Good morning, and welcome to The J. M. Smucker Company's Fiscal 2019 First 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 up for questions and answers after the prepared remarks. Please limit yourself to two questions during the Q&A session and re-queue if you have additional questions. I will now turn the conference over to Aaron Broholm, Vice President, Investor Relations. Please go ahead, sir.

Good morning and thank you for joining us for our fiscal 2019 first quarter earnings conference call. Mark Smucker, President and CEO; and Mark Belgya, Vice Chair and CFO will provide our prepared comments. Also participating in the Q&A are Tina Floyd, Senior Vice President and General Manager Consumer Foods; Dave Lemmon, President, Pet Food and Pet Snacks; and Joe Stanziano, Senior Vice President and General Manager, Coffee. During today's call, we will make forward-looking statements that reflect the Company's current expectations about future plans and performance. These statements rely on 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 to evaluate performance internally as detailed in the press release. We have posted to our website a supplementary slide deck, summarizing the quarterly results and our fiscal 2019 full year outlook. The slides can be accessed through the link to the webcast of this call and will be archived on our website along with the replay of this call. If you have additional questions after today's call, please contact me. I will now turn the call over the Mark Smucker.

Thank you, Aaron. Good morning everyone and thank you for joining us. Our first quarter performance reflects significant progress in realigning our portfolio to growth areas and on-trend categories. Smucker’s Uncrustables, Dunkin' Donuts, Café Bustelo, Nature's Recipe, and Sahale Snacks , all achieved double-digit sales growth in the quarter and in the aggregate, accounted for three percentage points of top-line growth. The Rachael Ray Nutrish brand also achieved double-digit sales growth versus the comparable period in the prior year. Achieving increases in nearly every key area of the portfolio where we have made investments validates that we can continue to win in today’s marketplace. Some of our established brands underperformed in their traditional categories in the quarter. These included Folgers, Jif and Natural Balance. While some of this was timing related, our teams are hard at work executing specific plans to improve performance for these brands through the remainder of the year. Let me expand on these topics by using our Coffee business as a proof point. We have previously shared our strategy to better align our Coffee portfolio with consumer preferences by increasing our presence in both Premium and One-Cup Coffee. Sales for our premium packaged coffee business grew 13% while our K-Cup portfolio increased 17% with all our K-Cup brands up in the first quarter. Growth in both our Premium and One-Cup segments continues to be led by the Dunkin' Donuts brand. Sales for the brand were up 13% in the quarter which builds on 10% growth in the first quarter of last year. The current year also included contributions from our recently introduced canister format, which is generating incremental sales for both the Dunkin' Donuts brand and our overall coffee business. 1850 Premium Coffee was another contributor to growth in both the Premium and One-Cup segments. Launched…

Thank you, Mark, and good morning, everyone. I will start with an overview of our first quarter results and then shift to an update on our full year outlook. Adjusted earnings was $1.78 compared to $1.51 in 2018, an increase of 18% primarily reflecting the benefit of tax reform. Included in this quarter’s EPS was $11million or $0.07 per share unfavorable impact related to adjusting Ainsworth inventory for fair market value at the acquisition date in accordance with purchase accounting rules. Net sales increased 9% driven by the acquisition of Ainsworth. Excluding Ainsworth, net sales declined $9 million reflecting the exit of certain Gravy Train products. In addition, a 1% impact from lower net price realization was slightly offset by volume mix. Adjusted gross margin was 36.8%, down 40 basis points compared to the prior year reflecting the Ainsworth inventory adjustment. Excluding this impact, adjusted gross margin increased 20 basis points as a decline in net price realization and increased freight cost were more than offset by lower input costs, most notably for the Coffee business. SG&A increased $35 million or 10% compared to 2018 due to the addition of Ainsworth. Excluding Ainsworth, SG&A expense was comparable to the prior year as higher margin expense was offset by budget spending disciplines through our Right Spend program. Factoring in all of this, adjusted operating income increased $15 million or 5% compared to the prior year. Below operating income, interest expense increased $12 million driven by borrowing costs associated with the Ainsworth acquisition. An effective tax rate of 23.2% was slightly lower than our full year guidance of 24.5% due to a deferred tax benefit related to the Ainsworth acquisition in the first quarter. Our full year tax rate guidance remains unchanged. Let me turn to the segment-specific results beginning with Coffee.…

[Operator Instructions] Our first question comes from the line of Adam Lazar [ph] of Barclays. Your line is now open.

Good morning everybody.

Good morning, Andrew.

I went through a quick name shift there. But it’s still starts in A, so I think we are good. And thanks for the question. I guess, I think one of the potential risks to the full year EPS range that you guys have highlighted before, was really the company’s ability to keep the underlying business roughly flattish on an organic basis outside of the new platform launches and some of the continued growth in things like Uncrustables and in the Premium Coffee side. And I know the organic part was a bit weaker in fiscal 1Q than you had thought, and it looks like you’re basically flowing through that weakness to the full year. So I guess, I am trying to get a sense of what are the changes going forward that gave you some comfort that there is less additional risk on the organic side for that underlying part of the business as we go through the year? And as part of that, I think you had said that originally organic was going to be up around two for the full fiscal year. Is that now perhaps closer to around one or so, given what we saw in 1Q? Thank you.

Andrew, this is Mark Smucker. I’ll start and I think Mark might have a comment, and the team to provide you more specifics. But, the first thing is, on Folgers specifically, we did plan for it to be down a little bit. It was down more than we would have liked. That said, we do think there is some timing there and some of that will come back. Likewise, I think in the prepared remarks with Jif, we do believe that the Jif’s core business will be up on a full year basis. So, I think that’s why we still feel confident about that underlying business. And then, just going back to the fact that, our strategy is working, in the sense that, as we execute against whether it be the divestiture, the new launches of innovation, the generation of fuel through our cost savings initiatives, all of those things are doing exactly what they are supposed to be doing. And so, I think that’s why again, we do have some confidence that that we can continue to particularly deliver our EPS and then shore up the base.

Andrew, it’s Mark Belgya. Just in terms of the question about the organic, it’s probably between zero and one, and again just to remind people that we did have a SKU rationalization program built into that, primarily around Gravy Train that we called out in June as well. But I think if you just sort of think of it from a zero to a plus one versus the original plus two.

Great. Thanks very much.

Thank you. Our next question comes from the line of David Driscoll of Citi. Your line is now open.

Hi, great. Thank you. Good morning.

Good morning, Dave.

So, two questions. The first one is just on the gain on sales. Mark, can you quantify what the gain on sale is to EPS? And then, normally, we exclude that. So I want to say then that comes out of the guidance because when you reiterated it, none of us have a gain on sale embedded in it. So could you just quantify that on an EPS basis? And then I have a follow-up on the innovation.

Yes, so, David, the $25 million I referenced is $0.16 to $0.17 of earnings, and. maybe just to address why we treat it as we did, it’s consistent with the way we treated gain when we sold our Milk business a couple of years ago. You’ve heard me say in terms of non-GAAP, we try to be pretty true to our definition of non-GAAP as we define it each quarter. And so, we just view the gain on sales sort of falls outside of that non-GAAP adjustment classification. We obviously call it out so you guys can do with what you will. One way to look at it for the current year too, I know there has been some question about why would we include it. It does somewhat offset the profit loss for this year, so while we certainly have to go after it next year and in the out years, it does kind of give us some offsets from an EPS perspective. So, that was our take on that.

Thank you for that. And then my question – my second question is just on the innovation. You made a few comments about the good start for 1850. I believe you referenced at 70% ACV, I am not sure if you – I didn’t hear that ACV mentioned for the PowerUps, but just, could you give us a little bit more color on those two important launches? And what’s the pacing -- what do you expect to see from this? Is it really not going to start to really move on 1850 until we get the advertising campaign going? Just a little color on what the cadence expected for the year on 1850 and Jif PowerUps would be helpful.

Good morning, David. Joe Stanziano here. Let me start, as you heard from both Mark and Mark, I mean, we are very pleased to this point although caution that it is still early on the launch of 1850. We have achieved our stated target distribution of ACV, 70% ACV. We did that in the month of July. That was great. You heard we are selling nearly $1 million per week at retail and that is improving each week which is important. Our broad based marketing program has been running for about six weeks now. So still early in the grand scheme of things. But we are pleased with the consumer reach there. Like any new launch, we are staying very close to the data. We are adjusting as we learn both with our retail customers and with our consumers, but to your point, we are going to need, we need to see more data behind it. There is some anecdotal data that would say, where we’ve been in distribution for a while, we are getting good repeat on consumers who have aware of the product and have tried it. So, we are going to be very focused on driving trials as much as we can with the consumers in the coming weeks. But, more data will be needed to give you some more analysis on that.

Hi, Dave. It’s Tina. I’ll speak to Jif PowerUps. We achieved about a 60% ACV at the end of the first quarter and the initial response, although it’s early, it’s really, really positive. We are getting great results from a unit per store per week metrics and we are just now starting to turn on our campaign which includes social and digital, TV started last week and we do have a celebrity influence there, Neil Patrick Harris is helping us to get that message out to our consumers. But we are staying pretty close to it and listening to our consumers and the results so far are very positive. But just consider, we are just not going into the back-to-school timeframe. So, I think over this next quarter, we should see some additional great things come out of PowerUps. But again, we just stay committed to the strategy and just reshaping our portfolio to make sure that we are offering those snacking options. But look forward to PowerUps continuing to do well.

Thank you very much.

Thank you. Our next question comes from the line of Pablo Zuanic of SIG. Your line is now open.

Hello. Hi, good morning everyone. One for Mark Belgya first and one for Dave Lemmon. So, Mark, in terms of the guidance, you told us $0.16 is a one-off gain, but just remind us what was the loss in terms of EPS from the sale of your Baking unit. It’s only eight months this year. I think before you had said $0.25 to $0.30 if you can remind us of that. Until we assume that $315 million are pretty much in net proceeds are going to go back to – going to go to share buybacks? That’s for Mark. And for Dave Lemmon, maybe Mark you want to also answer, it seems to me that the sales guidance cut in terms of organic sales on 2% or zero to one, is mostly due to softness in the Pet Food business. Is that true? And if you can expand in terms of what’s new there that’s guiding to – that’s pointing you to cut guidance there? Thanks.

Thanks, Pablo. Thanks for the questions. In terms of the loss of profit, yes, what we said when we announced the divestiture, we said $0.25 to $0.30 on a full year basis. So, you can sort of pro rata that. And so, if you take the gain on the sale that I mentioned, like, $0.17, if you take, just an assumption that we pay down all the – take the proceeds and pay down debt and then some transitional services income that we are going to generate, it’s pretty much a wash. It’s pretty negligible loss for the period. So that’s how that played. The question about using the proceeds, as I called out in my scripted comments, if we are going to assume that the debt pay down, we’ve got a lot of flexibility in what we do with that. We’ve obviously done buybacks in the past. That would be something we consider. But for modeling purposes and what we provided to you guys, we just assume the full amount would be used for the debt pay down. And then, maybe I’ll start and then pitch it back to you guys for any other comment. So the reduction – if I remember your question, reduction was driving the – going from plus to two to a flat of plus one, I called out that the sales shortfall really was sort of across the businesses. I mean, we called out our Roast and Ground. We are talking about Jif a little bit. But I don’t think I would necessarily say it’s pointed to just past. I don’t know if you guys want to add anything to that. But, hey, more importantly, it’s just how we are going to – I think the question we got end about how we are going to deliver on, and then perhaps Jif which was down.

Yes, this is Tina. I can jump in. I mean, just a reminder for the quarter, if we take Baking out for Consumer, we were flat versus prior year. But specifically for Jif, it’s down for the quarter. However, I am still very confident as we look to the balance of the year. The team is doing an amazing job continuing to work to close those opportunity gaps that we may have. But keep in mind, we are entering into back-to-school. We have great equity support out there as we speak. We have the launch of Jif PowerUps, a new distribution in place. So we feel really confident with our peanut butter business going forward.

Can I ask a quick follow-up to Dave Lemmon, so, just remind us in terms of Nature’s ACV, when are you lapping the rollout into FEM? And then, just some color in terms of the underlying growth in that business and just a more color in terms of the innovation that’s coming through that brand specifically. Thanks.

Sure, it’s Dave Lemmon, Pablo. Nature’s Recipe, we’ve already lapped the entry of that. So, we are into comp sales, if you will. Nature’s recipe is up 26% on the quarter in consumption. So, we are seeing great consumer takeaway on that brand and I would just add that, although Natural Balance is down and if you back out the Gravy Train exit, we are pretty flat, - pretty much flat on our base business or our legacy business. And then, APN, Ainsworth is showing significant upside to the year. It’s up 30%, 28% in consumption and it has record shares really 9% during the latest quarter. So, we see a significant upside and just looking to the future, I think that we see this growth continue as we start to see innovation – the innovation cycle in the fourth quarter of this year really help out the brands. And it’s across all of our brands, but in particular, on snacking where we have – Mark spoke of it, but new innovation coming behind the Milk Bone brand in the engagement space and behind the Nature’s Recipe brand in the Natural Meat space. So, we feel really good about those brands.

Thank you.

Thank you. Our next question comes from the line of Chris Growe of Stifel. Your line is now open.

Hi, good morning.

Good morning, Chris.

Good morning, Chris.

Hi. Just a first question for you if I could, I guess, for Mark Belgya. Do you still expect around $80 million in savings for the year? And I guess, related to that, are you on track for that marketing spend that you outlined for like 1850 and for Jif? Are those sort of on track which you expected based on the first quarter performance?

Yes, so, in terms of the $80 million, we are tracking very well. That was probably actually a little heavily skewed towards the benefit to the Keurig contract, which we said, when like last third quarter. So we are getting that. And then I think I had mentioned in my scripted comments that the Right Spend in our zero-based budgeting program, we’ve actually not only built it into our budgets but we are actually positive to our budget. So, I would actually say, we are probably tracking ahead of one-fourth of that 80 if you will. And then, yes, the marketing, right now our forecast has not adjusted down marketing partly at all for the year. Some of the marketing that I commented on earlier was just more of a timing in our Pet business more than anything. But if you look across our business, we are still projecting that $50 million if you will between the $30 million for Coffee and $20 million for PowerUps and then some of the other brands that we commented on in June as well.

Okay. So just a question, perhaps for Mark Smucker, the – you obviously undertook this divestiture of the Baking division, it obviously came in with - a roughly low amount of proceeds, but it’s certainly is getting where the business had been really challenged on the top-line. So, I want to understand, in terms of like, this quarter the portfolio shaping, is that – activity likely done, more you could do there and then just any other observations about the price of selling assets, because this multiple was quite low?

Yes, I’ll start and anyone else want to chime in. Thanks for the question, Chris. Clearly, just from a strategic standpoint, clearly was as we reshaped our strategy and our business, clearly that was sort of an obvious one. So I think, you guys have asked the question about the Baking business now for a couple of years and you are just basically seeing the fruits of our labor. I think you asked, did you not – are there other opportunities to divest, did you asked that?

Yes, just to understand – obviously, not the names, if there are – if it’s just how you think about portfolio shaping and the divestiture activity going forward, yes.

Yes, I think, we always will look at our portfolio and as our strategy might shift, we potentially could that. But at this time, I think that we feel pretty good where our portfolio is. Assets that we have are some of the ones that you might be questioning are generating decent cash and so forth. So, I think at this point, we feel very good that we have a relatively focused portfolio that we can really spend our time on and not really dilute our attention in other areas.

Okay, thank you very much.

Thanks, Chris.

Thank you. Our next question comes from the line of Farha Aslam - Stephens. Your line is now open.

Hi, good morning.

Hey, Farha.

Good morning.

My question is – hi, on the gross margin line, there is clearly some Coffee tailwind, but – some peanut headwinds and you are offsetting some of that with pricing and promotions. How should we think about that gross margin for the year?

Hey, Farha, it’s Mark Belgya. I think the way I would think about it is, this quarter we were affected by – we were still lapping our freight cost. We took the $11 million charge that hit COGS for the Ainsworth balance sheet adjustment. But, it’s going to be more positive for a couple of reasons. One is, we are going to have our cost synergies that relates to the COGS side of the house and they are going to start kicking in a little bit. Mix is going to play. So, Tina had mentioned where Jif, traditional peanut butter is going to pick back up. That’s a high margin business for us. So that’s a positive mix play. So, I think the way I would think about is, sort of broad brush is for the next three quarters sort of in the 39% type gross profit versus whatever it was 37% plus this quarter, it’s probably more reflective than this first quarter. I think that was just for the reasons I mentioned was lower than we would expect the rest of the year end to end.

That’s helpful. And my follow-up is on Ainsworth. How is the expansion into the Pet specialty channel going and kind of what kind of organic growth should we look for, for Ainsworth for the year?

Yes, this is Dave Lemmon, Farha. And I would say that the Ainsworth entry into the pet specialty segment is going extremely well. Again, just to ground everyone, growth through the first quarter, we saw consumption grow at 28%, up 26% from our last call. Our share on nutrition nearly sits at 9% and is up 6% from the prior period. Our Snacks, Cat and wet Dog businesses are all high growth areas of the business, all growing at 50% or higher. And I would just say that finally giving us confidence moving forward is the white space opportunity on the brand. So, as we look at Military Pet Specialty Club and Dollar channel, our cycle of innovation and our cycle of innovation that will be launched late in Q3 of this year. All of this to say is that, the growth in Pet Specialty is not coming at the expense in Milo’s. It’s truly incremental to the brand and I think our shares and our consumption growth shows that.

So, organic growth, roughly for the year on Ainsworth and going forward, how should we think about that brand?

So, we should think about it the way that we feel that the growth at 28% is certainly something that will continue fueled by the white space opportunities and the innovation that I spoke of.

So, that’s a sustainable level, I am just trying to get, is that lacking any kind of gain – like extraordinary gain you expect that Ainsworth brand, the Nutrish brand to grow 28% or kind of annual growth rate?

That’s correct.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Jason English of Goldman Sachs. Your line is now open.

Hey, good morning folks.

Good morning, Jason.

Good morning, Jason.

Jeez, a lots of questions left to ask, but I’ll try to be respectful to your time and maybe just focus on Coffee. First, the sales benefit from pipeline fill behind 1850, Dunkin' canister. I assume that’s the reason that your receivables are elevated. Could you give us any sort of quantification of how much benefit you have this quarter?

Jason, this is Mark Belgya. Let me address the AR and then I’ll let Joe address the Coffee. It actually was – that was part of it, but it was broader than that. If you just look at the way sales fell in the quarter versus a year ago, there was just more sales dollars in the third month, July, if you will of this year versus a year ago. So, our days sales are trending quite well, just more the mechanics of when the sales actually occurred within the 90 days of the quarter.

So, you feel that your net sales are reflective of consumption and if so, why aren’t we seeing that in the Nielsen data? Where is the strength?

No, that’s not what I was saying. What I was just trying to explain is why our AR balance is up. So it was just more than reflected…

Oh, got it, got it.

Yes, yes.

Jason it’s Joe. I’ll talk about 1850, obviously, yes, we’ve filled the pipeline, got that distribution up. What we are looking at is that, weekly velocity of that just under $1 million number we quoted. We have to continue to work on improving that, looking at velocities, account-by-account to ensure that we are getting up to the place we need to be. So, we anticipate, especially as we come into the higher coffee consumption period in the fall that we’ll continue to see that elevate. Dunkin’ canister distribution is still relatively low. I mean, it’s about 30% ACV. So I wouldn’t say it’s a broad distribution and I think those numbers are fairly small as fair as the fell. But again, early, seeing good movement on that as well.

Okay. So, there is no quantification of pipeline fill on sales, is that right?

We are not calling a number out, Jason. It’s Mark again. But it was a contributor, but, I would say that, the other areas that we called up with Estella and Dunkin, K-Cup and that drove more the overall dollars to increase the quarter. Hope they clearly added to it.

Okay. And I know you guys were looking for price in Coffee to be sort of net neutral in the back half of the year. But I think I heard rhetoric of higher trade spend coming to help sort of support Folgers. Should we now be expecting that price realization to be a bit deflationary, and if so, has your cost outlook changed? I know Coffee cost is kind of continuing to drift lower. Are you still looking for a net neutral position on cost?

Let me comment on the cost side and then I’ll let Joe comment on the price side. So, you are right. I mean, green coffee cost continue to trend downward, I think it was stated before wrap it within a dollar. So we do anticipate ongoing favorable costs. So that would be by far the most significant positive cost trend. If you look across other parts of the business, similar to what I said in June, we are still seeing unfavorable cost in both Pet and in Consumer across a whole host of both raw materials and packaging performances along with freight. But in terms of the pricing, I’ll let Joe speak to that.

Yes, I mean, I think, we continue to see those out futures drop a little bit, but from our perspective again, we’ve talked about – we are feeling much better with our cost price alignment. Our trade strategy and our promotional pricing is in really good shape for Q2 and Q3. We’ve got really strong merchandizing support lined up and we feel as we look through the rest of the fiscal year, we feel we are in a good spot with our pricing.

Okay. Thanks guys.

Thank you. Our next question comes from the line of Rob Dickerson of Deutsche Bank. Your line is now open.

Great. Thank you. My first question – I guess, is just to really clarify, maybe I’m just not did I go with math sometimes the case. So, in your revised guidance, right, the top-line comes down a bit and I thought you said, Mark Belgya, the one-time gain is pretty much a wash with the loss with the lost earnings. So, I am just curious, is the offset then just a slightly lower interest or is that your sales are coming down a bit and we can just say while the gain is offsetting the lost earnings on Baking, then, how do we just get to a flat earnings?

Yes, let me just again walk through the components of the divestiture. So, we got the lost profit that we commented on. We’ve got the gain. We’ve got some income that will come from, we are going to provide some services and the transitional period and then assume pay down of debt to lower interest. So if you net all those components together, it’s basically a wash on EPS in totality. I think where you are seeing some of the profit – the ability to maintain our original guidance despite the decrease in sales is that, it really comes from cost savings. So, some of – we mentioned on some of the raw materials side, we still anticipate favorable spending against our Right Spend program. Some of those costs are simply discretionary spending. So, we will take a hard look at. But we expect that to be positive throughout the year. So, if those components that I would say are offsetting the slight decline in our top-line estimate.

Okay, fair enough. And then, so, in terms of – I think you said last quarter, for the year, the expectation was for Consumer profit to be flat to down slightly and then also SG&A would be up mid to high-single-digit ex Ainsworth. Are those two guides still in place?

Yes, I’d say that there is no change on the SG&A side. I mean, there might be some tweaking if we do end up with but favor on the spending, but because marketing is relatively unchanged at this point, and that would be the biggest driver for the increase, that’s true. The other reasons that drove the increase some of the leveling out of the compensation, things like that I mentioned in June are still intact. So, and then, on the Consumer, I think that’s probably right. I’d say the only risk there and maybe to Pet is that, freight is probably projecting a little bit worse. I don’t think any of the other underlying input costs are too much different from what we thought two months ago, but freight is probably still a little more challenging than we would have thought two months ago.

Okay, and then just lastly, sales for the year. I know there are lot of moving parts with respect to pricing volume, launches, what have you, but, just simplistically, as we look out into Q2, I know, you may not be giving quarterly guidance, but just – how should we think about this acceleration so to speak for the year, given in total Q1was – or it was down 50 BPS. You kind of pointed zero to one. So there is obviously an improvement baked in, but your comparison is lot more difficult. So - and pricing might be a bit more challenged. It sounds like there is an expectation for volume to essentially kick up as we go through the year. Is that right?

Yes, I think that’s right and I think we said, we would expect shifts again because of more of a timing thing, so we should see some of that coming through the back three quarters. We’ve talked about – what our trade spend support on Roast and Ground. We should see improvement. You are going to see more of the ongoing benefit of our introductions. We are going to have the Pet introductions coming here at the beginning of calendar 2019. So those are all sort of factoring in. So there is a little bit of an acceleration I think versus what we had in Q1.

Super. Thank you.

Thank you. Our next question comes from the line of Rob Moskow of Credit Suisse. Your line is now open.

Hi, thank you. I guess, just taking a step back, what kind of surprises me in the numbers is to see pricing down for the company in the quarter and that’s kind of a sequential deceleration in the trend and the whole commentary on packaged foods is that, pricing should be moving at a positive direction, because a lot of companies are finally getting some price increases pushed through. Have you had some success, I guess, getting some pricing push through to retailers? And I think, I’ve heard you say that in the past, and if so, why isn’t it showing up in the numbers yet? Thanks.

Rob, it’s Mark Smucker. I’ll start. So, a couple things. First of all, just as you look across, we have had some success in moving on price where we need to most recently in Pet and so we have been able to pass along pricing and that’s particularly in a category that as you know in some of those areas we are not the leader. So, the fact that we’ve been able to get pricing through in Pet I think is an indicator, a positive one. But as you look at Coffee and peanut butter specifically which are two of our larger categories, Coffee, we – it’s still deflationary. I mean, we are seeing some of the lowest Coffee costs that’s approximately 10 years. I mean, since we’ve been in the business, we’ve never seen coffee cost as low. And so, given where our hedging position is, we will continue to enjoy those lower costs. They haven’t crossed as you may assume another threshold that would indicate a hard list price change. That’s why you are seeing us reinvest some of the benefit in trade. And then in peanut butter, we had taken a pricing action probably about a year ago and so, again, although we are seeing some inflation in peanuts, our cost – our actual costs have not crossed a threshold that would trigger us to move on price. So, that’s sort of, I think our business given the commodities and underlying cost is probably a little bit unique compared to the industry just given which of those commodities that we are trading in and when and how we’ve taken price over the last year or so.

Yes. Hey, Rob, it’s Mark Belgya. Just to sort of add to Mark’s comment, Crisco for example, the oil market is continuing to be fairly flat to down and we took a price decline and that had a pretty significant impact. When you just look at the overall net impact on the price for the company. So, but, again it kind of underscores Mark’s commentary around the commodity nature.

Hey, Rob. This is Dave Lemmon. Just to comment a little bit more on Pet. We did take price on select items within our snacks portfolio late in Q1 due to higher input costs that we were not able to recover. And also we took price, if you remember, late in Q3, early Q4 on Natural Balance from last fiscal. So, there is two examples that we are able to get pricing through. And as you know, it’s not getting any easier. It’s getting more and more difficult to get pricing through saying that we’ve been able to pass along pricing so long as it’s cost justified, so.

So, the plan then for the year is pricing will probably be a negative for the year, but gross profit dollars can still be up because of the commodity direction. Is that fair?

Yes, that’s fair. Yes.

Okay. All right. Thank you.

Thank you. I will now turn the conference call back over to Mark Smucker.

Well, just again, thank you for your time today for joining us. We appreciate and we look forward seeing many of you in Boston in a couple of weeks and then we have our Investor Day in New York on October 9th. So, we look forward to all of that. And just – I would just close by saying that, we are very pleased with our results for the quarter and the fact that our strategy continues to yield results. And so, again, thank you and we will see you all soon.

Ladies and gentlemen, this concludes our conference call for today. Thank you for participating and have a nice day. All parties may now disconnect.