Good morning and welcome to The J.M. Smucker Company fiscal 2017 third quarter earnings conference call. This conference is being recorded, and all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation. Please limit yourself to two initial questions during the Q&A session and re-queue if you have any additional questions. I will now turn the conference over to Aaron Broholm, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on our third quarter earnings conference call. Mark Smucker, President and CEO; and Mark Belgya, Vice Chair and CFO, will provide our prepared comments this morning. Also participating in the Q&A are Steve Oakland, Vice Chair and President, U.S. Food and Beverage; and Barry Dunaway, President, Pet Food and Pet Snacks. During the call, we will make forward-looking statements that reflect the company's current expectations about future plans and performance. These 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 concerning forward-looking statements in this morning's press release, which is located on our corporate website at jmsmucker.com. Additionally, please note the company uses non-GAAP results for the purpose of evaluating performance internally as detailed in the press release. These non-GAAP results exclude certain items that affect comparability. One such item for the third quarter was a $76 million or $0.44 per share non-cash impairment charge related to certain trademarks of the Pet Food business, representing approximately 1% of the company's total non-goodwill intangible assets. This charge is excluded from segment profit and the non-GAAP profit measures we will discuss this morning. We have posted to our website a supplementary slide deck summarizing the quarterly results, which can be accessed through the link to the webcast of this call. These slides and a replay of this call will be archived on our website. We will be presenting at the CAGNY investor conference next Wednesday at 8:00 AM Eastern Time. A live webcast of the presentation will be available through our website. We look forward to sharing a more comprehensive update on our strategy and key initiatives at that time. As a result, our prepared comments today will be primarily focused on third quarter results and our full-year outlook. If you have additional questions after today's call, please contact me. I will now turn the call over to Mark Smucker.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. We are making good progress positioning the business to meet our long-term objectives for top and bottom line growth while delivering against our consumer-centric vision to engage, delight, and inspire our consumers. Central to our strategy is capitalizing on the strength of our leading brands such as Folgers, Smucker's, Jif, and Milk-Bone while supporting the growth potential of smaller on-trend brands like Smucker's Uncrustables, Café Bustelo, and Sahale Snacks. Investing in these growth initiatives requires us to continue generating fuel in the form of ongoing cost management. Touching on a few of the key accomplishments in the quarter, we had a successful start to the launch of our Nature's Recipe premium dog food in grocery and mass channels, as shipments began during the last week of the quarter. Retailer response to the introduction has been very enthusiastic, as evidenced by significant display and merchandising activities in the past couple weeks. We also announced plans to construct a new Smucker's Uncrustables frozen sandwich factory outside of Denver, which will double our existing manufacturing capacity for this growing brand. During the quarter, company-wide Smucker's Uncrustables volume grew 8% on top of a plus 38% volume comp in the prior year. Our actions for Jif peanut butter and Kibbles 'n Bits dog food reversed the recent volume declines for each brand. We also had strong top line growth for the Dunkin' Donuts and Café Bustelo coffee brands, including continued growth from Dunkin' Donuts K-Cups. Lastly, while overall net sales were down from the prior year, operating income and earnings per share were up on a comparable basis. This is a testament to our diligence around cost management and a continuous improvement mindset, which are providing bottom line support and fuel for…

Thank you, Mark, and good morning, everyone. Let me begin by providing further detail on the non-cash impairment charge reflected in our third quarter GAAP results. As we disclosed in our 10-Q filed in November, we performed an impairment analysis on the goodwill and indefinite-lived intangible assets related to the Pet Foods segment during the second quarter. Although our annual impairment testing date is in February of each year, this interim analysis was performed due to the previously announced reduction in our fiscal 2017 sales outlook for the Pet segment. The results of the second quarter analysis indicated no required write-down of Pet-related goodwill or indefinite-lived intangible assets. However, as we disclosed, both items were sensitive to a hypothetical increase in the discount rate used in the calculation. Given this sensitivity and a subsequent increase in the risk-free interest rates, we reperformed this analysis during the third quarter to reflect the higher weighted average cost to capital used to discount the assumed future cash flows. Other assumptions utilized including growth rates did not change materially from the second quarter analysis. The results of this updated analysis continued to indicate no impairment of goodwill. However, it did indicate a fair value that was less than book value for certain indefinite-lived intangible assets, resulting in a non-cash charge of $76 million or $0.44 per share in the third quarter. Moving ahead, the pet food-related goodwill and intangible assets remain sensitive to the risk of further impairment if the risk-free interest rate or other market factors used in the calculation of the weighted average cost of capital increase. Let me now provide additional color on the rest of our third quarter results. I will then conclude with an update on our full-year outlook. Net sales decreased by $95 million or 5% in the…

Thank you. As a reminder, limit yourself to two questions during the Q&A. Our first question comes from Ken Goldman with JPMorgan.

Hi, good morning and thank you.

Good morning, Ken.

I hope this question is taken in the intent it has, which is to actually find an answer and not really to sound too harsh. But, Mark, management talked today about growth coming back in Pet and Coffee. I think Mark Belgya said that in the impairment analysis of Pet, the company didn't even meaningfully adjust the outlook for sales growth. But looking back, your Coffee sales have grown by a total, if my numbers are right, of only 4% in the last five years, not CAGR but total. Pet sales are down over the last three years, including when you didn't own it. These are long-term trends, not short-term hiccups. So why is it reasonable to assume that sales will rebound? And I'm not talking about minor stuff like the timing of coffee shipments, which you mentioned. I'm talking about getting back to your long-term guidance of 3% organic sales per year. And it's a target you're going to miss now I think for five straight years. So again, I'm not trying to sound harsh. I really just want to know what the answers are, how we get back to that level.

Ken, thanks for the question. This is Mark Smucker. I would start, so first of all, let me just acknowledge. There has been softness, as you know and you clearly pointed out. At the end of the day, the shifts that we've made in our strategy and the investments that we are making in innovation over the short and long term, we're pretty confident that that's going to help reverse those trends. So for example – and we'll share more with you guys next week at CAGNY, but given the changing consumer landscape, those are the trends that indeed drove the shift in our strategy to not only focus on leading iconic brands, but also to focus on some of these emerging brands as well as innovation across all of that. So we've always been good at the singles and doubles, as we call them, the line extensions, the short-term innovation. We'll continue to be good at that. And then as it relates to the longer stuff, we're going to start thinking about or we are starting to think about platforms like Uncrustables as just one example of how we can think about more meaningful innovation to come out in the next one to two to three years. And so that is what we are laser-focused on. We've had a tremendous amount of work done on our long-term innovation pipeline. And actually, I feel great about what is going to be coming in the next couple years. So in the meantime, we're going to continue to focus on – in Coffee, for example, being present and leading in all of the segments, and thinking about the innovation that can come not only in the short term but also some of the triples and home runs that we hope to bring to bear in the marketplace going forward.

Okay, great. Thank you very much, Mark.

Our next question comes from David Driscoll with Citi.

Great, thank you and good morning.

Hi, David.

Good morning.

So for my two questions, I wanted to spend time on Coffee and then just Coffee things in a bigger, broader sense. On Coffee, maybe to follow-on on Ken's points, there really is an area of growth in Coffee, but it's in K-Cups and it's in the margin – in the mix movement. But the K-Cup business for you guys has just been a struggle, and I guess I'd just really like to hear what's the plans to move forward on K-Cups to really accelerate that business because that does look like – but maybe you disagree, but that does look like the area where you could really chop some wood. The Folgers brand just continues to be a struggle within K-Cups, but we see other brands that are not too dissimilar from that one that are doing well. So I really would appreciate some diagnostics here on what's wrong and how you really turn that into a big tailwind. The second question would just be to Mark and Mark – I like saying that by the way. What's the story with the cost savings longer term? Back to the whole SG&A comments and SG&A as a percent of sales, it really does look like the company has an opportunity here, but I'm curious just how much you guys are really looking at that and maybe at some future date might have something to truly say about increased cost savings. Thank you.

Okay, why don't I start? Hi, David. It's Steve Oakland. And I think this might help for some of Ken's comments as well. Let me take you through the Coffee business and the structure of the Coffee business and where we see growth, where we think both the near-term opportunity and the longer-term opportunities are. So to understand our Coffee business, you really have to look at three basic components. There's the premium roast and ground business, the mainstream roast and ground business, and our K-Cup business. In the premium roast and ground business, we have two brands. We talked a little bit about them in the prepared comments, but we have the Dunkin' brand, which is growing nicely both in sales and profits, and we're pleased to say we've got a robust pipeline. We're right in the middle right now of launching an at-home Dunkin' cold brew kit. So working with our partners at Dunkin' Brands, we've got a nice pipeline of innovation that ties to their stores nicely, ties to their brand nicely. The other brand that we don't talk a lot about in here other than its growth, it's still relatively small, but Café Bustelo. And Café Bustelo has been growing at double digits for a number of quarters, and that sales and profit growth is nice. And when you combine that with Dunkin', we have a broad consumer message in that premium segment. But that brand is bringing a very diverse and a much younger consumer into the portfolio. So our premium brands are positioned well. As they grow, they will be big enough over time to offset some of the decline in the mainstream roast and ground segment. So let's talk about mainstream roast and ground. That's our biggest segment. It's our Folgers brand. It's…

David, this is Mark Smucker. I'll take your second question, and if Mark has anything to add, he certainly can. So just on the cost takeout, what I would start by saying is number one, we're very pleased we've been able to accelerate the current target. We've been able to deliver more. We will deliver more this year. So that's great. Number two, cost takeout is an ongoing effort, and our teams, our employees understand that it is a continuous improvement mindset. It's something that we have to do every day, not just a onetime thing. And so coming out of this, the targets that we've laid out for you guys, we will be continuing to look at other ways to take cost out, and I will submit that there are opportunities. I would also submit that if you think about us versus our peers from an organization standpoint, we're starting from a relatively lean place. We've got just over 7,000 employees. So from that perspective, we feel like we're in pretty good shape. But there are other opportunities over time to continue to look and get better. We have a proven ability in the supply chain. We've consolidated facilities. We've moved around our distribution network. We've done a lot of things in the supply chain and will continue to, but as you point out, there are other opportunities to do that, and we will share some more of those ideas with you guys next week.

This is Mark Belgya. Maybe just to add a little bit to that last comment, as we've been able to deliver here, the acceleration of synergies has helped. We also have been pretty aggressive in looking at certain expenses across the company, both G&A and other. And we firmly believe that what might be viewed as temporary cost reductions just to deliver a year can become permanent. So we would expect that to play, and I will tell you that we've put the challenge out to the organization as part of our budgeting process, fiscal 2018 planning, to take a harder look at budgeting, probably harder than we have ever done. And then the only other thing here, and I just weighed it, I think you guys know this, but sometimes, you have to be a little cautious. I know it's easy to compare things like SD&A, but companies do treat things a little differently. For example, I know distribution can be in SD&A, it can be in COGS, so I'd just wave that flag a little bit when you do side-by-side comparisons. But that said, we're still going to challenge all those components to see where we have some opportunities. And again, I think next week you'll get a little bit better sense of how we see the synergies playing out through the rest of next year and then maybe some other cost opportunities as well.

Thank you so much.

Thanks.

Our next question comes from Chris Growe with Stifel. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi. Good morning.

Good morning.

Good morning. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi. I just had a question for you in terms of – in Coffee, the price-cost relationship being a little imbalanced this quarter, does that get fixed relatively quickly in 4Q with the pricing coming through and some of the adjustments to trade promotion spending?

Hi, Chris. Steve Oakland. We get a little bit of that back in the fourth, but it really starts in the first quarter of next year. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. So the fourth quarter may still have a little bit of a negative price-cost relationship. Is that right?

Yes, it will, Chris. This is Mark Belgya. If you think back what coffee cost did over the last call it three to four months, remember we had a period where we sold arabica across $1.70. And we've talked many times about our hedging, where we're constantly hedging over, and so we're moving that average. So through the third quarter and into the fourth quarter, we're averaging at the high end of that, and that'll start coming down a little bit, and that'll align itself with where we priced ourselves as we move forward. Christopher Growe - Stifel, Nicolaus & Co., Inc.: I see, okay. Yes, thank you. And then just to follow up, if I could, on the cost savings, I want to understand, Mark – and if I missed this, pardon me – but are the cost savings being pulled forward? Is that the way to look at the incremental savings this year? And then as the overall program change, are you still looking for $200 million I think? But is this simply just a pull-forward into 2017?

Yes, that's right, Chris. This is Mark Belgya again. That's correct. We just accelerated the recognition and the variety of buckets we talked about the last couple of years. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay, thanks so much.

Our next question comes from Robert Moskow with Credit Suisse. Robert Moskow - Credit Suisse Securities (USA) LLC: Hi. Thank you. I was hoping you could just take a step back for a second and talk about EBIT growth this year. If I look at the new guidance, it really implies no EBIT growth if I take the new tax rate. But you had $120 million of savings that I thought would originally in the beginning of the year drop to the bottom line. Can you help us just to understand how that got absorbed? Was it absorbed in lower coffee sales than expected? Was it incremental investments you needed to make in pet food to get the sales going again? And maybe take a step forward to 2018 and give us a sense of what would make us feel more comfortable that those savings could drop to the bottom line in 2018 instead.

Hey, Rob. This is Mark Belgya. So you are correct. We had the $100 million plus of synergies. Just candidly, a lot of that came from the volume profits that we reported on over the course of the year. Now, we have experienced certainly some favorable commodity input that helped from a cost perspective. But just the volume shortfalls, the net sales shortfalls have impacted most of that if you just look at it from the highest level. And I'll let Barry or Steve talk in a moment. And if we just fast forward to next year a little bit, I mean, I think there's a couple of things. One is that we're going to continue to have the opportunity to have synergies, so that, again, will temper anything from the top line. But I think as we'll talk next week at CAGNY with some of the innovation and just with the programs that both Steve and Barry have in terms of just the businesses that they're running, we would not expect to have some of the softness that we experienced in the past year from a top line perspective. So maybe, guys, if you just want to comment on that a little bit.

Sure, Mark. This is Barry. Let me just comment from a Pet perspective. With the launch of Nature's Recipe, that was a strategic decision we made to enter the premium segment in dog food. And in order to drive that business and especially to speak to the consumers about that consumer proposition, we'll be making some significant investments in marketing in F 2018, so we'll expect growth out of our base business, but with that investment in the Nature's Recipe launch, that will have an impact on our F 2018 expectations. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay, I appreciate that. And maybe, Steve Oakland, just to follow up, I think you said that you think you have opportunities to negotiate better supply chain arrangements on K-Cups. I imagine that's with your major partner in K-Cups. What gives you confidence that those supply chain arrangements can be negotiated better? What leverage do you have there?

Well, Rob, I think there's a couple of things. Number one, there are options that never existed when these agreements were originally done, right, so the options both with our current partner and outside our current partner are significant, so more importantly, I think the relationship with the partner and their understanding that they need a healthy Folgers business in this category, and they need Dunkin'. The Dunkin' original SKU is the number one SKU in K-Cups, right? They need that SKU invested in. They need that SKU healthy for the growth of the system long term. So I wouldn't suggest that our goals are necessarily incongruent. That doesn't mean that we don't see what's going on around us and the public comments about how favorable some of the other arrangements have become. Now, those things roll off at different times. We were an early adopter. The agreements, as you can imagine, that were written at the beginning are very different than what an agreement would be written today. And so we're confident from the dialogue we've had with them, from the options we see around us that there's significant opportunity for us to improve that profitability.

And, Rob, this is Mark Smucker. You know from just your tenure on covering us that we were the first one in the system. We've had great relationships with that partner over time. As their leadership has changed, we've continued to have great relationship. And over that same time period, it's an ongoing dialogue, and so we've made modifications, as have other partners, to those agreements over time. And this is just another one of those opportunities to do that. Robert Moskow - Credit Suisse Securities (USA) LLC: Thank you very much.

Our next question comes from Rob Dickerson with Deutsche Bank.

Thank you. Good morning.

Rob, good morning.

Hey. Barry, just a couple of questions. The first question I had was just with respect to reinvestment needs relative to cost savings. I know if you do, let's say, announce next week that there are additional measures that can improve your all-in savings, I mean, do you foresee just because of the pressure obviously the industry is experiencing in mainstream, in general mass, and center of the store categories that maybe you need more firepower to compete effectively?

Hey, Rob. This is Mark Belgya. Let me just start and then I'll ask the guys to jump in. So let me set a couple of things. First of all, in terms of investments, we have talked candidly for the last two years since we acquired the Pet business and as we got into the synergies that the synergy recognition was $200 million first bottom line, identified an additional $50 million that we were very specific that every dollar would be reinvested. Some of that is on capabilities, but clearly the majority of that is intended to be reinvested back in the brands. Some of our brands candidly just need additional support. So that's piece one. As we look forward, what we say is continuous improvement is a mindset that we have and will continue to focus on in the company. And what we want to do is we want to balance our cost savings and our future cost savings basically such that when we think about this as an organization as we're very focused on innovation, but we also are focused on cost takeout. The issue is you don't look at these things mutually exclusive. So what we're trying to do is build this mental model where the whole organization is focused on cost such that we can provide the fuel to support the top line growth. So we feel at this point in time – and again, we'll speak a little bit more on this next week at CAGNY. But we feel that the programs that we have in place, things that we've identified from a cost perspective and then just as the work that each of the respective businesses do on a daily basis to identify takeout cost such as Steve suggested, that will all provide adequate support over time to support the innovation that's going to be so important to turn around the top line.

Rob, this is Mark Smucker. I would just add to that. The other component, clearly, the idea, the concept that fuel is inextricably linked to our ability to drive top line growth, that's what Mark was talking about. The second component of that that we've gotten better at is prioritizing where the dollars go. So to the extent that we haven't had a ton more dollars to put against marketing and we've made some very strategic choices like Nature's Recipe, we've gotten a lot better at making sure that the most important opportunities get the resources.

Okay.

Rather than sprinkling a little dollars across every brand, we're getting a lot more strategic about where the dollars and resources go, and that would also be true as we think about how we go to market as well with our customers.

Okay, perfect. I appreciate that. And then, Mark Belgya, just a simple question for you, the free cash flow target came in a bit, but CapEx stayed the same. Is the CapEx number this year, there's no incremental that we should be building in for the Uncrustables plant, or is there some incremental next year or is all of that already in guidance?

So good question. So there's nothing coming in this year. So the $240 million was our original guidance. Next year's will be up. We'll give a little bit more obviously as we move through at our next call and guidance. But what I would say is that in our press release that we said it was $200 million, $170 million to $200 million (sic) [$140 million] in the next phase. That will not all be incremental to next year. So we'll be above the $240 million, but it won't all be additive to the $240 million. So we're still finalizing our plans but just to give you that as some general guidelines. It will probably top off some place a little over $300 million for next year.

Okay, great, and then just a quick last one. With respect to share repurchase, I don't want to assume that, let's say, that your shares might be down a bit today, but at some point, they get to a level that share repurchase actually looks attractive. I'm assuming, though, that for the time being at least, the main priority is still deleveraging getting to those targets.

It is still important to delever, but I will say that when we talk about deployment now as we're getting closer to that three times, it does open up the door for more of what we'll call strategic uses of cash, be it M&A and share repurchase. We still feel share repurchase is a key to long-term valuation growth. And so when it's the right time, we would certainly entertain opportunities to look at that. So I wouldn't take away the comment that we're just focused on debt deleveraging.

Okay, great. Thanks so much. I'll see you next week.

Okay, thanks.

Our next question comes from Alexia Howard with Bernstein. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Good morning, everyone.

Good morning.

Good morning, Alexia. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: So two questions, first of all, we're hearing from a number of companies that the retailer environment is getting a lot sharper on pricing. And I'm just curious about whether you're feeling that, how you are seeing that playing out across your three categories. I'm particularly thinking about list pricings and promotional activities that seem to be becoming a theme for this year. And then secondly, just on the Pet Food business, we've seen a marked drop-off on the pet treats side of the business. That was always a really strong growth part. Would just be curious about what's causing the pressure on that side of the business and when you think things might start to stabilize and recover there. Thank you.

Why don't I start? Alexia, it's Steve. And then Barry can speak to pet treats. With regard to the pricing environment with the customer, yes, I would agree with your statement that it's as intense as ever. But one of the questions we get a lot is why do we take pricing up and down in Coffee, and why don't we spend trade or why would we do that? We've got great respect of our customers of the transparency of our commodity-based businesses. And the fact that we take them down makes, frankly, taking them up a bit easier. So they trust that when those commodity costs swing, we'll swing it back the other way. So we work really hard on pricing. We work really hard on that relationship with the retailer and them understanding why. Having said that, I would agree that it is about as difficult of an environment as I've seen, but I think the fact that we have those relationships has gotten us through it. So, Barry?

Sure, good morning, Alexia. It's Barry. Let me comment on the snacks category. We continue to believe there are tremendous growth opportunities in snacks. As the leader of the snacks category, we've driven growth of that category through innovation. And as we stepped back over the last several months and looking at our brand strategies and our innovation pipeline, we've rebuilt that pipeline with some big ideas that we can bring to market. So we think that is going to be fundamental to driving the category growth. I would also speak to our brand strength. When we think of Milk-Bone, it's probably one of our strongest brands across the Smucker portfolio. And based on our deep consumer insights, we think that brand can play in a number of segments where it currently doesn't participate. I'd just give one example of that. We're launching a Milk-Bone toy that will drive incremental treat sales. I think that's just one example where we think we can take the Milk-Bone brand into new segments that will also drive incremental growth. And then from an M&A perspective, we think there are some enabling and bolt-on opportunities in the treat area, so that will also be part of our growth strategy. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Thank you very much, I'll pass it on.

Our next question comes from Evan Morris of Bank of America Merrill Lynch. Evan Morris - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Good morning, everyone.

Good morning. Evan Morris - Merrill Lynch, Pierce, Fenner & Smith, Inc.: I just have a broader top line question. So it's been a couple of quarters in a row I guess now where you've had to revise your expectations lower. I'm thinking about it more from an organic sales standpoint. But the commentary seems to be it's going to get better, it's going to get better, we're going to grow. I feel like if you listen to a lot of the comments that your peers have made over the past year or two as well, it's been the same pattern, saying things are going to get better but ultimately having to revise down. So I guess if I look at your business now and how it's tracking from a top line standpoint, and I understand there are certain things that may be a little bit of a drag, some of the commodity type stuff, but I guess I think about it going forward into next year and beyond like, I guess why isn't this more the new normal? Why isn't this the new pattern of where sales trend versus the expectation of improvement, again, because it seems like, again, this broader pattern in the food space of taking numbers down as opposed to sales moving higher?

Hey, Evan. It's Mark Belgya here, then I'll turn it back to Mark. So a couple things, and I do want to call out one point that you made on the commodities, is that with all due respect to our peers, I suspect we have maybe as much flow-through commodity pricing as anybody. So any period of time, especially in downturns of commodity cost, we're probably a little bit more affected, but that aside. So I think it just reinforces what you've heard throughout the course of the morning, is that we recognize that we're in a boat with a lot of other folks in terms of what we're seeing in volume and so forth. But we do feel confident in the fact that we have brands that are iconic brands with large share of market. Take Milk-Bone, Smucker's, Jif, Folgers, in categories that are very important to the retailer that are not necessarily affected as much by the negative things you hear around bad ingredients. So we've got a great core, but where we think we can add what maybe is a little different than a few years ago is what we talked about, this enhanced vision, and this is the focus on these emerging brands. Some of those will be acquired over time. But candidly, we're very fortunate to have what we say – and albeit they're still small, but when you take Uncrustables, Uncrustables is a $200 million business, and we're going to build this facility, which means we're going to push $500 million in the next five years roughly on that business. You take Café Bustelo, which is addressing an entirely different consumer base, bringing the millennial in, which right now is one of the biggest issues that a lot of the iconic brands we see across the food space are being challenged by. And then the Sahale Snacks, which we think is just an up-and-comer that has a lot of legs to grow. So yes, they're small and maybe it's hard to extrapolate those into the kind of growth that maybe you want to see, but we feel strong about that, and that's where our resources and focuses are going to be.

That was a great answer. I don't really have anything to add to that. This is Mark Smucker. I guess I would just emphasize that it is a journey, and the shifts that we've made both in our priorities and our strategy are critical to driving long-term growth. And I am confident that over the next year and beyond, we will see the types of growth that we have been talking about. And in the meantime, we will continue to focus on the close-in things that can drive top line growth. So I appreciate the question. I think that it's the question that is being asked of our industry right now. But again, the shifts that we have made do position us indeed for continued growth in the long term. Evan Morris - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. And just my second question, it might still be a little early, but you have invested in revenue growth, management team, and capabilities. Just any learnings from there and anything that you think that you'll be able to apply to fiscal 2018, and could you see any benefit from some of your early work?

So basically, where we are in that journey is we've restructured our go-to-market organization in total and basically allowing us to focus more on where we need to play strategically. Part of that is RGM [Revenue Growth Management]. We are just now in the process of – or almost finished getting that organization fully staffed. And so over the course of the next fiscal year, what our focus will be is on driving efficiencies and finding the low-hanging fruit. Longer term, we will be implementing new tools, new analytics. That would be more in the next 12 to 18 months. That will give us even better visibility to where those efficiencies are. So it will start this year and will continue on over the next couple of years until we really have all of the tools and capabilities that we need to continue to be more effective in that area. Evan Morris - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay, perfect. Thank you. I'll pass it along.

Our next question comes from Andrew Lazar with Barclays.

Good morning, everybody.

Good morning.

Hi, Andrew.

Hi. I guess, Steve, just thinking about mainstream roast and ground coffee, I know your commentary suggested that's the part of the Coffee business with the scale and where a lot of the synergy can flow through. I think over the last few years, you've tried a number of things, I think, from an innovation standpoint, different platforms and such, again, in mainstream roast and ground. So I'm trying to get a sense of if your commentary is different at all with respect to the desire to do more innovation or platform work, again, within that mainstream piece. Or is the thought now maybe some of that didn't play out as expected, and it's now much more of a focus around synergy specifically in that very large and I know very profitable segment?

Hi, Andrew. I would say we have not given up on innovation in the Folgers mainstream business. I think we're realistic about it. I think we understand that maybe in premium coffee, that's an easier hill to climb. We're in the process this month of relaunching the perfect measures. That's a concept that tested amazingly well, and the reason you go to a lead market or test market is to get learning. And I think the learning that we got, we're relaunching. The original customers have expanded the product, so there may be something there. So I would say Folgers probably has a much stronger cost reduction culture than we've talked about in the past, but that culture is really alive and well, and they've identified a number of things both in the near term and the forward term. So we will continue to do that. There will be some focus on innovation, but I wouldn't say at all we've abandoned it. But we do know that we've got to drive cost. We've got to drive fuel from that mainstream business to invest in our premium business, to invest in the other initiatives across the company. And then I spoke to the K-Cup opportunity. We need to offset that K-Cup margin drag in the interim until K-Cups start to carry their own weight. So what I...

Thanks for that. Thank you for that. Yeah, that's very helpful. Thank you. And then, Mark Belgya, just a quick one. I think some companies more recently have had to think about, I guess, changing the way they treat their cash EPS treatment given some various inquiries and whatnot from the financial accounting boards and such. Is that something that Smucker's needs to potentially think about in the way they report the cash EPS numbers, or does that not really affect how you guys are thinking about it?

Sure, great question. Right now, we feel comfortable. As everyone knows on the call, we've redefined beginning of this fiscal year to add back amortization and impairment charges. A couple of comments around that. Obviously, we'll see how things play out from an SEC perspective and if there's more challenges and so forth, but the reason we feel good about it is that if you look back over time, we have been very consistent for the last several years in our definition of what we report as non-GAAP EPS, and so we've always had merger integration costs. We've always had restructuring charges. So we feel confident that between our disclosures and our consistencies that we are providing the investors with the proper information, and that we'll just monitor as time plays out as SEC does their thing in terms of the normal course of the quarterly and K reviews and see if we need to of course correct, but at this point, we feel comfortable.

Thank you all and see you next week.

Okay.

Our next question comes from Farha Aslam with Stephens.

Hi. Good morning.

Good morning, Farha.

Hi, Farha.

Could we talk about dog food portfolio and how you think about growth at Natural Balance, Nature's Recipe and Kibbles 'n Bits going forward?

Sure. Good morning, Farha. It's Barry. Let me take that. First, as we entered into this fiscal year, our priority was to stabilize the Kibbles 'n Bits business, and I think we've demonstrated that we've done that. This last quarter, we actually saw growth both in terms of volume and dollar sales. So we're really encouraged as we've focused on the fundamentals really of pricing against that brand. We still think that that brand makes a lot of sense in our portfolio as we think about playing in every segment, so value with Gravy Train. We think about Kibbles 'n Bits as a mainstream brand. We think about Nature's Recipe as a premium brand, and then Natural Balance as a super premium brand within the pet specialty channel. So that's how we think across the portfolio. I just want to compliment our team on the rollout of the Nature's Recipe launch. From decision time to shipment was 17 weeks, and the execution was just incredible. And I think that speaks to a great portfolio of brands, deep knowledge, consumer insights and knowledge regarding our brand portfolio, and then our go-to-market capabilities and leveraging the scale of the broader Smucker organization. So that really came to light. Just some commentary. Early days as far as the launch. The Nature's Recipe brand is now on shelf. We've had some early indications from retailers that the product is performing at least even greater than expectations, and feedback we received from one retailer is 50% of the purchases so far are from consumers who did not shop the pet aisle previously in the grocery and the U.S. retail channel. So I think it just speaks to the incrementality that we expect to see from that brand. And then relative to Natural Balance, that's our flagship brand in pet specialty. Crossing Nature's over into the U.S. retail channel allows us to be laser-focused on that brand. And so our pet specialty team is focused on growing that brand and in that channel. We're launching some great innovation. At the end of the fourth quarter, we'll be bringing a high-protein, limited ingredient offering which really speaks to the equities of Natural Balance. And then from an e-comm perspective, our sales of Natural Balance to the e-comm channel are 50% greater than what we expected them to be this year. So when we think about the growth opportunities with e-comm and particularly with Natural Balance, we see a lot of upside there. So that's how we're thinking about the dog food portfolio.

That's helpful. And just, again, follow-up on Pet, do you still see this Pet business as having the capability to grow in that 3% to 4% range when you bought the business now that you've repositioned the portfolio? Or should we think of it as a lower growth rate business, maybe in the 2% range?

Yes, we're still confident in the growth expectations around the Pet business. Certainly, 3% near term. I think as we look at some longer-term opportunities, when we bring some big bets from an innovation perspective and then I spoke earlier about some bolt-on and enabling acquisitions, we think we'll get back to that 4% to 5% longer term. So yes, still very confident regarding the growth opportunities about Pet. It's a great category to be in. We have amazing brands, and so we do expect to see that growth.

That's helpful, thank you.

Our next question comes from John Baumgartner with Wells Fargo.

Hi. Good morning. Thanks for the questions.

Hi, John.

Maybe a few for Barry. I'd like to ask sticking with Pet, can you quantify how much the pet supers channel declined in the quarter and your outlook for traffic there moving forward? And then maybe how much of the pressure in Natural Balance was due to anything that was more brand-specific or execution-related relative to just the inability for growth in e-comm to fully offset the declines in bricks and mortar?

Hey. Good morning, John. It's Barry. Let me just speak to the pet specialty channel. I think like our competitors, we all saw some declines in store traffic especially this past quarter, and I think it was close to 5% declines in traffic across all the major retailers. So not unlike our competitors, I think that was part of the challenge. We spoke to an ingredient issue. So with our Natural Balance product and our proposition, we have some unique proteins. Unfortunately, with one of those, those proteins in a lead item, we've experienced some shortages. Our supply chain team is focused on replenishment, and we'll get back to a continuous supply I think probably by the end of the fourth quarter.

Okay. And then maybe just as a follow-up, can you speak to the influence of the natural value segment evolving in terms of how much of a headwind is that to the established brands such as Natural Balance? Is development of that natural value segment having more of an impact on the business than expected going forward?

No, I don't think it's having a significant impact. No.

Thank you.

Thanks.

Our next question comes from Akshay Jagdale with Jefferies.

Thanks. Thanks for the question. I'll just keep it to one, and I think it's for Steve and Mark. But just going back to your commentary on Coffee, very helpful how you're thinking about it, but can you help frame that entire perspective or give us some perspective relative to commodity cost movements and your long-term EBIT growth expectations for that business? So basically, before this quarter, the trailing six quarters before this, you had significant growth in EBIT in that segment, right? It was double digits, I think 12% on average. And you had lower commodity costs, and you had the successful launch of Dunkin' helping you there. So when you have commodity costs rising, should we think of a different growth algorithm than when commodity costs are coming down? How does that really play through? Because it does seem to imply that when costs are going up, for a period of time, you're going to be below what the normal EBIT growth rate for that business should be. And I know you're saying you need to make a push or be better in innovation. Can you help us understand what you're doing there to be better? Perfect Measures is a good recent example where you thought it was a big bet, and I guess, it hasn't played out as well, so that's my question.

Sure. Hi, Akshay. I would say a couple of things. I think volatility is more difficult in the short term in our mainstream business than rising costs. We can manage rising costs, and we've got a history of that. When we have situations like we have where we have commodity spike for short periods of time where we've got our own position and our competitive position have different cost structures throughout them. Then you see funds fall through in trade, funds fall through in different methods. So I think that creates those difficult periods that you're referencing. I think over the long term, we're convinced we can, with the mix of businesses we have, with the growth of our premium business, the cost reduction focus on our mainstream, over time, we can give you that EBIT growth especially once we get our K-Cup business to contribute at the levels that it used to when it first started. So we'll get that back. We haven't talked a lot about the different components like this before. We've overcome the price compression in the K-Cup business over the last year or two in the numbers that you referenced. So I think when we have periods like we just experienced where it's really volatile, we may have some tough quarters in the mainstream business. Generally, price inflation or deflation, as long as it's consistent, then over time, we can manage that. So in a period like this, you've got to look a little longer term. And with regard to innovation, I think we have a portfolio now that's broad enough between the three segments that we can bring enough innovation to bear. Like I said in an earlier question, we're not giving up on our Folgers business. It's got great equity. It still got 23 million households across the country. It's got the largest household penetration by far. The number one premium brand has 8 million households. The total private label K-Cup, the fastest growing part of K-Cup, had 10 million households, all brands combined. So the Folgers business is still a really important business. There's a large customer base out there. We've got some work to do to find the right insight, those things that target them. So we're not giving up on it, but we also have some other places to play both in K-Cups and premium.

In the interest of time, I'll pass it on. Thank you.

Ladies and gentlemen, this does conclude the Q&A portion of today's conference. I'd like to turn the call back to management to conclude.

Again, I just want to thank all of you for your interest this morning. I know one of our peers is on their call right now, so thank you for your attention. Thanks for listening, and we really look forward to seeing many of you next week at CAGNY. Have a great weekend.

Ladies and gentlemen, if you wish to access the re-broadcast after this live call, you may do so by dialing 855-859-2056 or 404-537-3406 with a pass code of 44189768. This concludes our conference call for today. Thank you all for your participation. Have a nice day. All parties may now disconnect.