Sonal P. Robinson - Director of Corporate Finance, Vice President of Investor Relations and Assistant Secretary Richard K. Smucker - Chief Executive officer and Director Vincent C. Byrd - President, Chief Operating Officer and Director Mark R. Belgya - Chief Financial officer and Senior Vice President Paul Smucker Wagstaff - Director and President of U.S. Retail Consumer Foods Steven T. Oakland - President Of International, Foodservice And Natural Foods Mark T. Smucker - President Of US Retail Coffee and Director

Andrew Lazar - Barclays Capital, Research Division Eric R. Katzman - Deutsche Bank AG, Research Division Farha Aslam - Stephens Inc., Research Division Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division David Driscoll - Citigroup Inc, Research Division Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division Thilo Wrede - Jefferies & Company, Inc., Research Division Jason English - Goldman Sachs Group Inc., Research Division Charles Edward Cerankosky - Northcoast Research Robert Dickerson - Consumer Edge Research, LLC John J. Baumgartner - Wells Fargo Securities, LLC, Research Division

Good morning, and welcome to The J. M. Smucker Company's Fourth Quarter 2013 Earnings Conference Call. At this time, I would like to inform you that the conference is being recorded. [Operator Instructions] I will now turn the conference over to Sonal Robinson, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our fourth quarter earnings conference call. Thank you for joining us today. On the call with me are: Richard Smucker, Chief Executive Officer; Vince Byrd, President and Chief Operating Officer; Mark Belgya, Chief Financial Officer; Steve Oakland, President, International, Foodservice and Natural Foods; Mark Smucker, President, U.S. Retail Coffee; and Paul Smucker Wagstaff, President, U.S. Retail Consumer Foods. Following this introduction, Richard will provide an update of fiscal 2013 and initial thoughts as we head into 2014. Vince will then provide an update on our business segments, and Mark will close with additional comments on our financial results for the quarter and our outlook for 2014. Before I turn the call over to Richard, let me remind you that we may make forward-looking statements during this call that reflect the company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates and actual results may differ materially due to risks and uncertainties. I encourage you to read the full disclosure statement in the press release concerning forward-looking statements. Additionally, please note the company uses non-GAAP results for the purpose of evaluating performance internally. Discussion on non-GAAP information is detailed in our press release located on our website at www.smuckers.com. A replay of this call will also be available on the website. If you have any follow-up questions or comments after today's call, please contact me or Mark Belgya. I will now turn the call over to Richard.

Thank you, Sonal. Good morning, everyone, and thank you for joining us. This morning, we reported strong fourth-quarter results that capped off another year of growth. We are pleased with our fiscal 2013 performance as we delivered record sales, earnings and cash flow while continuing to return cash to our shareholders. Vince and Mark will cover specifics of the quarter. So let me highlight a few of our many accomplishments during the past fiscal year. Net sales increased 7% to nearly $5.9 billion for the year, reflecting solid growth across our key categories and brands. In the coffee segment, volume for the Folgers and Dunkin' Donuts brands were up 3% and 11% respectively, while Cafe Bustelo and the Pilon brands both achieved mid-teen percentage growth. In addition, K-Cups continued their strong performance, contributing nearly $290 million of the segment's net sales. Within Consumer Foods, volume for the Jif brand grew 8%, while Smucker's Uncrustables increased 23%. Innovation from Pillsbury continued to strengthen that brand's overall positioning. Finally, our fiscal 2012 foodservice acquisition accounted for a significant portion of the sales growth within the International, Foodservice and Natural Food segment. Our Canadian and Natural Foods businesses also posted solid results for the year. Non-GAAP earnings per share were $5.37, an increase of 14% with profit growth coming from all 3 segments. We also achieved another year of strong cash performance. Cash from operations increased 17% to over $850 million for the year with free cash flow increasing over 40% to approximately $650 million. Other key initiatives in fiscal 2013 included the launch of 70 new items, including new varieties of K-Cups in both the U.S. and Canadian businesses and our Hazelnut Jif brand, also Smucker's Natural Foods brands and several new flavors of Pillsbury mixes and frostings. In addition, we increased…

Thank you, Richard. Good morning, everyone. As we began fiscal 2013, we outlined several key areas of focus in response to a challenging economy, volatility in the commodity markets and increased competition. These included furthering our brand-building efforts, demonstrating price leadership, continuing to optimize our supply chain and acquisition integration. The results we achieved for the year, including a strong fourth quarter, validate our commitment to these priorities. Of particular note is our ongoing focus on innovations as products launched during the past 3 years represented $530 million of fiscal 2013 net sales. In addition, share of market remain strong across our businesses with increased dollar share in most of our key categories for the latest 12-week IRI scan period. Let me now provide some color on each segment's results and highlight upcoming initiatives as we look to carry this momentum into 2014. Starting with U.S. Retail Coffee segment. Our fourth quarter performance was very strong, with volume up 6% and profit growth of 18%. Moderating green coffee cost provided the opportunity to lower prices during the year. These pricing actions, along with our brand-building initiatives, contributed to the segment achieving year-over-year volume growth in each quarter of 2013, resulting in a 4% volume increase for the full year. Ultimately, volume growth, along with the continued benefits of profitable mix and restructuring savings, helped deliver 12% segment profit growth in 2013. Keep in mind, because we took pricing down earlier in the fiscal year before recognizing lower cost, our profit was back half-loaded. Despite the timing impacts this may have quarter-to-quarter, we continue to manage the price-to-cost relationship over a longer period. And on a full year basis, the net impact did not significantly contribute to segment profit growth. Looking at the key coffee categories, we are pleased with the…

Thank you, Vince, and good morning, everyone. Let me begin with a few comments on fourth quarter results. Net sales decreased $16 million or 1%, reflecting a 5% impact of lower net price realization, primarily driven by price declines taken in coffee and peanut butter. A 2% increase in volume and a favorable sales mix helped to mostly offset the price impact. Non-GAAP earnings per share exceeded the high end of our implied fourth quarter guidance range by 13%. This outperformance is attributable to several factors, notably stronger-than-expected volume across our U.S. retail business, favorable absorption of manufacturing overhead, a lower-than-projected tax rate and the purchase of shares under our buyback program. GAAP earnings per share were $1.22 this quarter and $0.93 in the fourth quarter of last year. Special project cost, as defined in our press release, continued to decline on a year-over-year basis as the underlying activities wind down. Also last year's fourth quarter included a significant portion of the merger integration costs associated with the foodservice acquisition. Excluding special project costs, earnings per share were $1.29 this quarter and $1.10 last year, an increase of 17%. Operating income, excluding special project cost, was up 5%, reflecting a mix- and volume-driven increase in gross profit. The favorable impact of lower manufacturing overhead caused by decreased costs and higher production volume also contributed to the higher gross profit. SD&A expenses increased 9% for the quarter, resulting from a 17% increase in marketing, along with higher G&A expenses that reflect incentive compensation cost adjusting up. The income tax rate was 32.1% in the quarter, which was below our expectations with lower state income taxes being the largest contributor to the decline. This compares to a 36.5% rate in the prior year's fourth quarter. For the full year, the tax rate…

[Operator Instructions] Our first question will go to Andrew Lazar with Barclays.

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

Andrew, yes. Andrew, this is Mark Belgya. That's exactly correct.

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

Andrew, this is Vince. I think, overall as a category -- or categorically, we would say yes. We'll continue to emphasize managing our price gaps. It obviously takes into account our position on the commodity in question. But yes, we will continue that activity.

And Andrew, this is Richard. And that being said, as you know, we don't just sell on price. And so we're very price-sensitive to not give promotions that are unreasonable.

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

We'll go next to Eric Katzman with Deutsche Bank.

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

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

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

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

Let me add. This is Mark Belgya. When we announced the deal, and I know over the last couple of quarters we've talked about the dollar impact on the sale side of exiting the portions of the business that we did not want to keep. And that number's kind of have been between $75 million and $100 million. It's probably closer to $110 million. And most of that will come through this year, primarily through the first 3 quarters. It's probably about $75 million to $80 million would be the current year impact.

Eric, this is Vince. Let me just expand on Paul's answer relative to the Pillsbury. It's a great example of what Richard was speaking to in the first question. We actually reduced our trade spend because of learnings that we had relative to our frequency and depth. And even though it affected some of our share, it was a conscious decision because it improved our bottom line and allows us to invest back in the brand.

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

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

And we'll go next to Farha Aslam with Stephens Inc.

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

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

And Farha, this is Mark Smucker. Just on coffee, I think it's basically everything that Paul just said. I mean, we did, of course, have a bit of a soft comp coming off of the last -- the prior Q4. But given all of our consumer and customer support, given the excellent pricing management that we had and just getting our absolute prices as well as those gaps right, we really saw good momentum. And I will daresay that that momentum in the latest 4 looks to be continuing. So not only were our shipments good, but also the consumer pull-through seems to be good as well.

I'll just add to that. This is Paul again. I'd say the same thing on momentum. Our momentum looks like it's continuing through this next quarter, so we're in really good shape.

Yes, Farha. This is Richard. If I had to put a percentage on it, I'd say that probably 80% of the actions that we've taken internally and 20% results of consumers feeling a little more confident. But it was more, I think, what we're doing. And we do see the consumer being a little more confident. But that's the smaller portion of it to.

That's very helpful. And then my second question is on your cost savings effort. You saved $90 million this year. Could you share with us what your run rate is for next year, any new initiative? And more particularly, your thoughts in how much you, longer-term, think you'll reinvest back into your business versus just sort of allow to fall to the bottom line? Just your thinking on how you think about those cost savings.

Farha, this is Mark Belgya. Maybe if you wouldn't mind, just for clarification, I think you said $90 million. I'm not quite sure we're that --

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

Okay, thank you, yes. Around our supply chain initiatives?

Yes.

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

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

And we'll take our next question from Chris Growe with Stifel. Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division: Just want to ask you, first of all, on the coffee division. You've had 2 really solid quarters, in part its comparisons to the prior year. But we've had a persistent decline in the underlying input, the green coffee costs. So my question is as you go into early -- to fiscal '14, it would seem like that benefits should continue to accrue to the company. I know you've taken a pricing decline, but the decline in input cost looks like it's even more dramatic than that. Would you expect that pricing versus cost deflation benefit to continue into the first quarter? I know you've called for overall flat EPS. But that division particularly, will that see a benefit?

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

Chris, it's Mark Belgya. Just to add in, I think just to underscore a comment that I had in my scripted remarks is that last year's first quarter in coffee, too, we sort of led with price, a little advance the declining coffee. So last year's profitability was, I'd call it, a bit of a softer comp as well. So the combination of 2 will affect the Q1 of '14. Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division: But it also reiterates in a kind of -- a bit to the question that, I think, Eric answered -- asked earlier about basically trying to keep the pressure on the -- if you get pricing to match cost deflation, in this case, and trying to keep that volume momentum, that seems to be the underlying theme here though. Is that correct in the coffee division?

Yes. Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just one quick follow-up, and that would be that you've called out another pretty solid increase in marketing for the year. I know it was -- the increase was pretty -- it was strong in fiscal '13, little less the initially anticipated because of some shift to promotion. So I just want to understand that, kind of how you look at promotion in fiscal '14 in relation to that pretty solid marketing increase. Is there any kind of reversal there, or how do those 2 interplay in fiscal '14?

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

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

And we'll go next to Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Can I just follow up on Chris's question about marketing spending? A couple of questions linked to that. Can you quantify roughly how much marketing expenditure is expected to increase in fiscal '14? And then on the quarter, how much is marketing spending in coffee up?

Alexia, this is Mark Belgya. For the fiscal '14, round numbers, is that 10% increase will equate to about $0.20 of EPS. And then I think, again, this is sort of broad brush, probably about half of that would be more Olympics related, as part of Olympics. In terms of the coffee, we don't really give increases other than I can say it's significant increase in marketing in Q4. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Great. And then a quick follow-up, your share repurchases have obviously driven a nice bump to the EPS growth in fiscal '14. Your cash flow is moderating slightly this year, but would you expect uses of cash to be broadly the same in fiscal '14 as you've seen this year?

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

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

Yes, I think -- Ken, this Mark Belgya again. Just to talk to some of the major drivers, obviously, I just mentioned the marketing impact, which 10% is -- although we did it last year, I wouldn't it's the normal amount of marketing support. So you can pick whatever you think the right number is and take that EPS impact. I think also on some of the exited business, between the Uncrustables, the out of school that we're exiting consciously as well as the private label coffee and the affiliated items around that, that also had -- if you total all together, it's probably another $0.05 to $0.10, which I'm guessing you may not have factored in. So those really are 2 key drivers of maybe what the expectations were versus where our guidance range is directing. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay. And then second question, I realize you previously guided to a decline at some point, but your prior guidance implied around $300 million in K-Cup sales for the year. You came in about $10 million below that. So can you help us understand what happened this quarter that maybe you didn't anticipate? And I guess as a corollary to that, your K-Cup growth was lower this quarter than what Nielsen might have forecast as well. So I'm hoping to get some color from you, whether this was an issue of measured versus non-measured channels or more about the timing of shipments.

Ken, this is Mark Smucker. I think, generally, K-Cup's ended up pretty much where we thought they were going to end up. I think the guidance that we gave were almost spot on. And it is -- it does go back to what -- we talked about the law of large numbers and as things grow, you're going to see this percent decline decrease. Having said that, if we're talking about a 15% growth for the coming year, it's still double digits. We still feel very good about that, and it actually is generally in line with what our #1 partner has guided to as well, I think, in their most recent call. So we still feel optimistic. We've got some new products coming out in K-Cups this year, and so we still feel good about our opportunities there. Kenneth Goldman - JP Morgan Chase & Co, Research Division: But for 6 straight quarters, your incremental sales from K-Cups were at least $30 million and they suddenly dropped to $11 million. I guess I'm curious, that's not a law of large numbers. That's a pretty sudden drop. What was -- what really did you see this quarter? Was it competitive activity? Was it the category declining? What did you see that drove the quickness of that drop, I guess, is what I'm going for?

Well, Ken, this is Vince. Again, I would go back to Mark's initial comment is we're still on a pretty significant steep ramp up. The other thing, of course, is we have a number of unlicensed participants that are getting trial during -- over the last 3 to 6 months, and so that obviously has an impact on the category. If you look at the Nielsen or IRI data, you will see how much those unlicensed participants have affected the category. So again, I would go back to what Mark said, to build a $290 million business in a short period of time, we are very, very pleased with.

And we'll take our next question from Jonathan Feeney with Janney.

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

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

So if you hit your target on working capital reduction, I could do this math, but -- I mean, about roughly how much money would that be?

Well, it'd be 1% of sales, so roughly $50 million to $60 million.

Okay. And D&A somewhere around $260 million? It was $260 million last year?

Yes, $250 million to $260 million. That would include special project. I think without it, I think I said that was $245 million.

Okay. So -- but I guess if I put all those things together, I would get to a number a little higher than $600 million x the pension piece. So I -- it's just that you're being kind of conservative there or...

Yes. I mean, obviously it's early yet. The key about working capital, as you know, it all kind of contingent on where you sit on April 30. So our best guess would put it there, and hopefully, we're a little conservative.

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

Jonathan, this is Mark Smucker. I think, generally, the answer to your question is yes. We have seen it played out more or less as expected. In terms of coffee declines and the pricing actions we've taken, in some cases we've actually seen some of the competitors lag in taking a price decline. So we are seeing a bit of compression there. But overall, yes, I think it has helped volume. And as you know, there has -- there continue to be some speculation in the marketplace. It sort of messes with the fundamentals. But overall, I think you're generally correct.

Jonathan, Paul. On the peanut butter side, I agree with Mark. It's similar situation. We feel that -- obviously, the pricing action has definitely stimulated the volume growth, not only for us, but for the category, and we'd anticipate that continuing.

Jonathan, this is Richard. I just want -- an overall comment on pricing and how we look at it. We -- our strategy is to own the #1 brands, and because of that, we do have some pricing flexibility, both up and down. And -- but the key is responsible pricing. We want the pricing -- again, we don't just compete upon pricing. So we want responsible pricing. We don't want to be in a position where we're driving the market down, and we're very sensitive to that. We don't see that happening. And all the categories that we currently are in have been pretty stable categories in terms of not getting into pricing wars, and so that's always been our leadership position.

And I guess one more thing, Richard, just to add, is -- in coffee, what we did see, if you recall when prices were really high, consumers started to trade down to more opening price points. And so now we're actually seeing that, like we've always said, it's a smoothing of the hourglass and consumers coming back to the core brands and the important stuff.

And we'll take our next question from David Driscoll with Citi.

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

Yes, it was.

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

Yes, I'd be glad to give. It's Mark Belgya. It really -- it falls in 3 primary buckets. It would be mixed volume and then the cost savings from the restructuring projects, as well as just ongoing projects around cost initiatives. But they're fairly well distributed between the 3 buckets.

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

Not on full year basis. It's pretty -- it might have been up slightly, but it was basically attributed to the other factors that Mark Belgya articulated.

It was just -- it did contribute. It was just one of probably 5 or 6 components, volume, mix, including a couple of others.

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

It's around $250 million. Plus, it depends on how you take into account the amortization of the restricted stock, which is about $20 million a year.

Okay. And you said that next year, you do expect $50 million of working capital benefits, is that right?

That's what our targeting is. That's correct.

Okay. And then $270 million of CapEx and all these numbers are supposed to come together for something around $600 million?

Thereabouts, yes.

And we'll take our next question from Akshay Jagdale with KeyBanc.

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

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

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

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

Okay, great. And just one last one on -- this is maybe for Mark. But -- you're increasing marketing support, which is great to see. You're launching more new products, and you're having more success with new product launches as well. At what point -- I mean, where are you in that journey of sort of solidifying the organic growth of the company or accelerating, rather, the organic growth rate of the company? And when might we actually see you guys have the confidence to maybe increase your sort of organic growth targets on operating margin -- or operating income?

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

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

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

In the future.

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

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

We'll take our next question from Jason English with Goldman Sachs.

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

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

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

Jason. Yes, actually, we do. And again, as I think we've said before, we think some of those pricing actions by the competition were lagging ours. So I think we're still positioned very well.

And we'll take our next question from Chuck Cerankosky with Northcoast Research.

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

Yes, that's the lower [ph]. We said, Chuck, it's 33.5%, which is pretty much in line with this year on a full year basis.

Okay. And in looking at the growth rate of K-Cups, 18% in the fourth quarter, would you be willing to say what it might be for fiscal '14? Could we see a slower rate than that?

For the fiscal year, we said 15% for the full '14.

All right. And in looking at the package gourmet coffee, there seems to be a lot of new brands in there. What is helping Dunkin' Donuts grow so rapidly, 29%?

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

And we'll take our next question from Robert Dickerson with Consumer Edge Research.

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

Rob, it's Mark Belgya. No, I wouldn't say that, because what you're going to see is the volume -- overall, the volume decline is due to the exit of the businesses, and that's more of a Q2 and Q3 event as opposed to the first quarter. So I would not make that statement.

Okay, perfect. And then also on the K-Cup side, I mean, there's obviously a lot of questions around the K-Cup business. If we see this -- we've seen decelerating growth, obviously, in the category for some time now. It's still good. It's still double-digit growth. But as I said, as we think forward, really I guess in the first half or into the holiday season, and with coffee cost down as much and with increased competition now in the market, I mean, should there be an expectation that, maybe not just for you, but that we could -- overall, can start to see a bit more price decline in K-Cups? Because you really haven't seen much. But as you talk about the unlicensed competitors, when you think about what's happening on the Kraft side, et cetera, would you expect more price competition to come over the next 2 quarters?

Rob, this is Mark Smucker again, a little bit. I mean, I think with some of the new entrants, we have seen some tiering in -- price tiering in the category. So you've got at least 3, if not 4 different pricing tiers in the category. Again, I think we go back to just our relative brand strength and quality to continue to drive repeat purchase in our brands, as well as some of the license. So it's typical to what we would see, basically, in the broader category. So I think we feel pretty comfortable where we are today.

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

Sure. Two things, first of all, we don't comment on the specifics of the agreement with Green Mountain, but we are adding SKUs. We're actually launching 2 new items this year. And as it relates to the other partners that Green Mountain has, we feel that we're on a level playing field.

And we'll take our next question from John Baumgartner with Wells Fargo.

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

Sure. Again, Mark Smucker here, John. Yes, we've seen a little bit of softness on Millstone. Obviously, the Folgers brand is doing very well. I think 2 things, I would just say that that -- the softness you've seen right now is probably driven just by, again, some of that trial that we've seen and the number of entrants in the category. But I will -- we are very confident that although we're exiting the Millstone bulk business, we are going to remain committed to that brand and continue to support it, both in the bag format as well as in the K-Cup format.

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

Yes. I think as we go forward, we're still very comfortable with that, and we're going to continue to drive that. There is plenty of opportunity for both Bustelo and Pilon to grow the brand with distribution as well as with new consumers. So I -- we're still very bullish on that. In the end, and as we said -- we've also said we're going to double that business in 5 years, and we're on track to do that.

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

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