Good morning, everyone, and welcome to The Hershey Company's third quarter 2015 results conference call. My name is Lindy, and I will be your conference operator today. All participants have been placed in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. Please note this call may be recorded. Thank you. Mr. Mark Pogharian, you may begin your conference.

Thank you, Lindy. Good morning, ladies and gentlemen. Welcome to The Hershey Company's third quarter 2015 conference call. J.P. Bilbrey, Chairman, President and CEO; and Patricia Little, Senior Vice President and CFO, will provide you with an overview of our results, which will then be followed by a Q&A session. Let me remind everyone listening that today's conference call may contain statements which are forward-looking. These statements are based on current expectations, which are subject to risk and uncertainty. Actual results may vary materially from those contained in the forward-looking statements, because of factors such as those listed in this morning's press release and in our 10-K for 2014 filed with the SEC. If you have not seen the press release, a copy is posted on our corporate website in the Investor Relations section. Included in the press release is a consolidated balance sheet and a summary of consolidated statements of income prepared in accordance with GAAP. Within the Note section of the press release, we have provided adjusted pro forma reconciliations of select income statement line items quantitatively reconciled to GAAP. The company uses these non-GAAP measures as key metrics for evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the company believes the presentation of earnings, excluding certain items, provides additional information to investors to facilitate the comparison of past and present operations. As a result, we will discuss third quarter results, excluding net pre-tax charges of $140 million or $0.47 per share-diluted, primarily related to the productivity initiative announced in June, a non-cash impairment charge in China and costs associated with the early extinguishment of debt. Our discussion of any future projections will also exclude the impact of these net charges. With that out of…

Our first question comes from Ken Goldman with JPMorgan. Please go ahead. Your line is open. John P. Bilbrey - Chairman, President & Chief Executive Officer: Hi, Ken.

Hi. Good morning, everyone. So we've now had about two years of performance that's come in, I think it's fair to say, worse than initial expectations. And I realize a lot of it's China, but some of it's domestic, too, right? I guess my question is this. You're guiding to better performance ahead, but why should we on the outside have a particularly high amount of confidence in that outlook? Because I know you said you're seeing better trends in October, but it feels like every quarter something unexpected starts to bite this category. So why should we have really a high level of confidence that 4Q will come in sort of as you're expecting? Is there anything particular that you're looking at that gives you that sort of upward trend in your outlook maybe? John P. Bilbrey - Chairman, President & Chief Executive Officer: Well I think, Ken, first of all, if I talk about the last couple of years, is clearly we've been in an environment which has been a bit different than we were in some of the previous years. So I think that as we continue to get greater clarity around at least our thinking, we think that consumer bifurcation has been an important driver. We're also seeing that there's expanded choice across the broader snacking continuum. As an example, snack bars, there's about 30% more SKUs in the category than there has been over the last couple of years. So we think we've had some trial there on some of those brands that has impacted some of our CMG brands. And then, of course, we've had the trips issue, where we've seen a continuing decline in trips across the category. And on an everyday and instant consumable basis, that's had a trending impact against our…

Thank you for that, but aren't those fundamentals getting less attractive? I mean, I'm just confused about why the optimism, if trips are down at a time when crude oil is down and fuel is down. Usually trips are up in that kind of scenario. So I'm just a little confused about what's driving some of the headwinds you're seeing right now? John P. Bilbrey - Chairman, President & Chief Executive Officer: Well, I think that if you look at the merchandising that we've seen on the floor, so quality merchandise at some large retailers. They've had a bit more of a clean floor policy than they've had, so we have to adjust and make sure that we're doing the best we can to get our fair share of that merchandising. And then, as we move into Q4, we've got, I think, attractive investments from a GRP standpoint against our brands and we'll continue to build our brands as we go into 2016. So, I can't tell you that on a single Monday morning the world changes, but I think the dynamics of the category continue to be attractive. Consumers are snacking more than they ever have before. We have to make sure our portfolio is attractive, and then we have to build brands within that. And I think history would suggest that we know how to do that and as the consumer participates, we're going to definitely win against our programs.

Your next question comes from Jonathan Feeney with Athlos Research. Please go ahead. Your line is open.

Good morning. Thanks very much. Just to follow up on Ken's question a little bit, real specific, in North America where you had a little bit disappointing volume, can you talk about not only this quarter, the difference between your everyday business and your seasonal business? And then you talked about programming going into the fourth quarter. How is that looking? How is your level of confidence in the everyday business looking versus that seasonal business that's been so steady for the company over the past couple of years? Thanks very much. John P. Bilbrey - Chairman, President & Chief Executive Officer: Well, we know one of the biggest drivers of the everyday business is effective advertising. And we have strong programming in Q4 that we think will support the everyday business. And that's one of the areas which we really have to focus against on some of our core brand growth and ensure that our advertising is working hard for us. That's a part of Q4. We continue to execute well against seasons, so we expect in the important Halloween period that we're going to win share there. So I feel, as you say, we've done well there. I feel good about that. And the everyday business is really impacted by trips. So we really are going to have to see an environment where across retailers, that trips begin to help us a bit, where I think it's been a drag on the business overall here over the last 12 to 18 months.

That's helpful, J.P. So just so I'm clear, relative to expectations, it sounds like the everyday business has been a little bit tougher than seasonal has been relative to expectations. Is that right? John P. Bilbrey - Chairman, President & Chief Executive Officer: Yeah. I think that's right. Yes.

Yeah. I think what you saw, Jon, that year-to-date June, I think trips were down roughly 2% across xAOC+C. And in the third quarter, you saw trips down 4%. And you saw, as J.P. referenced in his remarks, C-store, for example, was down 9%. Now, it feels like and the early look on the data looks like September and October got better, but it's that kind of choppiness that we historically haven't seen and that's been with us now – or really, the retail environment in CPG space all along – going on a year and a half, two years now.

And since, by definition, people are stocking-up for seasonal, like Halloween trick-or-treating or whatnot, it's a little bit less affected by trips, right? John P. Bilbrey - Chairman, President & Chief Executive Officer: Correct.

Great. Thanks very much.

And your next question comes from the line of Chris Growe with Stifel. Please go ahead. Your line is open. John P. Bilbrey - Chairman, President & Chief Executive Officer: Good morning.

Morning, Chris. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Hi. Good morning. I had just two quick questions, if I could. I want to understand, first of all, in the U.S., with consumption being down a little bit, but your revenue is being up in the quarter, just the shipments versus takeaway and I guess maybe this is a better indication of the seasonal shipping that occurred in the quarter. I just thought I'd get a little more color around that gap that occurred in 3Q. John P. Bilbrey - Chairman, President & Chief Executive Officer: Yeah. So you saw a bit of a benefit just trying to get seasons on the floor as early as we could, given some of the other things that we're seeing. So we did have good seasonal shipments in Q3 to support some of the merchandising that's happening in Q4. And then the other thing you don't see in those numbers, which was also a benefit, is some of our snacks and adjacencies, which don't get measured in the CMG numbers, and I think those were close to a point benefit to our business. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for that. If I could ask a quick question really around the guidance and this incremental dilution occurring from acquisitions, the $0.35, I think you've been on $0.20 previously. Does that incremental gap in relation to the reduction in earnings guidance you have for the year suggest more dilution that what you've lowered your guidance for the year? Does that imply a better North American performance, I guess, essentially or better overall, let's call it, non-SGM performance? Patricia A. Little - Chief Financial Officer & Senior Vice President: Hi. It's Patricia. Yes. So it definitely reflects better performance in our bottom line to overcome that added dilution. I think of it in sort of two buckets. One is in the expense line, where, as I mentioned before, we have greater savings from our restructuring project that we announced in June. We've kept a very tight lid on discretionary spending, and that's probably about half of the difference. I would say that the other half of the difference is more sort of technical things related to movement within the range, as well as, as I mentioned in my remarks, interest at the lower end as well as the buyback. So those are the two big buckets that we're using to make up that difference.

Your next question comes from the line of John Baumgartner with Wells Fargo. Please go ahead. Your line is open. John P. Bilbrey - Chairman, President & Chief Executive Officer: Good morning, John.

Thanks. Good morning. Good morning. J.P., wondering if you could speak more to China in terms of maybe what you're seeing with the competition as it concerns price promotion and innovation and then maybe where you see the bottom occurring as this all plays out. And from an expense perspective, I realize you haven't provided 2016 guidance, but how should we be thinking about incremental cost in China as you focus more on the small format retailers or maybe even opportunities to adjust your cost structure lower for the lower sales base? John P. Bilbrey - Chairman, President & Chief Executive Officer: Yeah. Let me take the China piece and I'll talk specifically about our Hershey business in China. So as you probably heard us talk before, we are heavily weighted to the hypermarket channel in China versus having deeper distribution. So even as we've grown our distribution, it's largely been in the Tier 1 cities and it's also been more weighted to hypermarkets. And the hypermarket channel has been more negatively impacted over the last 12 months than have other channels, although the total category across channels is down. But we're not as well represented and some of those channels have actually done better than the hypermarket channel. So we have a weighting mix issue that's really impacted our business there, which is one of the things that interested us so much in Shanghai Golden Monkey is it gives us better and deeper distribution across smaller stores, supermarkets and then also Tier 2 and Tier 3 cities where appropriate. So we think those factors are still relevant and that we'll benefit from that. Obviously, we've had some struggles in terms of the start-up of Shanghai Golden Monkey, but the real drivers of why we made the acquisition still exist, the distributions channel's there, the manufacturing's there, the brands, et cetera. So we think as we go forward and gain control of that business, we'll definitely benefit from the greater penetration across all the channels. But that's how I would think about what's happening there. And then you have a faster evolution there probably than any place else in terms of e-commerce. So in our category, about 15% of the business is sold in e-commerce. We're right about where the category is. That piece of our business is growing very nicely. So we're participating in that channel development quite nicely. And so those are several things that I would mention about China.

So as your China recovery plan unfolds, it sounds like you can get more mileage and better leverage out of the inherited Shanghai sales force as opposed to investing more feet on the street yourself? John P. Bilbrey - Chairman, President & Chief Executive Officer: Yes. I think that's correct.

All right. Thanks, J.P. John P. Bilbrey - Chairman, President & Chief Executive Officer: Thank you.

Your next question comes from Eric Katzman with Deutsche Bank. Please go ahead. Your line is open. John P. Bilbrey - Chairman, President & Chief Executive Officer: Good morning, Eric.

Morning, everybody. So I guess two questions, sorry Mark. The first one is, I mean, I know the outlook is a little more challenging than you'd like, but I'm a little bit surprised that the decision to not give an adjusted long-term guidance is hinging on the 20% of Shanghai Golden Monkey that you don't own. I mean, you're already consolidated and just back out the 20%. So that seems like that's just a financial exercise. So is there something about this last 20% that is a real like impact to what you think you can do long-term on a global basis? And then I guess for Patricia, the higher commodity costs that were mentioned as a negative to gross margins this past quarter, I'm a bit surprised. I mean, it seems like most of your inputs are down. So maybe you could give a little bit more color there and maybe a little view into 2016 as you see your hedged inputs. Thanks. John P. Bilbrey - Chairman, President & Chief Executive Officer: Yes. So, Eric, let's take this in two pieces. I'll start and then Patricia can follow up. So I think that we're being as thoughtful as we possibly can around how we think about our long-term guidance. And I want to move us to an environment where we talk about a little bit long-term guidance and then we can talk about where we think we are within that range. Sometimes we'll be above, below, whatever. But given all of the moving parts that we've seen historically, we've given our guidance on this third quarter call. There's a lot of moving parts. I wouldn't put it, by any means, all of that weighted into what's happening in China. I think it's really we want to make sure that we have a good sense of what 2016 and beyond looks like from a category standpoint. And we'll go from there and we'll probably talk about that in January. Patricia A. Little - Chief Financial Officer & Senior Vice President: And it's Patricia, I'll talk about the higher commodity. We did have a little bit of cocoa price inflation in the third quarter, but I just want to go back to the fact that on a net basis, obviously, we're ahead because that cocoa inflation is why we priced. We have good visibility into 2016 and I don't really want to get into this commodity or that commodity because where we remain focused is an overall gross margin focus and you can see that coming through in our third quarter results.

Okay. All right, I'll pass it on. Thank you.

And your next question comes from David Driscoll with Citi Research. Please go ahead. Your line is open. John P. Bilbrey - Chairman, President & Chief Executive Officer: Good morning, David.

Thanks a lot. Good morning. And thanks for the question. Patricia, I hate to do this, but I got to go over some old ground here. I still don't understand the 2015 guidance reconciliation, so $4.10, when you're barely moving the EPS number, but it's like a tsunami of negatives. You guys, say U.S. sales are weaker. China chocolate sales are weaker. Shanghai Golden Monkey negative $0.35 versus, $0.15 worse than before; tax rate's worse. These are large numbers, so for this EPS number not to move. You then gave some comments to – and I forget who asked the question -- but you said like the expense line, greater savings. That savings number is $10 million better – that's like $0.03 or something like that? It's de minimis.

Well, David, first, one thing, you're double counting on the tax because it's included in the dilution. You don't know where we were in the $10 million to $15 million restructure savings in June, so we could have been at the low end and now at the high end and that's a $15 million delta. Patricia talked about the interest expense. That's now at the low end because we ended up doing the bond deal in August, but. Patricia A. Little - Chief Financial Officer & Senior Vice President: Yeah. And just overall, while you're right in terms of the savings related to the restructuring that we announced in June, as I also mentioned, we're just overall holding the line on discretionary spending beyond that specific impact. And you could see that in our third quarter, where, ex-M&A, we were actually down year-over-year in our SM&A, excluding marketing-related expenses. So it's all of those movements, and it's a pretty big number. Yeah, I was going to make the same point Mark did. Just to be really clear, the tax impact related to Shanghai Golden Monkey NOLs is part of the walk of the dilution number moving from $0.20 to $0.35.

Okay. So just final follow-up here for me then, J.P., there's a lot of moving parts. It seems to me then that the focus is still just back on the sales line, and you've got slightly weaker than expected U.S. sales and, clearly, weaker China sales. But you seem to be giving us the statement or this confidence that 2016 is clearly better and will be better. And I think is that the message here, is it that some of the things that are been happening, that you just have a very strong line of sight to that the company will do better in 2016 on the top-line? John P. Bilbrey - Chairman, President & Chief Executive Officer: Well, you know, I think, David, we want to go execute against the fundamentals in the business. We continue to be optimistic about the category and the role the category plays with retailers. We have a pretty balanced look at 2016, from both a top and bottom-line standpoint, and we'll talk a bit more about that in January. At this point, with some of the things we're seeing with the consumer, I think it's important that we focus on the things we can control. We've got to make sure that our portfolio is compelling and we participate where we think that the consumer is going. And we'll continue to read those things, but we have to get in a position where we're winning share every day, and growing our brands. And we feel good about the plans we have. We feel good about the innovation contribution to our business. So from those standpoints, I am optimistic. I do think there are some macro issues that are impacting retailers as well as our business. And so we've got to operate within that environment.

Thanks for the comments.

Your next question will come from Robert Moskow with Credit Suisse. Please go ahead. Your line is open. Robert Moskow - Credit Suisse Securities (USA) LLC (Broker): Hi. Thank you. John P. Bilbrey - Chairman, President & Chief Executive Officer: Morning, Rob. Robert Moskow - Credit Suisse Securities (USA) LLC (Broker): Good morning. Maybe you could give us a little more detail, J.P., on your comment about being under-leveraged in the value segment. Are you considering introducing newer products or new initiatives to get bigger in dollar stores? Is that kind of what you're hinting around at? John P. Bilbrey - Chairman, President & Chief Executive Officer: Well, yeah, sure. I'd love to talk about that. So in the chocolate segment, we believe we've been under-represented in the premium part of the category. While it's a relatively small piece, less than 10% of the total category consumption, we recognize that we have to do a better job there. In the value segment, a lot of what happened this year was really around sugar confectionery and sweets. And we think The Allan Candy acquisition will enable us to do well there. We also think there were some manufacturers that probably benefited from the spot price of sugar. And based on where things are manufactured, that could have given them an opportunity to invest in the category more so than in the past. So the beauty of The Hershey brand is, is it's one of the most accessible brands that there is. Chocolate in our country from all manufacturers, it's the best value per pound of any place in the world. So I think frequency is something we have to make sure that we're driving. I think the portfolio is largely attractive in chocolate, but we need to work on the high…

And our next question comes from Kenneth Zaslow with BMO Capital Markets. Please go ahead. Your line is open.

Hey. Good morning, everyone. John P. Bilbrey - Chairman, President & Chief Executive Officer: Hey. Good morning.

Hi, Ken.

Two questions; one is, over the last several years, many packaged food companies have shifted its algorithm to more of a margin focus. And your repeated commentary about balance, is there maybe not a sea change, but a shift in how you're thinking about your algorithm more to a cost restructuring, even in both in the U.S. and China? And my second question is, in terms of category adjacencies, you've had mixed performance on certain category adjacencies, so trying to figure out how you're getting more confident in moving into the snack bites, the snack bars categories, and how do you assess the adjacencies.

Yeah. I mean, one thing, Ken, and I think on the balance, how we were thinking about it is, yes, I know we're lapping a lot of one-time type of costs related to China this year, but I think the way we've always thought about this business and even before we got into snacks, there's never a shortage of places to invest around here. And I think we have a lot of good, big buckets that you'll see us continue to invest in on not only our core business, which is always number one, but always some of the snacks and adjacencies that we're talking about. John P. Bilbrey - Chairman, President & Chief Executive Officer: I think good examples of that are KRAVE. We've got our Brookside bars. We mentioned Allan a little bit earlier. And as we continue to look at snacking in total, we've got a number of things that are on the innovation front that, as appropriate, we'll be bringing those things to market. So I think as Mark says, a lot of places to invest that are attractive and, as appropriate, we'll continue to expand our portfolio.

So there's not going to be a heightened focus on restructuring or cost savings? John P. Bilbrey - Chairman, President & Chief Executive Officer: No. I think the way to think about it is, is that first of all, I think it's important that we always act with a scarcity mentality. And certainly, you've seen some of that in the numbers that we're talking about today in terms of where we're spending and choosing to spend. So I think we'll continue that, that way. We also want to invest in markets where we're trying to grow our brands, and volume is always the magic elixir, so pace is important to think about. So where we see there's opportunities, we need to go to the ball there. And when growth is a little tougher or less attractive, we need to moderate in those places as well. We'll continue to do that, but we want to be a consumer-centric brand-building company, and we'll invest appropriately.

And we'll go next to Jason English with Goldman Sachs. Please go ahead. Your line is open. Jason M. English - Goldman Sachs & Co.: Hey, guys. John P. Bilbrey - Chairman, President & Chief Executive Officer: Hey, Jason. Jason M. English - Goldman Sachs & Co.: Thanks for squeezing me in. Real quick housekeeping question and then back to some of the other stuff we've been talking about; the second installment for Shanghai Golden Monkey, where do we stand on that? John P. Bilbrey - Chairman, President & Chief Executive Officer: So, we're still working through and negotiating our position with them around the second closing. We're still trying to bring clarity to a number of different issues where we may have different points of view around some things. And so that's all still in process, but we feel good about the progress that we're making.

And we'll go next to Alexia Howard with Bernstein. Please go ahead. Your line is open. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Good morning, everyone. John P. Bilbrey - Chairman, President & Chief Executive Officer: Good morning. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Can I ask about as you look forward, the algorithm for sales growth in North America has been pretty heavily price-focused for the last 10 years or so. I think you've taken three either high single digit or low double digit price increases for good commodity-based reasons. It seems as though the cocoa commodity prices have been reasonably steady, albeit at peak levels for the last few years. Going forward, does it have to become much more volume mix-based, because it will be harder without a commodity-driven step-up to take more pricing? How are you thinking about the U.S. sales growth formula going forward? Thank you. John P. Bilbrey - Chairman, President & Chief Executive Officer: Well, I think the first place that we would start is that we continue to believe that the category historically is going to grow in the 3% to 4% range. So that's a starting point. If you look over the last decade or even longer, growth has always been a combination almost equally split between price and volume. And as we go through this current period, it continues to track around that model. So what we believe is, as I said earlier, the real influencers on the category are really around this trips issue that has impacted the business more than it has been on price. So I don't think the historical norms have changed. Obviously, in chocolate, where we're a 45% share in the category, we have a lot of responsibility in terms of category growth. So we have to innovate and grow and compete for consumer occasions, which are growing all the time across day parts. And so we have to participate in that. But I don't think there's anything around the category itself that would cause us to think that price, et cetera, is different. Now, to your point, if we move into a period of time where commodities are less of a driver around the price piece, as we've said historically, you know we're a gross margin-focused company, and we would have to make sure that we continue to do that to maintain the attractive gross margins that we have today. But I wouldn't see us thinking about that significantly different.

And we'll go next to Bryan Spillane with Bank of America. Please go ahead. Your line is open.

Hey, good morning, everyone. Patricia A. Little - Chief Financial Officer & Senior Vice President: Good morning, Bryan.

Just one question, I just wanted to get a little bit of clarification on the true-up on trade promotions in China. I just want to make sure I heard this right. It's $80 million less than your expectation, so I guess the gap between gross and net sales... Patricia A. Little - Chief Financial Officer & Senior Vice President: Yeah. I'm glad you asked for the clarification. No, what we're saying is after the true-up, our current net sales estimate is about $80 million.

Yeah. I think it was around $90 million, Bryan, last time we spoke to you guys. Patricia A. Little - Chief Financial Officer & Senior Vice President: Time we talked.

Okay. So the true-up in the quarter was about a $10 million differential? Patricia A. Little - Chief Financial Officer & Senior Vice President: For the year.

For the year.

For the year. Okay. And then, just as we think about that for next year, does it imply that whatever your expectations were for net pricing at the start of the year, you just have a different base net price? And so as you go into next year, it's not that you necessarily add that back, it's just your net price is lower than what you were originally assuming or is there something about that true-up that your net price realization that you'll recognize will be a little bit better next year?

Yeah, I mean, on a hypothetical basis, Bryan, if gross sales are the same year-over-year, net sales would be up, because I have all this trade running through between gross and net sales this year. So in a hypothetical situation where gross sales are the same year-over-year, net sales would be up, assuming there's no more trade. Patricia A. Little - Chief Financial Officer & Senior Vice President: But I think it's also fair to say that it is overall just a rebase to a lower level as well in terms of the gross sales.

And this concludes our Q&A session. I'd like to turn our program back to our speakers for closing remarks.

Great. Thank you for joining us for this morning's call. I'll be available all morning and afternoon, too, for any follow-ups that you may have.

And this does conclude today's program. You may disconnect at this time.