The J.M. Smucker Company (NYSE:SJM)
Barclays Back to School Conference Call
September 3, 2013 3:00 PM ET
Richard K. Smucker – Chief Executive Officer
Mark R. Belgya – Senior Vice President and Chief Financial Officer
Vincent C. Byrd – President and Chief Operating Officer
Andrew Lazar – Barclays Capital Inc.
Andrew Lazar – Barclays Capital Inc.
All right if we could just all find our seats we will kick this off. We are very pleased to yet again be hosting the J.M. Smucker Company at Back to School. With Smucker shares trading here all time highs, we think the Company has gotten credit for its ability to effectively drive volume growth in a tough consumer environment, managed through evolve cause backdrop, also maintaining a focus on cash return to shareholders.
Overtime we’ve also come to really appreciate the Company’s perspective on the state of the consumer as it interacts with many sub-segments of the consumer population by virtue of its category exposure and tiered product offerings.
Here today from the Company are CEO Richard Smucker, President and COO Vince Byrd, and SVP and CFO Mark Belgya. Thanks for being here, and with that I’ll pass it on to you Richard.
Richard K. Smucker
Andrew thank you and thank you for being here today. Actually I appreciate you are being here, it’s a pretty good size crowd today, and Jardine's just bought the Candle Company and so I thought you would all sneak over there, but we have no announcements to make like that today. So we’ll cover our normal business.
Andrew announced who is here today, I’ll also mention that Mark Smucker who is our President of Retail Coffee is here and Paul Smucker Wagstaff who is President of our U.S. Retail Consumer business is here and after we breakout those individuals along with ourselves will be together to answer any questions you might have.
Now before I begin the presentation, let me remind you that certain information we’ll provide today is forward-looking based upon current views and assumptions, you are encouraged to read our forward-looking statement included in the handout. Additionally the Company uses non-GAAP results for purposes of evaluating performance internally and details can be found in the handout on our website. If you all read that.
Our Company continues to execute on all fronts. Two weeks ago we reported our first quarter earnings, continuing the momentum of a record fiscal 2013 last year. Some of the key accomplishments from last year included new highs for net sales, EPS and cash from operations, continuing innovation efforts and marketing support, capitalizing on new businesses and number of new brands, complimenting $70 million acquisition should – expansion of our Coffee facility in New Orleans and commencing operations at our new $150 million plant in Orrville, Ohio. Ultimately increasing our shareholder value overall.
For fiscal 2014, we look to build on this performance with particular emphasis on the areas shown on this slide. Much of today’s presentation will focus our on our success and plans around the first three topics, innovation and brand support, digital and social media and the strengthening of our supply chain. Coupled with highlighting the bigger opportunities that we previewed at Cagney last year, specifically these included, expansion of our presence in Single Serve Coffees, accelerating the growth of the Smucker’s and Jif brands and continuing to build our frozen handheld business.
With that as a background, let me begin our presentation by highlighting the strengths of Smucker’s as we see it, which we have on this slide. While we will adjust tactics to changing circumstances, we remain committed to our strategy and the long-term growth of our business and our brands. We expect to grow net sales annually by 6% of our strategic timeframe. Over half of this growth is expected to be achieved organically with the remainder from acquisitions, innovation and other brand building activities are the primary means to deliver organic growth.
Our strategic architecture guides our innovation efforts, challenging us to push out on the attributes seen here. While recognizing consumers define our product benefits and values in many different ways and it’s our effort to make sure that we fill their needs.
Our teams have delivered record levels of innovation this past years ranging from new platforms and line extensions to new flavor varieties and packaging innovations that bring new news to our categories. This led to the launch of more than 60 new items in 2012 and additional 70 new items in 2013, and this year we are on track to launch 100 new items. This spans all of our key categories and our brands. We believe our innovation success rate exceeds industry norms.
Our internal target is for new products to contribute 1% growth to the top line annually, but over the past few years we have far exceeded this objective. In 2013, products introduced in the last years delivered $530 million or approximately 9% of our Company’s net sales. Vince will elaborate on specific innovation and brand building success stories across our portfolio of brands in just a minute.
Let me now briefly comment on the other half of the growth equation. Our M&A activities and our thoughts on the current deal environment, we take a focused and disciplined approach to acquisitions and believe that overtime attractive brands and businesses will come to the market.
As you go through the stores aisles today, I think you’ll agree that there are a number of brands that would fit nicely into our portfolio. Our vision states will own and market food brands and hold the number one market position in their respective categories, with an emphasis on North America while maintaining a global perspective. So how do we evaluate acquisition targets with this as our guiding premise?
Our acquisition filter focuses a number one – on a number of critical components, the first being, is it a strategic fit? To answer this question, we evaluate whether the acquisition provides us with leading brands, is it an attractive category? Does it have center of the store presence? And is it North America focused? That said, we’ve been clear that we maintain a global perspective and our focus globally is primarily in China outside of North America.
Once a target is confirmed as a strategic fit, other key attributes include, are there opportunities for synergies where we can leverage our go-to-market supply chain capabilities? And are we willing to pay the right price for which us historically has been multiples between seven and ten times EBITDA. If needed, is there an innovative manner in which we can structure the deal? And historically we have been pretty structuring creatively.
Ultimately, will the acquisition deliver financial metrics that we target and be accretive in the first year or two? We categorize acquisitions across three different types, transformational, bolt-ons and enabling. Last month, we made an enabling acquisition with the purchase of Enray Inc and its flagship brand truRoots, enabling acquisition while typically smaller in size, present opportunities for new products, capabilities and technologies, as well as capitalizing on our current resources.
Enray is a leading manufacturer and marketer of premium organic, gluten-free ancient grain products, truRoots brand provides us with an on trend compelling product platform across the rapidly growing gluten free market. This acquisition significantly increases the breath of our existing natural foods business. Currently, we have a leadership position in the organic and natural beverage categories with our R.W. Knudsen and Santa Cruz Organic brands.
The acquisition is expected to add sales in excess of $50 million on an annual basis, increasing the scale of our natural foods and specialty businesses, which currently generates approximately $170 million in sales. We are excited about the growth prospects of this business as we integrated into our marketing sales and distribution organizations.
Overall, it appears M&A activities within the food business area have picked up significant in the past 12 months, multiples have been increasing and we anticipate that this is likely to continue. We also acknowledge that competition for assets is likely to increase, yet we remain confident in our ability to identify and complete transactions that are necessary to meet our top line growth activities.
Our strategy has served us well as reflected on this slide, our five year compounded annual growth rates through fiscal 2013 of 18% for sales and 11% for non-GAAP earnings per share, both exceed our strategic long-term growth objectives of 6% and 8% plus respectively. This consistent growth has provided significant cash generation and we continue to demonstrate responsible deployment by reinvesting in the business and returning cash to shareholders.
In fiscal 2013, we increase the annual dividends paid by 9%. We also repurchased approximately 4% of our shares outstanding, spending approximately $360 million. Over the last five fiscal years, we have returned $2.2 billion to our shareholders through dividends and share repurchases. This represents over 70% of the cash from operations generated during this period. Fiscal year-to-date, we have further enhanced shareholder value, by increasing our quarterly dividend by 12%, by the way it’s effective today with today's dividend payment. And we repurchased 1.5 million shares in the first quarter.
Before I turn this over to Vince, let me comment that our success would not be possible without the dedication of our employees. And our real secret to a Company is the type of individuals that we hire. Unfortunately you don't get the opportunity to see those individuals, you only get to see a few of us up here each year, but if you had a chance to come to Orrville or visit one of our many plants, the type of people that work for Smucker's and their dedication and their length of service makes the real difference in whether or not we are successful or not. So I would like to give a nod to those individuals who really do make the Smucker Company unique and give us the culture that we have.
With that let me turn the meeting over to Vince and then we'll have a chance for questions-and-answers in a minute.
Vincent C. Byrd
Thank you Richard and good afternoon everyone. Before we begin or I begin, there’s another member of our team that’s here that was on the slide and I’m sure most of you know Sonal Robinson but she is our Vice President of Industrial Relations. So, Sonal thank you for everything that you do.
In executing our strategy, we’ve assembled a strong portfolio of leading brands that allow us to deliver on our strategic purpose of helping to bring families together to share memorable meals and moments. As a way to further capitalize on these great brands, we are placing increased focus and resources over the next several years on a few key areas that Richard referenced.
Further developing our Single Serve Coffee strategy, growing Smucker’s and Jif into billion-dollar brands and significantly increasing our presence in frozen handheld. Expected avenues to achieve these objectives include, growing our brands and categories in which we currently participate, extending our brands into new categories and ultimately achieving this growth through product innovation, acquisition, licensing arrangements, marketing support and investments in our supply chain. Our confidence in achieving these growth objectives stands from our past successes along with the current initiatives that are underway.
Let me share a few of these beginning with Single Serve Coffee. Our focus on growing our Single Serve Coffee business has centered around the fast-growing K-Cup category, providing consumers with a variety and convenience K-Cup had driven overall coffee category growth to new levels and have dramatically changed the overall coffee landscape. In 2011, K-Cups represented 6% of the At-Home Coffee sales, and they now represent 26% of the over $8 billion category.
As the leader in the At-Home Coffee, our focus has been competing in all segments in all forms allowing us to meet varying consumer needs and preferences. Recognizing the Single Serve Coffee represented a gap on our portfolio when we acquired the coffee business five years ago; this became one of our immediate strategic priorities.
In 2010, we became the first nationally branded to player to partner with Green Mountain Coffee Roasters and be distributed in traditional retail channels. Since them our relationship with Green Mountain has strengthened and we remain excited about the current and future opportunities that are expected to provide additional value to both companies as well as to our consumers and customers.
In addition we will continue to view Green Mountain as the highest quality and most sufficient producer of K-Cups in the industry. In three years K-Cups ground to represent 12% of our U.S. Retail Coffee sales and we have contributed to the success in growing the overall Keurig system.
In 2013, K-Cups added nearly $290 million to our top line, accounting for roughly half of the total company new product sales. While this growth rates are – while the growth rates are moderating given the increased competition in the segment, we anticipate our K-Cup sales to grow approximately 15% this fiscal year and remain pleased with our positioning.
The growth is supported by continued expansion of our product line, with a recent introduction of two new varieties we now mark at 12 K-Cup offering in the U.S. and eight in Canada. We also have continued to support the line with marketing investments.
Let’s take a look at a new TV ad for Folgers Gourmet Selections that highlight our K-Cup offering for also supporting the recent re-launch of the brands line of premium bag coffee.
Turning now to Jif, the brands growth has accelerated with the introduction of Jif Natural and Jif To Go. Jif Natural continues to be one of our fastest growing product lines with 2013 volume increasing nearly 30%, it bow holds a $22 share of the natural peanut butter segment, and when combined with our other natural peanut butter brands we hold nearly $50 share of the natural segment. Jif Natural has driven our overall category growth and helped solidify our leadership in peanut butter.
Jif To Go has delivered on our objective are providing convenience, while currently smaller in scale, new flavors and dedicated marketing support have resulted in volume growth of nearly 60% this past year and the product has great upside. More recently, we extended the Jif brand with this summer’s introduction of Jif Whips an innovative light peanut butter product great for snacking. The tub style packaging and product placement within grocery store also differentiates it from traditional peanut butter.
We are currently on air, we are TV advertising as part of an integrated marketing support, lets take a look at this ad.
Extending the Jif brand beyond peanut butter has created another avenue for growth. Nut butters continues to be the fastest growing category with sales exceeding $400 million at retail, more than doubling just two years ago. We entered the category last year with the introduction of two flavors of Jif Hazelnut Spreads. This summer, we followed on the launch with Jif Almond and Jif Cashew Butters representing the first national brand in these segments.
In order to meet our overall Jif growth plans, we need to ensure an efficient supply chain. As we announced in 2013, we are expanding our manufacturing footprint with plans to invest approximately $30 million to $40 million yet this fiscal year. Overall, we are very optimistic about the potential growth of Jif, our teams will continue to innovate around new flavors, forms and packaging, while also seeking new platforms all part of the plan to build Jif into a billion-dollar brand. Plans to grow the Smucker’s brand will follow a similar strategy. Our Smucker’s brand team are evaluating opportunities to extend the brand into categories beyond fruit spreads, toppings, and syrups.
In addition, we may seek opportunities to leverage the brand that could lead to co-branding or other licensing opportunities. This summer, we launched a line of Smucker's natural fruit spreads with four flavors, this great tasting, sugar sweetened product provides another way to further expand our leadership position within the fruit spreads category. Here is a current TV spot that is currently supporting this launch.
Lastly, within fruit spreads we are in the final stage of completing the full transition to our new manufacturing facility. Some of the initial savings associated with the new plant have been reinvested back into the business allowing us to address price grabs on-shelf in an effort to drive future volume. All of these actions representing key steps in growing this Smucker's brand.
The growth of frozen handheld products represents an exciting opportunity for us. Our Uncrustables Frozen Sandwiches have experienced three consecutive quarter of 20% volume growth in our retailer channels. Much of the focus this fiscal year centers on adding capacity at our Scottsville, Kentucky plant due to completion of an $80 million expansion.
Once complete, we will have the necessary capacity to deliver on current growth plans, which include new flavors and varieties. We are also in a position to pursue channels beyond the current retail and school markets. Accelerating uncrustable sales will go far in achieving our long term goals for frozen handheld. However, we recognize that acquisitions will also likely be required. This combination of organic growth and acquisition alliance with our overall corporate strategy it is a great way to build the scale we need in the freezer section.
Our innovation efforts have not only been limited to our bigger opportunities as it [preppies] growth across our entire brand portfolio. Let me highlight two other brands where innovation is driving our success, specifically in Dunkin' Donuts and Pillsbury. Starting with Dunkin' Donuts Coffee, innovation has focused on providing the consumer with a variety and expanding the on-shelf presence of the brand.
The business has far exceeded our initial expectation from its launch five years ago with net sales growing at a 9% CAGR to $315 million in 2013. In 2014, we’ll continue to push out on seasonal coffee offerings where sales have been incremental to the brand and category.
This summer, we also launched a new year around platform for the brands Dunkin' Donuts Bakery Series. We are pleased with the initial level of retailer acceptance and are optimistic about the potential for this line. With this launch, our overall portfolio has increased to nearly 20 varieties, expanding the breath of this popular brand. Marketing investments have also been critical to the success of what we have achieved with Dunkin' Donuts.
Let’s take a look at our latest commercial that highlights our consumer passion for the brand.
Shifting to Pillsbury, our innovation looks to capitalize on the brands image of being fun and family friendly while providing consumers with convenience. Pillsbury baking mixes and frosting have experienced a five year CAGR of 10% and currently hold the number two position within the category. Of particular note has been our success in three key areas including our Funfetti product line, which is celebrating its 25th anniversary this year, our Sugar Free mixes and frosting where we remain the only national brand providing sugar-free product line in the category.
And lastly, our leadership in seasonal offerings which we will continue to build with the new follow line that is shown here. As we’ve noted a key part in supporting all of our brands is the consistent investment in marketing. In 2013, we increased our total marketing spend by 10%, including the production of 25 new television commercials and expanding our digital presence.
Building on this, we are increasing our marketing in 2014 by another 10%, well ahead of our sales growth. A portion of this year’s increase is attributed to our sponsorship at the U.S. Olympic and Paralympics teams for the 2014 Winter Games in Russia and 2016 Games in Brazil. Marketing support will span television advertising, retailer and consumer promotions, product packaging and digital marketing support behind our participating brands of Folgers, Jif, Smucker’s and Uncrustables.
In addition, our 2014 marketing plan, include a continuation of our significant on air presence. As you know, we have historically maintained a leading share of voice in many of our key categories and we expect this year to be no different. Let me share one final example with you an equity stock supporting our Folgers Mainstream Roast & Ground coffee business.
Complementing our traditional marketing tactics, digital remains an effective and efficient vehicle to maintain a two way dialogue with consumers; we continue to expand our social media footprint allowing us to double our total Facebook followers during the past year to over 3 million. We are also broadening our presence on popular sites such as Instagram and Penrose both representing great avenues for recipe sharing. Overall by the end of the fiscal year, we anticipate having over 40 social media assets across our brand portfolio.
In summary, let me reinforce that with 100 new products on [tap] for 2014, which are expected to deliver between 2% and 3% points of top line growth and planned increase in marketing of 10%, our brand building activities are stronger than ever in support of achieving our long-term organic growth objectives and our focus on bigger opportunities.
Thank you for your time today. I’ll now turn the presentation over to Mark Belgya.
Mark R. Belgya
Thank you Vince and good afternoon everyone. My comments today will briefly touch upon the results of our recently announced first quarter, updated guidance and certain key financial areas, including gross profit trends and free cash flow.
We had a solid start to fiscal 2014 with a 6% increase in earnings per share, highlighted by improved gross profit and the impact of share repurchase. We were encouraged with 4% volume growth in our U.S. retail channels while planned rationalization in our International, Foodservice, and Natural Foods segments resulted in total Company volume increasing 1%.
Price decreases taken over the last 12 months primarily on coffee and peanut butter caused sales to decline modestly. Key points related to our quarter release and conference call included volume and net sales estimates for the year, cost to price relationships, updated guidance and K-Cup growth.
Looking at the full year, we expect net sales to decline 1% from last year compared to our previous expectation of sales being flat. This decrease reflects the impact of passing through lower green coffee cost. As we indicated on the call, we can affect this pass through of lower cost to our consumers and customers by means beyond a traditional list price decline. As such we have chosen to accomplish this via promotional spending. Also included in our guidance is approximately $40 million of partial year sales associated with our Enray acquisition.
Overall volume growth is projected to be flat, which is consistent with our original outlook. While we still expect U.S. Retail volume to be up 2% for the fiscal, we will continue to absorb the effects of rationalized businesses through much of the remainder of 2014. Also the first quarter results included strong growth in our oils and flower categories, which we see moderating over the remaining three quarters of the fiscal year.
And finally, we increased our EPS guidance to a range of $5.72 and $5.82 with a leaning towards the upper end of that range. This slide illustrates how we adjusted up from our previous guidance of $5.65 to $5.75. As we noted during our call, the impact of share repurchase and the Enray acquisitions are key components of the guidance raised. However, we do expect some of the base business performance to also contribute.
Achieving the higher end of the range will result in 8% EPS growth over 2013 compared to the 6% we originally anticipated if you assume the mid-point of our previous range. Much of the non-GAAP earnings growth in the quarter and for the full year comes from increases in gross profit. We have consistently commented that due to the pass though nature of our commodity cost, we will focus on increasing profit dollars versus solely profit margin, and this slide highlights a few key points around gross profit and gross margin.
First, you can see that we’ve realized solid year-on-year growth in gross profit, and we would expect to continue this upward trajectory. The gross margin which is represented by the blue line and based on the trailing 12 months is also improving. To my earlier point, you can also see the downward impact with the significant price increases we passed on had our margins back in the later part of fiscal 2012 and early part of 2013.
As a note, our updated guidance assumes that this year’s gross margin should come in about 250 basis points better than last year. In addition to favorable price versus cost relationship, benefits achieved to-date on our restructuring projects, a positive sales mix and rationalization of lower margin products are all contributing to gains in our gross profit.
Lastly from a COGS perspective, we would like to use the Back to School Conference to update you on the components of our cost of good sold. Our top 10 ingredients in packaging items still represent approximately two thirds of our total COGS and there have been no major changes in the overall components since a year ago.
Let me conclude my portion of the presentation with commentary related to free cash flow and the key underlying components as we progress toward our fiscal 2017 free cash flow target of $850 million, this doubles the amount forecasted for 2012 the year we announced the goal.
As we noted at the outset of this fiscal year, we project free cash flow of $600 million in 2014 down from about $650 million last year. This is due to the anticipated increase in CapEx spending and supported the key growth initiatives that were outlined early in our presentation along with construction projects at our corporate campus in Orrville.
Going forward, our goal is to reduce CapEx spending as a present of net sales helping us achieve our free cash flow goal. We are also targeting improvement in working capital. Working capital excluding cash currently represents just over 15% of our net sales based on the trailing 12 months. 100 basis point improvements in that metric would provide approximately $60 million in incremental free cash based upon on our current revenue levels.
And let me conclude with an update on our revolving credit facility and the borrowing against it. In last week’s 10-Q filing, we reported that our borrowing against the revolver was approximately $210 million. This is up from $85 million at the end of our first quarter due to the acquisition of Enray and certain other corporate needs. We will continue to add this borrowing position during the quarter, but do expect to repay all borrowings by the end of our fiscal year.
In closing, let me reiterate that our performance continues to exceed our strategic growth objective, which allow us the ability to continue to invest in our business. Our success is further reflected in our market capitalization, which has grown from nearly $3 billion prior to the Folgers acquisition to $11 billion today. For this and all the other reason shown here we believe Smucker is well position to continue our trend of long-term growth.
We thank you for your time and I believe we have few moments for question. Thank you.
Andrew Lazar – Barclays Capital Inc.
Okay, thank you I’ll just kick it off. Richard first one Just from an industry perspective, I think some of the concern right is that some of the food companies have stated maybe more recently and this came up a little bit on your recent call that volume trends have slowed a bit and some of them are more challenging. My concern is that promotional spend will increase at least history has shown sometimes as known to happen in a more manageable input cost environment. You’ve made some tactical adjustments in a couple of key categories for specific situations around pricing and promotional activities. But I guess what are you seeing more broadly at this stage, has there been any real change more recently? Whether it would be in your categories or more broadly?
Richard K. Smucker
Yeah. Well we haven’t seen a lot of changes since our conference call three weeks ago. So there hasn’t been a lot of change since then. But as you made the comment and I agree with it, there is commodity cost come down, now there is ways to pass that on to your customers either through price reduction or do a little bit more trade spend. And we’re doing – we’ve done a little bit of both. But we don’t see anything significantly different, than historical levels and so we don’t see a real big change.
Andrew Lazar – Barclays Capital
You know a lot of discussion around on his of course K-Cups, that where a lot of the growth is, but something I think that haven’t been discussed maybe enough of late is with half of your business being in coffee and over 60% of that being in Mainstream Roast & Ground. The trends there have actually looked quite a bit better for you, than they have in the past year, year and a half. So perhaps a little but around what change there, and how sustainable or what the visibility to the better performance in that key piece of it?
Vincent C. Byrd
Yeah. So a couple of things Andrew that we’ve talk about on our conference calls is clearly when the cost of coffee ran up two years ago, the consumers sent us a message about how high, it was too high. And I think we’ve done a much better job of managing the absolute price point as well as managing the gaps versus some key competitors. I would also state that Mark and his team continue to make marketing investments against the core business and those trends have turned around, we did lean into some pricing a little over a year ago as we leaned into some pricing on Jif, but it’s all about doing a better job of managing those price gaps of where we need to be.
Richard K. Smucker
I might add to that probably two years ago I was concerned as a CEO might be in terms of how quickly the K-Cups might grow, concerned in terms of what we would do with our Red Can business and, I can confidently say at this point in time, I'm very pleased with where we stand with the Red Can business and our base business, since that was kind of your question.
We’ve done the right things, it’s a solid business continues to grow and we are also growing the K-Cup business. So although K-Cups and Single Serve are going to be a larger percentage of the business as we go forward, we are participating in both and our base business is growing also. So I feel much more comfortable now than I did a couple of years ago on that and can honestly say that we are heading the right direction.
Vincent C. Byrd
And I would only add as we continue to look at segments, we did obviously a bolt-on acquisition with the Café Bustelo and Café Pilon brand and those are providing some nice growth avenues as well.
Andrew Lazar – Barclays Capital Inc.
You have obviously talked at length already about some of the near-term noise we’ve seen, can expect from some of the unlicensed players in the K-Cup arena, but I guess you have also spoken a little bit to why you feel the visibility around your K-Cup business overtime is actually still pretty strong and there were a couple of metrics I think you brought up on the recent conference call that give you that visibility, but perhaps you could touch on that a little bit as well given the near-term noise that we are likely to continue to see for a couple of quarters.
Vincent C. Byrd
Well again, I think we’ve had a longstanding relationship with Green Mountain, longstanding in the sense three or four years, but we’ve also had modified that initial agreement since we’ve entered into it, our teams are looking at other opportunities between our two companies. As we said In our formal remarks we still believe the highest quality most efficient producer. So we had look under the tent on some technology that’s coming down the path and we feel very comfortable with that relationship and have no reason to want to break that relationship.
The growth as far exceeded our expectation we’re comfortable with the 15%, but it comes the rule of larger numbers after a while. And I don’t think any of us that was going to be $290 million in 2.5 years. So but we again, we feel – it fills out another segment that we needed to play and we’re very confident of working with Green Mountain.
Andrew Lazar – Barclays Capital Inc.
And last one for me would be Mark on the fourth quarter conference call you talked about the gross margin expansion expectation of around 200 basis points for fiscal 2014. I can’t remember, honestly if it came up I don’t think it did, outwardly on the first quarter call. Today you’re saying 250. So just may be what is the differential there that I missed out in the first quarter call, if not what’s driving it is base business, or just the price cost sort of relationship and you’ll have that take it to the breakout from more after that.
Mark R. Belgya
Sure well you didn’t miss anything on the call that was new news today. It basically is the later Andrew where the price that we’re passing through the lower sales, we are still maintaining the gross margin, the gross profit rather and that’s been 50 basis points pick up on the margin.
Andrew Lazar – Barclays Capital Inc.
Okay let me take it to the breakout. Thank you.
Vincent C. Byrd
Great, thank you.
Richard K. Smucker
Thank you very much.
Mark R. Belgya
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!