Lazar - Barclays Capital: You mentioned in the press release that for the year, prices were down more than the benefit from lower input cost. I'm assuming this is primarily because of the mismatch between price and cost in peanut butter, and that price and cost were more aligned, or even maybe a net positive, specifically for coffee in the year. Is that a fair statement?

Mark R. Belgya - SVP and CFO: That is exactly correct.

Andrew Lazar - Barclays Capital: You talked about over last couple of quarters some of the pricing actions that you were taking for various different reasons in some of the businesses. It certainly seems like the volume response anyway that you're getting would be one that bears out the reason for having done some of that. So as you go into '14, what's the thinking around some of those activities around either promotional price points and things where you made some tactical decisions? Do you keep going with those? Do you expand maybe the scope of some of that? Given you've got more reasonable input cost flexibility, just because you're seeing certainly the positive impact on volume?

Vincent C. Byrd - President and COO: I think, overall as a category or categorically we would say yes, we'll continue to emphasize managing our price caps. It obviously takes into account our position on the commodity in question. But yes, we will continue that activity.

Richard K. Smucker - CEO: That being said, as you know, we don't just sell on price, and so we are very price-sensitive to get promotions that are unreasonable.

Vincent C. Byrd - President and COO: I think it's more – let me just expand. I think it's more about applying the learnings that we have on our pricing gaps and our elasticities that we were doing a better job of managing.

Operator: Eric Katzman, Deutsche Bank.

Eric Katzman - Deutsche Bank: I guess, the first question on the Pillsbury business, is it something in the competitive set that's making you I guess as you put it, materially change your promotional strategy there?

Paul Smucker Wagstaff - President, U.S. Retail Consumer Foods: Actually, when we look at the overall Pillsbury business in the baking aisle, we felt that the change in promotional strategy was driven by not so much competitive, but what we felt would be an opportunity to improve margins overall and still take some of those margins and reinvest in innovation which we've been able to do and grow that business pretty significantly. So – but we think it's the right strategy, and so far it's been working.

Eric Katzman - Deutsche Bank: Then I guess, on the foodservice coffee, the liquid part of it, can you just – you've had the business for a little over a year I guess or close to it and you are finally going to be scaling back to that core business. Maybe you could just kind of give a bit of detail on how big the business is today and how big you think it can be and what – how far you're willing to go in terms of being, let's say, like a distributor which I guess is kind of what this Cumberland business got what that is for you.

Steven Oakland - President, International, Foodservice and Natural Foods: Let me take you through a couple of pieces of that. As you know, when we finally closed the Sara Lee deal, we ended up with a lot of noise in that business. And this private label volume and the customer relationships, and so, yes, that's been frustrating to get that all right and get through that. But behind that, the liquid coffee business, the core liquid coffee business both in United States, Canada and Mexico has grown during that period. And it's grown with the Douwe Egberts brand on it. And although well recognized and a great brand in much of Europe and other parts of the world, it is unrecognized in North America. So, we're very excited about putting the Folgers brand on it, and that allows us to take that product, the high-volume coffee outlets where it will be front-of-house, where the consumer will see the piece of equipment. So, we think that opens up a whole new realm of opportunities for us. So that will happen in the next month or so and we'll start shipping that product, and the response to-date has been great, so excited about that. Number two, the Cumberland arrangement, and I think if we step back and look at what we did to foodservice. We did the foodservice what we did to the Smucker Company years ago with the Jif and Crisco opportunity. We really increased our scale and our relevance to the customer. So, being in the coffee business, it's a key category to every foodservice operator, and so you take out all of the noise we've done, we created a direct sales opportunity. We have national sales and service. So, we've got much deeper coverage. So things like the Cumberland quite frankly, is the first benefit you'll see of that new scale. Cumberland came to us, they're a wonderful family company. It's probably more of a sales and marketing agreement. We think it'll have good margins long-term for both parties. What's more, closely aligned to us in tabletop Sugar In The Raw, tabletop Sweet'N Low. And they've got a great new product line that we think we can take to market over time. So, we're excited about that and that's a first look at the benefit of Sara Lee on the Foodservice business.

Mark R. Belgya - SVP and CFO: Let me add. When we announced the deal, and over the last couple of quarters, we've talked about the dollar impact on the sale side of -- the portion of the business that we do not want to keep, and that number has kind of have been between $75 million and $100 million. It's probably closer to $110 million. Most of that will come through this year, primarily through the first three quarters. It's probably about $75 million to $80 million would be the current year impact.

Vincent C. Byrd - President and COO: Let me just expand on Paul's answer relative to the Pillsbury. It's a great example of what Richard was speaking to in the first question. We actually reduced our trade spend because of learnings that we had relative to our frequency and depth. Even though it affected some of our share, it was a conscious decision because it improved our bottom line and allow us to invest back in the brand.

Eric Katzman - Deutsche Bank: Just last question on the guidance and the waiting. How much of it Mark would you say is due to the timing in peanut butter and costs and the roll-off of the inventory I guess versus the exiting of the rest of this Sara Lee stuff and ramping up of Cumberland, et cetera? Like how do we – like bucket-wise the guidance, the weighting and the difference between $5.65 versus $5.75 on the earnings?

Mark R. Belgya - SVP and CFO: Yeah. I guess what I would say, Eric, is that it clearly is heavily impacted by the cost of the peanuts. We will certainly move into lower-cost peanuts as we progress through the year as compared to the price decline we took. So, that is going to be a heavy back end. In terms of the exited business in foodservice, that's a little bit more ratably over to Q2 and Q3.

Operator: Farha Aslam, Stephens Inc.

Farha Aslam - Stephens: First question is on volume. It clearly outperformed your expectations during the current quarter. If you had to kind of parse out the reasons for that outperformance versus your expectations, do you think it was easy comps, do you think it's your marketing programs and promotional programs or do you think it's the consumer that's getting more comfortable with the prices on the shelf now?

Paul Smucker Wagstaff - President, U.S. Retail Consumer Foods: I'll start Mark, and then you can go. On some of the categories like peanut butter for example, we got pricing back in line to what made sense with the consumer, and clearly we saw significant increase. Jif was up 17% for the quarter, so that was good. When you look at our frosting business, we were up 17%. That was also driven by a couple of factors, new product launches that have done very well and we've been very pleased with that and some of the promotional dialogue that we talked about earlier. Fruit spreads was also up 4% and we have taken some pricing action on that as well as launching some new items. So, I think it's a combination of pricing, new products and getting back in line from a price point perspective on shelf.

Mark T. Smucker - President, U.S. Retail Coffee: Just on coffee, I think it's basically everything that Paul just said. I mean, we did of course have a bit of a soft comp coming off of the last – the prior Q4. But given all of our consumer and customer support, given the excellent pricing management that we had and just getting our absolute prices as well as those gaps right, we really saw good momentum, and I will daresay that, that momentum in the latest (fore looks) to be continuing. So not only were our shipments good, but also the consumer pull-through seems to be good as well.

Paul Smucker Wagstaff - President, U.S. Retail Consumer Foods: I'll just add to that. This is Paul, again. I'd say the same thing on the momentum. Our momentum looks like it's continuing through this next quarter, so we're in really good shape.

Richard K. Smucker - CEO: If I had to put a percentage on it, I'd say probably 80% of the actions that we've taken internally, and 20%, the results of consumers feeling a little more confident, but it was more, I think what we're doing. We do see the consumer being a little more confident, but that's the smaller portion of it too.

Farha Aslam - Stephens: Then my second question is on your cost savings effort. You save $90 million this year, could you share with us what your run rate is for next year? Any new initiative and more particularly your thoughts and how much you – longer term think you'll reinvest back into your business versus just sort of allowed to fall to the bottom-line, just your thinking on how you think about those cost savings?

Mark R. Belgya - SVP and CFO: Maybe if you wouldn't mind just for clarification, I think, you said $90 million. I'm not quite sure we're that.

Farha Aslam - Stephens: I'm sorry. Was that your cost savings actions? Did I get the $90 million wrong? What did you save in terms of cost savings for 2013 and what do you expect for 2014 from those pricing actions?

Mark R. Belgya - SVP and CFO: Around our supply chain initiatives?

Farha Aslam - Stephens: Yes.

Mark R. Belgya - SVP and CFO: What we've said is that on a full year run rate basis, we're now up to $60 million. You'll recall when we announced it two year ago, we said that, that total would be $70 million. So, we'll hit that $70 million fully in fiscal '15 and that really comes once the Orrville plan is online and everything is in transition. This year, we did take the opportunity -- we'll be taking the opportunity to take these incremental savings, that's sort of that first batch of savings if you will from Orrville and putting that back into the fruit spreads. That was part of our intention all along. I think we've said that some of that savings overall from our projects would flow through the bottom line, but we would also take the opportunity to reinvest. Specifically, as it relate to fruit spreads on price shelving, particularly with private label had widened a bit more than we like. So we see this as a great opportunity to take those first batch of savings and put that back against the pricing. There will be more next year. If all goes well, hopefully that will be more directed towards the bottom line. But we'll wait to see how that plays out.

Richard K. Smucker - CEO: I just want to complement our team in case any of them are listening. They did a wonderful job of building this $150 million plant to give us even better quality than we've ever had and started up on a very rapid basis. And we've been able to produce product at a better quality at lower cost. So, it was a great combination and the team did a wonderful job on that.

Operator: Christopher Growe, Stifel Nicolaus.

Christopher Growe - Stifel Nicolaus: Just want to ask you first of all on the coffee division. You've had two really solid quarters; I know in part its comparisons to the prior year. But we've had a persistent decline in the underlying input, the green coffee costs. So my question is as you go into early fiscal '14, it would seem like that benefits should continue to accrue to the Company. I know you've taken the pricing decline, but the decline in input cost looks like it's even more dramatic than that. Would you expect that pricing versus cost deflation benefit to continue into the first quarter? I know you've called for overall flat EPS. But that division in particular, will that see a benefit?

Mark T. Smucker - President, U.S. Retail Coffee: Yes, I think a couple of comments. First of all, if you recall, obviously we buy both robusta and Arabica. So, robusta prices have been firm. Arabica has seen what I would call a consistently gradual decline. As you know, when we priced for that in February, we did reflect some of that. So, there are a combination of factors. As we go forward and look into the next couple of quarters, we will take a pricing action when our cost and position dictate that we do that. So we'd keep an eye on it. But again, I guess I would just emphasize that it's not just Arabica, there are other factors in the price of the instruments that we trade.

Mark R. Belgya - SVP and CFO: Just to add in I think just to underscore a comment that I had in my scripted remarks is that, last year's first quarter in coffee, too, and we sort of led with price in little advance with the declining coffee. So last year's profitability was, I'd call it a bit of a softer comp as well. So the combination of two will affect the Q1 of '14.

Christopher Growe - Stifel Nicolaus: To also reiterate, and it comes back a bit to the question that I think Eric asked earlier about, basically trying to keep the pressure on the – if you get pricing to match cost deflation, in this case, and trying to keep that volume momentum, that seems to be the underlying theme here though. Is that correct in the coffee division?

Mark T. Smucker - President, U.S. Retail Coffee: Yes.

Christopher Growe - Stifel Nicolaus: Just one quick follow-up and that would be that you've called out another pretty solid increase in marketing for the year. I know it was – the increase was pretty strong in fiscal '13, little less than you initially anticipated because of some shift to promotion. So I just want to understand that kind of how you look at promotion in fiscal '14 in relation to that pretty solid marketing increase. Is there any kind of reversal there, or how do those two inter play in fiscal '14?

Paul Smucker Wagstaff - President, U.S. Retail Consumer Foods: A couple of things we're doing on marketing side. Obviously, it's the Olympics, is impacting our increase in spending. Again, we're very excited about the opportunity, and I know on the consumer side, it's the Jif, it's the Uncrustables and the Smucker's brand and it's in Folgers in coffee. And then also we have – we're launching 58 new items, I know on the Consumer Foods side, and so our marketing is increasing because of that investment spending.

Vincent C. Byrd - President and COO: Let me just say that the trade spend is one area that we obviously compose a lever versus our other marketing elements, and so we clearly are pleased that we increased the marketing in '13. Our plan is to increase marketing in '14. Trade spend will ebb and flow a little bit depending upon, again our pricing position of our commodities and where we need to be competitive in the marketplace. So, it will go – it will increase or decrease depending upon where we are, the position of our raw materials, as well as competitive activity.

Operator: Alexia Howard, Sanford C. Bernstein & Co.

Alexia Howard - Sanford C. Bernstein & Co.: Can I just follow-up on Chris' question about marketing spending. Couple of questions linked to that. Can you quantify roughly how much marketing expenditure is expected to increase in fiscal '14, and then on the quarter, how much is marketing spending in Coffee up?

Mark R. Belgya - SVP and CFO: For the fiscal '14 round numbers is that that 10% increase will equate to about $0.20 of EPS. And then I think again this is sort of broad brush, probably about half of that would be more Olympics related as part of Olympics. In terms of the coffee, we don't really give increases other than I can say it's significant increase in marketing in Q4.

Alexia Howard - Sanford C. Bernstein & Co.: Then a quick follow-up. Your share repurchases have obviously driven a nice bump to the EPS growth in fiscal '14. Your cash flow is moderating slightly this year, but would you expect uses of cash to be broadly the same in fiscal '14, as you've seen this year?

Mark R. Belgya - SVP and CFO: I don't see a significant change in our assumptions around cash deployment. Now of course, the question will be if that's the case then why are the shares right now basically unchanged for the year. That's pretty much the approach we take when we plan. We don't assume buybacks because if you buy it on day one of the year and has a completely different impact if you buy it on the last day of the year. But just from an actual use of cash, it still plays a very big part on our deployment.

Operator: Ken Goldman, JPMorgan.

Ken Goldman - JPMorgan: You're guiding to, if my math is right, 5% to 7% EPS growth next year. That's below your long-term guidance. The only time you've been that low since you bought coffee was 2012 when coffee costs were spiking pretty hard, right? So, now you have coffee going the other way. I know you mentioned robusta not being down as much, but I'm looking at the future is in Bloomberg. It looks like robusta is pretty straight line down over the last few months. So, I'm just curious if you can highlight some of the strongest headwinds you see into '14 that are going to offset the benefits of those lower bean costs. I realize you've outlined some of these. I'm just hoping to pick your brain about how we may weigh some of them more heavily than others if we can.

Mark R. Belgya - SVP and CFO: Just to talk to some of the major drivers. Obviously, I just mentioned the marketing impact, which 10% is although we did it last year, I wouldn't it's a normal amount of marketing support. So you can pick whatever you think the right number is and take that EPS impact. I think also on some of the exited business, between the Uncrustables, the out of school that we are exiting consciously as well as the private label coffee and the affiliated items around that, that also had - if you total altogether, it's probably another $0.05 to $0.10, which I'm guessing you may not have factored in. So, those really are two key drivers of maybe what the expectations were versus what our guidance range is directing

Ken Goldman - JPMorgan: Then second question, I realize you previously guided to a decline at some point, but your prior guidance implied around $300 million in K-Cup sales for the year. You came in about $10 million below that. So, can you help us understand what happened this quarter that maybe you didn't anticipate? And I guess as a corollary to that, your K-Cup growth was lower this quarter than what Nielsen might have forecast as well. So, I'm hoping to get some color from you whether this was an issue of measured versus non-measured channels or more about the timing of shipments. Thanks.

Mark T. Smucker - President, U.S. Retail Coffee: I think generally, K-Cups ended up pretty much where we thought they were going to end up. I think the guidance that we gave, we were almost spot on, and it is – it does go back to what we talked about the law of large numbers, and as things grow, you are going to see this percent decline decrease. Having said that, if we are talking about a 15% growth for the coming year it's still double digits. We still feel very good about that and it actually is generally in line with what our number one partner has guided to as well, I think, in their most recent call. So, we still feel optimistic. We've got some new products coming out in K-Cups this year, and so we still feel good about our opportunities there.

Ken Goldman - JPMorgan: But for six straight quarters, your incremental sales from K-Cups were at least $30 million, and they suddenly dropped to $11 million. I guess I'm curious, that's not a law of large numbers. That's a pretty sudden drop. What really did you see this quarter, was it competitive activity? Was it the category declining? What did you see that drove the quickness of that drop, I guess, is what I'm going for?

Vincent C. Byrd - President and COO: Again, I would go back to Mark's initial comment is we're still on a pretty significant steep ramp up. The other thing, of course, is we have a number of unlicensed participants that are getting trial during – over the last three to six months, and so that obviously has an impact on the category. If you look at the Nielsen or IRI data, you will see how much those unlicensed participants have affected the category. So again, I would go back to what Mark said, to build a $290 million business in a short period of time, we are very, very pleased with.

Operator: Jonathan Feeney, Janney Montgomery Scott.

Jonathan Feeney - Janney Montgomery Scott: I wanted to ask about the cash flow, both the timing over the course of the year, and I apologize if I've missed this, but you talked about $600 million for next year. This year, you got some about $40 million, it seems out of working capital and you made a $40 million pension contribution. Could you talk about maybe working capital and pension for next year in the context of your $600 million guidance?

Mark R. Belgya - SVP and CFO: In terms of the pension, we would not have that kind of contribution this year. That was to help support some of the things that we had done around some lump sum payouts that will return to a much lower amount in '14. I guess my primary comment, Jon, would be around working capital. We still feel – and this is not just a '14 comment, this is probably a more longer-term comment, that we still can drive that number down. So, we've assumed – we look at that as a percent of revenue. So we think we can take it down another point, which would be about $50 million reduction. So we've got that roughly built into our '14 estimate. You may have missed this, so I apologize if you've heard this. But in terms of just a year-over-year decline from $650 million to $600 million, that really is driven by the capital expenditure increase. We're going from $207 million this year to $270 million next year. So, as we said, as we move out towards 2017, we've got a couple of years of high amount. We really think that at least most of the major capital expenditures will be behind us and we'll see that taper down a bit and that should help us deliver that $850 million that we've been talking about.

Jonathan Feeney - Janney Montgomery Scott: So, if you hit your target on working capital reduction, I should do this math. About roughly how much money would that be?

Mark R. Belgya - SVP and CFO: It'd be 1% of sales, so roughly $50 million to $60 million.

Jonathan Feeney - Janney Montgomery Scott: D&A somewhere around $260 million? It was $260 million last year?

Mark R. Belgya - SVP and CFO: Yes, $250 million to $260 million. That would include special project. I think without it I think I'd say it was $245 million.

Jonathan Feeney - Janney Montgomery Scott: I guess if I put all those things together, I would get to a number a little higher than $600 million x the pension piece. So, is just that you're being conservative there or...

Mark R. Belgya - SVP and CFO: Yes. Obviously, it's early yet. The key about working capital as you know, it all kind of contingent on where you sit on April 30. So our best guess would put it there, and hopefully we're a little conservative.

Jonathan Feeney - Janney Montgomery Scott: Just one other question. Both the peanut butter and the coffee category have necessarily due to some of your commodity price corrections are going through some price reductions. These things do tend to take on a life of their own sometimes. Sometimes it works and price stabilizes, other times it really changes the competitive dynamic quite a bit. In both of those categories, have declines and price have been simulative to volume? Have they brought volume back to the category, you think just that specifically? I know there is a lot of things going on, and is it playing out competitively the way that you would have thought it would, the way you were planning for as far as it could be measured with price reductions and managing gross profit?

Mark T. Smucker - President, U.S. Retail Coffee: I think generally, to answer to your question is yes. We have seen it played out more or less as expected. In terms of coffee declines and the pricing actions we have taken. In some cases we've actually seen some of the competitors lag in taking a price decline. So, we are seeing a bit of compression there. But overall, yes, I think it has helped volume, and as you know, there continues to be some speculation in the marketplace that sort of messes with the fundamentals. But overall, I think you are generally correct.

Paul Smucker Wagstaff - President, U.S. Retail Consumer Foods: On the peanut butter side, I agree with Mark. It's a similar situation. We feel that obviously the pricing action has definitely stimulated the volume growth not only for us but for the category, and we would anticipate that continuing.

Richard K. Smucker - CEO: I just want to – an overall comment on pricing and how we look at it, we – our strategy is to own the number one brands, and because of that, we do have some pricing flexibility, both up and down, and – but the key is responsible pricing. We want the pricing – again, we don't just compete on pricing. So, we want responsible pricing. We don't want to be in a position where we are driving the market down, and we are very sensitive to that. We don't see that happening, and all the categories that we currently are in have been pretty stable categories in terms of not getting into pricing wars, and so that's always been our leadership position.

Mark T. Smucker - President, U.S. Retail Coffee: I guess one more thing, Richard, just to add is – one, in coffee, what we did see if you recall when prices were really high, consumers started to trade down to more opening price points. And so now we're actually seeing that like we've always said, it's a smoothing of the hourglass and consumers coming back to the core brands and the important stuff.

Operator: David Driscoll, Citigroup.

David Driscoll - Citigroup: Wanted to ask a few coffee questions, Mark. First, was the positive sales mix in coffee also positive to coffee margins?

Mark T. Smucker - President, U.S. Retail Coffee: Yes, it was.

David Driscoll - Citigroup: Then second question here, can you guys discuss a little bit more of the full year coffee profit growth? I guess what I'm trying to do is break away from kind of some of this quarterly volatility that we see. I think profits in coffee were up about 12%. I think volumes on the year were up something like 4% or 4.5%. But if you could bridge this, kind of what are the main factors that are driving the profit growth, and noting, I did hear your comment that green coffee costs were favorable, but I'm kind of hoping you can rank this stuff for us and get me a little bit of a better understanding on the full year coffee profit algorithm?

Mark R. Belgya - SVP and CFO: Yes, I'd be glad to give, it's Mark Belgya. Really it falls in three primary buckets. It would be mixed volume and then the cost savings from the restructuring projects, as well as just ongoing projects around cost initiatives. But they're fairly well distributed between the three buckets.

David Driscoll - Citigroup: Okay, and that's true for the full year basis, and then I thought you said to Andrew Lazar's question that green coffee cost were a positive in 2013. I thought he was asking the difference between the peanuts and the coffee. I thought you said that coffee was a net favorability.

Richard K. Smucker - CEO: Not on full year basis. It might have been up slightly, but it was basically attributed to the other factors that Mark Belgya articulated.

Mark R. Belgya - SVP and CFO: It did contribute, we just want probably 5 or 6 components volume mix, including a couple of others.

David Driscoll - Citigroup: Final quick question, just back to the cash flow. Just so I understand, it's something like $600 million in net income for '14. D&A -- what was your guidance for D&A for next year?

Mark R. Belgya - SVP and CFO: It's around $250 million. Plus, it depends on how you take into account amortization of the restricted stock, which is about $20 million a year.

David Driscoll - Citigroup: You said that next year, you do expect $50 million of working capital benefits, is that right?

Mark R. Belgya - SVP and CFO: That's what our targeting is. That's correct.

David Driscoll - Citigroup: Then $270 million of CapEx and all these numbers are supposed to come together for something around $600 million?

Mark R. Belgya - SVP and CFO: Thereabouts, yes.

Operator: Akshay Jagdale, KeyBanc Capital Markets.

Akshay Jagdale - KeyBanc Capital Markets: Just first question on coffee and just the overall category dynamics. I think you guys are consistently hitting $6.99, $7 price point on your core offering on ground coffee. Part of that I guess is being funded by lower coffee cost, right. So can you just talk about the movement in the consumer a little bit more in the coffee aisle? On the one hand, clearly, you are doing a lot more in the premium side with K-Cups doing really well again and you are launching new products there. But it looks like the base business is also starting to come back a little bit. Can you just help bridge that a little bit, give us more color on what's happening, what's sustainable, and how much of that movement back to the mainstream is really just related to coffee prices being where they are?

Mark T. Smucker - President, U.S. Retail Coffee: First of all, just on your first point about promoted pricing, we are not at a $6.99 level. I think the lowest you'd probably see us in market on deals, it's about $7.99. Then secondly, to your other questions, you are absolutely right. I mean, the migration back to core has been fantastic. If you look at what we are looking at on our share trends through IRI, we are seeing, despite a very modest decline in the mainstream segment, we are growing our business as well as obviously share in that segment. And then on premium, again, it's what you said. We are focusing on premium. We've done good things on Dunkin' from a support perspective as well as getting the pricing right. FGS is doing well, and then of course, as you know, we continue to support our K-Cups. So – and then of course, even our Hispanic brands are also doing extremely well. So, right now, we are feeling very good about all the segments.

Akshay Jagdale - KeyBanc Capital Markets: Then, just on K-Cups and your guidance for '14, I understand the 15% guidance, and we appreciate you being specific. But when you started this year, I think, you said strong double digits and then you ended up being up over 60%. So can you just help us with the moving parts there, market growth versus market share, and perhaps give us your view on competition? You talked about – what I thought was interesting as you said new entrants are getting trial, but my guess is that what you think or what you're seeing is they're getting trial but the repeat rates might not be as strong. So, any color there will be great. I'm just trying to understand if you're being conservative with your sort of growth assumption for K-Cups or – and if that's the case, whether it's sort of share related or category related.

Mark T. Smucker - President, U.S. Retail Coffee: Okay, sure. Akshay, you're generally – again I think you're correct is a lot of the assumptions that you voiced. Frankly, the category is going to continue to grow, and there are – as Vince mentioned there is a lot of unlicensed entrants and they are generating trial. I think it remains to be seen whether or not they continue to generate repeat purchase. I think we feel very confident that we – over the longer time, the consumer will recognize the relative quality that the licensed entrants provide in their cup of coffee and may migrate back there. But you're going to see a lot of noise in the category over the next couple of quarters. I don't believe necessarily, I think the 15% is accurate. I think that we're pretty comfortable with that number. So, again, there has been – although there has been a lot of noise, there has been some quality issues with some of the unlicensed entrants and a recall here and there. So, I think that noise will continue, but longer term, our goal is to grow the business even if we may see some slight share erosion in the coming couple of quarters.

Akshay Jagdale - KeyBanc Capital Markets: Just one last one on – this is maybe for Mark. You're increasing marketing support, which is great to see. You're launching more new products, and you're having more success with new product launches as well. At what point -- where are you in that journey of sort of solidifying the organic growth of the Company or accelerating, rather, the organic growth rate of the Company? When might we actually see you guys have the confidence to maybe increase your organic growth targets on operating margin or operating income?

Mark R. Belgya - SVP and CFO: Let me start and let me start, and if anyone wants to jump in, please do. I think that, we do hear you in terms of organic growth. We've been pretty consistent over the last several years in terms of our -- particularly our top line growth expectations being split between organic/new products and acquisition. We've made a lot of investments. We clearly have exceeded our 1% new product target. I think that the emphasis we've put on, particularly at CAGNY, we're talking about Jif and Smucker's growth opportunities, handheld, right now being Uncrustables. Just the nature of what we're talking about and where we're investing our dollars would drive more organic-based growth. So that top line growth, clearly the contribution to the profit level should follow. So, I think we've been pretty clear to that. If everything plays out as we hope over the next couple of years, I think you'll see that.

Operator: Thilo Wrede, Jefferies & Company.

Thilo Wrede - Jefferies & Company: Just had a question on the Sara Lee business and the Cumberland acquisition. I think you said in your remarks that the negative impact from the discontinuation was higher than you initially expected because there were some bundling effects. Then you also said the Cumberland is really the first benefit from the Sara Lee acquisition. How far along are you on the learning curve of understanding or getting the Sara Lee business to say that you can already get incremental business because of Cumberland, just trying to understand what incremental opportunities could be from Cumberland?

Steven Oakland - President, International, Foodservice and Natural Foods: A couple of things, the contracts that we're exiting. I think what you're seeing in the financial statement I guess does not reflect the quality of the work that's going on in the business. The teams are in place. The direct sales forces are in place. We're working through these contracts. They're coming off the financials just when the contracts end. Quite frankly, some of those contracts were so good for the customer. They haven't been able to replace them. So, that's why they're running them to the very end. So, that's working its way through. In the interim, our team has been able to add the Cumberland business and if you think about a tabletop sweetener business, there's very few branded tabletop items, let alone those that tie-in directly with our coffee business. So, we think there is an opportunity with their current business, but also to launch their line of their own natural sweeteners over time. So, that's the first one. We think there are a number, and we don't usually talk about specific opportunities. But we think there are a number of away from home branded businesses that we now have the capacity and the organization to support. So, we're working hard on those and like every other business unit, acquisition is a key part of our growth, and we'll work those as they come available.

Thilo Wrede - Jefferies & Company: Would you make any comments when we should expect to see the first -- kind of updates what these incremental opportunities could be?

Steven Oakland - President, International, Foodservice and Natural Foods: That's hard to do. As you know those things are lumpy, right, and you fish and you fish and then eventually one comes about. So they're lumpy. But we're excited about Cumberland. I think it's a great, I think we all know Sugar In The Raw, we all know Sweet'N Low, and hot bev – being in the hot beverage business, having that complement is, we think, right on strategy.

Richard K. Smucker - CEO: Just on the whole Sara Lee acquisition, that's been – it's really been a great acquisition for us and a great fit with our foodservice business, and we still feel 100% confident that's going in the right direction. These are basically, in the whole scheme of things, small integration issues that you get into occasionally, and their whole economics are not that big. But the strategic reason for buying the Sara Lee business is still there. The base business is still very strong. It's given us great credibility in foodservice, and so we don't want to overemphasize just these small changes on a quarter basis, but it's still a very solid acquisition.

Operator: Jason English, Goldman Sachs.

Jason English - Goldman Sachs: We've been going on in the call for a while. This is a marathon call. So just – I've only got a couple of small housekeeping questions left for you guys. First question for you, Paul, the peanut butter cost versus price mismatch, I thought you were pretty explicit in the last call saying, 'listen, this is a fourth quarter question issue. We get into the next fiscal year and this thing is all trued up.' It sounds like that's not the case that we still have a bit of a bleed over to the first half of the mismatch. Is that right? Am I hearing you correctly? And if so, what's changed?

Paul Smucker Wagstaff - President, U.S. Retail Consumer Foods: Hey Jason, Paul here. Actually, I recall in the last quarter that we did mention (indiscernible) impact for next fiscal year as well. So, actually nothing has changed from our perspective. We knew there was going to be an impact going into the first half of fiscal '14, which it still is. I'd say the part that we're happy about is that the volume is responding. We were hoping it would, and we would continue to see that momentum continue.

Jason English - Goldman Sachs: Sounds like it was an interpretation issue on my end then thanks for the clarification. Then turning to Mark Smucker, one other housekeeping for you. You mentioned price gaps. You felt like you were in a good place. We saw Gevalia announced a price cut in May. We saw Starbucks and Seattle's Best announced price cuts in May as well. On the premium bag end, do you feel comfortable with your price gaps in the wake of those pricing actions from your competitors?

Mark T. Smucker - President, U.S. Retail Coffee: Jason. Yes actually, we do. And again, as I think we've said before, we think some of those pricing actions by the competition were lagging ours. So, I think we're still positioned very well.

Operator: Chuck Cerankosky, Northcoast Research.

Chuck Cerankosky - Northcoast Research: First question for you Mark would be, what kind of tax rate you're looking at in fiscal '14? With regard to – I'm just thinking about the low tax rate we saw in the fourth quarter, I'm guessing that's not indicative of next year or the current fiscal year?

Mark R. Belgya - SVP and CFO: Yeah, that's (indiscernible). We said, Chuck, it's 33.5%, which is pretty much in line with this year on a full year basis.

Chuck Cerankosky - Northcoast Research: In looking at the growth rate of K-Cups, 18% in the fourth quarter, would you be willing to say what it might be for fiscal '14, could we see a slower rate than that?

Mark T. Smucker - President, U.S. Retail Coffee: For the fiscal year, we said 15% for the full '14.

Chuck Cerankosky - Northcoast Research: Then, looking at the package gourmet coffee, there seems to be a lot of new brands in there. What is helping Dunkin' Donuts grow so rapidly to 29%?

Mark T. Smucker - President, U.S. Retail Coffee: Basically, it's what we've been talking just in terms of making sure we've got all the right consumer and customer support as well as getting those – the pricing, the absolute pricing and the gaps just right. And of course, we have a new product line actually that we are launching this year at Dunkin' bakery series which is not a seasonal item. It is actually a permanent line, and so that will help us. It's flavored coffee. It's flavored like basically Dunkin's pastries and doughnuts in their shop, and we feel very good that that will add to the growth as well.

Operator: Robert Dickerson, Consumer Edge Research.

Robert Dickerson - Consumer Edge Research: Just couple of quick questions. I guess, you said I guess for Q1, you expect EPS to basically be flat relative to last year. Should we be expecting the volumes to now be down in the first half or at least in Q1, just considering the fairly easy comparison we've seen in Q3 and Q4?

Mark R. Belgya - SVP and CFO: No, I wouldn't say that, because what you are going to see is the volume – overall, the volume decline is due to the exit of the businesses, and that's more of a Q2 and Q3 event as opposed to the first quarter, so I would not make that statement.

Robert Dickerson - Consumer Edge Research: Then also on the K-Cup side, I mean, there's obviously a lot of questions around the K-Cup business. If we see this – we've seen decelerating growth obviously in the category for some time now, it's still good. It's still double-digit growth. But that said, as we think forward, really I guess in the first half or into the holiday season and with coffee costs down as much, and with increased competition now in the market. I mean should there be an expectation that maybe not just for you, but that we could – overall can start to see a bit more price decline in K-Cups, because you really haven't seen much, but as you talk about the unlicensed competitors, when you think about what's happening on the Kraft side, et cetera, would you expect more price competition to come over the next two quarters?

Mark T. Smucker - President, U.S. Retail Coffee: Rob, this is Mark Smucker again. A little bit. I mean, I think with some of the new entrants, we have seen some tiering in price tiering in the category. So, you've got at least three if not four different pricing tiers in the category. Again, I think we go back to just our relative brand strength and quality to continue to drive repeat purchase in our brands, as well as some of the license. So, it's typical to what we would see, basically, in the broader category. So, I think we feel pretty comfortable where we are today.

Robert Dickerson - Consumer Edge Research: Then the last question, if you actually can comment on this, I'm not sure. But we heard obviously, that Green Mountain and Starbucks that their contract was renewed. We're not hearing it from you. I don't mean that implies anything. But I am curious, like within the given contract, are you able to add as many SKUs and as much capacity, et cetera as you want or the restrictions et cetera?

Mark T. Smucker - President, U.S. Retail Coffee: Two things, first of all, we don't comment on the specifics of the agreement with Green Mountain, but we are adding SKUs. We're actually launching two new items this year. As it relates to the other partners that Green Mountain has, we feel that we're on a level playing field.

Operator: John Baumgartner, Wells Fargo.

John Baumgartner - Wells Fargo: More specifically in terms of the K-Cups, there seems to be a little bifurcation here between Folgers, you're still getting some reasonably good growth, but Millstone looks increasingly weak calendar year to date. So, just wondering if you can elaborate a little bit on the dynamics for Millstone, what can you do to stabilize that brand going forward?

Mark T. Smucker - President, U.S. Retail Coffee: Yes, we've seen a little bit of softness on Millstone. Obviously, the Folgers brand is doing very well. I think two things, I would just say, the softness you're seeing right now is probably driven just by again some of that trial that we've seen on the number of entrants in the category. But we are very confident that although we're exiting the Millstone bulk business, we are going to remain committed to that brand and continue to support it both in the bag format, as well as in the K-Cup format.

John Baumgartner - Wells Fargo: Then just a follow-up in terms of the Rowland brands. Those also seem to have slowed a little bit in terms of the roast and ground. Anything there you can call out, maybe consumers trading back to the core with prices coming down? Just elaborating on that. Then your thoughts on distribution growth for that portfolio going forward.

Mark T. Smucker - President, U.S. Retail Coffee: I think as we go forward, we're still very comfortable with that, and we're going to continue to drive that. There is plenty of opportunity for both Bustelo and Pilon to grow the brand with distribution, as well as with new consumers. So we're still very bullish on that. As we've said, we've also said we are going to double that business in five years, and we are on track to do that.

Richard K. Smucker - CEO: Well, thank you very much for your call today. We appreciate it and we have a solid plan in place for next year and look forward to executing it. So have a great weekend. Thank you.

Operator: Ladies and gentlemen, if you would like to access the rebroadcast after this live call, you may do so by dialing 1-888-203-1112 or 1-719-457-0820 with a passcode of 2721955. This concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.