Sara Lee Corp. F4Q08 (Qtr End 6/28/08) Earnings Call Transcript

Sara Lee Corp. (SLE)

F4Q08 (Qtr End 6/28/08) Earnings Call

August 7, 2008 10:00 am ET

Executives

Aaron Hoffman - VP of IR

Brenda Barnes - Chairman and CEO

Theo de Kool - Chief Financial and Administrative Officer

Analysts

Ken Zaslow - BMO Capital Markets

Eric Serotta - Merrill Lynch

Judy Hong - Goldman Sachs

Chris Growe - Stifel Nicolaus

Andrew Lazard - Lehman Brothers

Brian Zeiger - Merrill Lynch

Eric Katzman - Deutsche Bank

Priya Ohri-Gupta - Lehman Brothers

Tim Ramey - DA Davidson

Alexia Howard - Sanford Bernstein

Vincent Andrews - Morgan Stanley

Regan McKenzie - Wells Fargo

Terry Bivens - JPMorgan

Bryan Scideri - Wachovia

Presentation

Operator

Good morning and welcome to Sara Lee Corporation's fourth quarter earnings call for fiscal 2008. (Operator Instruction).

I would now like to turn the call over to Aaron Hoffman, our Vice President of Investor Relations for Sara Lee Corporation. Thank you, Aaron. You may begin.

Aaron Hoffman

Thank you, Candy. Good morning and welcome to Sara Lee's, full year 2008, earnings conference call. As always we very much appreciate your time and your interest. Joining me for today's call are Brenda Barnes, our Chairman and CEO, and Theo de Kool, our Chief Financial and Administrative Officer.

Our preliminary year-end results were released at 6:30 Central this morning via press release you can find it on our website at sarahlee.com. If you have problems accessing the release, please call Gene William at 630-598-4966. Our 10-k for 2008 will be filed later this month.

To begin, I will caution you that our remarks this morning contain forward-looking statements about Sara Lee's future operations, financial performance, and business conditions. These forward-looking statements are based on currently available competitive, financial, and economic data, as well as management's views and assumptions regarding future events.

Such forward-looking statements are inherently uncertain and investors must recognize that actual results may differ from those expressed or implied in these statements. Consequently, I need to caution you not to place undue reliance on forward-looking statements. We provide additional information in our press release and 'Form 10-K for fiscal 2007 that I encourage you to review concerning factors that could cause actual results to differ materially from these forward-looking statements.

And now with all that out of the way, let me turn the time over to Brenda.

Brenda Barnes

Thanks, Aaron. Good morning and thanks everyone for joining us today. Let me start by saying that we had an outstanding fourth quarter, which helped us deliver a very good fiscal 2008. Sales, volumes, cash flow, adjusted earnings and market share all rose.

Driving the results are the capabilities and process discipline that we developed in marketing, pricing procurement planning and IT to name a few. These are core building bocks that will continue to pay dividends going forward, but you should also note that the improvement came uniformly across our business.

Now I know there are lot of puts and takes over the past year, but let me take you through the things we delivered in a phase of extremely difficult commodity and economic situations around the world.

Let me remind you of what we said last August and what we did. First, in August 2007 we expected adjusted EPS to be between $0.77 and $0.83 per share. We reported $0.83 today, which also puts us on the higher end of our latest range of $0.80 to $0.84. And although, we got help from currency, we hit the high end of that range even with the tax rate 5 points higher than anticipated a year ago. We guided to over $12.6 billion of sales last August. In spite of divesting $300 million from our Mexican meat joint-venture, but with the help of currency and pricing, we ended the year at $13.2 billion.

Very importantly, unit volumes were projected to be flat to up to 1% and they were up 1.2% even as we took the substantial price increases. Adjusted operating margins was originally projected to be between 7.6% and 8% last year and we delivered 8.1%.

Looking at cash, we expected CapEx to be $550 million, and it was $515 million, while cash from operations exceed our forecasts by around $200 million. We thought that fiscal 2008 plan was aggressive and I know most of you did too, especially in the face of commodity and economic headwinds, so we are pleased to have performed so well.

Beyond that, we held marketing investment relatively flat, but focus is effectively to support on-trend products that have come from our significantly improved innovation pipeline. Around the world, we are delivering more and better new products. To support this innovation, marketing dollars are being spent far more efficiently.

Anyone who has seen the ad campaigns and the in-store execution knows that the quality of our efforts has never been better. The proof of course is in the numbers. Notably, we drove share gains in virtually every significant category in which we complete.

Sara Lee continues to be the number one brand of fresh bread and is now a $1 billion- brand in aggregate. Our fresh bakery grew in total and grew share. Ball Park achieved their record share, Jimmy Dean protein breakfasts products increased share by more than 5 points. Our international beverage household and body care business gained share of many major European markets and beyond.

We successfully increased pricing essentially inline with commodities this year. In aggregate, pricing rose about $350 million for the year $120 million in the Q4. This compares to approximately $350 million of incremental input cost this year and $125 million for the quarter. I should note that for the full year we benefited from about $35 million of hedging gains that pull forward cost protection benefits from fiscal 2009.

In fact, during fiscal 07 and '08 combined we faced about a $0.5 billion of commodity increases and match them almost one-to-one with pricing. Our procurement organization along with the business units has done a superb job managing input side of the equation. And our sales force did a great job partnering with our customers to strategically move pricing.

Our strong brands enabled us to achieve these increases with no real negative consumer reaction in higher prices in fresh bakery, retail meats and international beverage. Our North American Food services business had seen a shift away from mid-scale and casual operators as well as the movement from out-of-home to in-home dining.

This is more a reflection of the overall environment than it is an indication of the health of our business. We've also seen some pressure in our Spanish fresh bread business and our share positions are generally steady or increasing another strong indicator of the value of our brands.

To summarize the full year performance for Sara Lee, I think we conclude that fiscal 2008 marketed a year of real progress in further developing capabilities from marketing to IT, to procurement, to innovation. We started the year with a clear if challenging plan. We faced obstacles along the way, but consistently made adjustments which allowed us to deliver our commitments in the end.'

Now let's take a look at the individual business segment. Our North American retail meat business is successfully moving into portfolio to consumer-focus on-trend and value-added product and grew adjusted sales by over 6% for the quarter, and 3% for the full year.

Full year retail sales rose 6.5% which excludes commodity sales we exited with a facility closure. Our sales mix improved significantly products Jimmy Dean and other frozen items, new Ball Park offerings as well as the ongoing of Hillshire Farms sliced daily meat.

In the fourth quarter, adjusted operating segment income doubled from $41 million to $81 million and we ended the year up about 1%. We are very encouraged by this trend as the fourth saw dramatic improvement in profits that should carry into fiscal 2009.

A good sign that their trend for improvement will hold, we experienced a very strong course of July for hot dogs handily beating our competition. And the most important weekend of the year for the category Ball Park volume was up almost 60% and our sales rose nearly 40%.

In response to significant input cost increases, we have raised our refrigerated an frozen meat product on a average of 1% this past year. And looking into 2009, we continue to get higher prices across the entire protein complex have increased pricing by an average of 5% in July, and will consider additional action if necessary throughout the year.

Behind continued new products success and share gains, our North American retail bakery business had a strong quarter. For the segment adjusted sales rose 13% and adjusted operating segment income rose 10%. Bakery finished the year with a 9% increase in adjusted sales and a 30% rise in adjusted operating segment income.

Looking behind the numbers, we have seen strong performance from Sara Lee Soft & Smooth, our whole wheat white platform. This year the platform pushed past $200 million in annual revenue behind wide range of on-trend new products.

Helped by these results, the Sara Lee brand remains the number one fresh bakery brand growing sales by 19% in the US this year. And as I mentioned a minute ago, it is our first billion dollar brand through the combination of fresh and frozen baked goods and daily meats.

While commodities like wheat, energy and edible oils have been a headwind offsetting some of our achievement, these markets have eased recently. Nonetheless, we expect to face the cost challenge of similar magnitude as fiscal 2008 and are in the process of planning a further increase this fall.

In our food service segment, we have exited various low or no-profit commodity meat products and some DSD coffee routes. While these actions are designed to improve profitability, there is an expected reduction in sales and volume. In the fourth quarter though, results began to reflect the benefits of many of the actions we've taken over the course of the year.

Adjusted sales rose 5.5% while adjusted operating segment income was up 15%. Full year results were not strong as we had anticipated, as a result of ongoing challenges in our DSD coffee route business and a migration to more in-home dining. In the fourth quarter, food service implemented a new approach to pricing. Changes will now follow our regularly quarter schedule allowing us to close the GAAP between cost inflations and market price realization. I remain comfortable that we will show better results overtime as pricing catches up to the commodity price increases and as our strategic actions pay greater dividend.

International beverage delivered a very good year. Adjusted sales rose over 8% and adjusted operating segment income increased about 9%. We had great success in many areas and let me just highlight three of them. We continue to see a successful turnaround of our Brazilian business, when we accelerated profit growth significantly through strategic pricing and better sales and marketing efforts.

Our international Senseo business remains highly profitable and growing. Sales were up 23% for the year on the strength of new offerings and currency benefits, and surpassed $500 million for the first time. Our very successful food service business also continues to grow, with sales up over 10% in local currency last year. The results for fiscal 2008 are very much in line with our strategy of driving revenue to renovation while maintaining or enhancing attractive margin structure.

In international bakery our French refrigerated dough business is doing well, while our Australian business is being repositioned to deliver improved results. However the Spanish fresh bakery bread business, which represents about two-thirds of sales faces one of the most difficult economies in Europe and the same escalating wheat prices, we face in America. As a result, adjusted sales for the total segment rose 3%, while adjusted operating segment income was flat for the year. As our new management team continues to improve our marketplace capabilities and economy conditions stabilize, we are content that we will see solid base business gains over the long-term.

Household and body care has kept a steady stream of successful product innovations flowing into the marketplace. These new offerings help offset some competitive and retail price pressure in various markets and categories around the world. While adjusted sales grew 2% for the year adjusted operating segment income increased by 3%. This is the second consecutive quarter in which the segment has returned to positive top and bottom line trends with an eye to even to better performance over the long-term. Behind new Omnipure, Sanex, and Radox products, we continue to gain or hold share in an increasingly competitive environment.

Now turning to the financials. Reported diluted earnings per share from continuing operations were a loss of $0.09 for the year. This number includes $1.10 net loss from significant items, which includes the impairment charges we announced in July and an 0.18 gain from tobacco sale proceeds, leading to an adjusted earnings per share of $0.83.

Cash from operations for the year was about $600 million, representing approximately $100 million of improvement. The increase is all the more significant if you consider then 2007, cash from operations included $88 million of cash flow from discontinued operations. As a result, we delivered a positive free cash flow of over $200 million for the year. You will remember that it was negative in the last few years and we regularly indicated that fiscal 2009 would mark our return to positive free cash flow. I am pleased that we achieved the milestone a year early. A reconciliation of this calculation is on the IR portion of our website.

Moving to guidance for fiscal 2009, we are forecasting diluted EPS in the range of $1.12 to $1.20, which includes a 0.22 gain from the sale of our tobacco business in fiscal 1999.

Our guidance does not include any additional significant items that may occur during the year. Our adjusted EPS guidance, which excludes the tobacco payment, is $0.90 to $0.98. Importantly, we anticipate a reduction in the adjusted tax rate of between roughly 3 and 5 points, which would benefit EPS this year. We also expect to repurchase approximately $500 million of stock this year, depending on market circumstances. This keeps us very much on course to achieve our commitment of buying back $2.5 billion to $3 billion of stock by the end of fiscal 2010.

At the end of fiscal 2008, we had repurchased over $1.5 billion of stock since the beginning of the transformation. Similar to fiscal 2008, cash from operations is expected to take another large step up, with guidance set at $750 million to $850 million. We will also care CapEx down further to $500 million, bringing in a bottom line with our long-term goal of $450 million to $500 million.

Moving on, we anticipate sales to be between $13.7 billion and $14 billion for the full year, which incorporates currency-related benefits and a very significant pricing increase in the face of what is likely to be another tough year for commodities..

For fiscal 2009, we expect to increase adjusted operating income by $40 million to $70 million, or by 3% to 6%, compared to the $1.70 billion we earned on an adjusted basis this year. In the current commodity environment, we started to believe that looking at profit dollars is more valuable and instructive than looking at profit as a percentage. The MAP is jump in sales as a result of pricing, simply distorts the relationship too much to be entirely useful.

In fact in fiscal 2009, based on current information, we expect commodity cost to increase by more than $500 million and we anticipate passing along the similar amount in pricing. Going forward, we will report mark-to-market and aggregate from Sara Lee and remove it from the second results.

As I look back on fiscal 2008, I am more encouraged than ever that we are no longer just rebuilding the company. We overcame a lot of headwinds in 12 months and we still delivered a good year.

Looking at fiscal 2009, we have a clear plan that builds on our strong 2008 results as we continue to leverage the progress we have made in innovation, marketing, SAP, continuous improvement, planning capability and many more. I have no doubt that we are very well positioned to deliver another aggressive plan as the improved capabilities that we have been talking about continues to translate future tangible results.

And now Theo, Aaron and I are happy to take your questions.

Question-and-Answer Session

Aaron Hoffman

Candy?

Operator

Yes, thank you. (Operator Instructions). All right. Thank you. We have our first question from Ken Zaslow. Your line is open and state your company name please.

Ken Zaslow - BMO Capital Markets

BMO Capital markets. Good morning, everyone.

Aaron Hoffman

Hi, Ken.

Ken Zaslow - BMO Capital Markets

First question I have is, your retail needs, your beverage and your global household hit all time highs in terms of operating profits on a quarterly basis. Can you talk about the sustainability of this and how much of the profits reflected lower MAP spending or FX or, just can you put that in some sort of context for us?

Brenda Barnes

First of all, I think the results are sustainable because we've been putting a lot of things in place that we think are not just one-time efforts, but really are building the business for the help of the long-term. So, I would first look to market share gains, and the customer reaction, consumer reactions, at the kinds of things that they do in marketplace. That's a very, very healthy sign. Certainly both the international businesses are benefited by the currency rate. That's why we always show the rate with currency and adjusted without it. But even without it, you can see the trends are still quite healthy. We have a series of new products that have been rolling out and continue to launch throughout '09, and we certainly have the carry-forward of pricing action that we had taken back in '08.

Ken Zaslow - BMO Capital Markets

Okay. And then, just in terms of the MAP spending, for the year, you were up about 5%. It sounds like that's a little bit lower than maybe some of your other peers. Is that the right growth rate for you in terms of consumer spending and how does it look for 2009?

Brenda Barnes

My team over here is backing off from what is going to be my reaction to this question, but I will give you the same answer I say to them all the time. I think you ought to love that we don't spend a dime more on 'marketing spending and driving the top line of market share gains. So, I think it's really not a great parameter.

Marketing these days comes in many different ways. It comes as in-store execution, effectiveness recalling on the trade, having good category management in place, targeting your marketing dollars to new products, as opposed to spreading it all over everything. So, We continue to invest in R&D. We continue to invest in new marketing ideas. I think you'll see some really exciting ideas come out in fiscal '09, and we support the level that we think is required to have a kind of impact we want in the marketplace.

So we will continue to move it that way, but we've gotten much better about cutting nonworking dollars, shipping those dollars of marketing spend into real consumer reach as opposed to things that don't reach the consumer. I'm not troubled at all by our marketing spend trend and I'm really excited about our effectiveness and efficiency going forward.

Ken Zaslow - BMO Capital Markets

And what you expected for 2009, it will be evenly distributed in terms of growth rate throughout the quarter?

Brenda Barnes

Yeah. We haven't guided on that number and don't have guidance at this time.

Ken Zaslow - BMO Capital Markets

Great, thank you very much.

Brenda Barnes

You're welcome.

Operator

All right, thank you. Next question Eric Serotta, your line is open. And state your company name, please.

Eric Serotta - Merrill Lynch

Merrill Lynch. Good morning.

Theo de Kool

Hi, Eric.

Eric Serotta - Merrill Lynch

First, just follow-up on Ken's question, I fully understand what you're saying in terms of being able to maximizing productivity as the marketing dollars that you are spending and the different types of marketing, which may not be accounted for enough, could you give us an idea in terms of the latter was in-store activity, that type of thing, were dollars spent on that up, down or flat, and basically was there bucket of consumer-related activity that would perhaps be accounted for various accounting reasons in the growth net line, was that up and what kind of order magnitude?

Brenda Barnes

Let's try to frame what was going on in the year, MAP, and if I don't answer your question, come back and point me in that direction. But we've said throughout the course of the year that our marketing spending was frontloaded for the year, and we knew that we are going to be having overlap, different overlap, by quarter in terms of when the market will expand.

So our dollars tend to flow and gravitate to when we have new product introductions, which we believe in, and I think we have evidence to prove that's the most effective way to spend the money. So that's point one and maybe we will help answer your question little bit. In terms of in-store activity, there are events that we roll out from a marketing standpoint that leads to more displays in stores, so if you look at our bundling of fresh bread and our meat products, it's through consumer promotions that tie those two together and give you incremental display activity.' That's not a huge addition, in terms of cost, but it actually takes an idea and shows the retailer how those two together can actually drive incremental sales for them and their consumers.

So in total, if you add up pricing promotions, consumer promotions, and marketing spending, we believe that we have the right level to deliver those share gains that we had.

Eric Serotta - Merrill Lynch

Okay, and then to move on to H&BC, a bit, it seems that the competitive situation might have gotten a bit worse in some of those markets versus the previous quarter, when you look at the price mix line. Could you comment on that at all? Last quarter you expressed a lot of confidence in the pipeline going forward. Could you give us maybe a bit of an update as to where that stands and when we will start to see through the next wave of innovation getting you ahead of competition again?

Brenda Barnes

Yeah. I don't think the issue for us is the next wave of innovation. I think we've had a steady flow, and we feel very good about it. Starting with three evolutions and then extending that all across various markets internationally. We've rolled out a Sanex deodorant, which is doing extraordinarily well, Nature Protect based on a natural deodorant that includes elements and ingredients and that's taking off very well, and we have a product called Renov'Air, which is an air freshener, that is meeting with great success.

The issue that I talked about last quarter that continues to be still be an issue is the economic conditions in Spain, primarily in the UK. And what you find in those countries primarily is increased competition on the pricing side, because everybody is trying to go after a market that is under a lot of pressure.

So, if you look at total household, if you actually strip those two countries out, you would find the trend great, much better in everything. But UK and Spain are big enough for us that intent to dampen the total numbers. So, we don't have a prediction in terms of when the economic conditions will change. As you know, there was a two-week transportation strike in Spain, or just a lot of economic conditions that are going in to those countries that do affect our trends for households.

Eric Serotta - Merrill Lynch

Okay, thank you. I will pass on, good luck.

Brenda Barnes

Thank you.

Operator

Alright, thank you. Next Judy Hong. Your line is open and state your company name, please.

Judy Hong - Goldman Sachs

Thanks, Goldman Sachs. Good morning, everyone.

Theo de Kool

Good morning.

Judy Hong - Goldman Sachs

The question about commodities and pricing, you said up $500 million for fiscal '09. I'm wondering how much of this is hedged or covered at this point. And secondly, as you've talked about some of the commodities showing a decline more recently and if we see that trend continuing whether you think you could get some pushback from retailers in terms of your ability to get more prices through?

Theo de Kool

Yes. I like to answer the first part of the question, about how much we are hedged. We don't give very specific data on that' one. Let me repeat what our policy and strategy is, and that is that we hedge until the moment that we can pass this price increase on to the market, and that differs market-by-market, so in certain cases we are hedged well into quarter three and others around just three months ahead of it. I'd also like to emphasize that we are having very successful in that program and that's the reason why we basically mixed our commodity increases with price increases across the board.

Brenda Barnes

In terms of the retailer and what you asked about that, fairly retailers are low aware of what commodity trends are. They are looking to add value to their consumers who are shopping in their stores. We keep a close eye on the trends, and as of today what we see as the outlook based on today's currency, today's commodity increased prices, that we will increase by about $500 million and those are real. We don't think we are disadvantaged in any way.

So, our efforts tend to be informing our retailers about what the trends and try to bring to value to them and the consumer in different way. On the food service side as an example, we are trying to find ways to offer products that would reduce their costs and use so, 3.5 as an example, more quicker, more efficient, they've got weight and then liquid coffee would be another example of that where high speed, no waste, excellent products.

So, we're trying to translate, reduce costs in ways that can be more efficient to offset some of these commodity increases. But they are definitely real and if it changes, we will obviously change our plan accordingly.

Judy Hong - Goldman Sachs

And in terms of the timing of how the price increases get pronounced or implemented. Do you think about $500 million for the full- year, have you announced another round of pricing at this point and what's the magnitude that you are taking sort of initially, does this get more pace in starting year?

Brenda Barnes

Well, as I mentioned in my remarks, we took a price increase on approaching concepts in July, on the meat products. Lot of people can look at the current meat trends and say, oh boy, some of this is going down. Well, part of the problem is people are liquidating their inventory and their stock, because the feed costs are so high. So there is actually more supply in the market that will end up being, a lesser supply down the road.

The great thing about, how we're looking at all this is as we have, a great visibility in terms of what is likely to happen, based on what producers are doing. So we know for sure that the working comps are going to be very challenging, although right now the marketplace might not reflect that, so, we have taken 5% there, we have been able to shorten our lead times quite a bit, to get pricing to the market and get it realized.

I mentioned the food service change of our pricing quarterly as opposed having the redo contract that we have in place for year long pricing. We are actually trying to shorten the lead time and use the data to that we see coming forward to get ahead of it as oppose to be behind it.

Judy Hong - Goldman Sachs

Okay, thank you.

Brenda Barnes

You're welcome.

Operator

Thank you. Next, Chris Growe your line is open and state your company name, please.

Chris Growe - Stifel Nicolaus

Thank you, its Stifel Nicolaus, good morning.

Theo de Kool

Hi, Chris.

Chris Growe - Stifel Nicolaus

Hi, I just had a few questions for you and one is a follow-up relative to the marketing question and the interest there. I guess ever since I was looking to maximize the amount of dollars they spend and achieve the share gains that you did this quarter. You were doing it at a lower level as percentage of sales. And I just have to be curious for 2009 perhaps it's going too far, but would you be looking for an increase in marketing as a percentage of sales in '09?

Brenda Barnes

I think what you have to look at share of voice. So, if you look at our bakery business as an example and looked at our percentage of sales as a number, you might say well its pretty low, and that's influences our number. We have the leading of share voice in the marketing spending, both advertising and other types of activities.

So, we tend to look at that as opposed to percentage of sales. That's always a good guideline, but it's within the markets in which we compete, so we have enough reach in frequency in our messages, hitting the consumers at the right place, right time, with the right incentives to be competitive. So that's more engaged. I think we're not a great company looking at 3% of sales versus some of the other categories; they are just different levels of support because of the category in which they compete.

Chris Growe - Stifel Nicolaus

Okay. And then just a question for Theo on the cash flow from operations in the nice kind of recovery there for the year, I would be curious within your estimates just, is there, there's got to be less drag in there from things of course like the transformation charges as well as lower cash taxes. I wonder if you have any more color you can provide on kind of how that's helping stimulate the cash flow from operations.

Theo de Kool

Well, not really in terms of concrete numbers, but both elements have certainly arrived, although I must say that the restructuring is still a significant item in '09 because its normally a [statements] program that can take more than one year, and on top of that we did an additional restructuring at the end of '08 and the cash will work itself to the '09 numbers, so that its still somewhat of the depression impact. We are not at a normalized level yet, but I think we made decent increase this year, and in the guidance we guide for another good increase for '09.

Chris Growe - Stifel Nicolaus

Okay, okay, thanks a lot.

Aaron Hoffman

You are welcome.

Operator

All right. Thank you. Next, Andrew Lazard. Your line is open and state your company name please.

Andrew Lazard - Lehman Brothers

Lehman Brothers, good morning, everyone.

Theo de Kool

Good morning.

Aaron Hoffman

Hi, Andrew.

Andrew Lazard - Lehman Brothers

Brenda, you talked about the focus on profit dollars as opposed to margin which is certainly consistent with the broader industry at this stage. I think 'you have done the math, but your guidance for '09 suggest flattish operating margins to rotate year-over-year in fiscal '09. So I want to get a bit of sense of if this is consistent with that earlier thought around the focus on dollars and then maybe the key puts and takes that you see, you need to have to get to a production work out?

Brenda Barnes

Yes. You're right on that Andrew. Extra, that is what it calculates to be. And when you look at $500 million on input costs, and the need to offset that on pricing and how that affects the top line, is just', there are so many moving uncertainties when we look out here that we're really just trying to make sure that we increase dollars and that that falls to the bottom line. To the extent that any of those variables change, obviously the outcome will change both on the margin side as well as the profit increase side.

Andrew Lazard - Lehman Brothers

Got it.

Brenda Barnes

But in the end, we just say, “Hey, our job is to drive top-line sales and to have more money fall through.” The bottom line, we would like to keep a better eye on that, I suppose to set percentage on that.

Andrew Lazard - Lehman Brothers

Yes, I'd agree with that. I guess, my point is protecting margins as flat year-over-year, which is just actually, may end up looking quite good relative to all your peers that are driving profit dollars but still seeing quite a bit of margin contraction frankly.

Brenda Barnes

We keep attributing that to, if you look into what's happening in our business, like we said we need to keep driving mix shift, and that's a big cost for us because as we exit, more no profit areas and we add value-added consumer ideas, that tends to shift the mix of our products to a high emerging area.

Andrew Lazard - Lehman Brothers

Got it. Okay and then, just very last thing on, talk about spending in a smarter way and against a lot of the new innovation and the new ideas you got out there. Is there any way to determine though if you feel like you're spending enough if you will on the core? Sometimes that doesn't, maybe less spending than 'is optimum on the core. Sometimes it wouldn't show up for maybe a year or two down the road. How do you think about that now as I make sure that's really the right amount for doing kind sum up by two and three years.

Brenda Barnes

Yes. We are doing more testing of spend levels. We 'don't report those to you, but what we're trying to do is really understand at what point does equal, lower, or heavier spending really move the needle in terms of what our business does. Most of our divisions have some kind of tests in place to test outside. What happens if you significantly increase marketing spending? Does it in fact show up in the numbers'? So that's one thing we're just trying to get more evidence of what will happen there.

We also have, as of a core strategy for Sara Lee, is to protect and build the core. So what we can do is get so enamored with new products, although they are critical, we've set our numbers. We're shooting to hit like a 15% of our portfolio being from our new products, at least an awfully big deal that has to grow, otherwise you just can't get there from here. So, we've been much more balanced I would say, in terms of what we do there and innovate against the core, by the way, whether its packaging innovation, flavor innovation and things like that and tracking our market share very carefully so that we are not compromising the core.

Andrew Lazard - Lehman Brothers

Thanks very much.

Brenda Barnes

Welcome.

Operator

All right. Thank you. Next, [Brian Zieger] your line is open and state your company name please.

Brian Zieger - Merrill Lynch

Merrill Lynch. Hi, guys, how are you doing?

Theo de Kool

Good, doing well.

Brian Zieger - Merrill Lynch

Just wondering if you guys had a target capital structure as far as leverage that the EBITDA, especially on adjusted basis?

Theo de Kool

Well, in order to stay within our rating, we have a debt EBITDA target to be below 3.0. Right from the preliminary numbers we are comfortably below that.

Brian Zieger - Merrill Lynch

Is that on an adjusted basis or is that just balance sheet?

Theo de Kool

That's on an adjusted basis.

Brian Zieger - Merrill Lynch

Okay, great and you just want to stay below three times?

Theo de Kool

That's what the plan is at the moment, yes.

Brian Zieger - Merrill Lynch

Great, thank you so much.

Operator

All right. Thank you and next Eric Katzman. Your line is open and state your company name please.

Eric Katzman - Deutsche Bank

Hi, its Deutsche Bank. Hi everybody.

Aaron Hoffman

Hi Eric.

Eric Katzman - Deutsche Bank

I got a few questions. I guess first Theo and somewhat response to the last question, I have given your numbers, let's say 800 million of net income, $600 million of D&A, subtract $0.5 billion for CapEx and $300 million for dividends, roughly that leaves you with about $600 million of free cash flow. And assuming some of that is going to be easing by restructuring in other cash costs. What is the debt pay down, what do you do with the rest of the cash, and what cash did you end up with for fiscal 2008, and what cash should you end up with fiscal 2009 based on your budget?

Theo de Kool

First of all, Eric, we are still working the detailed numbers so we have not filed our 10-K. So, I prefer not to give the details on our balance sheet at this point in time. But yes, we did also strengthen $315 million on cherry purchase, (share repurchase) 21st, 0:52 and as we indicated that as of going forward we have in our plan at the moment, another $500 million. 'And that will basically take all the free cash flow so there is no room to decrease our debts expansion.

Eric Katzman - Deutsche Bank

So there is no debt pay down in fiscal '09 expected?

Theo de Kool

Not material. There is a debt maturing, but we will have to replace it with the mix of potentially turned debt and commercial paper.

Eric Katzman - Deutsche Bank

Okay. And then, I think Brenda you made a quick comment on mark-to-market accounting for hedging and the swing from segments to corporate, can you just kind of detail that a bit more versus just kind of your past policy on how you hedged?

Brenda Barnes

It doesn't change our policy on hedging, so that change is the same as the change of how we reported and what we saw certainly during the course of this past year, how it's hit any one segment could significantly alter that segment results, and we thought it was not a true picture of ongoing state of the business. And then we looked at how our peers are doing it, and there seems to be a practice more common of taking the hedging pluses and minuses at the corporate level. 'So that's what we are doing. It will still be reflected in all of our numbers. There will be one number that we can talk to you about, above how much hedging affected for the whole company so within the segment you see it without those swings in it.

Theo de Kool

Okay. So this isn't an adjustment from I guess for the latest FAS-B ruling, this is just how you're kind of showing it?

Theo de Kool

Yes.

Eric Katzman - Deutsche Bank

Okay. All right.

Theo de Kool

And can I just come back on another additional call of the eye, and say the first question on cash flow, you take net income and you add D&A. By the way your D&A is a little bit on the high side, is the way I look at it, now it's more in the 525 range. But apart from that, referring to earlier remarks in this call, we have also substantially restructuring an additional tax payment to go through. That's why our free cash flow, the way you described it has no $600 million, but a lower number and look at our cash flow report.

Eric Katzman - Deutsche Bank

Okay. Thanks. So then the 600 basically wiped out by the other charges, tax stuff. Okay.

Aaron Hoffman

Well, 300 for share repurchase and 300 wiped out for tax stuff and other things et cetera.

Eric Katzman - Deutsche Bank

Okay, all right. And then, I guess last question. I just am not, it's been a long time since I've been this far off in an EBIT estimate for almost any company.

Aaron Hoffman

And we're glad you are.

Eric Katzman - Deutsche Bank

And my guess is that everybody else on call started thinking the same way. So, I just need a better sense as to what this 11% operating margin in the quarter or $380 million in EBIT if we want to look at dollars, how that should be thought about within the context of a multi-year restructuring that had its tough times, maybe now is coming out of it. Tell us what inning are we in, in terms of SAP and centralization. And if you're looking at an 8% operating margin and $1 billion dollar EBIT figure, and you answered Andrew's question that implies that, yeah, there was a lot of MAP spending adjust in currency change that we shouldn't figure in for '09 and that this isn't really a run rate. I am lost, I have no idea how to think about particular number.

Brenda Barnes

Chris, I'll say, I think many of you weren't alone in not believing what we are forecasting for our fourth quarter, because it was a bit of a hockey stick. Going in for three quarters, you know what our numbers were on the fourth quarter required a significant improvement.

We sat around the phone (we sat here on the call) 23rd, 0:58, and said, “we are telling you there is going to be a significant improvement in the fourth quarter because we knew all the elements that were in there, how they overlapped, what the pricing period were, all those things.” So, quite frankly, we're not surprised by our fourth quarter. We are very happy to demonstrate it to you. But I think that's a little what was the problem. For three quarters it didn't look like things were happening, and we never gave quarterly guidance either.

So, this fourth quarter was in our original annual operating plans from the get-go and we just never gave the guidance quarter-by-quarter. So, it's real, it's nothing fake. Its how sale, MAP spending fell, its how the pricing increases fell, it's how overlap happened, all those things.

Now the run rate, if you took fourth quarter and said that's the run rate that would be not appropriate, because there are a lot of things in '07 that affected it, making increases what they are in '08. Fundamentally, we have significant underlying improvements in our business. And the transformation required, I always found building blocks, there were quite a lot of building bocks. So in terms of where are we inning on this whole thing, I think we are more than halfway through in terms of getting the capability in place and we're less than halfway through in demonstrating it to all of you of what kind of company we are. I can't even begin to tell you the differences of what's going on here, in terms of how people are working, what the culture is like. We did a round of restructuring in North America, we have an ongoing things to do.

Every step we take, we find ten more steps that are possible including tightening up our cost structure, utilizing SAP better, getting more weight out of the system, and we are reducing SKUs in each of our businesses right now.

Now that in the beginning it's okay, where does that show up? It will show up everywhere, our manufacturing capacity increases, our lines have longer runs, the cost of goods to manufacture is better, we need more warehousing space, the sales force gets more efficient, we have less effect on store show, because we have fewer SKU's which by the way had blip, a lot of them had very low volume low, low profitability, and that's an initiative that we are doing now that's added to everything that we have done before.

So, I feel very bullish about this company continuing to drive the top line, and drive profitability increases and our capability is just growing month-by-month, so I don't know if you want more specifics than that, but I personally have very, very high confidence.

Eric Katzman - Deutsche Bank

I mean, maybe we will just get in to at the Analyst Day in September, but in terms of the innings on these various measures that you have been working on specifically I just tying that to an 11% margin, $380 million of EBIT in the quarter. That if you kind of play around with the tax rate capital structure shares, that basically equals an earnings power of what you were talking about when you first started this thing, whatever it was 3 or 4 years ago.

Brenda Barnes

Yeah, we will do that, because the other thing that we have done and my team has worked on quite a bit is the next three years, what does that look like and what's, we hope to do at the next meeting is stop in a way bridging back to, day one in transformation and now say here is where we are, here is where we are going and here is the strategies to get up there.

We have a plan mapped out that we feel good about, and I think that's doing a lot of what you are saying is, okay where it's going to come from? How is it going to come from a geographic standpoint, product line standpoint and what not?

Eric Katzman - Deutsche Bank

Okay. Thank you.

Operator

All right, thank you. Next, Priya Ohri-Gupta. Your line is open, and state your company name.

Priya Ohri-Gupta - Lehman Brothers

Hi, it's actually Priya Ohri-Gupta of Lehman Brothers. Just wondering if I could get some sense of your appetite for acquisitions as you've allude to in the past. With respect to the leverage target that you referenced earlier in the call that the 3.0 times. How much of a cushion do you want to maintain with respect to that leverage target. How comfortable would you feel reflecting in your balance sheet to a level that, that would be more commensurate with that 3.0 time.

And also if I could just get additional color around your plans to potentially turn out existing CP that was used to refinance maturities earlier in the year. Thank you?

Brenda Barnes

I will just make the comments that I made before in terms of acquisition activity, and that is that we feel that we as a company are more capable now to take a look at things. The things we look at will be consistent with what our capabilities and core products are, and that we will consider bolt-on acquisitions that fit within that as we have done in the past. If anything comes up that looks attractive, it will have to be attractive, that we will not, grow it just for the sake of growing, but we will evaluate based on adding strategic advantages to our company as well as do it at a cost and profitability that makes sense. So, other than that, I'm having plans to announce that maybe Theo can talk a little bit about our capital structure.

Theo de Kool

Let me answer the second part of your question. We have some appetites for turning out [CP]. Our treasury team is looking at that profit that I'm having in the right charge really in sync with the business strategy and our long range plan, and that product has not been finalized, we have not made decisions but we are seriously looking in to this.

Priya Ohri-Gupta - Lehman Brothers

Okay, thank you very much.

Theo de Kool

You are welcome.

Operator

All right, thank you and next Tim Ramey your line is open and state your company name.

Tim Ramey - DA Davidson

DA Davidson, good morning.

Aaron Hoffman

Good morning, Tim.

Theo de Kool

Hi Ramey.

Tim Ramey - DA Davidson

On the mark-to-market, does the new policy start with the new fiscal year, that was not in place for the 4Q is that right?

Theo de Kool

That's correct.

Tim Ramey - DA Davidson

Can you tell us there was a mark-to-market gain in the fiscal year, can you tell us where it was in the 4Q and in what segment?

Theo de Kool

I can tell that it was $10 million in the fourth quarter, but do not disclose the details by the way we will also not disclose the details by segment going forward. But we will record the segments laid out to the mark-to-market impact.

Tim Ramey - DA Davidson

Okay and then Brenda the coffee results were stunning and I know you have some product news and innovation coming there. Should we expect another sort of hockey stick kind of a year. Next year in coffee where you have heavy spending early in the year or is that kind of already in the mix?

Brenda Barnes

Haven't guided yet on the quarterly flow, obviously I will choose not to do that. But I will say, the coffee segment is behaving extraordinarily well, from a innovation pipeline standpoint. I think we've got a lot of great ideas, that will be flowing and we have geographies that we are investing in and we are seeing the benefits of that Russia, being one of them, Brazil being the other in terms of how we changed our approach there and categories, I think we are making great progress on all forms of single serve. So, revenue in common, quarter-on-quarter, I think we can expect coffee group to continue to show great results.

Tim Ramey - DA Davidson

Okay and then the tax rate was very high 45%. I guess that's what I calculated on an operating basis, was there a heavy up on repatriation or what happened there, Theo?

Theo de Kool

Actually by my calculation its 38.8%, which you filled little point from page five of the press release. But what happened there is actually two things, indeed we had repatriated more than we anticipated for various reasons. And we had to pay a price for that and also our full-year model had some changes in estimates which all came down in the fourth quarter.

Since this is kind of a more over long time thing. We are comfortable saying that our next year's rate will be a couple of points lower again. Not that we've will repatriate less, but we still have some previously taxed income in US that it can now repatriate. In other words we cannot repatriate money and we will not pay the bill for that anymore in the US because we did that already.

Tim Ramey - DA Davidson

Okay and just finally I'd say as someone who hasn't missed an opportunity to criticize in the past, this was an amazing quarter and you really deserve a lot of credit for getting this thing turned.

Theo de Kool

Thanks.

Tim Ramey - DA Davidson

Thank you.

Operator

(Operator Instructions) And next we do have Alexia Howard. Your line is open and state your company name.

Alexia Howard - Sanford Bernstein

Hi it's Sanford Bernstein, hi everyone.

Theo de Kool

Hi Alexia.

Alexia Howard - Sanford Bernstein

And so a couple of quick questions here. Coming back to the question of the sort of profit growth formula from here on, I remember a year ago we were talking about it more in terms of percentage margins and how pricing in productivity would offset pricing and then mix improvement to drive that, drag margins upwards. Now, that you are moving more towards the dollar formula, just trying to understand if we are still think that pricing should be able to offset cost inflation.

Obviously there is big set up in cost inflation expected this fiscal year. Does that mean, we are seeing a month slowdown in the mix of productivity or is that something to do with the way restructuring costs are being treated perhaps not breaking them out. Could you maybe just give me a little bit of detail on that?

Brenda Barnes

Yes. The algorithm is still very similar Alexia, its just pricing is expected to offset commodity increases. I mean that's our ingoing approach. You always have to be careful in terms of what the market there is but that's certainly our ingoing approach. Yes, we will continue to have a mix shift that leads to products and segments and categories that are higher on the average than our current mix.

Yes, we still have an on going very aggressive cost savings approach that both from lean techniques and continuous improvements to other initiatives that probably can give us some step function improvements over the next couple of years. So it's in that mix that we believe that the ongoing profit improvement will come. It's the question of how that translates to the margin percentage based on what's the top lines growth.

Alexia Howard - Sanford Bernstein

And specifically, if that all works, having delivered I guess 14% adjusted operating profit growth in fiscal '08. What's slowing down to bring it down to just between 3% and 6% in '09?

Brenda Barnes

Yeah, I think the way we are looking at it, the volatility of the economic conditions that we have been facing and continue to face, just make us and that maybe realistic in terms of what those things can bring. Certainly if that changes the results may change.

Alexia Howard - Sanford. Bernstein

So, its really just uncertainty around what's going on with the top line, I guess?

Brenda Barnes

Yeah, yeah.

Alexia Howard - Sanford. Bernstein

Okay, that makes sense and then just a quick follow-up on the share repurchase strategy and Theo, could you maybe just tell us a little bit more about what triggers or sort of purchasing activity given that obviously the share repurchase price this year was probably a bit higher than we've seen in recent quarters and there wasn't much going on this last quarter when stock prices were low. Going forward could you just give us some thoughts on how you are planning to handle that?

Theo de Kool

Well, actually what we announced three years ago is a plan for the next five years and we pretty much have executed according to that plan. I must say that of course it's tempting at these lower levels to buy. It looks attractive. But we also are monitoring our debt EBITDA levels as I said on the previous question.

So we have a balanced approach there and we look at our debt level, share repurchase and dividends and other opportunities that may come along like our appetite to maybe do bolt-on acquisitions etcetera. So we plan it out actually in the next two years to fulfill our commitment just the current plan.

Alexia Howard - Sanford. Bernstein

Okay, thank you very much.

Operator

All right. Thank you and next is Vincent Andrews. Your line is open and state your company.

Vincent Andrews - Morgan Stanley

Morgan Stanley. Good morning everyone.

Theo de Kool

Good morning.

Vincent Andrews - Morgan Stanley

Just a couple of quick questions, the first is, you stated that commodity input cost increased for fiscal 2008. That was your actual incurred cost, which included any sort of benefit from hedging theoretically. Correct?

Theo de Kool

Actually that's the P&L impact, so that has a benefit of the $35 million that we mentioned before is in that number.

Vincent Andrews - Morgan Stanley

Okay. So if you weren't hedged at all, that number would have been materially higher? That's correct as well?

Theo de Kool

Yes. It will be materially higher.

Vincent Andrews - Morgan Stanley

And, would you care to share with us what that number would have been?

Theo de Kool

Well, no, not necessarily. But if prices increase and you hedge forward you of course have a benefit. So this can work against you, because I'm sure that in the next quarter prices would have come down, but we don't expect. You have been hedged, you'd all probably said, why did you do that, but it's just to protect our margin going forward so it's a consistent policy. But yes, under the current circumstances, a hit to the P&L would have been much higher if we would not have been hedged.

Vincent Andrews - Morgan Stanley

Okay, no, I understand the trick. I just trying to understand what the overall magnitude of cost increases was that you felt prior to the hedging trends. And then just to a similar extent, the number that you've given for full '09, that would be a number reflective of where you're hedged as well, correct?

Theo de Kool

Yes. indeed.

Vincent Andrews - Morgan Stanley

Okay, and then Brenda, you called out that the Ball Park franchise and a number of times, and results are obviously very good. Can you just give us a sense of, Frank, how much of that has to do with sort of consumers trading down from the growing season from some more expensive costs. Is that what you're seeing?

Brenda Barnes

Yeah, we're probably not, they are precise in their cost. You have to a demand, whenever we tend to look at price points, but you have to believe that the consumers are always looking at their shopping baskets and take making the kinds of decisions they need to fit within their budget. So we'd like to think that a Ball Park hot dog is a great alternative to [fixed date], and we offer that as a meal solution for dinner all the time in addition to sandwiches by the way.

Vincent Andrews - Morgan Stanley

Sure. Okay and just one last one which is follow-up on the earlier questions on hedging, when you approached the retailer to discuss price increases we just talked about, there is a number you'd actually say it's a cost increase and then what you said from hedging, what in that conversation with the retailer, what number is typically being used? Everybody knows that there are commodities that are up if I don't know what your mix is, so how is this conversation being carried out?

Brenda Barnes

Just, like we don't publicly say under what category commodity we're hedged again so we were not talking those terms to retailers either. So what they have to look at is, all things considered everything in, because there are many factors that go into the cost structure in addition to commodities and I don't believe that's the big one and what value proposition you're offering to them for the product in the promotions and activity that you're giving so you don't get to that level of process detail

Theo de Kool

There is a processing policy in place here as well of course. It's not just that we just pass on the pricing, because of the P&L impact of the commodities. We carefully look at that price distance versus competition versus a private label and how we position that inside so there are many elements at play around that.

Brenda Barnes

And this is one of the capabilities that I often talk about. We enable building capabilities, the capability our product in near occasions and purchase occasions has made us much smarter by wherever we can and wherever can't take pricing.

Vincent Andrews - Morgan Stanley

Okay, thank you very much, it's very helpful. I'll pass it along.

Operator

Hi, thank you. Next, Peter Jacob, your line is open and state your company name.

Wells Fargo - Regan McKenzie

Thank you. Wells Fargo, Regan McKenzie. First, Theo, could you talk a little bit about the flow of the tax rate quarter-to-quarter in fiscal 09? I'm just curious on how I should think about that with the contingent tobacco proceeds coming through in the first quarter. Does that then suggest that you're going to have a lower tax rate then and then get back to a normalized tax rate or a normal tax rate in the subsequent three quarters or do you spread that out over the year? That's my first question.

Theo de Kool

We plan according to the capitals. We planned a flat rate during the year.

Wells Fargo - Regan McKenzie

Okay. So that's how we should be thinking about it. Very good. Second, Brenda, could you maybe discuss what you're seeing on the competitive front in the stores regarding private label brands and any specifics in terms of how you are addressing, I guess the increasing prevalence of those? In spite you're doing a great job in that, I think a lot of us are surprised by that with the preponderance of private labels out there.

Brenda Barnes

Yes. We certainly recognize that every retailer has their own store brand and it plays a very important role for them. They've been in place for as long as I've been around working in this business, 30 years or more. It's really all about how do you offer value relative to what that line and its value in terms of the price point and the GAAP versus added loan value in terms of perceived value and real value from what consumer sees.

So, it's there, it's always there. I think when you really look at private label you have to look by category. There is not much product differentiation or not perceived value. You really have a hard time not having some trade-downs that are going on. So what we have seen in our segments and what we want to keep doing is make sure that that value proposition stays firm. We do that in terms of product innovation, the price points and managing that price GAAP.

Wells Fargo - Regan McKenzie

When you discuss your market share of gains in some of the categories, is this market share gains, are those coming from other name brands or, and you're just holding our own private label or are you taking market share or holding our own or market share across the board? That's another way I guess I could ask the question.

Brenda Barnes

Yes. Again, you only look it by segments. So if you look at household and body care, it's not a big factor, private label is not a huge factor there. The game is played between the big brand and competitors. If you look at fresh bread in United States, we have actually seen a decline in the private label market share. So the play is often between what the regional brand, who have the major national brands, regional brands and private label. There is more inner play I think if you look in general versus the regional brands.

Meat is not a huge private label segment. Maybe because you need branded meat makes a difference. People want the security, the safety, the assurance that that product is really good. So that's not a typical segment. But it's more in coffee, branded products tend to compete. Private label does play a role in certain markets. It certainly affected us in sale and (inaudible). Our response to that certainly was to come out with more innovation. We have chocolate, coffee products now and we keep coming out with new ideas that keep us one step ahead. So, really there is very exciting category.

Wells Fargo - Regan McKenzie

Okay, great. Thank you.

Operator

Hi. Thank you. Next we have Terry Bivens. Your line is open and state your company name.

Terry Bivens - JPMorgan

Hi. I'm with JPMorgan, good morning everyone.

Theo de Kool

Morning, Jerry.

Aaron Hoffman

Good morning.

Terry Bivens - JPMorgan

Just a couple of quick things, I know there is a lot of discussion of MAP, what was that in the quarter? Up, down, if I missed it I apologize.

Aaron Hoffman

Okay, Terry. MAP for the quarter was down 21% on a reported basis, for the full year was up about 5% on a reported basis.

Terry Bivens - JPMorgan

Down 21%, okay.

Theo de Kool

And I will remind you that it's the fourth quarter of '07 MAP was up significantly, I think it was up 20 some percent, about $30 some million. So on a year-over-year the fourth quarter is basically flat, for a multi-year period.

Terry Bivens - JPMorgan

Okay Theo. And in terms of, I think we were looking at roughly about $100 million worth of commodity push in the quarter, and also looking for kind of roughly the same amount in additional pricing. So, those two should have kind of balanced out. I guess you should have got a gross margin contribution too from the absence of the Mexican meat operation, would that be correct?

Brenda Barnes

Yes. The quarter on declines was 125 increase and the price was up 120. So that's the total number that you were referring to. The exit of Mexican meats would have been a plus on our margin side.

Terry Bivens – JPMorgan

Were there any productivity savings in there? I would think that would have added an increment to the gross margin but.

Theo de Kool

There is a continuous flow of productivity improvement across all the quarters. I don't have the number by quarter but it's a difficult amount of procurement savings and continuous improvement that applies to all the quarter. So, yes, there is a improvement there.

Terry Bivens - JPMorgan

I guess, I'm wondering Theo, why wouldn't have shown up in the numbers a bit?

Theo de Kool

That is basically because you, although you offset the commodities, pricing is higher, so your margin is lowers.

Brenda Barnes

And your offsetting.

Theo de Kool

Deductions margin is kind of the same.

Brenda Barnes

A lot of those savings too are offsetting labor inflation. The other inflation other than the commodities, so it's not one-for-one for every dollar in statements didn't fall through. It offsets with regular inflation.

Terry Bivens - JPMorgan

Okay. All right. Thanks.

Operator

All right. Thank you. Our last question comes from Jonathan Feeney. Your line is open and state your company name please.

Bryan Scideri - Wachovia

[Bryan Scideri], Wachovia in for John. Good Morning

Theo de Kool

Good Morning

Bryan Scideri - Wachovia

How are you doing? Sorry, it's been answered already. But, in the context of your sales guidance next year, do you guys have volume expectorations, 1.2% volume growth this year was pretty good in the commodity environment we're facing with all the pricing you guys have been taking. Any thoughts going forward there.

Aaron Hoffman

We haven't provided guidance on that metric this year. I think as always we will do everything we can to work towards that but we haven't given a specific number.

Bryan Scideri - Wachovia

Fair enough. Thanks.

Aaron Hoffman

Thank you.

Operator

All right. Thank you. At this time we are showing no questions.

Aaron Hoffman

Great. Thank you all very much for joining us today and we look forward to not catching up with you, or actually you'll see an official publication of this, I guess for much more official change that we're going to move our annual Analyst Day from October when we originally had it to I believe November 5th, which is the day of our first quarter '09 earnings. So we'll do them both at the same time because that was little more efficient for all of us.

So we'll invite you to come to Chicago on November 5th, and enjoy a nice day with us and include the first quarter earnings results at that time and, you will get the official details from that very soon. So we look forward to catching you up with all of you then. Thank you very much.

Operator

Hi. Thank you. That does end today's conference. Have a great day. You may disconnect.

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